Lesson 3: Dwelling Form Pt. 2, General Property Form, RCBAP
Overview
Lesson 2 provided an overview of the Standard Flood Insurance Policy (SFIP) and its three forms: the Dwelling Form, the General Property Form, and the Residential Condominium Building Association Policy (RCBAP). It also reviewed the first three sections of the Dwelling Form:
Section I: The Agreement
Section II: Definitions
Section III: Property Insured
Lesson 3 continues this review of the Dwelling Form and then goes on to highlight the differences between it and the General Property and RCBAP Forms.
Remember!
Remember: "Read the policy! Know the policy!" Becoming familiar with the policy provisions helps give you a thorough and practical knowledge of the SFIP so that you can explain it clearly to the policyholder.
Lesson Objectives
In this lesson you will:
Review sections of the Dwelling Form, including:
Property Not Insured
Exclusions
Deductibles
General Conditions
Differentiate between the SFIP forms
Prerequisites
The NFIP Claims Review contains four lessons. You must complete all four lessons to complete the course. You should already have completed:
Introduction to Flood Claims (IS-1112)
Adjuster Customer Service (IS-1107)
NFIP Claims Review Lesson 1
NFIP Claims Review Lesson 2
Once you complete this course, you may take additional courses in specialized knowledge areas, such as IS-1111 Introduction to Commercial Claims and IS-1109 Understanding Basement Coverage.
Section IV. Property Not Covered
The SFIP does not cover any of the following property:
Personal property not inside a building
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
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
Recreational vehicles other than travel trailers defined in the SFIP, Section II.B.6.c., whether affixed to a permanent foundation or on wheels
Self-propelled vehicles or machines, including their parts and equipment. However, the SFIP does cover self-propelled vehicles or machines not licensed for use on public roads that are used mainly to service the described location or designed and used to assist handicapped persons. The vehicles or machines must be located inside a building at the described location
Land, land values, lawns, trees, shrubs, plants, growing crops, or animals. Animals are specifically excluded from coverage by the provision in Dwelling Form Section IV.6 (also General Property Form Section IV.6 and RCBAP Section IV.6). This exclusion applies to live bait, such as worms or minnows, sold in fishing tackle shops
Accounts, bills, coins, currency, deeds, evidence of debt, medals, money, scrip, stored value cards, postage stamps, securities, bullion, manuscripts, or other valuable papers
Underground structures and equipment, including wells, septic tanks, and septic systems
Section IV. Property Not Insured (cont'd)
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
Adjuster Tip: The SFIP does not cover decks. However, stairways and staircases are insured if they are attached directly to the insured building. Coverage is provided for stairways or staircases attached to decks or walkways for the purpose of ingress and egress. If there are two staircases attached to the same deck or walkway, then there is coverage for only one of the staircases. The SFIP allows for payment for steps and a landing. The maximum allowable area for a landing is 16 square feet.
Containers, including related equipment, such as, but not limited to, tanks containing gases or liquids
Buildings or units and all their contents if more than 49 percent of the Actual Cash Value (ACV) of the building or unit is below ground, unless the lowest level is at or above the Base Flood Elevation (BFE) and is below ground by reason of earth having been used as insulation material in conjunction with energy-efficient building techniques
Fences, retaining walls, seawalls, bulkheads, wharves, piers, bridges, and docks
Aircraft or watercraft, or their furnishings and equipment
Hot tubs and spas that are not bathroom fixtures, and swimming pools and their equipment, such as, but not limited to, heaters, filters, pumps, and pipes, wherever located
Property not eligible for flood insurance pursuant to the provisions of the Coastal Barrier Resources Act, and Coastal Barrier Improvement Act and amendments to these acts
Personal property the policyholder owns in common with other unit owners comprising the membership of a condominium association
Section V. Exclusions
The SFIP provides coverage for direct physical loss by or from flood, which means the SFIP does not pay the policyholder for:
Loss of revenue or profits
Loss of access to the insured property or described location
Loss of use to the insured property or described location
Loss from business interruption or production
The cost of complying with any law or ordinance except those described in Coverage D – Increased Cost of Compliance
Any other economic loss
Additional living expenses
Section V. Exclusions (cont'd)
The SFIP does not insure a loss directly or indirectly caused by a flood that is already in progress at the time and date:
The policy term begins
Coverage is added at the policyholder's request
Whether a flood is in progress for a claim is evaluated on an individual basis. Evidence that a flood may be in progress on the date the policy’s first term begins or on the date increased policy coverage is effective may include a recent:
1. Flood in the community where the insured building is located caused by the same source of flooding as the flood on the insured property, or
2. Event initiating a flood that causes damage, such as:
a. A spillway opening,
b. A levee breaching,
c. A dam releasing water, or
d. Water escaping from the banks of a waterway (stream, river, creek, etc.).
