National Flood Insurance Program; Standard Flood Insurance Policy

Federal RegisterSep 23, 1996

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FEDERAL EMERGENCY MANAGEMENT AGENCY

44 CFR Part 61

RIN 3067-AC54

National Flood Insurance Program; Standard Flood Insurance Policy

AGENCY: Federal Insurance Administration (FEMA).

ACTION: Proposed rule.

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SUMMARY: This proposed rule would amend the National Flood Insurance

Program (NFIP) regulations to add coverage under the Standard Flood

Insurance Policy to pay for the increased cost to rebuild or otherwise

alter flood-damaged structures to conform with State or local

floodplain management ordinances or laws consistent with the

requirements and guidance of the NFIP.

DATES: Comments are requested and must be received by November 7, 1996.

ADDRESSES: Comments should be sent to the Rules Docket Clerk, Office of

the General Counsel, Federal Emergency Management Agency, 500 C Street

SW., room 840, Washington, DC 20472, (fax) (202) 646-4536.

FOR FURTHER INFORMATION CONTACT: Charles M. Plaxico, Jr., Federal

Insurance Administration, 500 C Street SW., Washington, DC 20472, (202)

646-3422.

SUPPLEMENTARY INFORMATION: The National Flood Insurance Program (NFIP)

was authorized by Congress (42 U.S.C. 4001 et seq.) to reduce the

mounting losses of life and property from floods through sound land use

and control practices in the Nation's floodplains and through the

availability of flood insurance. As a condition for the availability of

flood insurance,

[[Page 49718]]

States and local communities must adopt and enforce laws and ordinances

that meet or exceed the minimum requirements of the NFIP's floodplain

management regulations at 44 CFR 60.3. In fulfilling the statutory

requirements to identify the Nation's floodprone areas and establish

flood risk zones, the Federal Emergency Management Agency (FEMA) has

produced various forms of flood risk maps and data for each of the

Nation's floodprone communities. The NFIP's floodplain management

regulations for buildings and development in special flood hazard areas

require that new or substantially improved residential buildings be

elevated so that the lowest floor is at or above the Base Flood

Elevation (BFE). A substantial improvement is an improvement to a

building, such as an addition or rehabilitation, the cost of which

equals or exceeds 50 percent of market value. Owners of new or

substantially improved buildings have the option of elevating the

lowest floor to or above the BFE or dry floodproofing--non-residential

structures only have this option--to the base flood level. The base

flood or 100-year flood is a flood having a one percent chance of being

equaled or exceeded in any given year.

Most floodprone buildings that predate the existence of the NFIP

were built in the floodplains by individuals who did not have

sufficient knowledge of the hazard to make informed decisions. Because

of their exposure to and risk of flooding, many of these existing

buildings will likely be repetitively or substantially damaged during

their lifetime. Claims paid for buildings that are repetitively or

substantially damaged account for a significant portion of the NFIP's

claim payments. Mitigation actions taken to protect these buildings can

significantly reduce future claim payments and strengthen the financial

condition of the National Flood Insurance Fund. The NFIP's minimum

floodplain management regulations require that a repaired or rebuilt

substantially damaged building located in a special flood hazard area

be treated as a substantial improvement. This means that if a building

is determined to be substantially damaged, the lowest floor, including

basement, must be elevated or dry floodproofed--non-residential

structures only have this option--to the BFE prior to occupancy of the

structure. ``Substantial damage'' means damage sustained by a structure

``whereby the cost of restoring the structure to its before damaged

condition would equal or exceed 50 percent of the market value of the

structure before the damage occurred'' (44 CFR 59.1).

Under the terms and conditions of the Standard Flood Insurance

Policy (SFIP), property owners are reimbursed for the costs to repair

actual physical damages from flood, but not for additional

``consequential'' costs to comply with a State or local floodplain

management ordinance or law requiring that the damaged structure be

elevated or floodproofed to the BFE. These requirements during

reconstruction to mitigate flood hazards have often created financial

hardships for property owners. This prompted Congress to authorize a

new benefit under the SFIP to provide assistance to such property

owners.

Specifically, section 555 of the National Flood Insurance Reform

Act of 1994, Title V of the Riegle Community Development and Investment

Act of 1994 (Public Law 103-325), requires the NFIP to provide coverage

under the SFIP for the increased costs of complying with the land use

and control measures established under section 1361 of the National

Flood Insurance Act of 1968, as amended. (Hereinafter this mandated

coverage will be referred to as ``increased cost of construction''

(ICC) coverage.)

