[Federal Register Volume 65, Number 105 (Wednesday, May 31, 2000)]
[Proposed Rules]
[Pages 34824-34857]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-13298]



[[Page 34823]]

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

Part II





Federal Emergency Management Agency





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



44 CFR Part 61



National Flood Insurance Program (NFIP); Insurance Coverage and Rates; 
Proposed Rule

  Federal Register / Vol. 65, No. 105 / Wednesday, May 31, 2000 / 
Proposed Rules  

[[Page 34824]]


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

FEDERAL EMERGENCY MANAGEMENT AGENCY

44 CFR Part 61

RIN 3067-AD01


National Flood Insurance Program (NFIP); Insurance Coverage and 
Rates

AGENCY: Federal Emergency Management Agency (FEMA).

ACTION: Proposed rule.

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

SUMMARY: We (the Federal Insurance Administration of FEMA) are 
proposing changes to the Standard Flood Insurance Policy (SFIP). The 
proposed changes include: rendering the SFIP in ``plain language'' and 
restructuring its format to resemble the homeowners policy. We are also 
using this opportunity to propose changes in the policy's coverage.

DATES: Please send your comments on the proposal on or before July 31, 
2000.

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: James S. P. Shortley, Federal 
Emergency Management Agency, Federal Insurance Administration, 500 C 
Street SW., Washington, DC 20472, 202-646-3418, (facsimile) 202-646-
4327, (email) [email protected].

SUPPLEMENTARY INFORMATION:

Plain Language Initiative

    On June 1, 1998, President Clinton directed the heads of Federal 
departments and agencies to ensure that their communications with the 
public be in ``plain language.'' That directive established January 1, 
1999, as the date when Federal executive agencies and departments must 
use plain language in all proposed and final rules published in the 
Federal Register. This proposal to revise the three separate forms of 
the Standard Flood Insurance Policy (SFIP)--the Dwelling Form, the 
General Property Form, and the Residential Condominium Building 
Association Policy--complies with that directive.

Implementing Guidance

    In drafting the proposed revisions of the SFIP, we followed the 
guidance on plain language developed by the National Partnership for 
Reinventing Government and provided on July 28, 1998 by Vice President 
Gore to the Federal executive agencies and departments and independent 
agencies.

Customer Review

    On September 15, 1999, in Lancaster, Pennsylvania, we convened a 
focus group of eight flood insurance policyholders--four had suffered 
flood losses and four had never had a flood loss--to help us judge the 
readability of our draft revised flood insurance policy. The group 
compared the readability of the current Dwelling Form of the SFIP with 
a semi-final draft of our proposed revision. These are comments that 
the participants offered about our proposed rewrite: ``Everything I 
looked at was easier.'' It had ``more specific language'' and was 
``worded much better.'' It was in ``layman's terms you can 
understand,'' and it made it ``easier to look up everything.'' Members 
of the focus group found that our proposed policy revision had shorter 
sentences than the current policy, had better organization, and used 
words that were easier to understand. The version of the SFIP we are 
proposing is essentially the version that the focus group reviewed with 
only minor editorial changes.
    The focus group recommended several specific additions that would 
make the proposed rewrite even easier for policyholders to use:
     Include a table of contents,
     Add an index of key words at the end of the policy,
     Insert page headers of major section sections at the top 
of each page,
     Use a variety of graphic devices to highlight headings and 
subheadings, and
     Add a section on frequently asked questions.
    We agree with most of these suggestions, which we will incorporate 
in the printed version of the SFIP that the policyholder receives and 
uses. They will not however appear in this proposed rule or in the Code 
of Federal Regulations.
    The focus group also suggested that we post the SFIP on the 
internet. We are already doing that: the current Standard Flood 
Insurance Policy is one of the ``Quick Links'' found at our web site: 
www.fema.gov/nfip. We will continue that practice and post the revised 
policy too once we publish the final rule, as well as this proposed 
rule, on our web site.
    We do not believe that adding a new section to the policy on 
frequently asked questions, however, is necessary. Our web site 
contains the link, ``Basic Questions and Answers about Flood 
Insurance,'' which gives the public, policyholders, and insurance 
agents ready access to specific information about coverage. We have 
also developed printed public education and public information 
materials that serve that purpose as well.

External Customers

    Our two largest external customer groups that use the SFIP are: (1) 
Roughly four million property owners who buy flood insurance and need 
to understand the terms of their contract for flood insurance, and (2) 
hundreds of thousands of private insurance agents across the country 
who sell and service the SFIP. Any revision to the SFIP must serve the 
needs of both groups: our policyholders for an easy-to-read flood 
insurance policy, and licensed private insurance agents for a flood 
insurance policy that is organized like the more familiar homeowners 
policy. There are also smaller, specialized customer groups that use 
the SFIP such as claims adjusters, insurance underwriters, auditors, 
etc., who will benefit from a policy that is clearer and easier to use.

Compatibility With the Homeowners Policy

    Making the SFIP conform more closely with the homeowners has been a 
long-standing recommendation of our partners in the insurance industry. 
We have received comments in the past that the flood insurance policy 
and coverages available under it should as nearly as possible ``look'' 
like other insurance policies which are commonly bought by the public 
or sold and handled by insurance agents in order to promote the 
greatest utilization of the NFIP.
    To help us make the SFIP conform with the homeowners policy, we 
contracted with Insurance Services Organization (ISO), Inc. ISO 
restructured the proposed rewrite of the SFIP so that it ``looks'' more 
like ISO's version of the homeowners policy, specifically HO-3. ISO 
also provided us an initial draft of that restructuring in plain 
language, which we used as a starting point to meet the 
Administration's standards for plain language communications with the 
public. By making the SFIP ``look'' and ``feel'' like homeowners 
policies, we believe the desk level staff in insurance agencies will be 
more comfortable with the SFIP since it will follow the same sequence 
and use the same format as its industry model. This we believe will 
help serve the goal of having more of the nation's property owners in 
flood-prone areas protected from uninsured flood losses.

Summary of Proposed Coverage Changes

    We are also proposing some changes in coverage for the three policy 
forms.

[[Page 34825]]

The following tables compare the current coverage under the SFIP with 
the proposed changes:

          Table 1.--Land Subsidence, Sewer Back-Up, and Seepage
------------------------------------------------------------------------
    Proposed change in SFIP coverage          Current SFIP coverage
------------------------------------------------------------------------
The proposed changes would not affect    Pay for losses from subsidence
 the coverage for losses from             of land along the shore of a
 ``subsidence of land'' along the shore   lake or other body of water as
 of a lake or other body of water as a    a result of flood-related
 result of flood-related erosion.         erosion.
Not pay for any losses from other land   Pay for losses from other land
 subsidence.                              subsidence under certain
                                          circumstances.
Pay for losses from sewer back-up and    Pay for losses from sewer back-
 seepage if there is a general            up and seepage:
 condition of flooding and the flood     If there is a general condition
 waters touch the structure.              of flooding in the general
Remove the current requirements for       area;
 replacement cost coverage on the        If the building has replacement
 building and for the loss occurring      cost coverage; and
 within 72 hours after the flood has     If the loss occurs within 72
 receded for sewer back-up and seepage    hours after the flood has
 losses.                                  receded.
Do not apply a separate deductible to    Apply a separate deductible to
 claims for sewer back-up and seepage.    claims for these losses.
------------------------------------------------------------------------

    As noted in the preceding table, we pay, in the current policy, for 
losses from sewer backup if flooding is ``in the area.'' We are 
proposing a more verifiable standard to adjust sewer backup losses, 
namely, that flood waters must touch the insured building. This 
proposed change would give us a more objective standard for adjusting 
claims for sewer backup losses.
    Also, as the preceding table shows, there are two references to the 
subsidence of land in the current policy. The first is in our 
definition of ``flood.'' Section 1370 of the National Flood Insurance 
Act of 1968 mandates that the term ``flood'' shall also include ``the 
collapse or subsidence of land along the shore of a lake or other body 
of water as a result of erosion or undermining caused by waves or 
currents of water exceeding anticipated cyclical levels.'' The second 
reference to land subsidence is in the Dwelling Form: currently we pay 
for losses from land subsidence when certain criteria are met such as 
amount of insurance coverage in force on the dwelling, the duration of 
flooding (``no later than 72 hours after the flood has receded''), and 
the proximity of the flood (``in the area''). The proposed changes do 
not include any revision to the statutory reference to ``subsidence of 
land'' in the policy's definition of ``flood.'' The proposed revisions 
would however eliminate coverage for land subsidence in any other 
situation.

         Table 2.--Loss Mitigation Measures and Loss Assessments
------------------------------------------------------------------------
    Proposed change in SFIP coverage          Current SFIP coverage
------------------------------------------------------------------------
Increase the amount we will pay for the  We currently pay up to $750 for
 labor and materials of certain           materials and labor for
 mitigation activities (e.g.,             mitigation efforts such as
 sandbagging) to $1,000.                  sandbagging.
Increase to $1,000 the amount we will    We currently pay up to $500 for
 pay for removal of personal property     the removal of personal
 from a flood-threatened building.        property in anticipation of
                                          the flood.
------------------------------------------------------------------------


    Table 3.--Personal Property, Motorized Vehicles and Special Needs
------------------------------------------------------------------------
    Proposed change in SFIP coverage          Current SFIP coverage
------------------------------------------------------------------------
We will permit a renter to apply 10% of  No coverage under the Dwelling
 contents coverage to cooking stoves,     Form.
 ranges, or refrigerators belonging to
 the renter, as well as to improvements
 by the renter to the building.
We will permit a condominium unit owner  No coverage.
 to apply 10% of the contents coverage
 to losses to interior walls, floors,
 and ceilings under the Dwelling Form.
We will increase to $2500 what we will   We now pay only up to $250 for
 pay for flood losses to collectibles,    eligible flood losses to
 artwork, furs, etc., and add to the      collectibles, artwork, furs,
 list business contents.                  etc.
Pay for losses to self-propelled         We only pay for losses to self-
 vehicles that service the premises and   propelled vehicles that
 assist handicapped persons provided      service the building.
 the vehicles are in a building on the
 premises.
------------------------------------------------------------------------


 Table 4.--Loss Settlement for Manufactured Homes and Interpretation of
                               Common Wall
------------------------------------------------------------------------
    Proposed change in SFIP coverage          Current SFIP coverage
------------------------------------------------------------------------
We propose to change how we settle       Replacement cost interpreted
 losses for double-wide manufactured      for total losses as the value
 homes. We propose to settle losses for   shown in NADA guide for mobile
 these structures with materials on a     homes.
 replacement cost basis but never more
 than 1.5 times the actual cash value.

[[Page 34826]]

 
We propose to treat as part of the       We currently only treat, as
 building additions or extensions         part of the building,
 attached by a rigid exterior wall, a     extensions or additions that
 solid load-bearing interior wall, a      are connected by a common
 stairway, an elevated walkway, or a      wall. Additions and extensions
 roof. At the insured's option, these     connected by a covered
 additions and extensions may be          breezeway, for example, are
 separately insured. If the addition or   treated as separate buildings--
 extension is attached by a common        not as part of the building.
 interior wall, it may not be insured
 as a separate building.
------------------------------------------------------------------------


  Table 5.--Reduction and Restoration (Reformation) of Coverage Limits
------------------------------------------------------------------------
    Proposed change in SFIP coverage          Current SFIP coverage
------------------------------------------------------------------------
We propose to add a policy restoration   No such provision.
 (reformation) provision for situations
 when an application or endorsement is
 received without all the necessary
 information. We propose to require the
 applicant to submit the missing
 information within 60 days. If the
 missing information is not received
 within 60 days, and a loss occurs, the
 maximum amount of insurance available
 is limited to the lesser of: the
 amount originally requested or the
 amount of coverage the original
 premium paid would buy, using the
 correct rating information.
------------------------------------------------------------------------

    We are also proposing to add coverage in basements and in 
enclosures of elevated buildings for water softeners, water filters and 
faucets. In addition, we are proposing to add coverage for damage from 
the pressure of water against the structure with the requirement that 
there be surface flooding in the area as well. On the other hand, we 
are proposing to exclude from coverage scrip and stored value cards. 
The revisions to the policy we are proposing would also exclude any 
losses caused by the policyholder's failure to inspect and maintain the 
property after the flood recedes. We are also proposing to eliminate 
the option for a ``scheduled building policy.'' The NFIP scheduled 
building policy has had little use. The only incentive for the insured 
to select this option, if eligible, is a small saving on the expense 
constant.
    The proposed rule would change the ``Closed Basin Lake'' 
endorsement in all three policy forms. Currently, policyholders must 
have ``NFIP flood insurance continuously in effect from a date 
established by FEMA until'' the policyholder files a claim. The current 
rule is silent however about how much flood insurance needs to be 
continuously in force. This means that a policyholder could technically 
meet this criterion for continuous coverage by buying a minimal amount 
of flood coverage initially, keeping the minimal amount of coverage in 
effect, and then increasing the face amount of the policy when the 
structure is eligible for relocation. The proposed change would require 
that policyholders have the same amount of insurance in effect 
continuously from the date set by FEMA until the policyholder files a 
claim. The proposed change would still allow the policyholder to buy 
recommended increases in coverage at policy renewal to keep pace with 
inflation.
    We are retaining in the proposed rule coverage for detached 
garages, but we are proposing also to eliminate coverage for detached 
carports since they do not have two walls--one of the criteria under 
the definition of building. We are also proposing to eliminate the 
requirement for a minimum premium. The proposed rule would add to the 
definition of ``flood'' the criteria we currently use for an event to 
qualify as a ``flood.'' Those criteria--currently included in the list 
of exclusions--requires that a qualifying flood event under the policy 
must inundate two properties or two acres. The proposed consolidation 
of the criteria into the definition of ``flood'' would be much more 
useful for the policyholder to understand the scope of coverage under 
the policy.
    Of special note is the proposed change on pollutants. The current 
SFIP has a pollution exclusion for Increased Cost of Compliance 
coverage only. We are proposing to add to the SFIP a general pollution 
exclusion, similar to that in the industry's HO-3 policy. The HO-3 
policy's pollution exclusion only applies, however, if the pollution 
damage is caused by a peril other than the sixteen named perils in that 
policy's Personal Property Coverage. Since we cover only one peril, 
flood, our proposed pollution exclusion is for all coverage under the 
SFIP, and hence is broader than the HO-3's pollution exclusion.
    We are also proposing to eliminate the reference to the policy's 
minimum premiums at 44 CFR 61.10 since our proposed revision of the 
policy would eliminate references to a minimum premium as well.
    In addition to these proposed coverage changes, we are proposing to 
change how we define loss in progress to make our intent clearer on 
when coverage begins in connection with loan closings. Also, we are 
proposing a change to the ``Mortgage'' clause, which follows more 
closely the format of HO-3. While the latter proposals are not coverage 
changes per se, we believe, if adopted, they would make the benefits to 
and responsibilities of lenders clearer.

Exclusive Federal Jurisdiction and Applicable Law

    Standard Flood Insurance Policies are sold by a number of private 
Write Your Own (WYO) insurance companies and directly to the public by 
the Federal Insurance Administration. Because the National Flood 
Insurance Program is national in scope and accomplishes a number of 
programmatic missions in addition to making affordable flood insurance 
generally available to the public, the SFIP provides that its terms 
cannot be altered, varied or waived except by the written authority of 
the Federal Insurance Administrator. The Administrator intends that the 
same benefits should be available to insureds wherever the insured 
property is located, or whether the policy is purchased from a WYO 
insurance company or from the Federal Government. Thus, there is a need 
for uniformity in the interpretation of and

[[Page 34827]]

standards applicable to the policies and their administration. 
Therefore, we have clarified the policy language pertaining to 
jurisdiction, venue and applicable law to emphasize that matters 
pertaining to the Standard Flood Insurance Policy, including issues 
relating to and arising out of claims handling, must be heard in 
Federal court and are governed exclusively by Federal law.

National Environmental Policy Act

    This proposed rule falls within the exclusion category 44 CFR 
10.8(d)(2)(ii) which addresses the preparation, revision, and adoption 
of regulations, directives, and other guidance documents related to 
actions that qualify for categorical exclusions. Qualifying for this 
exclusion and because no other extraordinary circumstances have been 
identified, this proposed rule will not require the preparation of 
either an environmental assessment or environmental impact statement as 
defined by the National Environmental Policy Act.

Executive Order 12866, Regulatory Planning and Review

    In the course of preparing this proposed rule we have considered 
the requirements of Executive Order 12866 of September 30, 1993, 58 FR 
51735, and have concluded that this proposed rule is not a significant 
regulatory action within the meaning of section 2(f) of the Executive 
Order. The rule would accomplish three principal changes:
    (1) It would render the SFIP in ``plain English'';
    (2) It restructures the format to resemble the basic homeowners 
policy; and
    (3) It would make several changes in the policy's coverage.

In all other substantive aspects the SFIP is unchanged from its past 
version.
    Of 18 proposed changes that affect coverage, we summarize 11 in 
Tables 1 through 5 of this preamble. We summarize the remaining 7 
changes in the paragraphs that immediately follow the tables. The 18 
proposed changes are evenly divided between changes that add or 
increase coverage and changes that reduce or remove coverage or require 
certain coverage from a date certain to the time a claim is filed for 
``closed basin lake'' claims.
    For each revised policy provision, we made two estimates: the first 
was the percentage of claims that would be impacted by the revised 
provision; the second estimate was the dollar impact that provision 
would have on each affected claim. We multiplied these two amounts to 
develop the dollar impact of each change spread over all program 
claims. We then summed those dollar amounts to arrive at an estimated 
decrease of $83.12 in the average paid claim under these revised policy 
provisions. We estimate that during the first fiscal year after 
enactment the NFIP would have about 4.3 million policyholders and about 
55,900 total flood losses. If so, that would result in an annual 
savings to the Program of approximately $4.6 million resulting from the 
proposed changes to the policy.
    For the reasons stated we have concluded that this rule is not a 
significant regulatory action within the meaning of Executive Order 
12866. The Office of Management and Budget has reviewed the proposed 
rule under the provisions of Executive Order 12866.

Paperwork Reduction Act

    The Office of Management and Budget (OMB) has approved the 
information collection requirements in this proposed rule under the 
provisions of the Paperwork Reduction Act of 1980, as amended. OMB has 
assigned control numbers 3067-0021 and 3067-0022 to the collection of 
information under this proposed rule.
    We estimate that the public reporting and recordkeeping burden for 
the collection of information titled ``Claims for National Flood 
Insurance Program'' to average 4.0 hours per claim. The estimate 
includes the time for reviewing instructions, searching existing data 
sources, gathering and maintaining the data needed, and completing and 
reviewing the information requirements. The information required under 
the terms of the Standard Flood Insurance Policy described in 
appendices A(1), A(2), and A(3) of the proposed rule is collected using 
the following FEMA forms:

----------------------------------------------------------------------------------------------------------------
              FEMA Form No.                           Title                          Burden estimate
----------------------------------------------------------------------------------------------------------------
81-16....................................  Application................
                   and
81-67....................................  Preferred Risk Application.  12 minutes.*
81-17....................................  Cancellation...............  7.5 minutes.
81-18....................................  Endorsement................  9 minutes.
81-25....................................  V-Zone Risk Factor.........  15 minutes.
81-40....................................  Worksheet-contents-personal  2.5 hours.
                                            property.
81-41....................................  Worksheet-building.........  2.5 hours.
81-41A...................................  Worksheet-building (Cont'd)  1.0 hour.
81-42....................................  Proof of loss..............  5-6 minutes.
81-42A...................................  Increased Cost of            2.0 hours.
                                            Compliance Proof of Loss.
81-43....................................  Notice of loss.............  4 minutes.
81-44....................................  Statement as to full cost    6-7 minutes.
                                            to repair.
81-57....................................  National Flood Insurance     4 minutes.
                                            Program Preliminary report.
81-58....................................  National Flood Insurance     4 minutes.
                                            Program Final report.
81-59....................................  National Flood Insurance     5-6 minutes.
                                            Program Narrative report.
81-63....................................  Cause of Loss and            45 minutes to 1 hour.
                                            Subrogation report.
81-98....................................  Increased Cost of            15 minutes.
                                            Compliance Adjuster Report.
N/A......................................  Renewal Premium Notice.....  3 minutes.
N/A......................................  Request for Policy           9 minutes.
                                            Processing and Renewal
                                            Information Letter.
----------------------------------------------------------------------------------------------------------------
* The Preferred Risk Applications and the regular Flood Insurance Applications are now processed and recorded
  together. There is no breakdown available to separate the burden of each application.


[[Page 34828]]

Executive Order 13132, Federalism

    This proposed rule involves no policies that have federalism 
implications under Executive Order 13132, Federalism, dated August 4, 
1999.

Executive Order 12778, Civil Justice Reform

    This proposed rule meets the applicable standards of section 
2(b)(2) of Executive Order 12778.

List of Subjects in 44 CFR Part 61

    Claims, Flood insurance.

    Accordingly, we propose to amend 44 CFR Part 61 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.


Sec. 61.10   [Removed]

    2. We remove Sec. 61.10.
    3. We revise Appendix A(1) to Part 61, Dwelling Form, to read as 
follows:

APPENDIX A(1) TO PART 61

Federal Emergency Management Agency, Federal Insurance 
Administration

Standard Flood Insurance Policy

DWELLING FORM

    Please read the policy carefully. The flood insurance provided is 
subject to limitations, restrictions and exclusions. This policy covers 
only:
    1. A non-condominium residential building designed for principal 
use as a dwelling place of one to four families, or
    2. A single family dwelling unit in a condominium building.

I. Agreement

    The Federal Emergency Management Agency provides flood insurance 
under the terms of the National Flood Insurance Act of 1968 and its 
Amendments, and Title 44 of the Code of Federal Regulations.
    We will pay you for direct physical loss by or from flood to your 
insured property if you:
    1. Have paid the correct premium;
    2. Comply with all terms and conditions of this policy; and
    3. Have furnished accurate information and statements.
    We have the right to review the information you give us at any time 
and to revise your policy based on our review.

