National Flood Insurance Program (NFIP); Inspection of Insured Structures by Communities

Federal RegisterMay 5, 1999

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SUMMARY: This proposed rule would establish an inspection procedure

under the National Flood Insurance Program (NFIP) to help verify that

structures in a community comply with the community's floodplain

management ordinance and to ensure that property owners pay flood

insurance premiums commensurate with their flood risk. The proposed

inspection procedure would require owners of insured buildings to

obtain an inspection from community floodplain management officials as

a condition of renewing the Standard Flood Insurance Policy (SFIP) on

the building. FEMA proposes to undertake the inspection procedure on a

pilot project basis only in two communities, Monroe County, Florida and

the incorporated Village of Islamorada located in Monroe County. We

would make any decision to implement the inspection procedure in other

NFIP participating communities outside of Monroe County, Florida only

after completing the pilot inspection procedure within the selected

communities and after an evaluation to determine the procedure's

effectiveness.

DATES: Please send comments on or before July 6, 1999.

ADDRESSES: Please send your comments to the Rules Docket Clerk, Office

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

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

or (email) [email protected].

FOR FURTHER INFORMATION CONTACT: Don Beaton, Federal Emergency

Management Agency, Federal Insurance Administration, 202-646-3442,

(facsimile) 202-646-4327 or Lois Forster, Federal Emergency Management

Agency, Mitigation Directorate, 202-646-2720, (facsimile) 202-646-2577.

SUPPLEMENTARY INFORMATION:

Background

Congress created the National Flood Insurance Program (NFIP) in

1968 to provide Federally supported flood insurance coverage, which

generally had not been available from private insurance companies. The

program is based on an agreement between the Federal Government and

each floodprone community that chooses to participate in the program.

FEMA makes flood insurance coverage available to property owners

provided that a community adopts and enforces floodplain management

regulations that meet or exceed the minimum requirements of the NFIP

set forth in part 60 of the NFIP Floodplain Management Regulations (44

CFR part 60).

Goal to reduce flood losses. A major goal of the NFIP is to reduce

flood losses by implementing floodplain management regulations that

protect new and substantially improved construction in floodprone areas

from flood damages. Without community oversight of building activities

and development in the floodplain, the best efforts of some to reduce

flood losses could be undermined or destroyed by the careless building

of others. Community enforcement of a floodplain management ordinance

is critical in protecting a building from future flood damages, in

reducing taxpayer funded disaster assistance, and also in keeping flood

insurance rates affordable.

We base the NFIP flood insurance rates for new construction on the

degree of the flood risk reflected by the flood risk zone on the Flood

Insurance Rate Map (FIRM) that we produce for the community. Flood

insurance rates also take into account a number of other factors

including the elevation of the lowest floor above or below the Base

Flood Elevation (the elevation of the 100-year flood frequency), type

of building, number of floors, and the existence of a basement or an

enclosure.

Inspection procedure. We intend to undertake the inspection

procedure on a pilot project basis in Monroe County and the Village of

Islamorada, Florida. The Village was formerly part of unincorporated

Monroe County, and incorporated as a separate community in January

1998. We would require that areas in Monroe County that incorporate and

become a separate community on or after January 1, 1999 to participate

in the inspection procedure as a condition of joining the NFIP. The

purpose of the proposed inspection procedure is to provide an

additional means for the pilot communities to identify whether post-

FIRM structures, i.e., those structures built after the effective date

of the FIRM, are in compliance with the community's floodplain

management ordinance. The proposed inspection procedure would also

enable FEMA to verify that structures insured under the NFIP are

properly rated. Post-FIRM construction is charged an actuarial rate

that must fully reflect the risk of flooding. Because Post-FIRM

construction is actuarially rated, buildings constructed in compliance

with community floodplain management regulations pay flood insurance

premiums based on rates that are in most cases significantly lower than

rates charged for buildings built in violation of these requirements.

We would make a decision whether to implement the inspection

procedure in other NFIP participating communities outside of Monroe

County, Florida only after the pilot inspection procedure is complete

within the selected communities and we complete an evaluation to

determine the procedure's effectiveness.

Selection of Communities To Participate in the Pilot Inspection

Procedure

We selected Monroe County and the Village of Islamorada, Florida

for the proposed pilot inspection procedure due to unique circumstances

in these communities and their willingness to participate in this

procedure. The proposed inspection procedure would apply only to NFIP

post-FIRM insured buildings in the Special Flood Hazard Areas (SFHAs)

of Monroe County and the Village of Islamorada that are possible

violations of the communities' floodplain management ordinance. Areas

designated as SFHAs on the FIRMs are based on a flood that would have a

one-percent chance of being equaled or exceeded in any given year (the

100-year flood). One-percent annual chance floods are shown on the

FIRMs as A Zones or V Zones.

Susceptibility of the area to flooding. Monroe County, Florida is

the southernmost county in the State of Florida and the continental

United States and includes the islands of the Florida Keys. The Village

of Islamorada is located in Monroe County, Florida and is a separate

NFIP participating community. The entire portion of the County that is

located on the mainland Florida peninsula, along with the islands

located in Biscayne Bay and the northern part of Florida Bay, are a

part of the Everglades National Park. Most of the development in Monroe

County is located in the Florida Keys. Almost the entire County,

including the Village of Islamorada, could be inundated by the base

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

equaled or exceeded in any given year). We have identified velocity

zones (V Zones), SFHAs associated with wave action, along the coastline

of Monroe

[[Page 24257]]

County and the Village of Islamorada and designated the remaining

portion of the SFHAs A Zones. Only portions of Key Largo, Cotton Key,

and Upper Matecumbe Key have areas with ground elevations high enough

to be outside of the SFHA.

FEMA findings in Monroe County. In August 1995, we conducted a

Community Assistance Visit (CAV) in Monroe County, Florida. At that

time, the Village of Islamorada was not incorporated and was still part

of Monroe County. The purpose of a CAV is to assess an NFIP community's

floodplain management program and to provide whatever assistance the

community needs to administer its floodplain management ordinance

effectively when program deficiencies or violations are identified. One

of the more serious problems that we identified through the 1995 CAV

was the widespread use of the enclosed area below the lowest floor of

elevated buildings for uses other than parking, access, or storage.

CAVs that we conducted in 1982 and 1987 also identified the use of

enclosed areas below elevated buildings as living space as a problem.

NFIP floodplain management regulations. Under the NFIP Floodplain

Management Regulations at 44 CFR 60.3, all new construction and

substantial improvements of structures in A Zones on the community's

FIRM that have fully enclosed areas below the lowest floor of an

elevated building can only be used for parking, access, or storage. The

enclosed area must be designed to include openings to equalize

hydrostatic flood pressure on exterior walls by allowing for the

automatic entry and exit of floodwaters [44 CFR 60.3(c)(5)]. In V

Zones, new construction and substantial improvements must have the

space below the lowest floor either free of obstruction or constructed

with open wood lattice-work, insect screening, or non-supporting

breakaway walls, intended to collapse under wind and water loads

without causing collapse, displacement, or other structural damage to

the elevated portion of the building or supporting foundation system.

The area below the lowest floor of an elevated building in V Zones can

only be used for parking, access, or storage.