To implement the mandated change in flood insurance coverage, FEMA

formed a task force in 1995 consisting of the agency's insurance and

mitigation experts to determine the appropriate terms and conditions of

ICC coverage, the limits of its liability, and the amount of the

premium surcharges for the coverage consistent with statutory intent

and limitations. The FEMA task force also solicited comments from two

of the NFIP's major constituent organizations--the Association of State

Flood Plain Managers and the Insurance Institute for Property Loss

Reduction. FEMA convened a meeting with representatives of these two

organizations on January 17, 1996, and the contributions from that

meeting helped shape the conceptual and technical framework for this

proposed rule.

In proposing this rule for ICC coverage under the SFIP, FEMA had to

consider: (1) How the implementation of ICC coverage would conform with

the floodplain management laws and ordinances administered by States

and local communities participating in the NFIP; (2) how repetitive

losses, which are not specifically included in the NFIP's land use and

control measures, would be addressed; (3) what features of the

insurance industry's building law and ordinance coverage under

conventional property insurance contracts should be included under ICC

coverage; (4) what the appropriate limits for ICC coverage would be in

the light of the current status of the National Flood Insurance Fund

and the $75 limit placed by Congress on the premium surcharge that the

NFIP may add to flood insurance policies for ICC coverage (42 U.S.C.

4011 (b)); (5) how ICC coverage would be applied to condominiums; and

(6) how ICC coverage should be incorporated into the SFIP and the

operations of the NFIP.

FEMA considered how the three categories of structures eligible for

ICC coverage should be treated in light of the NFIP's current land use

and control standards which more than 18,450 local governments have

adopted and are enforcing as a condition for participation in the

program. The statute authorizes ICC coverage for three categories of

structures: (1) Structures that have flood damage in which the cost of

repairs equals or exceeds 50 percent of the value of the of the

structure at the time of the flood event; (2) repetitive loss

structures (as defined by the statute); and (3) other structures

damaged by flood on multiple occasions where the FEMA Director has

determined it is in the best interests of the National Flood Insurance

Fund to require compliance with land use and control measures (42

U.S.C. 4011(b)(1),(2), and (3)).

The NFIP defines ``substantial damage,'' which applies to the first

category of structures eligible by statute for ICC coverage, as

``damage from any origin sustained by a structure whereby the cost of

restoring the structure to its before damage condition would equal or

exceed 50 percent of the market value of the structure before the

damage occurred'' (44 CFR 59.1). The proposed rule is consistent with

the existing NFIP floodplain management requirements that States and

localities use ``market value'' as the basis for determining whether a

structure has been substantially damaged. (Non-residential structures

have the option of being elevated or floodproofed in order to meet the

NFIP's requirements. Residential structures however may only be

elevated to meet the requirement.)

The proposed rule would limit ICC coverage to situations where the

structure has been damaged by ``flood'' as defined in the SFIP. The

proposed ICC coverage would not pay for the increased cost of repairing

or altering structures substantially damaged by wind, fire, or other

perils. This, however, is required by the statute which restricts ICC

coverage to flood-damaged structures.

[[Page 49719]]

The second category of structures eligible for ICC coverage is

repetitive loss structures. In considering how the NFIP would treat ICC

coverage for repetitive loss structures within the context of the

program's authorities, FEMA concluded that: (1) ICC coverage is

intended to respond to State or local ordinances or laws requiring

damaged buildings to be rebuilt to more stringent flood protection

measures, (2) State or local ordinances or laws must be applied

consistently and cannot be applied selectively, i.e., independently of

whether or not a property owner is to receive insurance payments, and

(3) land use and building requirements are to be implemented at the

State or local level.

FEMA therefore proposes to implement the repetitive loss aspect of

ICC by having the coverage respond to a State or local ordinance or law

requiring actions based on cumulative substantial damage (i.e., two

losses within a 10-year period causing cumulative damage totaling 50%

or more of the building's value) in combination with the NFIP's having

a history of paying repetitive insurance claims on the property. FEMA

believes that this approach meets the intent of the legislation in a

manner that preserves State or local control over building practices,

provides ICC coverage in response to a State or local ordinance or law

requiring property owner action, and meets the statutory definition of

repetitive loss structure. In that connection, the proposed rule uses

the statutory definition for repetitive losses, i.e., a structure

``covered by a contract for flood insurance under this title that has

incurred flood-related damage 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 repair, on the average, equaled or exceeded 25

percent of the value of the structure at the time of each such flood

event'' (42 U.S.C. 4121(a)(7)).