Reference Bulletin W-11030
Adjuster Tip: When handling this type of claim, the adjuster should establish the policy effective date first and then compare the policy effective date to the date of loss, as a policyholder may have obtained a mortgage immediately prior to a flood in progress or deliberately increased the coverage amount immediately prior to a flood in progress. In either case, work very closely with the adjusting company and insurer.
Section V. Exclusions (cont'd)
The SFIP does 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 the SFIP does not cover are:
earthquake
landslide
land subsidence
sinkholes
destabilization
movement of land that results from accumulation of water in subsurface land area
gradual erosion
The SFIP does, however, pay for losses from mudflow and land subsidence as a result of erosion that are specifically insured under the definition of flood, Section II.A.1.c and Section II.A.2.
Note: The adjuster should recognize and immediately report potential structural instability of the insured property to the NFIP DSA or the WYO company and recommend that a qualified licensed expert conduct an on-site inspection of the insured building. The expert should provide a comprehensive report detailing causation of the settlement/subsidence including photographs of the structure.
Section V. Exclusions - Damage Due to Mold, Water, Moisture or Mildew
The policy does not insure for direct physical loss caused directly or indirectly by any of the following:
The pressure or weight of ice
Freezing or thawing
Rain, snow, sleet, hail, or water spray
Water, moisture, mildew, or mold damage that results primarily from any condition
Substantially confined to the dwelling, or
That is within the policyholder’s control, including but not limited to:
Design, structural, or mechanical defect
Failure, stoppage, or breakage of water or sewer lines, drains, pumps, fixtures, or equipment
Failure to inspect and maintain the property after the flood recedes
Section V. Exclusions
The SFIP provides coverage for direct physical loss by or from flood, which means the SFIP does not pay the policyholder for:
Water or water-borne materials that
Back up through sewers or drains
Discharge or overflow from a sump, sump pump, or related equipment,
Seep or leak on or through the insured property, unless there is a flood in the area and the flood is the proximate cause of the sewer or drain backup, sump pump discharge or overflow, or the seepage of water. Note: Water that seeps or leaks on or through the insured property is not insured, e.g., wind-driven rain
The pressure or weight of water unless there is a flood in the area and the flood is the proximate cause of the damage from the pressure or weight of water
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. Note: Power failures occurring off the described location due to flood and causing damage to insured heating or cooling equipment or any other insured property are not insured. If the power is intentionally turned off by the insured, there is no coverage
Theft, fire, explosion, wind, or windstorm
Anything the policyholder or any member of their household does or conspires to do to cause loss by flood deliberately
Alteration of the insured property that significantly increases the risk of flooding
Section V. Exclusions (cont'd)
The SFIP does not insure for loss to any building or personal property located on land leased from the Federal Government or 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.
The SFIP does not pay for the testing for or monitoring of pollutants unless required by law or ordinance.
Section VI. Deductibles
When a loss is insured under this policy, the policy will pay only that part of the loss that exceeds the deductible amount, subject to the limit of liability that applies. Deductible amounts are found on the Declarations Page.
There are separate deductibles for the structure and personal property ranging from $1000 to $50,000 depending on the occupancy.
Section VI. Deductibles (cont'd)
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 the loss, the deductible amount will be two times the deductible that would otherwise apply to a completed building. Per Dwelling Form Section III.A.5.a.(2), if there is no work on the building for a period of 90 continuous days, coverage ceases until such time as work is resumed.
The deductible does not apply to:
Loss avoidance measures
Condominium loss assessments
Increased Cost of Compliance
Section VII. General Conditions - Pairs and Sets
The Pairs and Sets provision under the SFIP (Section VII.A. of the Dwelling and General Property Forms and Section VIII.A. of the RCBAP Form) does not provide coverage for the undamaged component as the provision states it will pay only 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.
Section VII. General Conditions - Concealment or Fraud and Policy Voidance
With respect to all insureds under the SFIP, the SFIP...
Is void
Has no legal force or effect
Cannot be renewed
Cannot be replaced by a new NFIP policy if, before or after a loss, you or any other insured or your agent have at any time
Intentionally concealed or misrepresented any material fact or circumstance
Engaged in fraudulent conduct, or
Made false statements relating to the policy or any other NFIP insurance
Adjuster Tip: The adjuster should report any relevant facts to the insurer on the Narrative Report.
