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Monday, May 2, 2011

W-10 Clarification of Rules and Regulations. Presenters : Steve Van Dyke, Tyrone Gregory & Carleathea Greenhill Facilitator: Corise Morrison. Monday, May 2, 2011. Presenter: Steve Van Dyke. Determining Policy Effective Dates .

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Monday, May 2, 2011

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  1. W-10 Clarification of Rules and Regulations Presenters: Steve Van Dyke, Tyrone Gregory & Carleathea Greenhill Facilitator: Corise Morrison Monday, May 2, 2011

  2. Presenter: Steve Van Dyke

  3. Determining Policy Effective Dates • Standard 30-day waiting period for new applications and for endorsements to increase coverage • No waiting period for flood insurance that is initially purchased in connection with a loan transaction • No waiting period in connection with a lender requirement on a building found to be within an SFHA that does not have flood insurance • 1-day waiting period for flood insurance that is initially purchased during the 13-month period beginning on the effective date of a map revision where the map shows a building to be in an SFHA when it had not been in an SFHA

  4. Standard 30-Day Waiting Period • If application and premium are received by insurer within 10 days (application date + 9 days) of application date then effective date is 30 days after application date. If application and premium are not received within 10 days of application date then effective date is 30 days after receipt date. • If mailed by certified mail within 4 days (application date +3 days) of application date then effective date is 30 days after application date. If not mailed by certified mail within 4 days of application date then effective date is 30 days after receipt date.

  5. LoanTransaction – No waiting period • If the application is dated on or before the loan closing date and the application and premium are received by the insurer within 10 days of the closing date (closing date + 9 days) the effective date is the closing date. If not received within 10 days the effective date is the receipt date regardless of zone. • If the premium payment is from the escrow account (lender’s check), title company, or settlement attorney and the application is dated on or before the closing date the effective date is the loan closing date if the application and premium are received within 30 days of the closing date. If not received within 30 days the effective date is the receipt date regardless of zone.

  6. Lender Requirement – No waiting period If a lender discovers that a building without flood insurance requires flood insurance because the building is located within an SFHA the following applies in determining the proper effective date: • The application date is the effective date if the application and premium are received by the insurer within 10 days of the application date. If not received within 10 days of the application date the effective date is the receipt date by the insurer. • If sent certified mail within 4 days of the application date the effective date is the application date. If not sent within 4 days then the effective date is the receipt date by the insurer.

  7. Map Revision – 1-day waiting period • The effective date for a policy initially purchased during the 13 months following a map revision placing the building in an SFHA is 1 day after the application date provided the application and premium are received within 10 days of the application date. If not received within 10 days of the application date then the effective date is 1 day after the receipt date.

  8. EFFECTIVE DATE PROBLEMS

  9. Example 1 June 1, 2011 June 1, 2012 • x Mr./Ms. Agent 05/02/2011 New policy requested in Zone X. The application and premium are received by the insurer on May 9. What is the correct effective date?

  10. Example 1 June 1, 2011 June 1, 2012 • x Mr./Ms. Agent 05/02/2011 New policy requested in Zone X. The application and premium are received by the insurer on May 9. What is the correct effective date? The correct effective date is June 1, 2011. Why? Application and premium are received within 10 days of the application date so the earliest effective date is 30 days after the application date.

  11. Example 2 June 1, 2011 June 1, 2012 • x Mr./Ms. Agent 05/02/2011 New policy requested in Zone X. The application and premium are received by the insurer on May 12. What is the correct effective date?

  12. Example 2 June 1, 2011 June 1, 2012 • x 05/02/2011 Mr./Ms. Agent New policy requested in Zone X. The application and premium are received by the insurer on May 12. What is the correct effective date? The correct effective date is June 11, 2011. Why? Since the application and premium were not received within 10 days of the application date, the effective date is 30 days from the receipt date.

  13. Example 3 May 2, 2011 May 2, 2012 • x Mr./Ms. Agent 05/02/2011 Loan closing is on May 2, 2011 in Zone X. The application and premium are received by the insurer on May 9. What is the correct effective date?

  14. Example 3 May 2, 2011 May 2, 2012 • x Mr./Ms. Agent 05/02/2011 Loan closing is on May 2, 2011 in Zone X. The application and premium are received by the insurer on May 9. The correct effective date is May 2, 2011. Why? Because the application was completed on or before the loan closing and the application and premium were received within 10 days of the closing date.

  15. Example 4 May 2, 2011 May 2, 2012 • x Mr./Ms. Agent 05/02/2011 Loan closing is on May 2, 2011 in Zone AE. The application and premium are received by the insurer on May 16. What is the correct effective date?

  16. Example 4 May 2, 2011 May 2, 2012 • x Mr./Ms. Agent 05/02/2011 Loan closing is on May 2, 2011 in Zone AE. The application and premium are received by the insurer on May 16. The correct effective date is May 16, 2011. Why? Because the application was completed on or before the loan closing and since the application and premium were not received within 10 days of the closing the receipt date is the effective date.