The benefit of ICC under the SFIP for repetitive loss structures

requires that two conditions be met. First the community has to have in

place a cumulative flood damage ordinance consistent with the statutory

definition of repetitive loss structure, i.e., involving 2 flood losses

within a 10-year period. Secondly, the NFIP must have a history of

claims payments for a property that match the flood losses used by the

community in enforcing this ordinance for the structure and that

satisfy the statutory definition of repetitive loss structure. FEMA has

structured the proposed addition to the SFIP to incorporate both those

criteria. While States and communities participating in the NFIP are

not required to adopt a floodplain management ordinance or law for

repetitive loss structures, FEMA recognizes that many NFIP communities

may already have an existing provision in their floodplain management

law or ordinance which addresses repetitive loss structures. States or

communities with a repetitive or cumulative substantial damage/

improvement provision in current floodplain management laws or

ordinances that are similar or more restrictive than the definition for

``repetitive loss structure'' in the Act (42 U.S.C. 4121(a)(7)) are

acceptable as long as the provision is applied consistently to all

structure in special flood hazard areas regardless of whether or not

the structure is covered by a contract of flood insurance. Also, for a

State or local repetitive loss provision to be acceptable, the two

losses, when combined, must equal or exceed 50 percent of the value of

the structure within a 10-year period ending on the date of the event

for which the second claim is made. Since ``repetitive loss

structures'' are not addressed in the NFIP's minimum floodplain

management requirements, FEMA will provide model repetitive loss law or

ordinance language and other guidance to States and communities so that

they may adopt such measures prior to the effective date of the final

rule providing ICC coverage under the SFIP. FEMA expects that States

and communities will require the first of the 2 losses meeting the

statutory definition of ``repetitive loss structure'' to occur after

the State or community's repetitive loss ordinance or law is in effect.

Also, a State or community official must determine that a structure

is substantially or repetitively damaged in accordance with the adopted

floodplain management law or ordinance. However, the proposed ICC

coverage does not pay for the increased cost of construction to meet

State or community floodplain management laws or ordinances which

exceed the minimum floodplain management criteria at 44 CFR 60.3,

except as provided for properties that are repetitive loss structures

in special flood hazard areas as defined in the Act (42 U.S.C.

4121(a)(7)). For example, ICC coverage will not pay for the increased

cost of construction to meet substantial damage thresholds which are

less than 50 percent of the market value of the structure. Buildings in

these communities must be damaged to 50 percent or more of their market

value to be eligible for the ICC benefit. ICC coverage will pay for the

elevation or floodproofing of structures up to the base flood level but

not for elevation or floodproofing above the base flood level. For

example, where States or local communities require 1 or 2 feet of

freeboard above the BFE, ICC coverage will pay for costs to elevate

only to the BFE. Also, ICC coverage will not pay for the cost to

elevate or otherwise alter flood-damaged structures located outside of

special flood hazard areas. The surcharge limit of $75 per policy for

ICC coverage set by Congress prevents extending ICC benefits to damaged

structures that must meet State or community laws or ordinances that

are more restrictive than the minimum criteria of the NFIP. On the

other hand, ICC coverage will not pay for rebuilding to standards that

do not meet the NFIP's minimum requirements, i.e., when the property

owner has received a variance from the community to rebuild the

property to an elevation below the BFE.

While the proposed rule responds to the first two categories of

properties, it would not however attempt to address the third category

of losses--``multiple losses''--which are not quantified in the

statute. The third situation, which is discretionary, may be added to

future proposed changes to the SFIP based on greater loss experience

and the status of the National Flood Insurance Fund at that time.

FEMA also considered the generic building law and ordinance

coverage offered by the insurance industry in homeowners and other

property insurance contracts to cover the costs to rebuild, in

compliance with State or local ordinances or laws, a structure damaged

by a number of covered perils. The sole ``triggering loss event''

however for ICC coverage proposed in this rule is a loss from ``flood''

(including covered flood-related erosion) as defined in the SFIP. This

is required by the statute which restricts ICC coverage to pay for the

increased cost of construction to comply with a State or local

floodplain management ordinance or law requiring elevation of the

structure to the BFE or other appropriate mitigation measure after a

flood loss.

