With the NFIP due to expire in September, and the past history of flood catastrophes and hurricanes, there is more and more interest in the private market trying to insure flood. It is a difficult subject since many homes in one area could be affected at the same time draining resources including available claim adjusters, builders and building supplies. But there are private flood policies. Some follow closely with the NFIP form, and others do not. This discussion looks at the Homeowners Choice Property & Casualty Insurance Company Inc. form (HCI) compared to the NFIP. It started out as a Florida policy only but is now expanding into Arkansas, California, Maryland, North Carolina, New Jersey, Ohio, Pennsylvania, South Carolina and Texas. As this policy is very similar to the NFIP dwelling form, the below chart identifies where the forms vary from each other.

If the policy sections are identical there is nothing entered. If one policy has a term or coverage that the other one does not, you will see it listed only under that form. If the wording between forms varies, the differing language will be highlighted in the form that is different from the NFIP. The discussions cover the variance between the two policies.

Insuring Agreement

The insuring agreement states that the policy will pay for “direct physical loss by or from flood” to the insured property if the correct premium has been paid, the insured has complied with all terms and conditions, and has furnished accurate information and statements. The carrier has the right to review such provided information at any time and revise the policy based on that review. This is virtually identical to the NFIP dwelling form.

Notice of the availability of flood insurance under NFIP is stated as an alternative to this policy. Also it is stated that this policy meets the private flood requirements specified in 42 U.S.C. s. 4012a(b) and that no provisions in the policy do not comply with this code. This code provides purchase and compliance requirements for flood insurance and escrow account requirements.

Definitions

The flood definition is identical to the NFIP definition except for the inundation of two or more properties; this policy states that they must be neighboring properties, one of which is the insureds while the NFIP form simply says it must be an inundation of two or more properties, one of which is the insureds. In the NFIP form the properties do not have to be neighboring; if a house four doors down floods and the insured property floods, it would be considered a flood under the NFIP policy but not under the HCI form. This is broader coverage.

The definition of building does not include the NFIP language that includes manufactured homes built on a permanent chassis, transported in one or more sections and affixed to a permanent foundation or a travel trailer without wheels, built on a chassis and affixed to a permanent foundation that is regulated under the community's floodplain management and building ordinances or laws. The NFIP policy is providing broader coverage by expanding the definition of building.

Condominium association is not defined at all in the HCI form, and the definition of dwelling does not include the language specific to single-family units in condominiums. The NFIP form defines condominium association as the entity of unit owners responsible for the maintenance of common elements and real property in which all unit owners have rights. Because it is a federal program, the NFIP policy is designed to cover a broad range of properties.

The Elevated Post-FIRM definition and Post-FIRM building definitions both relate to improvements to buildings after 1974 or the effective date of an initial Flood Insurance Rate Map (FIRM). The HCI policy provides a little more detail and explains that the lowest elevated floor is raised above ground level by foundation or other walls, posts, or columns and has no basement.

Expense Constant and Federal Policy Fee are only found in the NFIP form. They are both flat charges to help defray government costs of running the program. The federal fee covers expenses; the expense constant does not.

The HCI policy defines replacement cost. The policy provides coverage on a replacement cost basis which is not available under the NFIP. The NFIP defines “regular program” which is the final phase of a community's participation in the flood program. A Flood Insurance Rate Map is in effect and full limits of coverage are available.

Deductible

The HCI policy specifically refers to the flood limit in the deductible section whereas the NFIP policy simply refers to the limit of liability that applies. The NFIP policy doubles the deductible amount if the building is under construction and does not have at least two rigid exterior walls and a full roof at the time of loss. Both policies exclude the deductible from certain coverages. In the HCI policy the excluded coverages are other coverages, loss avoidance measures, increased cost of compliance and loss of use, while in the NFIP policy loss avoidance measures, condominium loss assessments and increased cost of compliance are the coverages excluded from deductibles.

Coverage A

The NFIP policy provides coverage for 45 days for property that has been removed to safety. The property must have been moved to a location other than the described location to protect the property from flood or imminent danger of flood. The property is covered for 45 consecutive days from the date the insured starts to move the property. The property must be in a fully enclosed building or otherwise reasonably protected from the elements.

The HCI policy provides coverage for other structures which the NFIP policy does not. Again, the HCI refers to the flood limit, and not just the limit of liability. The exclusion for the use of the garage in the NFIP includes use of the garage as a dwelling or for residential purposes; the HCI does not include this exclusion, and it also provides coverage for other structures as well as garages. Again, this is a huge broadening of coverage. The NFIP covers the main structure but not garages or other structures. In the HCI policy an insured can have gazebos, sheds, and any other structure covered for flood damage as well as the main residence.

While the NFIP policy will provide coverage for a building under construction, the HCI policy will only cover buildings other than a dwelling. The NFIP will also provide coverage for a manufactured home or travel trailer as defined, but certain parameters must be met. Here the NFIP is providing broader coverage. Again, being a federal program the NFIP policy is trying to provide coverage for multiple types of property, whereas the HCI policy can be more selective in the properties it covers. The home must be anchored to the ground by over-the-top or frame ties to ground anchors, or in accordance with the manufacturer's specifications, or in compliance with the community's flood plain management unless it has continuously been insured since September 30, 1982.