II. Definitions

    A. In this policy, ``you'' and ``your'' refer to the insured(s) 
shown on the Declarations Page of this policy. ``We'', ``us'' and 
``our'' refer to the insurer.
    Some definitions are complex because they are provided as they 
appear in the law or regulations, or result from court cases. The 
precise definitions are intended to protect you.
    Flood, as used in this flood insurance policy, means:
    1. A general and temporary condition of partial or complete 
inundation of two or more acres of normally dry land area or of at 
least two or more properties (one of which is your property) from:
    a. The overflow of inland or tidal waters.
    b. The unusual and rapid accumulation or runoff of surface waters 
from any source.
    c. Mudflows.
    2. The collapse or subsidence of land along the shore of a lake or 
similar body of water as a result of erosion or undermining caused by 
waves or currents of water exceeding anticipated cyclical levels which 
result in a flood as defined in Flood, paragraph A.1.a above.
    B. The following are the other key definitions we use in this 
policy:
    1. Act. The National Flood Insurance Act of 1968 and any amendments 
to it.
    2. Actual Cash Value. The cost to replace an insured item of 
property at the time of loss, less the value of its physical 
depreciation.
    3. Application. The statement made and signed by you or your agent 
in applying for this policy. The application gives information we use 
to determine the eligibility of the risk, the kind of policy to be 
issued and the correct premium payment. The application is part of this 
flood insurance policy. For us to issue you a policy, the correct 
premium payment must accompany the application.
    4. Base Flood. A flood having a one percent chance of being equaled 
or exceeded in any given year.
    5. Basement. Any area of the building, including any sunken room or 
sunken portion of a room, having its floor below ground level 
(subgrade) on all sides.
    6. Building.
    a. A structure with two or more outside rigid walls and a fully 
secured roof, that is affixed to a permanent site;
    b. A manufactured home (a ``manufactured home,'' also known as a 
mobile home, is a structure that is built on a permanent chassis and 
affixed to a permanent foundation and that is transported to its site 
in one or more sections); or
    c. A travel trailer without wheels, built on a chassis and affixed 
to a permanent foundation, that is regulated under the community's 
floodplain management and building ordinances or laws.
    Building does not mean a gas or liquid storage tank or a 
recreational vehicle, park trailer or other similar vehicle, except as 
described in 6.c., above.
    7. Cancellation. The ending of the insurance coverage provided by 
this policy before the expiration date.
    8. Condominium. That form of ownership of real property in which 
each unit owner has an undivided interest in common elements.
    9. Condominium Association. The entity made up of the unit owners 
responsible for the maintenance and operation of:
    a. Common elements owned in undivided shares by unit owners;
    b. Other real property in which the unit owners have use rights; 
where membership in the entity is a required condition of unit 
ownership.
    10. Declarations Page. A computer-generated summary of information 
you furnish in the application for insurance. The declarations page 
also describes the term of the policy, limits of coverage, and displays 
the premium and our name. The declarations page is a part of this flood 
insurance policy.
    11. Described Location. The location where the building(s) or 
personal property are found. The described location is shown on the 
declarations page.
    12. Direct Physical Loss By or From Flood. Loss or damage to 
insured property, directly caused by a flood. Direct physical loss must 
be evidenced by physical changes to the property.
    13. Dwelling. A building designed for use as a residence for no 
more than four families or a single-family unit in a building under a 
condominium form of ownership.
    14. Elevated Building. A building that has no basement and that has 
its lowest elevated floor raised above ground level by foundation 
walls, shear walls, posts, piers, pilings, or columns.
    15. Emergency Program. The initial phase of a community's 
participation in the National Flood Insurance Program. During this 
phase, only limited amounts of insurance are available under the Act.
    16. Expense Constant. A flat charge that you must pay on each new 
or renewal policy to defray the expenses of the Federal Government 
related to flood insurance.
    17. Federal Policy Fee. A flat charge that you must pay on each new 
or renewal policy to defray certain administrative expenses incurred in

[[Page 34829]]

carrying out the National Flood Insurance Program. This fee covers 
expenses not covered by the expense constant.
    18. Improvements. Fixtures, alterations, installations, or 
additions comprising a part of the insured dwelling or the apartment 
unit in which you reside.
    19. Mudflow. A river of liquid and flowing mud on the surfaces of 
normally dry land areas, as when earth is carried by a current of 
water. Other earth movements, such as landslide, slope failure, or a 
saturated soil mass moving by liquidity down a slope, are not mudflows.
    20. National Flood Insurance Program (NFIP). The program of flood 
insurance coverage and floodplain management administered under the Act 
and applicable Federal regulations in title 44 of the Code of Federal 
Regulations, Subchapter B.
    21. Policy. The entire written contract between you and us. It 
includes:
    a. This printed form;
    b. The application and declarations page;
    c. Any endorsements that may be issued; and
    d. Any renewal certificate indicating that coverage has been 
instituted for a new policy and new policy term.
    Only one dwelling, specifically described by you in the 
application, may be insured under this policy.
    22. Pollutants. Includes, but is not limited to, any solid, liquid, 
gaseous or thermal irritant or contaminant, including smoke, vapor, 
soot, fumes, acids, alkalis, chemicals and waste. Waste includes, but 
is not limited to, materials to be recycled, reconditioned or 
reclaimed.
    23. Post-FIRM Building. A building for which construction or 
substantial improvement occurred after December 31, 1974, or on or 
after the effective date of an initial Flood Insurance Rate Map (FIRM), 
whichever is later.
    24. Probation Premium. A flat charge you must pay on each new or 
renewal policy issued covering property in a community that has been 
placed on probation under the provisions of 44 CFR 59.24.
    25. Regular Program. The final phase of a community's participation 
in the National Flood Insurance Program. In this phase, a Flood 
Insurance Rate Map is in effect and full limits of coverage are 
available under the Act.
    26. Special Flood Hazard Area. An area having special flood or 
mudflow, and/or flood-related erosion hazards, and shown on a Flood 
Hazard Boundary Map or Flood Insurance Rate Map as Zone A, AO, A1-30, 
AE, A99, AH, AR, AR/A, AR/AE, AR/AH, AR/AO, AR/A1-30, V1-30, VE, or V.
    27. Unit. A single-family unit you own in a condominium building.
    28. Valued Policy. A policy in which the insured and the insurer 
agree on the value of the property insured, that value being payable in 
the event of a total loss. The Standard Flood Insurance Policy is not a 
valued policy.

III. Property Covered

A. Coverage A--Building Property

    We insure against direct physical loss by or from flood to:
    1. The dwelling at the described location, or for a period of 45 
days at another location as set forth in III.C.2.b., Property Removed 
to Safety.
    2. Additions and extensions attached to and in contact with the 
dwelling by means of a rigid exterior wall, a solid load-bearing 
interior wall, a stairway, an elevated walkway, or a roof. At your 
option, additions and extensions connected by any of these methods may 
be separately insured. Additions and extensions attached to and in 
contact with the building by means of a common interior wall that is 
not a solid load-bearing wall are always considered part of the 
dwelling and may not be separately insured.
    3. A detached garage, used as such, at the described location. 
Coverage is limited to no more than 10% of the limit of liability on 
the dwelling. Use of this insurance is at your option but reduces the 
building limit of liability.
    4. Materials and supplies to be used for construction, alteration 
or repair of the dwelling or a detached garage while the materials and 
supplies are stored in a fully enclosed building at the described 
location or on an adjacent property.
    5. A building under construction, alteration or repair at the 
described location.
    a. If the structure is not yet walled or roofed as described in the 
definition for building (See B.6.a.) then coverage applies:
    (1) Only while such work is in progress; or
    (2) If such work is halted, only for a period of up to 90 
continuous days thereafter.
    b. However, coverage does not apply until the building is walled 
and roofed if the lowest floor, including the basement floor, of a non-
elevated building or the lowest elevated floor of an elevated building 
is:
    (1) Below the base flood elevation in Zones AH, AE, A1-30, AR, AR/
AE, AR/AH, AR/A1-30, AR/A, AR/AO; or
    (2) Below the base flood elevation adjusted to include the effect 
of wave action in Zones VE or V1-30.
    The lowest floor levels are based on the bottom of the lowest 
horizontal structural member of the floor in Zones VE or V1-30 and the 
top of the floor in Zones AH, AE, A1-30, AR, AR/AE, AR/AH, AR/A1-30, 
AR/A, AR/AO.
    6. A manufactured home or a travel trailer as described in the 
Definitions Section (See II.B.6.b.and II.B.6.c.).
    If the manufactured home or travel trailer is in a special flood 
hazard area, it must be anchored in the following manner at the time of 
the loss:
    a. By over-the-top or frame ties to ground anchors; or
    b. In accordance with the manufacturer's specifications; or
    c. In compliance with the community's floodplain management 
requirements unless it has been continuously insured by the NFIP at the 
same described location since September 30, 1982.
    7. The following items of property which are covered under Coverage 
A only:
    a. Awnings and canopies;
    b. Blinds;
    c. Built-in dishwashers;
    d. Built-in microwave ovens;
    e. Carpet permanently installed over unfinished flooring;
    f. Central air conditioners;
    g. Elevator equipment;
    h. Fire sprinkler systems;
    i. Freezers, walk-in.
    j. Furnaces and radiators;
    k. Garbage disposal units;
    l. Hot water heaters, including solar water heaters;
    m. Light fixtures;
    n. Outdoor antennas and aerials fastened to buildings;
    o. Permanently installed cupboards, bookcases, cabinets, paneling, 
and wallpaper;
    p. Plumbing fixtures;
    q. Pumps and machinery for operating pumps;
    r. Ranges, cooking stoves, and ovens;
    s. Refrigerators; and
    t. Wall mirrors, permanently installed.
    8. Items of property in a building enclosure lower than the lowest 
elevated floor of an elevated post-FIRM building located in zones A1-
30, AE, AH, AR, AR/A, AR/AE, AR/AH, AR/A1-A30, V1-30, or VE, or in a 
basement, regardless of the zone. Coverage is limited to the following:
    a. Any of the following items, if installed in their functioning 
locations and, if necessary for operation, connected to a power source:
    (1) Central air conditioners;
    (2) Cisterns and the water in them;

[[Page 34830]]

    (3) Drywall for walls and ceilings in a basement and the cost of 
labor to nail it, unfinished and unfloated and not taped, to the 
framing;
    (4) Electrical junction and circuit breaker boxes;
    (5) Electrical outlets and switches;
    (6) Elevators, dumbwaiters and related equipment, unless installed 
below the base flood elevation after September 30, 1987;
    (7) Fuel tanks and the fuel in them;
    (8) Furnaces and hot water heaters;
    (9) Heat pumps;
    (10) Nonflammable insulation in a basement;
    (11) Oil tanks and oil in them;
    (12) Pumps and tanks used in solar energy systems;
    (13) Stairways and staircases attached to the building, not 
separated from it by elevated walkways;
    (14) Sump pumps;
    (15) Water softeners, water filters and faucets installed as an 
integral part of the plumbing system;
    (16) Well water tanks and pumps;
    (17) Required utility connections for any item in this list; and
    (18) Footings, foundations, posts, pilings, piers, or other 
foundation walls and anchorage systems required to support a building.
    b. Clean-up.

B. Coverage B--Personal Property

    1. If you have purchased personal property coverage, we insure 
against direct physical loss by or from flood to personal property 
inside a building at the described location, if:
    a. The property is owned by you or your household family members; 
and
    b. At your option, the property is owned by guests and servants.
    Personal property is also covered for a period of 45 days at 
another location as set forth in III.C.2.b., Property Removed to 
Safety.
    Personal property in a building that is not fully enclosed must be 
secured to prevent flotation out of the building. If the personal 
property does float out during a flood, it will be conclusively 
presumed that it was not reasonably secured. In that case there is no 
coverage for such property.
    2. Coverage for personal property includes the following property, 
subject to paragraph B.1. above, which is covered under Coverage B. 
only:
    a. Air conditioning units--portable or window type;
    b. Carpets, not permanently installed, over unfinished flooring;
    c. Carpets over finished flooring;
    d. Clothes washers and dryers;
    e. ``Cook-out'' grills;
    f. Food freezers, other than walk-in, and food in any freezer; and
    g. Portable microwave ovens and portable dishwashers.
    3. Coverage for items of property in a building enclosure lower 
than the lowest elevated floor of an elevated post-FIRM building 
located in zones A1-30, AE, AH, AR, AR/A, AR/AE, AR/AH, AR/A1-A30, V1-
30, or VE, or in a basement, regardless of the zone, is limited to the 
following items, if installed in their functioning locations and, if 
necessary for operation, connected to a power source:
    a. Air conditioning units--portable or window type;
    b. Clothes washers and dryers; and
    c. Food freezers, other than walk-in, and food in any freezer;
    4. If you are a tenant and have insured personal property under 
Coverage B in this policy, we will cover such property, including your 
cooking stove or range and refrigerator. The policy will also cover 
improvements made or acquired solely at your expense in the dwelling or 
apartment unit in which you reside, but for not more than 10% of the 
limit of liability shown for personal property on the declarations 
page. Use of this insurance is at your option but reduces the personal 
property limit of liability.
    5. If you are the owner of a unit and have insured personal 
property under Coverage B in this policy, we will also cover your 
interior walls, floor and ceiling (not otherwise covered under a flood 
insurance policy purchased by your condominium association) for not 
more than 10% of the limit of liability shown for personal property on 
the declarations page. Use of this insurance is at your option but 
reduces the personal property limit of liability.
    6. Special Limits. We will pay no more than $2,500 for any one loss 
to one or more of the following kinds of personal property:
    a. Artwork, photographs, collectibles, or memorabilia, including 
but not limited to, porcelain or other figures, and sports cards;
    b. Rare books, manuscripts or autographed items;
    c. Jewelry, watches, precious and semi-precious stones, articles of 
gold, silver or platinum;
    d. Furs or any article containing fur which represents its 
principal value; or
    e. Personal property used in any business.
    7. We will pay only for the functional value of antiques.

C. Coverage C--Other Coverages

    1. Debris Removal.
    We will pay reasonable expenses to remove debris directly caused by 
flood, provided the debris is:
    a. Debris from property:
    (1) That you do not own;
    (2) That originates from beyond the boundaries of the described 
location, and
    (3) That is physically on or in the insured building; or
    b. Debris of the insured property anywhere.
    If you or a member of your household perform the removal work, the 
value of your work will be based on the Federal minimum wage.
    This coverage does not increase the Coverage A or Coverage B Limit 
of Liability.
    2. Loss Avoidance Measures
    a. Sandbags, Supplies and Labor
    (1) We will pay up to $1,000 for costs you incur to protect the 
insured building from a flood or imminent danger of flood, including:
    (a) Your reasonable expenses to buy:
    (i) Sandbags, including sand to fill them;
    (ii) Fill for temporary levees;
    (iii) Pumps; and
    (iv) Plastic sheeting and lumber used in connection with these 
items.
    (b) The value of work, at the Federal minimum wage, that you or a 
member of your household perform.
    (2) This coverage for Sandbags, Supplies and Labor only applies if 
damage to insured property by or from flood is imminent and the threat 
of flood damage is apparent enough to lead a person of common prudence 
to anticipate flood damage. One of the following must also occur:
    (a) A general and temporary condition of flooding in the area near 
the described location must occur, even if the flood does not reach the 
building; or
    (b) A legally authorized official must issue an evacuation order or 
other civil order for the community in which the building is located 
calling for measures to preserve life and property from the peril of 
flood.
    This coverage does not increase the Coverage A or Coverage B Limit 
of Liability.
    b. Property Removed to Safety
    (1) We will pay up to $1,000 for the reasonable expenses you incur 
to move insured property to another place other than the described 
location that contains the property in order to protect it from flood 
or the imminent danger of flood.
    Reasonable expenses include the value of work, at the Federal 
minimum wage, that you or a member of your household perform.
    (2) If you move insured property to another location other than the 
described location that contains the property, in order to protect it 
from flood or the imminent danger of flood,

[[Page 34831]]

we will cover such property while at that location for a period of 45 
consecutive days from the date you first begin to move it there. The 
personal property that is moved must be placed in a fully enclosed 
building, or otherwise reasonably protected from the elements.
    Any property removed, including a moveable home described in 
Definition 6. Building, paragraphs b. and c. must be placed above 
ground level or outside of the special flood hazard area.
    This coverage does not increase the Coverage A or Coverage B Limit 
of Liability.
    3. Condominium Loss Assessments.
    a. If this policy insures a unit, we will pay, up to the Coverage A 
limit of liability, your share of loss assessments charged against you 
by the condominium association in accordance with the condominium 
association's articles of association, declarations and your deed.
    The assessment must be made as a result of direct physical loss by 
or from flood during the policy term, to the building's common 
elements.
    b. We will not pay any loss assessment charged against you:
    (1) And the condominium association by any governmental body;
    (2) That results from a deductible under the insurance purchased by 
the condominium association insuring common elements;
    (3) That results from a loss to personal property, including 
contents of a condominium building;
    (4) That results from a loss sustained by the condominium 
association that was not reimbursed under a flood insurance policy 
written in the name of the association under the Act because the 
building was not, at the time of loss, insured for an amount equal to 
the lesser of:
    (a) 80% or more of its full replacement cost; or
    (b) The maximum amount of insurance permitted under the Act;
    (5) To the extent that payment under this policy for a condominium 
building loss, in combination with payments under any other NFIP 
policies for the same building loss, exceeds the maximum amount of 
insurance permitted under the Act for that kind of building; or
    (6) To the extent that payment under this policy for a condominium 
building loss, in combination with any recovery available to you as a 
tenant in common under any NFIP condominium association policies for 
the same building loss, exceeds the amount of insurance permitted under 
the Act for a single-family dwelling.
    Loss assessment coverage does not increase the Coverage A Limit of 
Liability.

D. Coverage D--Increased Cost of Compliance

    A. General.
    This policy pays you to comply with a State or local floodplain 
management law or ordinance affecting repair or reconstruction of a 
structure suffering flood damage. Compliance activities eligible for 
payment are: elevation, floodproofing, relocation, or demolition (or 
any combination of these activities) of your structure. Eligible 
floodproofing activities are limited to:
    1. Non-residential structures.
    2. Residential structures with basements that satisfy FEMA's 
standards published in the Code of Federal Regulations (44 CFR 60.6 (b) 
or (c)).
    B. Limit of Liability.
    $20,000 is the maximum we will pay you for this Coverage D 
(Increased Cost of Compliance), which only applies to policies with 
building coverage (Coverage A). Our payment of claims under Coverage D 
is in addition to the amount of coverage which you selected on the 
application and which appears on the Declarations Page. But the maximum 
you can collect under this policy for both Coverage A (Building 
Property) and Coverage D (Increased Cost of Compliance) cannot exceed 
the maximum permitted under the Act. We do NOT charge a separate 
deductible for a claim under Coverage D.
    C. Eligibility.
    1. A structure covered under Coverage A--Building Property 
sustaining a loss caused by a flood as defined by this policy must:
    a. Be a ``repetitive loss structure.'' A ``repetitive loss 
structure'' is one that meets the following conditions:
    (1) The structure is covered by a contract of flood insurance 
issued under the NFIP.
    (2) The structure has suffered flood damage on 2 occasions during a 
10-year period which ends on the date of the second loss.
    (3) The cost to repair the flood damage, on average, equaled or 
exceeded 25% of the market value of the structure at the time of each 
flood loss.
    (4) In addition to the current claim, the NFIP must have paid the 
previous qualifying claim, and the State or community must have a 
cumulative, substantial damage provision or repetitive loss provision 
in its floodplain management law or ordinance being enforced against 
the structure; or
    b. Be a structure that has had flood damage in which the cost to 
repair equals or exceeds 50% of the market value of the structure at 
the time of the flood. The State or community must have a substantial 
damage provision in its floodplain management law or ordinance being 
enforced against the structure.
    2. This Coverage D pays you to comply with State or local 
floodplain management laws or ordinances that meet the minimum 
standards of the National Flood Insurance Program found in the Code of 
Federal Regulations at 44 CFR 60.3. We pay for compliance activities 
that exceed those standards under these conditions:
    a. Paragraph C. 1. a. above.
    b. Elevation or floodproofing in any risk zone to preliminary or 
advisory base flood elevations provided by FEMA which the State or 
local government has adopted and is enforcing for flood-damaged 
structures in such areas. (This includes compliance activities in B, C, 
X, or D zones which are being changed to zones with base flood 
elevations. This also includes compliance activities in zones where 
base flood elevations are being increased, and a flood-damaged 
structure must comply with the higher advisory base flood elevation.) 
Increased Cost of Compliance coverage does not apply to situations in 
B, C, X, or D zones where the community has derived its own elevations 
and is enforcing elevation or floodproofing requirements for flood-
damaged structures to elevations derived solely by the community.
    c. Elevation or floodproofing above the base flood elevation to 
meet State or local ``freeboard'' requirements, i.e., that a structure 
must be elevated above the base flood elevation.
    3. Under the minimum NFIP criteria at 44 CFR 60.3(b)(4), States and 
communities must require the elevation or floodproofing of structures 
in unnumbered A zones to the base flood elevation where elevation data 
is obtained from a Federal, State, or other source. Such compliance 
activities are also eligible for Coverage D.
    4. This coverage will also pay for the incremental cost, after 
demolition or relocation, of elevating or floodproofing a structure 
during its rebuilding at the same or another site to meet State or 
local floodplain management laws or ordinances, subject to Exclusion 
E.7. below.
    5. This coverage will also pay to bring a flood-damaged structure 
into compliance with state or local floodplain management laws or 
ordinances even if the structure had received a variance before the 
present

[[Page 34832]]

loss from the applicable floodplain management requirements.
    D. Conditions.
    1. When a structure covered under Coverage A--Building Property 
sustains a loss caused by a flood, our payment for the loss under this 
Coverage D will be for the increased cost to elevate, floodproof, 
relocate, or demolish (or any combination of these activities) caused 
by the enforcement of current State or local floodplain management 
ordinances or laws. Our payment for eligible demolition activities will 
be for the cost to demolish and clear the site of the building debris 
or a portion thereof caused by the enforcement of current State or 
local floodplain management ordinances or laws. Eligible activities for 
the cost of clearing the site will include those necessary to 
discontinue utility service to the site and ensure proper abandonment 
of on-site utilities.
    2. When the building is repaired or rebuilt, it must be intended 
for the same occupancy as the present building unless otherwise 
required by current floodplain management ordinances or laws.
    E. Exclusions.
    Under this Coverage D (Increased Cost of Compliance) we will not 
pay for:
    1. The cost to comply with any floodplain management law or 
ordinance in communities participating in the Emergency Program.
    2. The cost associated with enforcement of any ordinance or law 
that requires any insured or others to test for, monitor, clean up, 
remove, contain, treat, detoxify or neutralize, or in any way respond 
to, or assess the effects of pollutants.
    3. The loss in value to any insured building or other structure due 
to the requirements of any ordinance or law.
    4. The loss in residual value of the undamaged portion of a 
building demolished as a consequence of enforcement of any State or 
local floodplain management law or ordinance.
    5. Any Increased Cost of Compliance under this Coverage D:
    a. Until the building is elevated, floodproofed, demolished, or 
relocated on the same or to another premises; and
    b. Unless the building is elevated, floodproofed, demolished, or 
relocated as soon as reasonably possible after the loss, not to exceed 
two years.
    6. Any code upgrade requirements, e.g., plumbing or electrical 
wiring, not specifically related to the State or local floodplain 
management law or ordinance.
    7. Any compliance activities needed to bring additions or 
improvements made after the loss occurred into compliance with State or 
local floodplain management laws or ordinances.
    8. Loss due to any ordinance or law that you were required to 
comply with before the current loss.
    9. Any rebuilding activity to standards that do not meet the NFIP's 
minimum requirements. This includes any situation where the insured has 
received from the State or community a variance in connection with the 
current flood loss to rebuild the property to an elevation below the 
base flood elevation.
    10. Increased Cost of Compliance for a garage or carport.
    11. Any structure insured under an NFIP Group Flood Insurance 
Policy.
    12. Assessments made by a condominium association on individual 
condominium unit owners to pay increased costs of repairing commonly 
owned buildings after a flood in compliance with State or local 
floodplain management ordinances or laws.
    F. Other Provisions.
    1. Increased Cost of Compliance coverage will not be included in 
the calculation to determine whether coverage meets the 80% insurance-
to-value requirement for replacement cost coverage as set forth in 
Section VII. V. Loss Settlement.
    2. All other conditions and provisions of the policy apply.

