[Federal Register Volume 61, Number 85 (Wednesday, May 1, 1996)]
[Rules and Regulations]
[Pages 19197-19201]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-10779]



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FEDERAL EMERGENCY MANAGEMENT AGENCY

44 CFR Parts 61 and 206

RIN 3067-AC35


National Flood Insurance Program; Group Flood Insurance Policy 
for Individual and Family Grant Program

AGENCY: Federal Emergency Management Agency (FEMA).

ACTION: Interim final rule with request for comments.

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SUMMARY: This interim final rule changes FEMA's Individual and Family 
Grant (IFG) regulations by establishing a minimum damage threshold of 
$201 or more in real or personal property losses, or both, resulting 
from any type of incident in order to receive an IFG award in these 
damage categories. The rule also changes our flood insurance 
regulations for IFG award recipients in Presidentially declared major 
disasters by establishing a Group Flood Insurance Policy (GFIP) and the 
criteria for its implementation. This interim final rule also 
authorizes the GFIP, as a one-time, pilot project, for recipients of 
the State of Alaska's own, fully funded disaster assistance grants to 
help individuals and families recover from flooding in September and 
October 1995. Comments are being solicited on making the GFIP available 
in the future to any

[[Page 19198]]

State with a fully funded, disaster assistance grant program for 
individuals and families.

DATES: This interim final rule is effective on May 1, 1996. Please 
submit any comments in writing by July 1, 1996.

FOR FURTHER INFORMATION CONTACT: Charles M. Plaxico, Jr., Federal 
Emergency Management Agency, Federal Insurance Administration, (202) 
646-3422, (facsimile) (202) 646-4327; or Laurence W. Zensinger in 
FEMA's Response and Recovery Directorate, (202) 646-3642, (facsimile) 
(202) 646-2730.