The proposed rule would establish a limit of $15,000 for ICC

coverage. The $15,000 limit considers the average range of actual costs

to elevate, relocate, or floodproof various types of construction

during reconstruction after a flood, e.g., from slab-on-grade

foundations to structures already elevated but below base flood

elevation.

In many cases, the maximum limit of $15,000 will enable the insured

to pay for most of the costs to elevate or floodproof an existing

structure

[[Page 49720]]

following a flood loss. Insureds will still have to bear a portion of

the costs to improve the structure so that it meets current State or

local floodplain management ordinances or laws. In practically all

cases, however, the limit of ICC coverage will make a significant

contribution toward rebuilding flood-damaged structures in conformity

with the NFIP's elevation and floodproofing standards.

In arriving at a limit for ICC coverage, FEMA wanted to establish

the highest amount possible for insureds. In light of the maximum

surcharge for ICC coverage allowed under law ($75) and the

Congressional intent that the program be actuarially sound, however,

FEMA has determined that $15,000 is the maximum benefit that could be

currently justified under the SFIP.

Additionally, the ICC benefit would be added to the payment for

direct loss from flood but the total reimbursement for ICC coverage and

direct loss from flood would not be greater than the maximum limits of

coverage for that class of structure established under the National

Flood Insurance Act of 1968, as amended.

FEMA also considered the appropriate scope and limits of ICC

coverage for condominiums. Under the Dwelling Form of the SFIP,

individual condominium unit owners may, in addition to the coverage

purchased by the condominium association for the commonly owned

portions of the complex, receive coverage for the portions of their

unit not covered by the association policy and also for assessments

placed by the association on the unit owner to pay a prorated portion

of the physical damage from flood exceeding the association's policy

limits. FEMA considered whether ICC coverage should be provided to

individual unit owners in a condominium for the increased costs to

ensure that elevation or other alterations of commonly owned portions

of the condominium complex substantially or repetitively damaged by

flood would comply with State or local floodplain management laws or

ordinances. The surcharge limit of $75 per policy for ICC coverage set

by Congress prevents extending ICC benefits to individual condominium

unit owners for assessments.

FEMA also considered the appropriate approach for providing ICC

payments. On the one hand, delaying payment of the ICC benefit until

after the flood-damaged structure had been rebuilt or otherwise altered

to comply with State or local ordinances or laws would make it

impossible for many insureds to initiate the extensive mitigation

effort necessary to bring the structure into compliance with floodplain

management ordinances or laws. On the other hand, a full payment of the

ICC benefit before the necessary mitigation effort is undertaken

creates the potential to abandon the structure. Given the financial

hardships of many flood victims and the inability to pay out-of-pocket

the costs to elevate or floodproof a building before a claim is

adjusted, FEMA plans to provide partial payments for ICC claims. Making

partial payments is an accepted practice under the NFIP's adjustment

process for flood loss. This practice will enable the insured to

initiate the mitigation activity required by the State or local

ordinance or law. FEMA also plans holdbacks of final payments until the

community ensures that the mitigation activity is satisfactorily

completed.

In that connection, FEMA believes that the property owner should

accomplish required repairs within a reasonable period of time, i.e.,

within 2 years from the date of loss which time frame is consistent

with insurance industry practices. Also, the property owner may decide

which mitigation measure will be taken to accomplish the repair or

reconstruction of the structure under ICC coverage, (i.e., elevation,

retrofitting, floodproofing, relocation, demolition, or any combination

thereof). It is expected however that States or communities will work

closely with the property owner to discuss alternatives in determining

the most technically feasible and cost effective mitigation measure for

the damaged structure.

It is also the State or community's responsibility to ensure that

all other necessary Federal, State, or local permits have been received

pertaining to laws, ordinances, building codes, or other requirements

in conjunction with the repair, elevation, floodproofing, retrofitting,

relocation, demolition, or other alteration to the building and site on

which the property is or is to be located. Additionally, the State or

community must ensure that all work is completed in accordance with

State or local laws and ordinances prior to issuing an occupancy

permit. States or communities must obtain an elevation certificate or

floodproofing certificate for structures that are elevated or

floodproofed.