IV. Property Not Covered

    We do not cover any of the following:
    1. Personal property not inside a building;
    2. A building, and personal property in it, located entirely in, 
on, or over water or seaward of mean high tide if it was constructed or 
substantially improved after September 30, 1982;
    3. Open structures, including a building used as a boathouse or any 
structure or building into which boats are floated, and personal 
property located in, on or over water;
    4. Recreational vehicles other than travel trailers described in 
the Definitions Section (see II.B.6.c.) whether affixed to a permanent 
foundation or on wheels;
    5. Self-propelled vehicles or machines, including their parts and 
equipment. However, we do cover self-propelled vehicles or machines not 
licensed for use on public roads that are:
    a. Used mainly to service the described location or
    b. Designed and used to assist handicapped persons, while the 
vehicles or machines are inside a building at the described location;
    6. Land, land values, lawns, trees, shrubs, plants, growing crops, 
or animals;
    7. Accounts, bills, coins, currency, deeds, evidences of debt, 
medals, money, scrip, stored value cards, postage stamps, securities, 
bullion, manuscripts, or other valuable papers;
    8. Underground structures and equipment, including wells, septic 
tanks and septic systems;
    9. Those portions of walks, walkways, decks, driveways, patios and 
other surfaces, all whether protected by a roof or not, located outside 
the perimeter, exterior walls of the insured building or the building 
in which the insured unit is located;
    10. Containers, including related equipment, such as, but not 
limited to, tanks containing gases or liquids;
    11. Buildings or units and all their contents if more than 49% of 
the actual cash value of the building is below ground, unless the 
lowest level is at or above the base flood elevation and is below 
ground by reason of earth having been used as insulation material in 
conjunction with energy efficient building techniques;
    12. Fences, retaining walls, seawalls, bulkheads, wharves, piers, 
bridges, and docks;
    13. Aircraft or watercraft, or their furnishings and equipment;
    14. Swimming pools, hot tubs, spas, and their equipment such as, 
but not limited to, heaters, filters, pumps, and pipes, wherever 
located;
    15. Property not eligible for flood insurance pursuant to the 
provisions of the Coastal Barrier Resources Act and the Coastal Barrier 
Improvement Act and amendments to these Acts;
    16. Loss to any building or personal property located on land 
leased from the Federal Government, arising from or incident to the 
flooding of the land by the Federal Government, where the lease 
expressly holds the Federal Government harmless under flood insurance 
issued under any Federal Government program.
    17. A detached garage used or held for use for residential (i.e. 
dwelling), business or farming purposes;
    18. Personal property you own in common with other unit owners 
comprising the membership of a condominium association.

V. Exclusions

    A. We only pay for direct physical loss by or from flood, which 
means that we do not pay you for:
    1. Loss of revenue or profits;
    2. Loss of access to the insured property or described location;
    3. Loss of use of the insured property or described location;

[[Page 34833]]

    4. Loss from interruption of business or production;
    5. Any additional living expenses incurred while the insured 
building is being repaired or is unable to be occupied for any reason;
    6. The cost of complying with any ordinance or law:
    a. Requiring or regulating the construction, demolition, 
remodeling, renovation or repair of property, including removal of any 
resulting debris. This exclusion does not apply to any eligible 
activities that we describe in Coverage D--Increased Cost of 
Compliance; or
    b. Requiring you or others to test for, monitor, clean up, remove, 
contain, treat, detoxify, or neutralize, or in any way respond to, or 
assess the effect of, any pollutant; or
    7. Any other economic loss you suffer.
    B. We do not insure a loss directly or indirectly caused by a flood 
that is already in progress at the time and date:
    1. The policy term begins; or
    2. Coverage is added at your request.
    C. We do not insure for loss to property caused directly by earth 
movement even if the earth movement is caused by flood. Some examples 
of earth movement that we do not cover are:
    1. Earthquake;
    2. Landslide;
    3. Land subsidence;
    4. Sinkholes;
    5. Destabilization or movement of land that results from 
accumulation of water in subsurface land area; or
    6. Gradual erosion.
    We do, however, pay for losses from erosion and mudflows that are 
specifically covered under our definition of flood.
    D. We do not insure for direct physical loss caused directly or 
indirectly by any of the following:
    1. The pressure or weight of ice;
    2. Freezing or thawing;
    3. Rain, snow, sleet, hail, or water spray;
    4. Water, moisture, mildew, or mold damage that results primarily 
from any condition:
    a. Substantially confined to the dwelling; or
    b. That is within your control, including but not limited to:
    (1) Design, structural or mechanical defects;
    (2) Failures, stoppages, or breakage of water or sewer lines, 
drains, pumps, fixtures, or equipment; or
    (3) Failure to inspect and maintain the property after a flood 
recedes;
    5. Water or water-borne material that:
    a. Backs up through sewers or drains;
    b. Discharges or overflows from a sump, sump pump or related 
equipment; or
    c. Seeps or leaks on or through the covered property, unless the 
property has been, at the same time, damaged by flood;
    6. The pressure or weight of water unless the damaged property has 
been, at the same time, damaged by flood;
    7. Power, heating or cooling failure unless the failure results 
from direct physical loss by or from flood to power, heating or cooling 
equipment on the described location;
    8. Discharge, dispersal, seepage, migration, release, or escape of 
pollutants;
    9. Theft, fire, explosion, wind, or windstorm;
    10. Anything that you or any member of your household do or 
conspires to do to deliberately cause loss by flood; or
    11. Alteration of the insured property that significantly increases 
the risk of flooding.

VI. Deductibles

    A. When a loss is covered under this policy, we will pay only that 
part of the loss that exceeds your deductible amount, subject to the 
limit of liability that applies. The deductible amount is shown on the 
declarations page.
    However, when a building under construction, alteration, or repair 
does not have at least two rigid exterior walls and a fully secured 
roof at the time of loss, your deductible amount will be two times the 
deductible that would otherwise apply to a completed building.
    B. In each loss from flood, separate deductibles apply to the 
building and personal property insured by this policy.
    C. The deductible does NOT apply to:
    1. III.C.2. Loss Avoidance Measures;
    2. III.C.3. Condominium Loss Assessments Coverage; or
    3. III.D. Increased Cost of Compliance Coverage.

VII. General Conditions

    A. Pair and Set Clause.
    In case of loss to an article that is part of a pair or set, we 
will have the option of paying you:
    1. An amount equal to the cost of replacing the lost, damaged or 
destroyed article, minus its depreciation, or
    2. The amount that represents the fair proportion of the total 
value of the pair or set that the lost, damaged or destroyed article 
bears to the pair or set.
    B. Concealment or Fraud and Policy Voidance.
    1. With respect to all insureds under this policy, this policy:
    a. Is void,
    b. Has no legal force or effect,
    c. Cannot be renewed, and
    d. Cannot be replaced by a new flood policy, if, before or after a 
loss, you or any other insured or your agent have at any time:
    (1) Intentionally concealed or misrepresented any material fact or 
circumstance,
    (2) Engaged in fraudulent conduct, or
    (3) Made false statements relating to this policy or any other NFIP 
insurance.
    2. This policy will be void as of the date wrongful acts of B.1. 
above were committed.
    3. Fines, civil penalties, and imprisonment under applicable 
Federal laws may also apply to the acts of fraud or concealment 
described above.
    4. This policy is also void for reasons other than fraud, 
misrepresentation, or wrongful act. This policy is void from its 
inception and has no legal force under the following conditions:
    a. If the property is located in a community that was not 
participating in the NFIP on the policy's inception date and did not 
join or re-enter the program during the policy term and before the loss 
occurred; or
    b. If the property listed on the application is otherwise not 
eligible for coverage under the NFIP.
    C. Other Insurance.
    1. If a loss covered by this policy is also covered by other 
insurance that includes flood coverage not issued under the Act, we 
will not pay more than the amount of insurance that you are entitled to 
for lost, damaged or destroyed property insured under this policy 
subject to the following:
    a. We will pay only the proportion of the loss that the amount of 
insurance that applies under this policy bears to the total amount of 
insurance covering the loss, unless b. or c. below applies.
    b. If the other policy has a provision stating that it is excess 
insurance, this policy will be primary.
    c. This policy will be primary (but subject to its own deductible) 
up to the deductible in the other flood policy (except another policy 
as described in Paragraph C.1.b. above). When the other deductible 
amount is reached, this policy will participate in the same proportion 
that the amount of insurance under this policy bears to the total 
amount of both policies, for the remainder of the loss.
    2. If there is other insurance in the name of your condominium 
association covering the same property covered by this policy, then 
this policy will be in excess over the other insurance.
    D. Amendments, Waivers, Assignment.

[[Page 34834]]

    This policy cannot be changed nor can any of its provisions be 
waived without the express written consent of the Federal Insurance 
Administrator. No action that we take under the terms of this policy 
constitutes a waiver of any of our rights. You may assign this policy 
in writing when you transfer title of your property to someone else 
except under these conditions:
    1. When this policy covers only personal property; or
    2. When this policy covers a structure during the course of 
construction.
    E. Cancellation of the Policy by You.
    1. You may cancel this policy at any time.
    2. If you cancel this policy, you may be entitled to a full or 
partial refund of premium under our applicable rules and regulations.
    F. Non-Renewal of the Policy by Us.
    Your policy will not be renewed:
    1. If the community where your covered property is located stops 
participating in the NFIP, or
    2. Your building has been declared ineligible under section 1316 of 
the Act.
    G. Reduction and Restoration of Coverage.
    1. If the premium we received from you was not enough to buy the 
kind and amount of coverage you requested, we will provide only the 
amount of coverage that can be purchased for the premium payment we 
received.
    2. The amount of coverage resulting from the reduction described in 
1. above can be restored to the amount you requested as follows:
    a. Discovery of Insufficient Premium or Incomplete Rating 
Information Before a Loss.
    (1) If we discover before you have a flood loss that your premium 
payment was not enough to buy the requested amount of coverage, we will 
send you and any mortgagee or trustee known to us a bill for the 
required additional premium for the current policy term (or that 
portion of the current policy term following any endorsement changing 
the amount of coverage). If you or the mortgagee or trustee pay the 
additional premium within 30 days from the date of our bill, we will 
restore the amount of coverage to the originally requested amount 
effective to the beginning of the current policy term (or subsequent 
date of any endorsement changing the amount of coverage).
    (2) If we determine before you have a flood loss that the rating 
information we have is incomplete and prevents us from calculating the 
additional premium, we will ask you to send the required information. 
You must submit the information within 60 days of our request. Once we 
determine the amount of additional premium for the current policy term, 
we will follow the procedure in (1) above.
    (3) If we do not receive the additional premium (or additional 
information) by the date it is due, the amount of coverage can only be 
restored by endorsement with any appropriate waiting period.
    b. Discovery of Insufficient Premium or Incomplete Rating 
Information After a Loss.
    (1) If we discover after you have a flood loss that your premium 
payment was not enough to buy the requested amount of coverage, we will 
send you and any mortgagee or trustee known to us a bill for the 
required additional premium for the current and the prior policy terms. 
If you or the mortgagee or trustee pay the additional premium within 30 
days of the date of our bill, we will restore the amount of coverage to 
the originally requested amount effective to the beginning of the prior 
policy term.
    (2) If we discover after you have a flood loss that the rating 
information we have is incomplete and prevents us from calculating the 
additional premium, we will ask you to send the required information. 
You must submit the information before your claim can be paid. Once we 
determine the amount of additional premium for the current and prior 
policy terms, we will follow the procedure in (1) above.
    (3) If we do not receive the additional premium by the date it is 
due, your flood insurance claim will be settled based on the reduced 
amount of coverage. The amount of coverage can only be restored by 
endorsement subject to any appropriate waiting period.
    3. However, if we find that you or your agent intentionally did not 
tell us, or falsified, any important fact or circumstance or did 
anything fraudulent relating to this insurance, the provisions of 
Condition B. above apply.
    H. Policy Renewal.
    1. This policy will expire at 12:01 a.m. on the last day of the 
policy term.
    2. We must receive the payment of the appropriate renewal premium 
within 30 days of the expiration date.
    3. If we find, however, that your renewal notice was not placed 
into the U.S. Postal Service, or if it was mailed properly, it was 
prepared in a way, e.g., with an incorrect, incomplete, or illegible 
address, to delay its delivery to you before the due date for the 
renewal premium, then we will follow these procedures:
    a. If you or your agent notified us, not later than one year after 
the date on which the payment of the renewal premium was due, of non-
receipt of a renewal notice before the due date for the renewal 
premium, and we determine that the circumstances in the preceding 
paragraph apply, 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.
    b. If we do not receive the premium requested in the second bill by 
the revised due date, then we will not renew the policy. In that case, 
the policy will remain as an expired policy as of the expiration date 
shown on the declarations page.
    4. In connection with the renewal of this policy, we may ask you 
during the policy term to re-certify, on a Recertification 
Questionnaire that we will provide to you, the rating information used 
to rate your most recent application for or renewal of insurance.
    I. Conditions Suspending or Restricting Insurance.
    We are not liable for loss that occurs while there is a hazard that 
is increased by any means within your control or knowledge.
    J. Requirements in Case of Loss.
    In case of a flood loss to insured property, you must:
    1. Give prompt written notice to us;
    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;
    3. Prepare an inventory of damaged property showing the quantity, 
description, actual cash value, and amount of loss. Attach all bills, 
receipts and related documents;
    4. Within 60 days after the loss, send us a proof of loss, which is 
your statement of the amount you are claiming under the policy signed 
and sworn to by you, and which furnishes us with the following 
information:
    a. The date and time of loss;
    b. A brief explanation of how the loss happened;
    c. Your interest (for example, ``owner'') and the interest, if any, 
of others in the damaged property;
    d. Details of any other insurance that may cover the loss;
    e. Changes in title or occupancy of the covered property during the 
term of the policy;
    f. Specifications of damaged buildings and detailed repair 
estimates;
    g. Names of mortgagees or anyone else having a lien, charge or 
claim against the insured property;
    h. Details about who occupied any insured building at the time of 
loss and for what purpose; and
    i. The inventory of damaged personal property described in 3. 
above.
    5. In completing the proof of loss, you must use your own judgment

[[Page 34835]]

concerning the amount of loss and justify that amount.
    6. You must cooperate with our adjuster or representative in the 
investigation of the claim.
    7. 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 matter of courtesy only and you must 
still send us a proof of loss within sixty days after the loss even if 
the adjuster does not furnish the form or help you complete it.
    8. We have not authorized the adjuster to approve or disapprove 
claims or to tell you whether we will approve your claim.
    9. At our option, we may accept an adjuster's report of the loss 
instead of your proof of loss. The adjuster's report will include 
information about your loss and the damages you sustained. You must 
sign the adjuster's report. At our option, we may require you to swear 
to the report.
    K. Our Options After a Loss.
    Options we may, in our sole discretion, exercise after loss include 
the following:
    1. At such reasonable times and places that we may designate, you 
must:
    a. Show us or our representative the damaged property;
    b. Submit to examination under oath, while not in the presence of 
another insured, and sign the same; and
    c. Permit us to examine and make extracts and copies of:
    (1) Any policies of property insurance insuring you against loss 
and the deed establishing your ownership of the insured real property;
    (2) Condominium association documents including the Declarations of 
the condominium, its Articles of Association or Incorporation, Bylaws, 
rules and regulations, and other relevant documents if you are a unit 
owner in a condominium building; and
    (3) All books of accounts, bills, invoices and other vouchers, or 
certified copies pertaining to the damaged property if the originals 
are lost.
    2. We may request, in writing, that you furnish us with a complete 
inventory of the lost, damaged or destroyed property, including:
    a. Quantities and costs;
    b. Actual cash values or replacement cost (whichever is 
appropriate);
    c. Amounts of loss claimed; and
    d. Any written plans and specifications for repair of the damaged 
property that you can make reasonably available to us.
    3. If we give you written notice within 30 days after we receive 
your signed, sworn proof of loss, we may:
    a. Repair, rebuild or replace any part of the lost, damaged or 
destroyed property with material or property of like kind and quality 
or its functional equivalent; and
    b. Take all or any part of the damaged property at the value that 
we agree upon or its appraised value.
    L. No Benefit To Bailee.
    No person or organization, other than you, having custody of 
covered property will benefit from this insurance.
    M. Loss Payment.
    1. We will adjust all losses with you. We will pay you unless some 
other person or entity is named in the policy or is legally entitled to 
receive payment. Loss will be payable 60 days after we receive 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:
    a. We reach an agreement with you;
    b. There is an entry of a final judgment; or
    c. There is a filing of an appraisal award with us, as provided in 
VII. P.
    2. If we reject your proof of loss in whole or in part you may:
    a. Accept our denial of your claim;
    b. Exercise your rights under this policy; or
    c. File an amended proof of loss as long as it is filed within 60 
days of the date of the loss or within any extension of time allowed by 
the Administrator.
    N. Abandonment.
    You may not abandon to us damaged or undamaged property insured 
under this policy.
    O. Salvage.
    We may permit you to keep damaged property insured under this 
policy 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.
    P. Appraisal.
    If you and we fail to agree on the actual cash value or, if 
applicable, replacement cost of your damaged property to settle upon 
the amount of loss, then either may demand an appraisal of the loss. In 
this event, you and we will each choose a competent and impartial 
appraiser within 20 days after receiving a written request from the 
other. The two appraisers will choose an umpire. If they cannot agree 
upon an umpire within 15 days, you or we may request that the choice be 
made by a judge of a court of record in the state where the covered 
property is located. The appraisers will separately state the actual 
cash value, the replacement cost and the amount of loss to each item. 
If the appraisers submit a written report of an agreement to us, the 
amount agreed upon will be the amount of loss. If they fail to agree, 
they will submit their differences to the umpire. A decision agreed to 
by any two will set the amount of actual cash value and loss, or if it 
applies, the replacement cost and loss.
    Each party will:
    1. Pay its own appraiser; and
    2. Bear the other expenses of the appraisal and umpire equally.
    Q. Mortgage Clause.
    The word ``mortgagee'' includes trustee.
    Any loss payable under Coverage A--Building Property will be paid 
to any mortgagee of whom we have actual notice and you, as interests 
appear. If more than one mortgagee is named, the order of payment will 
be the same as the order of precedence of the mortgages.
    If we deny your claim, that denial will not apply to a valid claim 
of the mortgagee, if the mortgagee:
    1. Notifies us of any change in the ownership or occupancy, or 
substantial change in risk of which the mortgagee is aware;
    2. Pays any premium due under this policy on demand if you have 
neglected to pay the premium; and
    3. Submits a signed, sworn proof of loss within 60 days after 
receiving notice from us of your failure to do so.
    All of the terms of this policy will then apply directly to the 
mortgagee.
    If we decide to cancel or not renew this policy, it will continue 
in effect for the benefit of the mortgagee only for 30 days after we 
notify the mortgagee of the cancellation or non-renewal.
    If we pay the mortgagee for any loss and deny payment to you, we 
are subrogated to all the rights of the mortgagee granted under the 
mortgage on the property. Subrogation will not impair the right of the 
mortgagee to recover the full amount of the mortgagee's claim.
    R. Suit Against Us.
    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 one year of the date of the written 
denial of all or part of the claim, and you must file the suit in the 
United States District Court of the district in which the covered 
property was located at the time of loss. This requirement applies to 
any claim that you may have under this policy and to any dispute that 
you may have arising out of the handling of any claim under the policy.
    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

[[Page 34836]]

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 must pay us back first before you may keep any of that money.
    T. Continuous Lake Flooding.
    1. Where an insured building has been flooded by rising lake waters 
continuously for 90 days or more and it appears reasonably certain that 
a continuation of this flooding will result in a covered loss to an 
insured building equal to or greater than the building policy limits 
plus the deductible 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:
    a. To make no further claim under this policy;
    b. Not to seek renewal of this policy;
    c. Not to apply for any flood insurance under the Act for property 
at the described location, and;
    d. Not to seek a premium refund for current or prior terms.
    If the policy term ends before an insured building has been flooded 
continuously for 90 days, the provisions of this paragraph 1. will 
apply as long as the insured building suffers a covered loss before the 
policy term ends.
    2. If your insured building is subject to continuous lake flooding 
from a closed basin lake, you may elect to file a claim under either 
paragraph 1. above or this paragraph 2. (A ``closed basin lake'' is a 
natural lake from which water leaves primarily through evaporation and 
whose surface area now exceeds or has exceeded one square mile at any 
time in the recorded past. Most of the nation's closed basin lakes are 
in the western half of the United States where annual evaporation 
exceeds annual precipitation and where lake levels and surface areas 
are subject to considerable fluctuation due to wide variations in the 
climate. These lakes may overtop their basins on rare occasions.) Under 
this paragraph we will pay your claim as if the building is a total 
loss even though it has not been continuously inundated for 90 days, 
subject to the following conditions:
    a. Lake flood waters must damage or imminently threaten to damage 
your building.
    b. Before approval of your claim, you must:
    (1) Agree to a claim payment that reflects your buying back the 
salvage on a negotiated basis; and
    (2) Grant the conservation easement contained in the Federal 
Emergency Management Agency's (FEMA) ``Policy Guidance for Closed Basin 
Lakes,'' to be recorded in the office of the local recorder of deeds. 
FEMA, in consultation with the community in which the property is 
located, will identify on a map an area or areas of special 
consideration (ASC) in which there is a potential for flood damage from 
continuous lake flooding. FEMA will give the community the agreed-upon 
map showing the ASC. This easement will only apply to that portion of 
the property in the ASC. It will allow certain agricultural and 
recreational uses of the land. The only structures that it will allow 
on any portion of the property within the ASC are certain, simple 
agricultural and recreational structures. If any of these allowable 
structures are insurable buildings under the NFIP and are insured under 
the NFIP, they will not be eligible for the benefits of this paragraph 
2. If a U.S. Army Corps of Engineers-certified flood control project or 
otherwise certified flood control project later protects the property, 
FEMA will, upon request, amend the ASC to remove areas protected by 
those projects. The restrictions of the easement will then no longer 
apply to any portion of the property removed from the ASC; and
    (3) Comply with paragraphs T.1.a. through T.1.d. above.
    c. Within 90 days of approval of your claim, you must move your 
building to a new location outside the ASC. FEMA will give you an 
additional 30 days to move if you show there is sufficient reason to 
extend the time.
    d. Before the final payment of your claim, you must acquire an 
elevation certificate and a floodplain development permit from the 
local floodplain administrator for the new location of your building.
    e. Before the approval of your claim, the community having 
jurisdiction over your building must:
    (1) Adopt a permanent land use ordinance, or a temporary moratorium 
for a period not to exceed 6 months to be followed immediately by a 
permanent land use ordinance, that is consistent with the provisions 
specified in the easement required in paragraph T. 2.b. above.
    (2) Agree to declare and report any violations of this ordinance to 
FEMA so that under Sec. 1316 of the National Flood Insurance Act of 
1968, as amended, flood insurance to the building can be denied; and
    (3) Agree to maintain as deed-restricted, for purposes compatible 
with open space or agricultural or recreational use only, any affected 
property the community acquires an interest in. These deed restrictions 
must be consistent with the provisions of paragraph T.2.b. above except 
that even if a certified project protects the property, the land use 
restrictions continue to apply if the property was acquired under the 
Hazard Mitigation Grant Program or the Flood Mitigation Assistance 
Program. If a non-profit land trust organization receives the property 
as a donation, that organization must maintain the property as deed-
restricted, consistent with the provisions of paragraph T.2.b. above.
    f. Before the approval of your claim, the affected State must take 
all action set forth in FEMA's ``Policy Guidance for Closed Basin 
Lakes.''
    g. You must have NFIP flood insurance coverage continuously in 
effect from a date established by FEMA until you file a claim under 
paragraph T.2. If a subsequent owner buys NFIP insurance that goes into 
effect within 60 days of the date of transfer of title, any gap in 
coverage during that 60-day period will not be a violation of this 
continuous coverage requirement. For the purpose of honoring a claim 
under this paragraph T.2, we will not consider to be in effect any 
increased coverage that became effective after the date established by 
FEMA. The exception to this is any increased coverage in the amount 
suggested by your insurer as an inflation adjustment.
    h. This paragraph T.2. will be in effect for a community when the 
FEMA Regional Director for the affected region provides to the 
community, in writing, the following:
    (1) Confirmation that the community and the State are in compliance 
with the conditions in e. and f. above, and
    (2) The date by which you must have flood insurance in effect.
    U. Duplicate Policies Not Allowed.
    1. We will not insure your property under more than one NFIP 
policy.
    If we find that the duplication was not knowingly created, we will 
give you written notice. The notice will advise you that you may choose 
one of several options under the following procedures:
    a. If you choose to keep in effect the policy with the earlier 
effective date, you may also choose to add the coverage limits of the 
later policy to the limits of the earlier policy. The change will 
become effective as of the effective date of the later policy.
    b. If you choose to keep in effect the policy with the later 
effective date, you may also choose to add the coverage