SUPPLEMENTARY INFORMATION: On February 7, 1995, FEMA published in the 
Federal Register (Vol. 60, page 7130) an interim final rule changing 
the flood insurance regulations for Individual and Family Grant program 
recipients in Presidentially declared major disasters, in order to meet 
the mandates of Sec. 582 of the National Flood Insurance Reform Act of 
1994 (NFIRA), which the President signed into law on September 23, 
1994.
    On March 15, 1995, FEMA then published in the Federal Register (60 
FR 13945) a proposed rule to establish an IFG eligibility requirement 
of $201 or more in real or personal property damage, or both, resulting 
from any type of disaster incident in order to receive an IFG award for 
items in these categories. In the same rule, we proposed to establish a 
GFIP and proposed criteria for the GFIP 's implementation by the 
National Flood Insurance Program (NFIP) when FEMA provides IFG awards.
    The term of the GFIP will be for 36 months, and, for implementation 
under the IFG program, will begin 60 days from the date of the disaster 
declaration. For the pilot project to be conducted in the State of 
Alaska, the term of the GFIP will begin on the date this interim final 
rule is published in the Federal Register. On and after the inception 
date of the GFIP, coverage for individual IFG recipients or the named 
insureds under FEMA's pilot project with the State of Alaska, will 
begin on the 30th day after the NFIP receives from the State the 
records of GFIP insureds and their premium payments. Hereafter and with 
this understanding, the GFIP will be referred to as a 3-year policy.
    To meet the NFIRA requirements that were effective when the 
President signed the law on September 23, 1994, FEMA had to write the 
February 7, 1995 interim final rule to be effective retroactively. 
However, FEMA welcomed comments for a 60-day period. The proposed rule, 
which made additions to the same paragraphs changed by the interim 
final rule, provided for a 45-day comment period. To ensure State and 
Regional personnel were informed of these two rules, FEMA staff 
included a rules presentation at eight Human Services Automated Systems 
Orientation (HSASO) sessions, at which time issues were discussed and 
written comments were encouraged. FEMA also requested comments on the 
estimates for the additional paperwork or record-keeping reporting 
burden in connection with the time it would take a State to research 
and compile the information and send premium payments to the NFIP. FEMA 
invited the public to submit comments to the agency or to the Office of 
Management and Budget (OMB) on the paperwork issues including the 
burden estimates and any aspects of the information collection 
requirements. Neither FEMA nor OMB received comments in connection with 
the collection of information.
    FEMA received four sets of written comments on each of the two 
rules--two of the six respondents commented on both rules. The tally of 
comments included representatives of four state agencies dealing with 
emergency management, a private consultant service dealing with banking 
and legislative issues, and an insurance committee of an association 
concerned with floodplain management issues. While generally supportive 
of the proposal to establish a GFIP the respondents did express concern 
for one or more of the proposed provisions.
    One State agency had a series of concerns. The first concern 
questioned how the February 7, 1995 interim final rule escaped OMB 
review. OMB does not require a review of rules where the aggregate 
annual impact of the rule is less than $100 million.
    The second concern, which was shared by another State, was that the 
NFIRA would place an administrative and monitoring burden on the States 
as an unfunded mandate. One State felt this would occur even if NFIP 
would track and maintain all information. FEMA has worked hard to take 
up the administrative burden for the States and will further ease 
burdens by tracking flood insurance maintenance beyond the 3-year 
requirement that has been in effect since the Flood Disaster Protection 
Act of 1973.
    The State's third concern was that the NFIRA requirements should be 
effectuated after the date FEMA had notified them by letter of the 
requirement. By mandating that the flood insurance purchase and 
maintenance requirement be made effective upon the signature of the 
President, Congress clearly intended to allow no exemptions. As a 
result FEMA had no time to inform States of the requirements and allow 
them to prepare for the consequences.
    The next concern was that the cost of implementing the rule would 
be greater to Federal and State governments than the benefits of 
tracking data for the life of each property. Congress clearly intended 
NFIRA mandates to be carried out regardless of the costs. However, 
since FEMA already tracks the data necessary to administer this 
program, there should be no additional burden to States.
    This State then proposed alternatives to NFIRA legislation. 
However, those alternatives are already part of NFIRA or are part of 
the implementing regulations.
    A second State felt it was punitive to require new owners to 
purchase and maintain flood insurance; this feeling was shared by many 
State participants in the HSASO sessions held during the comment 
periods. The NFIRA--not the rule--requires new owners to maintain flood 
insurance. Congress intended for property owners who buy or build in a 
floodplain to protect themselves or bear the cost. Accordingly, 
disaster assistance will not be provided to the occupant for a second 
flood when flood insurance has not been purchased and maintained by the 
new owner.
    Two States questioned who would be responsible for informing the 
buyer of property upon which the flood insurance purchase and 
maintenance requirements were imposed. The NFIRA stipulates the 
``transferor'' or seller of the property must disclose this requirement 
to the buyer, and such written notification must be contained in 
documents evidencing the transfer of ownership of the property.
    Three States and the association expressed concern about a database 
tracking system for real estate transactions. Rather than attempt to 
undertake the impossible task of tracking such sales forever, FEMA has 
chosen to prohibit Federal flood disaster assistance from being 
provided for a property a second time. To do otherwise would place a 
heavy burden on State and local governments.
    The association felt the Federal government, and not the States, 
should maintain any database required to implement the mandates imposed 
by Sec. 582 of the NFIRA. FEMA agrees and will maintain the database.
    A State and the association expressed concern that was also voiced 
by the majority of attenders at the HSASO sessions, namely, that the 
coverage

[[Page 19199]]

