Flood Insurance Policies

Flood insurance premiums are calculated based upon geographic maps setting forth the boundaries for various flood zones.

Because most property insurance policies covering property at fixed locations exclude flooding, flood insurance must be purchased separately.  In 1969, Congress created the National Flood Insurance Program to administer the sale of flood insurance.  National flood insurance is available directly from the Federal Insurance Administration or through hundreds of private insurers who participate in federal insurance programs.  The Federal Emergency Management Agency (FEMA) reinsurers private companies against flood losses.

Contract claims must be filed in federal court, and are subject to strict requirements of the policy and federal law.  Insureds still have the right in the Fifth Circuit to bring suit on extra-contractual claims under state law against a flood insurer, according to the 1993 opinion, Spence v. Omaha Indem. Ins. Co.  It should be noted that there is a disagreement in this area as to whether the National Flood Insurance Act of 1968, preempts state law in this area.

The standard flood policy is designed to insure against loss caused by an overflow of inland or tidal waters, unusual and rapid runoff of surface waters, and mud slides caused by flooding.  All loses caused by perils other than flood are excluded.  For example, the Standard Flood Policy excludes coverage for consequential damages resulting from the interruption of business activities following a flood.  Water damage caused by heavy rains, however, does not constitute “flood damage.”

An insured may not recover under a standard flood insurance policy unless the insured sends a proof of loss form to FEMA within sixty days of the loss.  Failure to sign and swear to the completed proof of loss form enables the insurer to reject the claim.

The standard flood insurance policy contains a contractual one year limitations period.  Extra-contractual causes of action against flood insurers are subject to the standard limitations periods under Texas law.