NFIP Claims Appeal

National Flood Insurance Program Claims Forms

Adjuster Claims Manual

NFIP Claims Appeal

OMB: 1660-0005

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2023-02-23 - Revision of a currently approved collection

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National Flood Insurance Program

Adjuster Claims Manual
December 2000
Revised January 2002
Revised January 2004
Revised June 2010

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National Flood Insurance Program

Adjuster Claims Manual
December 2000
Revised January 2002
Revised January 2004
Revised June 2010

Prepared by the Claims and Underwriting Department
NFIP Bureau and Statistical Agent

This page is intentionally left blank.

CONTENTS
I.
A.
B.
C.

National Flood Insurance Program (NFIP) ............................................................... I-1
Background ................................................................................................................. I-1
The Write Your Own Program ..................................................................................... I-1
The NFIP Today .......................................................................................................... I-1
1. NFIP Direct Program ............................................................................................. I-1
2. WYO Program ....................................................................................................... I-1
D. Flood Hazard Zones .................................................................................................... I-2
E. Program Phases and Coverage Limits ........................................................................ I-3
1. Program Phases.................................................................................................... I-3
2. Amounts of Insurance Available ............................................................................ I-4
II. Adjuster Participation in the NFIP............................................................................ II-1
A. Qualifications............................................................................................................... II-1
1. Residential, Manufactured (Mobile) Home/Travel Trailer,
and Commercial Authorization ............................................................................... II-1
2. Large Commercial and RCBAP Authorization........................................................ II-2
B. Authorization Requirements ........................................................................................ II-2
C. Adjustment Standards and Requirements ................................................................... II-3
1. General Standards and Requirements................................................................... II-3
2. Specific Standards and Requirements ................................................................... II-4
D. NFIP Fee Schedule Billing........................................................................................... II-8
1. Gross Losses ........................................................................................................ II-8
2. Increased Cost of Compliance (ICC) Claims.......................................................... II-8
III. NFIP Disaster Response ........................................................................................... III-1
A. Disaster Response Field Offices ................................................................................. III-1
1. Adjuster Control Office .......................................................................................... III-1
2. Claims Coordinating Office .................................................................................... III-1
3. Flood Insurance Claims Office ............................................................................... III-1
4. Flood Response Office .......................................................................................... III-1
B. Single Adjuster Program and Claims Coordinating Office ............................................ III-2
1. Objective ............................................................................................................... III-2
2. Background ........................................................................................................... III-2
3. Implementation ...................................................................................................... III-2
4. Adjuster Briefing .................................................................................................... III-3
IV. Policy Changes Affecting the Liberalization Clause ............................................... IV-1
V. Standard Flood Insurance Policy ............................................................................. V-1
A. Introduction ................................................................................................................. V-1
1. The Three Policy Forms ........................................................................................ V-1
2. Use of New Policy Forms ...................................................................................... V-1
3. Currency of Information ......................................................................................... V-1
B. Coverage Comparison Table....................................................................................... V-1
C. Policy Forms and Commentaries................................................................................. V-3
Dwelling Form ............................................................................................................. V-5
General Property Form................................................................................................ V-43
Residential Condominium Building Association Policy ................................................. V-79

ADJUSTER CLAIMS MANUAL

REVISED JUNE 2010

VI.
A.
B.
C.
D.
E.

Increased Cost of Compliance (ICC) ...................................................................... VI-1
Principal Features of ICC Coverage .......................................................................... VI-1
Coverage Questions and Answers ............................................................................ VI-1
Eligibility Questions and Answers ............................................................................. VI-2
Claims Adjustment Questions and Answers .............................................................. VI-4
Other Frequently Asked Questions and Answers ...................................................... VI-7

VII.
A.
B.
C.
D.
E.
F.
G.

Basic Adjustment Issues ........................................................................................ VII-1
Actual Cash Value (ACV) .......................................................................................... VII-1
Additions and Extensions .......................................................................................... VII-1
Adjuster Preliminary Damage Assessment (APDA) ................................................... VII-1
Advance Payments ................................................................................................... VII-1
Basements ................................................................................................................ VII-1
Contents Manipulation. .............................................................................................. VII-1
Depreciation .............................................................................................................. VII-2
1. Building Physical Depreciation .............................................................................. VII-2
2. Contents Physical Depreciation ............................................................................. VII-2
Evidence of Loss ....................................................................................................... VII-2
1. Insured’s Responsibilities....................................................................................... VII-2
2. Adjuster’s Responsibilities ..................................................................................... VII-3
Flood Definition ......................................................................................................... VII-3
Improvements and Betterments ................................................................................ VII-3
Lease Agreements/Insurable Interest ....................................................................... VII-3
Non-Waiver Agreement ............................................................................................ VII-4
Other Insurance Clause ............................................................................................. VII-4
1. Introduction ........................................................................................................... VII-4
2. Examples .............................................................................................................. VII-5
Overhead and Profit ................................................................................................... VII-6
Pollution Damage ...................................................................................................... VII-7
Proof of Loss Requirements and Waiver .................................................................... VII-7
Repair vs. Replacement............................................................................................. VII-7
1. Appliances ............................................................................................................. VII-7
2. Furniture ................................................................................................................ VII-7
Replacement Cost Coverage (RCC) and Hold Back .................................................. VII-8
Reservation of Rights Letter....................................................................................... VII-8
Reserves ................................................................................................................... VII-8
Salvage ..................................................................................................................... VII-9
Self-Propelled Vehicles .............................................................................................. VII-9
Special Loss Settlement ............................................................................................ VII-9
Subrogation ............................................................................................................... VII-10

H.
I.
J.
K.
L.
M.
N.
O.
P.
Q.
R.
S.
T.
U.
V.
W.
X.

VIII. Special Adjustment Issues...................................................................................... VIII-1
A. Air Conditioning Condensers and Solar Heating Elements ........................................ VIII-1
B. Bailee Goods ............................................................................................................. VIII-1
C. Boathouses: Coverage for Non-Boathouse Parts of Building
into Which Boats Are Floated ...................................................................................... VIII-1
D. Carpeting and Drapes ................................................................................................ VIII-2
E. Cisterns ..................................................................................................................... VIII-2
F. Closed Basin Lakes and Continuous Lake Flooding .................................................. VIII-2
1. Closed Basin Lakes ............................................................................................... VIII-2
2. Continuous Lake Flooding ..................................................................................... VIII-2
G. Coastal Barrier Resources System (CBRS) ............................................................... VIII-3

ADJUSTER CLAIMS MANUAL

REVISED JUNE 2010

1. Introduction ........................................................................................................... VIII-3
2. Coastal Barrier Resources Act .............................................................................. VIII-3
3. Coastal Barrier Improvement Act ........................................................................... VIII-4
4. Substantial Improvement: The 50 Percent Rule..................................................... VIII-4
H. Commercial Losses ..................................................................................................... VIII-4
I. Condemnation of Property........................................................................................... VIII-5
J. Condominium Unit Owner – Dwelling Form ................................................................ VIII-5
K. Constructive Total Loss ............................................................................................... VIII-5
L. Decks .......................................................................................................................... VIII-5
M. Elevated Buildings ....................................................................................................... VIII-6
1. Coverage Restrictions ........................................................................................... VIII-6
2. Coverage for Garages and Contents ..................................................................... VIII-6
3. Coverage for Building Property in a Building Enclosure
Below the Lowest Elevated Floor or in a Basement ............................................... VIII-7
N. Elevators ..................................................................................................................... VIII-8
O. Erosion and Wave Wash ............................................................................................. VIII-8
P. Fiberboard Sheathing/Blackboard ............................................................................... VIII-9
Q. Food in Freezers ......................................................................................................... VIII-9
R. Foundations ................................................................................................................ VIII-9
S. Freezers ...................................................................................................................... VIII-10
T. Garages ..................................................................................................................... VIII-10
U. Hydrostatic Pressure ................................................................................................... VIII-10
V. Ice and Debris Impact Damage ................................................................................... VIII-10
W. LOMA and LOMR ....................................................................................................... VIII-10
X. Manufactured (Mobile) Homes and Travel Trailers ...................................................... VIII-10
Y. Mudflow....................................................................................................................... VIII-11
Z. Property Removed to Safety ....................................................................................... VIII-11
A’. Reformation of Coverage ........................................................................................... VIII-11
B’. Repetitive Loss Structures and Previous Claims ......................................................... VIII-11
1. Repetitive Loss Structures ..................................................................................... VIII-11
2. Previous Claims .................................................................................................... VIII-11
C’. Scrip and Stored Value Cards ..................................................................................... VIII-12
D’. Seepage and High Water Table .................................................................................. VIII-12
E’. Stock (Personal Property) Losses-General Property Form........................................... VIII-12
F’. Swimming Pools, Hot Tubs, and Spas ........................................................................ VIII-12
G’. Travel Trailers ............................................................................................................. VIII-13
H’. Blinds .......................................................................................................................... VIII-13
I’. Water, Moisture, Mildew, or Mold Damage .................................................................. VIII-13
J’. Water Softeners .......................................................................................................... VIII-13
K’. Well Water Pumps ...................................................................................................... VIII-13
IX. Wind vs. Flood Issues............................................................................................... IX-1
X. Maintaining the Integrity of the NFIP
A. Quality Assurance Inspections .................................................................................... X-1
1. Routine Reinspections........................................................................................... X-1
2. Special Assist Reinspections ................................................................................. X-1
B. Fraud Prevention......................................................................................................... X-1
1. Detecting Possible Fraud....................................................................................... X-1
2. Reporting Possible Fraud ...................................................................................... X-2
C. Flood Insurance Reform Act of 2004 (FIRA) ............................................................... X-2
D. Audits ......................................................................................................................... X-2
ADJUSTER CLAIMS MANUAL

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REVISED JUNE 2010

1.
2.
3.
4.
5.

Incorrect Estimate/Worksheet Calculation ............................................................ X-3
Insufficient Damage Documentation ..................................................................... X-3
Payment Processing Errors .................................................................................. X-3
Covered loss exceeded the value of certain items ................................................. X-3
Case Loss Reserving ............................................................................................ X-4

Appendix A: NFIP Forms Used in Claims Adjustment ................................................. A-1
Exhibit 1.
Adjuster Certification Application (F-673/81-110) .......................................... A-3
Exhibit 2.
Adjuster Preliminary Damage Assessment (F-674/81-109) ........................... A-5
Exhibit 3.
Cause of Loss and Subrogation Report (F-092/81-63) .................................. A-7
Exhibit 4.
Elevation Certificate, 2009 Revision (F-063/81-31) ....................................... A-9
Exhibit 5.
Increased Cost of Compliance (ICC) Adjuster Report (F-555/81-98)............. A-11
Exhibit 6.
Increased Cost of Compliance Proof of Loss (F-554/81-42A) ....................... A-13
Exhibit 7.
Manufactured (Mobile) Home/Travel Trailer Worksheet (F-136/81-96) ......... A-15
Exhibit 8.
Manufactured (Mobile) Home/Travel Trailer Worksheet
(Continued) (F-776/81-96A) .......................................................................... A-17
Exhibit 9.
National Flood Insurance Program Preliminary Report (F-093/81-57) ........... A-19
Exhibit 10. National Flood Insurance Program Narrative Report (F-095/81-59) .............. A-21
Exhibit 11. National Flood Insurance Program Final Report (F-094/81-58) ..................... A-23
Exhibit 12. Notice of Loss (F-102/81-43) ........................................................................ A-25
Exhibit 13. Proof of Loss (F-101/81-42) .......................................................................... A-27
Exhibit 14. Statement as to Full Cost of Repair or Replacement (F-103/81-44) .............. A-29
Exhibit 15. Worksheet – Building (F-099/81-41) ............................................................. A-31
Exhibit 16. Worksheet – Building (Cont’d) (F-100/81-41A).............................................. A-33
Exhibit 17. Worksheet – Contents – Personal Property (F-098/81-40) ............................ A-35
Appendix B: FEMA Bulletins ......................................................................................... B-1
Exhibit 1.
Claims Payments on Enclosures at or above the
Base Flood Elevation (W-04011) ................................................................. B-3
Exhibit 2.
Flood Insurance Claims Guidance (W-04020)............................................... B-7
Exhibit 3.
Flood Insurance Claims Guidance (elevated slabs) (W-04091)..................... B-9
Exhibit 4.
Waiver of the Two-Year Time Limit for ICC (W-06019) ................................. B-11
Exhibit 5.
Wind/Water Investigative Tips (W-08008) .................................................... B-13
Exhibit 6.
Claims Guidance-Detached Garages (W-08043) .......................................... B-17
Exhibit 7.
NFIP Adjuster Fee Schedule – 2008 Revision (W-08052) ............................. B-21
Exhibit 8.
Flood Insurance Claims Guidance (W-08070)............................................... B-25
Exhibit 9.
NFIP Case Loss Reserving Procedures (W-08095) ...................................... B-29
Exhibit 10. Formal Appeals Process – Issuance of Denial Letter (W-09002) .................. B-31
Exhibit 11. Substantially Damaged Structures (W-09077) .............................................. B-33
Exhibit 12. Update - NFIP Case Loss Reserving Procedures (W-10008)........................ B-35
Exhibit 13 Buildings Over Water That Were Originally Constructed
Over Land (W-10010) ................................................................................... B-37
Exhibit 14. Wind vs. Water – Adjusting Process (W-10017)............................................ B-41
Exhibit 15. Flood Insurance Guidance Concerning Contents
Manipulation (W-10035)................................................................................ B-51
Exhibit 16. Wind vs. Water – Adjusting Process Clarification (W-10060) ........................ B-53
Exhibit 17. Oil in Flood Water (W-10065a) ..................................................................... B-55

ADJUSTER CLAIMS MANUAL

REVISED JUNE 2010

I. NATIONAL FLOOD INSURANCE PROGRAM
A. BACKGROUND
The National Flood Insurance Program (NFIP) is a federal program that allows property owners
to purchase insurance protection against losses from flooding. This insurance is designed to
provide an alternative to costly, taxpayer-funded disaster assistance.
Congress established the NFIP with the passage of the National Flood Insurance Act of 1968
that provides the NFIP authority and guidelines. All changes since 1968 have been made as
amendments to this act. The Federal Emergency Management Agency (FEMA) administers
the NFIP.
Participation in the NFIP is based on an agreement between local participating communities and
the federal government. The community agrees to implement and enforce floodplain measures
(ordinances and laws) to reduce future flood damage to new construction in Special Flood
Hazard Areas; the federal government will make flood insurance available within the community
as financial protection against future flood losses.

B. THE WRITE YOUR OWN PROGRAM
In 1981, FEMA initiated efforts to once again involve the private-sector insurance industry in the
NFIP. A cooperative effort between FEMA and insurance company representatives led to the
creation of the Write Your Own (WYO) Program in July 1983. The WYO Companies issue and
service federally backed Standard Flood Insurance Policies under their own names, collect
premiums, and handle and pay claims. FEMA pays the WYO Companies a fee for these
services. In August 1983, FEMA extended an invitation to all licensed property and casualty
companies to participate in the WYO Program for fiscal year 1984.

C. THE NFIP TODAY
The NFIP now has two programs—the NFIP Direct Program and the WYO Program.
1. NFIP Direct Program
The program that deals with the issuing and servicing of flood insurance policies, and the
handling of resultant claims, directly by the federal government is known as the NFIP Direct
Program. The NFIP Servicing Agent assists and advises agents and adjusters who handle
Direct Program policies. The NFIP Servicing Agent also manages the Group Flood
Insurance Policy Program and the policies for buildings that are identified as Severe
Repetitive Loss Properties.
2. WYO Program
The WYO Program now accounts for approximately 90 percent of all flood policies. The
NFIP Bureau and Statistical Agent assist and advise the WYO Companies. However, this
does not diminish the authority of the WYO Company or relieve the company of its
obligations. The WYO Company still collects the premium, issues the policy, and provides
adjustment and payment for claims.