maintenance requirement, equating to the IFG maximum grant amount, is a 
financial hardship to IFG recipients, who are predominantly the elderly 
and individuals and families receiving public support. FEMA must 
implement laws enacted by the Congress. In recognizing that maintaining 
flood insurance is a hardship on those with limited income, FEMA is 
establishing a GFIP to assist grantees for up to 3 years of coverage. 
However, in keeping with the spirit of NFIRA to increase NFIP 
participation and replace disaster assistance with flood insurance 
coverage, we have decided to establish for all IFG recipients the 
maximum IFG award amount as the amount of flood insurance to be bought 
and maintained as a condition for future IFG eligibility for any 
uninsured flood-damaged real or personal property, or both.
    The association recommended a long-term, low-cost policy providing 
a fixed amount of flood insurance coverage, and offering the grantee 
the option of purchasing either a GFIP or a Standard Flood Insurance 
Policy (SFIP). Under a GFIP, the State will provide the grantee with up 
to 3 years of coverage. The grantee can always switch to an SFIP at an 
increased cost.
    The association and a State were concerned that grantees will not 
maintain flood insurance beyond the end of the 3-year term of the GFIP. 
FEMA shares this concern. NFIP will send a notice to GFIP certificate 
holders at the end of the 3-year policy period to alert them to the 
maintenance requirement and to the consequences of not maintaining 
flood insurance. The notice will (1) encourage them to apply for NFIP's 
conventional SFIP by contacting a local insurance agent, producer, or a 
private insurance company selling NFIP policies, and (2) advise them as 
to the amount of coverage they must maintain in order not to jeopardize 
their eligibility for future disaster assistance.
    One of the States suggested that the responsibility of the NFIP to 
notify the IFG grantee/policyholder toward the end of the 3-year 
coverage period (as described in the Supplementary Information section 
of the proposed rule and as discussed above) be incorporated into the 
implementing regulations. FEMA agrees and a new paragraph (c) 
incorporating such language has been added to Sec. 61.17.
    The consultant recommended that the cost of the flood insurance be 
deducted from the grant award and that flood insurance coverage be 
placed directly by FEMA through its regional offices. To ensure that 
the IFG recipient will have coverage as soon after the grant award as 
possible, a fixed premium amount will be added to the IFG awards 
(subject to the current grant maximum), but withheld from the grant and 
provided directly to the NFIP Servicing Agent. Since the Servicing 
Agent is already equipped to issue policies, it would not be cost-
effective to duplicate this capability using the limited FEMA resources 
in the regions. The Servicing Agent will send the IFG recipient a 
Certificate of Flood Insurance and advise the grantee of the option of 
securing increased limits of coverage by purchasing an SFIP at an 
increased cost.
    One of the States suggested we continue to allow grants of $200 or 
less, but exempt those recipients from the insurance requirement. The 
law does not appear to allow us the option of exempting grantees from 
maintaining flood insurance. Therefore, we have determined it was more 
cost-effective for the victim and the government to disallow grants of 
$200 or less for damages or losses to real or personal property, or 
both. This minimum-loss eligibility requirement shall be applicable not 
only to floods, but also to all types of disaster incidents.
    The consultant questioned whether the maximum grant amount (then 
$12,600) was for the entire family or each member of the household, 
since there appeared to be an inconsistency in reference to 
``homeowner.'' The proposed rule refers to a ``homeowner'' in context 
of an insurance ``policy'', whereas grants are made to each eligible 
property owner to apply to damaged/lost property. The maintenance 
requirement is, therefore, placed on each property owner who receives a 
grant.
    The consultant then questioned how new maps or revised map changes 
would affect a homeowner who has received a grant when the property was 
not initially in a special flood hazard area (SFHA) and, as a result of 
a new or revised map, is placed in an SFHA. If a property was not in an 
SFHA at the time the grant was given, there would have been no flood 
insurance purchase requirement. If the homeowner were to apply for an 
IFG grant at a later date after the property had been placed in an 
SFHA, the flood insurance purchase requirement would apply and the 
State would follow the procedure for securing a GFIP for that IFG 
recipient.
    The fourth State objected to the burdensome requirement of 
providing NFIP with weekly reports and payments. Since FEMA does not 
want to burden States, we are asking for weekly vs. daily reports. FEMA 
will also provide States with an automated system that will support 
this requirement.
    The same State felt that the NFIRA flood insurance requirements 
should apply to the Disaster Housing Assistance program, as well as to 
the IFG program. FEMA is in the process of reviewing this proposition.
    This State's last comment was that all disaster programs should 
comply with the same regulations. FEMA is coordinating with all Federal 
and State agencies involved in implementing this law. We have actively 
solicited and welcomed comments from all sources, and have tried our 
best to ensure equity in program assistance provided to all.
    In addition to the changes made in response to the comments, we 
amended Sec. 61.17(b)(2) in this final rule to clarify that benefits 
under Article 3 B.3. of the SFIP Dwelling Form will not be subject to a 
separate deductible, but are subject to the GFIP deductible of $200 
(applicable separately to any building loss and any contents loss).
    Additionally, FEMA received a request from the State of Alaska to 
make the GFIP available not only to recipients of IFG grants but also 
to recipients of its own fully funded disaster assistance program 
comparable to the IFG program in benefits and eligibility requirements. 
The State's request, which was prompted by a recent disaster recovery 
effort, has merit. FEMA has determined that 42 U.S.C. Secs. 4014(a)(2) 
and 4015(b)(2), which authorize FEMA to make the GFIP available to 
recipients of IFG awards, may also apply to recipients of certain 
State-funded disaster assistance programs. We have modified the interim 
final rule to apply the GFIP, as a one-time, pilot project, to 
recipients of the State of Alaska's own fully funded disaster 
assistance program for individuals and families suffering damage from 
flooding that occurred in the State during September and October 1995. 
The decision to make the GFIP available to these flood disaster victims 
is based on the fact that the State of Alaska's award program is 
comparable to the IFG program, including eligibility requirements such 
as income levels. The State also has the capability to provide 
information to the NFIP in a format compatible with NFIP requirements. 
The evaluation of this one-time, pilot project of the GFIP in the State 
of Alaska will help FEMA evaluate whether the GFIP should be made 
available to other States requesting the availability of the GFIP for 
100-percent, State-funded disaster assistance programs comparable to 
the IFG program. Comments are also being solicited specifically on this 
issue.
    Finally, Sec. 582 of the NFIRA prohibits future Federal disaster 
assistance to