The FEMA Regional Offices are available to provide technical

assistance to property owners and communities on technically feasible

and cost effective mitigation measures that can be applied to the

structure and that qualify for the ICC benefit. FEMA also has a number

of publications to assist communities, individuals, architects,

engineers, builders, and contractors on various mitigation measures and

techniques including elevation, floodproofing, retrofitting, and

relocation.

Finally, FEMA considered how ICC coverage should be implemented

within the context of the insurance operations of the program. Under

the proposed rule, ICC coverage would not be subject to the

liberalization clause of the SFIP. Rather, since a premium surcharge

must be added to pay for the required additional ICC, policyholders

would obtain this coverage upon renewal of their policies with

effective dates on or after May 1, 1997--the target date for

inauguration of this coverage. After the effective date of the final

rule, policyholders with three-year policies in force would also have

the option of canceling their flood insurance policy on the anniversary

date and obtaining the coverage under a rewritten policy. All new flood

insurance policies with effective dates on or after May 1, 1997 would

include ICC coverage, and policyholders would be charged the premium

surcharge appropriate for their flood risk classification.

The proposed rule would add a new section on ICC coverage in the

SFIP. In implementing any such changes in coverage, however, insurance

companies participating in the Write Your Own program would have the

option of printing a new SFIP incorporating the changes in coverage for

ICC or attaching an endorsement to the SFIP.

National Environmental Policy Act

This proposed rule is categorically excluded from the requirements

of 44 CFR part 10, Environmental Consideration. No environmental

assessment has been prepared.

Executive Order 12898, Environmental Justice

The socioeconomic conditions to this proposed rule were reviewed

and a finding was made that no dispropor-tionately high and adverse

effect on minority or low income populations would result from this

proposed rule.

Executive Order 12866, Regulatory Planning and Review

This proposed rule would not be a significant regulatory action

within the meaning of sec. 2(f) of E.O. 12866 of September 30, 1993, 58

FR 51735, and has not been reviewed by the Office of Management and

Budget. Nevertheless, this proposed rule adheres to the regulatory

principles set forth in E.O. 12866.

[[Page 49721]]

Paperwork Reduction Act

This proposed rule does not contain a collection of information and

is therefore not subject to the provisions of the Paperwork Reduction

Act.

Executive Order 12612, Federalism

This proposed rule involves no policies that have federalism

implications under Executive Order 12612, Federalism, dated October 26,

1987.

Executive Order 12778, Civil Justice Reform

This proposed rule meets the applicable standards of section

2(b)(2) of Executive Order 12778.

List of Subjects in 44 CFR Part 61

Flood insurance.

Accordingly, 44 CFR part 61 is proposed to be amended as follows:

PART 61--INSURANCE COVERAGE AND RATES

1. The authority citation for Part 61 continues to read as follows:

Authority: 42 U.S.C. 4001 et seq.; Reorganization Plan No. 3 of

1978, 43 FR 41943, 3 CFR, 1978 Comp., p. 329; E.O. 12127 of Mar. 31,

1979, 44 FR 19367, 3 CFR, 1979 Comp., p. 376.

2. Paragraph A. 6. of Article 3 of Appendix A (1) is proposed to be

amended to add the following phrase at the end:

* * * * *

* * * except as provided in Coverage D--Increased Cost of

Construction.

* * * * **

3. A new section is proposed to be added to Article 4 of Appendix A

(1) to read as follows:

* * * * *

Coverage D--Increased Cost of Construction Coverage (``Building Law and

Ordinance Coverage'')

Increased Cost of Construction coverage (Coverage D)is for the

consequential loss brought on by a floodplain management ordinance

or law affecting repair and reconstruction involving elevation,

relocation, retrofitting, or demolition of a structure (or any

combination), after a direct loss caused by a ``flood'' as defined

by this policy.

The limit of liability under this Coverage D (Increased Cost of

Construction) will not exceed $15,000. This coverage is only

applicable to policies with building coverage (Coverage A) and is in

addition to the Building limit you selected on your application, and

appears on the Declaration Page. No separate deductible applies. The

maximum amount collectible under this policy for both Coverage A

(Building Property) and Coverage D (Increased Cost of Construction)

cannot exceed the maximum permitted under the Act.