NFIP

I-1

REVISED JUNE 2010

D. FLOOD HAZARD ZONES
In addition to providing flood insurance for property, the NFIP is actively engaged in the
evaluation of existing and potential flood hazards and their long-term reduction. Accordingly,
various zones of flooding probability and severity have been established.
Flood Insurance Rate Maps (FIRMs) are produced to show the projected elevation to which
flooding is likely to occur in a Special Flood Hazard Area (SFHA). Community officials are
responsible for issuing building permits and must keep the FIRM and make the information
available. In some instances, the local agent may have the maps available. Maps can also be
obtained by contacting the FEMA Map Service Center at 1-800-358-9616. The zone
designations currently in use and the criteria by which they are grouped are as follows:
Zone Designation

Criteria

Zone A

SFHA in which the lowest floor elevation is required and
the Base Flood Elevations (BFEs) are not provided.

Zones A1-A30

SFHAs in which the lowest floor elevation is required and
the BFEs are provided.

Zone AE

SFHA designation used in place of Zones A1-A30 on
some maps.

Zone AH

SFHA in which shallow water depths (ponding) and/or
unpredictable flow paths between 1 and 3 feet deep occur.
BFEs are provided on the FIRM.

Zone AO

SFHA in which shallow water paths (sheet flow) and/or
unpredictable flow paths between 1 and 3 feet deep
occur. BFEs are not provided. Base flood depths may
be provided.

Zone A99

SFHA in which enough progress has been made on a
protective system such as dikes, dams, and levees to
consider it complete for insurance rating purposes. BFEs
are not provided.

Zone AR

SFHA in which there has been decertification of a
previously accredited flood protection system that is being
restored to provide base flood protection.

Zones AR/AE, AR/AH, AR/AO,
AR/A1-A30, and AR/A

Dual-zone SFHAs in which, because of flood risk from
water sources that the flood protection system does not
contain, there will continue to be hazard of flooding after
the flood protection system is adequately restored.

Zone V

Coastal high-hazard SFHA in which inundation by tidal
floods with velocity occurs. BFEs are not provided.

NFIP

I-2

REVISED JUNE 2010

Zone Designation (continued)

Criteria (continued)

Zones V1-V30

Coastal high-hazard SFHAs in which inundation by tidal
floods with velocity occurs. BFEs are provided.

Zone VE

SFHA designation used in place of Zones V1-V30 on
some maps.

Zone VO

SFHA in which shallow water depths and/or unpredictable
flow paths between 1 and 3 feet deep with velocity occur.

Zones B, C, and X

Areas in which moderate or minimal flooding may result
from severe storm activity or local drainage problems.
Because they are not SFHAs, these zones may be lightly
shaded or unshaded on the FIRM. Zone X is the
designation for B and C Zones and is used in place of
these zones on some maps.

Zone D

Area of undetermined flood hazard in which the population
usually is very sparse. The designation of Zone D can
also be used when one community has incorporated
portions of another community’s area where no map has
been prepared.

E. PROGRAM PHASES AND COVERAGE LIMITS
1. Program Phases
Flood insurance may be written only in those communities that have been designated by
FEMA as participating in the NFIP.
a. Emergency Program
This is the initial phase of a community’s participation in the NFIP. Limited amounts of
coverage are available.
b. Regular Program
This is the final phase of a community’s participation in the NFIP. In this phase, a Flood
Insurance Rate Map is adopted and enforced by the community and full limits of
coverage are available.
2. Amounts of Insurance Available
The table on the next page shows maximum amounts of insurance available under the
Standard Flood Insurance Policy (SFIP) for building coverage and contents coverage, in
both Emergency Program communities and Regular Program communities.

NFIP

I-3

REVISED JUNE 2010

AMOUNTS OF INSURANCE AVAILABLE:
DWELLING FORM AND GENERAL PROPERTY FORM1
EMERGENCY
PROGRAM

REGULAR PROGRAM

Insurance
Limits

Basic
Insurance
Limits

Additional
Insurance
Limits

Total
Insurance
Limits

Single-Family Dwelling

$ 35,0002

$ 60,000

$190,000

$250,000

Two- to Four-Family Dwelling

$ 35,0002

$ 60,000

$190,000

$250,000

Other Residential

$100,0003

$175,000

$75,000

$250,000

Non-Residential

$100,0003

$175,000

$325,000

$500,000

Residential

$ 10,000

$ 25,000

$ 75,000

$100,000

Non-Residential

$100,000

$150,000

$350,000

$500,000

BUILDING COVERAGE

CONTENTS COVERAGE

For the Residential Condominium Building Association Policy (which is written only in Regular Program
communities), the amount of building coverage available is the lesser of replacement cost value or
$250,000 times the number of insured units in the building. See the CONDO section of the Flood
Insurance Manual for contents coverage options.

In Alaska, Guam, Hawaii, and the U.S. Virgin Islands, the amount of building coverage available in the
Emergency Program for Single-Family Dwellings and Two- to Four-Family Dwellings is $50,000.

In Alaska, Guam, Hawaii, and the U.S. Virgin Islands, the amount of building coverage available in the
Emergency Program for Other Residential and Non-Residential buildings is $150,000.

NFIP

I-4

REVISED JUNE 2010

II. ADJUSTER PARTICIPATION IN THE NFIP
A. QUALIFICATIONS
The Federal Emergency Management Agency (FEMA) requires all independent adjusters who
adjust flood losses for the National Flood Insurance Program (NFIP) to be NFIP flood certified.
They must attend a NFIP claims presentation annually in order to maintain their active status
of certification.
The National Flood Insurance Program (NFIP) Bureau and Statistical Agent is required to
maintain a database of independent adjusters who qualify to adjust flood claims under policies
issued by the NFIP Direct and the Write Your Own (WYO) carriers who utilize the services of
the independent adjusting community. The qualifications reflect that the NFIP, like many other
insurers, has its own distinct characteristics concerning coverage and adjusting requirements.
The adjuster database is designed to reflect by Flood Certification Number or other means
that the approved adjuster has attended regular or special workshops that are held throughout
the country. An adjuster may also attend a FEMA-recognized approved claims presentation
conducted by independent adjusting firms or WYO Companies to maintain their active
certification status. The records reflect the adjuster’s name and the date and location
of the workshop.
The purpose of these workshops is to keep the adjusting community current with claims
procedures and guidance required for adjusting losses under the three forms of the Standard
Flood Insurance Policy-the Dwelling Form, the General Property Form, and the Residential
Condominium Building Association Policy (RCBAP). For this reason, all independent adjusters
who wish to be certified must submit the Adjuster Certification Application. WYO Company staff
adjusters should be guided by their particular company’s procedures.
The application contains five areas of authorization. An adjuster can be authorized in all five
categories or any combination thereof, if the adjuster’s qualifications meet the requirements.
The five categories are as follows:
•
•
•
•
•

Residential
Manufactured (Mobile) Home/Travel Trailer
Commercial
Large Commercial
Condominium (RCBAP)

1. Residential, Manufactured (Mobile) Home/Travel Trailer, and
Commercial Authorization
To be approved for Residential, Manufactured (Mobile) Home/Travel Trailer, or Small
Commercial losses, or any combination thereof, an adjuster should:
a. Have at least 4 consecutive years of full-time property loss adjusting experience;
b. Be capable of preparing an accurate scope of damage and dollar estimate to $50,000 for
manufactured (mobile) home/travel trailers, and $250,000 for residential and up to
$500,000 for commercial losses.

ADJUSTER PARTICIPATION

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REVISED JUNE 2010

c. Have attended an NFIP workshop and be able to demonstrate knowledge of the SFIP
and of NFIP adjustment criteria for all policy forms; and
d. Be familiar with manufactured (mobile) home/travel trailer and Increased Cost of
Compliance coverages and criteria.
These requirements will be checked and verified prior to approval.
2. Large Commercial and RCBAP Certification
To be approved for Large Commercial or RCBAP losses, or both, an adjuster should:
a. Have at least 5 consecutive years of full-time large-loss property adjusting experience;
b. For Large Commercial be capable of preparing an accurate scope of damage and dollar
estimate of $ 500,000 or more
c. For RCBAP be capable of preparing an accurate scope of damage and dollar estimate
of $ 1,000,000 or more
d. Submit written recommendations from three insurance company supervisor’s or claim
management personnel. The recommendations must reflect adjusting experience only;
and
e. FEMA encourages adjusters to have Errors and Omissions (E & O) Insurance coverage.
There are some WYO companies that require adjusters who are assigned to handle their
claims to have E&O coverage.
These requirements will be checked and verified prior to approval.

B. AUTHORIZATION REQUIREMENTS
FEMA recognizes that specialized knowledge is required in order for the adjuster to properly
adjust NFIP losses. Adjusters must know the differences between the Standard Flood Insurance
Policy (SFIP) and private industry property insurance forms. They must know interpretations of
coverage made by FEMA and the unique reporting requirements of the NFIP. Accordingly,
FEMA has made it a contractual requirement for the NFIP Bureau and Statistical Agent to
maintain a list of adjusters who are authorized to handle NFIP losses.
The requirement that independent adjusters be certified by the NFIP applies to all independent
adjusters seeking to handle flood losses. FEMA also encourages, but does not require staff
adjusters handling WYO claims to be certified by the NFIP Bureau and Statistical Agent. The
WYO companies are free to choose whatever adjusters they wish, either, staff adjusters or
independent adjusters, to adjust their flood losses and are likewise free to establish any related
qualifications or requirements for adjusters. A WYO staff adjuster handling a direct loss
assigned under the Single Adjuster Program (SAP) is not required to submit an application for
NFIP certification. In this case, WYO staff adjusters are deemed certified to handle SAP claims
by virtue of their being staff adjusters for a WYO Company and that the WYO Company
assigned the claim. (For further discussion of this situation, see Single Adjuster Program and
Claims Coordinating Office in Subsection III. B. of this manual, page III-2.) Independent
adjusters must be flood certified in order to adjust losses under the SAP.

ADJUSTER PARTICIPATION

II-2

REVISED JUNE 2010

Adjusters seeking recertification must attend an annual presentation and submit a properly
completed and signed Adjuster Certification Application, (FF81-110). This form can be found at
http://www.fema.gov/library/viewRecord.do?id=2581.
The application can be sent via any of the following methods:
1) E-mailed to [email protected];
2) Faxed to (301) 577-3421; or
3) Mail to P.O. Box 310, Lanham, MD 20706
Adjusters who are already certified and not seeking any changes to the categories in which they
are certified, only need to attend an adjuster presentation. Adjusters who do not attend one of
the annual NFIP claims presentations will be placed in an inactive status until such time they
attend a NFIP claims presentations.
After the application has been processed the adjusters will be notified by email of their approval,
upgrade, no change or denial. The adjusters that are newly approved or requested an upgrade
to their classification will receive notification by email.
All adjusters who attend an approved NFIP Claims Presentation will be e-mailed a PDF of their
FCN cards confirming their “active” status to handle NFIP flood claims.

C. ADJUSTMENT STANDARD AND REQUIREMENTS
FEMA’s adjustment standards and requirements have been revised and expanded to clarify
NFIP expectations of flood adjusters. What follows supersedes the “NFIP Minimum Standards
and Reporting Procedures,” which have been distributed in the past and should be carefully
reviewed by adjusters.
1. General Standards and Requirements
a. Authority of the Adjuster. The NFIP expects every adjuster handling NFIP flood losses
to understand and to communicate to the policyholders that the adjuster does not have
the authority to deny a claim or to commit the NFIP or the WYO Company to pay a claim
and that all adjustments are recommendations only, subject to review by the NFIP
Servicing Agent or the WYO Company.
b. Knowledge of the Program. The NFIP expects every adjuster handling flood losses to
be thoroughly familiar with the provisions of the Standard Flood Insurance Policy (SFIP).
The adjusters should also know coverage interpretations issued by FEMA, and
explained during the NFIP Claims Presentations. All claims are adjusted in compliance
with these provisions.
c. Professionalism. Because the adjuster represents the NFIP to the policyholder and
public, the NFIP expects that every adjuster will conduct themselves in accordance with
the highest standards of integrity and ethics and be courteous and professional in all
dealings with policyholders.

ADJUSTER PARTICIPATION

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REVISED JUNE 2010

2. Specific Standards and Requirements
a. Adjuster Preliminary Damage Assessment. The adjuster completes the Adjuster
Preliminary Damage Assessment form (PDA) on building claims that meet the criteria for
substantial damage. After the adjuster conducts the inspection of the risk, the form must
be completed and submitted to the NFIP Bureau and Statistical Agent by fax at (301)
577-2421, e-mail [email protected], or by mail to P.O. Box 310, Lanham,
MD 20706 (refer to FEMA Bulletin W-09077, issued November 20, 2009).
b. Building Replacement Cost (RC) Special Loss Settlement, and Actual Cash Value
(ACV). The adjuster prepares accurate calculations of the insured building’s
replacement cost and actual cash value and properly conclude the claim on an RC or
ACV basis as applicable.
c. Contents Claim Adjustment. The NFIP requires the adjuster to assist the insured when
necessary with the preparation of the contents claim, to verify that all contents included
in the adjustment are covered under the SFIP, and to determine or verify accurate local
replacement costs and reasonable physical deprecation. Applicable depreciation should
be shown separately for each item.
d. Special Limits. The special limitations on some contents (jewelry, furs, contents used in
business, etc.) should be properly applied. Appropriate documentation supporting the
claim value should accompany the worksheets.
e. Loss Avoidance Measures. Claims for removal of insured property due to the imminent
danger of flooding must be documented and verified in order to be covered under the
SFIP. Only the value of work performed by the insured and a member of the household
is covered.
f.

Final Report. The NFIP Final Report is required on all NFIP Direct and WYO
losses. The adjuster should not close his or her file until all items on the Final Report
are completed.

g. Identification of Building Equipment and Major Appliances. The NFIP requires the
adjuster to provide identifying information (manufacturer, model and serial number, and
whenever possible, capacity, etc.) on major building equipment such as furnaces, central
air conditioning units and major appliances such as refrigerators, washers, dryers,
televisions, etc.
h. Identification of Minor Appliances. The adjuster should provide identifying information
on certain items for claims control and validation purposes.
i.

Inspection. The adjuster is required to inspect the property within 48 hours of receiving
the loss assignment. This is also time to complete the Adjuster Preliminary Damage
Assessment Form. The Adjuster Preliminary Damage Assessment form must be
completed and submitted to the NFIP Bureau and Statistical Agent by fax at (301) 5773421, e-mail [email protected], or by mail to P.O. Box 310, Lanham, MD
20706 (refer to FEMA Bulletin W-09077, issued November 20, 2009). The initial
inspection will include preparation of a preliminary scope of damages. The adjuster
assigned to the loss must inspect it personally and should not take a contractor along to
inspect or scope the loss. If it is not possible for the adjuster to inspect the loss within the
required time frame, the adjuster must explain why in the NFIP Preliminary Report and

ADJUSTER PARTICIPATION

II-4

REVISED JUNE 2010

advise when the loss will be inspected. Visits to the insured risk without an appointment
should be avoided.
j.

Insured’s copy. When the claim has been concluded, the adjuster furnishes the insured
with a copy of all building and contents worksheets and proof(s) of loss.

k. Manufactured (Mobile) Home/Travel Trailer Worksheet. The adjuster should
complete a Manufactured (Mobile) Home/Travel Trailer Worksheet for every
manufactured (mobile) home/travel trailer loss.
l.