[[Page 19200]]

anyone who fails to obtain and maintain flood insurance coverage in 
connection with previous flood-related disaster assistance. Section 582 
provides: ``Notwithstanding any other provision of law, no Federal 
disaster relief assistance made available in a flood disaster may be 
used to make a payment (including any loan assistance payment) to a 
person for repair, replacement, or restoration for damage to any 
personal, residential, or commercial property if that person at any 
time has received flood disaster assistance that was conditional on the 
person first having obtained flood insurance under applicable Federal 
law and subsequently having failed to obtain and maintain flood 
insurance as required under applicable Federal law on such property.''
    In light of the requirements of Sec. 582, and in anticipation of 
the spring flood season, there is an urgent need to make the GFIP 
available upon publication of this final rule. FEMA finds that there is 
a compelling need and good cause to waive the 30-day effective date 
requirements of the Administrative Procedure Act, 5 U.S.C. 553(d). This 
interim final rule is effective on the date of publication in the 
Federal Register.

National Environmental Policy Act

    This interim final rule is categorically excluded from the 
requirements of 44 CFR Part 10, Environmental Consideration. No 
environmental impact assessment has been prepared.

Executive Order 12866, Regulatory Planning and Review

    This interim final rule is not a significant regulatory action 
within the meaning of Sec. 2(f) of E.O. 12866 of September 30, 1993, 58 
FR 51735, but attempts to adhere to the regulatory principles set forth 
in E.O. 12866. The interim final rule has not been reviewed by the 
Office of Management and Budget under E.O. 12866.

Paperwork Reduction Act

    This interim final rule does not contain a collection of 
information and therefore is not subject to the provisions of the 
Paperwork Reduction Act of 1995.

Executive Order 12612, Federalism

    This interim final rule involves no policies that have federalism 
implications under E.O. 12612, Federalism, dated October 26, 1987.

Executive Order 12778, Civil Justice Reform

    This interim final rule meets the applicable standards of 
Sec. 2(b)(2) of E.O. 12778.

List of Subjects in 44 CFR Parts 61 and 206

    Flood insurance; Disaster assistance.

    Accordingly, 44 CFR Parts 61 and 206 are 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. Section 61.17 is added to read as follows:


Sec. 61.17  Group Flood Insurance Policy.

