Flood Insurance Manual Part 1

V. STANDARD FLOOD INSURANCE POLICY
A. INTRODUCTION
The Standard Flood Insurance Policy (SFIP) specifies the terms and conditions of the
agreement of insurance between either the Federal Emergency Management Agency (FEMA)
as insurer (for policies issued by the NFIP Servicing Agent) or the WYO company as insurer
(for policies issued by the WYO Program) and the named insurer.
Named insurers in NFIP participating communities include homeowners, renters, business
owners, builders of buildings that are in the course of construction, condominium associations,
owners of residential condominium units, and mortgagees/trustee (applicable to building
coverage only.)
1. The Three Policy Forms
There are three policy forms – Dwelling Form, the General Property Form, and the
Residential Condominium Building Association Policy. Each is used to insure a different type
of property. All, however, contain certain terms and condition (e.g., Mortgage Clause,
Reformation of Coverage) that are unique to flood insurance.
2. Use of Policy Forms
The SFIP policy forms must be used for all new and renewal policies that become effective
on or after December 31, 2000. On the following pages, you will find a coverage comparison
table and a detailed commentary on key provisions of each form.
The Liberalization Clause applies to losses occurring on or after December 31, 2000, for
policies written on the old SFIP forms.
3. Currentness of Information
The National Flood Insurance Reform Act of 1994 substantially revised the SFIP. As noted
above, FEMA revised the SFIP in December 2000. FEMA published and maintains the
Adjuster Claims Manual with its integrated explanations of the 2000 SFIP. FEMA published
and maintains Policy issuances and Claims and Underwriting Bulletins to further explain and
clarify coverage under the SFIP. These are available at www.fema.gov/library. All other
earlier policy explanations, coverage interpretations, policy guidance memorandums, and
letters are superseded and should not be referred to in determining coverage.

B. COVERAGE COMPARISON TABLE
The table on pages V-2 and V-3 shows similarities and differences among the three SFIP
forms for more than 30 coverage items.

STANDARD FLOOD INSURANCE POLICY

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COVERAGE COMPARISON AS OF DECEMBER 31, 2000
ITEM

DWELLING FORM

GEN. PROP. FORM

RCBAP

Additional Living Expenses

NO

NO

NO

Appurtenant Structures

YES; 10% of Building limit of
liability can be applied to a
qualifying detached garage
at described location.

NO

NO

Awnings

ACV, if attached to bldg.

ACV, if attached to bldg.

ACV, if attached to bldg.

Building Fixtures

Listed

Listed

Listed

Carpeting

ACV; no overhead and profit

ACV; no overhead and profit

ACV; no overhead and profit

Construction Before Walled
& Roofed

YES; two times the
deductible

YES; two times the
deductible

YES; two times the
deductible

Debris Removal

YES

YES

YES

Decks

NO; limit of 16 sq. feet

NO; limit of 16 sq. feet

NO; limit of 16 sq. feet

Deductible

Applied separately to
building and contents

Applied separately to
building and contents

Applied separately to
building and contents

Loss Avoidance Measures
(Mitigation), Pre-Flood

Limited coverage, $1,000

Limited coverage, $1,000

Limited coverage, $1,000

Exterior Paint

YES

YES

YES

Fences

NO

NO

NO

Hot Tubs & Spas

YES, if they are bathroom
fixtures

YES, if they are bathroom
fixtures or stock

YES, if they are bathroom
fixtures

Hurricane Shutters

YES

YES

YES

ICC

YES, except Emergency
Program and Group Policy

YES, except Emergency
Program

YES, except Emergency
Program

Improvements &
Betterments

YES; if tenant has personal
property coverage, we cover
cooking stove, range, and
refrigerator. 10% of personal
property coverage will cover
other tenant-installed
improvements.

10% of personal property
coverage

Yes

Loss Assessments

YES

NO

NO

Loss of Rents

NO

NO

NO

Ordinance or Law

ICC only see Exclusion A.6

ICC only see Exclusion A.6.

ICC only see Exclusion A.6.

Pollutants

YES

YES, up to $10,000

YES

Power Failure

YES, if caused by flood on
the described location

YES, if caused by flood on
the described location

YES, if caused by flood on
the described location

Replacement Cost,
Building

YES, if insured to 80% of
RC and insured lived at risk
80% of previous 365 days

NO

YES, with coinsurance
provision

Replacement Cost,
Personal Property

NO

NO

NO

Screened Porches

YES, unless below elevated
floor (Post-FIRM)

YES

YES

Storage Sheds

NO

NO

NO

STANDARD FLOOD INSURANCE POLICY

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COVERAGE COMPARISON AS OF DECEMBER 31, 2000
ITEM

DWELLING FORM

GEN. PROP. FORM

RCBAP

Stove & Refrigerator

Building ACV, if tenant’s
contents

Building ACV, if tenant’s
contents

Building ACV

Swimming Pools/Hot Tubs

NO

NO

NO

Temporary Repairs

NO

NO

NO

Trees

NO

NO

NO

Venetian Blinds

Building ACV

Building ACV

Building ACV

Walkways

NO

NO

NO

C. POLICY FORMS AND COMMENTARIES
The SFIP forms, along with a commentary on each, are reproduced on the following pages in
this order: Dwelling Form, General Property Form, and Residential Condominium Building
Association Policy. This section of the manual uses a side-by-side format in which:
1. Each left-hand page reproduces a page of the SFIP; and
2. Each facing right-hand page provides commentary about the policy changes and other
coverage issues important to claims adjusters.
The footer on each page includes the name of the policy form, so you’ll know which form of the
SFIP is being shown and discussed.

STANDARD FLOOD INSURANCE POLICY

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STANDARD FLOOD INSURANCE POLICY

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Dwelling Form

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NATIONAL FLOOD INSURANCE PROGRAM

DWELLING FORM

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DWELLING FORM
COMMENTARY
LIMITATIONS, RESTRICTIONS, AND EXCLUSIONS
The Dwelling Form covers only:
•

One to four family dwelling not under the condominium form of ownership, and its
personal property.

•

Personal Property in a multi-unit building.

•

A single-family dwelling unit in a condominium building, and its personal property.

I. AGREEMENT
The insuring agreement states the following:
•

The Standard Flood Insurance Policy (SFIP) is based upon the National Flood Insurance
Act of 1968 and all amendments, and Title 44 of the Code of Federal Regulations (CFR).

•

The insured must pay the correct premium to get the requested amount of coverage.

•

The insured or the insured’s representative must submit accurate information.

II. DEFINITIONS
•

Flood. Requires surface water inundation of normally dry land from any source, including
mudflow (see ”Mudflow” definition). Two acres of the insured property or two or more
properties, one of which may be a public roadway, must be inundated.

•

Actual Cash Value. Replacement cost value of the insured building and contents less
applicable depreciation (does not include antique value).

•

Application. Part of this policy; the application paragraph states that the insured must pay
the correct premium.

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II. DEFINITIONS (continued)
Basement. Any area having its floor below ground level (subgrade) on all sides.
Building. A building must have at least two rigid walls and a roof. Liquid storage tanks and
bubbles are not covered. Grain bins and silos are covered. Travel trailers without wheels and
affixed to a permanent foundation are covered if regulated by local law.
Condominium. Ownership of a building in which each unit owner has an interest in the
common elements.
Condominium Association. The Residential Condominium Building Association Policy
(RCBAP) may only insure Condominium Associations. The RCBAP may not insure Homeowner
Associations, Cooperatives, and other forms of ownership that are not condominiums. The
adjuster must review the condominium by-laws if there is a question.
Declarations Page. A summary of information provided by the policyholder on the insurance
application. The adjuster must verify the accuracy of the building description, as this may
affect coverage.
Described Location. Shown on the Declarations Page.
Direct Physical Loss By or From Flood. Flood waters must touch the insured building, with
the exception of seepage/hydrostatic pressure.
Elevated Building. This definition requires space between ground level and the lowest floor.
Mudflow. A surface river of liquid and flowing mud. Other earth movements such as landslide,
slope failure, or saturated soil moving by liquidity are not mudflows. (The word “mudslide” no
longer is used in the SFIP.)
Pollutants. Testing for or monitoring of pollutants is not covered unless required by law.

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II. DEFINITIONS (continued)
Post-FIRM Building. Start of construction or substantial improvement after December 31,
1974, or on or after the publication of the initial Flood Insurance Rate Map (FIRM), whichever is
later. Note: A pre-FIRM building would be a building constructed or substantially improved prior
to December 31, 1974.
Special Flood Hazard Area (SFHA). All zones listed are SFHAs. However, the Post-FIRM
coverage limitations apply only to Zones A1-A30, AE, AH, AR, AR/A, AR/AE, AR/AH, AR/A1A30, V1-V30, and VE.
Valued Policy. The SFIP is not a valued policy, in any state.

III. PROPERTY COVERED
COVERAGE A – BUILDING PROPERTY
This policy covers only one- to four-family dwellings.
Additions that are attached to and in contact with the risk by a rigid exterior wall, a solid loadbearing interior wall, a stairway, an elevated walkway, or a roof are covered.
A solid load-bearing interior wall cannot have any openings and must not provide access from
one building or room into another (partial walls). If access is available through a doorway or
opening, then the structure must be insured as one building. Other provisions are:
•
•

At the insured’s option, the additions and extensions may be insured separately.
A common interior wall that is not solid or load bearing necessitates one policy.

Detached Garages. Coverage is limited to no more than 10 percent of liability on the dwelling.
Any reimbursement for damage to detached garages would reduce the coverage. If any part of
the detached garage is used for residential, business, or farming purposes, coverage for the
garage is nullified.
FEMA interprets “residential” to mean “living space”, i.e., an apartment, and the like. The
structure retains its character as a detached garage if it is used only for parking motorized
vehicles, storage, heaters, air conditioners, powder room, refrigerator with ice maker, freezer,
laundry, mud sink, hot water heating in floor, workshop. What is not covered is a detached
garage that is entirely or in part used as or held for use as a sleeping space. Of course, if any
space is rented or held for rental, the contents owned by the policyholder and related to the
rental would be limited to the $2,500 contents used in any business.
Materials and Supplies. Those used to alter, repair, or construct the insured building or a
covered detached garage must be in a fully enclosed building at the property address or an
adjoining property.
Building Under Construction. The deductible is doubled (see Dwelling Form Section VI.
Deductibles, second paragraph of provision A.) and, if there is no work on the building for a
period of 90 continuous days, coverage ceases until such time as work is resumed. Coverage is
provided for those items that will become part of the finished building. For example, rebar,
footings, and concrete walls that will become part of the finished building are covered. There is
no coverage for the forms used to retain the concrete. There is no coverage for a building under
construction before it is walled and roofed when the building is Post-FIRM and the basement
floor or lowest elevated floor is below Base Flood Elevation in any of Zones AH, AE, A1-A30,
AR, AR/AE, AR/AH, AR/A1-A30, AR/A, or AR/AO, or below Base Flood Elevation adjusted for
wave action in any of Zones VE or V1-V30.