Narrative Report. One or more NIFP Narrative Reports may be submitted for any flood
claim in which the circumstances are unusual, suspect, or especially complicated, and
additional explanation is appropriate. Only facts should be included in reports. Opinions
or accusations have no place in reports.

m. Origin of Loss Verified. The adjuster verifies that the reported claim was caused by
direct physical loss by or from flood as defined in the SFIP.
n. Partial (Advance) Payments. FEMA encourages advance payments to the insured and
the adjuster should advise the insured of the availability of a partial (advance) payment.
If the insured requests a partial payment, the adjuster must prepare documentation
necessary to support the recommendation to the insurer of the amount of payment
requested, including an NFIP Proof of Loss form or advance payment receipt. The range
of partial payment amounts will be approved by the WYO Companies or the NFIP
Servicing Agent. The partial payment should not be for more than 50 percent of the
anticipated total claim payment and preferably should be made against the contents
claim. If paid under the building coverage, the mortgagee(s) must be included on the
claim check.
o. Preliminary Report Complete. The NFIP Preliminary Report is required on all flood
losses; however, adjusters who handle losses for WYO Companies may use the
company’s preliminary form or comparable form provided by the company. The
Preliminary Report is due to the company within 15 days after the claim has been
assigned to the adjuster and the adjuster should complete all items in the Preliminary
Report. Information unknown at the time the Preliminary Report is submitted must be
supplied in a later report.
An estimated reserve amount (the dollar value of future payments) should be provided to
the insurer. If there are changes in the value of future payments during the adjustment of
the claim the adjuster should notify the insurer. The depth of flood water and its duration
in the insured building are important and the duration should be verified by a local official
when possible or when in the adjuster’s judgment it seems necessary.
p. Prior Losses Checked. The adjuster should verify that damages from any prior loss
have been repaired before the subject loss occurred, and must exclude from the
adjustment any unrepaired prior damages. The adjuster is expected to review to the
extent necessary, using judgment, experience, and investigative skills to determine if
prior damage(s) have been repaired.
In those instances, were prior loss history is warranted the WYO Company
representative should contact the NFIP Bureau and Statistical Agent to determine
the prior losses history on claims if the previous losses were insured through a
different carrier.

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REVISED JUNE 2010

q. Progress Notes in the File. The adjuster’s file should contain adequate notes about the
progress of the claim and the scope of damages, calculations of replacement cost and
actual cash value, and a diagram of the insured building with measurements. The
adjuster will make his or her notes available to the NFIP General Adjuster(s) during the
reinspection process.
r. Prompt Contact. The adjuster initiates contact with the insured or agent by the end of
the business day after receiving the loss assignment. This initial contact preferably will
be by telephone; but, if contact by telephone is not possible, the adjuster should send
the insured or agent a postcard or letter acknowledging the assignment. The postcard or
letter should include the adjuster’s telephone number where the adjuster can be
reached. Also, when the insured, agent, or company staff person leaves a telephone
message for the adjuster, the adjuster is expected to return the call by the end of the
business day after the message was left. In the majority of flood events, these standards
are easily met. However, there have been instances where the insured property was
severely damaged, hindering the adjuster’s ability to contact the insured within the
required time. The adjuster should contact the carrier and seek guidance on how to
proceed with the loss.
s. Proof of Loss. The adjuster may assist the insured in completing the Proof of Loss;
however, this assistance is only a courtesy. Insureds must use their own judgment
concerning the amount of the loss and they must justify that amount. A fully completed
NFIP Proof of Loss form, signed and sworn to, with the required documentation is
required on every claim on which any payment is recommended.
Unless in very large events the Federal Insurance Administrator extends the time in
writing (Bulletin) the insured must send the signed and sworn to Proof of Loss with all
required supporting documentation to the insurer within 60 days after the date of loss.
Only the Federal Insurance Administrator can waive this or any SFIP provision. All
waiver requests are made through the insurer. Proofs of Loss and/or NFIP Final Reports
are issued as follows:
•

•
•
t.

On claims up to $7,500, the signed NFIP Final Report form will suffice for this
purpose. The WYO Company may request the policyholder’s signature on the Final
Report to be sworn to. If the claim payment is more than $7,500, a separate Proof of
Loss form is submitted.
If the insured qualifies for replacement cost coverage, the adjuster submits the
Statement as to Full Cost of Repair or Replacement for the additional amount
recoverable under the replacement cost provisions.
If the insured qualifies for Increased Cost of Compliance (ICC) coverage, a signed
and sworn to Increased Cost of Compliance Proof of Loss form is submitted.

Proper Building Depreciation. Depreciation is applied reasonably and accurately. This
refers both to the determination of the building’s actual cash value (replacement cost
less the value of physical depreciation) and the repair estimate. Depreciation is shown
separately, as applicable, for each line item in the adjustment, including overhead and
profit. “Lump sum” depreciation is not acceptable. Replacement cost, depreciation, and
actual cash value for each item are shown in this manner on all claims, regardless of
whether the claim is concluded on an RCV or ACV basis.

u. WYO Errors (Proper Building Scope and Estimate). The NFIP expects the adjuster to
accurately identify the covered damages caused by flood and to allow only the cost of
ADJUSTER PARTICIPATION

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REVISED JUNE 2010

repairs and/or replacements reasonably caused by direct physical loss by or from
flood. The WYO Companies and the NFIP Servicing Agent rely upon the judgment of
adjusters in the preparation of the scope of loss and the estimate of damage. It is
natural and expected that the judgment or opinion of the adjuster at the scene
immediately after the disaster may differ from those reviewing estimates either on the
scene at a later date or by a reviewer in a remote location after the claim has been
resolved. Claim payments arising out of policies issued by the insurer are binding upon
the Federal government. However, non-judgmental errors, at its discretion, are not
binding on the Federal Government.
•

Non-judgmental matters involving inadvertent error (e.g., payment of a loss
under a policy issued on an ineligible risk, payment of a loss, twice, for the same
item of damage, payment for nonexistent items of damage, payment of a loss in
respect to which the damages are unverified, such as where an adjuster might
scope the damage as to one building, then settle multiple, similar buildings on the
same basis without actually verifying the damage, etc.) are governed by Article IX
of the Arrangement, dealing with errors and omissions, in which it is provided
that the responsible party (Federal Emergency Management Agency (FEMA)
or the WYO Company) will rectify the error as soon as possible after discovery.
FEMA management, in such cases, will resolve the manner in which the error
is to be rectified with the WYO Company management. In such cases, redress
may be sought, for example, from the policyholder or adjusting firm responsible for
the error, either by the company, in a claim for reimbursement, or FEMA in a
federal claims collect effort, as is appropriate. NFIP and WYO Company joint
reinspection representatives are encouraged to highlight the above situations
in their reports, thereby calling such instances to the attention of WYO Company
and FEMA management.

•

Judgmental matters where there may be a difference of opinion between WYO
claims Management and the Federal Emergency Management Agency (FEMA)
as to whether a claim payment involved on excessive, or inadequate, loss
payment (e.g., differing views on the amount of depreciation taken, whether a
general condition of flooding existed, whether sufficient verification of damages
was obtained, etc.) are governed by Article II (F) of the Arrangement, which provides
that “The Company shall investigate, adjust, settle and defend all claims or losses
arising from policies issued under this Arrangement. Payment of flood insurance
claims by the Company shall be binding upon the FEMA.” Such matters will be
subjected of claims operational reviews and special meetings between WYO
management and FEMA management. The above wording was designed primarily
for reinspections of buildings and may not express the documentation requirements
of large commercial contents claims. What is expressed is the long-held principal
that FEMA will not recoup from the WYO Companies or the NFIP Direct Servicing
Agent when an error is judgmental.

v. Proper Photographs. The adjuster should take as many photographs as are necessary
to portray the damage. Photographs of non-damaged property can oftentimes be as
important as photographs of damaged property.
w. Salvage. The salvage value of all total-loss items must be considered. Where the size of
the salvageable loss makes it appropriate, a salvor should be engaged, with the
authorization of the NFIP Servicing Agent or WYO Company. Otherwise, the reasonable
salvage value of property left with the insured is deducted from the covered loss.

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REVISED JUNE 2010

x. Subrogation. When the adjuster identifies subrogation potential, he or she must
determine the grounds for a possible subrogation recovery. The investigation is
considered a routine part of a loss adjustment. The adjuster completes the
Cause of Loss and Subrogation Report form and any details of the investigation should
be provided to the insurer.
y. Timely Reporting. The adjuster’s NFIP Preliminary Report is submitted within 15 days
after receipt of the loss assignment. The NFIP Final Report is due 30 days later. If the
claim has not been concluded within 45 days, subsequent reports are due every 30 days
after the Preliminary Report, or otherwise as specifically directed by the claims
examiner, until the claim is concluded.
D.

NFIP FEE SCHEDULE BILLING

Payment of the adjuster’s service fee will be according to the NFIP fee schedule. The scheduled
fee for handling a loss is based on the NFIP-approved adjustment. The fee includes all travel,
photographs, reporting, telephone, and office investigation expenses to conclude the claim,
including identification of possible subrogation, salvage, and fraud. Customarily, the claim file
contents will include coverage verification; normal adjuster investigation documentation,
including statements where necessary; building reports and investigations; damage verification;
and other documentation relevant to the adjustment of the claim under the NFIP’s and the WYO
Company’s traditional claim adjustment procedures.
There are two fee schedules (pages B-22 and B-23)—one for gross losses and one for
Increased Cost of Compliance claims.
1. Gross Losses
For gross losses sustained on or after September 1, 2008, use the NFIP Fee Schedule
[Gross Loss] (page B-22). Use this schedule whether the claim will be closed without
payment or will be paid up to the limit of $250,000 or more.
2. Increased Cost of Compliance (ICC) Claims
For Increased Cost of Compliance claims, use the NFIP ICC Fee Schedule (page B-23).
Use this schedule whether the claim will be closed without payment or will be paid up to the
increased limit of $30,000 that became effective on May 1, 2003.

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REVISED JUNE 2010

III. NFIP DISASTER RESPONSE
A. DISASTER RESPONSE FIELD OFFICES
1. Adjuster Control Office
The Adjuster Control Office (ACO) is a temporary catastrophe office set up by the NFIPDirect Servicing Agent (DSA) that enables them to efficiently assign claims to certified flood
adjusting companies.
2. Claims Coordinating Office
The Claims Coordinating Office (CCO) is the repository for receiving notices of loss involving
hurricane, wind, and flood damage. The wind and flood losses are matched by property
address and assigned to a single adjuster who represents both insurers. The assignments
are made by the Windpools for the NFIP Servicing Agent and the WYO companies. (See
Subsection III.B. of this manual, Single Adjuster Program and Claims Coordinating Office
for details).
3. Flood Insurance Claims Office
The NFIP Direct Servicing Agent (DSA) will establish an on-site Flood Insurance Claims
Office (FICO) following a major flood event to enable the efficient processing of flood claim
payments on claims made on NFIP Direct policies. Examining staff and General Adjuster
staff is present at the FICO to assist flood adjusters in properly closing DSA flood claims.
The FICO only handles flood claims on DSA flood policies; FICO is unable to assist on any
WYO flood claim.
4. Flood Response Office
The Flood Response Office (FRO) is established to efficiently coordinate with private-sector
windpool associations, WYO companies, FIMA’s Joint Field Office (JFO) and Disaster
Recovery Centers, and FIMA’s regional staff engaged in mitigation and floodplain
management compliance activities in local communities.
Major activities of the FRO include the following:
a. Coordination with WYO companies to provide guidance, define the scope of coverage,
and facilitate the adjustment of losses sustained by policyholders of the NFIP who are
insured by WYO companies.
b. Coordination with WYO companies, the NFIP Servicing Agent, and state windpool
associations under the Single Adjuster Program (SAP) and NFIP Claims Coordinating
Office (CCO).
c. Support and coordination with the JFOs to advise the Federal Coordinating Officer
on flood insurance activities, help avoid duplication of benefits, provide information
and assistance to NFIP policyholders, and speed the delivery of flood insurance
claim payments.
NFIP DISASTER RESPONSE

III-1

REVISED JUNE 2010

d. Distribution and utilization at the FRO and Disaster Recovery Centers of a series of
educational and informational brochures to provide guidance to the flood-insured public,
agents, adjusters, and federal and state officials in matters related to the NFIP’s overall
catastrophe response procedures.
e. Implementation of support services such as the reinspection program, special
adjuster meetings, and claim troubleshooting activities. Additional activities include
surveying flood disaster areas, assessing the extent of damage, and advising FIMA
of the findings.

B. SINGLE ADJUSTER PROGRAM AND CLAIMS COORDINATING OFFICE
1. Objective
In conjunction with the Claims Coordinating Office (CCO), the Single Adjuster Program
(SAP) provides the most efficient use of adjusting resources in a catastrophic hurricane
situation to improve service to the mutual policyholders of both wind damage and flood
damage insurers.
2. Background
There are currently over a million coastal flood insurance policies at risk, many of which
could be subject to a combined wind/flood loss.
Through the establishment of a CCO at the time of a catastrophe, many of these potential
combined losses can be identified and assigned to adjusting companies jointly representing
the WYO companies and the Coastal Plans (e.g., Windpool Associations, Fair Plans, Beach
Plans, and Joint Underwriting Associations).
The purpose of the CCO is to provide a central clearinghouse for receiving notices of loss
involving hurricane, wind, and flood damage. This is accomplished by the systematic
identification of wind and flood losses at the same property address followed by assignment
of the loss to a single adjuster who represents both insurers. Adjuster assignments are
made by the Windpools for the NFIP Servicing Agent and WYO companies. The CCO, in
cooperation with the WYO companies, Windpools, and other property insurers, oversees the
SAP. This measure avoids duplicate assignments of losses and better deploys the available
adjuster resources in a major hurricane event.
3. Implementation
FIMA and the various Windpools determine whether a catastrophic event will necessitate an
SAP response. The National Weather Service’s declaration of a tropical storm or hurricane
event begins the watch for a possible single adjuster response. In general, FIMA approves
the SAP response when the storm is 48 hours from landfall.
The NFIP deploys their team to the affected area prior to landfall of the storm. The WYO
companies are advised by telephone, email or fax, through their designated Single Adjuster
Liaison, as to the areas and states that will be subjected to the SAP response. At that point,
the WYO companies are asked to immediately notify their agents of the SAP procedures for
reporting the losses.

NFIP DISASTER RESPONSE

III-2

REVISED JUNE 2010

The telephone call, e-mail, or fax to the WYO companies is followed by a written notice
directing all WYO companies to have their agency force submit all flood losses that are
reasonably believed to involve wind and flood damage to the CCO.
Telephone contact also is made and a written notice is simultaneously sent to the
participating State Coastal Plan, Joint Underwriting Association, etc., advising them of the
opening of the CCO, which is co-located with or near the State Coastal Plan at a
predetermined site. The on-site CCO becomes fully operational within 24 hours after the
storm’s landfall.
When the CCO is operational, the WYO companies are notified of all of their assigned
claims. Reports reflecting the assigned claims are faxed each day. Once the assignment is
made and communicated to each company, the WYO Company manages its own loss
adjustment. However, the CCO personnel ensure that the adjuster receives the loss
assignment containing all the relevant information.
4. Adjuster Briefing
The NFIP General Adjusters and FIMA will conduct adjusting briefings before and after
major storms. These briefings will address regional problems, construction issues, adjuster
certification, and community and state ordinances, etc. The adjuster briefing location, date
and time will be posted through the Clearinghouse at www.nfipiservice.com.

NFIP DISASTER RESPONSE

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REVISED JUNE 2010

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NFIP DISASTER RESPONSE

III-4

REVISED JUNE 2010

IV. POLICY CHANGES AFFECTING THE
LIBERALIZATION CLAUSE
When the NFIP makes a change that broadens coverage under the current policy edition, that
will not require any additional premium, then that change will automatically include the
broadened coverage in similar and existing policies. However, the change will only be
effectuated if the implementation date falls within 60 days before, or during, the policy term
stated on the Declarations Page.

POLICY CHANGES

IV-1

REVISED JUNE 2010

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POLICY CHANGES

IV-2

REVISED JUNE 2010

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

V-1

REVISED JUNE 2010

COVERAGE COMPARISON AS OF DECEMBER 31, 2000
ITEM

DWELLING FORM

GEN. PROP. FORM

RCBAP

Additional Living Expenses

Appurtenant Structures

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

Awnings

ACV, if attached to bldg.