In addition, owners must build the area below the lowest floor of

an elevated building using flood resistant materials and must use

construction methods and practices that minimize flood damages. Owners

must also build with electrical, heating, ventilation, plumbing, and

air conditioning equipment and other service facilities that are

designed or located so as to prevent water from entering or

accumulating within the components during conditions of flooding.

Flood damages potential. Allowing uses other than parking, access,

or storage in the enclosed area below the Base Flood Elevation

significantly increases the flood damage potential to the area below

the lowest floor of the elevated building. Improperly constructed

enclosure walls and utilities can tear away and damage the upper

portions of the elevated building exposing the building to greater

damage. Improperly constructed enclosures can also result in flood

forces being transferred to the elevated portion of the building with

the potential for catastrophic damage. If a flood disaster occurs, the

impact will go beyond the building itself. If the ground level

enclosure is finished with living spaces, there is an increased risk to

lives. Residents who live in these ground level enclosures may not be

fully aware of the flood risk. Along with significant flood damages to

the building and the potential for loss of life, the community, the

State, and the Federal Government will face costly outlays for flood

fighting and rescue operations, response, and recovery as well as

taxpayer funded disaster assistance.

Limited flood insurance coverage. Because the area below the lowest

floor of an elevated building has a greater exposure to flood waters,

there is limited coverage in this area for elevated post-FIRM

buildings, as provided for in the Standard Flood Insurance Policy

(SFIP) under Article 6--Property Not Covered. This provision of the

SFIP, effective since October 1, 1983, limits coverage for enclosures,

including personal property contained therein. However, we provide

coverage for enclosures below the elevated floors of elevated buildings

for essential building elements, namely, sump pumps, well water tanks

and pumps, oil tanks, furnaces, hot water heaters, clothes washers and

dryers, freezers, air conditioners, heat pumps, electrical junction and

circuit breaker boxes, elevators, natural gas tanks, pumps or tanks

related to solar energy, cisterns, and stairways and staircases

attached to the building. Also, foundation elements that support the

building are insurable under the NFIP. We do not cover such items as

finished enclosure walls, floors, ceilings, and personal property such

as rugs, carpets, and furniture.

In 1983, we limited the coverage for enclosed areas below elevated

buildings and in basement areas due to the financial losses we

experienced when we provided full coverage in these areas. In order to

provide insurance coverage for the items that we exclude under the

SFIP, we would have to charge significantly higher insurance rates,

which would make flood insurance on the building and its contents

unaffordable for many property owners.

In spite of the limited coverage afforded for these enclosed areas,

they affect the rating of the policy. As previously mentioned in

``Flood damages potential'', flood forces can be transferred to the

elevated portion of the building causing severe damages. This damage

potential is recognized in the rates by adding rate loadings based on

the size of the enclosure and whether the enclosure contains covered

machinery or equipment. The proposed inspection procedure will ensure

that the policyholders with buildings that have enclosures are paying

premiums commensurate with their flood risk.

Floodplain management criteria. The limitation of flood insurance

coverage for the enclosed area of an elevated building is consistent

with the NFIP floodplain management criteria. These criteria limit the

use of the enclosed space to parking, access, and storage, require use

of flood resistant materials, require openings in foundation walls in A

Zones, require the area below the lowest floor of an elevated building

in V Zones to be free of obstruction, and require that mechanical,

electrical, and utility equipment be designed or located to prevent

flood waters from entering or accumulating within the components.

Buildings built in compliance with NFIP floodplain management criteria

will have minimal damage potential to the building and its contents.

Factors affecting compliance determinations. There are several

factors that have limited Monroe County's ability to determine whether

a building with an enclosure complies with the County's floodplain

management ordinance. It is often difficult from the street to

determine whether the enclosed area below an elevated building contains

uses other than parking, access, or storage. Although the County can

seek consent and approval of the owner to inspect their property, the

community has had limited success in identifying violations using this

method. The volume of possible violations is also a contributing factor

in the community's ability to address this problem. Monroe County

estimates that there are several thousand buildings with illegal

enclosures below the lowest floor of an elevated building. Furthermore,

a provision in Florida law exempts ``owner-occupied family

[[Page 24258]]

residences'' from the administrative warrant inspection procedure

provided under State law for identifying building-safety issues. Under

Florida State law, entry by local officials into owner-occupied single

family homes without consent of the owner requires a search warrant,

which is extremely difficult to obtain. Consequently, the community has

had little success in identifying possible violations so that it could

then require actions to remedy the violations to the maximum extent

possible.

Monroe County agreement to participate. Given these circumstances,

Monroe County indicated its interest in participating in the inspection

procedure. In January 1997, a Monroe County Citizen's Task Force, which

was appointed by the Monroe County Board of County Commissioners to

address the issue of illegal enclosures below the lowest floor of an

elevated building, recommended establishment of a procedure to require

an inspection and a compliance report before the renewal of a flood

insurance policy. On June 11, 1998, the Board of County Commissioners

of Monroe County, Florida, passed a resolution that requested FEMA to

establish an inspection procedure for the County as a means of

verifying that insured buildings in the SFHA under the NFIP comply with

the County's floodplain management ordinance.

Village of Islamorada's agreement to participate. The Village of

Islamorada incorporated as a separate community within Monroe County in

January 1998 and became a participating NFIP community on October 1,

1998. The Village of Islamorada encompasses four of the Florida Keys

that would have been included as part of the inspection procedure in

Monroe County. Because of possible illegal enclosures in the Village of

Islamorada, the community indicated its interest in participating in

the pilot inspection procedure in a letter dated September 24, 1998, in

its application to join the NFIP.

Continuing community responsibilities. Nothing that would be

established through this proposed pilot inspection procedure would

modify Monroe County or the Village of Islamorada's responsibility

under the NFIP to enforce their floodplain management ordinance. That

responsibility includes new construction and substantial improvements

within the SFHAs pertaining to non-insured buildings or to insured

buildings in which an inspection was not obtained by the policyholder.

We intend that the proposed inspection procedure assist Monroe County

and the Village of Islamorada materially in identifying and correcting

violations. We do not intend that this procedure be a substitute or

alternative for these communities to enforce provisions within their

own laws or ordinances. When Monroe County and the Village of

Islamorada identify violations, they would continue to have the

responsibility to remedy the violations to the maximum extent possible

for all buildings in the SFHA.

Awareness program for interested people. We envision that we,

Monroe County, and the Village of Islamorada will coordinate efforts to

conduct an awareness program with property owners, mortgage lenders,

real estate agents, insurance agents, appraisers, and local officials

on this inspection procedure.

We would make any decision to implement the inspection procedure in

other NFIP participating communities outside of Monroe County, Florida

only after completing the pilot inspection procedure within the

selected communities and after an evaluation to determine how effective

the procedure is in achieving NFIP building compliance. The evaluation

would examine the level of effort required for the communities,

insurance companies, and us to implement the procedure, how many non-

compliant structures are brought into compliance, and whether the

procedure enabled us to determine whether structures insured under the

NFIP are properly rated.

Description of the Pilot Inspection Procedure

The proposed rule would establish a pilot inspection procedure that

would be built around the flood insurance policy renewal process and

would apply only to NFIP insured buildings in SFHAs in Monroe County

and the Village of Islamorada. The proposed inspection procedure would

require owners of insured buildings to obtain an inspection from local

officials and submit an inspection report as a condition of renewing

flood insurance on the building.