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III. PROPERTY COVERED (continued)
COVERAGE A – BUILDING PROPERTY (continued)
The items listed in the Dwelling Form Section III.A.7. are considered building property; they cannot
be paid under contents coverage unless Section III.B.4. applies. Other building items are not
excluded, but the items listed are those that will be covered only as part of the building.
The items listed in Dwelling Form Section III.A.8., when installed beneath the lowest elevated floor of
an elevated Post-FIRM building or in a basement, are considered building property; they cannot be
paid under contents coverage.
A building enclosure and personal property items in a building enclosure below the lowest elevated
floor of an elevated post-FIRM building located in Zones A1-30, AE, AH, AR, AR/A, AR/AE, AR/AH,
AR/A1-30 where the top of the lowest enclosure floor is at or above the Base Flood Elevation (BFE)
as shown on the FIRM in effect on the date of loss, is covered.

COVERAGE B – PERSONAL PROPERTY
Contents coverage must be purchased separately, and a separate deductible is applied.
Contents must be owned by the insured or family members of the insured’s household, or at the
insured’s option, within the limits of liability of the policy, by the insured’s guests or servants.
Contents are covered while stored in the dwelling or in another fully enclosed building at the
described location. Flotation of contents out of a building that has fewer than four rigid walls
is not covered.
The items listed in Dwelling Form Section III.B.2., General Property Form Section III.B.3.,
and RCBAP Section III.B.2. are considered personal property and cannot be paid under
building coverage.
The items listed in Dwelling Form Section III.B.3., when installed beneath the lowest elevated floor of
an elevated Post-FIRM building or in a basement, are considered personal property items. They
cannot be paid under building coverage. Also see General Property Form Section III.B.4. and
RCBAP Section III.B.3.
A building enclosure and personal property items in a building enclosure below the lowest elevated
floor of an elevated Post-FIRM building located in Zones A1-30, AE, AH, AR, AR/A, AR/AE, AR/AH,
AR/A1-30 where the top of the lowest enclosure floor is at or above the BFE as shown on the FIRM
in effect on the date of loss, is covered.
Note: The policy lists items that must always be considered contents (III.B.2.). The policy also lists
items covered in a basement or beneath the lowest elevated floor of a Post-FIRM elevated building
(III.B.3.) that must always be considered contents.

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III. PROPERTY COVERED (continued)
COVERAGE B – PERSONAL PROPERTY (continued)
Tenants. Paragraph 4. states that, if the insured is a tenant and has personal property coverage
(Coverage B), the coverage extends to the insured’s cooking stove, range, and refrigerator
when tenant ownership can be (is) substantiated. Also, improvements made or acquired solely
at the insured’s expense are covered for up to 10 percent of the limit of liability for personal
property. The 10 percent limit of liability for improvements does not include cooking stoves,
ranges, or refrigerators.
Special Limits. A total of $2,500 is the maximum payment allowed for artwork, rare books,
jewelry, furs, or any article containing fur, which represents its principal value, as well as
personal property used in any business. This maximum payment also extends to the following:
•
•
•
•

Photographs
Collectibles
Memorabilia
Porcelain or other figures and sports cards

•
•
•
•

Autographed items
Watches
Precious and semiprecious stones
Articles of gold, silver, or platinum

This coverage is limited to personal property owned by the named insured, household family
members, servants, and guests.
Antiques. Coverage is provided only for the functional value of antiques.

COVERAGE C – OTHER COVERAGES
Debris Removal. Insured property means property we insure—i.e., the described building and
covered contents. The described premises include the lot, which is not covered.
Coverage extends to insured property anywhere and to non-owned debris on or in the
insured property. Non-covered items such as contents in a basement are excluded from
debris removal coverage.
Loss Avoidance Measures (Mitigation). Expenses are covered up to $1,000 per measure; no
deductible applies. Paid receipts are required for sandbags, supplies, and property removed to
safety (truck rental, storage unit, etc.). Loss mitigation measures are described below.
a. Sandbags, Supplies, and Labor
• Sandbags, including sand
• Fill for temporary levees
• Pumps
• Plastic sheeting and lumber used in connection with these items
• Labor (Insured and members of family can be paid for labor at the federal minimum wage.)
This coverage applies only under Coverage A – Building Property.
b. Property Removed to Safety. A maximum of $1,000 can be paid to move insured property to
another place other than the described location above ground or outside the SFHA to preserve it
from flood. Read Dwelling Form Section III.C.2.b. Property Removed to Safety.

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III. PROPERTY COVERED (continued)
COVERAGE C – OTHER COVERAGES (continued)
If the property removed is a manufactured (mobile) home or travel trailer, coverage
extends to it for 45 days, even if it is not on a foundation. This coverage can be used for
building, contents, or both; but the total of building and contents payments cannot exceed
$1,000 each.
Other provisions regarding property removed to safety are:
•

Contents must be placed in a fully enclosed building or otherwise reasonably protected
and moved temporarily away from the peril of flood.

•

Property must be removed to a location other than the described location. Property
moved from one place to another at the described location is not covered.

•

Coverage extends for 45 days at another place.

•

With paid receipts, coverage is also extended to return the removed property back to the
described location.

•

No deductible applies.

Removed property is covered for damage by flood only. Any property removed, including a
moveable home described in Dwelling Form Section II.B.6.b. and c., must be placed above
ground level at a location other than the described location or outside of the SFHA. See
General Property Form Section III.C.2.b. and RCBAP Section III.C.2.b.
Condominium Loss Assessment: If no Residential Condominium Building Association
Policy (RCBAP) is in force on the building, then the Dwelling Form will respond to covered
loss assessments. The Dwelling Form will not respond to assessments if there is an RCBAP
that is not insured to 80 percent of the RCV or the maximum insurable value of the building,
whichever is less. See 3.b. (4)(a) and (b). The Dwelling Form will not respond to
assessments of non-covered items.

COVERAGE D – INCREASED COST OF COMPLIANCE
The limit of liability for Increased Cost of Compliance (ICC) coverage was raised to $30,000 on
May 1, 2003. Any flood loss incurred prior to May 2003 will be adjusted according to the
previous limit of $20,000.
ICC coverage is used for floodproofing, demolition, elevation, or relocation of the structure, or a
combination of these. It is an additional amount of insurance above building limits of liability, but
we cannot pay more than the law allows ($250,000 dwelling, $500,000 commercial, $250,000 x
the number of units under the RCBAP).
For further information about ICC coverage, see Section VI of this manual. Subsection VI.D.3.
specifically addresses assignment of Coverage D by the policyholder to the community.

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III. PROPERTY COVERED (continued)
COVERAGE D – INCREASED COST OF COMPLIANCE (continued)
Structures that are in an SFHA and are declared by the local community to be substantially flooddamaged by 50 percent of their market value are eligible. An ICC claim must not be opened until
the local official has declared in writing that the structure has been substantially damaged
specifically by flood.
On ICC claims for structures in B, C, X, D, unnumbered A and V, and A99 zones, the adjuster
needs to obtain a written statement from the local official that the zone is being changed to a
SFHA and is requiring an ICC activity.
For communities that have cumulative damage language in their ordinance, the building must
have sustained two flood losses in 10 years, averaging 25 percent. The adjuster must verify that
the community has such cumulative damage language in the ordinance. The adjuster must also
verify that NFIP claim payments were issued to the insured for both qualifying losses.
The date of loss for the ICC claim is the same as the date of loss of the underlying flood claim.

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III. PROPERTY COVERED (continued)
COVERAGE D – INCREASED COST OF COMPLIANCE (continued)
Under ICC, even if a local ordinance or law requires the testing, monitoring, clean-up, removal,
containment, treatment, detoxification, or neutralization of pollutants, there is no coverage.
Note: FEMA Bulletin W-06019, March 14, 2006, waived the 2-year time limit for the completion of
ICC activities for all claims on or after June 1, 2005, and extended the time to complete these
activities to 4 years. In an upcoming revision to the SFIP, the time limit found at paragraph 5.e.(2)
will be changed to 4 years. The 4-year limit for completing an ICC claim begins on the date of the
written declaration by the local community official that the insured structure has been substantially
damaged by flood. This means that the 4-year period that will be referenced in paragraph 5.e.(2)
begins on the date of the written declaration.
The two conditions in Paragraph 5.e. refer to the total payment of an ICC claim. Partial payments
of ICC claims are permitted. Partial payments may be issued before completion of the mitigation
activity but cannot exceed 50 percent of the estimated reimbursable cost of the mitigation activity,
up to 50 percent of the maximum ICC coverage available.
Adjusters are required to submit daily reports of possible substantially damaged properties to
the NFIP Bureau and Statistical Agent by fax at 1-800-457-4232, or by mail to P.O. Box 310,
Lanham, MD 20706.
See Section VI of this manual, “Increased Cost of Compliance (ICC)” for additional information.

IV. PROPERTY NOT COVERED
Building or Personal Property Entirely in, on, or over Water or Seaward of Mean High Tide.
No coverage is provided if the building was constructed or substantially improved after
September 30, 1982.
Recreational Vehicles. Excluded from coverage except travel trailers defined in Dwelling Form
II.B.6.c.
Self-Propelled Vehicles or Machines. Excluded from coverage, except those used to
service the described location or designed and used to assist handicapped persons. The
vehicles or machines must be located inside the building at the described location. Such
vehicles located below the lowest elevated floor of a post-FIRM elevated building or in a
basement are not covered.
Land, Land Values, Lawns, Trees, Shrubs, Plants, Growing Crops, or Animals. Animals
are specifically excluded from coverage by the provision in Dwelling Form Section IV.6 (also
General Property Form Section IV.6 and Residential Condominium Building Association Policy
Section IV.6). This exclusion applies to live bait, such as worms or minnows, sold in fishing
tackle shops.