[[Page 34837]]

limits of the earlier policy to the limits of the later policy. The 
change will be effective 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 permissible limits of coverage 
under the Act or your insurable interest, whichever is less. We will 
make a refund to you, according to applicable NFIP rules, of the 
premium for the policy not being kept in effect.
    2. The insured's option under Condition U. Duplicate Policies Not 
Allowed to elect which NFIP policy to keep in effect does not apply 
when duplicates have been knowingly created. Losses occurring under 
such circumstances will be adjusted according to the terms and 
conditions of the earlier policy. The policy with the later effective 
date must be canceled.
    V. Loss Settlement.
    1. Introduction.
    This policy provides three methods of settling losses, Replacement 
Cost, Special Loss Settlement and Actual Cash Value. Each method is 
used for a different type of property as explained in paragraphs V.1. 
a., b., and c. below.
    a. Replacement Cost Loss Settlement described in 2. below applies 
to a single-family dwelling provided:
    (1) It is your principal residence, which means, at the time of 
loss, you or your spouse lived there for 80% of:
    (a) The 365 days immediately preceding the loss; or
    (b) The period of your ownership, if you owned the dwelling for 
less than 365 days, and
    (2) At the time of loss, the amount of insurance in this policy 
that applies to the dwelling is 80% or more of its full replacement 
cost immediately before the loss, or is the maximum amount of insurance 
available under the NFIP.
    b. Special Loss Settlement described in 3. below applies to a 
single-family dwelling that is a travel trailer or a manufactured or 
mobile home.
    c. Actual Cash Value loss settlement applies to a single-family 
dwelling not subject to replacement cost or special loss settlement, 
and to the property listed in paragraph V.4. below.
    2. Replacement Cost Loss Settlement.
    The following loss settlement conditions apply to a single-family 
dwelling described in paragraph V.1.a. above:
    a. We will pay to repair or replace the damaged dwelling after 
application of the deductible and without deduction for depreciation, 
but not more than the least of the following amounts:
    (1) The building limit of liability shown in the declarations;
    (2) The replacement cost of that part of the dwelling damaged, with 
materials of like kind and quality and for like use; or
    (3) The necessary amount actually spent to repair or replace the 
damaged part of the dwelling for like use.
    b. If the dwelling is rebuilt at a new location, the cost described 
above is limited to the cost that would have been incurred if the 
dwelling had been rebuilt at its former location.
    c. When the full cost of repair or replacement is more than $1000 
or more than 5% of the whole amount of insurance that applies to the 
dwelling, we will not be liable for any loss under paragraph V.2.a. 
above or paragraph V.4.a.(2) below unless and until actual repair or 
replacement is completed.
    d. You may disregard the replacement cost conditions above and make 
claim under this policy for loss to dwellings on an actual cash value 
basis. You may then make claim for any additional liability according 
to paragraphs 2.a., b., and c. above, provided you notify us of your 
intent to do so within 180 days after the date of loss.
    e. If the community in which your dwelling is located has been 
converted from the Emergency Program to the Regular Program during the 
current policy term then we will consider the maximum amount of 
available NFIP insurance to be the amount that was available at the 
beginning of the current policy term.
    3. Special Loss Settlement.
    The following loss settlement conditions apply to a dwelling that 
is a manufactured or mobile home or a travel trailer, as defined in 
Section II Definitions, B., paragraphs 6.b. and c.:
    a. If such a dwelling is at least 16 feet wide when fully assembled 
and has at least 600 square feet within its perimeter walls when fully 
assembled, and is totally destroyed or damaged to such an extent that, 
in our judgment, it is not economically feasible to repair, at least to 
its pre-damaged condition, we will, at our discretion:
    (1) Pay the least of the following amounts:
    (a) The lesser of the replacement cost of the dwelling or 1.5 times 
the actual cash value.
    (b) The Building Limit of liability shown on your Declarations 
Page.
    b. If such a dwelling is partially damaged and, in our judgment, it 
is economically feasible to repair it to its pre-damaged condition, we 
will settle the loss according to the Replacement Cost conditions in 
paragraph V.2. above.
    4. Actual Cash Value.
    The types of property noted below are subject to actual cash value 
(or in the case of V.a.(2), proportional) loss settlement. ``Actual 
cash value'' is defined in Section II--Definitions.
    a. A dwelling, at the time of loss, when the amount of insurance on 
the dwelling is both less than 80% of its full replacement cost 
immediately before the loss and less than the maximum amount of 
insurance available under the NFIP. In that case, we will pay the 
greater of the following amounts, but not more than the amount of 
insurance that applies to that dwelling:
    (1) The actual cash value of the damaged part of the dwelling; or
    (2) A proportion of the cost to repair or replace the damaged part 
of the dwelling, without deduction for physical depreciation and after 
application of the deductible.
    This proportion is determined as follows: If 80% of the full 
replacement cost of the dwelling is less than the maximum amount of 
insurance available under the NFIP, then the proportion is determined 
by dividing the actual amount of insurance on the dwelling by the 
amount of insurance that represents 80% of its full replacement cost. 
But if 80% of the full replacement cost of the dwelling is greater than 
the maximum amount of insurance available under the NFIP, then the 
proportion is determined by dividing the actual amount of insurance on 
the dwelling by the maximum amount of insurance available under the 
NFIP.
    b. A two, three or four family dwelling.
    c. A unit that is not used exclusively for single-family dwelling 
purposes.
    d. Detached garages.
    e. Personal property.
    f. Appliances, carpets and carpet pads.
    g. Outdoor awnings, outdoor antennas or aerials of any type, and 
other outdoor equipment.
    h. Any property covered under this policy that is abandoned after a 
loss and remains as debris anywhere on the described location.
    i. A dwelling that is not the principal residence of the insured.
    5. Amount of Insurance Required.
    To determine the amount of insurance required for a dwelling 
immediately before the loss, do not include the value of:
    a. Footings, foundations, piers, or any other structures or devices 
that are below the undersurface of the lowest basement floor and 
support all or part of the dwelling;
    b. Those supports listed in a. above, that are below the surface of 
the ground inside the foundation walls if there is no basement; and

[[Page 34838]]

    c. Excavations and underground flues, pipes, wiring, and drains.
    Note: The Coverage D limit of liability is not included in the 
determination of the amount of insurance required.

VIII. Liberalization Clause

    If we make a change that broadens your coverage under this edition 
of our policy, but does not require any additional premium, then that 
change will automatically apply to your insurance as of the date we 
implement the change, provided that this implementation date falls 
within 60 days before or during the policy term stated in the 
Declarations Page.

IX. What Law Governs

    This policy and all disputes arising from the handling of any claim 
under the policy are governed exclusively by the flood insurance 
regulations issued by FEMA, the National Flood Insurance Act of 1968, 
as amended (42 U.S.C. 4001, et seq.), and Federal common law.
    In Witness Whereof, we have signed this policy below and hereby 
enter into this Insurance Agreement.


Jo Ann Howard,

Administrator,

Federal Insurance Administration.

    4. We revise Appendix A(2) to Part 61, General Property Form, to 
read as follows:

APPENDIX A(2) TO PART 61

Federal Emergency Management Agency, Federal Insurance 
Administration

Standard Flood Insurance Policy

GENERAL PROPERTY POLICY

    Please read the policy carefully. The flood insurance coverage 
provided is subject to limitations, restrictions and exclusions.
    This policy provides no coverage:
    1. In a regular program community, for a residential condominium 
building, as defined in this policy; and
    2. Except for personal property coverage, for a unit in a 
condominium building.

I. Agreement

    The Federal Emergency Management Agency provides flood insurance 
under the terms of the National Flood Insurance Act of 1968 and its 
Amendments, and Title 44 of the Code of Federal Regulations.
    We will pay you for direct physical loss by or from flood to your 
insured property if you:
    1. Have paid the correct premium;
    2. Comply with all terms and conditions of this policy; and
    3. Have furnished accurate information and statements.
    We have the right to review the information you give us at any time 
and to revise your policy based on our review.

II. Definitions

    A. In this policy, ``you'' and ``your'' refer to the insured(s) 
shown on the Declarations Page of this policy. ``We'', ``us'' and 
``our'' refer to the insurer.
    Some definitions are complex because they are provided as they 
appear in the law or regulations, or result from court cases. The 
precise definitions are intended to protect you.
    Flood, as used in this flood insurance policy, means:
    1. A general and temporary condition of partial or complete 
inundation of two or more acres of normally dry land area or of at 
least two or more properties (one of which is your property) from:
    a. The overflow of inland or tidal waters.
    b. The unusual and rapid accumulation or runoff of surface waters 
from any source.
    c. Mudflows.
    2. The collapse or subsidence of land along the shore of a lake or 
similar body of water as a result of erosion or undermining caused by 
waves or currents of water exceeding anticipated cyclical levels which 
result in a flood as defined in paragraph A.1.a. above.
    B. The following are the other key definitions we use in this 
policy:
    1. Act. The National Flood Insurance Act of 1968 and any amendments 
to it.
    2. Actual Cash Value. The cost to replace an insured item of 
property at the time of loss, less the value of its physical 
depreciation.
    3. Application. The statement made and signed by you or your agent 
in applying for this policy. The application gives information we use 
to determine the eligibility of the risk, the kind of policy to be 
issued and the correct premium payment. The application is part of this 
flood insurance policy. For us to issue you a policy, the correct 
premium payment must accompany the application.
    4. Base Flood. A flood having a one percent chance of being equaled 
or exceeded in any given year.
    5. Basement. Any area of the building, including any sunken room or 
sunken portion of a room, having its floor below ground level 
(subgrade) on all sides.
    6. Building.
    a. A structure with two or more outside rigid walls and a fully 
secured roof, that is affixed to a permanent site;
    b. A manufactured home (a ``manufactured home,'' also known as a 
mobile home, is a structure that is built on a permanent chassis and 
affixed to a permanent foundation and that is transported to its site 
in one or more sections); or
    c. A travel trailer without wheels, built on a chassis and affixed 
to a permanent foundation, that is regulated under the community's 
floodplain management and building ordinances or laws.
    d. Building does not mean a gas or liquid storage tank or a 
recreational vehicle, park trailer or other similar vehicle, except as 
described in paragraph 6. c., above.
    7. Cancellation. The ending of the insurance coverage provided by 
this policy before the expiration date.
    8. Condominium. That form of ownership of real property in which 
each unit owner has an undivided interest in common elements.
    9. Condominium Association. The entity, formed by the unit owners, 
responsible for the maintenance and operation of:
    a. Common elements owned in undivided shares by unit owners; and
    b. Other real property in which the unit owners have use rights 
when membership in the entity is a required condition of unit 
ownership.
    10. Declarations Page. A computer-generated summary of information 
you furnish in the application for insurance. The declarations page 
also describes the term of the policy, limits of coverage, and displays 
the premium and our name. The declarations page is a part of this flood 
insurance policy.
    11. Described Location. The location where the building or personal 
property is found. The described location is shown on the declarations 
page.
    12. Direct Physical Loss By or From Flood. Loss or damage to 
insured property, directly caused by a flood. Direct physical loss must 
be evidenced by physical changes to the property.
    13. Elevated Building. A building that has no basement and that has 
its lowest elevated floor raised above ground level by foundation 
walls, shear walls, posts, piers, pilings, or columns.
    14. Emergency Program. The initial phase of a community's 
participation in the National Flood Insurance Program. During this 
phase, only limited amounts of insurance are available under the Act.
    15. Expense Constant. A flat charge that you must pay on each new 
or renewal policy to defray the expenses of the Federal Government 
related to flood insurance.
    16. Federal Policy Fee. A flat charge that you must pay on each new 
or renewal policy to defray certain administrative expenses incurred in

[[Page 34839]]

carrying out the National Flood Insurance Program. This fee covers 
expenses not covered by the expense constant.
    17. Improvements. Fixtures, alterations, installations, or 
additions comprising a part of the insured building.
    18. Mudflow. A river of liquid and flowing mud on the surfaces of 
normally dry land areas, as when earth is carried by a current of 
water. Other earth movements, such as landslide, slope failure, or a 
saturated soil mass moving by liquidity down a slope, are not mudflows.
    19. National Flood Insurance Program (NFIP). The program of flood 
insurance coverage and floodplain management administered under the Act 
and applicable Federal regulations in title 44 of the Code of Federal 
Regulations, subchapter B.
    20. Policy. The entire written contract between you and us. It 
includes:
    a. This printed form;
    b. The application and declarations page;
    c. Any endorsements that may be issued; and,
    d. Any renewal certificate indicating that coverage has been 
instituted for a new policy and new policy term.
    Only one building, specifically described by you in the 
application, may be insured under this policy.
    21. Pollutants. Includes, but is not limited to, any solid, liquid, 
gaseous or thermal irritant or contaminant, including smoke, vapor, 
soot, fumes, acids, alkalis, chemicals and waste. Waste includes, but 
is not limited to, materials to be recycled, reconditioned or 
reclaimed.
    22. Post-FIRM Building. A building for which construction or 
substantial improvement occurred after December 31, 1974, or on or 
after the effective date of an initial Flood Insurance Rate Map (FIRM), 
whichever is later.
    23. Probation Premium. A flat charge you must pay on each new or 
renewal policy issued covering property in a community that has been 
placed on probation under the provisions of 44 CFR 59.24.
    24. Regular Program. The final phase of a community's participation 
in the National Flood Insurance Program. In this phase, a Flood 
Insurance Rate Map is in effect and full limits of coverage are 
available under the Act.
    25. Residential Condominium Building. A building, owned and 
administered as a condominium, containing one or more family units and 
in which at least 75% of the floor area is residential.
    26. Special Flood Hazard Area. An area having special flood or 
mudflow, and/or flood-related erosion hazards, and shown on a Flood 
Hazard Boundary Map or Flood Insurance Rate Map as Zone A, AO, A1-30, 
AE, A99, AH, AR, AR/A, AR/AE, AR/AH, AR/AO, AR/A1-30, V1-30, VE, V.
    27. Stock means merchandise held in storage or for sale, raw 
materials and in-process or finished goods, including supplies used in 
their packing or shipping. Stock does not include any property not 
covered under Section IV. Property Not Covered, except the following:
    a. Parts and equipment for self-propelled vehicles;
    b. Furnishings and equipment for watercraft;
    c. Spas and hot-tubs, including their equipment; and
    d. Swimming pool equipment.
    28. Unit. A unit in a condominium building.
    29. Valued Policy. A policy in which the insured and the insurer 
agree on the value of the property insured, that value being payable in 
the event of a total loss. The Standard Flood Insurance Policy is not a 
valued policy.

III. Property Covered

A. Coverage A--Building Property

    We insure against direct physical loss by or from flood to:
    1. A building described in the declarations page at the described 
location. If the building is a condominium building and the named 
insured is the condominium association, Coverage A includes all units 
within the building and the improvements within the units, provided the 
units are owned in common by all unit owners.
    2. We also insure building property for a period of 45 days at 
another location, as set forth in III.C.2.b., Property Removed to 
Safety.
    3. Additions and extensions attached to and in contact with the 
building by means of a rigid exterior wall, a solid load-bearing 
interior wall, a stairway, an elevated walkway, or a roof. At your 
option, additions and extensions connected by any of these methods may 
be separately insured. Additions and extensions attached to and in 
contact with the building by means of a common interior wall that is 
not a solid load-bearing wall are always considered part of the 
building and may not be separately insured.
    4. The following fixtures, machinery and equipment, all while 
within the building or fastened to the building, and owned by the named 
insured, which are covered under Coverage A only;
    a. Awnings and canopies;
    b. Blinds;
    c. Carpet permanently installed over unfinished flooring;
    d. Central air conditioners;
    e. Elevator equipment;
    f. Fire extinguishing apparatus;
    g. Fire sprinkler systems;
    h. Freezers, walk-in;
    i. Furnaces;
    j. Light fixtures;
    k. Outdoor antennas and aerials attached to buildings;
    l. Permanently installed corner cupboards, bookcases, paneling, and 
wallpaper;
    m. Pumps and machinery for operating pumps;
    n. Ventilating equipment; and
    o. Wall mirrors, permanently installed.
    p. In the units within the building, installed:
    (1) Built-in dishwashers;
    (2) Built-in microwave ovens;
    (3) Garbage disposal units;
    (4) Hot water heaters, including solar water heaters;
    (5) Kitchen cabinets;
    (6) Plumbing fixtures;
    (7) Radiators;
    (8) Ranges;
    (9) Refrigerators; and
    (10) Stoves.
    5. Materials and supplies to be used for construction, alteration 
or repair of the insured building while the materials and supplies are 
stored in a fully enclosed building at the described location or an 
adjacent property.
    6. A building under construction, alteration or repair at the 
described location.
    a. If the structure is not yet walled or roofed as described in the 
definition for building (See II.6.a.), then coverage applies:
    (1) Only while such work is in progress; or
    (2) The work is halted, only for a period of up to 90 continuous 
days thereafter.
    b. However, coverage does not apply until the building is walled 
and roofed if the lowest floor, including the basement floor, of a non-
elevated building or the lowest elevated floor of an elevated building 
is:
    (1) Below the base flood elevation in Zones AH, AE, A1-30, AR, AR/
AE, AR/AH, AR/A1-30, AR/A, AR/AO; or
    (2) Below the base flood elevation adjusted to include the effect 
of wave action in Zones VE or V1-30.
    7. The lowest floor levels are based on the bottom of the lowest 
horizontal structural member of the floor in Zones VE or V1-30 and the 
top of the floor in Zones AH, AE, A1-30, AR, AR/AE, AR/AH, AR/A1-30, 
AR/A, AR/AO.

[[Page 34840]]

    8. A manufactured home or a travel trailer as described in the 
Definitions Section (See II.B.6.b. and II.B.6.c.).
    If the manufactured home or travel trailer is in a special flood 
hazard area, it must be anchored in the following manner at the time of 
the loss:
    a. By over-the-top or frame ties to ground anchors; or
    b. In accordance with the manufacturer's specifications; or
    c. In compliance with the community's floodplain management 
requirements unless it has been continuously insured by the NFIP at the 
same described location since September 30, 1982.
    9. Items of property in a building enclosure lower than the lowest 
elevated floor of an elevated post-FIRM building located in zones A1-
30, AE, AH, AR, AR/A, AR/AE, AR/AH, AR/A1-A30, V1-30, or VE, or in a 
basement, regardless of the zone. Coverage is limited to the following:
    a. Any of the following items, if installed in their functioning 
locations and, if necessary for operation, connected to a power source:
    (1) Central air conditioners;
    (2) Cisterns and the water in them;
    (3) Drywall for walls and ceilings in a basement and the cost of 
labor to nail it, unfinished and unfloated and not taped, to the 
framing;
    (4) Electrical junction and circuit breaker boxes;
    (5) Electrical outlets and switches;
    (6) Elevators, dumbwaiters and related equipment, unless installed 
below the base flood elevation after September 30, 1987;
    (7) Fuel tanks and the fuel in them;
    (8) Furnaces and hot water heaters;
    (9) Heat pumps;
    (10) Nonflammable insulation in a basement;
    (11) Oil tanks and oil in them;
    (12) Pumps and tanks used in solar energy system;
    (13) Stairways and staircases attached to the building, not 
separated from it by elevated walkways;
    (14) Sump pumps;
    (15) Water softeners, water filters and faucets installed as an 
integral part of the plumbing system;
    (16) Well water tanks and pumps;
    (17) Required utility connections for any item in this list; and
    (18) Footings, foundations, posts, pilings, piers, or other 
foundation walls and anchorage systems required to support a building.
    b. Clean-up.