Proposed Endorsement. Flood insurance policies with renewal

effective dates on and after the implementation date of the pilot

inspection procedure would contain the endorsement established in

proposed Appendices (A)(4), (A)(5), and (A)(6) of 44 CFR part 61. The

endorsement would provide that an inspection by the community may be

required before a subsequent renewal of the flood insurance policy.

Policies issued as new policies after the effective date for

implementing the pilot inspection procedure would also contain the

endorsement established in proposed Appendices (A)(4), (A)(5), and

(A)(6). The proposed endorsement would amend all flood insurance

policies (pre-FIRM and post-FIRM) on buildings in Monroe County and the

Village of Islamorada, Florida. The proposed changes to the SFIP would

revise the Voidance, Reduction or Reformation of the Coverage provision

and the Policy Renewal provision. A notice describing the purpose of

the inspection procedure would accompany the new endorsement to the

SFIP regarding the inspection procedure.

Procedure established under new section. Under a new section, 44

CFR 59.30, the proposed rule would establish criteria for implementing

a pilot inspection procedure in the selected community. Monroe County

and the Village of Islamorada previously indicated their interest to

participate in the inspection procedure. Based upon the communities'

willingness to participate in the pilot inspection procedure, the

Associate Director for Mitigation and the Federal Insurance

Administrator would establish a starting date and termination date

based on the recommendation of the FEMA Regional Director in

consultation with Monroe County and the Village of Islamorada.

Information we would provide. We would provide Monroe County and

the Village of Islamorada a list of pre-FIRM and post-FIRM policies in

SFHAs to use in implementing the inspection procedure before the

effective date for implementing the pilot inspection procedure. We

would also provide a list of any policies issued as new policies after

the effective date for implementing the pilot inspection procedure to

the appropriate community.

Community reviews. The communities would agree to undertake a

review of the pre-FIRM polices and provide a list of insured buildings

in SFHAs to FEMA that were incorrectly identified as a pre-FIRM

building because they were built or substantially improved on or after

the effective date of the initial FIRM. We would provide the list of

buildings that may be incorrectly rated as pre-FIRM to the insurers for

possible rerating under the post-FIRM rating rules. The communities

would also agree to undertake a review of all insured post-FIRM

buildings in SFHAs, including those incorrectly identified as pre-FIRM,

to determine whether the building is a possible violation of the

community's floodplain management ordinance and provide this list to

us. We would expect the community to identify possible violations of

insured post-FIRM buildings in SFHAs from a visual street

[[Page 24259]]

inspection of the building, from tax records and other documents on

file in the community pertaining to the property, and through other

community procedures.

We would also expect the communities to review the list of pre-FIRM

and post-FIRM flood insurance policy information before the effective

date established for implementing the inspection procedure.

Coordination of timeframe for inspections. We would coordinate with

each community to determine the appropriate timeframe to implement the

inspection procedure to give each community adequate time to complete

the inspections and undertake enforcement actions. Our determination

would be based on the number of pre-FIRM and post-FIRM policies in each

community's SFHAs and the number of potential inspections and

enforcement actions the community may need to undertake.

Public notice. Before the effective date for implementing the pilot

inspection procedure, Monroe County and the Village of Islamorada would

have to provide adequate public notice. This notice would take the form

of an announcement in a prominent local newspaper and other community

notices as appropriate. The Associate Director for Mitigation and the

Federal Insurance Administrator would publish a notice in the Federal

project basis. This notice would provide the reason and the starting

date and the termination date for implementing the inspection

procedure.

Notice to policyholders. For those buildings identified by Monroe

County and the Village of Islamorada as possible violations, the

insurer would send a notice to policyholders approximately 6 months

before the policy expiration date. This notice would state that the

policyholder must obtain an inspection from the community and submit

the results of the inspection as part of the renewal of the flood

insurance policy by the end of the renewal grace period (30 days after

date of the policy expiration). The insurer would send a reminder

notice to the policyholder with the Renewal Notice about 45 to 60 days

before the policy expires.

Property inspection. The policyholder would be responsible for

contacting the community to arrange for an inspection. The community

would inspect the building to determine whether it complies with the

community's floodplain management ordinance and document its findings

in an inspection report. The community would provide two copies of the

inspection report to the property owner. The community would use its

copy of the inspection report to begin enforcement actions on a

building identified as violating the community's floodplain management

ordinance.

Renewal of flood insurance after inspection. If the policyholder

obtained a timely inspection and sent the community's inspection report

and the renewal premium payment to the insurer by the end of the

renewal grace period, the insurer would renew the flood insurance

policy whether or not the building has been identified as a violation

by the community. The insurer would review the flood insurance policy

for rerating. If the building was not properly rated to reflect the

building's risk of flooding, the policy would be rerated to reflect

that risk.

Community enforcement. If the community's inspection did not find a

violation, the community would take no other action. However, if the

community inspected the building and identified a violation under its

floodplain management ordinance, the community would have to undertake

an enforcement action to remedy the violation to the maximum extent

possible. For each violation identified, the community would have to

demonstrate to us that it is undertaking all possible actions to remedy

the violation. If, after one year, the community demonstrated that it

has taken all enforcement actions within its authority to remedy the

violation to the maximum extent possible, including a notice to the

property owner to remedy the violation and appropriate legal action,

and the property owner had not corrected the violation, the community

would submit a declaration of a violation and request a denial of flood

insurance under 44 CFR 73, Implementation of Section 1316 of the

National Flood Insurance Act of 1968.

Failure to obtain a community inspection. If the policyholder did

not obtain an inspection and submit an inspection report with the

renewal payment by end of the renewal grace period (30 days after date

of expiration), the flood insurance policy would not be renewed. We

would establish a procedure for the insurer to send appropriate notices

to the insured, to the agent, and to the mortgagee that the flood

insurance policy expired and cannot be re-issued without the community

inspection report. All flood insurance policies that were not renewed

under the inspection procedure would be identified on a list of

ineligible properties for the sale of flood insurance that would be

sent to insurers that write and service NFIP flood insurance policies.

Flood insurance policies sold on buildings ineligible in accordance

with the proposed inspection procedure would be void in accordance with

the proposed SFIP endorsement. If a property owner subsequently

obtained an inspection from the community and an inspection report was

submitted with the premium payment at the time the property owner

applies for a flood insurance policy, a new policy would be issued on

the building.

National Environmental Policy Act

We are currently reviewing this proposed rule under the

requirements of 44 CFR 10, Environmental Considerations, and under the

mandates of the National Environmental Policy Act. We will make a

determination whether we need an environmental assessment or

environmental impact statement before we publish the final rule.

Executive Order 12898, Environmental Justice

We are also reviewing this proposed rule under E.O. 12898,

Environmental Justice, and will make appropriate determinations before

publishing the final rule.

Executive Order 12866, Regulatory Planning and Review

We are submitting this proposed rule to the Office of Management

Budget for review under sec. 2(f) of E.O. 12866 of September 30, 1993,

58 FR 51735. We will make a determination whether this is a significant

regulatory action before we publish the final rule.

Paperwork Reduction Act

We have submitted the information collection requirements in this

proposed rule to the Office of Management and Budget (OMB) for approval

under the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. We prepared

an Information Collection Request (ICR) and you may obtain a copy from

Muriel Anderson by mail at FEMA, 500 C Street, SW., room 316,

Washington, DC 20472, by email at [email protected], or by

calling (202) 646-2625. Highlights of the ICR follow.

