Special Requirements and the Basics of Flood Insurance

Many homeowners don’t realize that a standard homeowner policy does not cover flood damage. That is why it is so important to purchase additional insurance for floods. Federally subsidized flood insurance is available, providing limited coverage under the National Flood Insurance Program: up to $250,000 for single family dwellings plus $100,000 for personal property, including furniture, and up to $500,000 for business and church properties, plus $500,000 for the contents.¹

The federal “Write Your Own” (WYO) policy allows private insurers to offer and administer standard form flood insurance policies with the federal government serving as the underwriter.² This means the U.S. Treasury pays the claims and administrative expenses.³

When dealing with a flood claim, it is important to understand that a standard form flood insurance policy is governed by the National Flood Insurance Act, Federal Emergency Management Agency (“FEMA”) regulations, and federal common law. The policy covers damage from a “flood,” which is defined in part as inundation of normally dry land area from overflow of inland tidal waters, “unusual and rapid accumulation or runoff” of surface waters from any source, and mudslides or mudflows⁴ proximately caused by such accumulation or runoff and “akin to a river of liquid and flowing mud on the surface of normally dry land areas…as when earth is carried by a current of water and deposited along the path of the current.”⁵ However, the policy excludes losses caused by a flood confined to the premises on which the insured property is located—unless the flood is displaced over two acres of property—and losses caused by landslides or movement of land.
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¹ 44 Code Fed. Reg. Section 61.6.
² See Flick v. Liberty Mut. Fire Ins. Co., 205 F.3d 386, 389 (9th Cir. 2000) (“The WYO program allows private insurers to write standard flood insurance policies under their own names.”).
³ Pecarovich v. Allstate Ins. Co., 309 F.3d 652, 656-57 (9th Cir. 2002), amended 317 F.3d 938.
⁴ There is a difference between mudslide and mudflow; for more on the distinction, see Denise Sze’s video blog post, Mudslides and Mud Flow.
⁵ Pecarovich, 309 F.3d at 654, fn.1.