B. Coverage B--Personal Property

    1. If you have purchased personal property coverage, we insure, 
subject to paragraphs B.2., 3. and 4. below, against direct physical 
loss by or from flood to personal property inside a fully enclosed 
insured building:
    a. Owned solely by you, or in the case of a condominium, owned 
solely by the condominium association and used exclusively in the 
conduct of the business affairs of the condominium association; or
    b. Owned in common by the unit owners of the condominium 
association.
    We also insure such personal property for 45 days while stored at a 
temporary location, as set forth in III.C.2.b., Property Removed to 
Safety.
    2. When this policy covers personal property, coverage will be 
either for household personal property or other than household personal 
property, while within the insured building, but not both.
    a. If this policy covers household personal property, it will 
insure household personal property usual to a living quarters, that:
    (1) Belongs to you, or a member of your household, or at your 
option:
    (a) Your domestic worker;
    (b) Your guest; or
    (2) You may be legally liable for.
    b. If this policy covers other than household personal property, it 
will insure your:
    (1) Furniture and fixtures;
    (2) Machinery and equipment;
    (3) Stock; and
    (4) All other personal property owned by you and used in your 
business.
    3. Coverage for personal property includes the following property, 
subject to paragraphs B.1.a. and B.1.b. above, which is covered under 
Coverage B. only:
    a. Air conditioning units installed in the building;
    b. Carpet, not permanently installed, over unfinished flooring;
    c. Carpets over finished flooring;
    d. Clothes washers and dryers;
    e. ``Cook-out'' grills;
    f. Food freezers, other than walk-in, and the food in any freezer;
    g. Outdoor equipment and furniture stored inside the insured 
building;
    h. Ovens and the like;
    i. Portable microwave ovens and portable dishwashers; and
    j. Refrigerators.
    4. Items of property in a building enclosure lower than the lowest 
elevated floor of an elevated post-FIRM building located in zones A1-
30, AE, AH, AR, AR/A, AR/AE, AR/AH, AR/A1-A30, V1-30, or VE, or in a 
basement, regardless of the zone, is limited to the following items, if 
installed in their functioning locations and, if necessary for 
operation, connected to a power source:
    a. Air conditioning units--portable or window type;
    b. Clothes washers and dryers; and
    c. Food freezers, other than walk-in, and food in any freezer.
    5. Special Limits. We will pay no more than $2,500 for any loss to 
one or more of the following kinds of personal property:
    a. Artwork, photographs, collectibles, or memorabilia, including 
but not limited to, porcelain or other figures, and sports cards;
    b. Rare books, manuscripts or autographed items;
    c. Jewelry, watches, precious and semi-precious stones, articles of 
gold, silver or platinum;
    d. Furs or any article containing fur which represents its 
principal value; or
    6. We will pay only for the functional value of antiques.
    7. If you are a tenant, you may apply up to 10% of the Coverage B 
limit to improvements:
    a. Made a part of the building you occupy; and
    b. You acquired, or made at your expense, even though you cannot 
legally remove.
    This coverage does not increase the amount of insurance that 
applies to insured personal property.
    8. If you are a condominium unit owner, you may apply up to 10% of 
the Coverage B limit to cover loss to interior:
    a. Walls,
    b. Floors, and
    c. Ceilings, that are not covered under a policy issued to the 
condominium association insuring the condominium building.
    This coverage does not increase the amount of insurance that 
applies to insured personal property.
    9. If you are a tenant, personal property must be inside a fully 
enclosed building.

C. Coverage C--Other Coverages

    1. Debris Removal.
    We will pay reasonable expenses to remove debris directly caused by 
flood provided the debris is:
    a. Debris from property:
    (1) That you do not own;
    (2) That originates from beyond the boundaries of the described 
location, and
    (3) That is physically on or in the insured building; or
    b. Debris of the insured property anywhere.
    If you perform the removal work, the value of your work will be 
based on the Federal minimum wage.
    This coverage does not increase the Coverage A or Coverage B Limit 
of Liability.

[[Page 34841]]

    2. Loss Avoidance Measures.
    a. Sandbags, Supplies and Labor.
    (1) We will pay up to $1,000 for the costs you incur to protect the 
insured building from a flood or imminent danger of flood, including:
    (a) Your reasonable expenses to buy:
    (i) Sandbags, including sand to fill them;
    (ii) Fill for temporary levees;
    (iii) Pumps; and
    (iv) Plastic sheeting and lumber used in connection with these 
items; and
    (b) The value of work, at the Federal minimum wage, that you 
perform.
    (2) This coverage for Sandbags, Supplies and Labor only applies if 
damage to insured property by or from flood is imminent and the threat 
of flood damage is apparent enough to lead a person of common prudence 
to anticipate flood damage. One of the following must also occur:
    (a) A general and temporary condition of flooding in the area near 
the described location must occur, even if the flood does not reach the 
insured building; or
    (b) A legally authorized official must issue an evacuation order or 
other civil order for the community in which the insured building is 
located calling for measures to preserve life and property from the 
peril of flood.
    This coverage does not increase the Coverage A or Coverage B limit 
of liability.
    b. Property Removed to Safety.
    (1) We will pay up to $1,000 for the reasonable expenses you incur 
to move insured property to another place other than the described 
location that contains the property in order to protect it from flood 
or the imminent danger of flood. Reasonable expenses include the value 
of work, at the Federal minimum wage, that you perform.
    (2) If you move insured property to another location other than the 
described location that contains the property, in order to protect it 
from flood or the imminent danger of flood, we will cover such property 
while at that location for a period of 45 consecutive days from the 
date you first begin to move it there. The personal property that is 
moved must be placed in a fully enclosed building, or otherwise 
reasonably protected from the elements.
    Any property removed, including a moveable home described in II. 
Definitions, Building, paragraphs b. and c., must be placed above 
ground level or outside of the special flood hazard area.
    This coverage does not increase the Coverage A or Coverage B limit 
of liability.

D. Coverage D--Increased Cost of Compliance Coverage

    A. General.
    This policy pays you to comply with a State or local floodplain 
management law or ordinance affecting repair or reconstruction of a 
structure suffering flood damage. Compliance activities eligible for 
payment are: elevation, floodproofing, relocation, or demolition (or 
any combination of these activities) of your structure. Eligible 
floodproofing activities are limited to:
    1. Non-residential structures.
    2. Residential structures with basements that satisfy FEMA's 
standards published in the Code of Federal Regulations (44 CFR 60.6 (b) 
or (c)).
    B. Limit of Liability.
    $20,000 is the maximum we will pay you for this Coverage D 
(Increased Cost of Compliance), which only applies to policies with 
building coverage (Coverage A). Our payment of claims under Coverage D 
is in addition to the amount of coverage which you selected on the 
application and which appears on the Declarations Page. But the maximum 
you can collect under this policy for both Coverage A (Building 
Property) and Coverage D (Increased Cost of Compliance) cannot exceed 
the maximum permitted under the Act. We do NOT charge a separate 
deductible for a claim under Coverage D.
    C. Eligibility.
    1. A structure covered under Coverage A--Building Property 
sustaining a loss caused by a flood as defined by this policy must:
    a. Be a ``repetitive loss structure.'' A ``repetitive loss 
structure'' is one that meets the following conditions:
    (1) The structure is covered by a contract of flood insurance 
issued under the NFIP.
    (2) The structure has suffered flood damage on 2 occasions during a 
10-year period which ends on the date of the second loss.
    (3) The cost to repair the flood damage, on average, equaled or 
exceeded 25% of the market value of the structure at the time of each 
flood loss.
    (4) In addition to the current claim, the NFIP must have paid the 
previous qualifying claim, and the State or community must have a 
cumulative, substantial damage provision or repetitive loss provision 
in its floodplain management law or ordinance being enforced against 
the structure; or
    b. Be a structure that has had flood damage in which the cost to 
repair equals or exceeds 50% of the market value of the structure at 
the time of the flood. The State or community must have a substantial 
damage provision in its floodplain management law or ordinance being 
enforced against the structure.
    2. This Coverage D pays you to comply with State or local 
floodplain management laws or ordinances that meet the minimum 
standards of the National Flood Insurance Program found in the Code of 
Federal Regulations at 44 CFR 60.3. We pay for compliance activities 
that exceed those standards under these conditions:
    a. C.1.a. above.
    b. Elevation or floodproofing in any risk zone to preliminary or 
advisory base flood elevations provided by FEMA which the State or 
local government has adopted and is enforcing for flood-damaged 
structures in such areas. (This includes compliance activities in B, C, 
X, or D zones which are being changed to zones with base flood 
elevations. This also includes compliance activities in zones where 
base flood elevations are being increased, and a flood-damaged 
structure must comply with the higher advisory base flood elevation.) 
Increased Cost of Compliance coverage does not apply to situations in 
B, C, X, or D zones where the community has derived its own elevations 
and is enforcing elevation or floodproofing requirements for flood-
damaged structures to elevations derived solely by the community.
    c. Elevation or floodproofing above the base flood elevation to 
meet State or local ``freeboard'' requirements, i.e., that a structure 
must be elevated above the base flood elevation.
    3. Under the minimum NFIP criteria at 44 CFR 60.3(b)(4), States and 
communities must require the elevation or floodproofing of structures 
in unnumbered A zones to the base flood elevation where elevation data 
is obtained from a Federal, State, or other source. Such compliance 
activities are also eligible for Coverage D.
    4. This coverage will also pay for the incremental cost, after 
demolition or relocation, of elevating or floodproofing a structure 
during its rebuilding at the same or another site to meet State or 
local floodplain management laws or ordinances, subject to Exclusion 
E.7. below.
    5. This coverage will also pay to bring a flood-damaged structure 
into compliance with state or local floodplain management laws or 
ordinances even if the structure had received a variance before the 
present loss from the applicable floodplain management requirements.
    D. Conditions.

[[Page 34842]]

    1. When a structure covered under Coverage A--Building Property 
sustains a loss caused by a flood, our payment for the loss under this 
Coverage D will be for the increased cost to elevate, floodproof, 
relocate, or demolish (or any combination of these activities) caused 
by the enforcement of current State or local floodplain management 
ordinances or laws. Our payment for eligible demolition activities will 
be for the cost to demolish and clear the site of the building debris 
or a portion thereof caused by the enforcement of current State or 
local floodplain management ordinances or laws. Eligible activities for 
the cost of clearing the site will include those necessary to 
discontinue utility service to the site and ensure proper abandonment 
of on-site utilities.
    2. When the building is repaired or rebuilt, it must be intended 
for the same occupancy as the present building unless otherwise 
required by current floodplain management ordinances or laws.
    E. Exclusions.
    Under this Coverage D (Increased Cost of Compliance) we will not 
pay for:
    1. The cost to comply with any floodplain management law or 
ordinance in communities participating in the Emergency Program.
    2. The cost associated with enforcement of any ordinance or law 
that requires any insured or others to test for, monitor, clean up, 
remove, contain, treat, detoxify or neutralize, or in any way respond 
to, or assess the effects of pollutants.
    3. The loss in value to any insured building or other structure due 
to the requirements of any ordinance or law.
    4. The loss in residual value of the undamaged portion of a 
building demolished as a consequence of enforcement of any State or 
local floodplain management law or ordinance.
    5. Any Increased Cost of Compliance under this Coverage D:
    a. Until the building is elevated, floodproofed, demolished, or 
relocated on the same or to another premises; and
    b. Unless the building is elevated, floodproofed, demolished, or 
relocated as soon as reasonably possible after the loss, not to exceed 
two years.
    6. Any code upgrade requirements, e.g., plumbing or electrical 
wiring, not specifically related to the State or local floodplain 
management law or ordinance.
    7. Any compliance activities needed to bring additions or 
improvements made after the loss occurred into compliance with State or 
local floodplain management laws or ordinances.
    8. Loss due to any ordinance or law that you were required to 
comply with before the current loss.
    9. Any rebuilding activity to standards that do not meet the NFIP's 
minimum requirements. This includes any situation where the insured has 
received from the State or community a variance in connection with the 
current flood loss to rebuild the property to an elevation below the 
base flood elevation.
    10. Increased Cost of Compliance for a garage or carport.
    11. Any structure insured under an NFIP Group Flood Insurance 
Policy.
    12. Assessments made by a condominium association on individual 
condominium unit owners to pay increased costs of repairing commonly 
owned buildings after a flood in compliance with State or local 
floodplain management ordinances or laws.
    F. Other Provisions.
    All other conditions and provisions of the policy apply.

IV. Property Not Covered

    A. We do not cover any of the following property:
    1. Personal property not inside a building;
    2. A building, and personal property in it, located entirely in, 
on, or over water or seaward of mean high tide, if it was constructed 
or substantially improved after September 30, 1982;
    3. Open structures, including a building used as a boathouse or any 
structure or building into which boats are floated, and personal 
property located in, on or over water;
    4. Recreational vehicles other than travel trailers described in 
the II. Definitions, Building, paragraph c., whether affixed to a 
permanent foundation or on wheels;
    5. Self-propelled vehicles or machines, including their parts and 
equipment. However, we do cover self-propelled vehicles or machines, 
provided they are not licensed for use on public roads and are:
    a. Used mainly to service the described location or
    b. Designed and used to assist handicapped persons, while the 
vehicles or machines are inside a building at the described location;
    6. Land, land values, lawns, trees, shrubs, plants, growing crops, 
or animals;
    7. Accounts, bills, coins, currency, deeds, evidences of debt, 
medals, money, scrip, stored value cards, postage stamps, securities, 
bullion, manuscripts, or other valuable papers;
    8. Underground structures and equipment, including wells, septic 
tanks and septic systems;
    9. Those portions of walks, walkways, decks, driveways, patios and 
other surfaces, all whether protected by a roof or not, located outside 
the perimeter, exterior walls of the insured building;
    10. Containers including related equipment, such as, but not 
limited to, tanks containing gases or liquids;
    11. Buildings or units and all their contents if more than 49% of 
the actual cash value of the building is below ground, unless the 
lowest level is at or above the base flood elevation and is below 
ground by reason of earth having been used as insulation material in 
conjunction with energy efficient building techniques;
    12. Fences, retaining walls, seawalls, bulkheads, wharves, piers, 
bridges, and docks;
    13. Aircraft or watercraft, or their furnishings and equipment;
    14. Swimming pools, hot tubs, spas, and their equipment such as, 
but not limited to, heaters, filters, pumps, and pipes, wherever 
located;
    15. Property not eligible for flood insurance pursuant to the 
provisions of the Coastal Barrier Resources Act and the Coastal Barrier 
Improvement Act of 1990 and amendments to these Acts; and
    16. Loss to any building or personal property located on land 
leased from the Federal Government, arising from or incident to the 
flooding of the land by the Federal Government, where the lease 
expressly holds the Federal Government harmless under flood insurance 
issued under any Federal Government program.
    17. Personal property used in connection with any incidental 
commercial occupancy or use of the building;
    18. Personal property owned by or in the care, custody or control 
of a unit owner, except for property of the type and under the 
circumstances set forth under III. Coverage B--Personal Property of 
this policy;
    19. A residential condominium building located in a Regular Program 
community.

V. Exclusions

    A. We only provide coverage for direct physical loss by or from 
flood, which means that we do not pay you for:
    1. Loss of revenue or profits;
    2. Loss of access to the insured property or described location;
    3. Loss of use of the insured property or described location;
    4. Loss from interruption of business or production;

[[Page 34843]]

    5. Any additional expenses incurred while the insured building is 
being repaired or is unable to be occupied for any reason;
    6. The cost of complying with any ordinance or law:
    a. Requiring or regulating the construction, demolition, 
remodeling, renovation or repair of property, including removal of any 
resulting debris. This exclusion does not apply to any eligible 
activities that we describe in Coverage D--Increased Cost of 
Compliance; or
    b. Requiring you or others to test for, monitor, clean up, remove, 
contain, treat, detoxify, or neutralize, or in any way respond to, or 
assess the effect of, any pollutant; or
    7. Any other economic loss.
    B. We do not insure a loss directly or indirectly caused by a flood 
that is in progress at the time and date:
    1. The policy term begins; or
    2. Coverage is added at your request.
    C. We do not insure for loss to property caused directly by earth 
movement even if the earth movement is caused by flood. Some examples 
of earth movement that we do not cover are:
    1. Earthquake;
    2. Landslide;
    3. Land subsidence;
    4. Sinkholes;
    5. Destabilization or movement of land that results from 
accumulation of water in subsurface land areas; or
    6. Gradual erosion. We do, however, pay for losses from erosion and 
mudflows that are specifically covered under our definition of flood.
    D. We do not insure for direct physical loss caused directly or 
indirectly by:
    1. The pressure or weight of ice;
    2. Freezing or thawing;
    3. Rain, snow, sleet, hail, or water spray;
    4. Water, moisture, mildew, or mold damage that results primarily 
from any condition:
    a. Substantially confined to the insured building; or
    b. That is within your control including, but not limited to:
    (1) Design, structural or mechanical defects;
    (2) Failures, stoppages, or breakage of water or sewer lines, 
drains, pumps, fixtures, or equipment; or
    (3) Failure to inspect and maintain the property after a flood 
recedes;
    5. Water or water-borne material that:
    a. Backs up through sewers or drains;
    b. Discharges or overflows from a sump, sump pump or related 
equipment; or
    c. Seeps or leaks on or through insured property,


unless the damaged insured property has been, at the same time, damaged 
by flood;

    6. The pressure or weight of water unless the damaged insured 
property has been, at the same time, damaged by flood;
    7. Power, heating or cooling failure unless the failure results 
from direct physical loss by or from flood to power, heating or cooling 
equipment situated on the described location;
    8. Discharge, dispersal, seepage, migration, release, or escape of 
pollutants;
    9. Theft, fire, explosion, wind, or windstorm;
    10. Anything that you or your agents do or conspire to do to 
deliberately cause loss by flood; or
    11. Alteration of the insured property that significantly increases 
the risk of flooding.

VI. Deductibles

    A. When a loss is covered under this policy, we will pay only that 
part of the loss that exceeds the applicable deductible amount, subject 
to the limit of liability that applies. The deductible amount is shown 
on the declarations page.
    However, when a building under construction, alteration or repair 
does not have at least two rigid exterior walls and a fully secured 
roof at the time of loss, your deductible amount will be two times the 
deductible that would otherwise apply to a completed building.
    B. In each loss from flood, separate deductibles apply to the 
building and personal property insured by this policy.
    C. No deductible applies to:
    1. III.C.2. Loss Avoidance Measures; or
    2. III.D. Increased Cost of Compliance Coverage.

VII. General Conditions

    A. Pair and Set Clause.
    In case of loss to an article that is part of a pair or set, we 
will have the option of paying you:
    1. An amount equal to the cost of replacing the lost, damaged or 
destroyed article, less depreciation, or
    2. An amount which represents the fair proportion of the total 
value of the pair or set that the lost, damaged or destroyed article 
bears to the pair or set.
    B. Concealment or Fraud and Policy Voidance.
    1. With respect to all insureds under this policy, this policy:
    a. Is void,
    b. Has no legal force or effect,
    c. Cannot be renewed, and
    d. Cannot be replaced by a new flood policy,


if, before or after a loss, you or any other insured or your agent have 
at any time:

    (1) Intentionally concealed or misrepresented any material fact or 
circumstance,
    (2) Engaged in fraudulent conduct, or
    (3) Made false statements

relating to this policy or any other NFIP insurance.

    2. This policy will be void as of the date the wrongful acts 
described in B. 1. above were committed.
    3. Fines, civil penalties, and imprisonment under applicable 
Federal laws may also apply to the acts of fraud or concealment 
described above.
    4. This policy is also void for reasons other than fraud, 
misrepresentation, or wrongful act. This policy is void from its 
inception and has no legal force under the following conditions:
    a. If the property listed on the application is not eligible for 
coverage under the NFIP; or
    b. If the property is located in a community that was not 
participating in the NFIP on the policy's inception date and did not 
join or re-enter the program during the policy term and before the loss 
occurred.
    C. Other Insurance.
    1. If a loss covered by this policy is also covered by other 
insurance that includes flood coverage not issued under the Act, we 
will not pay more than the amount of insurance that you are entitled to 
for lost, damaged or destroyed property insured under this policy 
subject to the following:
    a. We will pay only the proportion of the loss that the amount of 
insurance that applies under this policy bears to the total amount of 
insurance covering the loss, unless b. or c. below applies.
    b. If the other policy has a provision stating that it is excess 
insurance, this policy will be primary.
    c. This policy will be primary (but subject to its own deductible) 
up to the deductible in the other flood policy (except another policy 
as described in C.1.b. above). When the other deductible amount is 
reached, this policy will participate in the same proportion that the 
amount of insurance under this policy bears to the total amount of both 
policies, for the remainder of the loss.
    2. Where this policy covers a condominium association and there is 
a flood insurance policy in the name of a unit-owner that covers the 
same loss as this policy, then this policy will be primary.
    D. Amendments, Waivers, Assignment.

[[Page 34844]]

    This policy cannot be changed nor can any of its provisions be 
waived without the express written consent of the Federal Insurance 
Administrator. No action that we take under the terms of this policy 
can constitute a waiver of any of our rights. You may assign this 
policy in writing when you transfer title of your property to someone 
else except under these conditions:
    1. When this policy covers only personal property; or
    2. When this policy covers a structure during the course of 
construction.
    E. Cancellation of Policy by You.
    1. You may cancel this policy at any time.
    If you cancel this policy, you may be entitled to a full or partial 
refund of premium under our applicable rules and regulations.
    F. Non-Renewal of the Policy by Us.
    Your policy will not be renewed:
    1. If the community where your covered property is located stops 
participating in the NFIP, or
    2. Your building has been declared ineligible under section 1316 of 
the Act.
    G. Reduction and Restoration of Coverage.
    1. If the premium we received from you was not enough to buy the 
kind and amount of coverage you requested, we will provide only the 
amount of coverage that can be purchased for the premium payment we 
received.
    2. The amount of coverage resulting from the reduction described in 
1. above can be restored to the amount you requested as follows:
    a. Discovery of Insufficient Premium or Incomplete Rating 
Information Before a Loss.
    (1) If we discover before you have a flood loss that your premium 
payment was not enough to buy the requested amount of coverage, we will 
send you and any mortgagee or trustee known to us a bill for the 
required additional premium for the current policy term (or that 
portion of the current policy term following any endorsement changing 
the amount of coverage). If you or the mortgagee or trustee pay the 
additional premium within 30 days from the date of our bill, we will 
restore the amount of coverage to the originally requested amount 
effective to the beginning of the current policy term (or subsequent 
date of any endorsement changing the amount of coverage).
    (2) If we determine before you have a flood loss that the rating 
information we have is incomplete and prevents us from calculating the 
additional premium, we will ask you to send the required information. 
You must submit the information within 60 days of our request. Once we 
determine the amount of additional premium for the current policy term, 
we will follow the procedure in (1) above.
    (3) If we do not receive the additional premium (or additional 
information) by the date it is due, the amount of coverage can only be 
restored by endorsement subject to any appropriate waiting period.
    b. Discovery of Insufficient Premium or Incomplete Rating 
Information After a Loss.
    (1) If we discover after you have a flood loss that your premium 
payment was not enough to buy the requested amount of coverage, we will 
send you and any mortgagee or trustee known to us a bill for the 
required additional premium for the current and the prior policy terms. 
If you or the mortgagee or trustee pay the additional premium within 30 
days of the date of our bill, we will restore the amount of coverage to 
the originally requested amount effective to the beginning of the prior 
policy term.
    (2) If we discover after you have a flood loss that the rating 
information we have is incomplete and prevents us from calculating the 
additional premium, we will ask you to send the required information. 
You must submit the information before your claim can be paid. Once we 
determine the amount of additional premium for the current and prior 
policy terms, we will follow the procedure in (1) above.
    (3) If we do not receive the additional premium by the date it is 
due, your flood insurance claim will be settled based on the reduced 
amount of coverage. The amount of coverage can only be restored by 
endorsement subject to any appropriate waiting period.
    3. However, if we find that you or your agent intentionally did not 
tell us, or falsified, any important fact or circumstance or did 
anything fraudulent relating to this insurance, the provisions of 
Condition B. above apply.
    H. Policy Renewal.
    1. This policy will expire at 12:01 a.m. on the last day of the 
policy term.
    2. We must receive the payment of the appropriate renewal premium 
within 30 days of the expiration date.
    3. If we find, however, that your renewal notice was not placed 
into the U.S. Postal Service, or if it was mailed properly, it was 
prepared in a such a way, e.g., with an incorrect, incomplete, or 
illegible address, as to delay its delivery to you before the due date 
for the renewal premium, then we will follow these procedures:
    a. If you or your agent notified us, not later than one year after 
the date on which the payment of the renewal premium was due, of 
nonreceipt of a renewal notice before the due date for the renewal 
premium, and we determine that the circumstances in the preceding 
paragraph apply, 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.
    b. If we do not receive the premium requested in the second bill by 
the revised due date, then we will not renew the policy. In that case, 
the policy will remain as an expired policy as of the expiration date 
shown on the declarations page.
    4. In connection with the renewal of this policy, we may ask you 
during the policy term to re-certify, on a Recertification 
Questionnaire that we will provide to you, the rating information used 
to rate your most recent application for or renewal of insurance.
    I. Conditions Suspending or Restricting Insurance 
    We are not liable for loss that occurs while there is a hazard that 
is increased by any means within your control or knowledge.
    J. Requirements in Case of Loss. 
    In case of a flood loss to insured property, you must:
    1. Give prompt written notice to us;
    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;
    3. Prepare an inventory of damaged property showing the quantity, 
description, actual cash value, and amount of loss. Attach all bills, 
receipts and related documents;
    4. 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 which furnishes us with the following 
information:
    a. The date and time of loss;
    b. A brief explanation of how the loss happened;
    c. Your interest (for example, ``owner'') and the interest, if any, 
of others in the damaged property;
    d. Details of any other insurance that may cover the loss;
    e. Changes in title or occupancy of the insured property during the 
term of the policy;
    f. Specifications of damaged buildings and detailed repair 
estimates;
    g. Names of mortgagees or anyone else having a lien, charge or 
claim against the insured property;
    h. Details about who occupied any insured building at the time of 
loss and for what purpose; and
    i. The inventory of damaged property described in 3. above.
    5. In completing the proof of loss, you must use your own judgment