Purpose of the proposed rule. The proposed rule would establish an

inspection procedure in Monroe County and the Village of Islamorada

that would be built around the flood insurance policy renewal process.

The purpose of the inspection procedure and need for the community

inspection report is:

[[Page 24260]]

To help the communities of Monroe County and the Village

of Islamorada, Florida, verify and document that post-FIRM structures

in their communities comply with the community's floodplain management

ordinance; and

To ensure that property owners pay flood insurance

premiums commensurate with their flood risk due to their increased

exposure to flood damages.

The requirement that a community inspect a building as a condition

of renewing the flood insurance policy on the building would only apply

to NFIP insured buildings in Special Flood Hazard Areas that the

communities identify as possible violations. The Special Flood Hazard

Areas (SFHA) is an area that is based on a flood that would have a 1-

percent chance of being equaled or exceeded in any given year, often

referred to as the 100-year flood.

Estimated number of inspections. We expect a total of 2,000 to

4,000 respondents (policyholders) to obtain an inspection from their

respective communities. This is the total estimated number of insured

buildings that are possible violations of the community's floodplain

management ordinance in both Monroe County and the Village of

Islamorada. We estimate that Monroe County will inspect 500-700 insured

buildings per year and the Village of Islamorada will inspect 200-400

insured buildings per year.

Previous OMB approval. The flood insurance renewal notice and flood

insurance application have previously been approved by OMB (OMB 3067-

0022).

Numbers and Types of Responses, Frequency, and Burden Hours

----------------------------------------------------------------------------------------------------------------

Frequency Total

Number of respondents/type of response of Burden hours burden

response hours

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4,000 policyholders to receive & read a notice 1 15 minutes (total for both notices)...... 1,000

that an inspection is required in order for

the flood insurance policy to be renewed.

These 4,000 policyholders will also receive a

reminder notice about 45-60 days before the

policy expires.

4,000 policyholders contact respective 1 1-2.5 hours**............................ 10,000

community to arrange for an inspection of the

property. Local official inspects the property

with the policyholder or his/her designee.

(Note: in any given year we expect several

hundred policyholders to receive the notice

and contact their community.) Compliant

buildings should take less time to inspection

compared to an insured building that is non-

compliant.

4,000 policyholders submit a copy of the 1 8 minutes................................ 533

inspection report with the renewal premium

payment.

800 estimated no.of respondents that did not 1 8 minutes................................ 107

obtain an inspection. These respondents will

be sent a notice at time of policy expiration

that their flood insurance policy expired.

(FEMA estimates that less than 20% of the

4,000 respondents will not obtain an

inspection and as a result their flood

insurance policy will not be renewed.)

----------------------------------------------------------------------------------------------------------------

* Total number of Burden Hours to implement the inspection procedure over a multi-year period: 11,640 hours.

Annual (one-time) total burden hours for each policyholder is approximately: 3 hours.

Total annual burden for approximately 500-700 inspections per year in Monroe County: 2,100 hours.

Total annual burden for approximately 200-400 inspections per year in the Village of Islamorada: 1,200 hours.

----------------------------------------------------------------------------------------------------------------

* We estimate that 2,000-4,000 buildings will need to be inspected over a several-year period. On an annual

basis, we estimate that the communities will inspect 700-1,100 buildings each year.

** We estimate that the amount of time to contact the community to arrange for the inspection and for the

policyholder or his/her designee to be available to let the community official into the building to conduct

the inspection will range from 1 hour to 2.5 hours.

Community fees for permits and inspections. Communities generally

charge a fee for permits and inspections as part of their

administration of their zoning ordinance, building code, and floodplain

management ordinance. We estimate that the cost per policyholder will

range between $35 to $50.00 for each inspection, and that there may be

expenses of about $15 per policyholder for telephone calls and

arranging for someone to be available when the local officials inspect

the building, for an estimated average cost of $65.00 per policyholder.

Total annual cost burden to respondents. For approximately 700 to

1,100 inspections per year, the total annual cost burden to respondents

is estimated to range between $45,500 and $71,500. This information

collection places no greater burden on small business or other small

entities than that required of any other policyholder in Monroe County

and the Village of Islamorada.

Community inspection report critical to effective implementation.

The community inspection report is critical to the effective

implementation of the proposed inspection procedure. Without the

inspection procedure, the Village of Islamorada and Monroe County would

continue to have limited ability to inspect properties for illegal

enclosures that violate their floodplain management ordinance. Allowing

uses other than parking of vehicles, building access, or storage in the

enclosed area below the Base Flood Elevation significantly increases

the flood damage potential to the building, and there is an increased

risk to lives.

Premium rates commensurate with flood risk. The increase in flood

damage potential to the building must be recognized in the rates by

adding rate loadings based on the size of the enclosure. Collection of

information from the policyholder in this inspection procedure will

help ensure that policyholders are paying premiums commensurate with

their flood risk.

Consultation with the communities; use of existing inspection

documents. We consulted with Monroe County and Village of Islamorada

officials on the type of existing building inspection reports they

currently use to implement their floodplain management ordinance and we

determined that the current community inspection documents could be

used for purposes of implementing the inspection procedure and for

purposes of determining whether the building needs to be rerated.

Starting and ending dates; coordination. After we publish the final

rule on the inspections, we will work closely with local officials from

Monroe County and the Village of Islamorada to establish a start and

end dates for the inspections. We will also coordinate and provide

assistance to local officials from both communities in preparation of

and during implementation of the inspection procedure. We anticipate

[[Page 24261]]

that the County and Village will apply the inspection procedure over a

several-year period.

Confidentiality. Confidentiality is provided under the Privacy Act.

The information collection will not be disclosed outside the Federal

Emergency Management Agency except to the servicing office, acting as

the government's fiscal agent, to the policyholders insurer, any

mortgagee named on the policy, and to other routine users.

Request for your comments. We ask for your comments on our need for

this information, the accuracy of our burden estimates, and any methods

you can suggest for minimizing the burden on respondents, including

automated collection techniques. Please send comments on the

Information Collection Request to the Information Collection Officer,

FEMA, 500 C Street, SW., room 316, Washington, DC 20472, and to the

Office of Information and Regulatory Affairs, Office of Management and

Budget, 725--17th Street, NW., Washington, DC 20503, marked

``Attention: Desk Officer for FEMA.'' Please include the ICR number in

your correspondence. Since OMB must make a decision about the ICR

between 30 and 60 days after May 5, 1999, OMB should receive your

comments by June 4, 1999 to assure that your comments will have full

effect. We will respond in the final rule to any OMB or public comments

on the information collection requirements contained in this proposed

rule.

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 subsections

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

List of Subjects in 44 CFR Part 59 and Part 61

Flood insurance, reporting, and recordkeeping requirements.

Accordingly, we propose to amend 44 CFR Parts 59 and 61 as follows:

PART 59--GENERAL PROVISIONS

The authority citation for Part 59 is revised 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. Part 59 is amended by adding a new subpart C consisting of

Sec. 59.30 to read as follows:

Subpart C--Pilot Inspection Program

Sec. 59.30 A Pilot Inspection Procedure

(a) Purpose. This section sets forth the criteria for implementing

a pilot inspection procedure in Monroe County and the Village of

Islamorada, Florida. These criteria will also be used to implement the

pilot inspection procedure in any area within Monroe County, Florida

that incorporates on or after January 1, 1999 and is eligible for the

sale of flood insurance. The purpose of this inspection procedure is to

provide the communities participating in the pilot inspection procedure

with an additional means to identify whether structures built in

Special Flood Hazard Areas (SFHAs) after the date of the effective

Flood Insurance Rate Map (FIRM) comply with the community's floodplain

management regulations. The pilot inspection procedure will also assist

us, FEMA, in verifying that structures insured under the National Flood

Insurance Program's Standard Flood Insurance Policy are properly rated.

