Major floods cause major losses, and cities are not immune to the impact. Like residential policyholders and businesses, communities are also under pressure to file flood insurance claims and recover from the damage as soon as possible.
In the United States, most flood insurance is offered through the National Flood Insurance Program (NFIP). While city properties are insurable under the NFIP, the requirements for participation and policy specifics can vary quite a bit from state to state and community to community. However, attorney Bill Voss would like to share some basic information and answers to common questions about city buildings and their coverage under the NFIP.
What Cities Should Understand About NFIP Coverage for Flooded Buildings
In order to use coverage through the NFIP, cities must first participate in the NFIP. This means meeting the minimum requirements, as well as adopting and enforcing flood zone regulations. The requirements for NFIP participation vary by state, and some cities are required by state law to participate in the NFIP, either outright or under certain circumstances. Cities that have the maximum coverage available through the NFIP may also be able to purchase additional supplemental flood coverage, if desired. In some cases, cities can take additional community flood precautions that will further reduce the costs of flood insurance for residents, businesses, and the city itself.
The NFIP lets communities insure municipal buildings, additions, building contents, software and computer equipment, office equipment, and other indoor property. Flood insurance for outdoor property, like playgrounds, parks, roads, and vehicles, must be purchased through a separate insurer, as it is not generally covered under the NFIP. Keep in mind that the NFIP may also cover city buildings that are not in a flood hazard area, and that coverage may even be less expensive.
However, despite the many laws and regulations that impact flood insurance for cities, coverage of flood losses isn’t always black and white. Here are some important things to understand about how city buildings and their contents may be covered after a flood:
- NFIP policies covering city buildings generally pay actual cash value of the damage to the structure and its contents, and may also pay for sandbagging and other necessary protective measures in flood conditions.
- Coverage for basements and below-ground property may be limited to structural damage, the cost of cleanup and drying, and damage to boilers and HVAC equipment. Some buildings that have a significant below-ground portion, like water and sewer facilities, may not be covered at all by standard policies.
- Likewise, structures on or over water—such as wharves, piers, docks, and marinas—are generally not covered through the NFIP.
- When city buildings are damaged by flooding from a storm surge related to a hurricane, the damage is generally covered under the city’s NFIP coverage—even if the direct hurricane damage to those same buildings are covered by a separate policy. Learn more about storm surge maps for municipalities.
- Deductibles may apply to municipal flood insurance coverage, especially in flood-prone regions. In some areas, cities may have the option to choose a higher deductible to reduce the costs of insuring city property.
- The costs of bringing a damaged property up to current building ordinances and codes may not be covered, and there may be limitations in coverage for city buildings that were under construction at the time of the flooding event.
- While damages to city-owned utility properties may be covered by the NFIP, cities may not have coverage for interruption of utility service, damage to underground fiber optic cables, damage to tanks and liquid storage, and other specific losses excluded by the NFIP.
Governmental flood losses can be very complex, and policyholders need to understand their options before moving forward with a large-loss flood claim. The attorneys with the Voss Law Firm have extensive experience with flood insurance claims involving governments and public agencies, and we would be happy to answer your questions and determine your policyholder rights after a loss event. For more information, contact our office today at 1-888-614-7730.