Eligibility

A structure covered under Coverage A--Dwelling sustaining a loss

caused by a ``flood'' as defined by this policy must:

1. Be a structure that is a repetitive loss structure. A

``repetitive loss structure'' means a structure, covered by a

contract for flood insurance issued pursuant to the Act, that has

incurred flood-related damage 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 structure at the

time of each such flood event. The National Flood Insurance Program

must have paid the previous qualifying claim, and the State or

community must have a cumulative flood damage provision in its flood

plain management law or ordinance being enforced against the

structure.

2. have had flood damage in which the cost to repair equals or

exceeds 50% of the market value of the structure at the time of the

flood event.

This policy will not pay for Increased Cost of Construction to

meet State or local floodplain management laws or ordinances which

exceed the minimum criteria at 44 CFR 60.3, except as provided in

No. 1 above.

Conditions

1. When a structure covered under Coverage A--Dwelling sustains

a loss caused by a ``flood'' as defined by this policy, our payment

for the loss will be based on:

(a) The increased cost to repair, retrofit, relocate, or

otherwise alter the building caused by enforcement of current State

or local floodplain management ordinances or laws;

(b) The cost to demolish and clear the site of the building or a

portion thereof caused by enforcement of current State or local

floodplain management ordinances or laws. Eligible activities for

the cost of clearing the site will include those necessary to

discontinue utility service to the site and ensure proper

abandonment of on-site utilities.

2. When the building is repaired or rebuilt, it must be intended

for the same occupancy as the present building unless otherwise

required by current floodplain management ordinance or laws.

3. If this coverage is concurrent with other insurance covering

the same loss, this coverage will be prorated with the other

insurance. This coverage is primary when the other insurance is

expressly excess insurance.

Exclusions

Under this Coverage D (Increased Cost of Construction), we will

not pay for:

(1) The cost associated with enforcement of any ordinance or law

that requires any insured or others to test for, monitor, clean up,

remove, contain, treat, detoxify or neutralize, or in any way

respond to, or assess the effects of pollutants. Pollutants mean any

solid, liquid, gaseous or thermal irritant or contaminant, including

smoke, vapor, soot, fumes, acid, alkalis, chemicals and waste. Waste

includes materials to be recycled, reconditioned or reclaimed.

(2) The loss in value to any covered building or other structure

due to the requirements of any ordinance or law;

(3) Any increased cost of construction under this Coverage D:

(a) Until the covered building is actually demolished, repaired,

retrofitted, or otherwise altered at the same or another premise;

and

(b) Unless the covered building is demolished, repaired,

retrofitted, or otherwise altered as soon as reasonably possible

after the loss, not to exceed two years.

(4) Loss due to any ordinance or law that you were required to

comply with before the current loss.

(5) Increased cost of construction to appurtenant structure(s).

(6) Assessments made by a condominium association on individual

condominium unit owners to pay increased costs of repairing commonly

owned buildings after a flood in compliance with State or local

floodplain management ordinances or laws.

Note: Increased Cost of Construction coverage will not be

included in the calculation to determine whether coverage meets the

80% insurance-to-value requirement for replacement cost coverage

under Article 8 or for payment under Article 3.B.3 for loss from

land subsidence, sewer backup, or seepage of water.

All other conditions and provisions of the policy apply.

* * * * *

4. Paragraph A.6. of Article 3 of Appendix A (2) would be amended

to add the following phrase at the end:

* * * * *

* * * except as provided in Coverage D-- Increased Cost of

Construction.

* * * * *

5. A new section would be added to Article 4 of Appendix A (2), to

read as follows:

* * * * *

Coverage D--Increased Cost of Construction Coverage ``Building Law and

Ordinance Coverage'')

Increased Cost of Construction coverage (Coverage D) is for the

consequential loss brought on by a floodplain management ordinance

or law affecting repair and reconstruction involving elevation,

relocation, retrofitting, or demolition of a structure (or any

combination), after a direct loss caused by a ``flood'' as defined

by this policy.

The limit of liability under this Coverage D (Increased Cost of

Construction) will not exceed $15,000. This coverage is only

applicable to policies with building coverage (Coverage A) and is in

addition to the Building limit you selected on your application, and

appears on the Declaration Page. No separate deductible applies. The

maximum amount collectible under this policy for both Coverage A

(Building Property) and Coverage D (Increased Cost of Construction)

cannot exceed the maximum permitted under the Act.

[[Page 49722]]

Eligibility

A structure covered under Coverage A--Building sustaining a loss