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Dealing with private flood insurance after a loss? | Property Insurance Protection Law Blog



Private flood insurance is different than insurance with the National Flood Insurance Program. As a result of federal law, primary private mortgage flood insurance policies must have insurance terms at least as favorable as those found in the National Flood Insurance Program.

Hurricane Ian policyholders have two types of private flood insurance. One is the primary flood insurance that Congress found a need for under the federal statute:

(1) many factors have made it uneconomic for the private insurance industry alone to make flood insurance available to those who need such coverage on reasonable terms; but

(2) a flood insurance program with large-scale participation by the federal government and carried out to the greatest extent possible by the private insurance industry is feasible and can be initiated.1

The key to these private policies is that they must, among other things, provide “flood insurance coverage that is at least as broad as the coverage provided under a [SFIP] … including when considering deductibles, exclusions and conditions offered by the insurer.”

I have never seen a private flood policy that provides less coverage. However, to properly analyze and ensure that all benefits are available, the full private policy must be read in conjunction with the coverages, exclusions and conditions of the National Flood Insurance Program form policy.

The other type of private insurance is flood insurance. These are usually found with substantial residential structures, commercial structures and condominiums. These policies are available and many great insurance agents correctly advised and quoted their clients for flood insurance. Poor and negligent insurance agents simply wrote or told their clients that the only flood coverage available was for National Flood Insurance Program limits. I expect there will be many errors and omissions claims against insurance agents who failed to advise that flood coverage was available.

Flood policies require the primary flood carrier to pay and exhaust underlying limits before there is any obligation on the flood policy to pay. Policyholders should notify both the primary and flood carrier of the loss and ensure that certain proofs of loss and damage documents are sent to both. Do not wait to start dealing with the flood carrier until the primary flood carrier pays because, ideally, the flood carrier should be ready to pay as soon as the primary stock of flood coverage is exhausted.

Flood coverage policies must be read carefully. Often they do not follow the form of the primary policy and have insurance coverage and benefits that are greater than the primary policy. Flood insurance is different from other deductibles, which normally follow the form of primary coverage.

Private flood insurance is becoming more prominent. Coverages may be broader than those offered by the National Flood Insurance Program. Read the entire policy and ensure that all insurance benefits are availed.

Today’s thought

There is a current in the affairs of men, which at the flood leads to fortune. Left out, their entire life’s journey is bound in shallowness and misery. In such a full sea we are now afloat. And we must take the power when it earns, or lose our bets.
—William Shakespeare
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1 42 USC §4001(b).


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