Building Fixtures

Listed

Carpeting

ACV; no overhead and profit

Construction Before Walled
& Roofed

YES; two times the
deductible

Debris Removal

YES

Decks

NO; limit of 16 sq. feet

Deductible

Applied separately to
building and contents

Loss Avoidance Measures
(Mitigation), Pre-Flood

Limited coverage, $1,000

Exterior Paint

YES

Fences

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

ICC

YES, except Emergency
Program and Group Policy

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

Loss of Rents

Ordinance or Law

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

Replacement Cost,
Building

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

YES, with coinsurance
provision

Replacement Cost,
Personal Property

Screened Porches

YES, unless below elevated
floor (Post-FIRM)

YES

Storage Sheds

STANDARD FLOOD INSURANCE POLICY

V-2

REVISED JUNE 2010

COVERAGE COMPARISON AS OF DECEMBER 31, 2000
ITEM

DWELLING FORM

GEN. PROP. FORM

RCBAP

Stove & Refrigerator

Building ACV, if tenant’s
contents

Building ACV

Swimming Pools/Hot Tubs

Temporary Repairs

Trees

Venetian Blinds

Building ACV

Walkways

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

V-3

REVISED JUNE 2010

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STANDARD FLOOD INSURANCE POLICY

V-4

REVISED JUNE 2010

Dwelling Form

V-5

NATIONAL FLOOD INSURANCE PROGRAM

DWELLING FORM

V-6

REVISED JUNE 2010

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.

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.

DWELLING FORM COMMENTARY

V-7

REVISED JUNE 2010

DWELLING FORM

V-8

REVISED JUNE 2010

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 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. 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.

DWELLING FORM COMMENTARY

V-9

REVISED JUNE 2010

DWELLING FORM

V-10

REVISED JUNE 2010

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. 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 an
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, a house, 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–A30, AE, AH, AR, AR/A, AR/AE,
AR/AH, AR/A1–A30 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–A30, AE, AH, AR, AR/A, AR/AE,
AR/AH, AR/A1–A30 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 figurines 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
movable 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.

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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.

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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)
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

•

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

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
(parcels of land), one of which may be a public roadway, must be inundated.
Actual Cash Value. Replacement cost value of 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 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–A30, AE, AH, AR, AR/A,
AR/AE, AR/AH, AR/A1–A30 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 figurines; 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
this 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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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.
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. 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
movable 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.

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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.

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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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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.

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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)
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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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 properties
(parcels of land), 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 composed 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 structure 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 an
opening, then the structure must be insured as one building. Other provisions are:



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–A30, AE, AH, AR, AR/A,
AR/AE, AR/AH, AR/A1–A30 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, are 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.)

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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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VI. INCREASED COST OF COMPLIANCE (ICC)
A. PRINCIPAL FEATURES OF ICC COVERAGE
The limit of liability for Increased Cost of Compliance (ICC) coverage was raised to $30,000
on May 1, 2003. Any flood loss prior to May 2003 will be adjusted according to the previous
limit of $20,000.
When a building covered by a Standard Flood Insurance Policy (SFIP) sustains “repetitive
losses” or “substantial damage” caused by a flood, the NFIP will pay up to $30,000 for losses
sustained on or after May 1, 2003, and up to $20,000 for losses sustained prior to May 1, 2003,
for the cost to elevate, floodproof (for nonresidential buildings only), demolish, or relocate the
building, or any combination thereof, when any of these actions are undertaken to comply with
the enforcement of state or local floodplain management laws or ordinances. ICC coverage is
available on residential and nonresidential buildings (this category includes public and
government buildings, such as schools, libraries, and municipal buildings) insured under
the SFIP.
The National Flood Insurance Reform Act of 1994 authorizes ICC coverage only for flooddamaged buildings. Therefore, ICC coverage does not pay for the increased cost of repairing or
altering buildings damaged by wind, fire, earthquake, or other perils.
ICC coverage was included as Coverage D in every SFIP written or renewed on and after
June 1, 1997. The premium charged for ICC coverage varies depending on the type of building,
whether the building is Pre-FIRM or Post-FIRM, the flood zone, and other factors.
The maximum amount collectible under the SFIP for both the ICC payment and the direct loss
payment for flood cannot be greater than the maximum limits of coverage for that class of
buildings authorized under the National Flood Insurance Act of 1968, as amended. The
maximum limit available of flood insurance building coverage are $250,000 for residential
buildings and $500,000 for nonresidential buildings. For a residential condominium building, the
maximum limit available of flood insurance building coverage is $250,000 times the number of
insured units.

B. COVERAGE QUESTIONS AND ANSWERS
1. Does ICC coverage extend beyond the building itself?
No. ICC coverage is provided only on the building covered by an SFIP. Under the SFIP, a
“building” is defined as a walled and roofed structure, other than a gas or liquid storage tank
that is principally above ground and affixed to a permanent site. Land, land values, lawns,
trees, shrubs, plants, and growing crops are not covered. In addition, items such as portions
of walks, walkways, decks, driveways, patios, and other surfaces located outside the
perimeter exterior walls of the insured building or units are not covered.
2. Is ICC coverage available for appurtenant (accessory) buildings?
Yes. ICC coverage is available for an appurtenant (accessory) building but only when a
separate flood insurance policy is written on the appurtenant building. An appurtenant
structure is one on the same parcel of property as the principal structure and the use of

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which is incidental to the use of the principal structure. The SFIP does not provide coverage
for direct physical loss from flood for an appurtenant structure except in the Dwelling Form.
The Dwelling Form extends coverage for direct physical loss from flood to a detached
garage located on the premises of a one- to four-family dwelling. However, ICC coverage
does not apply to these or any other appurtenant buildings indicated in the “Exclusions”
section of the ICC coverage. Therefore, a separate flood insurance policy must be written
on any appurtenant structure to obtain ICC coverage.
3. What buildings have ICC coverage?
All buildings in Regular Program communities have ICC coverage except the following:
a. Buildings insured under the Group Flood Insurance Policy, which covers recipients
awarded an Individual and Family Grant for flood damage under §411 of the Stafford
Act (42 U.S.C. § 5178) as a result of a Presidential major disaster declaration.
b. Units insured under a condominium unit owner policy.
Buildings located in communities participating in the Emergency Program do not have
ICC coverage.

C. ELIGIBILITY QUESTIONS AND ANSWERS
1. When is an insured building eligible for an ICC claim payment?
An insured building (note exceptions in 3, a, and b above) is eligible for an ICC claim
payment when a new SFIP is issued or upon the renewal of an SFIP on or after June 1,
1997. Canceling a policy to obtain ICC coverage is prohibited.
2. Will an ICC claim be paid on a building that is less than 50 percent damaged but must
comply with a state or community floodplain management law or ordinance that has
a substantial damage threshold below 50 percent of the market value of the building?
No. Buildings must be damaged by flood to at least 50 percent of market value in order to
be eligible for an ICC claim payment.
3. Once an ICC claim for demolition is paid, can the insured, at a later date and once
it is decided to rebuild on the same or at another site, make an additional ICC claim
for elevation?
Yes, but the total payment (demolition plus elevation) is limited to the ICC limit at the time of loss,
currently $30,000. Also, the elevation activity must be completed within 4 years of the
community’s original declaration of substantial damage (see below). The elevation activity may
be accomplished at the original lot or at another lot where there is a requirement to elevate.
4. What conditions must be met for a repetitively damaged building to be eligible for an
ICC claim payment?
A building is eligible for an ICC claim payment for repetitive damage if it is in an SFHA
(A and V zones), is a repetitive loss structure, and is subject to state or community
floodplain management laws or ordinances.

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There are two additional conditions that must be met in order for an ICC claim to be paid
under the SFIP for a repetitive loss structure.
a. The state or community must have adopted and be currently enforcing a repetitive
loss provision or a cumulative substantial damage provision requiring action by the
property owner to comply with the state or community floodplain management laws
or ordinances.
States and communities are not required to adopt a repetitive loss provision. Adoption of
a cumulative substantial damage provision or a repetitive loss provision is voluntary. In
the event that a state or community adopts a repetitive loss provision or a cumulative
substantial damage provision, this provision must be enforced on all buildings in the
community irrespective of whether the buildings are covered by flood insurance.
b. The building must have a history of NFIP claim payments that satisfies the National
Flood Insurance Reform Act of 1994 definition of a “repetitive loss structure”:
“a building covered by a contract for flood insurance that has incurred
flood-related damages on 2 occasions during a 10-year period ending on
the date of the event for which a second claim is made, in which the cost
of repairing the flood damage, on the average, equaled or exceeded 25%
of the market value of the building at the time of each such flood event.”
The date on which the first loss occurred, even if the loss occurred before June 1,
1997, is immaterial as to eligibility for an ICC claim payment, so long as the state or
community enforced a repetitive loss or cumulative substantial damage requirement
and the loss occurred within the 10-year period and the insured building satisfies the
definition of “repetitive loss structure” under the National Flood Insurance Reform
Act of 1994.
5. What conditions must be met for a substantially damaged building to be eligible for
an ICC claim payment?
A building is eligible for an ICC claim payment for substantial damage if the community
determines that it has been damaged by flood and the cost of restoring the building to its
before-damaged condition would equal or exceed 50 percent of the market value of the
building before damage occurred.
All states and communities participating in the NFIP must have a substantial damage
provision in their floodplain management laws or Substantial Damage is deemed to have
occurred when:
“damage of any origin is sustained by a building whereby the cost of
restoring the building to its before damaged condition would equal or
exceed 50 percent of the market value of the building before the
damage occurred.”
The NFIP substantial damage definition applies to building damage from any origin, such as
fire, wind, earthquake, etc. In cases where the damage is due to a combination of hazards,
such as wind and flood, an ICC claim is paid only when the flood component of the damage
equals or exceeds 50 percent of the market value of the building. In order for a payment to

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be made under ICC, the claim representative must verify that the damage was caused
solely by flood or that the cost to repair the flood component of the damage to the building
equals or exceeds 50 percent of the market value of the building.
6. How long does an insured have to complete the approved ICC mitigation measure(s)
and what is the correct date of loss for an ICC claim?
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. The time limit found at paragraph 5.e. (2) will be
changed to 4 years.
The date of loss for an ICC claim is the same as the date of loss for the underlying flood
claim. However, the time limit for completing an ICC claim (4 years for claims on or after
June 1, 2005) begins on the date of the declaration by the local community official that the
insured structure has been substantially damaged by flood.
7. Will a handicapped insured’s ICC elevation claim that includes the cost of installing
an elevator or chair lift to access the now elevated building be paid when a covered
elevator or chairlift was not previously installed?
No. If these items existed at the time of loss coverage would be afforded in the underlying
direct physical damage claim subject to all SFIP policy limitations and exclusions that apply.
8. If a building is compliant at the time of loss, but after the loss the community adopts
a freeboard ordinance or the Advisory BFE, would the otherwise compliant building
be eligible for ICC benefits?
Yes, if the mitigation activity was taken after the community adopted and enforced the new
ordinance and height requirement(s).

D. CLAIMS ADJUSTMENT QUESTIONS AND ANSWERS
1. What is the process for adjusting a claim under ICC coverage?
When a flood event has occurred, an adjuster is assigned to adjust the direct physical
damages. The adjuster advises the policyholder of ICC coverage in the SFIP if it appears
that damages may exceed 50 percent or more of the value of the structure and the building
is in an SFHA.
Because ICC claims are paid only when the property owner is required to rebuild in
compliance with a community’s substantial damage or repetitive loss provision, a
determination must be made by the community whether the flood damages to the building
result in substantial damage or repetitive loss that requires compliance with state or
community floodplain management laws or ordinances. The adjuster must obtain the
substantial damage or repetitive loss determination in writing before adjusting the ICC
claim. The policyholder and the community should discuss the floodplain management
requirements and the mitigation options (elevation, floodproofing, demolition, or relocation
of the building, or any combination of these) once a determination by the community has
been made.

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Once a determination has been made by the community that the building has been
substantially or repetitively damaged by flooding, the policyholder notifies the insurer of the
determination. The adjuster advises the property owner that a signed construction contract,
one itemized cost breakdown of the work (see FEMA Bulletin W-04020, May 7, 2004,1.),
and a start and completion date for the work will be needed.
Once the policyholder has notified the insurer of the substantial damage or repetitive loss
determination, the insurer creates a claim file and assignment to an adjuster. The adjuster
must obtain information from the community regarding the community’s substantial damage
or repetitive loss determination. The adjuster uses this information to confirm that the floodrelated damage for the current building claim (and prior claim, if it is a repetitive loss
structure) supports the community’s substantial damage or repetitive loss determination. In
addition, the adjuster will verify whether the claim meets all other eligibility requirements for
payment under ICC coverage.
The adjuster confirms that the damage meets the requirements for making an ICC claim
payment and that the policyholder has provided a signed contract and one cost estimate for
the mitigation measure. The adjuster provides the policyholder with the ICC Proof of Loss
form. The adjuster also explains to the policyholder how payments will be made and advises
the policyholder that, if the mitigation measure is not completed within the required time
frame, any payments issued under the ICC claim must be returned to the insurer. In
addition, the adjuster advises the policyholder that a permit issued by the community to
undertake the work will be needed prior to making the initial ICC claim payment. For
buildings that are to be elevated or floodproofed in SFHAs, the permit must indicate the
level of protection to which the building is to be elevated or floodproofed.
After the ICC Proof of Loss form and a permit from the community have been returned to
the adjuster, the adjuster advises the property owner that the request for initial payment
toward the ICC claim will be submitted to the insurer for review and payment authorization.
When the mitigation measure is completed, the adjuster obtains an elevation certificate, (if
warranted), a copy of the certificate of occupancy, letter, or written official notice from the
community that the mitigation measure has been satisfactorily completed and that no
variance was granted. The claim representative issues the final ICC claim payment after all
documentation of satisfactory completion has been submitted.
2. Can partial payment be issued on an ICC claim?
Paragraph 5.e. of SFIP Coverage D – Increased Cost of Compliance provides that an ICC
claim cannot be paid (1) until the building is elevated, floodproofed, demolished, or
relocated on the same or to another premises, and (2) unless the building is elevated, flood
proofed, demolished, or relocated as soon as reasonably possible after the loss, not to
exceed 2 years. The question has arisen as to whether this provision precludes the
issuance of partial payments for ICC claims.
The two conditions in SFIP paragraph 5.e. refer to the total payment of an ICC claim, which
means partial payments are permitted. Partial payments may be issued in advance of
completion of the mitigation activity but cannot exceed 50 percent of the total estimated
reimbursable cost of the mitigation activity.

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3. Should mortgagee name(s) be included on the ICC partial and final payment checks?
No. The SFIP Dwelling Form - Mortgagee Clause, Section VII, General Conditions. Q.,
states that any loss payable under Coverage A. will be paid to any mortgagee of whom the
insurer has actual knowledge. ICC payments are subject to Coverage D and do not require
naming a mortgage.
4. What does “assignment of Coverage D” mean? What is the process involved?
If a community plans to pursue a FEMA-approved mitigation project, such as a project
under the Hazard Mitigation Grant Program, the policyholder can assign the eligible portion
of Coverage D (ICC) claim to the community. The insured must complete the Assignment of
Coverage D form and return it to the community official. The community official will submit a
copy of the completed form and a written Declaration of Substantial Damage to the NFIP
Bureau and Statistical Agent. The Bureau and Statistical Agent will enter the data into a
tracking system and send both documents to the insurer, with instructions.
Specific steps for assignment of the ICC claim benefit to the community are itemized below.
a. Policyholder consents to assignment of the ICC claim payment.
b. Community official provides the policyholder with an Assignment of Coverage D form.
c. Policyholder completes the form and returns it to the community official.
d. Community official sends a copy of the form, along with the community’s signed
Declaration of Substantial Damage, to the NFIP Bureau and Statistical Agent at the
following address:
NFIP Bureau and Statistical Agent
PO Box 310
Lanham MD 20706
Fax: (301) 577-3421
E-mail: [email protected]
e. Bureau and Statistical Agent enters the ICC information submitted by the community
into a database. The Bureau then sends the documents to the appropriate WYO
Company, with instructions. The company assigns an adjuster.
f.

Assigned adjuster contacts the policyholder to confirm receipt of the claim, and then
contacts the community official to help coordinate the claim.

g. Adjuster reviews the contract for demolition, elevation, relocation, or floodproofing to
determine the covered cost.
h. Adjuster has the community official sign the ICC Proof of Loss form once the claim
value has been determined.
i.

Adjuster sends the NFIP Final Report form and the Proof of Loss to the insurance
company for payment.