[[Page 34845]]

concerning the amount of loss and justify that amount.
    6. You must cooperate with our adjuster or representative in the 
investigation of the claim.
    7. 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 sixty days after the loss 
even if the adjuster does not furnish the form or help you to complete 
it.
    8. We have not authorized the adjuster to approve or disapprove 
claims or to tell you whether we will approve your claim.
    9. At our option, we may accept an adjuster's report of the loss 
instead of your proof of loss. The adjuster's report will include 
information about your loss and the damages you sustained. You must 
sign the adjuster's report. At our option, we may require you to swear 
to the report.
    K. Our Options After a Loss.
    Options that we may, in our sole discretion, exercise after loss 
include the following:
    1. At such reasonable times and places that we may designate, you 
must:
    a. Show us or our representative the damaged property;
    b. Submit to examination under oath, while not in the presence of 
another insured, and sign the same; and
    c. Permit us to examine and make extracts and copies of:
    (1) Any policies of property insurance insuring you against loss 
and the deed establishing your ownership of the insured real property;
    (2) Condominium association documents including the Declarations of 
the condominium, its Articles of Association or Incorporation, Bylaws, 
and rules and regulations; and
    (3) All books of accounts, bills, invoices and other vouchers, or 
certified copies pertaining to the damaged property if the originals 
are lost.
    2. We may request, in writing, that you furnish us with a complete 
inventory of the lost, damaged, or destroyed property, including:
    a. Quantities and costs;
    b. Actual cash value;
    c. Amounts of loss claimed; and
    d. Any written plans and specifications for repair of the damaged 
property that you can make reasonably available to us.
    3. If we give you written notice within 30 days after we receive 
your signed, sworn proof of loss, we may:
    a. Repair, rebuild or replace any part of the lost, damaged or 
destroyed property with material or property of like kind and quality 
or its functional equivalent; and
    b. Take all or any part of the damaged property at the value that 
we agree upon or its appraised value.
    L. No Benefit to Bailee.
    No person or organization, other than you, having custody of 
covered property will benefit from this insurance.
    M. Loss Payment. 
    1. We will adjust all losses with you. We will pay you unless some 
other person or entity is named in the policy or is legally entitled to 
receive payment. Loss will be payable 60 days after we receive 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:
    a. We reach an agreement with you;
    b. There is an entry of a final judgment; or
    c. There is a filing of an appraisal award with us, as provided in 
VII. P.
    2. If we reject your proof of loss in whole or in part you may:
    a. Accept such denial of your claim;
    b. Exercise your rights under this policy; or
    c. File an amended proof of loss as long as it is filed within 60 
days of the date of the loss or within any extension of time allowed by 
the Administrator.
    N. Abandonment.
    You may not abandon damaged or undamaged insured property to us.
    O. Salvage.
    We may permit you to keep damaged insured property 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.
    P. Appraisal.
    If you and we fail to agree on the actual cash value of the damaged 
property so as to determine the amount of loss, either may demand an 
appraisal of the loss. In this event, you and we will each choose a 
competent and impartial appraiser within 20 days after receiving a 
written request from the other. The two appraisers will choose an 
umpire. If they cannot agree upon an umpire within 15 days, you or we 
may request that the choice be made by a judge of a court of record in 
the state where the insured property is located. The appraisers will 
separately state the actual cash value and the amount of loss to each 
item. If the appraisers submit a written report of an agreement to us, 
the amount agreed upon will be the amount of loss. If they fail to 
agree, they will submit their differences to the umpire. A decision 
agreed to by any two will set the amount of actual cash value and loss.
    Each party will:
    1. Pay its own appraiser; and
    2. Bear the other expenses of the appraisal and umpire equally.
    Q. Mortgage Clause.
    The word ``mortgagee'' includes trustee.
    Any loss payable under Coverage A--Building Property will be paid 
to any mortgagee of whom we have actual notice and you, as interests 
appear. If more than one mortgagee is named, the order of payment will 
be the same as the order of precedence of the mortgages. If we deny 
your claim, that denial will not apply to a valid claim of the 
mortgagee, if the mortgagee:
    1. Notifies us of any change in the ownership or occupancy, or 
substantial change in risk of which the mortgagee is aware;
    2. Pays any premium due under this policy on demand if you have 
neglected to pay the premium; and
    3. Submits a signed, sworn proof of loss within 60 days after 
receiving notice from us of your failure to do so.
    All of the terms of this policy will then apply directly to the 
mortgagee.
    If we decide to cancel or not renew this policy, it will continue 
in effect for the benefit of the mortgagee only for 30 days after we 
notify the mortgagee of the cancellation or non-renewal.
    If we pay the mortgagee for any loss and deny payment to you, we 
are subrogated to all the rights of the mortgagee granted under the 
mortgage on the property. Subrogation will not impair the right of the 
mortgagee to recover the full amount of the mortgagee's claim.
    R. Suit Against Us.
    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 one year of the date of the written 
denial of all or part of the 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. This requirement applies to 
any claim that you may have under this policy and to any dispute that 
you may have arising out of the handling of any claim under the policy.
    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

[[Page 34846]]

or do anything which would prevent us from recovering it. If you make 
any claim against any person who caused your loss and recover any 
money, you must pay us back first before you may keep any of that 
money.
    T. Continuous Lake Flooding.
    1. Where an insured building has been flooded by rising lake waters 
continuously for 90 days or more and it appears reasonably certain that 
a continuation of this flooding will result in a covered loss to an 
insured building equal to or greater than the building policy limits 
plus the deductible 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:
    a. To make no further claim under this policy;
    b. Not to seek renewal of this policy;
    c. Not to apply for any flood insurance under the Act for property 
at the described location, and;
    d. Not to seek a premium refund for current or prior terms.
    If the policy term ends before an insured building has been flooded 
continuously for 90 days, the provisions of this paragraph 1. will 
apply as long as the insured building suffers a covered loss before the 
policy term ends.
    2. If your insured building is subject to continuous lake flooding 
from a closed basin lake, you may elect to file a claim under either 
paragraph 1. above or this paragraph 2. (A ``closed basin lake'' is a 
natural lake from which water leaves primarily through evaporation and 
whose surface area now exceeds or has exceeded one square mile at any 
time in the recorded past. Most of the nation's closed basin lakes are 
in the western half of the United States where annual evaporation 
exceeds annual precipitation and where lake levels and surface areas 
are subject to considerable fluctuation due to wide variations in the 
climate. These lakes may overtop their basins on rare occasions.) Under 
this paragraph we will pay your claim as if the building is a total 
loss even though it has not been continuously inundated for 90 days, 
subject to the following conditions:
    a. Lake flood waters must damage or imminently threaten to damage 
your building.
    b. Before approval of your claim, you must:
    (1) Agree to a claim payment that reflects your buying back the 
salvage on a negotiated basis; and
    (2) Grant the conservation easement contained in the Federal 
Emergency Management Agency's (FEMA) ``Policy Guidance for Closed Basin 
Lakes,'' to be recorded in the office of the local recorder of deeds. 
FEMA, in consultation with the community in which the property is 
located, will identify on a map an area or areas of special 
consideration (ASC) in which there is a potential for flood damage from 
continuous lake flooding. FEMA will give the community the agreed-upon 
map showing the ASC. This easement will only apply to that portion of 
the property in the ASC. It will allow certain agricultural and 
recreational uses of the land. The only structures that it will allow 
on any portion of the property within the ASC are certain, simple 
agricultural and recreational structures. If any of these allowable 
structures are insurable buildings under the NFIP and are insured under 
the NFIP, they will not be eligible for the benefits of this paragraph 
T.2. If a U.S. Army Corps of Engineers-certified flood control project 
or otherwise certified flood control project later protects the 
property, FEMA will, upon request, amend the ASC to remove areas 
protected by those projects. The restrictions of the easement will then 
no longer apply to any portion of the property removed from the ASC; 
and
    (3) Comply with T.1.a. through T.1.d. above.
    c. Within 90 days of approval of your claim, you must move your 
building to a new location outside the ASC. FEMA will give you an 
additional 30 days to move if you show there is sufficient reason to 
extend the time.
    d. Before the final payment of your claim, you must acquire an 
elevation certificate and a floodplain development permit from your 
local floodplain administrator for the new location of your building.
    e. Before the approval of your claim, the community having 
jurisdiction over your building must:
    (1) Adopt a permanent land use ordinance, or a temporary moratorium 
for a period not to exceed 6 months to be followed immediately by a 
permanent land use ordinance, that is consistent with the provisions 
specified in the easement required in T.2.b. above.
    (2) Agree to declare and report any violations of this ordinance to 
FEMA so that under Sec. 1316 of the National Flood Insurance Act of 
1968, as amended, flood insurance to the building can be denied; and
    (3) Agree to maintain as deed-restricted, for purposes compatible 
with open space or agricultural or recreational use only, any affected 
property the community acquires an interest in. These deed restrictions 
must be consistent with the provisions of T.2.b. above except that even 
if a certified project protects the property, the land use restrictions 
continue to apply if the property was acquired under the Hazard 
Mitigation Grant Program or the Flood Mitigation Assistance Program. If 
a non-profit land trust organization receives the property as a 
donation, that organization must maintain the property as deed-
restricted, consistent with the provisions of T.2.b. above.
    f. Before the approval of your claim, the affected State must take 
all action set forth in FEMA's ``Policy Guidance for Closed Basin 
Lakes.''
    g. You must have NFIP flood insurance coverage continuously in 
effect from a date established by FEMA until you file a claim under 
this paragraph 2. If a subsequent owner buys NFIP insurance that goes 
into effect within 60 days of the date of transfer of title, any gap in 
coverage during that 60-day period will not be a violation of this 
continuous coverage requirement. For the purpose of honoring a claim 
under this paragraph T.2, we will not consider to be in effect any 
increased coverage that became effective after the date established by 
FEMA. The exception to this is any increased coverage in the amount 
suggested by your insurer as an inflation adjustment.
    h. This paragraph T.2. will be in effect for a community when the 
FEMA Regional Director for the affected region provides to the 
community, in writing, the following:
    (1) Confirmation that the community and the State are in compliance 
with the conditions in T.2.e. and T.2.f. above, and
    (2) The date by which you must have flood insurance in effect.
    U. Duplicate Policies Not Allowed.
    1. Property may not be insured under more than one NFIP policy.
    If we find that the duplication was not knowingly created, we will 
give you written notice. The notice will advise you that you may choose 
one of several options under the following procedures:
    a. If you choose to keep in effect the policy with the earlier 
effective date, you may also choose to add the coverage limits of the 
later policy to the limits of the earlier policy. The change will 
become effective as of the effective date of the later policy.
    b. If you choose to keep in effect the policy with the later 
effective date, you may also choose to add the coverage limits of the 
earlier policy to the limits of the later policy. The change will be 
effective as of the effective date of the later policy.
    In either case, you must pay the pro rata premium for the increased 
coverage

[[Page 34847]]

limits within 30 days of the written notice. In no event will the 
resulting coverage limits exceed the permissible limits of coverage 
under the Act or your insurable interest, whichever is less. We will 
make a refund to you, according to applicable NFIP rules, of the 
premium for the policy not being kept in effect.
    2. The insured's option under this Condition U. Duplicate Policies 
Not Allowed to elect which NFIP policy to keep in effect does not apply 
when duplicates have been knowingly created. Losses occurring under 
such circumstances will be adjusted according to the terms and 
conditions of the earlier policy. The policy with the later effective 
date must be canceled.
    V. Loss Settlement.
    We will pay the least of the following amounts after application of 
the deductible:
    1. The applicable amount of insurance under this policy;
    2. The actual cash value; or
    3. The amount it would cost to repair or replace the property with 
material of like kind and quality within a reasonable time after the 
loss.

VIII. Liberalization Clause

    If we make a change that broadens your coverage under this edition 
of our policy, but does not require any additional premium, then that 
change will automatically apply to your insurance as of the date we 
implement the change, provided that this implementation date falls 
within 60 days before or during the policy term stated in the 
Declarations Page.

IX. What Law Governs

    This policy and all disputes arising from the handling of any claim 
under the policy are governed exclusively by the flood insurance 
regulations issued by FEMA, the National Flood Insurance Act of 1968, 
as amended (42 U.S.C. 4001, et seq.), and Federal common law.
    In Witness Whereof, we have signed this policy below and hereby 
enter into this Insurance Agreement.


Jo Ann Howard,

Administrator, Federal Insurance Administration.

    5. We revise Appendix A(3) to Part 61, Residential Condominium 
Building Association Policy, to read as follows:

APPENDIX A(3) TO PART 61

Federal Emergency Management Agency, Federal Insurance 
Administration

Standard Flood Insurance Policy

RESIDENTIAL CONDOMINIUM BUILDING ASSOCIATION POLICY

I. Agreement

    Please read the policy carefully. The flood insurance provided is 
subject to limitations, restrictions and exclusions.
    This policy covers only a residential condominium building in a 
regular program community. if the community reverts to emergency 
program status during the policy term and remains as an emergency 
program community at time of renewal, this policy cannot be renewed.
    The Federal Emergency Management Agency provides flood insurance 
under the terms of the National Flood Insurance Act of 1968 and its 
Amendments, and Title 44 of the Code of Federal Regulations.
    We will pay you for direct physical loss by or from flood to your 
insured property if you:
    1. Have paid the correct premium;
    2. Comply with all terms and conditions of this policy; and
    3. Have furnished accurate information and statements.
    We have the right to review the information you give us at any time 
and to revise your policy based on our review.

II. Definitions

    A. In this policy, ``you'' and ``your'' refer to the insured(s) 
shown on the Declarations Page of this policy. ``We'', ``us'' and 
``our'' refer to the insurer.
    Some definitions are complex because they are provided as they 
appear in the law or regulations, or result from court cases. The 
precise definitions are intended to protect you.
    ``Flood'', as used in this flood insurance policy, means:
    1. A general and temporary condition of partial or complete 
inundation of two or more acres of normally dry land area or of at 
least two or more properties (one of which is your property) from:
    a. The overflow of inland or tidal waters.
    b. The unusual and rapid accumulation or runoff of surface waters 
from any source.
    c. Mudflows.
    2. The collapse or subsidence of land along the shore of a lake or 
similar body of water as a result of erosion or undermining caused by 
waves or currents of water exceeding anticipated cyclical levels which 
result in a flood as defined in ``Flood'' paragraph A.1.a above.
    B. The following are the other key definitions we use in this 
policy:
    1. Act. The National Flood Insurance Act of 1968 and any amendments 
to it.
    2. Actual Cash Value. The cost to replace an insured item of 
property at the time of loss, less the value of its physical 
depreciation.
    3. Application. The statement made and signed by you or your agent 
in applying for this policy. The application gives information we use 
to determine the eligibility of the risk, the kind of policy to be 
issued and the correct premium payment. The application is part of this 
flood insurance policy for us to issue you a policy, the correct 
premium payment must accompany the application.
    4. Base Flood. A flood having a one percent chance of being equaled 
or exceeded in any given year.
    5. Basement. Any area of the building, including any sunken room or 
sunken portion of a room, having its floor below ground level 
(subgrade) on all sides.
    6. Building.
    a. A structure with two or more outside rigid walls and a fully 
secured roof, that is affixed to a permanent site;
    b. A manufactured home (a ``manufactured home'', also known as a 
mobile home, is a structure that is built on a permanent chassis and 
affixed to a permanent foundation and that is transported to its site 
in one or more sections); or
    c. A travel trailer without wheels, built on a chassis and affixed 
to a permanent foundation, that is regulated under the community's 
floodplain management and building ordinances or laws.
    Building does not mean a gas or liquid storage tank or a 
recreational vehicle, park trailer or other similar vehicle, except as 
described in 6.c., above.
    7. Cancellation. The ending of the insurance coverage provided by 
this policy before the expiration date.
    8. Condominium. That form of ownership of real property in which 
each unit owner has an undivided interest in common elements.
    9. Condominium Association. The entity, formed by the unit owners, 
responsible for the maintenance and operation of:
    a. Common elements owned in undivided shares by unit owners; and
    b. Other real property in which the unit owners have use rights; 
when membership in the entity is a required condition of unit 
ownership.
    10. Declarations Page. A computer-generated summary of information 
you furnish in the application for insurance.

[[Page 34848]]

The declarations page also describes the term of the policy, limits of 
coverage, and displays the premium and our name. The declarations page 
is a part of this flood insurance policy.
    11. Described Location. The location where the building or personal 
property are found. The described location is shown on the declarations 
page.
    12. Direct Physical Loss By or From Flood. Loss or damage to 
insured property, directly caused by a flood. Direct physical loss must 
be evidenced by physical changes to the property.
    13. Elevated Building. A building that has no basement and that has 
its lowest elevated floor raised above ground level by foundation 
walls, shear walls, posts, piers, pilings, or columns.
    14. Emergency Program. The initial phase of a community's 
participation in the National Flood Insurance Program. During this 
phase, only limited amounts of insurance are available under the Act.
    15. Expense Constant. A flat charge that you must pay on each new 
or renewal policy to defray the expenses of the Federal Government 
related to flood insurance.
    16. Federal Policy Fee. A flat charge that you must pay on each new 
or renewal policy to defray certain administrative expenses incurred in 
carrying out the National Flood Insurance Program. This fee covers 
expenses not covered by the expense constant.
    17. Improvements. Fixtures, alterations, installations, or 
additions comprising a part of the residential condominium building, 
including improvements in the units.
    18. Mudflow. A river of liquid and flowing mud on the surfaces of 
normally dry land areas, as when earth is carried by a current of 
water. Other earth movements, such as landslide, slope failure, or a 
saturated soil mass moving by liquidity down a slope, are not mudflows.
    19. National Flood Insurance Program (NFIP). The program of flood 
insurance coverage and floodplain management administered under the Act 
and applicable Federal regulations in title 44 of the Code of Federal 
Regulations, Subchapter B.
    20. Policy. The entire written contract between you and us. It 
includes:
    a. This printed form;
    b. The application and declarations page;
    c. Any endorsements that may be issued; and
    d. Any renewal certificate indicating that coverage has been 
instituted for a new policy and new policy term.
    Only one building, specifically described by you in the 
application, may be insured under this policy.
    21. Pollutants. Includes, but is not limited to, any solid, liquid, 
gaseous or thermal irritant or contaminant, including smoke, vapor, 
soot, fumes, acids, alkalis, chemicals and waste. Waste includes, but 
is not limited to, materials to be recycled, reconditioned or 
reclaimed.
    22. Post-FIRM Building. A building for which construction or 
substantial improvement occurred after December 31, 1974, or on or 
after the effective date of an initial Flood Insurance Rate Map (FIRM), 
whichever is later.
    23. Probation Premium. A flat charge you must pay on each new or 
renewal policy issued covering property in a community that has been 
placed on probation under the provisions of 44 CFR 59.24.
    24. Regular Program. The final phase of a community's participation 
in the National Flood Insurance Program. In this phase, a Flood 
Insurance Rate Map is in effect and full limits of coverage are 
available under the Act.
    25. Residential Condominium Building. A building, owned and 
administered as a condominium, containing one or more family units and 
in which at least 75% of the floor area is residential.
    26. Special Flood Hazard Area. An area having special flood or 
mudflow, and/or flood-related erosion hazards, and shown on a Flood 
Hazard Boundary Map or Flood Insurance Rate Map as Zone A, AO, A1-30, 
AE, A99, AH, AR, AR/A, AR/AE, AR/AH, AR/AO, AR/A1-30, V1-30, VE, V.
    27. Unit. A single-family unit in a residential condominium 
building.
    28. Valued Policy. A policy in which the insured and the insurer 
agree on the value of the property insured, that value being payable in 
the event of a total loss. The Standard Flood Insurance Policy is not a 
valued policy.

III. Property Covered

A. Coverage A--Building Property

    We insure against direct physical loss by or from flood to:
    1. The residential condominium building described in the 
declarations page at the described location, including all units within 
the building and the improvements within the units.
    2. We also insure such building property for a period of 45 days at 
another location, as set forth in III.C.2.b., Property Removed to 
Safety.
    3. Additions and extensions attached to and in contact with the 
building by means of a rigid exterior wall, a solid load-bearing 
interior wall, a stairway, an elevated walkway, or a roof. At your 
option, additions and extensions connected by any of these methods may 
be separately insured. Additions and extensions attached to and in 
contact with the building by means of a common interior wall that is 
not a solid load-bearing wall are always considered part of the 
building and may not be separately insured.
    4. The following fixtures, machinery and equipment, all while 
within the building or fastened to the building, including its units, 
which are covered under Coverage A only:
    a. Awnings and canopies;
    b. Blinds;
    c. Carpet permanently installed over unfinished flooring;
    d. Central air conditioners;
    e. Elevator equipment;
    f. Fire extinguishing apparatus;
    g. Fire sprinkler systems;
    h. Freezers, walk-in;
    i. Furnaces;
    j. Light fixtures;
    k. Outdoor antennas and aerials fastened to buildings;
    l. Permanently installed corner cupboards, bookcases, paneling, and 
wallpaper;
    m. Pumps and machinery for operating pumps;
    n. Ventilating equipment; and
    o. Wall mirrors, permanently installed.
    p. In the units within the building, installed:
    (1) Built-in dishwashers;
    (2) Built-in microwave ovens;
    (3) Garbage disposal units;
    (4) Hot water heaters, including solar water heaters;
    (5) Kitchen cabinets;
    (6) Plumbing fixtures;
    (7) Radiators;
    (8) Ranges;
    (9) Refrigerators; and
    (10) Stoves.
    5. Materials and supplies to be used for construction, alteration 
or repair of the insured building while the materials and supplies are 
stored in a fully enclosed building at the described location or an 
adjacent property.
    6. A building under construction, alteration or repair at the 
described location.
    a. If the structure is not yet walled or roofed as described in the 
definition for building (see II. Definitions, B.6. Building, paragraph 
a.), then coverage applies:
    (1) Only while such work is in progress; or
    (2) If such work is halted, only for a period of up to 90 
continuous days thereafter.

