Katrina victims offered retroactive flood coverage

While individual states sue U.S. insurers over whether flood damage in New Orleans wrought by Hurricane Katrina is exempted from coverage, the U.S. federal government is preparing a bill that would allow victims of Hurricanes Rita and Katrina to buy retroactively into the federal government’s National Flood Insurance Program (NFIP).
As reported by A.M. Best, if passed, the Hurricane Katrina and Hurricane Rita Flood Insurance Buy-In Act would allow affected home and business owners whose properties do not lie in federally designated flood hazard zones to purchase coverage from the NFIP.
Home and business owners would make the equivalent of 10 years of premium payments, plus a 5% late penalty, which would be deducted from the property owner’s claim settlement. The NFIP currently caps settlements at $250,000 for homeowners’ policies and $500,000 for commercial policies.
In cases where the amount of wind insurance coverage provided by the private homeowners or business owners policy was less than the NFIP ceilings, the flood insurance claims amounts would be capped at that lower figure.
The bill would not provide coverage for damage to contents, which requires a separate endorsement under the NFIP. Also, the flood insurance program doesn’t cover claims for business interruption or extra living expenses for homeowners.
According to the text of the legislation, property owners who opt for the buy-in program would be required by the Federal Emergency Management Agency to enter a binding agreement to maintain flood insurance coverage on the affected property “in perpetuity.” Property owners also would be required to accept “any offer to take mitigation actions or activities made with respect to the structure.”
“This won’t be a program that allows people to grab the money and run,” Mississippi Democrat Gene Taylor, the sponsor of the bill, is quoted as saying in an A.M. Best news bulletin. “If you buy into the flood insurance program, you agree to enroll in the program for as long as you own that property. We want people to rebuild, but they need to rebuild smartly and safely.”