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Insurance company issues the check to the community and advises the NFIP Bureau
and Statistical Agent of the amount of the claim payment.

E. OTHER FREQUENTLY ASKED QUESTIONS AND ANSWERS
1. When an estimate for demolition of a dwelling includes the cost to demolish the
garage, is coverage for the garage provided under ICC?
The cost to demolish the home is covered. If the garage is detached, then coverage will not
apply. The garage should have its own policy.
2. Is ICC coverage provided for the slab, walkway, and driveway?
Coverage is afforded for the slab. However, there is no coverage for the walkway
and driveway.
3. Fill dirt is required to stabilize the lot. Is this covered under ICC?
If the cost is to grade the lot, then coverage will apply. The Interim Guidance for ICC –
Part 4, Demolition, paragraph 2, states “Once the building is removed from the site,
steps should be taken to clear the site of any remaining materials such as the foundation,
remove any utility systems, and grade and stabilize the site in accordance with any State
or local regulations.”
4. If the lot is littered with trash such as tires, cans, etc., will this be considered
ICC-covered debris?
No coverage applies.
5. The SFIP excludes coverage for septic systems. If the building is demolished under
ICC, will the cost to remove the septic system be covered?
Yes. First, all applicable permits to demolish the building must be obtained. Once the
building is removed from the site, steps should be taken to clear the site of any remaining
materials such as the foundation, remove any utility systems, and grade and stabilize the
site in accordance with any State or local regulations.
6. Are well water plugs covered under ICC?
If the well water plug is part of the abandonment of on-site utilities, coverage will
be afforded.
7. What conditions must be met for a substantially damaged building to be eligible for
an ICC claim ?
A building is eligible for an ICC claim payment if it is in a Special Flood Hazard Area, and
the community determines that the building has been damaged by flood to such an extent
that the cost of restoring the building to its pre-damage condition would equal or exceed
50 percent of its pre-damage market value. At the time of loss, the building must be out of
compliance with the local floodplain management construction guidelines (typically, the
lowest floor for rating purposes is below the BFE).

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8. A flood claim was processed in accordance with the policy provisions. In the interim,
the policy expired and was not renewed. The community then declared the building
substantially damaged by flood. Will an ICC claim be honored even though the
policy expired?
Yes. The date of loss for the ICC claim is the date of loss for the underlying flood claim.
9. Is a CBRA property that has been declared substantially damaged by the community
eligible for ICC benefits?
Yes, but once substantially damaged, the property is no longer eligible for flood insurance
coverage in the CBRA and the policy must be cancelled.
10. Are Condominium Single-Family Detached Units eligible for ICC benefits under the
SFIP program?
Yes, ICC coverage is available on a Single-Family Detached Condominium Unit as long as
the ICC premium was charged and insured paid for ICC coverage.
11. Is the cost to fill in a sub-grade basement area to grade covered under ICC?
Yes, there is coverage for this type of mitigation if this activity is what is required by the
community enforcing their floodplain management ordinance as it relates to elevation.
12. The community has deemed the insured risk substantially damaged. The insured is
going to demolish the structure by burning it down. The cost incurred by the insured
for this is a donation to the Fire Department to stand by and make sure there is no
other damaged caused. Will the insured’s cost be considered covered demolition
cost under ICC?
Yes, the insured’s cost would be allowed as a covered mitigation expense, including
possibly other costs incurred to haul away the remaining debris and capping off utilities.
13. Is an Elevation Certificate relating to ICC required before and after elevating a
flood-damaged structure?
There is only the need to provide the elevation certificate after the building has been
elevated, unless the adjuster cannot determine that an existing elevated building is at or
above the BFE. When the elevated floor is visible and recognizable, some written
documentation from the local official stating that the elevation meets code is necessary to
enable the insured to receive the final 50 percent payment. The letter from the building
department should indicate that the elevation was completed in accordance with the local
building Floodplain Management guidelines.
14. If the insured property is not located in a SFHA, but the community is adopting
AFBE’s, is the insured risk eligible for ICC benefits?
Yes, coverage is available if the community is enforcing an elevation requirement based on
FEMA provided ABFEs.

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15. Can communities withdraw and reissue permits?
If a policyholder is provided a building permit, but does not start construction, and the
community withdraws the permit and reissues after the ABFE is adopted and enforced, ICC
benefits are allowable to comply with the new ABFE requirement.
16. Are historic building and buildings on the National Register eligible for ICC benefits?
Yes, historic structures can meet limited floodproofing guidelines established in their
ordinances. The file must be fully documented.
17. Are ICC benefits available for properties relocated from a location within a SFHA
to a non-SFHA?
Relocation expenses are covered under ICC to relocate a structure on the same site where
the risk of flooding is less; to another site in the SFHA where the risk of flooding is less; or
to a non SFHA.
18. What is considered covered incremental costs associated with elevating or
floodproofing of the replacement building at the same or another site within a SFHA?
Incremental costs would include any additional height requirement concerning pilings; even
if required to be driven deeper; plumbing, wiring, any additional charges for bracing and
other costs directly associated with the required elevation. However, the ICC payment will
be limited to the costs to mitigate the insured building as it was at the time of loss and there
is no coverage for any additional costs associated with structural modifications, upgrades,
or any change in size.
19. Would a policyholder have ICC coverage if their flood insurance policy was cancelled
and not renewed applying for other programs available to them? After two years the
policyholders decide they want to demolish the flood damaged structure using ICC
funds from the lapsed policy and rebuild a new home on the same site.
The structure must have been covered by an NFIP policy on the date of loss, no eligibility
for GFIP or Condo Unit Owner’s policies. If all other eligibility requirements under Coverage
D have been met, as long as the policy was in force on the date of the underlying flood
claim and the time limit- authorized by the SFIP- from the date of the declaration has not
expired, the claim can be made. If the time period for completing the mitigation measure
has expired, the insurer may request a review by FEMA based upon the individual merits of
the claim. These requests would be reviewed by FEMA on a case-by-case basis.
20. What ICC benefit is payable for a structure that is demolished and the property
owner chooses to build a replacement building outside the SFHA?
Demolition costs only. Since there would be no requirement to reduce the risk of flooding,
ICC would not be paid for the replacement building unless the community enforces
elevations in non-SFHA. A copy of the ordinance would need to be provided to document
the ICC claim.

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21. Is a claim eligible for ICC benefits if the substantial damage declaration from the
community does not state that the substantial damage was caused solely by flood?
If the letter from the local official is not sufficient, the carrier, through the adjuster, insured or
other reasonable means should contact the local official to determine the market value used
to determine the structure was substantially damaged; once obtained, the carrier can
compare the total flood damage to the market value and determine if the flood damage is
50 percent or more. If this is the case, they can proceed with the normal ICC claim
procedures. The claim file should ascertain damage from other perils.
If the structure has been washed off its foundation, the carrier can assume it is substantially
damaged by flood. (Refer to FEMA Bulletin W-06067, issued September 20, 2006).
22. Can an ICC claim be assigned?
The SFIP does not provide for the assignment of a claim but will allow for the assignment of
the policy when the title to the property is transferred to a new property owner. The only
time an ICC claim can be transferred is when it is conjunction with a FEMA project. (Refer
to FEMA Bulletin W-07003, issued January 16, 2007).

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VII. BASIC ADJUSTMENT ISSUES
A. ACTUAL CASH VALUE (ACV)
The NFIP defines ACV as the replacement cost of an insured item at the time of loss, less the
value of physical depreciation.

B. ADDITIONS AND EXTENSIONS
Buildings that are connected by a rigid exterior wall, a solid load-bearing interior wall, a
stairway, an elevated walkway, or a roof can be insured as part of the dwelling. The insured has
the option of obtaining separate coverage for these building items.

C. ADJUSTER PRELIMINARY DAMAGE ASSESSMENT (APDA)
Capturing claims data on buildings that will probably be substantially damaged has become
increasingly important to FEMA and to the officials of affected communities. Adjusters
should report as soon as possible after it appears that the building is substantially damaged
(50 percent of the building’s value). After the adjuster conducts the inspection of the risk, the
APDA form must be completed and faxed to iServices claims department at (301) 577-3421.

D. ADVANCE PAYMENTS
FEMA has always encouraged advance payments. Typically, such payments are made after the
physical inspection of the property reveals flood damage (less the amounts of estimated
depreciation and the deductible) is greater that the advance payment. Advance payments are
generally made against the Personal Property claim, but if the advance is to be made against
the Building Property claim, the mortgagee must be named on the advance payment check.
To the extent that any advance payment exceeds the payable flood damage (after depreciation
and policy deductible), it will not be reimbursed.

E. BASEMENTS
Exterior Windows and Doors – In “daylight” basements or basements with exterior windows
and/or doors, the windows and doors that are installed in exterior foundation walls are covered.
However, they can be painted or otherwise finished on the exterior surfaces only.
Baseboard Heaters – Baseboard heaters installed in basements are not covered. Only building
items listed in SFIP Section III.A.8.a. (1)–(17) are covered.

F. CONTENTS MANIPULATION
If the policyholder has not purchased Personal Property (Contents) Coverage, there is no
coverage for contents manipulation.
FEMA recognizes that, in certain instances, manipulation of undamaged insured contents may
be necessary to perform covered building repair. These charges are often included in the
contractor’s unit cost(s) for items being repaired or replaced and not as a separate charge to the
insured. FEMA also recognizes that, in some instances, a contractor may present a more

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detailed breakdown of his or her charges and bill contents manipulation as a separate line-item.
In these instances, an adjuster may allow for contents manipulation separately in the estimate
subject to the conditions below.
Adjusters may no longer make lump-sum allowances or room-by-room allowances in the
estimate for contents manipulation without providing supporting documentation of these costs.
FEMA does not expect to see estimated allowances for contents manipulation. All reasonable
and necessary costs for contents manipulation will need to be supported by an invoice or
receipt clearly indicating the actual incurred expense.
These documented expenses may be included under the building coverage, even when
contents coverage is available when they are a function of the covered building repair.
This coverage does not include the removal and/or storage of the contents away from the
insured location.
When contents manipulation is allowed under Coverage A – Building Property, the insured must
also carry contents coverage on the policy and the contents items being manipulated must be
covered by the SFIP. Coverage for manipulation of tenants’ personal property and non-covered
personal property located in a Post-FIRM elevated building enclosure or basement remains
unchanged and is not allowed under the building or contents coverage of the SFIP.

G. DEPRECIATION
To accurately determine the ACV of an item, the adjuster must consider the replacement cost
along with the depreciation, as well as the average useful life of the item. The condition of the
item prior to loss must also be considered. The NFIP will not accept lump-sum depreciation
figures. Replacement costs on contents items need to be validated with a reliable source when
they appear to be inaccurate.
1. Building Physical Depreciation
If an adjuster is removing and replacing a building item that is not new, appropriate
depreciation must be applied.
2. Contents Physical Depreciation
Contents depreciation must be line by line and item by item. Each item is considered on its
own merit. Things to consider include replacement cost of the item, age of the item, and
condition of the item prior to the flood, and anticipated useful life.

H. EVIDENCE OF LOSS
1. Insured’s Responsibilities
The insured’s responsibilities in the event of loss (which adjusters should remind the
policyholder of) are as follows:
a. Immediately notify the agent or the company of the flood loss.
b. As soon as reasonably possible, separate the damaged and undamaged property,
putting it in the best possible order so that the adjuster can examine it and properly
substantiate the loss.

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c. Place all account books, financial records, receipts, and other loss verification material in
a safe place for examination and evaluation by the adjuster.
d. Within 60 days after the loss, submit an NFIP Proof of Loss Form (FF81-42, a sample
of which is included on page A-27 of this manual) to the WYO Company or the NFIP
Servicing Agent.
2. Adjuster’s Responsibilities
The adjuster’s responsibilities in the event of a loss are as follows:
a. Determine whether there was a general condition of flooding as defined by the policy.
b. Determine how the water entered the building.
c. Check for exterior and interior waterlines and provide the height of each in the report as
well as photographs.
d. Investigate and document all other evidence of loss.
e. Document that prior flood damage has been repaired in the event that the building
sustained previous flood damage.

I. FLOOD DEFINITION
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 (parcels
of land), one of which may be a public roadway, must be inundated.

J. IMPROVEMENTS AND BETTERMENTS
If the insured is a tenant and has personal property coverage (Coverage B) under the Dwelling
Form, the coverage extends to the insured’s cooking stove, range, and refrigerator. 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. Improvements do not include cooking
stoves, ranges, or refrigerators.

K. LEASE AGREEMENTS/INSURABLE INTEREST
If the policyholder is the tenant and is carrying building coverage under a General Property
Form for non-residential property, the adjuster must obtain the lease agreement. The lease
agreement requires the tenant policyholder to:
1. Purchase the flood insurance (building);
2. Be financially responsible for any flood damage (building); and
3. State that the property must be returned to the owner at the end of the lease with all
flood damage repaired.
These lease provisions can establish the tenant policyholder’s insurable interest in the building.
The building owner should be named as an additional payee on the building check. Only one
policy may be written on any one building in the maximum amount, in the aggregate of
$500,000 regardless of the number of interested parties.

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L. NON-WAIVER AGREEMENT
When the adjuster identifies a problem that could affect coverage or result in denial, a nonwaiver agreement must be secured from the insured. Failure to secure a non-waiver agreement
might hinder the company from denial of claim when denial would be in order.
Examples of circumstances that require a non-waiver agreement include the following:
1. The policy has lapsed in coverage.
2. By action of the insured, the policy has become void.
3. More than one building is on a policy (except when scheduled), or there is more than one
building at the property address. (Blanket coverage is not provided under the SFIP.)
4. The address of the risk is different from that listed on the policy.
5. The insured has not complied with the policy requirements.
6. Possibility of fraud.
7. Late reporting.
8. Any other situation for which the adjuster believes that a non-waiver agreement is needed.
In the event a non-waiver cannot be obtained in a timely manner, a detailed Reservation of
Rights letter must be sent to the policyholder.

M. OTHER INSURANCE CLAUSE
1. Introduction
Where there is another insurance policy that covers flood damage and that is not an NFIP
SFIP, and the other policy has a provision stating that it is excess insurance, the SFIP will
be primary.
In all other cases where there is another insurance policy covering flood and an SFIP, the
SFIP will be primary (subject to its deductible) up to the deductible of the other policy
covering flood. Once the other deductible is reached, the NFIP policy will pay in the same
proportion that the amount of SFIP insurance covering the loss bears to the total amount of
insurance covering the loss. For large losses, when the SFIP’s pro-rata share equals or
exceeds the SFIP limit plus the deductible, the SFIP limit is paid.
Note: Duplicate NFIP policies are not allowed. Therefore, except in the case of an RCBAP
and a Building Property SFIP naming a condominium unit owner, the other insurance
should never be another SFIP. In the instance of commercial properties under the General
Property Policy, both the property owner and tenant may purchase building coverage,
if the tenant can demonstrate insurable interest in the building, as may be required in the
lease agreement.