[[Page 34849]]

    However, coverage does not apply until the building is walled and 
roofed if the lowest floor, including the basement floor, of a non-
elevated building or the lowest elevated floor of an elevated building 
is:
    (3) Below the base flood elevation in Zones AH, AE, A1-30, AR, AR/
AE, AR/AH, AR/A1-30, AR/A, AR/AO; or
    (4) Below the base flood elevation adjusted to include the effect 
of wave action in Zones VE or V1-30.
    The lowest floor levels are based on the bottom of the lowest 
horizontal structural member of the floor in Zones VE or V1-30 and the 
top of the floor in Zones AH, AE, A1-30, AR, AR/AE, AR/AH, AR/A1-30, 
AR/A, AR/AO.
    7. A manufactured home or a travel trailer as described in the 
Definitions
    Section (See II. Definitions, B. Building, paragraphs b. and c.).
    If the manufactured home is in a special flood hazard area, it must 
be anchored in the following manner at the time of the loss:
    a. By over-the-top or frame ties to ground anchors; or
    b. In accordance with the manufacturer's specifications; or
    c. In compliance with the community's floodplain management 
requirements unless it has been continuously insured by the NFIP at the 
same described location since September 30, 1982.
    8. Items of property in a building enclosure lower than the lowest 
elevated floor of an elevated post-FIRM building located in zones A1-
30, AE, AH, AR, AR/A, AR/AE, AR/AH, AR/A1-A30, V1-30, or VE, or in a 
basement, regardless of the zone. Coverage is limited to the following:
    a. Any of the following items, if installed in their functioning 
locations and, if necessary for operation, connected to a power source:
    (1) Central air conditioners;
    (2) Cisterns and the water in them;
    (3) Drywall for walls and ceilings in a basement and the cost of 
labor to nail it, unfinished and unfloated and not taped, to the 
framing;
    (4) Electrical junction and circuit breaker boxes;
    (5) Electrical outlets and switches;
    (6) Elevators, dumbwaiters and related equipment, unless installed 
below the base flood elevation after September 30, 1987;
    (7) Fuel tanks and the fuel in them;
    (8) Furnaces and hot water heaters;
    (9) Heat pumps;
    (10) Nonflammable insulation in a basement;
    (11) Oil tanks and oil in them;
    (12) Pumps and tanks used in solar energy systems;
    (13) Stairways and staircases attached to the building, not 
separated from it by elevated walkways;
    (14) Sump pumps;
    (15) Water softeners, water filters and faucets installed as an 
integral part of the plumbing system;
    (16) Well water tanks and pumps;
    (17) Required utility connections for any item in this list; and
    (18) Footings, foundations, posts, pilings, piers, or other 
foundation walls and anchorage systems required to support a building.
    b. Clean-up.

B. Coverage B--Personal Property

    1. If you have purchased personal property coverage, we insure, 
subject to paragraphs 2. and 3. below, against direct physical loss by 
or from flood to personal property that is inside a fully enclosed 
insured building and is:
    a. Owned by the unit owners of the condominium association in 
common, meaning property in which each unit owner has an undivided 
ownership interest; or
    b. Owned solely by the condominium association and used exclusively 
in the conduct of the business affairs of the condominium association.
    We also insure such personal property for 45 days while stored at a 
temporary location, as set forth in III.C.2.b., Property Removed to 
Safety.
    2. Coverage for personal property includes the following property, 
subject to paragraph B.1., above, which is covered under Coverage B 
only:
    a. Air conditioning units--portable or window type;
    b. Carpet, not permanently installed, over unfinished flooring;
    c. Carpets over finished flooring;
    d. Clothes washers and dryers;
    e. ``Cook-out'' grills;
    f. Food freezers, other than walk-in, and the food in any freezer;
    g. Outdoor equipment and furniture stored inside the insured 
building;
    h. Ovens and the like;
    i. Portable microwave ovens and portable dishwashers; and
    j. Refrigerators.
    3. Items of property in a building enclosure lower than the lowest 
elevated floor of an elevated post-FIRM building located in zones A1-
30, AE, AH, AR, AR/A, AR/AE, AR/AH, AR/A1-A30, V1-30, or VE, or in a 
basement, regardless of the zone, is limited to the following items, if 
installed in their functioning locations and, if necessary for 
operation, connected to a power source:
    a. Air conditioning units--portable or window type;
    b. Clothes washers and dryers; and
    c. Food freezers, other than walk-in, and the food in any freezer.
    4. Special Limits. We will pay no more than $2,500 for any one loss 
to one or more of the following kinds of personal property:
    a. Artwork, photographs, collectibles, or memorabilia, including 
but not limited to, porcelain or other figures, and sports cards;
    b. Rare books, manuscripts or autographed items;
    c. Jewelry, watches, precious and semi-precious stones, articles of 
gold, silver or platinum;
    d. Furs or any article containing fur which represents its 
principal value.
    5. We will pay only for the functional value of antiques.

C. Coverage C--Other Coverages

    1. Debris Removal.
    We will pay reasonable expenses to remove debris directly caused by 
flood provided the debris is:
    a. Debris from property:
    (1) That you do not own;
    (2) That originates from beyond the boundaries of the described 
location; and
    (3) That is physically on or in the insured building; or
    b. Debris of the insured property anywhere.
    If you perform the removal work, the value of your work will be 
based on the Federal minimum wage.
    This coverage does not increase the Coverage A or Coverage B Limit 
of Liability.
    2. Loss Avoidance Measures.
    a. Sandbags, Supplies and Labor.
    (1) We will pay up to $1,000 for the costs you incur to protect the 
insured building from a flood or imminent danger of flood, including:
    (a) Your reasonable expenses to buy:
    (i) Sandbags, including sand to fill them;
    (ii) Fill for temporary levees;
    (iii) Pumps; and
    (iv) Plastic sheeting and lumber used in connection with these 
items; and
    (b) The value of work, at the Federal minimum wage, that you 
perform.
    (2) This coverage for Sandbags, Supplies and Labor is subject to 
the following: Damage to insured property by or from flood is imminent 
and the threat of flood damage is apparent enough to lead a person of 
common prudence to anticipate flood damage. One of the following must 
also occur:
    (a) A general and temporary condition of flooding in the area near 
the described location must occur, even if the flood does not reach the 
insured building; or
    (b) A legally authorized official must issue an evacuation order or 
other civil

[[Page 34850]]

order for the community in which the insured building is located 
calling for measures to preserve life and property from the peril of 
flood.This coverage does not increase the Coverage A or Coverage B 
Limit of Liability.
    b. Property Removed to Safety.
    (1) We will pay up to $1,000 for the reasonable expenses you incur 
to move insured property to another place other than the described 
location that contains the property in order to protect it from flood 
or the imminent danger of flood.
    Reasonable expenses include the value of work, at the Federal 
minimum wage, that you perform.
    (2) If you move insured property to another location other than the 
described location that contains the property, in order to protect it 
from flood or the imminent danger of flood, we will cover such property 
while at that location for a period of 45 consecutive days from the 
date you first begin to move it there. The personal property that is 
moved must be placed in a fully enclosed building, or otherwise 
reasonably protected from the elements.
    Any property removed, including a moveable home described in 
Definition 6. Building, paragraphs b. and c., must be placed above 
ground level or outside of the special flood hazard area.
    This coverage does not increase the Coverage A or Coverage B Limit 
of Liability.

D. Coverage D--Increased Cost of Compliance Coverage

    A. General.
    This policy pays you to comply with a State or local floodplain 
management law or ordinance affecting repair or reconstruction of a 
structure suffering flood damage. Compliance activities eligible for 
payment are: elevation, floodproofing, relocation, or demolition (or 
any combination of these activities) of your structure. Eligible 
floodproofing activities are limited to:
    1. Non-residential structures.
    2. Residential structures with basements that satisfy FEMA's 
standards published in the Code of Federal Regulations [44 CFR 60.6 (b) 
or (c)].
    B. Limit of Liability.
    $20,000 is the maximum we will pay you for this Coverage D 
(Increased Cost of Compliance), which only applies to policies with 
building coverage (Coverage A). Our payment of claims under Coverage D 
is in addition to the amount of coverage which you selected on the 
application and which appears on the Declarations Page. But the maximum 
you can collect under this policy for both Coverage A (Building 
Property) and Coverage D (Increased Cost of Compliance) cannot exceed 
the maximum permitted under the Act. We do NOT charge a separate 
deductible for a claim under Coverage D.
    C. Eligibility.
    1. A structure covered under Coverage A--Building Property 
sustaining a loss caused by a flood as defined by this policy must:
    a. Be a ``repetitive loss structure.'' A ``repetitive loss 
structure'' is one that meets the following conditions:
    (1) The structure is covered by a contract of flood insurance 
issued under the NFIP.
    (2) The structure has suffered flood damage on 2 occasions during a 
10-year period which ends on the date of the second loss.
    (3) The cost to repair the flood damage, on average, equaled or 
exceeded 25% of the market value of the structure at the time of each 
flood loss.
    (4) In addition to the current claim, the NFIP must have paid the 
previous qualifying claim, and the State or community must have a 
cumulative, substantial damage provision or repetitive loss provision 
in its floodplain management law or ordinance being enforced against 
the structure; or
    b. Be a structure that has had flood damage in which the cost to 
repair equals or exceeds 50% of the market value of the structure at 
the time of the flood. The State or community must have a substantial 
damage provision in its floodplain management law or ordinance being 
enforced against the structure.
    2. This Coverage D pays you to comply with State or local 
floodplain management laws or ordinances that meet the minimum 
standards of the National Flood Insurance Program found in the Code of 
Federal Regulations at 44 CFR 60.3. We pay for compliance activities 
that exceed those standards under these conditions:
    a. C.1.a. above.
    b. Elevation or floodproofing in any risk zone to preliminary or 
advisory base flood elevations provided by FEMA which the State or 
local government has adopted and is enforcing for flood-damaged 
structures in such areas. (This includes compliance activities in B, C, 
X, or D zones which are being changed to zones with base flood 
elevations. This also includes compliance activities in zones where 
base flood elevations are being increased, and a flood-damaged 
structure must comply with the higher advisory base flood elevation.) 
Increased Cost of Compliance coverage does not apply to situations in 
B, C, X, or D zones where the community has derived its own elevations 
and is enforcing elevation or floodproofing requirements for flood-
damaged structures to elevations derived solely by the community.
    c. Elevation or floodproofing above the base flood elevation to 
meet State or local ``freeboard'' requirements, i.e., that a structure 
must be elevated above the base flood elevation.
    3. Under the minimum NFIP criteria at 44 CFR 60.3(b)(4), states and 
communities must require the elevation or floodproofing of structures 
in unnumbered A zones to the base flood elevation where elevation data 
is obtained from a Federal, State, or other source. Such compliance 
activities are also eligible for Coverage D.
    4. This coverage will also pay for the incremental cost, after 
demolition or relocation, of elevating or floodproofing a structure 
during its rebuilding at the same or another site to meet State or 
local floodplain management laws or ordinances, subject to Exclusion 
E.7. below relating to improvements.
    5. This coverage will also pay to bring a flood-damaged structure 
into compliance with state or local floodplain management laws or 
ordinances even if the structure had received a variance before the 
present loss from the applicable floodplain management requirements.
    D. Conditions.
    1. When a structure covered under Coverage A--Building Property 
sustains a loss caused by a flood, our payment for the loss under this 
Coverage D will be for the increased cost to elevate, floodproof, 
relocate, or demolish (or any combination of these activities) caused 
by the enforcement of current State or local floodplain management 
ordinances or laws. Our payment for eligible demolition activities will 
be for the cost to demolish and clear the site of the building debris 
or a portion thereof caused by the enforcement of current State or 
local floodplain management ordinances or laws. Eligible activities for 
the cost of clearing the site will include those necessary to 
discontinue utility service to the site and ensure proper abandonment 
of on-site utilities.
    2. When the building is repaired or rebuilt, it must be intended 
for the same occupancy as the present building unless otherwise 
required by current floodplain management ordinances or laws.
    E. Exclusions.
    Under this Coverage D (Increased Cost of Compliance) we will not 
pay for:
    1. The cost to comply with any floodplain management law or

[[Page 34851]]

ordinance in communities participating in the Emergency Program.
    2. The cost associated with enforcement of any ordinance or law 
that requires any insured or others to test for, monitor, clean up, 
remove, contain, treat, detoxify or neutralize, or in any way respond 
to, or assess the effects of pollutants.
    3. The loss in value to any insured building or other structure due 
to the requirements of any ordinance or law.
    4. The loss in residual value of the undamaged portion of a 
building demolished as a consequence of enforcement of any State or 
local floodplain management law or ordinance.
    5. Any Increased Cost of Compliance under this Coverage D:
    a. Until the building is elevated, floodproofed, demolished, or 
relocated on the same or to another premises; and
    b. Unless the building is elevated, floodproofed, demolished, or 
relocated as soon as reasonably possible after the loss, not to exceed 
two years.
    6. Any code upgrade requirements, e.g., plumbing or electrical 
wiring, not specifically related to the State or local floodplain 
management law or ordinance.
    7. Any compliance activities needed to bring additions or 
improvements made after the loss occurred into compliance with State or 
local floodplain management laws or ordinances.
    8. Loss due to any ordinance or law that you were required to 
comply with before the current loss.
    9. Any rebuilding activity to standards that do not meet the NFIP's 
minimum requirements. This includes any situation where the insured has 
received from the State or community a variance in connection with the 
current flood loss to rebuild the property to an elevation below the 
base flood elevation.
    10. Increased Cost of Compliance for a garage or carport.
    11. Any structure insured under an NFIP Group Flood Insurance 
Policy.
    12. Assessments made by a condominium association on individual 
condominium unit owners to pay increased costs of repairing commonly 
owned buildings after a flood in compliance with State or local 
floodplain management ordinances or laws.
    F. Other Provisions.
    1. Increased Cost of Compliance coverage will not be included in 
the calculation to determine whether coverage meets the coinsurance 
requirement for replacement cost coverage under VIII. General 
Conditions, V. Loss Settlement.
    2. All other conditions and provisions of the policy apply.

IV. Property Not Covered

    We do not cover any of the following:
    1. Personal property not inside a building;
    2. A building, and personal property in it, located entirely in, 
on, or over water or seaward of mean high tide, if constructed or 
substantially improved after September 30, 1982;
    3. Open structures, including a building used as a boathouse or any 
structure or building into which boats are floated, and personal 
property located in, on or over water;
    4. Recreational vehicles other than travel trailers described in 
the Definitions Section (see II.B.6.c.) whether affixed to a permanent 
foundation or on wheels;
    5. Self-propelled vehicles or machines, including their parts and 
equipment. However, we do cover self-propelled vehicles or machines, 
provided they are not licensed for use on public roads that are:
    a. Used mainly to service the described location or
    b. Designed and used to assist handicapped persons, while the 
vehicles or machines are inside a building at the described location;
    6. Land, land values, lawns, trees, shrubs, plants, growing crops, 
or animals;
    7. Accounts, bills, coins, currency, deeds, evidences of debt, 
medals, money, scrip, stored value cards, postage stamps, securities, 
bullion, manuscripts, or other valuable papers;
    8. Underground structures and equipment, including wells, septic 
tanks and septic systems;
    9. Those portions of walks, walkways, decks, driveways, patios and 
other surfaces, all whether protected by a roof or not, located outside 
the perimeter, exterior walls of the insured building;
    10. Containers, including related equipment, such as, but not 
limited to, tanks containing gases or liquids;
    11. Buildings and all their contents if more than 49% of the actual 
cash value of the building is below ground, unless the lowest level is 
at or above the base flood elevation and is below ground by reason of 
earth having been used as insulation material in conjunction with 
energy efficient building techniques;
    12. Fences, retaining walls, seawalls, bulkheads, wharves, piers, 
bridges, and docks;
    13. Aircraft or watercraft, or their furnishings and equipment;
    14. Swimming pools, hot tubs, spas, and their equipment such as, 
but not limited to, heaters, filters, pumps, and pipes, wherever 
located;
    15. Property not eligible for flood insurance pursuant to the 
provisions of the Coastal Barrier Resources Act and the Coastal Barrier 
Improvements Act of 1990 and amendments to these Acts.
    16. Loss to any building or personal property located on land 
leased from the Federal Government, arising from or incident to the 
flooding of the land by the Federal Government, where the lease 
expressly holds the Federal Government harmless under flood insurance 
issued under any Federal Government program.
    17. Personal property used in connection with any incidental 
commercial occupancy or use of the building.

V. Exclusions

    A. We only pay for direct physical loss by or from flood, which 
means that we do not pay you for:
    1. Loss of revenue or profits;
    2. Loss of access to the insured property or described location;
    3. Loss of use of the insured property or described location;
    4. Loss from interruption of business or production;
    5. Any additional living expenses incurred while the insured 
building is being repaired or is unable to be occupied for any reason;
    6. The cost of complying with any ordinance or law:
    a. Requiring or regulating the construction, demolition, 
remodeling, renovation or repair of property, including removal of any 
resulting debris. This exclusion does not apply to any eligible 
activities that we describe in Coverage D--Increased Cost of 
Compliance; or
    b. Requiring you or others to test for, monitor, clean up, remove, 
contain, treat, detoxify, or neutralize, or in any way respond to, or 
assess the effect of, any pollutant; or
    7. Any other economic loss.
    B. We do not insure a loss directly or indirectly caused by a flood 
that is in progress at the time and date:
    1. The policy term begins; or
    2. Coverage is added at your request.
    C. We do not insure for loss to property caused directly by earth 
movement even if the earth movement is caused by flood. Some examples 
of earth movement that we do not cover are:
    1. Earthquake;
    2. Landslide;
    3. Land subsidence;
    4. Sinkholes;
    5. Destabilization or movement of land that results from 
accumulation of water in subsurface land areas; or

[[Page 34852]]

    6. Gradual erosion.
    We do, however, pay for losses from erosion and mudflows that are 
specifically covered under our definition of flood.
    D. We do not insure for direct physical loss caused directly or 
indirectly by:
    1. The pressure or weight of ice;
    2. Freezing or thawing;
    3. Rain, snow, sleet, hail, or water spray;
    4. Water, moisture, mildew, or mold damage that results primarily 
from any condition:
    a. Substantially confined to the insured building; or
    b. That is within your control including, but not limited to:
    (1) Design, structural or mechanical defects;
    (2) Failures, stoppages, or breakage of water or sewer lines, 
drains, pumps, fixtures or equipment; or
    (3) Failure to inspect and maintain the property after a flood 
recedes;
    5. Water or water-borne material that:
    a. Backs up through sewers or drains; or
    b. Discharges or overflows from a sump, sump pump or related 
equipment; or
    c. Seeps or leaks on or through insured property, unless the 
damaged insured property has been, at the same time, damaged by flood;
    6. The pressure or weight of water unless the damaged insured 
property has been, at the same time, damaged by flood;
    7. Power, heating or cooling failure unless the failure results 
from direct physical loss by or from flood to power, heating or cooling 
equipment situated on the described location;
    8. Discharge, dispersal, seepage, migration, release, or escape of 
pollutants;
    9. Theft, fire, explosion, wind, or windstorm;
    10. Anything that you or your agents do or conspire to do to 
deliberately cause loss by flood; or
    11. Alteration of the insured property that significantly increases 
the risk of flooding.

VI. Deductibles

    A. When a loss is covered under this policy, we will pay only that 
part of the loss that exceeds the applicable deductible amount, subject 
to the limit of insurance that applies. The deductible amount is shown 
on the declarations page.
    However, when a building under construction, alteration or repair 
does not have at least two rigid exterior walls and a fully secured 
roof at the time of loss, your deductible amount will be two times the 
deductible that would otherwise apply to a completed building.
    B. In each loss from flood, separate deductibles apply to the 
building and personal property insured by this policy.
    C. No deductible applies to:
    1. III.C.2. Loss Avoidance Measures; or
    2. III.D. Increased Cost of Compliance Coverage.

VII. Coinsurance

    A. This Coinsurance Section applies only to coverage on the 
building.
    B. We will impose a penalty on loss payment unless the amount of 
insurance applicable to the damaged building is:
    1. At least 80% of its replacement cost; or
    2. The maximum amount of insurance available for that building 
under the NFIP, whichever is less.
    C. If the actual amount of insurance on the building is less than 
the required amount in accordance with the terms of VII. B. above, then 
loss payment is determined as follows (subject to all other relevant 
conditions in this policy including those pertaining to valuation, 
adjustment, settlement and payment of loss):
    1. Divide the actual amount of insurance carried on the building by 
the required amount of insurance.
    2. Multiply the amount of loss, before application of the 
deductible, by the figure determined in C.1. above.
    3. Subtract the deductible from the figure determined in C.2. 
above.
    We will pay the amount determined in C.3. above, or the amount of 
insurance carried, whichever is less. The amount of insurance carried, 
if in excess of the applicable maximum amount of insurance available 
under the NFIP, is reduced accordingly.

Examples

                    Example #1 (Inadequate Insurance)
------------------------------------------------------------------------
             Example #1 (Inadequate Insurance)
------------------------------------------------------------------------
Replacement value of the building..........................     $250,000
Required amount of insurance...............................     $200,000
(80% of replacement value of $250,000)
Actual amount of insurance carried.........................     $180,000
Amount of the loss.........................................     $150,000
Deductible.................................................         $500
------------------------------------------------------------------------

Step 1: 180,000  200,000 = .90
(90% of what should be carried.)
Step 2: 150,000  x  .90 = 135,000
Step 3: 135,000 - 500 = 134,500

    We will pay no more than $134,500. The remaining $15,500 is not 
covered due to the coinsurance penalty ($15,000) and application of the 
deductible ($500).

                     Example #2 (Adequate Insurance)
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Replacement value of the building..........................     $500,000
(80% of replacement value is $400,000)
 
Required amount of insurance...............................     $400,000
Actual amount of insurance carried.........................     $400,000
Amount of the loss.........................................     $200,000
Deductible.................................................         $500
------------------------------------------------------------------------

    In this example there is no coinsurance penalty, because the actual 
amount of insurance carried meets the required amount. We will pay no 
more than $199,500 ($200,000 amount of loss minus the $500 deductible).
    D. In calculating the full replacement cost of a building:
    1. The replacement cost value of any covered building property will 
be included;
    2. The replacement cost value of any building property not covered 
under this policy will not be included; and
    3. Only the replacement cost value of improvements installed by the 
condominium association will be included.