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IV. PROPERTY NOT COVERED (continued)
Containers. Fuel tanks and well water tanks are not covered outside a basement,
elevated building enclosure, or the insured building. Tanks containing other liquids or
gases are not covered.
Hot Tubs, Spas and Swimming Pools. These and their equipment are not covered,
except that spas and hot tubs are covered if they are bathroom fixtures.
Coastal Barrier Resources Act (CBRA). It is the adjuster’s responsibility not to
recommend payment for buildings and their contents made ineligible by CBRA legislation,
as it is against the law to insure such buildings. These should be referred to Underwriting
for a coverage determination.

V. EXCLUSIONS
Loss of Revenue or Profit, Loss of Access, Loss of Use, Business Interruption, and
Additional Living Expenses. We will not pay for these. Coverage is not provided for the cost of
complying with any ordinance or law except those described in D. Coverage D – Increased Cost
of Compliance.
Loss in Progress. Not covered (Paragraph B.).
Single Peril. Paragraph C. makes it clear that this is a single-peril policy. Earth movement
caused by flood is excluded. This includes but is not limited to earthquake, landslide, land
subsidence, sinkholes, destabilization, or movement of land resulting from the accumulation of
water in subsurface land areas, and gradual erosion.
Land subsidence is covered if it is caused by erosion as specified in the definition of flood (see
Dwelling Form Section II.A.2.).
Note: The adjuster should recognize and immediately report potential structural instability of the
insured property to the WYO Company and recommend a qualified expert conduct an on-site
inspection of the insured building. The expert should provide a comprehensive report detailing
the cause and effect of the settlement/subsidence including photographs of the structure to the
WYO Company that will assist in making the necessary determination as to whether or not
damage is a direct physical loss by for from flood.
Water, Moisture, Mildew, Mold, Damage. Not covered when caused by a condition substantially
confined to the building, or within the insured’s control, which includes design, structural, or
mechanical defects; failure, stoppage, or breakage of water or sewer lines, drains, pumps,
fixtures, or equipment; or the insured’s failure to adequately inspect and maintain the property
after the flood waters recede. (For additional information about mold damage, see Subsection
VIII.C′. of this manual.)
Note: The insured should not be reimbursed for any pre-existing damage resulting from rotten or
deteriorated wood or other framing members. The adjuster should be able to distinguish whether
or not the wood members have been exposed to long-term moisture causing the wood to crumble,
rot and/ or weaken. Often, the adjuster will observe infestation by termites or other insect’s in the
deteriorated area; the damage resultant from infestation is also not covered by the SFIP.

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V. EXCLUSIONS (continued)
Water or Waterborne Materials. Damage from water or waterborne materials that cause sewers
or drains to back up, including the discharge or overflow of water from a sump, sump pump, or
any related equipment, or seeps or leaks on or through insured property, is not covered. However,
if there is a general and temporary condition of flooding in the area and the flood is the proximate
cause of the sewer, drain, or sump pump back-up and is the proximate cause of the seepage of
water, then coverage is provided.
Other Water Damage. Water that seeps or leaks on or through the covered property is not
covered e.g., wind-driven rain.
Power Failure. Only losses resulting from power, heating, or cooling equipment failure, if the
failure was caused by flood and the failing equipment was located on the described location, are
covered. Power failures occurring off the described location due to flood and causing damage to
insured heating or cooling equipment or any other insured property are not covered. If the power
is intentionally turned off by the insured, there is no coverage.

VI. DEDUCTIBLES
The deductible is doubled for a building under construction. (Per Dwelling Form Section
III.A.5.a.(2), if there is no work on the building for a period of 90 continuous days, coverage
ceases until such time as work is resumed.)
There are separate deductibles for the structure and personal property ranging from $500 to
$50,000 depending on the occupancy.

VII. GENERAL CONDITIONS
Pairs and Sets. We pay for the one item damaged less applicable depreciation, or the fair
proportion of the value of the pair or set that the destroyed item bears to the pair or set.
Concealment or Fraud and Policy Voidance. Any NFIP flood policy can be voided if the
insured commits fraud. The adjuster must report to the insurer any relevant facts on the
Narrative Report form.

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VII. GENERAL CONDITIONS (continued)
Other Insurance. This policy is primary over all other policies that clearly state they are excess. If the
other policy does not state it is excess, this policy is primary up to the other policy’s deductible, subject
to this policy’s deductible; once our payment reaches the other deductible amount, the coverage
becomes pro-rata. (See examples in Section VII. of this manual, Basic Adjustment Issues, following.)
Nonrenewal of the Policy by Us. The policy will not be renewed if the community in which the insured
property is located stops participating in the NFIP or if the building has been declared ineligible under
Section 1316 of the National Flood Insurance Act of 1968, as amended.
Reduction and Reformation of Coverage. The coverage amounts will be reduced if it is discovered
that the premium was insufficient; if the amount of additional premium can be determined, the insured
has 30 days to pay the additional premium. Only prospective premiums are to be charged. The time
required to determine the additional premium must not delay the claim process.

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VII. GENERAL CONDITIONS (continued)
Requirements in Case of Loss. Claims should be investigated under a Reservation of Rights or
Non-Waiver Agreement if the insured does not comply with Paragraphs J.1. through 9.

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VII. GENERAL CONDITIONS (continued)
Bailee Goods. Bailee Goods are the result of a bailment, which is the delivery of personal property
by one person (the bailor) to another (the bailee) who holds the property for a certain purpose under
an express or implied-in-fact contract.
Example: When the bailor takes a pair of shoes to the cobbler (the bailee) for repair, a bailment is
established while the bailee has the shoes. The shoes while in the possession of the bailee are
bailee goods. Note: a bailment involves a change in possession but not in title.
Real property, by definition, can never be bailee goods. In addition, property that is sold (title
changes) cannot be bailee goods. Therefore, real property that is sold cannot be bailee goods after
the sale or before the sale.

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VII. GENERAL CONDITIONS (continued)
Loss Payment. The adjuster needs to be prompt in reporting the investigation, as the insurer has only
60 days from the date of receiving the insured’s Proof of Loss to pay the claim, or within 90 days after
the adjuster files a report that is signed and sworn to by the insured in lieu of the Proof of Loss. If the
Proof of Loss is rejected in whole or in part or a new supplemental Proof of Loss is filed, it must be
submitted and received within 60 days of the date of loss. Only FEMA has the authority to waive or
extend the filing deadline.
Salvage. The insured has the option to keep damaged property after a flood, and the adjuster will
reduce the amount of the loss proceeds payable to the insured.
Appraisal. The appraisal clause applies if the insured and adjuster fail to agree on the actual cash
value or replacement cost of the damaged property, whichever is appropriate. In the event that the two
appraisers appointed by the insured and insurer cannot agree, they should submit only their
differences to an umpire. There is no appraisal for coverage issues.
Mortgage Clause. The mortgage clause applies to any loss payable under Coverage A – Building.
ICC is Coverage D; therefore, protecting the mortgagee is not required for ICC payments. ICC
payments are to help policyholders comply with local floodplain management laws or ordinances. The
insurer may choose to include the mortgagee on these checks. However, the mortgage contract may
allow the lender to apply claim payments to the loan and not to the paid activity. Making the insurer
aware of the policy wording and any other information associated with the payment is important in their
decision making process.
We will also protect the interest of any loss payee or other interested party discovered during the
investigation. This protection extends to the U.S. Small Business Administration (SBA). A typical SBA
Assignment of Insurance Proceeds letter states, “The U.S. Small Business Administration (SBA) has
approved a loan to repair/replace your insured’s damaged real estate and/or personal property…in
compliance with the assignment, future payments on this claim (except payments for additional living
expenses) are to name the U.S. Small Business Administration as a co-payee.” This means the SBA
must be included on the building check(s) (including ICC), and the contents check(s) on this claim.
Suit Against Us. The insured must file suit in the United States District Court within one year after the
written denial of all or part of the claim.
Subrogation. The insured’s right to recover for a loss in part or in whole for damages caused
by someone else is transferred to the insurer if the loss is paid under the Standard Flood
Insurance Policy.

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VII. GENERAL CONDITIONS (continued)
Continuous Lake Flooding. The structure must be inundated by lake water for 90 continuous days,
and it must be reasonably certain that the continuation of this flooding will result in damage equal to
or greater than policy limits, or the ACV or RCV, as applicable. If it is not reasonably certain that the
flooding will cause a total loss, then we will pay only for the actual damage up to the waterline.
(See Section VIII of this manual, Special Adjustment Issues, for more information about continuous
lake flooding.)
Closed Basin Lakes. A closed basin lake is a natural lake from which water leaves primarily through
evaporation, and whose surface area now exceeds or has exceeded one square mile at any time in
the past. If an insured building is subject to continuous closed basin lake flooding, a total loss claim can
be paid if lake flood waters damage or imminently threaten to damage the building and an eventual
total loss appears likely.
Special reporting procedures apply to ICC claims and closed basin lake claims. Notify the NFIP Bureau
and Statistical Agent upon receipt of either type of claim.

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VII. GENERAL CONDITIONS (continued)
Duplicate Policies Not Allowed. If the insured has two policies on the same property, the insured
may choose to keep either policy. However, if the insured wishes to combine coverage limits, the
effective date of the policy will be that of the later of the two policies purchased.
If the insured has a Group Flood Insurance Policy as the result of a Federal Disaster Declaration, the
insured may not purchase a Standard Flood Insurance Policy as excess coverage over the Group
Flood Insurance Policy or to duplicate flood insurance benefits. The insured may cancel the Group
Flood Insurance Policy mid-term and purchase a Standard Flood Insurance Policy to obtain higher
coverage amounts. No premium refunds are given under the Group Flood Insurance Policy.
Loss Settlement. There are three methods to settle a loss under the Dwelling Form:
•
•
•

Replacement Cost
Special Loss Settlement
Actual Cash Value

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VII. GENERAL CONDITIONS (continued)
Replacement Cost. The insured residence must be the principal residence, meaning that, at
the time of loss, the insured lived there for at least 80 percent of the preceding 365 days, or
80 percent of the period of ownership if less than 365 days. Replacement cost applies if the building is
insured to 80 percent or more of its full replacement cost immediately before a loss occurs, or if the
maximum amount of insurance is purchased.
By FEMA Guidance W-04020, effective May 7, 2004, when the insured dwelling is eligible for
replacement cost loss settlement, there is no longer any requirement to withhold the recoverable
depreciation until repairs are made.
Special Loss Settlement. Replacement Cost applies to a manufactured (mobile) home or travel trailer
if the dwelling is at least 16 feet wide and has an area of at least 600 square feet within its walls. The
structure must also be the principal residence. If a single-family dwelling that is a manufactured
(mobile) home or travel trailer is a total loss or is not economically feasible to repair, then the
adjustment of the property will be the lesser of:
•
•

The replacement cost of the dwelling or 1.5 times the actual cash value, or
The building limit of liability.