Section VII. General Conditions - 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, The SFIP will not pay more than the amount of insurance 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 C.1.b. or c. immediately below applies.
b. If the other policy has a provision stating that it is excess insurance, this policy will be primary.
2. 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.
If there is other insurance in the name of the policyholder's condominium association covering the same property, then this policy will be in excess over the other insurance.
Section VII. General Conditions - Reduction and Reformation of Coverage
The coverage amounts will be reduced if it is discovered that the premium was insufficient. The policyholder has 30 days to pay the additional premium. Only prospective premiums are to be charged. The time required to determine the additional premium must not delay the claim process.
Section VII. General Conditions - Conditions Suspending or Restricting Insurance
The SFIP is not liable for loss that occurs while there is a hazard that is increased by any means within the policyholder's control or knowledge.
Section VII. General Conditions - Requirements in Case of Loss
In case of a flood loss to insured property, the policyholder must:
Give prompt written notice
Separate damaged and undamaged property so it may be examined
Prepare an inventory of damaged property
Within 60 days after the loss, submit a Proof of Loss, which is the policyholder's statement of the amount claimed under the policy and is signed and sworn to by the policyholder
Section VII. General Conditions - Requirements in Case of Loss (cont'd)
The policyholder must cooperate with the adjuster or representative in the investigation of the claim.
The adjuster may furnish the policyholder with a Proof of Loss form and may help complete it. However, it is ultimately the policyholder’s responsibility to submit this form within the required 60 days.
The adjuster is not authorized to approve or disapprove claims or to tell the policyholder their claim will be approved.
Section VII. General Conditions - Our Options After a Loss
The insurer may exercise its rights after a loss to:
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
Condominium association documents including the declarations of the condominium; its articles of association or incorporation, bylaws, rules, and regulations; and other relevant documents, if the policyholder is unit owner in a condominium building
All books of accounts, bills, invoices, and other vouchers, or certified copies pertaining to the damaged property if the originals are lost
See Section VII. General Conditions, K. Our Options After a Loss.
Section VII. General Conditions - No Benefit to Bailee
No person or organization other than the policyholder having custody of insured property, will benefit from this insurance.
Note: Bailee goods are the result of a bailment, which is the delivery of personal property by one person (the bailor) to another (the bailee) who holds the property for a certain purpose under an express or implied-in-fact contract. Real property, by definition, can never be bailee goods. In addition, property that is sold (title changes) cannot be bailee goods. Therefore, real property that is sold cannot be bailee goods after the sale or before the sale.
Example: When the bailor takes a pair of shoes to the cobbler (the bailee) for repair, a bailment is established while the bailee has the shoes. The shoes while in the possession of the bailee are bailee goods. Note that a bailment involves a change in possession but not in title.
Section VII. General Conditions - Loss Payment
FEMA will adjust all losses with an insured 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.
Section VII. General Conditions - Abandonment
You may not abandon damaged or undamaged insured property to us.
Adjuster Tip: If a policyholder chooses to walk away (abandon insured property), the policy will pay for damages but will not accept the property.
Section VII. General Conditions - Salvage
The insurer may permit a policyholder to keep damaged insured property after a loss and will reduce the amount of the loss proceeds payable to the policyholder by the value of the salvage.
Section VII. General Conditions - Appraisal
The appraisal clause applies if the insured and adjuster fail to agree on the ACV or replacement cost of the damaged property, whichever is appropriate. In the event that the two appraisers appointed by the insured and insurer cannot agree, they should submit only their differences to an umpire.
There is no appraisal for coverage issues.
Section VII. General Conditions - Mortgage Clause
The mortgage clause applies to any loss payable under Coverage A – Building.
The SFIP protects the interest of any loss payee or other interested party discovered during the investigation. This protection extends to the U.S. Small Business Administration (SBA).
Section VII. General Conditions - Suit Against the Insurer
If the policyholder files suit against the insurer, the suit must be filed in the United States District Court within one year after the written denial of all or part of the claim.
Adjuster Tip: It is important for the insurer to issue a denial letter for the claim, or part of the claim, in order for the “clock to start ticking.”
Section VII. General Conditions - Subrogation
Whenever the insurer makes a payment for a loss under the policy, the payment is subrogated to the policyholder's right to recover for that loss from any other person. This means the policyholder's right to recover for a loss caused by someone else is automatically transferred to the insurer to the extent that the insurer has paid the policyholder for the loss.