(b) Procedures and requirements for implementation. Each community

must establish procedures and requirements for implementing the pilot

inspection procedure consistent with the criteria established in this

section.

(1) The Associate Director for Mitigation and the Federal Insurance

Administrator will establish the starting date and the termination date

for implementing the pilot inspection procedure upon the recommendation

of the Regional Director, who will consult with each community.

(2) Before the starting date of the inspection procedure, each

community must publish a notice in a prominent local newspaper and

publish other notices as appropriate. The Associate Director for

Mitigation and the Federal Insurance Administrator will publish a

notice in the Federal Register that the community will undertake an

inspection procedure. Published notices will include the purpose for

implementing the inspection procedure and the effective period of time

that the inspection procedure will cover.

(3) The communities participating in the pilot inspection procedure

must review a list of all pre-FIRM and post-FIRM flood insurance

policies in SFHA to confirm that the start of construction or

substantial improvement of insured pre-FIRM buildings occurred on or

before December 31, 1974, and identify possible violations of insured

post-FIRM buildings. The community will provide to FEMA a list of

insured buildings incorrectly rated as pre-FIRM and a list of insured

post-FIRM buildings that the community identifies as possible

violations.

(4) In the communities that undertake the pilot inspection

procedure, all new and renewed flood insurance policies that become

effective on and after the date that we and the community establish for

the start of the inspection procedure will contain an endorsement to

the Standard Flood Insurance Policy that an inspection may be necessary

before a subsequent policy renewal [see Part 61 Appendices A(4), (5),

and (6)].

(5) For a building identified as a possible violation under

paragraph (3) of this subsection, the insurer will send a notice to the

policyholder that an inspection is necessary in order to renew the

policy and that the policyholder must submit a community inspection

report as part of the policy renewal process, which includes the

payment of the premium. The insurer will send this notice about 6

months before the Standard Flood Insurance Policy expires.

(6) If a policyholder receives a notice under paragraph (C)(5) of

this section that an inspection is necessary in order to renew the

Standard Flood Insurance Policy the following applies:

(i) If the policyholder obtains an inspection from the community

and the policyholder sends the community inspection report to the

insurer as part of the renewal process, which includes the payment of

the premium, the insurer will renew the policy and will verify the

flood insurance rate, or

(ii) If the policyholder does not obtain and submit a community

inspection report the insurer will not renew the policy.

(7) For insured post-FIRM buildings that the community inspects and

determines to violate the community's floodplain management

regulations, the community must demonstrate to FEMA that the community

is undertaking measures to remedy the violation to the maximum extent

possible. Nothing in this section modifies the community's

responsibility under the NFIP to enforce adequately floodplain

management regulations that meet the minimum requirements in Sec. 60.3

for all new construction and substantial improvements within the

community's SFHAs. The community's responsibility also includes the

insured buildings where the policyholder did not obtain an inspection

report, and non-insured buildings that this procedure does not cover.

[[Page 24262]]

(d) Restoration of flood insurance coverage. Insurers will not

provide new flood insurance on any building if a property owner does

not obtain a community inspection report or if the property owner

obtains a community inspection report but does not submit the report

with the renewal premium payment. Flood insurance policies sold on a

building ineligible in accordance with paragraph (c)(6)(ii) are void

under the Standard Flood Insurance Policy inspection endorsements [44

CFR Part 61, Appendices (A)(4), (A)(5), and (A)(6)]. When the property

owner applies for a flood insurance policy and submits a completed

community inspection report by the community with an application and

renewal premium payment, the insurer will issue a flood insurance

policy.

3. We amend Part 61 by adding Appendix A(4) to Part 61 as follows:

Appendix A (4) to Part 61

Federal Emergency Management Agency, Federal Insurance Administration

Standard Flood Insurance Policy Endorsement to Dwelling Form

[Issued Pursuant to the National Flood Insurance Act of 1968, or Any

Acts Amendatory Thereof (Hereinafter Called the Act), and Applicable

Federal Regulations in Title 44 of the Code of Federal Regulations,

Subchapter B. The provisions of this endorsement replace the

provisions of Article 9 of the Standard Flood Insurance Policy,

Dwelling Form, only in applicable policies in Monroe County and the

Village of Islamorada, Florida].

Article 9--General Conditions and Provisions

A. Pair and Set Clause: If you lose an article that is part of a

pair or set, we will have the option of paying you an amount equal

to the cost of replacing the lost article, less depreciation, or an

amount that represents the fair proportion of the total value of the

pair or set that the lost article bears to the pair or set.

B. Concealment, Fraud: We will not cover you under this policy,

which will be void, nor can this policy be renewed or any new flood

insurance coverage be issued to you if:

1. You have sworn falsely, or willfully concealed or

misrepresented any material fact; or

2. You have done any fraudulent act concerning this insurance

(see paragraph F.1.d. below); or

3. You have willfully concealed or misrepresented any fact on a

``Recertification Questionnaire,'' that causes us to issue a policy

to you based on a premium amount that is less than the premium

amount that would have been payable by you were it not for the

misstatement of fact (see paragraph G. below).

C. Other Insurance. If a loss covered by this policy is also

covered by other insurance whether collectible or not, except

insurance in the name of the Condominium Association issued pursuant

to the Act, we will pay only the proportion of the loss that the

limit of liability that applies under this policy bears to the total

amount of insurance covering the loss.

If there is other insurance in the name of the Condominium

Association covering the same property covered by this policy, this

insurance will be excess over the other insurance.

D. Amendments, Waivers, Assignment: This policy cannot be

amended nor can any of its provisions be waived without the express

written consent of the Federal Insurance Administrator. No action we

take under the terms of this policy can constitute a waiver of any

of our rights. Except in the case of 1. a contents only policy, and

2. a policy issued to cover a building in the course of

construction, assignment of this policy, in writing, is allowed upon

transfer of title.

E. Cancellation of Policy By You: You may cancel this policy at

any time but a refund of premium money will only be made to you

when:

1. You cancel because you have transferred ownership of the

described building or unit to someone else. In this case, we will

refund to you, once we receive your written request for cancellation

(signed by you), the excess of premiums paid by you that apply to

the unused portion of the policy's term, pro rata but with retention

of the expense constant and the Federal policy fee.

2. You cancel a policy having a term of 3 years, on an

anniversary date, and the reason for the cancellation is:

a. A policy of flood insurance has been obtained or is being

obtained in substitution for this policy and we have received a

written concurrence in the cancellation from any mortgagee of which

we have actual notice; or

b. You have extinguished the insured mortgage debt and are no

longer required by the mortgagee to maintain the coverage.

Refund of any premium, under this subparagraph 2., will be pro

rata but with retention of the expense constant and the Federal

policy fee.