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If the SFIP covers a condominium association and there is an insurance policy that covers
flood in the name of a unit owner and both policies cover the same loss, the policy naming
the condominium association will be primary.
2. Examples
a. Where there is another insurance policy in addition to the SFIP and the other policy has
a provision stating it is excess insurance, the SFIP will be primary.
Loss: $ 35,000
SFIP Coverage

$ 50,000

Deductible

$ 1,000

Other Insurance

$250,000

Deductible

$50,000

The SFIP is primary and the other insurance is excess. The NFIP will pay $35,000 loss
minus the $1,000 deductible.
Note: The above example could be a non-NFIP policy that covers flood and names the
condominium association, plus an NFIP SFIP that names a unit owner. If the other policy
is excess, the unit owner’s SFIP would be primary. In such cases, the condominium
association’s by-laws should be reviewed to determine what the unit owner owns.
b. For any other flood insurance policy, the SFIP will be primary (subject to its own
deductible) up to the other flood policy’s deductible. When the other deductible amount
is reached, the SFIP will pro-rate for the remainder of the loss.
Loss: $480,000
SFIP Coverage

$250,000

Deductible $ 5,000

Other Insurance

$500,000

Deductible $15,000

The SFIP is primary up to $15,000 of the loss. The SFIP $5,000 deductible will be
deducted from the amount for which the SFIP is primary. In this case, the result of the
calculation is $10,000. We will pro-rate the loss that exceeds the amount for which the
SFIP is primary ($15,000). The other insurance equation will be used to pro-rate the
remainder of the loss (i.e., $480,000 − $15,000 = $465,000).
SFIP Coverage

$250,000/$750,000 = .3333 x $465,000 = $154,984.50

Other Insurance

$500,000/$750,000 = .6667 x $465,000 = $310,015.50

SFIP Pays

$154,984.50 + $10,000 =

Total

BASIC ADJUSTMENT ISSUES

$164,984.50
$475,000.00

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c. The limit of liability under the Residential Condominium Building Association Policy
(RCBAP) depends upon the coinsurance calculation.
Value of Building

$1,500,000

Other Insurance

$1,000,000

Deductible $200,000

SFIP Coverage

$ 500,000

Deductible $

Insurance Required

$1,200,000

(80% of $1,500,000)

Loss

$ 625,000

5,000

The RCBAP coinsurance calculation is as follows:
Insurance carried x the amount of the loss = RCBAP available limit
Insurance Required
$500,000 = .4167 x $625,000 = $260,437.50
$1,200,000
$260,437.50 is the available RCBAP limit of liability.
The RCBAP will be primary (subject to its deductible) up to the deductible amount of the
other flood insurance, or: $200,000 - $5,000 (RCBAP deductible) = $195,000.
The remaining loss will be prorated
$500,000 = .3333 x $425,000 ($625,000 - $200,000) = $141,652.
$1,500,000
The RCBAP will not pay $336,652.50 ($195,000 + $141,652.50), but will pay up to $260,437.50,
which is its available limit of liability after the coinsurance calculation. If the loss exceeds the
combined policy limits, the RCBAP deductible will disappear.

N. OVERHEAD AND PROFIT
The overhead and profit percentage must be applied to the depreciation total and reflected in
the ACV loss figure. Overhead and profit is not applied to the following items:
1.
2.
3.
4.

Carpeting
Insured’s own labor
Outside service charges such as plumber, electrician, or appliance service calls
Repairs made by the insured (however, an allowance can be made for the insured’s time
and expense in purchasing materials, not to exceed 10 percent)

Overhead and profit is warranted only if a general contractor has been hired to make repairs.
The adjuster must document the general contractor’s involvement. The NFIP Servicing Agent or
the WYO Company has the option of withholding the overhead and profit until the repairs are
completed or until a contract is signed.
In the event the policyholder functions as general contractor, a reasonable allowance may be
added for the policyholder’s time and effort in coordinating subcontracted repairs.

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O. POLLUTION DAMAGE
The SFIP covers direct physical loss by or from flood. Therefore, when floodwaters contain
pollutants or cause release of pollutants that damage insured property, the cleanup, repair, and
mitigation costs associated with such pollutants are covered under the General Property Form
up to $10,000.
If vinyl tile containing asbestos is damaged by flood (the asbestos does not damage insured
property), the claim for removal and replacement of the flood-damaged tile is limited only by the
Building Property policy limit less the deductible.
See FEMA Bulletin W-10065a (included on page B-55 of this manual) regarding basic claims
procedures with handling claims involving oil in water.

P. PROOF OF LOSS REQUIREMENTS AND WAIVER
The NFIP Proof of Loss Form (FF81-42, a sample of which is included on page A-27 of this
manual) is required on all advance payments, as well as on any paid claim. However, the Proof
of Loss may be waived on claims under $7,500. When a Proof of Loss is waived, the insured’s
signature must be obtained on the NFIP Final Report Form (FF81-58, a sample of which is
included on page A-23 of this manual) after the loss and the claim have been determined. A
copy of the signed Final Report must be left with the insured. In the absence of a local witness,
the adjuster may witness the form. If the loss is over $7,500, the Final Report must still be
completed and a Proof of Loss must be obtained.
Two forms are used for documenting losses. The Proof of Loss Form is used for actual cash
value claims. The Statement as to Full Cost of Repair or Replacement is used for replacement
cost claims.
All signatures obtained on a Proof of Loss or NFIP Final Report should be signed and sworn to
by the insured.

Q. REPAIR VS. REPLACEMENT
This is an area where adjuster improvement is needed. Everything that becomes wet is not
necessarily a total loss. In these instances, the expertise of the adjuster is essential.
Consideration must be given to the type of floodwaters involved (clear, muddy, fresh, salt,
contaminated) and to the length of time the water remained in the building. Many buildings and
contents items will respond to cleaning and need not be replaced. Some examples of “repair vs.
replacement” are presented below.
1. Appliances
Always consider having the item checked and serviced rather than replaced. Even if a
service technician states that the appliance will break down in the future, do not total the unit
out if it is working. Advise the insured that a supplemental claim can be presented within a
reasonable period of time (30–60 days) if the insured can prove that the flood caused the
breakdown.
2. Furniture
Refinish, rather than replace, when possible.

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On re-inspections conducted weeks and months after losses, NFIP General Adjusters have
discovered appliances and furniture that were still being used after they had been declared total
losses in the adjustment.
Remediation, drying, emergency service contractors
Water remediation, drying charges, emergency service charges should be reviewed to limit their
scope to repairing only direct loss from flooding. This would include charges to properly dry the
salvageable building materials. Particular care should be taken to exclude charges to dry
material that is non-salvageable. Charges not considered a direct loss from flood should not be
allowed.
Additionally, the effort put forth by the restoration company to salvage the flood-damaged items
should preclude the need to replace those salvageable items. If repair or restoration cost is
incurred for an item, an additional claim for replacement of that item will not be considered.
The SFIP provides up to three loss settlement methods, depending on the policy form under
which the risk is insured. See Dwelling Form and General Property Form VII.V. Loss Settlement
and RCBAP VIII.V. Loss Settlement.

R. REPLACEMENT COST COVERAGE (RCC) AND HOLD BACK
For single-family residences, including doublewide manufactured (mobile) homes, RCC is
applicable only to building coverage. Under the Residential Condominium Building Association
Policy, a co-insurance clause requires the condominium association to insure its building to at
least 80 percent of the replacement cost value, in order to avoid suffering uninsured losses and
charging assessments to members.
When insured property is eligible for replacement cost loss settlement, it is no longer required to
hold back the recoverable depreciation (see FEMA Bulletin W-04020, included on page B-7 of
this manual). Any amounts that would have currently been held back should be paid as part of
the claim. The Bulletin, however, does not preclude the need to support the allowable
depreciation. While RCC is paid upfront, adjusters should continue to indicate line-by-line
depreciation on all estimates, and the ACV amount should continue to be referenced in reports
and included in the Proof of Loss. The allowable depreciation amount may continue to be
reflected in the signed Statement as to full cost of repair or replacement under the replacement
cost coverage and the signed Final Report; however, if you do not choose to utilize these
methods, you may include the allowable depreciation amount in the signed ACV Proof of Loss.

S. RESERVATION OF RIGHTS LETTER
A Reservation of Rights letter from the insurer to the insured is a notice that, even though the
company is investigating the claim, certain losses might not be covered by the SFIP. By means
of this letter, the company reserves its legal right to deny coverage later, as additional
information about the loss becomes available.

T. RESERVES
The reserving system mandates that reports must be timely and reflect true reserves. The initial
case loss reserve may be a system-generated amount based on criteria established by the
WYO Company or it may be an individually set reserve based on the best knowledge of the loss
at the time the reserve is set. A company may also set a bulk catastrophe reserve. The NFIP

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Preliminary Report and each subsequent adjuster report should refine the case loss reserve
amount as the company becomes aware of additional facts, inspections, and estimates. The
goal is that this knowledge along with any reductions of partial or advance payments will result
in a case loss reserve that closely reflects the value of all future payments and ultimately the
value of the final payment. See FEMA Bulletin W-08095, included on page B-29 of this manual.

U. SALVAGE
On residential and small mercantile losses, adequate salvage credit is taken when the insured
retains possession of totally damaged items. The contents inventory must specifically denote
those items that have been considered salvageable and left with the insured. A professional
salvor must be used to handle items of significant value.
Salvage on large commercial losses must be promptly identified and inventoried by an approved
professional salvor. Salvage agreements are executed in all cases where the stock has been
taken over by a salvage company.
Permission to secure the services of a salvor must be authorized by the WYO Company or
NFIP Servicing Agent.

V. SELF-PROPELLED VEHICLES
Coverage is provided for self-propelled vehicles that service the described location and for selfpropelled vehicles used to assist handicapped persons, so long as the vehicles are inside the
building at the described location. Such vehicles below the lowest elevated floor of a Post-FIRM
elevated building are not covered.

W. SPECIAL LOSS SETTLEMENT
Replacement cost applies to manufactured (mobile) homes or travel trailers 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 and that qualifies for replacement cost is a total loss or is not economically feasible to
repair, then the adjustment of the property will be the lesser of:
1. The replacement cost of the dwelling or 1.5 times the actual cash value, or
2. 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 paragraphs 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. and RCBAP VIII.V.2.

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X. SUBROGATION
The identification of subrogation lies initially with the adjuster assigned to the flood loss and,
ultimately, with the claims representative responsible for the file. The adjuster must identify
on the NFIP Preliminary Report, in the “Origin” section, the cause of loss, whether the loss
was associated with failure of a dam, pumps, a storm drain system, or other flood control
measure, and whether a non-natural cause contributed to the loss. The Cause of Loss and
Subrogation Report (FF81-63, a sample of which is included on page A-7 of this manual) then
must be completed.

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VIII. SPECIAL ADJUSTMENT ISSUES
A. AIR CONDITIONING CONDENSERS AND SOLAR HEATING ELEMENTS
Building coverage extends to the insured building and additions and extensions attached to and
in contact with it by means of a common wall. Air conditioning condensers and solar heating
panels are considered building property even if they are located apart from the structure and are
not attached in accordance with the policy definition. Condensers are eligible for replacement
cost coverage if the structures they service are eligible for it.
Coverage does not apply to other equipment, such as generators, air compressors, and
substation transformers owned by the policyholder that may service the building, but are located
apart from the structure and are not attached. If a generator or other such equipment is attached
in accordance with the policy definition or are in a fully-enclosed structure, coverage would
apply. If generators and other such equipment not listed in the coverage are in a basement, they
are not covered.

B. 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.

C. BOATHOUSES: COVERAGE FOR NON-BOATHOUSE PARTS
OF BUILDING INTO WHICH BOATS ARE FLOATED
FEMA has determined that non-boathouse parts of a building into which boats are floated are
not excluded from coverage. This means that, with respect to a building, a part of which is used
for boathouse purposes and a part of which is used for other than boathouse purposes (e.g.,
residential, commercial, or municipal), non-covered items are limited to the following:
1. The ceiling and roof over the boathouse portion of the building into which boats are floated
(unless there is an area above the boathouse used for purposes unrelated to the boathouse
use, e.g., residential, in which case the upper area is covered, from the floor joists to and
including the upper area walls and roof)
2. Floors, walkways, etc., within the boathouse area, or outside the area but pertaining to the
boathouse use
3. Exterior walls and doors of the boathouse area not common to the rest of the building

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4. Interior walls and coverings within the boathouse area (although a common wall between
the boathouse area and the other part of the building is covered)
5. Contents located with the boathouse area, including furnishings and equipment, relating to
the operation and storage of boats and other boathouse uses.
However, when the building is entirely in, on, or over water, there is no coverage at all if it was
constructed or substantially improved after September 30, 1982.

D. CARPETING AND DRAPES
Carpeting is considered building property if it is installed over an unfinished floor surface.
Carpeting over finished floors is considered personal property (contents), even if it is wall to wall
or affixed to the floor. All carpet losses, whether building property coverage or personal
property coverage, are adjusted on an ACV basis. When a carpet loss is paid, overhead and
profit is not allowed, unless a general contractor is responsible for installation and such
responsibility is documented for the claim file.
Drapes are always treated as contents items, even if they are custom-made and fit only a
specific window. However, window blinds of all kinds are considered building property (See
Dwelling Form III.A.7.b.).

E. CISTERNS
In certain communities, especially in the Virgin Islands, cisterns are fundamental parts of
residential buildings. These are often the only source for storing water. Methods of construction
of cisterns include beneath the structure, on the roof, above ground and physically attached to a
side of a structure by a common wall or as a separate unit detached from the structure. The
SFIP provides coverage only if the cistern is an integral part of the insured building, such as
above ground and connected by a common wall, on the roof, or within the perimeter walls.
There is no coverage if the cistern is under ground unless it is contained in the basement. If the
cistern is covered by the SFIP, the water in it also is covered.

F. CLOSED BASIN LAKES AND CONTINUOUS LAKE FLOODING
1. 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 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.
2. Continuous Lake Flooding
In a few areas of the United States, lake waters have risen to long-term record levels. Devil’s
Lake, North Dakota, is a primary example of this condition. The insured building must be
inundated by rising lake waters continuously for 90 days or more, and it must appear
reasonably certain that the loss and damage will reach or exceed the policy building limits
including the deductible, or the maximum amount payable under the policy for any one
building loss.

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The current position of the National Flood Insurance Program (NFIP) is that occurrences
of long-term, continuous lake flooding, loss, and damage to property will be settled on a
one-time basis by paying the lesser of the two amounts mentioned above, if the insured
signs a release agreeing to the following:
a. To make no further claim under the SFIP
b. Not to seek renewal of the policy
c. Not to apply for any NFIP flood insurance for the property at the property location of the
insured building

G. COASTAL BARRIER RESOURCES SYSTEM (CBRS)
1. Introduction
To determine whether a building (the insurable property) is eligible for flood insurance
coverage when the building appears to be located in a Coastal Barrier Resources System
(CBRS) area, the adjuster should consult the community’s Flood Insurance Rate Map (FIRM)
panel or a community code office (for example, the Tax Assessor’s Office or the Building and
Zoning Office) to determine which coastal barriers act applies to the property in question. In
CBRS areas, eligibility for flood insurance coverage depends on this determination. (See
IV. Property Not Covered, 15. in the SFIP.)
When handling any claim that may be in a CBRS area, the adjuster should:
a.
b.
c.
d.

Identify the location of the risk on the FIRM;
Determine when the risk was constructed;
Comment on substantial improvement; and
Provide photographs of all sides of the risk.

If any building you are adjusting appears to be subject to one of the laws discussed below,
write a brief summary of your findings on the NFIP Narrative Report form and send it to the
NFIP Servicing Agent or the WYO company for the claims examiners to evaluate.
2. Coastal Barrier Resources Act
Congress passed the Coastal Barrier Resources Act (CBRA) on October 1, 1982. The act
became effective on October 1, 1983. Congress’s intent was to reduce or restrict the federal
government’s direct involvement in encouraging development of certain undeveloped
“coastal barriers.” The act defined a coastal barrier as “a naturally occurring island, sandbar,
or other strip of land, including coastal mainland that protects the coast from severe wave
wash.”
CBRA does not prohibit development of designated undeveloped coastal barrier islands; nor
does it affect private funding or investment for development of such areas. Instead, the act
attempts to eliminate the use of “federal funds” (specifically, loans) for such development.
Under the terms of the Act, FEMA is prohibited from providing NFIP flood insurance
protection for structures built or substantially improved after October 1, 1983, in any area
designated an undeveloped coastal barrier. However, structures in such areas that were
built (walled and roofed) before October 1, 1983, remain eligible for coverage until such time
as they are substantially damaged or substantially improved.

