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Hurricane Ian Victims Learn About FEMA’s 50% Rule | Property Insurance Protection Law Blog



Hurricanes with significant flooding are devastating. They also change the landscape and character of many communities because structures with significant damage must comply with FEMA’s 50% rule, which often requires structures to be built taller and on stilts.

What is the 50% rule? If the cost to repair a damaged building exceeds 50% of the building’s market value, the building must be brought into compliance with the National Florida Insurance Program’s current surveying requirements. The market value is for the building value and not the land value. The value is determined by the county’s property assessment or a licensed appraiser.

My experience has been that many older buildings with significant damage in a flood zone will often not meet current flood elevation requirements and will also have damage greater than 50% of the building̵

7;s value. The property owner will then have to rebuild the structure at a higher height, which often means demolishing the structure or raising it.

Will the insurance pay for the increased cost to go along with raising the building or have a total loss? Perhaps. If flooding caused part of the damage, it would pay up to $30,000 under increased cost of compliance (ICC). If the damage was caused by a windstorm and the insurance has legal and regulatory protection, the increased costs will be covered up to the available legal and regulatory protection.

Property insurance adjusters should be aware of this rule because it affects the amount of financial loss the policyholder will suffer. It is not cheap to rebuild a structure at a higher height. Often it cannot be done without demolishing the structure. Accordingly, adjusters need to know if the building conforms to the current flood zone elevation map and if the building’s damage is greater than 50% of a properly adjusted claim.

JS Held wrote an excellent article on this topic, FEMA’s Often Misinterpreted “50% Rule”. The article correctly warns:

As floodplain management regulations continue to evolve, it is important for design professionals and insurance professionals to understand how to interpret these regulations. The substantial improvements and significant damage definitions and requirements are arguably the most misinterpreted floodplain regulations. Many times those involved in a project such as the designer, contractor or property owner are not aware of these requirements until their application for a repair permit is denied by the local building department. Knowing how to interpret and implement these requirements is critical to floodplain management compliance and to reducing the risks of repetitive loss patterns.

Since many areas affected by Hurricane Ian are in flood zones, my concern is that many older buildings with significant damage will need to be built to the elevated levels of current flood maps. Many charming neighborhoods may look significantly different in the future. There will also be many property owners who will lack sufficient resources to rebuild.

Thought for a Monday afternoon

When life gives you Monday, dip it in glitter and sparkle all day.
– Ella Woodward


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