Loss Settlement paragraph 1.a.(2) does not apply to manufactured (mobile) homes or travel trailers
under Special Loss Settlement.
Only manufactured (mobile) homes and travel trailers as described in paragraph 3.a.(2) and (3) qualify
for Special Loss Settlement. All other manufactured (mobile) homes and travel trailers require Actual
Cash Value Loss Settlement.
If we determine that the building is repairable, the loss will be settled according to the Replacement
Cost conditions stated in Dwelling Form VII.V.2.
Actual Cash Value (ACV) or Proportional Settlement. ACV is the cost to replace the insured item of
property at the time of the loss, less its physical depreciation.
If proportional settlement is beneficial to the insured, no depreciation is taken and Replacement Cost is
used after the deductible is taken. There are two ways to do this:
•

When 80 percent of the replacement cost of the dwelling is less than the maximum amount of
NFIP insurance available, then the proportion is figured as follows:
Amount of insurance purchased
Amount of insurance that is 80% of RC

•

x

RC loss with deductible
already taken

When 80 percent of the replacement cost of the dwelling is more than the maximum amount of
NFIP insurance available, compute as follows:
Amount of insurance purchased
Maximum amount of NFIP insurance available

x

loss less the deductible

The insured will receive either ACV or Proportional Settlement, whichever is higher.

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VII. GENERAL CONDITIONS (continued)
The following types of property are specifically subject to Actual Cash Value loss settlements:
•
•
•
•
•
•
•
•

A two-, three-, or four-family dwelling
A unit that is not used exclusively for single-family dwelling purposes
Detached garages
Personal property
Appliances, carpets, and carpet pads
Outdoor awnings, outdoor antennas or aerials of any type (including policyholder-owned satellite
dishes), and other outdoor equipment attached to the insured dwelling
Abandoned property that, after a loss, remains as debris at the described location
A dwelling that is not the principal residence

Amount of Insurance Required. When the insured, agent, and/or adjuster calculates the
amount of insurance required for a dwelling before the loss, the following building components
will not be considered:
•

Footings, foundations, piers, or any other structures or devices that are below the undersurface of
the lowest basement floor and support all or part of the dwelling

•

Supports listed above that are below the surface of the ground inside the foundation walls if there
is no basement

•

Excavations and underground flues, pipes, wiring, and drains

The ICC limit of liability is not included in the determination of the amount of insurance required.

VIII. LIBERALIZATION CLAUSE
Liberalization with additional premium, such as ICC, does not fall into this category. The insured
can choose the policy application that is most beneficial. The loss must be after the effective date
of the liberalization.

IX. WHAT LAW GOVERNS
Federal law governs. This policy is not subject to state departments of insurance or state
and local courts.

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GENERAL PROPERTY FORM
COMMENTARY
LIMITATIONS, RESTRICTIONS, AND EXCLUSIONS
The General Property Form does not provide coverage for:
•
•

A residential condominium building
A unit in a condominium building, except for personal property coverage

I. AGREEMENT
The insuring agreement states the following:
•

The Standard Flood Insurance Policy (SFIP) is based upon the National Flood Insurance
Act of 1968 and all amendments, and Title 44 of the Code of Federal Regulations (CFR).

•

The insured must pay the correct premium to get the requested amount of coverage.

•

The insured or the insured’s representative must submit accurate information.

II. DEFINITIONS
Flood. Requires surface water inundation of normally dry land from any source, including
mudflow (see “Mudflow” definition). Two acres of the insured property or two or more properties,
one of which may be a public roadway, must be inundated.
Actual Cash Value. Replacement cost value of insured building and contents less applicable
(does not include antique value).
Application. Part of the policy; the application paragraph states that the insured must pay
the correct premium.

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II. DEFINITIONS (continued)
Basement. Any area having its floor below ground level (subgrade) on all sides.
Building. A building must have at least two rigid walls and a roof. Liquid storage tanks and
bubbles are not covered. Grain bins and silos are covered. Travel trailers without wheels and
affixed to a permanent foundation are covered if regulated by local law.
Condominium Association. The Residential Condominium Building Association Policy
(RCBAP) may insure only Condominium Associations. The RCBAP may not insure Homeowner
Associations, Cooperatives, and other forms of ownership that are not condominiums. The
adjuster must review the condominium by-laws if there is a question.
Declarations Page. A summary of information provided by the policyholder on the insurance
application. The adjuster must verify the accuracy of the building description, as this may
affect coverage.
Described Location. Shown on the Declarations Page.
Direct Physical Loss By or From Flood. Floodwaters must touch the insured building with the
exception of seepage/hydrostatic pressure and sewage backup.
Elevated Building. This definition requires space between ground level and the lowest floor.
Mudflow. A surface river of liquid and flowing mud. Other earth movements such as landslide,
slope failure, or saturated soil moving by liquidity are not mudflows. (The word “mudslide” no
longer is used in the SFIP.)
Pollutants. Testing for or monitoring of pollutants is not covered unless required by law.
Post-FIRM Building. Start of construction or substantial improvement after December 31,
1974, or on or after the publication of the initial Flood Insurance Rate Map (FIRM), whichever is
later. Note: A pre-FIRM building would be a building constructed or substantially improved prior
to December 31, 1974.

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II. DEFINITIONS (continued)
Special Flood Hazard Area (SFHA). All zones listed are SFHAs. However, the Post-FIRM
coverage limitations apply only to Zones A1-A30, AE, AH, AR, AR/A, AR/AE, AR/AH,
AR/A1-A30, V1-V30, and VE.
Stock. Merchandise that is stored or for sale, raw materials, and in-process or finished goods,
inclusive of supplies used for their packing and shipping, are covered. However, coverage is not
provided for property listed in General Property Form Section IV. Property Not Covered, with the
exception of the following:
•
•
•
•

Parts and equipment for self-propelled vehicles
Furnishings and equipment for watercraft
Spas and hot tubs, including their equipment
Swimming pool equipment

Valued Policy. This is not a valued policy, in any state.

III. PROPERTY COVERED
COVERAGE A – BUILDING PROPERTY
If the insured building is a condominium building in the name of the condominium association,
coverage is provided for all units and the improvements, if the units are owned in common by all
unit owners.
Additions that are attached to and in contact with the risk by a rigid exterior wall, a solid loadbearing interior wall, a stairway, an elevated walkway, or a roof are covered.
A solid load-bearing interior wall cannot have any openings and must not provide access from
one building or room into another (partial walls). If access is available through a doorway or
opening, then the structure must be insured as one building. Other provisions are:
•
•

At the insured’s option, at the time of the flood application for coverage, the additions and
extensions may be insured separately.
A common interior wall that is not solid or load bearing necessitates one policy.

Fixtures, Machinery, and Equipment. The items in this list (General Property Form Section III.
Property Covered, A. Coverage A – Building Property, 4.) are defined as building property and
cannot be paid under contents coverage. The list of items in Paragraph 4 is not exclusive. If
there are other items that fit this coverage, they can be included.

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III. PROPERTY COVERED (continued)
COVERAGE A – BUILDING PROPERTY (continued)
Materials and Supplies. Those used to alter, repair, or construct the insured building must be
in a fully enclosed building at the property address or an adjacent property.
Building Under Construction. The deductible is doubled (see General Property Form Section
VI. Deductibles, second paragraph of provision A.) and, if there is no work on the building for a
period of 90 continuous days, coverage ceases until such time as work is resumed. Coverage is
provided for those items that will become part of the finished building. For example, rebar,
footings, and concrete walls that will become part of the finished building are covered. There is
no coverage for the forms used to retain the concrete. There is no coverage for a building under
construction before it is walled and roofed when the building is Post-FIRM and the basement
floor or lowest elevated floor is below Base Flood Elevation in any of Zones AH, AE, A1-A30,
AR, AR/AE, AR/AH, AR/A1-A30, AR/A, or AR/AO, or below Base Flood Elevation adjusted for
wave action in any of Zones VE or V1-V30.
A building enclosure and personal property items in a building enclosure below the lowest
elevated floor of an elevated post-FIRM building located in Zones A1-30, AE, AH, AR, AR/A,
AR/AE, AR/AH, AR/A1-30 where the top of the lowest enclosure floor is at or above the Base
Flood Elevation as shown on the FIRM in effect on the date of loss, is covered.

COVERAGE B – PERSONAL PROPERTY
Contents owned solely by the insured or by a condominium are covered.
Contents are covered while stored in the building. Flotation of contents out of a building that has
fewer than four rigid walls is not covered.
The items listed in General Property Form Section III.B.3., Dwelling Form Section III.B.2.,
and RCBAP Section III.B.2. are considered personal property and cannot be paid under
building coverage.
The items listed in General Property Form Section III.B.4., when installed beneath the lowest
elevated floor of an elevated Post-FIRM building or in the basement, are considered personal
property items. They cannot be paid under building coverage. Also see Dwelling Form Section
III.B.3. and RCBAP Section III.B.3.
A building enclosure and personal property items in a building enclosure below the lowest
elevated floor of an elevated post-FIRM building located in Zones A1-30, AE, AH, AR, AR/A,
AR/AE, AR/AH, AR/A1-30 where the top of the lowest enclosure floor is at or above the Base
Flood Elevation as shown on the FIRM in effect on the date of loss, is covered.

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III. PROPERTY COVERED (continued)
COVERAGE B – PERSONAL PROPERTY (continued)
Coverage is extended for either household contents or commercial contents. The policy will not
respond to both. Commercial contents coverage is subject to all limitations and exclusions of this
policy. The policy does not cover any types of stock listed in General Property Form Section IV.
Property Not Covered, except those specifically mentioned in the definition of stock. The list of
items in Paragraph 2.b. is not exclusive. If there are other items that fit this coverage, they can
be included.
Stock. Spas and hot tubs, including their equipment, are covered if held in storage or for sale.
Refer to Section II. Definitions, 27, for covered items inside the described location.
Special Limits. A total of $2,500 is the maximum payment allowed for artwork, rare books,
jewelry, furs, or any article containing fur, which represents its principal value, as well as
personal property used in any business. This maximum payment also extends to the following:
•
•
•
•

Photographs
Collectibles
Memorabilia
Porcelain or other figures; sports cards

•
•
•
•

Autographed items
Watches
Precious and semiprecious stones
Articles of gold, silver, or platinum

These special limits apply even if the items are stock. Personal property is defined as either
household personal property or other than household personal property, while within the insured
building, but not both.
Antiques. Coverage is provided only for the functional value of antiques.
Improvements. For tenant-occupied properties, the insured tenant may apply up to 10 percent
of the limit of liability for personal property to tenant-installed improvements. This includes items
that the insured tenant purchased and that are permanently installed and considered part of the
building. Refer to Section VII – BASIC ADJUSTMENT ISSUES, Point K on page VII-3 of
Adjuster Claims Manual.
Interior Walls, Floors, and Ceilings. If the policyholder is a condominium unit owner and has
insured personal property under Coverage B, the unit’s interior walls, floors, and ceilings (not
otherwise covered under a flood insurance policy purchased by the condominium association) are
covered for up to 10 percent of the limit of liability shown for personal property on the Declarations
Page. The use of this insurance is at the insured’s option but reduces the personal property limit
of liability. The 10 percent coverage cannot be applied and no coverage is available if the RCBAP
or a combination of coverages pays the statutory limit.