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3. Coastal Barrier Improvement Act
The Coastal Barrier Improvement Act (CBIA) was enacted and made effective on November
16, 1990. The CBIA greatly expanded the identified land in the Coastal Barrier Resources
System established pursuant to the CBRA of 1982.
4. Substantial Improvement: The 50 Percent Rule
Substantial improvement, as defined in public law (44 Code of Federal Regulations 59.1)
means:
“any reconstruction, rehabilitation, addition, or other improvement of a
structure, the cost of which requires or exceeds 50 percent of the market
value of the structure before the ‘start of construction’ of the improvement.
This term includes structures which have incurred ‘substantial damage,’
regardless of the value of or actual cost of repair work performed. The
term does not, however, include either (1) any project for improvement of
a structure to correct existing violations of state or local health, sanitary,
or safety code specifications which have been identified by the local code
enforcement official and which are the minimum necessary to assure safe
living conditions or (2) any alterations of a ‘historical structure,’ provided
that the alteration will not preclude the structure’s continued designation
as a historical structure.”
In other words, if the damage or improvement equals 50 percent of the market value of the
structure before damage, the insured building could be considered substantially damaged. If
any building you are adjusting appears to be subject to the 50 percent rule, write a brief
summary of your findings on the NFIP Narrative Report form and send it to the NFIP
Servicing Agent or the WYO company for the underwriters to evaluate. In your report, use
the replacement cost of the building less fair depreciation to obtain actual cash value
(market value). Land values and outside improvements are not considered in the
determination of market value.
The community that has jurisdiction over the area is the only authority that can make the final
determination as to substantial improvement or substantial damage.

H. COMMERCIAL LOSSES
When you encounter an unusual commodity or type of business, with which you are not familiar,
notify the examiner or claims management immediately for assistance and guidance.
On commercial stock losses, the quantity and insured’s cost must be established and
documented for the claim file. Adjusters should not assume that all stock and business property
on the premises is owned by the insured. The adjuster must verify ownership, especially for
manufacturing, repairing, and high-end sales businesses. The SFIP insures only property
owned solely by the insured. There is no bailee, consignment, or floor plan coverage. The SFIP
does not provide coverage for property of others in the care, custody, and control of the insured
under any policy form. The use of a CPA and/or other expert(s) is highly encouraged for large
and/or complex claims.

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I. CONDEMNATION OF PROPERTY
Communities may condemn flood-damaged properties as the result of ordinance enforcement
or for loss mitigation. The SFIP covers only direct physical damage caused by flood and not loss
of use or access. A flood claim for a structure with less than total damage but not repairable due
to a condemnation order or ordinance receives coverage only for the direct physical loss by or
from flood.

J. CONDOMINIUM UNIT OWNER – DWELLING FORM
Personal Property – If direct physical damage by or from flood is limited to the first floor of the
condominium building, and a unit owner’s insured personal property on an upper floor has
sustained no covered loss, the personal property is not covered even if access to the personal
property is denied by local officials or by damage to the first floor (see Section V. Exclusions.
A.2. &3.).
Assessment Coverage – Assessment coverage applies only to building property that is
covered by the SFIP. Assessments for swimming pools and their equipment, hot tubs and spas
that are not bathroom fixtures, parking lots, landscaping, etc. cannot be covered.
Association assessments to unit owners representing a co-insurance penalty made because the
association was not insured to at least 80% of the replacement cost of the RCBAP insured
building, cannot be covered. Assessments made because the association was not insured from
80% to 100% of the building’s replacement cost are covered, but only to the extent of that
underinsurance (for example, if insured to 90% of value, then only 10% is covered). If the
association has purchased insurance only to 50% of the building’s replacement cost and
assesses unit owners for the remaining 50%, only an amount equal to 20% (80%-100%) would
be covered. The statutory limit of $250,000 per unit would apply to the combination of RCBAP
and unit owner (Dwelling Form) payments.
Association assessments to unit owners made to recover the RCBAP deductible are
not covered.

K. CONSTRUCTIVE TOTAL LOSS
Sometimes, when a flood-damaged building is less than a total loss, the insured will ask to be
paid on the basis that a constructive total loss has occurred, so as to use the loss proceeds to
move the insured building away from the peril of flood. FEMA has concluded that the SFIP does
not and should not provide for such payments.

L. DECKS
Since 1994, the SFIP has specifically excluded coverage for decks. However, stairways and
staircases are still covered, if they are attached directly to the insured building. We also cover
stairways or staircases attached to decks or walkways for the purpose of ingress and egress. If
there are two staircases attached to the same deck or walkway, then there is coverage for only
one of the staircases. The SFIP allows for payment of steps and a landing. The maximum
allowable area is 16 square feet.

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M. ELEVATED BUILDINGS
1. Coverage Restrictions
An “elevated building” is defined as a non-basement building in which the lowest elevated
floor is raised above ground level by foundation walls, shear walls, posts, piers, pilings, or
columns. post-FIRM elevated buildings in certain SFHAs are subject to coverage restrictions
specified in the Standard Flood Insurance Policy. A manufactured (mobile) home may be an
elevated building.
Determination of the Lowest Elevated Floor – Full coverage for post-FIRM elevated
buildings begins at the lowest elevated floor. This is the lowest floor raised above the
ground, even if the pilings extend above it (see FEMA Bulletin W-04020, May 7, 2004,
page 2 included in Appendix 2).
Some confusion has been reported about the applicability of the elevated building coverage
restrictions to a non-elevated post-FIRM building located in an SFHA and constructed with
its lowest floor below the Base Flood Elevation. Such a building is not subject to the
elevated building coverage restrictions. The rating of any structure must be based on the
correct elevation difference between the lowest floor and the Base Flood Elevation.
Structures that are misrated should be reported to the company’s underwriting department
as soon as possible after the potential error is discovered.
The restrictions apply only to post-FIRM, Regular Program, elevated buildings in Zones
A1-A30, AE, AH, AR, AR/A, AR/AE, AR/AH, AR/A1-A30, V1-V30, or VE. “post-FIRM” means
that a building was constructed or substantially improved on or after the community’s initial
FIRM date or after December 31, 1974, whichever is later. The coverage restrictions apply
to any area of an elevated building that is lower than the lowest elevated floor.
Coverage will respond for the building and personal property items listed in the policy,
provided that these items are connected to a power source and installed in their functioning
locations and that the insured has purchased appropriate coverage.
Floor insulation and the underpinning material used to hold it in place against the underside
of the lowest elevated floor of a post-FIRM elevated building is covered. No finish of the
underpinning material is allowed.
2. Coverage for Garages and Contents
a. Attached Garage
If a post-FIRM elevated building located in zones A1-A30, AE, AH, AR, AR/A, AR/AE,
AR/AH, AR/A1-A30, V1-V30, or VE has an attached garage with a floor lower than the
lowest elevated floor, the coverage restrictions apply to that area. Any contents located
above the level of the lowest elevated floor (such as hanging from the ceiling or on the
garage walls) are covered.

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b. Detached Garage
If a dwelling is post-FIRM elevated and there is a detached garage present with a floor
lower than the lowest elevated floor of the insured dwelling, the garage is fully covered.
Also, contents inside the garage are covered, subject to all other policy provisions
(such as the requirement that they be secured against flotation if the structure is not
fully enclosed).
No coverage will apply to any detached garage used or held for use for residential (i.e.,
dwelling), business, or farming purposes. The ordinary dictionary meanings of the words
“residential” (e.g. suitable for or used as a residence or dwelling) and “dwelling” (e.g., a
place to live in, abode) when applying coverage to detached garages. These words
should no longer be broadly applied to limit coverage. However, for the purpose of this
limitation, kitchen facilities are not required for the space to qualify as residential use or a
place to live in. 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. Otherwise covered contents in such detached garages are covered.
The General Property Form and RCBAP do not provide coverage for appurtenant private
structures. Coverage for a detached garage responds only in the case of 1-4 family
residential buildings insured under the Dwelling Form. The insured may elect to apply up
to 10 percent of the building coverage limit for a detached garage. This is not an
additional amount of insurance.
As indicated in the “Exclusions” section of the ICC coverage (Coverage D), ICC
coverage does not apply to a garage. To obtain ICC coverage on an appurtenant
structure, a separate flood insurance policy must be written. For example, a detached
garage that has been converted for residential purposes, receives no ICC coverage
unless it is insured under a separate policy.
3. Coverage for Building Property in a Building Enclosure below the Lowest Elevated
Floor or in a Basement
Paragraph III.A.8. of the SFIP provides coverage for certain items of building property (and
related clean-up) in an enclosure below the lowest elevated floor of an elevated post-FIRM
building in any of Zones A1-A30, AE, AH, AR, AR/A, AR/AE, AR/AH, AR/A1-A30, V1-V30, or
VE, or in a basement regardless of zone. Coverage is limited to:
a. Clean-up expenses
b. Any of the following items, if installed in their functioning locations and, if necessary for
operation, connected to a power source:
•

Central air conditioners

•

Cisterns and the water in them

•

Drywall for walls and ceilings in a basement and the cost of labor to nail it, unfinished
and unfloated and not taped, to the framing

•

Electrical junction and circuit breaker boxes

•

Electrical outlets and switches

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REVISED JUNE 2010

•

Elevators, dumbwaiters, and related equipment, except for related equipment
installed below the Base Flood Elevation after September 30, 1987

•

Fuel tanks and the fuel in them

•

Furnaces and hot water heaters

•

Heat pumps

•

Nonflammable insulation in a basement

•

Pumps and tanks used in solar energy systems

•

Stairways and staircases attached to the building, not separated from it by
elevated walkways

•

Sump pumps

•

Water softeners and the chemicals in them, water filters, and faucets installed as an
integral part of the plumbing system

•

Well water tanks and pumps

•

Required utility connections for any item in this list

•

Footings, foundations, posts, pilings, piers, or other foundation walls and anchorage
systems required to support a building

If an area below grade on all sides is within a room, such as a living room, then coverage is
not provided for the “finished walls” of the area below grade. When the area extends above
grade, or if there are contents located in the sunken area, coverage limitations will apply.
When the entire room is below grade, even if the walls extend above grade, as in a daylight
basement, there is no coverage for contents on the floor or coverage for the walls except
those listed in the policy. The coverage limitations apply to the whole area, including the
“finished walls.”
If an elevated building, subject to the coverage limitations, has an attached garage with a
floor lower than the lowest elevated floor of the building, the coverage restrictions apply to
that area. Any contents located above the level of the lowest elevated floor (such as hanging
from the ceiling or on garage walls) are covered.

N. ELEVATORS
The SFIP provides coverage for elevators, dumbwaiters, and related equipment. When these
items are located in a basement or the enclosed area below an elevated building, there is no
coverage for the related equipment below the Base Flood Elevation unless it was installed on or
before September 30, 1987.
Elevators and chairlifts installed outside of the perimeter of the insured building are
not covered.

O. EROSION AND WAVE WASH
The SFIP states that loss and damage from wave action along a lake or other body of water is
considered direct physical loss by flood. Loss and damage from spray consequent to washover, whether wind driven or not, is not covered. Loss and damage to structures arising from
ongoing erosion is not covered under the SFIP. However, collapse or subsidence of land along

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the shore of a lake or other body of water as a result of erosion or undermining caused by
waves or currents of water exceeding cyclical levels which result in flooding is included in the
definition of “flood” (SFIP II.A.2.) and, thus, is covered.
Replacement of soil lost through erosion is covered only when the erosion results from an
overflow of inland or tidal waters and not from the unusual and rapid accumulation or runoff of
surface waters from any source. Soil replacement must be confined to within the perimeter of,
and related to the support of, the building. Soil replacement beyond this perimeter is not payable
under the SFIP. Rip-rap, armoring, and retaining walls are not covered.

P. FIBERBOARD SHEATHING/BLACKBOARD
When the flooding of buildings consisting of wood frame construction and brick veneer occurs,
complete demolition is not always required. There are alternative methods of repair or
replacement of fiberboard sheathing.

Q. FOOD IN FREEZERS
When food is located in a post-FIRM building enclosure below the lowest elevated floor or in a
basement and subject to restrictive coverage outlined in Section III.B.3. of the SFIP, coverage is
only provided for food located in food freezers. Damage to food in refrigerator/freezers is
excluded from coverage.

R. FOUNDATIONS
Floods can cause significant foundation damage, but so can settlement, improper construction,
earth movement, tree roots, and sinkholes. Many times an insured will claim normal settlement
cracks in slabs and foundations as flood related. The insured will indicate that he or she never
noticed the foundation and slab damage until after the flood. This neither proves nor disproves
that the damage resulted from flood.
Most slab and foundation damage occurs because of a lack of moisture in the ground. The soil
shrinks away from the foundation, allowing the grade beams to settle downward under the
supported weight. This results in a bowing effect and cracks. Excess water in the ground exerts
upward pressure on the slab floor and inward pressure on the subgrade foundation walls. This
also results in cracks and displacement. Damage of this kind is considered the result of
hydrostatic pressure and is not covered under the SFIP, unless there is a general condition of
flooding in the area.
Flooding with sufficient water movement to carry the subsoil away (scouring) from the slab or
foundation walls generally leaves visible signs. Claims for foundation damage without any
visible indication of scouring or land subsidence bear close scrutiny. Most foundation and slab
damage that occurs without any visible signs of soil displacement may have resulted from
causes other than flooding and is not covered by the SFIP. The adjuster must carefully check
the perimeter and underneath the building for soil washout from velocity water flow. When
finding no indication, the adjuster must resist a claim for foundation damage. The insured then
has the responsibility to prove that the damage was caused by flood. Use of structural
engineers must be limited to losses with visible indications of flood damage or of floodwaters’
having exacerbated preexisting damage.
There is limited coverage for slabs under post-FIRM elevated buildings. Coverage provided at
SFIP III. A.8.a. (17) is limited to “footings, foundations, posts, pilings, piers, or other foundation

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walls and anchorage systems required to support the building.” These slabs are covered only if
they are part of the foundation. To be part of the foundation, a slab must be at least 6” thick
containing rebar and tied into the posts, pilings, piers, or other foundation walls and anchorage
systems required to support the building (see FEMA Bulletin W-04091, November 19, 2004).

S. FREEZERS
Walk-in freezers attached to the building are considered part of the building.

T. GARAGES
If a garage is in contact with the insured dwelling (elevated or not) by means of rigid exterior
wall, a solid load-bearing interior wall, a stairway, an elevated walkway, or a roof, the
policyholder has the option of insuring the garage separately. However, if connected by a
common interior wall that is not a solid load-bearing wall; the addition is always considered part
of the building and cannot be separately insured. (See SFIP Dwelling Form III.A.2 and 3.)
Otherwise, the garage will be considered detached and subject to the 10% of Coverage A
(Dwelling) limit. The General Property Form and RCBAP do not cover detached garages or
other appurtenant structures, but do provide coverage for qualifying additions and extensions.
See, also, “M. Elevated Buildings” above.

U. HYDROSTATIC PRESSURE
The SFIP excludes damages resulting from hydrostatic pressure unless there is surface flooding
in the area and the flood is the proximate cause of the damage from the pressure of water
against the insured structure.

V. ICE AND DEBRIS IMPACT DAMAGE
Damage sustained from freezing or thawing of water, along with damage sustained from and by
the weight and pressure of ice, is not covered unless the property itself is under direct contact
by flood as defined in the SFIP. Damage to property elements by freeze or thaw after the
surface water has receded from the property is not covered.

W. LOMA AND LOMR
A Letter of Map Amendment (LOMA) or Letter of Map Revision (LOMR) effectively removes a
post-FIRM elevated building from the Special Flood Hazard Area (SFHA). If the LOMA or LOMR
is obtained after the loss, its effective date is as of the loss. This means that the coverage
limitations to areas beneath the lowest elevated floor do not apply.
A LOMA or LOMR may not be issued if the lowest adjacent grade of the property is below the
Base Flood Elevation (BFE). But, if such a property has its lowest floor (enclosure floor) above
the BFE, the property may comply with the NFIP Floodplain Management Regulations. Claims
involving such buildings should be sent to FEMA with a request for a waiver of the elevated
building coverage limitation (See FEMA Bulletin W-04091, November 19, 2004 2).

X. MANUFACTURED (MOBILE) HOMES AND TRAVEL TRAILERS
The replacement cost for a manufactured (mobile) home will not exceed 1.5 times its actual
cash value (see Special Loss Settlement – SFIP Dwelling Form, Section VII (VIII RCBAP) V.3.).

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Unless the manufactured home meets the requirement of this section, settlement is limited to its
Actual Cash Value.
Only community-compliant travel trailers without wheels are covered, even if the community
ordinance allows wheels to be installed (see Section II. Definitions 6. c.). For the purpose of
coverage determination, “without wheels” means with no wheels.