  17. Example 5 May 2, 2011 May 2, 2012 • x Mr./Ms. Agent 05/05/2011 Loan closing is on May 2, 2011 in Zone AE. The application and premium are received by the insurer on May 9. What is the correct effective date?

  18. Example 5 May 2, 2011 May 2, 2012 • x Mr./Ms. Agent 05/05/2011 Loan closing is on May 2, 2011 in Zone AE. The application and premium are received by the insurer on May 9. The correct effective date is May 5, 2011. Why? The application was completed after the closing, so a policy effective on the closing date is not possible. The application and premium were received within 10 days of the application date and no waiting period applies so the effective date is the application date.

  19. Example 6 May 2, 2011 May 2, 2012 • x Mr./Ms. Agent 05/05/2011 Loan closing is on May 2, 2011 in Zone AE. The application and premium are received by the insurer on May 13. What is the correct effective date?

  20. Example 6 May 2, 2011 May 2, 2012 • x Mr./Ms. Agent 05/05/2011 Loan closing is on May 2, 2011 in Zone AE. The application and premium are received by the insurer on May 13. The correct effective date is May 13, 2011. Why? The application was completed after the closing, and the application and premium were not received within 10 days of the closing. The receipt date is the effective date.

  21. Example 7 May 2, 2011 May 2, 2012 • x Mr./Ms. Agent 05/02/2011 Loan closing is on May 2, 2011 in Zone AE. The application and premium from the settlement attorney are received by the insurer on May 16. What is the correct effective date?

  22. Example 7 May 2, 2011 May 2, 2012 • x Mr./Ms. Agent 05/02/2011 Loan closing is on May 2, 2011 in Zone AE. The application and premium from the settlement attorney are received by the insurer on May 16. The correct effective date is May 2, 2011. Why? Because the application was completed on or before closing and the application and premium from the settlement attorney were received within 30 days of the closing.

  23. Example 8 May 2, 2011 May 2, 2012 • x Mr./Ms. Agent 05/05/2011 Loan closing is on May 2, 2011 in Zone X. The application and premium are received by the insurer on May 9. What is the correct effective date?

  24. Example 8 May 2, 2011 May 2, 2012 • x Mr./Ms. Agent 05/05/2011 Loan closing is on May 2, 2011 in Zone X. The application and premium are received by the insurer on May 9. The correct effective date is June 4, 2011. Why? Because the application was not completed on or before closing and since the building in Zone X is not mandatory purchase the 30-day waiting period applies .

  25. Example 9 May 4. 2011 May 4. 2012 • x Mr./Ms. Agent 05/04/2011 Lender determines building is located in Zone VE and now requires insurance. The application and premium are received by the insurer on May 11. What is the correct effective date?

  26. Example 9 May 4. 2011 May 4. 2012 • x Mr./Ms. Agent 05/04/2011 Lender determines building is located in Zone VE. The application and premium are received by the insurer on May 11. The correct effective date is May 4, 2011. Why? The application and premium are received within 10 days of the application date.

  27. Example 10 May 4. 2011 May 4. 2012 • x Mr./Ms. Agent 05/04/2011 Lender determines building is located in Zone AH. The application and premium are received by the insurer on May 14. What is the correct effective date?

  28. Example 10 May 4. 2011 May 4. 2012 • x Mr./Ms. Agent 05/04/2011 Lender determines building is located in Zone AH. The application and premium are received by the insurer on May 14. The correct effective date is May 14, 2011. Why? The application and premium are not received within 10 days of the application date so the receipt date is the effective date.

  29. Example 11 June 1, 2011 June 1, 2012 • x Mr./Ms. Agent 05/31/2011 New policy requested within the 13-month period from the date of a map revision from Zone X to A. The application and premium are received by the insurer on June 10. What is the correct effective date?

  30. Example 11 June 1, 2011 June 1, 2012 • x Mr./Ms. Agent 05/31/2011 New policy requested within the 13-month period from the date of a map revision from Zone X to A. The application and premium are received by the insurer on June 10. What is the correct effective date? The correct effective date is June 11, 2011. Why? 1-day waiting period for map revision to SFHA but application and premium not received within 10 days from date of application so effective date is receipt date plus 1 day.

  31. Presenter: Tyrone Gregory

  32. Agenda • Reducing Coverage Limits or Reforming Policies after a Loss • Buildings Entirely Over Water • Rating Situations • Buildings in multiple flood zones • Different BFEs • Flood Zone Discrepancies • Transfers of Business

  33. Reduction of Coverage Limits or Reformation Rule of Thumb If insufficient premium is received to purchase the amounts of insurance requested, then the policy shall be deemed to provide only such insurance as can be purchased for the entire policy termfor the amount of premium received. Refer to page GR-12, paragraph D in the Flood Insurance Manual.