COVERAGE C – OTHER COVERAGES
Debris Removal. Insured property means property we insure—i.e., the described building and
covered contents. The described premise includes the lot, which is not covered.
Coverage extends to insured property anywhere and to non-owned debris on or in the insured
premises or on or in the insured property. Non-covered items such as contents in a basement
are excluded from debris removal coverage.

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a.

We will pay you up to $30,000 under this Coverage D
-Increased Cost of Compliance, which only applies to
policies with building coverage (Coverage A).

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III. PROPERTY COVERED (continued)
COVERAGE C – OTHER COVERAGES (continued)
Loss Avoidance Measures (Mitigation). Expenses are covered up to $1,000 per measure; no
deductible applies. Paid receipts are required for sandbags, supplies and property removed to
safety (truck rental, storage unit, etc.). Loss mitigation measures are described below.
b. Sandbags, Supplies, and Labor
• Sandbags, including sand
• Fill for temporary levees
• Pumps

•
•

Plastic sheeting and lumber used in connection
with these items
Labor (Insured and members of family can be
paid for labor at the federal minimum wage.)

This coverage applies only under Coverage A – Building Property.
b. Property Removed to Safety. A maximum of $1,000 can be paid to move insured property
to another place other than the described location above ground or outside the SFHA to
preserve it from flood. If the property removed is a manufactured (mobile) home or travel
trailer, coverage extends to it for 45 days even if it is not on a foundation. This coverage can
be used for building, contents, or both; but the total of building and contents payments
cannot exceed $1,000 each.
Other provisions regarding property removed to safety are:
• Contents must be placed in a fully enclosed building or otherwise reasonably protected
and moved temporarily away from the peril of flood.
• Coverage extends for 45 days at another place.
• With paid receipts, coverage is also extended to return the removed property back to the
described location
• No deductible applies.
Removed property is covered for damage by flood only. Any property removed, including a
moveable home described in General Property Form Section II.B.6.b. and c., must be
placed above ground level at a location other than the described location or outside of the
SFHA. See Dwelling Form Section III.C.2.b. and RCBAP Section III.C.2.b.
Pollution Expenses. Damages to insured property caused by pollutants are covered if the
discharge, seepage, migration, release, or escape of the pollutants is caused by flood. The
maximum allowed under this coverage is $10,000. Testing for or monitoring of pollutants is
excluded unless required by law or ordinance. This is not an additional amount of insurance.

COVERAGE D – INCREASED COST OF COMPLIANCE
The limit of liability for Increased Cost of Compliance (ICC) coverage was raised to $30,000 on
May 1, 2003. Any flood loss incurred prior to May 2003 will be adjusted according to the
previous limit of $20,000.
ICC coverage is used for floodproofing, demolition, elevation, or relocation of the structure, or a
combination of these. It is an additional amount of insurance above building limits of liability, but
we cannot pay more than the law allows ($250,000 dwelling, $500,000 commercial, and
$250,000 x the number of units under the RCBAP).
For further information about ICC coverage, see Section VI. of this manual. Subsection VI.D.3.
specifically addresses assignment of Coverage D by the policyholder to the community.
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III. PROPERTY COVERED (continued)
COVERAGE D – INCREASED COST OF COMPLIANCE (continued)
Structures that are in an SFHA and are declared by the local community to be substantially flooddamaged by 50 percent of their market value are eligible. An ICC claim must not be opened until
the local official has declared in writing that the structure has been substantially damaged
specifically by flood.
On ICC claims for structures in B, C, X, D, unnumbered A and V, and A99 zones, the adjuster
needs to obtain a written statement from the local official that the zone is being changed to a
SFHA and is requiring ICC activity.
For communities that have cumulative damage language in their ordinance, the building must
have sustained two flood losses in 10 years, averaging 25 percent. The adjuster must verify that
the community has such cumulative damage language in the ordinance. The adjuster must also
verify that NFIP claim payments were issued to the insured for both qualifying losses.
The date of loss for the ICC claim is the same as the date of loss for the underlying flood claim.
For further information about ICC coverage, see Section VI of this manual. Subsection VI.D.3.
specifically addresses assignment of Coverage D by the policyholder to the community.

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III. PROPERTY COVERED (continued)
COVERAGE D – INCREASED COST OF COMPLIANCE (continued)
Under ICC, even if a local ordinance or law requires the testing, monitoring, clean-up, removal,
containment, treatment, detoxification, or neutralization of pollutants, there is no coverage.
Note: FEMA Bulletin W-06019, March 14, 2006, waived the 2-year time limit for the completion of
ICC activities for all claims on or after June 1, 2005, and extended the time to complete these
activities to 4 years. In an upcoming revision to the SFIP, the time limit found at paragraph 5.e.(2)
will be changed to 4 years. The 4-year limit for completing an ICC claim begins on the date of the
written declaration by the local community official that the insured structure has been substantially
damaged by flood. This means that the 4-year period that will be referenced in paragraph 5.e.(2)
begins on the date of the written declaration.
The two conditions in Paragraph 5.e. refer to the total payment of an ICC claim. Partial payments
of ICC claims are permitted. Partial payments may be issued before completion of the mitigation
activity but cannot exceed 50 percent of the estimated reimbursable cost of the mitigation activity,
up to 50 percent of the maximum ICC coverage available.
Adjusters are required to submit daily reports of possible substantially damaged properties to
the NFIP Bureau and Statistical Agent by fax at 1-301-577-3421or by mail to P.O. Box 310,
Lanham, MD 20706.
See Section VI of this manual, “Increased Cost of Compliance (ICC)” for additional information.

IV. PROPERTY NOT COVERED
Building or Personal Property Entirely in, on, or over Water or Seaward of Mean High Tide.
No coverage is provided if the building was constructed or substantially improved after
September 30, 1982.
Recreational Vehicles. Excluded from coverage except travel trailers defined in General
Property Form II.B.6.c.
Self-Propelled Vehicles or Machines. Excluded from coverage, except those used to
service the described location or designed and used to assist handicapped persons. The
vehicles or machines must be located inside the building at the described location. Such
vehicles located below the lowest elevated floor of a Post-FIRM elevated building or in a
basement are not covered.

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IV. PROPERTY NOT COVERED (continued)
Land, Land Values, Lawns, Trees, Shrubs, Plants, Growing Crops, or Animals. Animals are
specifically excluded from coverage by the provision in General Property Form Section IV.6 (also
Dwelling Form Section IV.6 and Residential Condominium Building Association Policy Section IV.6).
This exclusion applies to live bait, such as worms or minnows, sold in fishing tackle shops.
Containers. Fuel tanks and well water tanks are not covered outside a basement, elevated building
enclosure, or the insured building. Tanks containing other liquids or gases are not covered.
Hot Tubs, Spas, and Swimming Pools. These and their equipment are not covered, except that
spas and hot tubs are covered if they are bathroom fixtures or stock and inventory held for sale.
Coastal Barrier Resources Act (CBRA). It is the adjuster’s responsibility not to recommend
payment for buildings and their contents made ineligible by CBRA legislation, as it is against the law
to insure such buildings. These should be referred to Underwriting for a coverage determination.

V. EXCLUSIONS
Loss of Revenue or Profit, Loss of Access, Loss of Use, Business Interruption, and
Additional Living Expenses. We will not pay for these. Coverage is not provided for the cost of
complying with any ordinance or law except those described in D. Coverage D – Increased Cost
of Compliance and C. Coverage C – Other Coverages, 3. Pollution Damage.
Loss in Progress. Not covered (Paragraph B.).
Single Peril. Paragraph C. makes it clear that this is a single-peril policy. Earth movement
caused by flood is excluded. This includes but is not limited to earthquake, landslide, land
subsidence, sinkholes, destabilization, or movement of land resulting from the accumulation of
water in subsurface land areas, and gradual erosion.
Land subsidence is covered if it is caused by erosion as specified in the definition of flood (see
General Property Form Section II.A.2.).
Note: The adjuster should recognize and immediately report potential structural instability of the
insured property to the WYO Company and recommend a qualified expert conduct an on-site
inspection of the insured building. The expert should provide a comprehensive report detailing
the cause and effect of the settlement/subsidence including photographs of the structure to the
WYO Company that will assist in making the necessary determination as to whether or not
damage is a direct physical loss by for from flood.
Water, Moisture, Mildew, Mold, Damage. Not covered when caused by a condition substantially
confined to the building, or within the insured’s control, which includes design, structural, or
mechanical defects; failure, stoppage, or breakage of water or sewer lines, drains, pumps,
fixtures, or equipment; or the insured’s failure to adequately inspect and maintain the property
after the flood waters recede. (For additional information about mold damage, see Subsection
VIII.C′. of this manual.)
Note: The insured should not be reimbursed for any pre-existing damage resulting from rotten or
deteriorated wood or other framing members. The adjuster should be able to distinguish whether
or not the wood members have been exposed to long-term moisture causing the wood to crumble,
rot and/ or weaken. Often, the adjuster will observe infestation by termites or other insect’s in the
deteriorated area; the damage resultant from infestation is also not covered by the SFIP.

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V. EXCLUSIONS (continued)
Water or Waterborne Materials. Damage from water or waterborne materials that cause sewers
or drains to back up, including the discharge or overflow of water from a sump, sump pump, or
any related equipment, or seeps or leaks on or through insured property, is not covered. However,
if there is a general and temporary condition of flooding in the area and the flood is the proximate
cause of the sewer, drain, or sump pump back-up and is the proximate cause of the seepage of
water, then coverage is provided.
Other Water Damage. Water that seeps or leaks on or through the covered property is not
covered e.g., wind-driven rain.
Power Failure. Only losses resulting from power, heating, or cooling equipment failure, if the
failure was caused by flood and the failing equipment was located on the described location, are
covered. Power failures occurring off the described location due to flood and causing damage to
insured heating or cooling equipment or any other insured property are not covered. If the power
is intentionally turned off by the insured, there is no coverage.
Note: Federal government lease exclusion.