    (a) A Group Flood Insurance Policy (GFIP) is a policy covering all 
individuals named by a State as recipients under Sec. 411 of the 
Stafford Act (42 U.S.C. 5178) of an Individual and Family Grant (IFG) 
program award for flood damage as a result of a Presidential major 
disaster declaration, and, as a one-time, pilot project, to recipients 
of the State of Alaska's own fully funded disaster assistance program 
for individuals and families suffering damage from flooding in 
September and October 1995. Alaska's disaster assistance program is 
comparable to the IFG program in benefits and eligibility requirements, 
including income levels. The State of Alaska has also agreed to provide 
information to the National Flood Insurance Program (NFIP) in a data 
format compatible with NFIP requirements. The premium for the GFIP, 
initially, is a flat fee of $200 per policyholder. Thereafter, the 
premium may be adjusted to reflect NFIP loss experience and any 
adjustment of benefits under the IFG program. The amount of coverage 
shall be equivalent to the maximum grant amount established under 
Sec. 411. The term of the GFIP shall be for 36 months and will begin, 
for implementation with the IFG program, 60 days from the date of the 
disaster declaration. For FEMA's pilot project with the State of 
Alaska, the term of the three-year policy will begin on May 1, 1996. On 
and after the inception date of the GFIP, coverage for IFG recipients 
or for recipients of the one time pilot project of the GFIP for the 
State of Alaska's own comparable fully funded, disaster assistance 
program, will begin on the 30th day after the NFIP receives the records 
of GFIP insureds and their premium payments from the State. A 
Certificate of Flood Insurance shall be sent to each IFG recipient, 
and, for the one-time pilot project in Alaska, to each individual or 
family receiving a grant from Alaska's own fully funded disaster 
assistance program.
    (b) The GFIP is the Standard Flood Insurance Policy Dwelling Form 
(a copy of which is included in Appendix A(1) of this part), except 
that:
    (1) The GFIP provides coverage for losses caused by land 
subsidence, sewer backup, or seepage of water without regard to the 
requirement in paragraph B.3. of Article 3 that the structure be 
insured to 80 percent of its replacement cost or the maximum amount of 
insurance available under the NFIP.
    (2) Article 7, Deductibles, does not apply to the GFIP. Instead, a 
special deductible of $200 (applicable separately to any building loss 
and any contents loss) applies to insured flood-damage losses sustained 
by the insured property in the course of any subsequent flooding event 
during the term of the GFIP. The separate deductible applicable to 
Article 3 B.3 does not apply.
    (3) Article 9 E., Cancellation of Policy By You, does not apply to 
the GFIP.
    (4) Article 9 G., Policy Renewal, does not apply to the GFIP.
    (c) A notice will be sent to the GFIP certificate holders 
approximately 60 days before the end of the 3-year term of the GFIP. 
The notice will (1) encourage them to contact a local insurance agent 
or producer or a private insurance company selling NFIP policies under 
the Write Your Own program of the NFIP to apply for a conventional NFIP 
Standard Flood Insurance Policy and (2) advise them as to the amount of 
coverage they must maintain in order not to jeopardize their 
eligibility for future disaster assistance.

PART 206--FEDERAL DISASTER ASSISTANCE FOR DISASTERS DECLARED ON OR 
AFTER NOVEMBER 23, 1988

    3. The authority citation for Part 206 is revised to read as 
follows:

    Authority: 42 U.S.C. 5121 et seq.; 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, 44 FR 19367, 3 CFR, 1979 Comp., p. 376.

Subpart E--Individual and Family Grant Programs

    4. Section 206.131(a) is amended by adding a sentence between the 
sentence ending, ``* * * to reflect changes in the Consumer Price Index 
for all Urban Consumers,'' and the sentence beginning, ``The Governor 
or his/her designee is responsible . . .'' to read as set forth below, 
and

[[Page 19201]]

Sec. 206.131(d)(1)(iii) (C) and (D) are revised to read as follows:


Sec. 206.131   Individual and family grant programs.