3. You cancel because we have determined that your property is

not, in fact, in a special hazard area; and you were required to

purchase flood insurance coverage by a private lender or Federal

agency pursuant to the Act; and the lender or Federal agency no

longer requires the retention by you of the coverage. In this event,

if no claims have been paid or are pending, your premium payments

will be refunded to you in full, according to our applicable

regulations.

F. Voidance, Reduction or Reformation of the Coverage By Us:

1. Voidance: This policy will be void and of no legal force and

effect in the event that any one of the following conditions occurs:

a. The property listed on the application is not eligible for

coverage, in which case the policy is void from its inception;

b. The community in which the property is located was not

participating in the National Flood Insurance Program on the

policy's inception date and did not qualify as a participating

community during the policy's term and before the occurrence of any

loss for which you may receive compensation under the policy;

c. If, during the term of the policy, the participation in the

National Flood Insurance Program of the community in which your

property is located ceases, in which case the policy will be deemed

void effective at the end of the last day of the policy year in

which such cessation occurred and will not be renewed.

If the voided policy included 3 policy years in a contract term

of 3 years, you will be entitled to a pro rata refund of any premium

applicable to the remainder of the policy's term;

d. If you or your agent have:

(1) Sworn falsely, or

(2) Fraudulently or willfully concealed or misrepresented any

material fact including facts relevant to the rating of this policy

in the application for coverage, or upon any renewal of coverage, or

in connection with the submission of any claim brought under the

policy, in which case this entire policy will be void as of the date

the wrongful act was committed or from its inception if this policy

is a renewal policy and the wrongful act occurred in connection with

an application for or renewal or endorsement of a policy issued to

you in a prior year and affects the rating of or premium amount

received for this policy. Refunds of premiums, if any, will be

subject to offsets for our administrative expenses (including the

payment of agent's commissions for any voided policy year) in

connection with the issuance of the policy;

e. The premium you submit is less than the minimum set forth in

44 CFR 61.10 in connection with any application for a new policy or

policy renewal, in which case the policy is void from its inception

date.

f. You have not submitted a community inspection report, cited

in ``G. Policy Renewal'' below that was required in a notice sent to

you in conjunction with the community inspection procedure

established under National Flood Insurance Program Regulations (44

CFR 59.30).

2. Reduction of Coverage Limits or Reformation: If the premium

payment received by us is not sufficient (whether evident or not) to

purchase the amount of coverage requested by an application,

renewal, endorsement, or other form and paragraph F.1.d. does not

apply, then the policy will be deemed to provide only such coverage

as can be purchased for the entire term of the policy, for the

amount of premium received, subject to increasing the amount of

coverage pursuant to 44 CFR 61.11; provided, however:

a. If the insufficient premium is discovered by us before a loss

and we can determine the amount of insufficient premium from

information in our possession at the time of our discovery of the

insufficient premium, we will give a notice of additional premium

due, and if you remit and we receive the additional premium required

to purchase the limits of coverage for each kind of coverage as was

initially requested by you within 30 days from the date we give you

written notice of additional premium due, the policy will be

reformed, from its inception date, or, in the case of an

endorsement, from the effective date of the endorsement, to provide

flood insurance coverage in the amount of coverage initially

requested.

[[Page 24263]]

b. If the insufficient premium is discovered by us at the time

of a loss under the policy, we will give a notice of premium due,

and if you remit and we receive the additional premium required to

purchase (for the current policy term and the previous policy term,

if then insured) the limits of coverage for each kind of coverage as

was initially requested by you within 30 days from the date we give

you written notice of additional premium due, the policy will be

reformed, from its inception date, or, in the case of an

endorsement, from the effective date of the endorsement, to provide

flood insurance coverage in the amount of coverage initially

requested.

c. Under subparagraphs a. and b. as to any mortgagee or trustee

named in the policy, we will give a notice of additional premium due

and the right of reformation will continue in force for the benefit

only of the mortgagee or trustee, up to the amount of your

indebtedness, for 30 days after written notice to the mortgagee or

trustee.

G. Policy Renewal: The term of this policy begins on its

inception date and ends on its expiration date, as shown on the

declarations page that is attached to the policy. We are under no

obligation to:

1. Send you any renewal notice or other notice that your policy

term is coming to an end and the receipt of any such notice by you

will not be deemed to be a waiver of this provision on our part.

2. Assure that policy changes reflected in endorsements

submitted by you during the policy term and accepted by us are

included in any renewal notice or new policy that we send to you.

Policy changes includes the addition of any increases in the amounts

of coverage.

This policy will not be renewed and the coverage provided by it

will not continue into any successive policy term unless the renewal

premium payment, and when applicable, the community inspection

report referred to below, is received by us at the office of the

National Flood Insurance Program within 30 days of the expiration

date of this policy, subject to Article 9, paragraph F. above. If

the renewal premium payment, and when applicable, the community

inspection report referred to below, is mailed by certified mail to

the National Flood Insurance Program before the expiration date, it

will be deemed to have been received within the required 30 days.

The coverage provided by the renewal policy is in effect for any

loss occurring during the 30-day period even if the loss occurs

before the renewal premium payment, and when applicable, the

community inspection report referred to below, is received within

the required 30 days. In all other cases, this policy will end as of

the expiration date of the last policy term for which the premium

payment, and when applicable, the community inspection report

referred to below, was timely received at the office of the National

Flood Insurance Program and, in that event, we will not be obligated

to provide you with any cancellation, termination, policy lapse, or

policy renewal notice.

In connection with the renewal of this policy, you may be

requested during the policy term to recertify, on a Recertification

Questionnaire we will provide you, the rating information used to

rate your most recent application for or renewal of insurance.

Your community has been approved by the Federal Emergency

Management Agency to participate in a special inspection procedure

set forth in National Flood Insurance Regulations (44 CFR 59.30)

that requires the submission of a community inspection report

completed by local officials as one condition for policy renewal. As

a property owner in such a community, you may be required to submit

such an inspection report by a community official certifying whether

your insured property is in compliance with the community's

floodplain management ordinance. You will be notified in writing of

this requirement approximately 6 months before your renewal date and

again at the time your renewal bill is sent.

Notwithstanding your responsibility to submit the appropriate

renewal premium in sufficient time to permit its receipt by us

before the expiration of the policy being renewed, we have

established a business procedure for mailing renewal notices to

assist Insureds in meeting their responsibility. Regarding our

business procedure, evidence of the placing of any such notices into

the U.S. Postal Service, addressed to you at the address appearing

on your most recent application or other appropriate form (received

by the National Flood Insurance Program before the mailing of the

renewal notice by us), does, in all respects for purposes of the

National Flood Insurance Program, presumptively establish delivery

to you for all purposes irrespective of whether you actually

received the notice.

However, if we determine that, through any circumstances, any

renewal notice was not placed into the U.S. Postal Service, or, if

placed, was prepared or addressed in a manner that we determine

could preclude the likelihood of its being actually and timely

received by you before the due date for the renewal premium, the

following procedures will be followed:

If you or your agent notified us, not later than 1 year after

the date on which the payment of the renewal was due, of a

nonreceipt of a renewal notice before the due date for the renewal

premium, which we determine was attributable to the above

circumstance, we will mail a second bill providing a revised due

date, which will be 30 days after the date on which the bill is

mailed.

If the renewal payment requested by reason of the second bill is

not received by the revised due date, no renewal will occur and the

policy will remain as an expired policy as of the expiration date

prescribed on the policy.

