Private flood insurance is different than insurance with the National Flood Insurance Program. As a result of federal law, primary private flood insurance policies with mortgages must have policy terms that are least as favorable as those found in the National Flood Insurance Program.
Hurricane Ian policyholders have two types of private flood insurance policies. One is the primary flood insurance which Congress found a need for as stated in the federal statute:
(1) many factors have made it uneconomic for the private insurance industry alone to make flood insurance available to those in need of such protection on reasonable terms and conditions; but
(2) a program of flood insurance with large-scale participation of the Federal Government and carried out to the maximum extent practicable by the private insurance industry is feasible and can be initiated.1
The key to these private insurance policies is that they must provide, among other conditions, “flood insurance coverage which 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 make certain all benefits are available, the full private policy must be read along with the coverages, exclusions, and conditions of the National Flood Insurance Program form policy.
The second type of private policy is the excess flood insurance policy. These are typically found with substantial residential structures, commercial structures, and condominiums. These policies are available and many great insurance agents properly advised and quoted their clients for excess flood insurance. Poor and negligent insurance agents simply wrote or told their clients that the only flood coverage available was for the limits of the National Flood Insurance Program. I expect that there will be many errors and omissions claims made against insurance agents who failed to advise that excess flood coverage was available.
Excess flood policies require that the primary flood carrier fully pay and exhaust underlying limits before there is any obligation of the excess policy to pay. Policyholders should place both the primary and excess flood carrier on notice of the loss and make certain proofs of loss and claims documents are sent to both. Do not wait to start dealing with the excess flood carrier until the primary flood carrier pays because, ideally, the excess flood carrier should be ready to pay as soon as the primary layer of flood coverage is exhausted.
Excess flood coverage policies have to be read carefully. Often, they do not follow the form of the primary coverage and have policy coverages and benefits greater than the primary policy. Excess flood insurance is different than other excess policies, which normally follow the form of primary coverage.
Private flood insurance is becoming more prominent. The coverages can be broader than those offered by the National Flood Insurance Program. Read the full policy and make certain all policy benefits are claimed.
Thought For The Day
There is a tide in the affairs of men, Which taken at the flood, leads on to fortune. Omitted, all the voyage of their life is bound in shallows and in miseries. On such a full sea are we now afloat. And we must take the current when it serves, or lose our ventures.
1 42 U.S.C. §4001(b).