Section VII. General Conditions - Continuous Lake Flooding and Closed Basin Lakes
Continuous Lake Flooding: The insured building must be inundated by lake water for 90 continuous days, and it must be reasonably certain that the continuation of this flooding will result in damage equal to or greater than policy limits, or the ACV or Replacement Cost Value (RCV), as applicable. If it is not reasonably certain that the flooding will cause a total loss, then the insurer will pay only for the actual damage up to the waterline. See Section VIII of the Claims Manual, Special Adjustment Issues, for more information about continuous lake flooding.
Closed Basin Lakes: 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 past. If an insured building is subject to continuous closed basin lake flooding, a total loss claim can be paid if lake flood waters damage or imminently threaten to damage the building and an eventual total loss appears likely.
Section VII. General Conditions - Duplicate Policies Not Allowed
The insurer will not insure property under more than one NFIP policy.
Adjuster Tip: If it is discovered that more than one NFIP policy exists, the policyholder will work with the insurer to rectify and determine which policy will remain in force.
Section VII. General Conditions - Loss Settlement
The SFIP provides three methods of settling losses:
Replacement cost loss settlement
Special loss settlement
Actual Cash Value loss settlement
Each method is used for a different type of property.
Loss Settlement - Replacement Cost Loss Settlement
Replacement cost loss settlement applies to a single-family dwelling, provided that it is the principal residence and insured to 80 percent of its value or to the statutory limit available under the NFIP, but not more than the following amounts:
The building limit of liability shown on the Declarations Page
Replacement cost of that part of the dwelling damaged, with materials of like kind and quality, and for like use
The necessary amount actually spent to repair or replace the damaged part of the dwelling for like use
See Section VII. General Conditions, V.2, a-e.
Loss Settlement - Special Loss Settlement
Special loss settlement conditions apply to a single-family dwelling that is:
A manufactured or mobile home or travel trailer
At least 16 feet wide when fully assembled and has an area of at least 600 square feet within its perimeter walls when fully assembled
The policyholder’s principal residence
If the dwelling is totally destroyed or damaged the extent that it is not economically feasible to repair to at least pre-damage condition, the policy pays the least of the following:
The lesser of the replacement cost of the dwelling or 1.5 times the Actual Cash Value
The building limit of liability shown on the Declarations Page
Loss Settlement - Actual Cash Value (ACV)
Actual Cash Value loss settlement applies to a single-family dwelling not subject to replacement cost or special loss settlement, at the time of loss, when the amount of insurance is both less than 80 percent of its full replacement cost immediately before the loss and less than the maximum amount of insurance available under the NFIP. In that case, the insurer will pay the greater of the following amounts, but not more than the amount of insurance that applies to that dwelling: the actual cash value of the damaged part of the dwelling or 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.
The types of properties that are subject to ACV loss settlement include:
A two-, three-, or four-family dwelling
A unit not used exclusively for a single-family dwelling
Detached garages
Personal property
Appliances, carpets, and carpet pads
Outdoor awnings, outdoor antennas or aerials of any type, and other outdoor equipment. Note: Outside air-conditioning condensing units are payable at RCV, if applicable
Abandoned property
A dwelling that is not the policyholder’s principal residence
Note that if the policyholder qualifies for replacement cost benefits, the depreciation of these items is not recoverable.
Loss Settlement - Amount of Insurance Required
To determine the amount of insurance required for a dwelling immediately before the loss, do not include the value of:
Footings, foundations, piers, or any other structures or devices that are below the understructure of the lowest basement floor and support all or part of the dwelling
Those supports listed above that are below the surface of the ground inside the foundation walls if there is no basement
Excavations and underground flues, pipes, wiring, and drains
The Coverage D – ICC limit of liability is not included in the determination of the amount of insurance required.
Note: This is not applicable to buildings under the RCBAP as their foundations must be included in the replacement cost calculation of the structure.
Section VIII. Liberalization
If the SFIP makes a change that broadens the policyholder's coverage under this edition of the policy, but does not require any additional premium, then that change will automatically apply to the policyholder's insurance as of the date the change is implemented, provided that this implementation date falls within 60 days before, or during, the policy term stated on the Declarations Page.
Section X. What Law Governs
The SFIP 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.
Congratulations!
You’ve now reviewed each section of the Dwelling Form. Next, we’ll look at the other two forms of the policy—General Property and Residential Condominium Building Association Policy (RCBAP)—and highlight how they differ from the Dwelling Form.
