The FEMA Programs and Insurance

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1 The Integration of FEMA & Insurance

2 FEMA Programs Individual Assistance Public Assistance Hazard Mitigation NFIP FMAG 2

3 Applicable Laws & Regulations Robert T. Stafford Disaster Relief and Emergency Assistance Act Code of Federal Regulations, Title 44 FEMA Public Assistance Guide (322) 9500 Series Policies Disaster Assistance Policies Disaster-Specific Guidance 3

4 Insurance Considerations No insurance Deductibles & Self-Insured Retention (SIR) Mandatory reductions (NFIP/SFHA) Insurance apportionment Obtain & Maintain Provisions 4

5 Stafford Act, Section 312 Disaster assistance will not be provided for damages or losses covered by insurance. Disaster assistance provided by FEMA is intended to supplement financial assistance from other sources. 5

6 PW Cost Tracking Damaged Property PW-Level Summaries Cost Category Summaries Straight Time Facility PW # 10 Building PW # 20 Contents Force Account Labor Force Account Equipment Force Account Materials Overtime Purchased Materials Rented Equipment How Much Insurance Contribution? What did Insurance Pay For? What Eligible Cost Remains? Purchases and Contracts A&E Consultants Contractors

7 Insurance Settlement Eligible funds will be reduced by the amount of insurance recovery FEMA must agree: settlement is reasonable In the case of a Blanket policy, reductions will be based on FEMA s concept of Apportionment 7

8 Apportionment Based on the percentage of the Total Loss: 85% of Total Losses 15% of Total Losses Insured FEMA-eligible Insured FEMA-ineligible Example: $2 Million in Blanket Coverage and $3.5 Million in Losses 8

9 Stafford Act, Section 311 with respect to any property to be replaced, restored, repaired, or constructed with such assistance, such types and extent of insurance will be obtained and maintained as may be reasonably available, adequate, and necessary, to protect against future loss to such property. 9

10 44 CFR (b) 1. Assistance under section 406 of the Stafford Act will be approved only on the condition that the grantee obtain and maintain such types and amounts of insurance as are reasonable and necessary to protect against future loss to such property from the types of hazard which caused the major disaster. The extent of insurance to be required will be based on the eligible damage that was incurred to the damaged facility as a result of the major disaster. 10

11 Stafford Act, Section 311 (b) Maintenance of insurance - No applicant for assistance under section 5172 of this title (relating to repair, restoration, and replacement of damaged facilities), section 5189 of this title (relating to simplified procedure), or section 3149(c)(2) of this title) may receive such assistance for any property or part thereof for which the applicant has previously received assistance under this Act unless all insurance required pursuant to this section has been obtained and maintained with respect to such property. 11

12 DAP Insurance Considerations for Applicants: Page 3, Paragraph #4: In the first disaster, FEMA deducts the total insurance proceeds received or anticipated from the total eligible cost of the project. The remaining amount is reimbursed, which usually includes deductibles, non-recoverable costs, or uninsurable losses. However, a deductible, up to and including the amount of eligible damages incurred in a previous disaster, is not eligible for the same facility in a subsequent disaster of the same type. The portion of a deductible in excess of the previous disaster damages is eligible. 12

13 Flood Insurance In a Special Flood Hazard Area (SFHA), amount of eligible funding for damages caused by flood is reduced by the maximum amount of coverage available under NFIP standard flood insurance policy: $500,000 Building $500,000 Contents $5,000 deductible Damaged facilities are valuated on an Actual Cash Value (ACV) basis 13

14 Flood Insurance Penalty Applied Example: $500,000 Building: ACV = $335,000 (FEMA = $165,000) $500,000 Contents: ACV = 225,000 (FEMA = $275,000) Damaged facilities are valued on an Actual Cash Value (ACV) basis. Replacement Cost Depreciation = Actual Cash Basis (ACV) 14

15 Summary FEMA pays the eligible cost to rebuild, replace or Restore a damaged facility to its pre-disaster design, function and capacity. FEMA obligations must be offset for Available Insurance Proceeds. FEMA may be required to Apportion available insurance proceeds. FEMA may require you to Obtain and Maintain additional Insurance. FEMA may apply a Flood Insurance Penalty. 15

16 Adjusters International