Y. MUDFLOW
Mudflow is the only form of earth movement covered by the SFIP. (The word “mudslide” no
longer is used in the SFIP.) A mudflow is a “river of liquid and flowing mud on the surfaces of
normally dry land areas, as when earth is carried by a current of water.”
Mudflow is unforeseeable, is less common than earth movement from landslide or erosion, and
has characteristics markedly similar to those of a flood. Landslide and slope failure are not
covered under the policy. However, coverage is provided for subsidence of land along the shore
of a lake or similar body of water which results from the erosion or undermining of the shoreline
caused by waves or currents of water which results in a flood.

Z. PROPERTY REMOVED TO SAFETY
If coverage has been purchased both for personal property (contents) and for the building, the
SFIP covers direct physical loss by flood to each while the property is located at the property
address shown on the application or endorsement. Coverage is available for 45 days at another
place above ground or outside of a Special Flood Hazard Area to which any insured property
(including a moveable building) is removed in order to protect and preserve it from a flood or
from the imminent danger of flood. Personal property that has been removed must be placed in
a fully enclosed building or otherwise reasonably protected from the elements to be insured
against loss. The reasonable expense incurred by the insured, including the value of the
insured’s own labor at prevailing federal minimum wage in moving the insured property away
from the peril of flood and storing the property at the temporary location, will be reimbursed to
the insured, up to $1,000.

AA. REFORMATION OF COVERAGE
If at the time of loss it is discovered that the premium collected is insufficient to provide the
coverage originally purchased because the policy was misrated, after May 19,2005,
retrospective (looking back) collection of additional premium will no longer be required.
Prospective (looking forward) additional premium will be required to be paid, but the time
required to collect information to calculate the additional premium will not delay the claims
process (see FEMA Bulletin W-05021, May 23, 2006, that includes FEMA Policy Issuance 12005, May 19,2005).

BB.

REPETITIVE LOSS STRUCTURES AND PREVIOUS CLAIMS

1. Repetitive Loss Structures
A repetitive loss structure is one that has sustained flood damage on two occasions during
a 10-year period ending on the date of the event for which a second claim is made, and for
which the cost of repairing the flood damage, on the average, equaled or exceeded 25
percent of the market value of the structure at the time of each such flood event. Repetitive

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losses are a major challenge to the NFIP. Since 1980, $1.2 billion has been paid on risks with
a repetitive loss history.
2. Previous Claims
It is imperative for the adjuster to be alert to the possibility that any loss property may have
been involved in previous claim activity. Where there is evidence of repetitive flood loss, the
adjuster must request the prior loss file from the WYO company or the NFIP Servicing
Agent. To identify the previous carrier, the adjuster should call the NFIP Bureau and
Statistical Agent.
In such cases, analyze prior loss file photographs and compare previous data to current
conditions. Photographs from different dates of loss that show the same paneling,
appliances, fixtures, machinery, and equipment indicating non-replacement for the prior
flood event should be brought to the attention of the claims examiner. When investigating
possible repetitive loss, always:
a. Look for similarities in furniture color and style.
b. Look for the same design, pattern, and texture in paneling.
c. Check appliances and mechanical apparatuses for manufacturer names, model
classifications, and serial numbers. (The same serial numbers between two events show
non-replacement of these items after a previous flood.)

CC.

SCRIP AND STORED VALUE CARDS

Coverage is specifically excluded for these items.

DD.

SEEPAGE AND HIGH WATER TABLE

The SFIP does not provide coverage for losses related to high water tables or seepage unless
there was a general condition of flooding in the area.

EE.

STOCK (PERSONAL PROPERTY) LOSSES – GENERAL PROPERTY FORM

Once the insured declares personal property as “other than household personal property,”
Stock, which is defined in the General Property Form at II. 27, is covered. However, Stock is
subject to the Special Limits at III.B.5. a.-d. This means that jewelry and other listed items
qualifying as Stock are covered only up to the special limit of $2,500. Dealers of such items
typically have separate property coverage for stock that includes flood as a covered peril.
Similarly, bait intended to be sold alive (i.e., worms, crickets, minnows, etc.) by bait and tackle
shops and others is not covered as stock since animals are excluded (see SFIP General
Property Form IV.6.). However, bait that is to be sold frozen, preserved, or otherwise not alive
may be covered as stock.

FF.

SWIMMING POOLS, HOT TUBS, AND SPAS

Coverage for swimming pools, hot tubs, spas, and their equipment is excluded, except that spas
and hot tubs are covered if they are bathroom fixtures. Spas and hot tubs are covered under the
General Property Form if they are bathroom fixtures or stock and inventory held for sale.

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GG. TRAVEL TRAILERS
Travel trailers without wheels, built on a chassis, affixed to a permanent foundation, and
regulated under the community’s floodplain management and building ordinances or laws
are covered.

HH.

BLINDS

The SFIP covers all types of window blinds. Blinds are covered under SFIP Coverage A. only.

II. WATER, MOISTURE, MILDEW, OR MOLD DAMAGE
The SFIP covers reasonable costs for remediation of mold damage except when the damage
results from a condition “confined to the insured building” or “within [the insured’s] control,” such
as “failure to inspect and maintain the property after a flood recedes.” Four examples of SFIP
coverage are provided below. If such damage is caused by “wicking,” it is covered.
1. If a building was inundated but not evacuated, the SFIP will pay reasonable expenses for
water extraction, dehumidifier and fan rental, and mildicide and anti-microbial application.
2. If, after the insured has taken the mitigation measures in example 1 above, mold reappears
and causes damage to the upper portions of walls, ceilings, etc., the NFIP will honor such
claims if the insured can show that mitigation attempts were made.
3. If a local official requires testing for mold, and has legal authority to do so, the SFIP will pay
reasonable costs for the test. No other testing is necessary because the SFIP pays for
reasonable remediation of mold damage (except as noted above). Therefore, the cost of
other testing, except as described here and in example 4 below, will not be covered.
4. If, during inspection of a claim for mold damage, the adjuster believes that such damage is
not the result of the recent flood but is a long-term, recurring problem, it may be necessary
to obtain a testing report from a Certified or Licensed Hygienist or Microbiologist. The
report must be specific as to whether the mold is a recent problem or a long-term,
recurring problem.
Obviously, there can be other scenarios: situations where waist-deep water has inundated the
building and remained for several days or situations where the insured was not allowed to return
to the building for an extended period of time. In such cases, apply common sense and good
adjusting principles. Use these examples as a guide in the handling of the more complex cases.

JJ. WATER SOFTENERS
If the water softener is installed at the described location and connected to a power source,
coverage is provided for the water softener and the chemicals in it.

KK.

WELL WATER PUMPS

The Dwelling Form provides coverage for well pumps located below the lowest elevated floor of
an elevated building and in basements. Well pumps are described as building items and
therefore cannot be construed as content items. If the well pump is located in an unattached
shed or building, then there is no coverage.

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IX. WIND VS. FLOOD ISSUES
Hurricanes and other severe storms may result in damage caused by both wind and flood.
When handling these claims, adjusters should use proven investigative methods.
The NFIP provides adjuster specific guidance in the form of wind or water investigative tips as a
tool to help determine the damage was caused by wind or water or a combination of both. The
adjuster should use the proven methods to document windstorm damage to buildings or
contents. See FEMA Bulletin W-08008, dated February 25, 2008, for a discussion of
Wind/Water Investigative Tips; this document can be obtained at www.nfipiservice.com.
In those instances where wind is coupled with the flood loss, the adjuster typically has little
difficulty when scoping the loss in separating the flood from the wind damage. A flood leaves a
clearly visible watermark and/or debris line on the exterior and in the interior of buildings.
Damage at and below that watermark is attributable to flood. Damage above that watermark is
attributable to wind, in this example.
As the line of separation between the losses caused by wind and flood narrows, and particularly
when they overlap, it becomes increasingly challenging for the adjuster to estimate the flood
damage at the margins. In these cases, expert engineers are often hired by the insurer and at
times by the policyholder to make the determination. In the extreme, such as in coastal
Mississippi, all that may be left of a policyholder’s home or business is a slab or other
foundation elements. The flood adjuster is trained in recognizing signs of flood versus wind
damage. When, like in coastal Mississippi, the storm surge depth and its intensity is sufficient to
cause the observed damage and there is no evidence of pre-surge wind damage, the flood
adjuster will determine the pre-loss value of the building and recommend payment as a total
loss limited by this value and the flood policy limit.
The NFIP requires the WYO Companies and the NFIP Servicing Agent to investigate and adjust
each claim by hiring flood certified independent adjusters. WYO Companies may use their staff
adjusters, but due to the specialized nature of both the flood claims and also Federal
requirements, this is not widely practiced.
The adjuster should contact the policyholder within 24 hours after receiving the assignment from
the insurer and set a date to meet with the policyholder to “scope” the loss or to discuss the
claims process with the policyholder, take photographs, measurements, and note the type and
severity of the damage caused by flood.
Once the estimate is prepared it is delivered to the policyholder with the required Proof of Loss.
As a courtesy, the adjuster may assist the policyholder in preparing the Proof of Loss; the
policyholder should submit their statement of the amount they are claiming. The adjuster has no
authority to indicate to the policyholder what will and won’t be covered or what will be paid. The
adjuster’s recommendation is reviewed by the insurer and when the agreed upon Proof of Loss
is received, payment is made.
The NFIP only pays for direct physical loss by or from flood as defined in the Standard Flood
Insurance Policy (SFIP). The scoping process described, records the information needed to
prepare a line-by-line and room-by-room detailed estimate using unit costs to value the damage,
for instance, in a typical room so many square feet of drywall may be removed and replaced at
a unit cost per square foot. This unit-cost includes the cost of labor and materials, as well as any
applicable taxes.

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X. MAINTAINING THE INTEGRITY OF THE NFIP
A. QUALITY ASSURANCE REINSPECTIONS
The purpose of reinspections is to maintain the high quality of claims processing in the WYO
program. There are two types of reinspections:
•
•

Routine
Special Assist

1. Routine Reinspections
Routine reinspections are conducted principally on open claim files. During a flooding event,
the NFIP Bureau and Statistical Agent will select a WYO Company for reinspections,
determine the number of claims, and select the claims to be reinspected.
The General Adjuster uses the three-part Reinspection Report form. The form is completed
in full and signed by both the WYO Company representative and the General Adjuster. If
the WYO Company representative disagrees with the reinspection results, the
representative must indicate the reasons for disagreement at the bottom of the form.
The General Adjuster then forwards copies of the Reinspection Report for review by
FEMA’s Government Technical Monitor in the offices of the NFIP Bureau and Statistical
Agent. If overpayments are noted, the Monitor will correspond with the WYO Company for
collection. If, over time, patterns of adjustment errors or oversights are noted, Bureau and
Statistical Agent staff will determine what additional training is needed.
2. Special Assist Reinspections
Special assist reinspections are precipitated by a written request from the WYO Company
claim coordinator or direction (oral or written) from FIMA. These involve specific claim
situations that require a General Adjuster’s intervention.

B. FRAUD PREVENTION
Fraud or misrepresentation is a continuing problem in the National Flood Insurance Program.
Any case where it is reasonably believed that there is the possibility of fraud, the adjuster is
responsible for immediately reporting fraud to NFIP Servicing Agent or WYO Company.
1. Detecting Possible Fraud
The following are common indications of possible fraud:
a. Changes of dates or amounts on receipts
b. Dated receipts or invoices that have their printed serial numbers out of sequence
c. Recent, multiple changes of ownership of real property (Check for relationship of
parties involved.)
d. Repeated changing of policies by insured
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e. Multiple waterlines in a building (This possible indicator of previous flooding may
demonstrate that the insured is trying to collect for repairs not completed from a
prior flood.)
f.

Bringing in damaged property not owned by the insured to be submitted in the claim

g. Fraudulent cause of loss
h. Deliberate misrating
i.

Photocopied receipts

Price quotes rather than receipts of purchase

2. Reporting Possible Fraud
As noted above, all instances of possible fraud must immediately be reported to the NFIP
Servicing Agent or the WYO Company.
Other improper or wasteful practices should be reported to FEMA’s Waste and Abuse Hotline at
1-800-323-8603.

C. FLOOD INSURANCE REFORM ACT OF 2004 (FIRA)
The FIRA provisions inform policyholders about the claims process and what to expect from
adjusters. In addition, the Flood Insurance Claims Handbook outlines the FEMA Claims Appeal
Process and instructs the policyholder on the 4 steps required to appeal their claim after the
WYO Company has made the final determination and the insured refutes their decision. In
addition, policyholders will receive the Summary of Coverage that provides assistance for
policyholders in determining what will be covered and what will not be covered by the SFIP.
Since Adjusters may receive questions from policyholders regarding these documents, they
should be familiar with their provisions. The Flood Insurance Claims Handbook can be obtained
via the FEMA web at: http://www.fema.gov/library/viewRecord.do?id=2184

D. AUDITS
WYO Companies and the NFIP Servicing Agent are responsible for handling and processing
NFIP claims. Since the NFIP is a Federal program, it is subject to the scrutiny of the
Department of Homeland Security (DHS) and other Federal agencies, including the
Government Accountability Office (GAO), the DHS Office of Inspector General (OIG), and the
Office of Management and Budget (OMB). In addition, FEMA conducts claims and underwriting
Operation Reviews and claims reinspections. WYO Companies engage CPA firms to perform
biennial audits that include a claims section.
It is in the interest of the all stakeholders including adjusters to be aware of findings from the
following audits: DHS Improper Payment Information Act (IPIA) Audit, DHS Financial Audit,
various GAO studies and reports, as well as the Operation Reviews, reinspections and
biennial audits.

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Many of the findings can be avoided simply by adherence to good claims handling practices
and knowing the terms and provisions of the Standard Flood Insurance Policy (SFIP). Best
practice tips will be included with the findings.
The following will identify findings and best practices when indicated:
1. Incorrect Estimate/Worksheet Calculation
• Estimates are line-by-line, room-by-room using unit costs
•

Depreciation to both building and contents are taken on a line-by-line basis

•

Rooms should be described and identified and the adjuster should verify that the
estimate/worksheet and the building diagram match.

•

Typically overhead and profit is not applied unless there is a general contractor
supervising at least three trades. Exceptions to this general rule should be fully explained
by the adjuster.

•

The adjuster should be careful to include only building items on the building
estimate/worksheet; for instance, clothes washers and dryers are always contents and
should not be included as building items.

•

Qualifications for Replacement Cost Loss Settlement should be clearly documented,
including single family residence, principal residence, insurance to at least 80% of full
replacement cost or maximum available.

2. Insufficient Damage documentation
• Invoices may be needed to adequately support a commercial inventory or other complicated
claim. A salvor or CPA may be required and must be approved by the WYO Company or
the NFIP Servicing Agent.
•

Photographs should adequately document the claimed damage – photographs of
undamaged building elements and contents are also important.

3. Payment Processing Errors
The adjuster should make all payment recommendations clear. Other claim documents
including the estimate/worksheet, Final Report, and the Proof of Loss should support the
recommendations.
4. Covered loss exceeded the value of certain items
• Care is taken when items with Special Limits are claimed, not to exceed the amount of
special limits in the aggregate.
•

Loss Avoidance Measures should be supported with invoices or other documentation.

•

Property Removed to Safety claims should be supported with invoices or
other documentation.

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5. Case Loss Reserving
The reserving system mandates that reports must be timely and reflect true reserves. The
initial case loss reserve may be a system generated amount based on criteria established
by the Company or it may be an individually set reserve based on the best knowledge of the
loss at the time the reserve is established. A company may also set a bulk catastrophe
reserve. The NFIP Preliminary Report and each subsequent adjuster report should refine
the case loss reserve amount as the company becomes aware of additional facts,
inspections, and estimates. The goal is that this knowledge along with any reductions of
partial or advance payments will result in a case loss reserve that closely reflects the value
of all future payments and ultimately the value of the final payment. See FEMA Bulletin
W-08095, December 22, 2008 included on page B-29.

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Author	jking124
File Modified	2017-01-05
File Created	2010-06-30