Remember that there are differences between forms regarding:
The amounts of insurance available
Coverages
Definitions
Provisions, exclusions, restrictions, and limitations in coverage
The SFIP General Property Form
As with all forms of the policy, the adjuster should read the policy, know the policy, and explain the coverage to the policyholder. The General Property Form insures:
Non-residential buildings and their personal property, for example, manufacturing type businesses, convenience stores, gas stations, and restaurants personal property, for example, manufacturing type businesses, convenience stores, gas stations, and restaurants
Other Residential buildings and their personal property with more than four dwelling units and where the normal occupancy of a guest is 6 months or more, for example, hotels, motels, and tourist homes, residential buildings other than hotels and motels, and apartment type buildings. Incidental business occupancy is permitted if less than 25 percent of the total floor area
Condominium buildings where less than 75 percent of the square footage of the building is residential
The General Property Form provides no coverage in a Regular Program community for a residential condominium building, as defined in this policy, except for personal property coverage for a unit in a condominium building.
The SFIP General Property Form
The General Property Form insures non-residential buildings (including business buildings and other non-residential buildings) and their personal property. A non-residential business is a building in which the named insured is a licensed commercial enterprise carried out to generate income and coverage is for:
A building designed as a non-habitational building
A mixed use building in which the total floor area devoted to residential uses is:
50% or less of the total floor area within the building if the residential building is a single family property
75% or less of the total floor area within the building for all other residential properties
A building designed for use as office or retail space, wholesale space, hospitality space, or similar use.
The SFIP General Property Form
The General Property Form insures Other Residential buildings and their personal property with more than four dwelling units where the normal occupancy of a guest is 6 months or more, for example:
Hotels
Motels
Tourist Homes
Residential buildings other than hotels and motels
Apartment type buildings
NOTE: Incidental business occupancy is permitted if less than 25 percent of the total floor area.
The General Property Form insures condominium buildings where less than 75% of the square footage of the building is residential.
The SFIP General Property Form
Other Non-Residential is a subcategory of non-residential buildings; A non-habitational building that does not qualify as a business building or residential building. This Category includes, but not limited to:
Churches
Schools
Farm buildings (including grain bins and silos)
Garages
Poolhouses
Clubhouses
Recreational Buildings
A small business cannot use this category.
The SFIP General Property Form - Amount of Coverage Available
The statutory limits for coverage available under the General Property Form are:
Coverage A – Building Coverage
Other Residential: $500,000
Non-Residential (including Business and Other Non-Residential): $500,000
Coverage B – Personal Property Coverage
Other Residential: $100,000
Non-Residential Business, Other Non-residential: $500,000
General Property Form Section II. Definitions
The Dwelling Form definitions generally apply to the General Property Form. However, the General Property Form contains some definitions that are either not included in the Dwelling Form or are defined differently. Select the links to see how these words are defined in the General Property Form:
Improvements:
Fixtures, alterations, installations, or additions comprising a part of the insured building.
Stock:
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:
Parts and equipment for self-propelled vehicles
Furnishings and equipment for watercraft
Spas and hot tubs, including their equipment
Swimming pool equipment
Unit:
A unit in a condominium building.
Adjuster Tip: Note that the General Property Form only provides coverage for the units owned in common.
General Property Form Section III. Property Insured
As with the Dwelling Form, Section III of the General Property Form, Property Insured, is divided into:
A. Coverage A ‒ Building Property
B. Coverage B ‒ Personal Property
C. Coverage C ‒ Other Coverages
D. Coverage D ‒ Increased Cost of Compliance
A. Coverage A - Building Property
The General Property Form of the SFIP insures against direct physical loss by or from flood to:
The building 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
Building property for a period of 45 days at another location under the provisions for Property Removed to Safety
Certain fixtures, machinery, and equipment insured only under Coverage A
A. Coverage A - Building Property: Coverage A Only Items
The following fixtures, machinery, and equipment are insured under Coverage A only:
Awnings and canopies
Blinds
Carpet permanently installed over unfinished flooring
Central air conditioners
Elevator equipment
Fire extinguishing apparatus
Fire sprinkler systems
Walk-in freezers
Furnaces
Light fixtures
Outdoor antennas and aerials attached to buildings
Permanently installed cupboards, bookcases, paneling, and wallpaper
Pumps and machinery for operating pumps
Ventilating equipment
Wall mirrors, permanently installed
A. Coverage A - Building Property: Coverage A Only Items (cont'd)
In the units within the building, installed:
Built-in dishwashers
Built-in microwave ovens
Garbage disposal units
Hot water heaters, including solar water heaters
Kitchen cabinets
Plumbing fixtures
Radiators
Ranges
Refrigerators
Stoves
Note: The adjuster should be aware of the differences in Section III. Property Insured in the Dwelling Form, General Property Form, and RCBAP.