H. Conditions Suspending or Restricting Insurance: Unless

otherwise provided in writing added hereto, we will not be liable

for loss occurring while the hazard is increased by any means within

your control or knowledge.

I. Alterations and Repairs: You may, at any time and at your own

expense, make alterations, additions and repairs to the insured

property, and complete structures in the course of construction.

J. Requirements in Case of Loss: Should a flood loss occur to

your insured property, you must:

1. Notify us in writing as soon as practicable;

2. As soon as reasonably possible, separate the damaged and

undamaged property, putting it in the best possible order so that we

may examine it; and

3. Within 60 days after the loss, send us a proof of loss, which

is your statement as to the amount you are claiming under the policy

signed and sworn to by you and furnishing us with the following

information:

a. The date and time of the loss;

b. A brief explanation of how the loss happened;

c. Your interest in the property damaged (for example,

``owner'') and the interest, if any, of others in the damaged

property;

d. The actual cash value or replacement cost, whichever is

appropriate, of each damaged item of insured property and the amount

of damages sustained;

e. Names of mortgagees or anyone else having a lien, charge or

claim against the insured property;

f. Details as to any other contracts of insurance covering the

property, whether valid or not;

g. Details of any changes in ownership, use, occupancy, location

or possession of the insured property since the policy was issued;

h. Details as to who occupied any insured building at the time

of loss and for what purpose; and

i. The amount you claim is due under this policy to cover the

loss, including statements concerning:

(1) The limits of coverage stated in the policy; and

(2) The cost to repair or replace the damaged property

(whichever costs less).

4. Cooperate with our adjuster or representative in the

investigation of the claim;

5. Document the loss with all bills, receipts, and related

documents for the amount being claimed;

6. The insurance adjuster whom we hire to investigate your claim

may furnish you with a proof of loss form, and she or he may help

you to complete it. However, this is a matter of courtesy only, and

you must still send us a proof of loss within 60 days after the loss

even if the adjuster does not furnish the form or help you complete

it.

In completing the proof of loss, you must use your own judgment

concerning the amount of loss and the justification for that amount.

The adjuster is not authorized to approve or disapprove claims

or tell you whether your claim will be approved by us.

7. We may, at our option, waive the requirement for the

completion and filing of a proof of loss in certain cases, in which

event you will be required to sign and, at our option, swear to an

adjuster's report of the loss that includes information about your

loss and the damages sustained, which is needed by us in order to

adjust your claim.

8. Any false statements made in the course of presenting a claim

under this policy may be punishable by fine or imprisonment under

the applicable Federal Laws.

[[Page 24264]]

K. Our Options After a Loss: Options we may, in our sole

discretion, exercise after loss include the following:

1. Evidence of Loss: If we specifically request it, in writing,

you may be required to furnish us with a complete inventory of the

destroyed, damaged and undamaged property, including details as to

quantities, costs, actual cash values or replacement cost (whichever

is appropriate), amounts of loss claimed, and any written plans and

specifications for repair of the damaged property that you can make

reasonably available to us.

2. Examination Under Oath and Access to Insured Property

Ownership Records and Condominium Documents: We may require you to:

a. Show us, or our designee, the damaged property, to be

examined under oath by our designee and to sign any transcripts of

such examinations; and

b. At such reasonable times and places as we may designate,

permit us to examine and make extracts and copies of any policies of

property insurance insuring you against loss; and the deed

establishing your ownership of the insured real property; and the

condominium documents including the Declarations of the condominium,

its Articles of Association or Incorporation, Bylaws, rules and

regulations, and other condominium documents if you are a unit owner

in a condominium building; and all books of accounts, bills,

invoices and other vouchers, or certified copies thereof if the

originals are lost, pertaining to the damaged property.

3. Options to Replace: We may take all or any part of the

damaged property at the agreed or appraised value and, also, repair,

rebuild or replace the property destroyed or damaged with other of

like kind and quality within a reasonable time, on giving you notice

of our intention to do so within 30 days after the receipt of the

proof of loss herein required under paragraph J.3. above.

4. Adjustment Options: We may adjust loss to any insured

property of others with the owners of such property or with you for

their account. Any such insurance under this policy will not inure

directly or indirectly to the benefit of any carrier or other bailee

for hire.

L. When Loss Payable: Loss is payable within 60 days after you

file your proof of loss (or within 90 days after the insurance

adjuster files an adjuster's report signed and sworn to by you in

lieu of a proof of loss) and ascertainment of the loss is made

either by agreement between us and you expressed in writing or by

the filing with us of an award as provided in paragraph N. below.

If we reject your proof of loss in whole or in part, you may

accept such denial of your claim, or exercise your rights under this

policy, or file an amended proof of loss as long as it is filed

within 60 days of the date of the loss or any extension of time

allowed by the Administrator.

M. Abandonment: You may not abandon damaged or undamaged insured

property to us. However, we may permit you to keep damaged, insured

property (``salvage'') after a loss and we will reduce the amount of

the loss proceeds payable to you under the policy by the value of

the salvage.

N. Appraisal: If at any time after a loss, we are unable to

agree with you as to the actual cash value or, if applicable,

replacement cost of the damaged property so as to determine the

amount of loss to be paid to you, then, on the written demand of

either one of us, each of us will select a competent and

disinterested appraiser and notify the other of the appraiser

selected within 20 days of such demand. The appraisers will first

select a competent and disinterested umpire; and failing, after 15

days, to agree upon such umpire, then, on your request or our

request, such umpire will be selected by a judge of a court of

record in the State in which the insured property is located. The

appraisers will then appraise the loss, stating separately

replacement cost, actual cash value and loss to each item; and,

failing to agree, will submit their differences, only, to the

umpire. An award in writing, so itemized, of any two (appraisers or

appraiser and umpire) when filed with us will determine the amount

of actual cash value and loss or, should this policy's replacement

cost provisions apply, the amount of replacement cost and loss. Each

appraiser will be paid by the party selecting him or her and the

expenses of appraisal and umpire will be paid by both of us equally.

O. Loss Clause: If we pay you for damage to property sustained

in a flood loss, you are still eligible, during the term of the

policy, to collect for a subsequent loss due to another flood. Of

course, all loss arising out of a single, continuous flood of long

duration will be adjusted as one flood loss.

P. Mortgage Clause: (Applicable to building coverage only and

effective only when the policy is made payable to a mortgagee or

trustee named in the application and declarations page attached to

this policy or of whom we have actual notice before the payment of

loss proceeds under this policy).

Loss, if any, under this policy, will be payable to the aforesaid

as mortgagee or trustee as interest may appear under all present or

future mortgages upon the property described in which the aforesaid may

have an interest as mortgagee or trustee, in order of precedence of

said mortgages, and this insurance, as to the interest of the mortgagee

or trustee only therein, will not be invalidated by any act or neglect

of the mortgagor or owner of the described property, nor by any

foreclosure or other proceedings or notice of sale relating to the

property, nor by any change in the title or ownership of the property,

nor by the occupation of the premises for purposes more hazardous than

are permitted by this policy; provided, that in case the mortgagor or

owner will neglect to pay any premium due under this policy, the

mortgagee or trustee will, on demand, pay the same.

Provided, also, that the mortgagee or trustee will notify us of any

change of ownership or occupancy or increase of hazard that will come

to the knowledge of said mortgagee or trustee and, unless permitted by

this policy, it will be noted thereon and the mortgagee or trustee

will, on demand, pay the premium for such increased hazard for the term

of the use thereof; otherwise, this policy will be null and void.