  34. Reduction of Coverage Limits or Reformation The Only 2 Exceptions - Reforming After A Loss The property must be insured using the correct SFIP form in order for the 2 exceptions below to apply. These 2 exceptions only apply when the discrepancy is discovered at the time of loss: Any additional premium due will be calculated prospectively from the date of discovery; and/or The automatic reduction in policy limits is effective the date of discovery.

  35. Reduction of Coverage Limits or Reformation Additional Information and Premium If additional information is needed, the policyholder will have 60 days to obtain the additional information, and then 30 days to pay the additional premium due for the remainder of the term, to restore the originally requested limits without a waiting period. If no additional information is needed, the policyholder will have 30 days from the date of discoveryto pay the additional premium that is due for the remainder of the policy term, to restore the originally requested limits. Claim payments will not be delayed because of additional information needed to calculate the correct payment.

  36. Reduction of Coverage Limits or Reformation Reforming Prior to a Loss If a claim occurs after the notice is sent to the policyholder requesting additional information or additional premium, then the claim cannot be processed until all information and premium are received by the insurer within the required time. All claim payments will be based on the coverage limits provided in accordance with the correct flood zone for the building location and not the zone on the policy if it is in error.

  37. Presenter: Carleathea Greenhill

  38. Buildings Entirely Over Water Pre-FIRM buildings entirely over water, constructed before October 1, 1982, are eligible for normal Pre-FIRM rates.If the building was constructed or substantially improved on or after October 1, 1982, the building is ineligible for coverage. Refer to page GR-4 in the Flood Insurance Manual.

  39. Buildings Entirely Over Water • The Exception: • If a building was originally constructed on land or partially over water, and later becomes entirely over water because of erosion, it is eligible for coverage only if the building has had continuous coverage: • from the period beginning at least 1 year prior to the building being located entirely over water, regardless of any changes in the ownership of the building; or • from the date of construction if it is less than 1 year old.

  40. Buildings Entirely Over Water Acceptable Documentation A letter from the community official stating that the building originally was constructed on land or only partially over water; and: Photographs of the building over land, if available; and The approximate date when the building became located entirely over water; and Proof of continuous flood insurance coverage from the period beginning 1 year prior to the building being located entirely over water, or from the date of construction if it is less than 1 year old.

  41. Rating Situations • Buildings in More Than One Flood Zone/BFE • Different BFE • Flood Zone Discrepancies

  42. Rating Situations Buildings in More Than One Flood Zone/BFE Buildings (not the land) located in more than 1 flood zone/BFE must be rated using the more hazardous zone/BFE. This condition applies even though the portion of the building located in the more hazardous flood risk zone/BFE may not be covered under the SFIP, such as a deck attached to a building.

  43. Rating Situations Buildings in More Than One Flood Zone/BFE (Cont.) The building must be rated using the more hazardous flood risk zone/BFE if any portion of the attached deck foundation extends into the more hazardous flood risk zone/BFE. If the attached deck overhangs the more hazardous flood risk zone/BFE, but its foundation system does not extend into more hazardous flood risk zone/BFE, then the building must be rated using the flood risk zone/ BFE where the building foundation is located. Refer to page GR-14, paragraph D in the Flood Insurance Manual.

  44. Rating Situations

  45. Different BFEs When the BFE shown on a Flood Zone Determination is different than that shown on the Elevation Certificate, and the zone and the map information (community number, panel number, and suffix) are the same on both documents, the BFE shown on the Elevation Certificate must be used to rate the policy. In all cases, the zone and BFE must be from the FIRM in effect on the application date or renewal effective date unless grandfathering. Refer to page GR-14, paragraph E in the Flood Insurance Manual.

  46. Different BFEs Flood Zone Determination AE 120067-0802-G 11/17/2005 7 Elevation Certificate 120067 0802 G 8 11/17/2005 AE

  47. Flood Zone Discrepancies When presented with 2 different flood zones, use the more hazardous flood zone for rating unless the building qualifies for grandfathering. The map information (community number, panel number, and suffix) and BFE must come from the same source as the zone used to rate the policy. You may use the flood zone and/or BFE that was in effect at the time of application or renewal even when a map revision that changes the zone and/or BFE occurs after the policy effective date. Refer to page GR-14, paragraph F in the Flood Insurance Manual.

  48. Flood Zone Discrepancies CITY OF GALVESTON GALVESTON TX 485469 0081 E 12/6/2002 12/6/2002 AE/VE 17.0

  49. Presenter: Tyrone Gregory

  50. Transfer of Business Transfers of Business procedures were recently added to the May 2011 NFIP Flood Insurance Manual. These procedures can be found in both General Rules and Policy Renewal sections of the flood manual.

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