B. Coverage B - Personal Property
The SFIP specifically states that if the policyholder purchased personal property coverage, the insurer insures, subject to Section III.B.2, 3, and 4, against direct physical loss by or from flood to personal property inside a fully enclosed insured building:
Owned solely by the policyholder, 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
Owned in common by the unit owners of the condominium association
The SFIP also insures such personal property for 45 days while stored at a temporary location, as set forth in Section III.C.2.B. Property Removed to Safety.
B. Coverage B - Personal Property: Coverage of Household Property
When the SFIP 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.
If the SFIP covers household personal property, it will insure household personal property usual to living quarters, that:
Belongs to the policyholder, or a member of the policyholder's household, or at the policyholder's option:
The policyholder's domestic worker
The policyholder's guest
If the SFIP covers household personal property, it will insure the policyholder's:
Furniture and fixtures
Machinery and equipment
Stock
Other personal property owned by the policyholder and used in the policyholder's business, subject to Section IV. Property Not Insured
B. Coverage B - Personal Property: Coverage B Only Items
Coverage for personal property includes the following property. Refer to the General Property Form. Personal property covered under Coverage B only includes:
Air conditioning units installed in the building
Carpet, not permanently installed, over unfinished flooring
Carpets over finished flooring
Clothes washers and dryers
"Cook-out" grills
Food freezers, other than walk-in, and food in any freezer
Outdoor equipment and furniture stored inside the insured building
Ovens and the like
Portable microwave ovens and portable dishwashers
Refer to the General Property Form at Section III.B. Coverage B - Personal Property B.1.a and B.1.b.
B. Coverage B - Personal Property: Special Limits
Under Coverage B of the SFIP General Property Form, there is a $2,500 limit on artwork, collectibles, jewelry, watches, furs, etc. This section differs from the Dwelling Form in that personal property used in any business is not subject to special limits.
Note: Special limits apply even to the insured policyholder’s stock.
The limit is not per type of item; coverage is collectively limited to $2,500.
B. Coverage B - Personal Property: Improvements When Policyholder is a Tenant
If the policyholder is a tenant, 10 percent of the Coverage B limit may be applied to improvements:
Made a part of the building the policyholder occupies
Acquired by the policyholder or made at his or her expense, even if the policyholder cannot legally remove them
This does not increase the limit of liability. For example, the policyholder, as a tenant, rents a building in which he or she operates a restaurant, and that policyholder has installed carpeting, built-in booths, etc. These are building items; however, the policyholder may use up to 10 percent of Coverage B - Personal Property to pay for damages to these improvements.
B. Coverage B - Personal Property: Improvements When Policyholder is a Condominium Unit Owner
If the policyholder is a condominium unit owner, he or she may apply up to 10 percent of the Coverage B limit to cover loss to improvements to the interior walls, floors, and 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.
B. Coverage B - Personal Property (cont'd)
If the policyholder is a tenant, personal property must be inside the fully enclosed building.
Coverage C - Other Coverages: Pollution Damage
The insurer will pay for damage caused by pollutants to covered property if the discharge, seepage, migration, release, or escape of the pollutants is caused by or results from flood. The most the insurer will pay under this coverage is $10,000. This coverage does not increase the Coverage A or Coverage B limits of liability. Any payment under this provision when combined with all other payments for the same loss cannot exceed the replacement cost or Actual Cash Value, as appropriate, of the covered property.
Adjuster Tip: Pollution damage to the insured property under the Dwelling Form and RCBAP is payable up to the policy limits. The maximum allowed under the General Property Form is $10,000. Testing for or monitoring of pollutants is excluded unless required by law or ordinance. This is not an additional amount of insurance.
Section IV. Property Not Covered
In addition to those items already mentioned under the Dwelling Form, the following property is not insured under the General Property Form:
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 Coverage B - Personal Property
A residential condominium building located in a Regular Program community
Section VII. General Conditions - Other Insurance
The General Property Form of the SFIP is primary over all other policies that clearly state they are excess. If the other policy does not state it is excess, the SFIP is primary up to the other policy’s deductible, subject to the SFIP’s deductible. Once the SFIP payment reaches the other deductible amount, the coverage becomes pro rata.
