Vantage Point: The Flood Insurance Reform Act of 2004

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One of the long-standing controversies about the National Flood Insurance Act has been whether the availability of flood insurance encourages floodplain development and whether taxpayer dollars are helping repair properties that suffer repeated flood damages. Recent years have spawned several legislative endeavors to avoid subsidizing repetitive losses, such as a bill bluntly named "Two Floods and You’re Out of the Taxpayers’ Pocket." That was not a particularly friendly title, and so this year’s successful version, signed into law by President Bush on June 30, has been more subtly named "The Flood Insurance Reform Act of 2004."

Interchangeability of Data
For those of us who either own or have clients who own properties identified as located within the 1% annual-chance floodplain (also known as the 100-year floodplain), the effects on mitigation, disaster assistance and flood insurance premiums are significant. Repetitive losses are the primary focus of the new legislation. Not to be overlooked, however, is Section 107, "Geospatial Digital Flood Hazard Data." That section reads as follows:

"For the purposes of flood insurance and floodplain management activities conducted pursuant to the National Flood Insurance Program under the National Flood Insurance Act of 1968 (42 U.S.C. 4001 et seq.), geospatial digital flood hazard data distributed by the Federal Emergency Management Agency, or its designee, or the printed products derived from that data, are interchangeable and legally equivalent for the determination of the location of 1 in 100 year and 1 in 500 year flood planes [sic], provided that all other geospatial data shown on the printed product meets or exceeds any accuracy standard promulgated by the Federal Emergency Management Agency."

The emphasis here is on interchangeability and legal equivalence of digital flood data with the paper maps that have served as the bible of floodplain management since the inception of the National Flood Insurance Program (NFIP). As F E MA pursues Map Modernization, we have already witnessed the start of the transition to digital data with the creation of FIRMettes on the Map Service Center’s website. These sections of scanned maps contain a paragraph below the title block addressing a FIRMette’s legal standing as an exact duplicate of the original. The 2004 Reform Act takes digital acceptability a step further.

This year’s legislation creates a little more stability in the NFIP by reauthorizing the program for five years, instead of subjecting it to annual re-approval by Congress, a situation that has more than once left the country without a flood insurance program for weeks at a time as our legislators recessed for year-end holidays without reaching certain important items on the agenda. Further, the 2004 Act allows appropriations for a new pilot program for mitigation of severe repetitive loss properties to remain available until spent, rather than forfeited as is the usual situation.

This new pilot program (which will initially only include residential structures) defines "severe repetitive loss properties" as those "for which 4 or more separate claims payments have been made . . . each such claim exceeding $5,000, and with the cumulative amount of such claims payments exceeding $20,000," or for which at least two separate claims payments cumulatively exceed the value of the property. The new mitigation program assists communities in such activities as acquisition, elevation, relocation, demolition, and floodproofing to prevent future public expense for disaster assistance and rising flood insurance costs. Property owners who refuse offers of such mitigation assistance will find that their flood insurance premiums will be increased to 150% of the chargeable rate for the property at the time of the flood event, and that each future claim of over $1500 will trigger an additional 150% increase (limited to non-subsidized actuarial insurance rates as the cap). Owners who decline mitigation offers will be informed that such offers are still "open" when it comes time to renew flood insurance policies.

Grounds for appealing such premium increases include evidence that the offer will not allow purchase of a "functionally equivalent primary residence," that the offer is below fair market value or will not cover the cost of mitigation, that the property is historic, that the flooding was caused by "significant actions" of a third party that are in violation of local, state, and federal laws and regulations, that the property owner relied on a Flood Insurance Rate Map that indicated the property was not in the mapped Special Flood Hazard Area, and that the property owner has an alternative and cost-effective mitigation proposal. Insurance fraud happens in the flood arena, and the Reform Act of 2004 allows FEMA’s Director to cancel a policy and deny future coverage to a property owner when fraudulent claims are discovered. New York State’s Flood Insurance Program Coordinator recently told me about two floodplain managers making a site visit for the purpose of assessing the local mapping. The owner of a repetitively flooded home thought they were there because of the "For Sale" sign, and proceeded to tell them about how he checked weather forecasts to move the good furniture to a different site before floods were predicted to hit, then brought in old beat-up furniture when the claims adjusters came to assess the damage. Apparently the owner felt that this means of making a little extra money with the flood-prone structure was a good selling point.

A Helpful Handbook
A large part of successful mitigation is the support of flood insurance policy holders. FEMA is to develop plain-language forms and documents to explain what is covered by flood insurance, what is not covered, how valuation for damages is derived, along with a flood insurance claims handbook on how to file claims and prove losses. All purchasers of new and renewed flood insurance policies are to receive the handbook. Recognizing that it is among items likely to be destroyed in a flood, at the time when most needed in order to file claims, the handbook will be redistributed to policyholders at the time of any flood loss.

Another step forward is required establishment of minimum training and education for flood insurance agents. This is to be a cooperative effort between FE MA, the insurance industry, and state insurance regulators. In the same vein, FE MA is also to distribute the flood insurance claims handbook noted previously to all insurance companies and agents authorized to sell flood insurance polices.

To view the new bill in its entirety, visit The Library of Congress website at (note the lack of "www") and enter "S.2238" in the search box. For a section-by-section analysis of the bill, visit the Association of State Floodplain Managers’ website at

As a footnote, on the heels of a string of hurricanes ravaging the East Coast as this is going to press, we must be aware of high weather risk areas as well as general flooding hazards. I am grateful, for instance, that my cousins in Pensacola, Florida have lost only a few trees and part of their garage in back-to-back storms, but wonder about the wisdom of packing residential construction in an area where increased impervious surfaces, whether pavement or roofs, will contribute to the rise in surface waters. As humanitarians, we should by all means assist those who have suffered in these storms, but we should also learn from these sad and terrible experiences.

Wendy Lathrop is licensed as a Professional Land Surveyor in New Jersey, Pennsylvania, Delaware, and Maryland, and as a Professional Planner in New Jersey. She has been involved since 1974 in surveying projects ranging from construction to boundary to environmental land use disputes.

A 1.047Mb PDF of this article as it appeared in the magazine complete with images is available by clicking HERE

About the Author

Wendy Lathrop, PLS, CFM

Wendy Lathrop is licensed as a Professional Land Surveyor in New Jersey, Pennsylvania, Delaware, and Maryland, and as a Professional Planner in New Jersey. She is also a Certified Floodplain Manager (CFM) through the Association of State Flood Plain Managers She holds a Master's degree in Environmental Policy, and has been involved since 1974 in surveying projects ranging from construction to boundary to environmental land use disputes. Wendy has taught courses at Mercer County College (New Jersey), Penn State University, and Drexel University, and also speaks across the US on surveying topics ranging from boundary to business to technical issues. She has been writing articles for surveyors since 1983. In 2005 Wendy bought and re-organized Cadastral Consulting, LLC, which provides continuing education courses for surveyors. Wendy represented the American Congress on Surveying and Mapping the Technical Mapping Advisory Council to the Federal Emergency Management Agency for the full five years of that advisory group's appointment, from 1995 through 2000. She was a panel member of the National Academy of Public Administration's study of US Geographic Information resources from December 1996 through September 1997, culminating in a NAPA-produced report entitled "Geographic Information for the 21st Century: Building a Strategy for the Nation". Wendy is a past President of the New Jersey Society of Professional Land Surveyors and of the National Society of Professional Surveyors. Contact Wendy Article List Below