VI. DEDUCTIBLES
The deductible is doubled for a building under construction. (Per General Property Form
III.A.6.a.(2), if there is no work on the building for a period of 90 continuous days, coverage
ceases until such time as work is resumed.)
There are separate deductibles for the structure and personal property ranging from $500 to
$50,000 depending on the occupancy.

VII. GENERAL CONDITIONS
Pairs and Sets. We pay for the one item damaged less applicable depreciation, or the fair
proportion of the value of the pair or set that the destroyed item bears to the pair or set.

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VII. GENERAL CONDITIONS (continued)
Concealment or Fraud and Policy Voidance. Any NFIP flood policy can be voided if the
insured commits fraud. The adjuster must report to the insurer any relevant facts on the Narrative
Report form.
Other Insurance. This policy is primary over all other policies that clearly state they are excess. If
the other policy does not state it is excess, this policy is primary up to the other policy’s deductible,
subject to this policy’s deductible; once our payment reaches the other deductible amount, the
coverage becomes pro-rata. (See examples in Section VII. of this manual, Basic Adjustment
Issues, following.)
Nonrenewal of the Policy by Us. The policy will not be renewed if the community in which the
insured property is located stops participating in the NFIP or if the building has been declared
ineligible under Section 1316 of the National Flood Insurance Act of 1968, as amended.
Reduction and Reformation of Coverage. The coverage amounts will be reduced if it is
discovered that the premium was insufficient; if the amount of additional premium can be
determined, the insured has 30 days to pay the additional premium. Only prospective premiums
are to be charged. The time required to determine the additional premium must not delay the
claim process.

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VII. GENERAL CONDITIONS (continued)
Policy Renewal. The policy expires at 12:01 a.m. on the final day of the policy term. For renewal,
premium must be received within 30 days of the expiration date.

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VII. GENERAL CONDITIONS (continued)
Requirements in Case of Loss. Claims should be investigated under a Reservation of Rights or
Non-Waiver Agreement if the insured does not comply with Paragraphs J.1. through 9.

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VII. GENERAL CONDITIONS (continued)
Bailee Goods. Bailee Goods are the result of a bailment, which is the delivery of personal
property by one person (the bailor) to another (the bailee) who holds the property for a certain
purpose under an express or implied-in-fact contract.
Example: When the bailor takes a pair of shoes to the cobbler (the bailee) for repair, a bailment
is established while the bailee has the shoes. The shoes while in the possession of the bailee
are bailee goods. Note: a bailment involves a change in possession but not in title.
Real property, by definition can never be bailee goods. In addition, property that is sold (title
changes) cannot be bailee goods. Therefore, real property that is sold cannot be bailee goods
after the sale or before the sale.
Loss Payment. The adjuster needs to be prompt in reporting the investigation, as the insurer
has only 60 days from the date of receiving the insured’s Proof of Loss to pay the claim, or within
90 days after the adjuster files a report that is signed and sworn to by the insured in lieu of the
Proof of Loss. If the Proof of Loss is rejected in whole or in part or a new supplemental Proof of
Loss is filed, it must be submitted and received within 60 days of the date of loss. Only FEMA has
the authority to waive or extend the filing deadline.
Salvage. The insured has the option to keep damaged property after a flood, and the adjuster will
reduce the amount of the loss proceeds payable to the insured.
Appraisal. The appraisal clause is much like that in the homeowner’s policy. There is no
appraisal for coverage issues. The appraisal clause applies if the insured and adjuster fail to
agree on the actual cash value or replacement cost of the damaged property, whichever is
appropriate. In the event that the two appraisers appointed by the insured and insurer cannot
agree, they should submit only their differences to an umpire. There is no appraisal for
coverage issues.
Mortgage Clause. The mortgage clause applies to any loss payable under Coverage A – Building;
therefore protecting the mortgagee is not required for ICC payments. ICC payments are to help
policyholders comply with local floodplain management laws or ordinances. The insurer may choose to
include the mortgagee on these checks. However, the mortgage contract may allow the lender to apply
claim payments to the loan and not to the paid activity. Making the insurer aware of the policy wording
and any other information associated with the payment is important in their decision making process.
We will also protect the interest of any loss payee or other interested party discovered during the
investigation. This protection extends to the U.S. Small Business Administration (SBA). A typical
SBA Assignment of Insurance Proceeds letter states, “The U.S. Small Business Administration
(SBA) has approved a loan to repair/replace your insured’s damaged real estate and/or personal
property…in compliance with the assignment, future payments on this claim (except payments for
additional living expenses) are to name the U.S. Small Business Administration as a co-payee.”
This means the SBA must be included on the building check(s) and the contents check(s) on
this claim.
Suit Against Us. The insured must file suit in the United States District Court within one year after
the written denial of all or part of the claim.

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VII. GENERAL CONDITIONS (continued)
Subrogation. The insured’s right to recover for a loss in part or in whole for damages caused
by someone else is transferred to the insurer if the loss is paid under the Standard Flood
Insurance Policy.
Continuous Lake Flooding. The structure must be inundated by lake water for 90 continuous
days, and it must be reasonably certain that the continuation of this flooding will result in damage
equal to or greater than policy limits, or the ACV or RCV, as applicable. If it is not reasonably
certain that the flooding will cause a total loss, then we will pay only for the actual damage up to
the waterline. (See Section VIII. of this manual, Special Adjustment Issues, for more information
about continuous lake flooding.)
Closed Basin Lakes. A closed basin lake is a natural lake from which water leaves primarily
through evaporation, and whose surface area now exceeds or has exceeded one square mile at
any time in the past. If an insured building is subject to continuous closed basin lake flooding, a
total loss claim can be paid if lake floodwaters damage or imminently threaten to damage the
building, and an eventual total loss appears likely.
Special reporting procedures apply to ICC claims and closed basin lake claims. Notify the NFIP
Bureau and Statistical Agent upon receipt of either type of claim.

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VII. GENERAL CONDITIONS (continued)
Duplicate Policies Not Allowed. If the insured has two policies on the same property, the
insured may choose to keep either policy. However, if the insured wishes to combine coverage
limits, the effective date of the policy will be that of the later of the two policies issued.
If the insured has a Group Flood Insurance Policy as the result of a Federal Disaster Declaration,
the insured may not purchase a Standard Flood Insurance Policy as excess coverage over the
Group Flood Insurance Policy or to duplicate flood insurance benefits. The insured may cancel the
Group Flood Insurance Policy mid-term and purchase a Standard Flood Insurance Policy to
obtain higher coverage amounts. No premium refunds are given under the Group Flood
Insurance Policy.
Loss Settlement. Under the General Property Form, building and contents claims must be settled
on an Actual Cash Value basis.

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VIII. LIBERALIZATION CLAUSE
Liberalization with additional premium, such as ICC, does not fall into this category. The insured
can choose the policy application that is most beneficial. The loss must be after the effective date
of the liberalization.

IX. WHAT LAW GOVERNS
Federal law governs. This policy is not subject to state departments of insurance or state and
local courts.

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Residential Condominium Building
Association Policy

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RESIDENTIAL CONDOMINIUM BUILDING
ASSOCIATION POLICY
COMMENTARY
LIMITATIONS, RESTRICTIONS, AND EXCLUSIONS
The Residential Condominium Building Association Policy (RCBAP) covers only a residential
condominium building in a Regular Program community.
Cooperatives and other forms of ownership cannot be insured by the RCBAP.

I. AGREEMENT
The insuring agreement states the following:
•

The Standard Flood Insurance Policy (SFIP) is based upon the National Flood Insurance
Act of 1968 and all amendments, and Title 44 of the Code of Federal Regulations (CFR).

•

The insured must pay the correct premium to get the requested amount of coverage.

•

The insured or the insured’s representative must submit accurate information.

II. DEFINITIONS
Flood. Requires surface water inundation of normally dry land from any source, including
mudflow (see ”Mudflow” definition). Two acres of the insured property or two or more adjoining
properties, one of which may be a public roadway, must be inundated.
Actual Cash Value. Replacement cost value of the insured building and contents less
applicable depreciation (does not include antique value).
Application. Part of the policy; the application paragraph states that the insured must pay
the correct premium.

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II. DEFINITIONS (continued)
Basement. Any area having its floor below ground level (subgrade) on all sides.
Building. A building must have at least two rigid walls and a roof. Liquid storage tanks and
bubbles are not covered. Grain bins and silos are covered. Travel trailers without wheels and
affixed to a permanent foundation are covered if regulated by local law.
Condominium Association. The association is comprised of unit owners who are responsible
for the maintenance and operation of the common elements owned by the unit owners and
other real property. The RCBAP may not insure Homeowner Associations, Cooperatives, and
other forms of ownership that are not condominiums. The adjuster must review the
condominium by-laws if there is a question.
Declarations Page. A summary of information provided by the policyholder on the insurance
application. The adjuster must verify the accuracy of the building description, as this may
affect coverage.
Described Location. Shown on the Declarations Page.
Direct Physical Loss By or From Flood. Floodwaters must touch the insured building with the
exception of seepage/hydrostatic pressure.
Elevated Building. This definition requires space between ground level and the lowest floor.
Mudflow. A surface river of liquid and flowing mud. Other earth movements such as landslide,
slope failure, or saturated soil moving by liquidity are not mudflows. (The word “mudslide” no
longer is used in the SFIP.)
Pollutants. Testing for or monitoring of pollutants is not covered unless required by law.

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II. DEFINITIONS (continued)
Post-FIRM Building. Start of construction or substantial improvement after December 31,
1974, or on or after the publication of the initial Flood Insurance Rate Map (FIRM), whichever is
later. Note: A pre-FIRM building would be a building constructed or substantially improved prior
to December 31, 1974.
Special Flood Hazard Area (SFHA). All zones listed are SFHAs. However, the Post-FIRM
coverage limitations apply only to Zones A1-A30, AE, AH, AR, AR/A, AR/AE, AR/AH,
AR/A1-A30, V1-V30, and VE.
Valued Policy. This is not a valued policy, in any state.