If the SFIP covers a condominium association and there is a flood insurance policy in the name of the unit owner that covers the same loss as the SFIP, then the General Property Form of the SFIP is primary.
Section VII. General Conditions - V. Loss Settlement
The General Property Form of the SFIP will pay the least of the following amounts after application of the deductible:
The applicable amount of insurance under the policy
The Actual Cash Value
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
Section VIII. Liberalization
As mentioned in the review of the Dwelling Form, if the SFIP makes a change that broadens the policyholder's coverage under this edition of the policy but does not require any additional premium, then that change will automatically apply to the policyholder's insurance as of the date the change is implemented, provided that this implementation date falls within 60 days before, or is during, the policy term stated on the Declarations Page.
Section IX. What Law Governs
As mentioned in the review of the Dwelling Form, the SFIP 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.
You’ve now completed reviews of both the Dwelling Form and the General Property Form. Next, we’ll look at the RCBAP. As we did with General Property, we’ll highlight how it differs from the Dwelling Form.
Remember that there are differences between forms regarding:
The amounts of insurance available
Coverages
Definitions
Provisions, exclusions, restrictions, and limitations in coverage
Residential Condominium Building Association Policy (RCBAP)
The RCBAP 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 an Emergency Program community at time of renewal, this policy cannot be renewed.
The RCBAP insures a building owned and administered as a condominium, containing one or more family units, and in which at least 75 percent of the floor area is residential.
RCBAP and Coinsurance
We mentioned in Lesson 2 that in addition to the same nine sections as the Dwelling and General Property Forms, RCBAP has a tenth section: Coinsurance.
Coinsurance is a penalty imposed on the loss payment unless the amount of insurance carried on the damaged building is at least 80 percent of its replacement cost or the maximum amount of insurance available for that building under the NFIP, whichever is less. Coinsurance applies only to building coverage under the RCBAP. See Section VII. Coinsurance.
Building Coverage: The total number of units X $250,000
Personal Property Coverage: $100,000 per policy
RCBAP - Definitions
As with the General Property Form, the Dwelling Form definitions also generally apply to RCBAP, but the RCBAP contains some additional definitions either defined differently than, or not found in, the other forms:
Improvements: Fixtures, alterations, installations, or additions comprising a part of the residential condominium building, including improvements in the units.
Adjuster Tip: The adjuster should be aware of the differences in coverage for improvements in the Dwelling and General Property Forms, which read:
Dwelling Form – Fixtures, alterations, installations, or additions comprising a part of the insured dwelling or the apartment in which the policyholder resides
General Property Form – Fixtures, alterations, installations, or additions comprising a part of the insured building
Adjuster Tip: The adjuster should be aware of the differences in the coverage for units in the Dwelling and General Property Forms, which read:
Dwelling Form – a single-family unit the policyholder owns in a condominium
General Property Form – a unit in a condominium building
RCBAP Section III. Property Insured
As with the Dwelling Form and General Property Form, Section III. Property Insured of the RCBAP is divided into:
A. Coverage A - Building Property
B. Coverage B - Personal Property
C. Coverage C - Other Coverages
D. Coverage D - Increased Cost of Compliance
A. Coverage A - Building Property
The RCBAP insures against direct physical loss by or from flood to:
The residential condominium building described on the Declarations Page at the described location, including all units within the building and the improvements within the units
Building property for a period of 45 days at another location under the provisions for Property Removed to Safety
Certain fixtures, machinery, and equipment insured only under Coverage A
Adjuster Tip: The adjuster should refer back to Coverage A - Building Property to review the differences in the policy interpretations for insured building property in all three forms.
A. Coverage A - Building Property: Coverage A Only Items
These fixtures, machinery, and equipment are insured under Coverage A only:
Awnings and canopies
Blinds
Carpet permanently installed over unfinished flooring
Central air conditioners
Elevator equipment
Fire extinguishing apparatus
Fire sprinkler systems
Walk-in freezers
Furnaces
Light fixtures
Outdoor antennas and aerials attached to buildings
Permanently installed cupboards, bookcases, paneling, and wallpaper
Pumps and machinery for operating pumps
Ventilating equipment
Wall mirrors, permanently installed
A. Coverage A - Building Property: Coverage A Only Items (cont'd)
In the units within the building, installed:
Built-in dishwashers
Built-in microwave ovens
Garbage disposal units
Hot water heaters, including solar water heaters
Kitchen cabinets
Plumbing fixtures
Radiators
Ranges
Refrigerators
Stoves
Note: The adjuster should be aware of the differences in Section III. Property Insured in the Dwelling Form, General Property Form, and RCBAP.