    (a) * * * IFG assistance for damages or losses to real or personal 
property, or both, will be provided to individuals or families with 
those IFG-eligible losses totaling $201 or more; those individuals with 
damages or losses of $200 or less to real or personal property, or 
both, are ineligible. * * *
* * * * *
    (d) * * *
    (1) * * *
    (iii) * * *
    (C)(1) The State may not make a grant for acquisition or 
construction purposes in a designated special flood hazard area in 
which the sale of flood insurance is available under the NFIP unless 
the individual or family obtains adequate flood insurance and maintains 
such insurance for as long as they live at that property address. The 
coverage shall equal the maximum grant amount established under 
Sec. 411(f) of the Stafford Act. If the grantee is a homeowner, flood 
insurance coverage must be maintained on the residence at the flood-
damaged property address for as long as the structure exists if the 
grantee, or any subsequent owner of that real estate, ever wishes to be 
assisted by the Federal government with any subsequent flood damages or 
losses to real or personal property, or both. If the grantee is a 
renter, flood insurance coverage must be maintained on the contents for 
as long as the renter resides at the flood-damaged property address. 
The restriction is lifted once the renter moves from the rental unit.
    (2) Individuals named by a State as eligible recipients under 
Sec. 411 of the Stafford Act for an IFG program award for flood damage 
as a result of a Presidential major disaster declaration will be 
included in a Group Flood Insurance Policy (GFIP) established under the 
National Flood Insurance Program (NFIP) regulations, at 44 CFR 61.17.
    (i) The premium for the GFIP is a necessary expense within the 
meaning of this section. The State shall withhold this portion of the 
IFG award and provide it to the NFIP on behalf of individuals and 
families who are eligible for coverage. The coverage shall be 
equivalent to the maximum grant amount established under Sec. 411(f) of 
the Stafford Act.
    (ii) The State IFG program staff shall provide the NFIP with 
records of individuals who received an IFG award and are, therefore, to 
be insured. Records of IFG grantees to be insured shall be accompanied 
by payments to cover the premium amounts for each grantee for the 3-
year policy term. The NFIP will then issue a Certificate of Flood 
Insurance to each grantee. Flood insurance coverage becomes effective 
on the 30th day following the receipt of records of GFIP insureds and 
their premium payments from the State, and terminates 36 months from 
the inception date of the GFIP, i.e., 60 days from the date of the 
disaster declaration.
    (iii) Insured grantees would not be covered if they are determined 
to be ineligible for coverage based on a number of exclusions 
established by the NFIP. Therefore, once grantees/policyholders receive 
the Certificate of Flood Insurance that contains a list of the policy 
exclusions, they should review that list to see if they are ineligible 
for coverage. Those grantees who fail to do this may find that their 
property is, in fact, not covered by the insurance policy when the next 
flooding incident occurs and they file for losses. Once the grantees 
find that their damaged buildings, contents, or both, are ineligible 
for coverage, they should notify the NFIP in writing in order to have 
their names removed from the GFIP, and to have the flood insurance 
maintenance requirement expunged from the NFIP data-tracking system. 
(If the grantee wishes to refer to or review a Standard Flood Insurance 
Policy, it will be made available by the NFIP upon request.)
    (D) A State may not make a grant to any individual or family who 
received Federal disaster assistance for flood damage occurring after 
September 23, 1994, if that property has already received federal 
flood-disaster assistance in a disaster declared after September 23, 
1994, a flood insurance purchase and maintenance requirement was levied 
as a condition or result of receiving that Federal disaster assistance, 
and flood insurance was, in fact, not maintained in an amount at least 
equal to the maximum IFG grant amount. However, if that property was 
determined to be ineligible for NFIP flood insurance coverage and is in 
a special flood hazard area located in a community participating in the 
NFIP, then the State may continue to make grants to those individuals 
or families that receive additional damage in all subsequent 
Presidentially declared major disasters involving floods.

(Catalog of Federal Domestic Assistance No. 83.100, ``Flood 
Insurance''; No. 83.516, ``Disaster Assistance'')

    Dated: April 25, 1996.
James L. Witt,
Director.
[FR Doc. 96-10779 Filed 4-30-96; 8:45 am]
BILLING CODE 6718-02-P