III. PROPERTY COVERED
COVERAGE A – BUILDING PROPERTY
This policy covers only a residential condominium building including the units within the building
and the improvements within the units.
Additions that are attached to and in contact with the risk by a rigid exterior wall, a solid loadbearing interior wall, a stairway, an elevated walkway, or a roof are covered.
A solid load-bearing interior wall cannot have any openings and must not provide access from
one building or room into another (partial walls). If access is available through a doorway or
opening, then the structure must be insured as one building. Other provisions are:
•
•

At the insured’s option, at the of the flood application for coverage, the additions and
extensions may be insured separately.
A common interior wall that is not solid or load bearing necessitates one policy.

Fixtures, Machinery, and Equipment. The items in this list (RCBAP Section III. Property
Covered, A. Coverage A – Building Property, 4.) are defined as building property and cannot be
paid under contents coverage. The list of items in Paragraph 4 is not exclusive. If there are
other items that fit this coverage, they can be included.
Materials and Supplies. Those used to alter, repair, or construct the insured building must be
in a fully enclosed building at the property address or an adjacent property.
Building Under Construction. The deductible is doubled (see RCBAP Section VI. Deductibles,
second paragraph of provision A.) and, if there is no work on the building for a period of 90
continuous days, coverage ceases until such time as work is resumed. Coverage is provided for
those items that will become part of the finished building. For example, rebar, footings, and
concrete walls that will become part of the finished building are covered. There is no coverage
for the forms used to retain the concrete. There is no coverage for a building under construction
before it is walled and roofed when the building is post-FIRM and the basement floor or lowest
elevated floor is below Base Flood Elevation in any of Zones AH, AE, A1-A30, AR, AR/AE,
AR/AH, AR/A1-A30, AR/A, or AR/AO, or below Base Flood Elevation adjusted for wave action in
any of Zones VE or V1-V30.

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III. PROPERTY COVERED (continued)
COVERAGE B – PERSONAL PROPERTY
Contents coverage must be purchased separately, and a separate deductible is applied.
Contents must be owned by the unit owner who has ownership interest, or be owned solely by
the condominium association and used exclusively for the association’s business.
Contents are covered while stored in the enclosed building at the property address. Flotation of
contents out of a building that has fewer than four rigid walls is not covered.
Read RCBAP Section III.C.2.b. Property Removed to Safety.
The policy lists items that must always be considered contents (RCBAP Section III.B.2.). The
policy also lists contents items covered in a basement or beneath the lowest elevated floor of a
post-FIRM elevated building (RCBAP Section III.B.3.).
A building enclosure and personal property items in a building enclosure below the lowest
elevated floor of an elevated post-FIRM building located in Zones A1-30, AE, AH, AR, AR/A,
AR/AE, AR/AH, AR/A1-30 where the top of the lowest enclosure floor is at or above the Base
Flood Elevation as shown on the FIRM in effect on the date of loss, is covered.

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III. PROPERTY COVERED (continued)
COVERAGE B – PERSONAL PROPERTY (continued)
Special Limits. A total of $2,500 is the maximum payment allowed for artwork, rare books,
jewelry, furs, or any article containing fur, which represents its principal value. This maximum
payment also extends to the following:
•
•
•
•
•
•
•
•

Photographs
Collectibles
Memorabilia
Porcelain or other figures and sports cards
Autographed items
Watches
Precious and semiprecious stones
Articles of gold, silver, or platinum

Antiques. Coverage is provided only for the functional value of antiques.

COVERAGE C – OTHER COVERAGES
Debris Removal. Insured property means property we insure—i.e., the described building and
covered contents. The described premises includes the lot, which is not covered.
Coverage extends to insured property anywhere and to non-owned debris on or in the insured
property. Non-covered items such as contents in a basement are excluded from debris removal
coverage.
Loss Avoidance Measures (Mitigation). Expenses are covered up to $1,000 per measure; no
deductible applies. Paid receipts are required for sandbags, supplies and property removed to
safety (truck rental, storage unit, etc.) Loss mitigation measures are described below.
a. Sandbags, Supplies, and Labor
•
•
•
•
•

Sandbags, including sand
Fill for temporary levees
Pumps
Plastic sheeting and lumber used in connection with these items
Labor (Unit owners and members of their families can be paid for labor at the federal
minimum wage.)

This coverage applies only under Coverage A – Building Property.
b. Property Removed to Safety. A maximum of $1,000 can be paid to move insured property
to another place other than the described location above ground or outside the SFHA to
preserve it from flood. If the property removed is a manufactured (mobile) home or travel
trailer, coverage extends to it for 45 days even if it is not on a foundation. This coverage can
be used for building, contents, or both; but the total of building and contents payments
cannot exceed $1,000 each.

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III. PROPERTY COVERED (continued)
COVERAGE C – OTHER COVERAGES (continued)
Other provisions regarding property removed to safety are:
•

Contents must be placed in a fully enclosed building or otherwise reasonably protected
and moved temporarily away from the peril of flood.

•

Coverage extends for 45 days at another place.

•

With paid receipts, coverage is also extended to return the removed property back to the
described location.

•

No deductible applies.

Removed property is covered for damage by flood only. Any property removed, including a
moveable home described in RCBAP Section II.B.6.b. and c., must be placed above ground
level at a location other than the described location or outside of the SFHA. See Dwelling
Form Section III.C.2.b. and General Property Form Section III.C.2.b.

COVERAGE D – INCREASED COST OF COMPLIANCE
The limit of liability for Increased Cost of Compliance (ICC) coverage was raised to $30,000 on
May 1, 2003. Any flood loss incurred prior to May 2003 will be adjusted according to the
previous limit of $20,000.
ICC coverage is used for floodproofing, demolition, elevation, or relocation of the structure, or a
combination of these. It is an additional amount of insurance above building limits of liability, but
we cannot pay more than the law allows.
Structures that are in an SFHA and are declared by the local community to be substantially flooddamaged by 50 percent of their market value are eligible. An ICC claim must not be opened until
the local official has declared in writing that the structure has been substantially damaged
specifically by flood.
On ICC claims for structures in B, C, X, D, unnumbered A and V, and A99 zones, the adjuster
needs to obtain a written statement from the local official that the zone is being changed to a
SFHA and is requiring an ICC activity.
For communities that have cumulative damage language in their ordinance, the building must
have sustained two flood losses in 10 years, averaging 25 percent. The adjuster must verify that
the community has such cumulative damage language in the ordinance. The adjuster must also
verify that NFIP claim payments were issued to the insured for both qualifying losses.
The date of loss for the ICC claim is the same as the date of loss for the underlying flood claim.

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III. PROPERTY COVERED (continued)
COVERAGE D – INCREASED COST OF COMPLIANCE (continued)
Under ICC, even if a local ordinance or law requires the testing, monitoring, clean-up, removal,
containment, treatment, detoxification, or neutralization of pollutants, there is no coverage.
Note: FEMA Bulletin W-06019, March 14, 2006, waived the 2-year time limit for the completion of
ICC activities for all claims on or after June 1, 2005, and extended the time to complete these
activities to 4 years. In an upcoming revision to the SFIP, the time limit found at paragraph 5.e.(2)
will be changed to 4 years. The 4-year limit for completing an ICC claim begins on the date of the
written declaration by the local community official that the insured structure has been substantially
damaged by flood. This means that the 4-year period that will be referenced in paragraph 5.e.(2)
begins on the date of the written declaration.
The two conditions in Paragraph 5.e. refer to the total payment of an ICC claim. Partial payments
of ICC claims are permitted. Partial payments may be issued before completion of the mitigation
activity but cannot exceed 50 percent of the estimated reimbursable cost of the mitigation activity,
up to 50 percent of the maximum ICC coverage available.
Adjusters are required to submit daily reports of possible substantially damaged properties to
the NFIP Bureau and Statistical Agent by fax at 301-577-3421, by mail to P.O. Box 310,
Lanham, MD 20706.
See Section VI. of this manual, “Increased Cost of Compliance (ICC)”, for additional information.

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IV. PROPERTY NOT COVERED
Building or Personal Property Entirely in, on, or over Water or Seaward of Mean High Tide.
No coverage is provided if the building was constructed or substantially improved after
September 30,1982.
Recreational Vehicles. Excluded from coverage except travel trailers defined in
RCBAP II.B.6.c.
Self-Propelled Vehicles or Machines. Excluded from coverage, except those used to
service the described location or designed and used to assist handicapped persons. The
vehicles or machines must be located inside the building at the described location. Such
vehicles located below the lowest elevated floor of a post-FIRM elevated building or in a
basement are not covered.
Land, Land Values, Lawns, Trees, Shrubs, Plants, Growing Crops, or Animals. Animals
are specifically excluded from coverage by the provision in RCBAP Section IV.6 (also Dwelling
Form Section IV.6 and General Property Form Section IV.6). This exclusion applies to live bait,
such as worms or minnows, sold in fishing tackle shops.
Containers. Fuel tanks and well water tanks are not covered outside a basement,
elevated building enclosure, or the insured building. Tanks containing other liquids or gases
are not covered.
Hot Tubs, Spas and Swimming Pools. These and their equipment are not covered, except
that spas and hot tubs are covered if they are bathroom fixtures.
Coastal Barrier Resources Act (CBRA). It is the adjuster’s responsibility not to
recommend payment for buildings and their contents made ineligible by CBRA legislation,
as it is against the law to insure such buildings. These should be referred to Underwriting for a
coverage determination.

V. EXCLUSIONS

Loss of Revenue or Profit, Loss of Access, Loss of Use, Business Interruption, and
Additional Living Expenses. We will not pay for these.