VIII. General Conditions

    A. Pair and Set Clause.
    In case of loss to an article that is part of a pair or set, we 
will have the option of paying you:
    1. An amount equal to the cost of replacing the lost, damaged or 
destroyed article, less depreciation; or
    2. An amount which represents the fair proportion of the total 
value of the pair or set that the lost, damaged or destroyed article 
bears to the pair or set.
    B. Concealment or Fraud and Policy Voidance.
    1. With respect to all insureds under this policy, this policy:
    a. Is void,
    b. Has no legal force or effect,
    c. Cannot be renewed, and
    d. Cannot be replaced by a new flood policy, if, before or after a 
loss, you or any other insured or your agent have at any time:
    (1) Intentionally concealed or misrepresented any material fact or 
circumstance,
    (2) Engaged in fraudulent conduct, or
    (3) Made false statements, relating to this policy or any other 
NFIP insurance.
    2. This policy will be void as of the date the wrongful acts 
described in B.1. above were committed.

[[Page 34853]]

    3. Fines, civil penalties, and imprisonment under applicable 
Federal laws may also apply to the acts of fraud or concealment 
described above.
    4. This policy is also void for reasons other than fraud, 
misrepresentation, or wrongful act. This policy is void from its 
inception and has no legal force under the following conditions:
    a. If the property listed on the application is not eligible for 
coverage under the NFIP; or
    b. If the property is located in a community that was not 
participating in the NFIP on the policy's inception date and did not 
join or re-enter the program during the policy term and before the loss 
occurred.
    C. Other Insurance.
    1. If a loss covered by this policy is also covered by other 
insurance that includes flood coverage not issued under the Act, we 
will not pay more than the amount of insurance that you are entitled to 
for lost, damaged or destroyed property insured under this policy 
subject to the following:
    a. We will pay only the proportion of the loss that the amount of 
insurance that applies under this policy bears to the total amount of 
insurance covering the loss, unless paragraph C.1.b. or paragraph 
C.1.c. immediately below applies.
    b. If the other policy has a provision stating that it is excess 
insurance, this policy will be primary.
    c. This policy will be primary (but subject to its own deductible) 
up to the deductible in the other flood policy (except another policy 
as described in paragraph C.1.b. above). When the other deductible 
amount is reached, this policy will participate in the same proportion 
that the amount of insurance under this policy bears to the total 
amount of both policies, for the remainder of the loss.
    Where there is a flood insurance policy in the name of a unit-owner 
that covers the same loss as this policy, then this policy will be 
primary.
    D. Amendments, Waivers, Assignment.
    This policy cannot be changed nor can any of its provisions be 
waived without the express written consent of the Federal Insurance 
Administrator. No action that we take under the terms of this policy 
constitutes a waiver of any of our rights. You may assign this policy 
in writing when you transfer title of your property to someone else 
except under these conditions:
    1. When this policy covers only personal property; or
    2. When this policy covers a structure during the course of 
construction.
    E. Cancellation of Policy by You.
    1. You may cancel this policy at any time.
    2. If you cancel this policy, you may be entitled to a full or 
partial refund of premium under our applicable rules and regulations.
    F. Non-Renewal of the Policy by Us.
    Your policy will not be renewed:
    1. If the community where your covered property is located stops 
participating in the NFIP, or
    2. Your building has been declared ineligible under section 1316 of 
the Act.
    G. Reduction and Restoration of Coverage.
    1. If the premium we received from you was not enough to buy the 
kind and amount of coverage you requested, we will provide only the 
amount of coverage that can be purchased for the premium payment we 
received.
    2. The amount of coverage resulting from the reduction described in 
1. above can be restored to the amount you requested as follows:
    a. Discovery of Insufficient Premium or Incomplete Rating 
Information Before a Loss.
    (1) If we discover before you have a flood loss that your premium 
payment was not enough to buy the requested amount of coverage, we will 
send you and any mortgagee or trustee known to us a bill for the 
required additional premium for the current policy term (or that 
portion of the current policy term following any endorsement changing 
the amount of coverage). If you or the mortgagee or trustee pay the 
additional premium within 30 days from the date of our bill, we will 
restore the amount of coverage to the originally requested amount 
effective to the beginning of the current policy term (or subsequent 
date of any endorsement changing the amount of coverage).
    (2) If we determine before you have a flood loss that the rating 
information we have is incomplete and prevents us from calculating the 
additional premium, we will ask you to send the required information. 
You must submit the information within 60 days of our request. Once we 
determine the amount of additional premium for the current policy term, 
we will follow the procedure in (1) above.
    (3) If we do not receive the additional premium (or additional 
information) by the date it is due, the amount of coverage can only be 
restored by endorsement subject to any appropriate waiting period.
    b. Discovery of Insufficient Premium or Incomplete Rating 
Information After a Loss.
    (1) If we discover after you have a flood loss that your premium 
payment was not enough to buy the requested amount of coverage, we will 
send you and any mortgagee or trustee known to us a bill for the 
required additional premium for the current and the prior policy terms. 
If you or the mortgagee or trustee pay the additional premium within 30 
days of the date of our bill, we will restore the amount of coverage to 
the originally requested amount effective to the beginning of the prior 
policy term.
    (2) If we discover after you have a flood loss that the rating 
information we have is incomplete and prevents us from calculating the 
additional premium, we will ask you to send the required information. 
You must submit the information before your claim can be paid. Once we 
determine the amount of additional premium for the current and prior 
policy terms, we will follow the procedure in (1) above.
    (3) If we do not receive the additional premium by the date it is 
due, your flood insurance claim will be settled based on the reduced 
amount of coverage. The amount of coverage can only be restored by 
endorsement subject to any appropriate waiting period.
    3. However, if we find that you or your agent intentionally did not 
tell us, or falsified, any important fact or circumstance or did 
anything fraudulent relating to this insurance, the provisions of 
paragraph B. Concealment or Fraud and Policy Voidance above apply.
    H. Policy Renewal.
    1. This policy will expire at 12:01 a.m. on the last day of the 
policy term.
    2. We must receive the payment of the appropriate renewal premium 
within 30 days of the expiration date.
    3. If we find, however, that your renewal notice was not placed 
into the U.S. Postal Service, or if it was mailed properly, it was 
prepared in such a way, e.g., with an incorrect, incomplete, or 
illegible address, as to delay its delivery to you before the due date 
for the renewal premium, then we will follow these procedures:
    a. If you or your agent notified us, not later than one year after 
the date on which the payment of the renewal premium was due, of 
nonreceipt of a renewal notice before the due date for the renewal 
premium, and we determine that the circumstances in the preceding 
paragraph apply, 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.
    b. If we do not receive the premium requested in the second bill by 
the revised due date, then we will not renew the policy. In that case, 
the policy will remain as an expired policy as of the expiration date 
shown on the declarations page.

[[Page 34854]]

    4. In connection with the renewal of this policy, we may ask you 
during the policy term to re-certify, on a Recertification 
Questionnaire that we will provide to you, the rating information used 
to rate your most recent application for or renewal of insurance.
    I. Conditions Suspending or Restricting Insurance.
    We are not liable for loss that occurs while there is a hazard that 
is increased by any means within your control or knowledge.
    J. Requirements in Case of Loss.
    In case of a flood loss to insured property, you must:
    1. Give prompt written notice to us;
    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.
    3. Prepare an inventory of damaged personal property showing the 
quantity, description, actual cash value, and amount of loss. Attach 
all bills, receipts and related documents;
    4. 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 which furnishes us with the following 
information:
    a. The date and time of loss;
    b. A brief explanation of how the loss happened;
    c. Your interest (for example, ``owner'') and the interest, if any, 
of others in the damaged property;
    d. Details of any other insurance that may cover the loss;
    e. Changes in title or occupancy of the insured property during the 
term of the policy;
    f. Specifications of damaged insured buildings and detailed repair 
estimates;
    g. Names of mortgagees or anyone else having a lien, charge or 
claim against the insured property;
    h. Details about who occupied any insured building at the time of 
loss and for what purpose; and
    i. The inventory of damaged personal property described in 3. 
above.
    5. In completing the proof of loss, you must use your own judgment 
concerning the amount of loss and justify that amount.
    6. You must cooperate with our adjuster or representative in the 
investigation of the claim.
    7. 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 sixty days after the loss even if 
the adjuster does not furnish the form or help you complete it.
    8. We have not authorized the adjuster to approve or disapprove 
claims or to tell you whether we will approve your claim.
    9. At our option, we may accept an adjuster's report of the loss 
instead of your proof of loss. The adjuster's report will include 
information about your loss and the damages you sustained. You must 
sign the adjuster's report. At our option, we may require you to swear 
to the report.
    K. Our Options After a Loss.
    Options that we may, in our sole discretion, exercise after loss 
include the following:
    1. At such reasonable times and places that we may designate, you 
must:
    a. Show us or our representative the damaged property;
    b. Submit to examination under oath, while not in the presence of 
another insured, and sign the same; and
    c. Permit us to examine and make extracts and copies of:
    (1) Any policies of property insurance insuring you against loss 
and the deed establishing your ownership of the insured real property;
    (2) Condominium association documents including the Declarations of 
the condominium, its Articles of Association or Incorporation, Bylaws, 
and rules and regulations; and
    (3) All books of accounts, bills, invoices and other vouchers, or 
certified copies pertaining to the damaged property if the originals 
are lost.
    2. We may request, in writing, that you furnish us with a complete 
inventory of the lost, damaged, or destroyed property, including:
    a. Quantities and costs;
    b. Actual cash values or replacement cost (whichever is 
appropriate);
    c. Amounts of loss claimed; and
    d. Any written plans and specifications for repair of the damaged 
property that you can make reasonably available to us.
    3. If we give you written notice within 30 days after we receive 
your signed, sworn proof of loss, we may:
    a. Repair, rebuild or replace any part of the lost, damaged or 
destroyed property with material or property of like kind and quality 
or its functional equivalent; and
    b. Take all or any part of the damaged property at the value that 
we agree upon or its appraised value.
    L. No Benefit to Bailee.
    No person or organization, other than you, having custody of 
covered property will benefit from this insurance.
    M. Loss Payment.
    1. We will adjust all losses with you. We will pay you unless some 
other person or entity is named in the policy or is legally entitled to 
receive payment. Loss will be payable 60 days after we receive 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:
    a. We reach an agreement with you;
    b. There is an entry of a final judgment; or
    c. There is a filing of an appraisal award with us, as provided in 
VIII. P.
    2. If we reject your proof of loss in whole or in part you may:
    a. Accept such denial of your claim;
    b. Exercise your rights under this policy; or
    c. File an amended proof of loss as long as it is filed within 60 
days of the date of the loss or within any extension of time allowed by 
the Administrator.
    N. Abandonment.
    You may not abandon damaged or undamaged insured property to us.
    O. Salvage.
    We may permit you to keep damaged insured property 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.
    P. Appraisal.
    If you and we fail to agree on the actual cash value or, if 
applicable, replacement cost of the damaged property so as to determine 
the amount of loss, then either may demand an appraisal of the loss. In 
this event, you and we will each choose a competent and impartial 
appraiser within 20 days after receiving a written request from the 
other. The two appraisers will choose an umpire. If they cannot agree 
upon an umpire within 15 days, you or we may request that the choice be 
made by a judge of a court of record in the state where the insured 
property is located. The appraisers will separately state the actual 
cash value, the replacement cost and the amount of loss to each item. 
If the appraisers submit a written report of an agreement to us, the 
amount agreed upon will be the amount of loss. If they fail to agree, 
they will submit their differences to the umpire. A decision agreed to 
by any two will set the amount of actual cash value and loss, or if it 
applies, the replacement cost and loss.
    Each party will:
    1. Pay its own appraiser; and
    2. Bear the other expenses of the appraisal and umpire equally.
    Q. Mortgage Clause.
    The word ``mortgagee'' includes trustee.
    Any loss payable under Coverage A--Building will be paid to any 
mortgagee of whom we have actual notice and you, as interests appear. 
If more than one mortgagee is named, the order of

[[Page 34855]]

payment will be the same as the order of precedence of the mortgages.
    If we deny your claim, that denial will not apply to a valid claim 
of the mortgagee, if the mortgagee:
    1. Notifies us of any change in the ownership or occupancy, or 
substantial change in risk of which the mortgagee is aware;
    2. Pays any premium due under this policy on demand if you have 
neglected to pay the premium; and
    3. Submits a signed, sworn proof of loss within 60 days after 
receiving notice from us of your failure to do so.
    All of the terms of this policy will then apply directly to the 
mortgagee.
    If we decide to cancel or not renew this policy, it will continue 
in effect for the benefit of the mortgagee only for 30 days after we 
notify the mortgagee of the cancellation or non-renewal.
    If we pay the mortgagee for any loss and deny payment to you, we 
are subrogated to all the rights of the mortgagee granted under the 
mortgage on the property.
    Subrogation will not impair the right of the mortgagee to recover 
the full amount of the mortgagee's claim.
    R. Suit Against Us.
    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 one year of the date of the written 
denial of all or part of the 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. This requirement applies to 
any claim that you may have under this policy and to any dispute that 
you may have arising out of the handling of any claim under the policy.
    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 must pay us back first 
before you may keep any of that money.
    T. Continuous Lake Flooding.
    1. Where an insured building has been flooded by rising lake waters 
continuously for 90 days or more and it appears reasonably certain that 
a continuation of this flooding will result in a covered loss to an 
insured building equal to or greater than the building policy limits 
plus the deductible 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:
    a. To make no further claim under this policy;
    b. Not to seek renewal of this policy;
    c. Not to apply for any flood insurance under the Act for property 
at the described location and;
    d. Not to seek a premium refund for current or prior terms.
    If the policy term ends before an insured building has been flooded 
continuously for 90 days, the provisions of this paragraph T.1. will 
apply as long as the insured building suffers a covered loss before the 
policy term ends.
    2. If your insured building is subject to continuous lake flooding 
from a closed basin lake, you may elect to file a claim under either 
paragraph T.1. above or this paragraph T.2. (A ``closed basin lake'' is 
a natural lake from which water leaves primarily through evaporation 
and whose surface area now exceeds or has exceeded one square mile at 
any time in the recorded past. Most of the nation's closed basin lakes 
are in the western half of the United States where annual evaporation 
exceeds annual precipitation and where lake levels and surface areas 
are subject to considerable fluctuation due to wide variations in the 
climate. These lakes may overtop their basins on rare occasions.) Under 
this paragraph we will pay your claim as if the building is a total 
loss even though it has not been continuously inundated for 90 days, 
subject to the following conditions:
    a. Lake flood waters must damage or imminently threaten to damage 
your building.
    b. Before approval of your claim, you must:
    (1) Agree to a claim payment that reflects your buying back the 
salvage on a negotiated basis; and
    (2) Grant the conservation easement contained in the Federal 
Emergency Management Agency's (FEMA) ``Policy Guidance for Closed Basin 
Lakes,'' to be recorded in the office of the local recorder of deeds. 
FEMA, in consultation with the community in which the property is 
located, will identify on a map an area or areas of special 
consideration (ASC) in which there is a potential for flood damage from 
continuous lake flooding. FEMA will give the community the agreed-upon 
map showing the ASC. This easement will only apply to that portion of 
the property in the ASC. It will allow certain agricultural and 
recreational uses of the land. The only structures that it will allow 
on any portion of the property within the ASC are certain, simple 
agricultural and recreational structures. If any of these allowable 
structures are insurable buildings under the NFIP and are insured under 
the NFIP, they will not be eligible for the benefits of this paragraph 
T.2. If a U.S. Army Corps of Engineers-certified flood control project 
or otherwise certified flood control project later protects the 
property, FEMA will, upon request, amend the ASC to remove areas 
protected by those projects. The restrictions of the easement will then 
no longer apply to any portion of the property removed from the ASC; 
and
    (3) Comply with paragraphs T.1.a. through T.1.d. above.
    c. Within 90 days of approval of your claim, you must move your 
building to a new location outside the ASC. FEMA will give you an 
additional 30 days to move if you show there is sufficient reason to 
extend the time.
    d. Before the final payment of your claim, you must acquire an 
elevation certificate and a floodplain development permit from your 
local floodplain administrator for the new location of your building.
    e. Before the approval of your claim, the community having 
jurisdiction over your building must:
    (1) Adopt a permanent land use ordinance, or a temporary moratorium 
for a period not to exceed 6 months to be followed immediately by a 
permanent land use ordinance, that is consistent with the provisions 
specified in the easement required in paragraph T.2.b. above.
    (2) Agree to declare and report any violations of this ordinance to 
FEMA so that under Sec. 1316 of the National Flood Insurance Act of 
1968, as amended, flood insurance to the building can be denied; and
    (3) Agree to maintain as deed-restricted, for purposes compatible 
with open space or agricultural or recreational use only, any affected 
property the community acquires an interest in. These deed restrictions 
must be consistent with the provisions of T.2.b. above except that even 
if a certified project protects the property, the land use restrictions 
continue to apply if the property was acquired under the Hazard 
Mitigation Grant Program or the Flood Mitigation Assistance Program. If 
a non-profit land trust organization receives the property as a 
donation, that organization must maintain the property as deed-

[[Page 34856]]

restricted, consistent with the provisions of T.2.b. above.
    f. Before the approval of your claim, the affected State must take 
all action set forth in FEMA's ``Policy Guidance for Closed Basin 
Lakes.''
    g. You must have NFIP flood insurance coverage continuously in 
effect from a date established by FEMA until you file a claim under 
this paragraph T.2. If a subsequent owner buys NFIP insurance that goes 
into effect within 60 days of the date of transfer of title, any gap in 
coverage during that 60-day period will not be a violation of this 
continuous coverage requirement. For the purpose of honoring a claim 
under this paragraph T.2, we will not consider to be in effect any 
increased coverage that became effective after the date established by 
FEMA. The exception to this is any increased coverage in the amount 
suggested by your insurer as an inflation adjustment.
    h. This paragraph T.2. will be in effect for a community when the 
FEMA Regional Director for the affected region provides to the 
community, in writing, the following:
    (1) Confirmation that the community and the State are in compliance 
with the conditions in paragraphs T.2.e. and T.2.f. above, and
    (2) The date by which you must have flood insurance in effect.
    U. Duplicate Policies Not Allowed.
    1. We will not insure your property under more than one NFIP 
policy.
    If we find that the duplication was not knowingly created, we will 
give you written notice. The notice will advise you that you may choose 
one of several options under the following procedures:
    a. If you choose to keep in effect the policy with the earlier 
effective date, you may also choose to add the coverage limits of the 
later policy to the limits of the earlier policy. The change will 
become effective as of the effective date of the later policy.
    b. If you choose to keep in effect the policy with the later 
effective date, you may also choose to add the coverage limits of the 
earlier policy to the limits of the later policy. The change will be 
effective 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 permissible limits of coverage 
under the Act or your insurable interest, whichever is less. We will 
make a refund to you, according to applicable NFIP rules, of the 
premium for the policy not being kept in effect.
    2. The insured's option under this condition U. Duplicate Policies 
Not Allowed to elect which NFIP policy to keep in effect does not apply 
when duplicates have been knowingly created. Losses occurring under 
such circumstances will be adjusted according to the terms and 
conditions of the earlier policy. The policy with the later effective 
date must be canceled.
    V. Loss Settlement.
    1. Introduction.
    This policy provides three methods of settling losses, Replacement 
Cost, Special Loss Settlement and Actual Cash Value. Each method is 
used for a different type of property as explained in paragraphs 
V.1.a., b., and c. below.
    a. Replacement Cost Loss Settlement described in paragraph V.2. 
below applies to buildings.
    b. Special Loss Settlement described in paragraph V.3. below 
applies to a travel trailer or a manufactured home.
    c. Actual Cash Value loss settlement applies to all other property 
covered under this policy, as outlined in paragraph V.4. below.
    2. Replacement Cost Loss Settlement
    a. We will pay to repair or replace a damaged or destroyed 
building, after application of the deductible and without deduction for 
depreciation, but not more than the least of the following amounts:
    (1) The amount of insurance in this policy that applies to the 
building;
    (2) The replacement cost of that part of the building damaged, with 
materials of like kind and quality and for like occupancy and use; or
    (3) The necessary amount actually spent to repair or replace the 
damaged part of the building for like occupancy and use.
    b. We will not be liable for any loss on a Replacement Cost 
Coverage basis unless and until actual repair or replacement of the 
damaged building or parts thereof, is completed.
    c. If a building is rebuilt at a location other than the described 
location, we will pay no more than it would have cost to repair or 
rebuild at the described location, subject to all other terms of 
Replacement Cost Loss Settlement.
    3. Special Loss Settlement.
    The following loss settlement conditions apply to a manufactured 
home or a travel trailer, as defined in Section II--Definitions, B., 
paragraphs 6.b. and c.:
    a. If such a manufactured home or travel trailer is at least 16 
feet wide when fully assembled and has at least 600 square feet within 
its perimeter walls when fully assembled, and is totally destroyed or 
damaged to such an extent that, in our judgment, it is not economically 
feasible to repair, at least to its pre-damaged condition, we will, at 
our discretion pay the least of the following amounts:
    (1) The lesser of the replacement cost of the manufactured home or 
travel trailer or 1.5 times the actual cash value; or
    (2) The Building Limit of liability shown on your Declarations 
Page.
    b. If such a manufactured home or travel trailer is partially 
damaged and, in our judgment, it is economically feasible to repair it 
to its pre-damaged condition, we will settle the loss according to the 
Replacement Cost Loss Settlement conditions in paragraph V.2. above.
    4. Actual Cash Value.
    a. The types of property noted below are subject to actual cash 
value loss settlement. ``Actual cash value'' is defined in II. 
Definitions.
    (1) Personal property;
    (2) Insured property abandoned after a loss and that remains as 
debris at the described location.
    (3) Outside antennas and aerials, awning, and other outdoor 
equipment, all whether attached to the buildings or not;
    (4) Carpeting and pads; and
    (5) Appliances.
    b. We will pay the least of the following amounts:
    (1) The applicable amount of insurance under this policy;
    (2) The actual cash value; or
    (3) The amount it would cost to repair or replace the property with 
material of like kind and quality within a reasonable time after the 
loss.

VIII. Liberalization Clause

    If we make a change that broadens your coverage under this edition 
of our policy, but does not require any additional premium, then that 
change will automatically apply to your insurance as of the date we 
implement the change, provided that this implementation date falls 
within 60 days before or during the policy term stated in the 
Declarations Page.

IX. What Law Governs

    This policy and all disputes arising from the handling of any claim 
under the policy are governed exclusively by the flood insurance 
regulations issued by FEMA, the National Flood Insurance Act of 1968, 
as amended (42 U.S.C. 4001, et seq.), and Federal common law.
    In Witness Whereof, we have signed this policy below and hereby 
enter into this Insurance Agreement.


Jo Ann Howard,

Administrator,

[[Page 34857]]


Federal Insurance Administration.


(Catalog of Federal Domestic Assistance No. 83.100,''Flood Insurance'')

    Dated: May 18, 2000.
Jo Ann Howard,
Administrator, Federal Insurance Administration.
[FR Doc. 00-13298 Filed 5-30-00; 8:45 am]
BILLING CODE 6718-03-P