RCBAP Coverage B - Personal Property
If the policyholder purchased personal property coverage, the SFIP will insure against direct physical loss by or from flood to personal property that is inside a fully enclosed insured building and is:
Owned by the unit owners of the condominium association in common, meaning property in which each unit owner has an undivided ownership interest
Owned solely by the condominium association and used exclusively in the conduct of the business affairs of the condominium association
Note: Under the RCBAP, only the personal property that is owned by the association or all of the unit owners in common is insured, not the individual unit owners’ personal property.
Adjuster Tip: The adjuster should review the differences in policy interpretation regarding the purchase of personal property coverage between the Dwelling Form, General Property Form, and RCBAP.
B. Coverage B - Personal Property
Coverage for personal property includes the property listed below. Refer to the RCBAP Section B. Coverage B - Personal Property, Item 2 (a-i).:
Air conditioning units installed in the building
Carpet, not permanently installed, over unfinished flooring
Carpets over finished flooring
Clothes washers and dryers
"Cook-out" grills
Food freezers, other than walk-in, and food in any freezer
Outdoor equipment and furniture stored inside the insured building*
Ovens and the like
Portable microwave ovens and portable dishwashers
* Contents are insured while stored in the building. Flotation of contents out of a building that has fewer than four rigid walls is not insured.
Adjuster Tip: The adjuster should review the differences in policy interpretation regarding the purchase of personal property coverage between the Dwelling Form, General Property Form, and RCBAP.
B. Coverage B - Personal Property: Special Limits
This section of the RCBAP differs from the Dwelling Form in that personal property used in any business is not subject to special limits. Under Coverage B of the SFIP RCBAP, there is a $2,500 limit on artwork, collectibles, jewelry, watches, furs, etc. not used in a business.
Note: Under RCBAP the policy pays no more than $2,500 for any one loss to one or more items of personal property.
Section IV. Property Not Insured
The RCBAP does not cover buildings and all their contents if more than 49 percent of the ACV of the building is below ground, unless the lowest level is at or above the BFE and is below ground by reason of earth having been used as insulation in conjunction with energy-efficient building techniques.'
Adjuster Tip: This section differs from the Dwelling Form because "unit" is not named in this section of the RCBAP.
Section VII. Coinsurance
Coinsurance applies only to coverage on the building. The coinsurance penalty is imposed on a loss payment unless the amount of insurance applicable to the damaged building is the lesser of:
At least 80 percent of its replacement cost
The maximum amount of insurance available for that building under the NFIP
If the actual amount of insurance on the building is less than the required amount in accordance with the terms listed above, then loss payment is determined subject to all other relevant conditions in the policy, including those pertaining to valuation, adjustment, settlement, and payment of loss.
The SFIP will pay the amount determined in Section VII. Coinsurance C.3 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.
Adjuster Tip: Building coverage purchased under individual Dwelling Forms cannot be added to RCBAP coverage in order to avoid the coinsurance penalty.
Section VIII. General Conditions - Other Insurance
This policy is primary over all other policies that clearly state they are excess. If the other policy does not state it is excess, this policy is primary up to the other policy’s deductible, subject to this policy’s deductible. Once the payment reaches the other deductible amount, the coverage becomes pro rata.
If there is a flood insurance policy in the name of the unit owner that covers the same loss as this policy, then this policy will be primary.
Section VIII. General Conditions - Loss Settlement
The policy provides three methods of settling losses:
The condominium master documents that are applicable
Insurance documents
List of unit owners
List of additional insurance
Adjusters must provide a detailed industry-acceptable replacement cost evaluation, and underwriting issues must be reported to the company immediately. You will learn more about adjusting issues in Lesson 4.
Section IX. Liberalization
As mentioned in the review of the Dwelling and General Property Forms, if the SFIP makes a change that broadens the policyholder's coverage under this edition of the policy but does not require any additional premium, then that change will automatically apply to the policyholder's insurance as of the date the change is implemented, provided that this implementation date falls within 60 days before, or during, the policy term stated on the Declarations Page.
Section X. What Law Governs
As mentioned in the review of the Dwelling and General Property Forms, the SFIP 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.
RCBAP - Adjusting Issues
Congratulations! You’ve completed Lesson 3: Dwelling Form Pt. 2, General Property, RCBAP. You have almost completed the NFIP Claims Review!
Your next step is to complete Lesson 4: SFIP Quality Assurance & Adjustment Issues.