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V. EXCLUSIONS (continued)
Coverage is not provided for the cost of complying with any ordinance or law except those described
in D. Coverage D – Increased Cost of Compliance.
Loss in Progress. Not covered (Paragraph B.).
Single Peril. Paragraph C. makes it clear that this is a single-peril policy. Earth movement caused by
flood is excluded. This includes but is not limited to earthquake, landslide, land subsidence, sinkholes,
destabilization, or movement of land resulting from the accumulation of water in subsurface land
areas, and gradual erosion.
Land subsidence is covered if it is caused by erosion as specified in the definition of flood (see
RCBAP Section II.A.2.).
Note: The adjuster should recognize and immediately report potential structural instability of the
insured property to the WYO Company and recommend a qualified expert conduct an on-site
inspection of the insured building. The expert should provide a comprehensive report detailing the
cause and effect of the settlement/subsidence including photographs of the structure to the WYO
Company that will assist in making the necessary determination as to whether or not damage is a
direct physical loss by for from flood.
Water, Moisture, Mildew, Mold, Damage. Not covered when caused by a condition substantially
confined to the building, or within the insured’s control, which includes design, structural, or
mechanical defects; failure, stoppage, or breakage of water or sewer lines, drains, pumps, fixtures, or
equipment; or the insured’s failure to adequately inspect and maintain the property after the flood
waters recede. (For additional information about mold damage, see Subsection VIII.C ′.of this manual.)
Note: The insured should not be reimbursed for any pre-existing damage resulting from rotten or
deteriorated wood or other framing members. The adjuster should be able to distinguish whether or
not the wood members have been exposed to long-term moisture causing the wood to crumble, rot
and/ or weaken. Often, the adjuster will observe infestation by termites or other insect’s in the
deteriorated area; the damage resultant from infestation is also not covered by the SFIP.
Water or Waterborne Materials. Damage from water or waterborne materials that cause sewers or
drains to back up, including the discharge or overflow of water from a sump, sump pump, or any
related equipment, or seeps or leaks on or through insured property, is not covered. However, if there
is a general and temporary condition of flooding in the area and the flood is the proximate cause of the
sewer, drain, or sump pump back-up and is the proximate cause of the seepage of water, then
coverage is provided.
Other Water Damage. Water that seeps or leaks on or through the covered property is not covered
e.g., wind-driven rain.
Power Failure. Only losses resulting from power, heating, or cooling equipment failure, if the failure
was caused by flood and the failing equipment was located on the described location, are covered.
Power failures occurring off the described location due to flood and causing damage to insured
heating or cooling equipment or any other insured property are not covered. If the power is
intentionally turned off by the insured, there is no coverage.
Note: Federal government lease exclusion.
Pollutants. Testing for or monitoring of pollutants is not covered unless required by law.

VI. DEDUCTIBLES
The deductible is doubled for a building under construction. (Per RCBAP Section III.A.6.a.(2), if there
is no work on the building for a period of 90 continuous days, coverage ceases until such time as work
is resumed.)

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VI. DEDUCTIBLES (continued)
As in the past, there are separate deductibles for the structure and personal property ranging from
$500 to $50,000 depending on the occupancy.

VII. COINSURANCE
Coinsurance is applied only to the building portion of the claim.
We will reduce any loss payment unless the amount of insurance applicable to the damaged
building is the lesser of:
•
•

At least 80 percent of its replacement cost; or
The maximum amount of insurance available for that building under the RCBAP.

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VIII. GENERAL CONDITIONS
Pairs and Sets. We pay for the one item damaged less applicable depreciation, or the fair
proportion of the value of the pair or set that the destroyed item bears to the pair or set.
Concealment or Fraud and Policy Voidance. Any NFIP flood policy can be voided if the
insured commits fraud. The adjuster must report to the insurer any relevant facts on the
Narrative Report form.
Other Insurance. This policy is primary over all other policies that clearly state they are excess. If
the other policy does not state it is excess, this policy is primary up to the other policy’s deductible,
subject to this policy’s deductible; once our payment reaches the other deductible amount, the
coverage becomes pro-rata. (See examples in Section VII. of this manual, Basic Adjustment
Issues, following.)

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VIII. GENERAL CONDITIONS (continued)
Nonrenewal of the Policy by Us. The policy will not be renewed if the community in which the
insured property is located stops participating in the NFIP or if the building has been declared
ineligible under Section 1316 of the National Flood Insurance Act of 1968, as amended.
Reduction and Reformation of Coverage. The coverage amounts will be reduced if it is
discovered that the premium was insufficient; if the amount of additional premium can be
determined, the insured has 30 days to pay the additional premium. Only prospective premiums
are to be charged. The time required to determine the additional premium must not delay the
claim process.

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VIII. GENERAL CONDITIONS (continued)
Requirements in Case of Loss. Claims should be investigated under a Reservation of Rights or
Non-Waiver Agreement if the insured does not comply with Paragraphs J.1. through 9.

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VIII. GENERAL CONDITIONS (continued)
Bailee Goods. Bailee Goods are the result of a bailment, which is the delivery of personal
property by one person (the bailor) to another (the bailee) who holds the property for a certain
purpose under an express or implied-in-fact contract.
Example: When the bailor takes a pair of shoes to the cobbler (the bailee) for repair, a bailment
is established while the bailee has the shoes. The shoes while in the possession of the bailee
are bailee goods. Note: a bailment involves a change in possession but not in title.
Real property, by definition can never be bailee goods. In addition, property that is sold (title
changes) cannot be bailee goods. Therefore, real property that is sold cannot be bailee goods
after the sale or before the sale.
Loss Payment. The adjuster needs to be prompt in reporting the investigation, as the insurer has
only 60 days from the date of receiving the insured’s Proof of Loss to pay the claim, or within 90
days after the adjuster files a report that is signed and sworn to by the insured in lieu of the Proof
of Loss. If the Proof of Loss is rejected in whole or in part or a new supplemental Proof of Loss is
filed, it must be submitted and received within 60 days of the date of loss. Only FEMA has the
authority to waive or extend the filing deadline.
Salvage. The insured has the option to keep damaged property after a flood, and the adjuster will
reduce the amount of the loss proceeds payable to the insured.
Appraisal. The appraisal clause is much like that in the homeowner’s policy. There is no
appraisal for coverage issues. The appraisal clause applies if the insured and adjuster fail to
agree on the actual cash value or replacement cost of the damaged property, whichever is
appropriate. In the event that the two appraisers appointed by the insured and insurer cannot
agree, they should submit only their differences to an umpire. There is no appraisal for
coverage issues.
Mortgage Clause. The mortgage clause applies to any loss payable under Coverage A – Building.
ICC is Coverage D; therefore protecting the mortgagee is not required for ICC payments. ICC
payments are to help policyholders comply with local floodplain management laws or ordinances. The
insurer may choose to include the mortgagee on these checks. However, the mortgage contract may
allow the lender to apply claim payments to the loan and not to the paid activity. Making the insurer
aware of the policy wording and any other information associated with the payment is important in their
decision making process.
We will also protect the interest of any loss payee or other interested party discovered during the
investigation. This protection extends to the U.S. Small Business Administration (SBA). A
typical SBA Assignment of Insurance Proceeds letter states, “The U.S. Small Business
Administration (SBA) has approved a loan to repair/replace your insured’s damaged real estate
and/or personal property…in compliance with the assignment, future payments on this claim
(except payments for additional living expenses) are to name the U.S. Small Business
Administration as a co-payee.” This means the SBA must be included on the building check(s)
and the contents check(s) on this claim.

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VIII. GENERAL CONDITIONS (continued)
Suit Against Us. The insured must file suit in the United States District Court within one year after
the written denial of all or part of the claim.
Subrogation. The insured’s right to recover for a loss in part or in whole for damages caused
by someone else is transferred to the insurer if the loss is paid under the Standard Flood
Insurance Policy.
Continuous Lake Flooding. The structure must be inundated by lake water for 90 continuous
days, and it must be reasonably certain that the continuation of this flooding will result in
damage equal to or greater than policy limits, or the ACV or RCV, as applicable. If it is not
reasonably certain that the flooding will cause a total loss, then we will pay only for the actual
damage up to the waterline. (See Section VIII. of this manual, Special Adjustment Issues, for
more information about continuous lake flooding.)
Closed Basin Lakes. A closed basin lake is a natural lake from which water leaves primarily
through evaporation, and whose surface area now exceeds or has exceeded 1 square mile at any
time in the past. If an insured building is subject to continuous closed basin lake flooding, a total
loss claim can be paid if lake flood waters damage or imminently threaten to damage the building
and an eventual total loss appears likely.
Special reporting procedures apply to ICC claims and closed basin lake claims. Notify the NFIP
Bureau and Statistical Agent upon receipt of either type of claim.

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VIII. GENERAL CONDITIONS (continued)
Duplicate Policies Not Allowed. If the insured has two policies on the same property, the
insured may choose to keep either policy. However, if the insured wishes to combine coverage
limits, the effective date of the policy will be that of the later of the two policies purchased.
If the insured has a Group Flood Insurance Policy as the result of a Federal Disaster
Declaration, the insured may not purchase a Standard Flood Insurance Policy as excess
coverage over the Group Flood Insurance Policy or to duplicate flood insurance benefits. The
insured may cancel the Group Flood Insurance Policy mid-term and purchase a Standard Flood
Insurance Policy to obtain higher coverage amounts. No premium refunds are given under the
Group Flood Insurance Policy.

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VIII. GENERAL CONDITIONS (continued)
Loss Settlement. There are three methods to settle a loss under the Residential Condominium
Building Association Policy:
•
•
•

Replacement Cost
Special Loss Settlement
Actual Cash Value

Replacement Cost. The insured residence must be the principal residence, meaning that, at
the time of loss, the insured lived there for at least 80 percent of the preceding 365 days, or
80 percent of the period of ownership if less than 365 days. Replacement cost applies if the
building is insured to 80 percent or more of its full replacement cost immediately before a loss
occurs, or if the maximum amount of insurance is purchased.
By FEMA Guidance W-04020, effective May 7, 2004, when the insured dwelling is eligible for
replacement cost loss settlement, there is no longer any requirement to withhold the recoverable
depreciation until repairs are made.
Special Loss Settlement. If the residential condominium building is a manufactured (mobile)
home or travel trailer, is at least 16 feet wide, and has an area of at least 600 square feet within its
walls, then the loss will be settled on a Replacement Cost basis. If a single-family dwelling that is
a manufactured (mobile) home or travel trailer is a total loss or is not economically feasible to
repair, then the adjustment of the property will be the lesser of:
•
•

The replacement cost of the dwelling or 1.5 times the actual cash value, or
The building limit of liability.

If we determine that the building is repairable, the loss will be settled according to the
Replacement Cost conditions stated in Paragraph VIII.V.2.
Actual Cash Value (ACV). ACV is the cost to replace the insured item of property at the time
of the loss, less its physical depreciation. The types of property that are subject to ACV
Settlement are:
•

The insured’s personal property

•

Abandoned property that, after a loss, remains as debris at the described location

•

Outdoor awnings, outdoor antennas or aerials of any type (including policyholder-owned
satellite dishes) and other outdoor equipment attached to the insured dwelling

•

Carpeting and pads

•

Appliances

•

A manufactured (mobile) home or travel trailer that is not at least 16 feet wide or does not
have an area of at least 600 square feet within its walls

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IX. LIBERALIZATION CLAUSE
Liberalization with additional premium, such as ICC, does not fall into this category. The insured
can choose the policy application that is most beneficial. The loss must be after the effective date
of the liberalization.

X. WHAT LAW GOVERNS
Federal law governs. This policy is not subject to state departments of insurance or state
and local courts.

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