If we cancel this policy, it will continue in force for the benefit

only of the mortgagee or trustee for 30 days after written notice to

the mortgagee or trustee of such cancellation and will then cease, and

we will have the right, on like notice, to cancel this agreement.

Whenever we will pay the mortgagee or trustee any sum for loss

under this policy and will claim that, as to the mortgagor or owner, no

liability therefor existed, we will, to the extent of such payment, be

thereupon legally subrogated to all the rights of the party to whom

such payment will be made, under all securities held as collateral to

the mortgage debt, or may, at our option, pay to the mortgagee or

trustee the whole principal due or to grow due on the mortgage with

interest, and will thereupon receive a full assignment and transfer of

the mortgage and of all such other securities; but no subrogation will

impair the right of the mortgagee or trustee to recover the full amount

of said mortgagee's or trustee's claim.

Q. Mortgagee Obligations: If you fail to render proof of loss, the

named mortgagee or trustee, upon notice, will render proof of loss in

the form herein specified within 60 days thereafter and will be subject

to the provisions of this policy relating to appraisal and time of

payment and of bringing suit.

R. Conditions for Filing a Lawsuit: You may not sue us to recover

money under this policy unless you have complied with all the

requirements of the policy. If you do sue, you must start the suit

within 12 months from the date we mailed you notice that we have denied

your claim, or part of your claim, and you must file the suit in the

United States District Court of the district in which the insured

property was located at the time of loss.

S. Subrogation: Whenever we make a payment for a loss under this

policy, we are subrogated to your right to recover for that loss from

any other person. That means that your right to recover for a loss that

was partly or totally caused by someone else is automatically

transferred to us, to the extent that we have paid you for the loss. We

may require you to acknowledge this transfer in writing. After the

loss, you may not give up our right to recover this money or do

anything that would prevent us from recovering it. If you make any

claim against any person who caused your loss and recover any money,

you

[[Page 24265]]

must pay us back first before you may keep any of that money.

T. Continuous Lake Flooding: Where the insured building has been

inundated by rising lake waters continuously for 90 days or more and it

appears reasonably certain that a continuation of this flooding will

result in damage, reimbursable under this policy, to the insured

building equal to or greater than the building policy limits plus the

deductible(s) or the maximum payable under the policy for any one

building loss, we will pay you the lesser of these two amounts without

waiting for the further damage to occur if you sign a release agreeing:

1. To make no further claim under this policy;

2. Not to seek renewal of this policy; and

3. Not to apply for any flood insurance under the Act for

property at the property location of the insured building.

If the policy term ends before the insured building has been

flooded continuously for 90 days, the provisions of this paragraph T.

still apply so long as the first building damage reimbursable under

this policy from the continuous flooding occurred before the end of the

policy term.

U. Duplicate Policies Not Allowed: Property may not be insured

under more than one policy issued under the Act. When we find that

duplicate policies are in effect, we will by written notice give you

the option of choosing which policy is to remain in effect under the

following procedures:

1. If you choose to keep in effect the policy with the earlier

effective date, we will by the same written notice give you an

opportunity to add the coverage limits of the later policy to those of

the earlier policy, as of the effective date of the later policy.

2. If you choose to keep in effect the policy with the later

effective date, we will by the same written notice give you the

opportunity to add the coverage limits of the earlier policy to those

of the later policy, as of the effective date of the later policy.

In either case, you must pay the pro rata premium for the increased

coverage limits within 30 days of the written notice. In no event will

the resulting coverage limits exceed the statutorily permissible limits

of coverage under the Act or your insurable interests, whichever is

less.

We will make a refund to you, according to applicable National

Flood Insurance Program rules, of the premium for the policy not being

kept in effect. For purposes of this paragraph U., the term ``effective

date'' means the date coverage that has been in effect without any

lapse was first placed in effect.

In addition to the provisions of this paragraph U. for increasing

policy limits, the usual procedures for increasing policy limits, by

mid-term endorsement or at renewal time, with the appropriate waiting

period, are applicable to the policy you choose to keep in effect.

3. We amend Part 61 by adding Appendix A(5) to Part 61 as follows:

Appendix A(5) to Part 61

Federal Emergency Management Agency, Federal Insurance Administration

Standard Flood Insurance Policy Endorsement to General Property Form

[Issued Pursuant to the National Flood Insurance Act of 1968, or Any

Acts Amendatory Thereof (Hereinafter Called the Act), and Applicable

Federal Regulations in Title 44 of the Code of Federal Regulations,

Subchapter B. The provisions of this endorsement replace the

provisions of Article 8 of the Standard Flood Insurance Policy,

General Property Form, only in applicable policies in Monroe County

and the Village of Islamorada, Florida].

Article 8--General Conditions and Provisions

A. Pair and Set Clause: If there is loss of an article that is part

of a pair or set, the measure of loss will be a reasonable and fair

proportion of the total value of the pair or set, giving consideration

to the importance of said article, but such loss will not be construed

to mean total loss of the pair or set.

B. Concealment, Fraud: This policy will be void, nor can this

policy be renewed or any new flood insurance coverage be issued to the

Insured if any person insured under Article 1, paragraph A., whether

before or after a loss, has:

1. Sworn falsely, or willfully concealed or misrepresented any

material fact; or

2. Done any fraudulent act concerning this insurance (See

paragraph E.1.d. below); or

3. Willfully concealed or misrepresented any fact on a

``Recertification Questionnaire,'' which causes the Insurer to issue

a policy based on a premium amount that is less than the premium

amount that would have been payable were it not for the misstatement

of fact (see paragraph F. below).

C. Other Insurance: If a loss covered by this policy is also

covered by other insurance, whether collectible or not, the Insurer

will pay only the proportion of the loss that the limit of liability

that applies under this policy bears to the total amount of

insurance covering the loss, provided, if at the time of loss, there

is other insurance made available under the Act, in the name of a

unit owner that provides coverage for the same loss covered by this

policy, this policy's coverage will be primary and not contributing

with such other insurance.

D. Amendments and Waivers, Assignment: This Standard Flood

Insurance Policy cannot be amended nor can any of its provisions be

waived without the express written consent of the Federal Insurance

Administrator. No action the Insurer takes under the terms of this

policy can constitute a waiver of any of its rights. Except in the

case of 1. a contents only policy and 2. a policy issued to cover a

building in the course of construction, assignment of this policy,

in writing, is allowed upon transfer of title.

E. Voidance, Reduction or Reformation of the Coverage: 1.

Voidance: This policy will be void and of no legal force and effect

if any one of the following conditions occurs:

a. The property listed on the application is not eligible for

coverage, in which case the policy is void from its inception;

b. The community in which the property is located was not

participating in the National Flood Insurance Program on the

policy's inception date and did not qualify as a participating

community during the policy's term and before the occurrence of any

loss;

c. If, during the term of the policy, the participation in the

National Flood Insurance Program of the community in which the

property is located ceases, in which case the policy will be deemed

void effective at the end of the last day of the policy year in

which such cessation occurred and will not be renewed.

If the voided policy included 3 policy years in a contract term

of 3 years, the Insured will be entitled to a pro-rata refund of any

premium applicable to the remainder of the policy's term;

d. If any Insured or its agent has:

(1) Sworn falsely; or