In the list of covered items if they are installed in their functioning locations and connected to a power source if necessary are elevators, dumbwaiters and related equipment. The NFIP policy lists an exception for related equipment installed below the base flood elevation after September 30, 1987. Older equipment is grandfathered in, but newer equipment below the base flood elevation will not be covered.

Coverage B

Under coverage B the policies vary slightly in the coverage of others; the HCI policy will provide coverage at the insured's option for property of guests or residence employees, and the NFIP will provide coverage for property owned by guests or servants. Nether residence employees nor servants are defined terms, so in case of dispute the common dictionary definition or common use of the term would be used.

The NFIP policy contains coverage for tenants and unit owners not provided in HCI policy. This is another example of the NFIP providing coverage for multiple types of dwellings and residences. Without the NFIP coverage, tenants and unit owners might not be able to obtain any flood coverage. While at times the NFIP policy is restrictive, it does provide coverage for a wide variety of structures and occupants. First, a tenant with personal property insured on the policy will be covered for cooking stoves, ranges or refrigerators along with the already listed air conditioners, washers, dryers, or freezers. Improvements made by the tenant solely at his expense are covered as well but not for more than ten percent of the personal property limit of liability listed on the declarations. Use of this coverage reduces the personal property limit.

Similar coverage is provided for unit owners. A unit owner with a NFIP policy with personal property coverage also has coverage for interior walls, floors, and ceilings (not otherwise covered by the condo association policy) for no more than ten percent of the personal property limit of liability. Again, this reduces the personal property limit of coverage.

Coverage C

Under debris removal, the HCI policy stipulates that it will pay no more than $500,000 or the coverage A limit of liability for “flood”, whichever is less. It also states that this does not increase the limit of liability for “flood” listed on the declarations page. This is generous coverage for debris removal. The NFIP policy simply states that this coverage does not increase the coverage A or B limits, and does not mention any sort of limit.

The insured can move property to safety in event of a flood or imminent flood. Because the NFIP policy provides coverage for moveable homes, even they are covered if they are moved to safety before a flood starts or while it is taking place.

Condominium Loss Assessments

Coverage for Condominium Loss Assessment is provided in the NFIP policy only, as the NFIP provides coverage for condominiums and the HCI policy does not. For the sake of space the language is presented here instead of in the chart.

3. Condominium Loss Assessments

a. If this policy insures a unit, we will pay, up to the Coverage A limit of liability, your share of loss assessments charged against you by the condominium association in accordance with the condominium association's articles of association, declarations and your deed.

The assessment must be made as a result of direct physical loss by or from flood during the policy term, to the building's common elements.

b. We will not pay any loss assessment charged against you:

(1) And the condominium association by any governmental body;

(2) That results from a deductible under the insurance purchased by the condominium association insuring common elements;

(3) That results from a loss to personal property, including contents of a condominium building;

(4) That results from a loss sustained by the condominium association that was not reimbursed under a flood insurance policy written in the name of the association under the Act because the building was not, at the time of loss, insured for an amount equal to the lesser of:

(a) 80% or more of its full replacement cost; or

(b) The maximum amount of insurance permitted under the Act;

(5) To the extent that payment under this policy for a condominium building loss, in combination with payments under any other NFIP policies for the same building loss, exceeds the maximum amount of insurance permitted under the Act for that kind of building; or

(6) To the extent that payment under this policy for a condominium building loss, in combination with any recovery available to you as a tenant in common under any NFIP condominium association policies for the same building loss, exceeds the amount of insurance permitted under the Act for a single-family dwelling.

Loss assessment coverage does not increase the Coverage A limit of liability.

The language is straightforward; loss assessments charged by the condominium association in accordance with the articles of association, declarations and the insured's deed are covered. The exclusions are standard as well; assessment from a government body, related to the association deductible, resultant from personal property loss, loss not reimbursed under a flood policy because the property was not properly insured, and loss exceeding policy limits. This coverage does not increase the coverage A limit of liability.

Coverage D – Increased Cost of Compliance

The NFIP policy limits floodproofing activities that are eligible for coverage. Floodproofing activities are limited to non-residential structures or residential structures with basements that comply with FEMA's standards in the Code of Federal Regulations [44 CFR 60.6(b) or (c).

While there are similarities between the limit of liability under the increased cost of compliance section, the policies differ. The HCI policy states that coverage D amount is in addition to the amount listed for coverage A, although the most that can be collected under coverages A and D is $500,000. The NFIP policy in contrast states that the amount paid under coverage D is in addition to the amount of coverage selected on the application and that appears on the declarations. The maximum that can be collected under both A and D is the maximum permitted under the Act.

Under the eligibility section for coverage D, the NFIP includes in its definition of a “repetitive loss structure” one that is covered by a contract of flood insurance under the NFIP. The HCI policy has no similar statement. The NFIP policy also requires that the NFIP has paid a previous qualifying claim.

Because the NFIP policy provides coverage for condominiums, under the exclusions section of part D assessments made by the condominium association for the unit owner to pay increased costs to repair common areas is excluded. These assessments stem from state or local floodplain management ordinances or laws.

Coverage E – Loss of Use

Loss of Use coverage is only provided in the HCI policy; such coverage is not available in the NFIP policy. Coverage is fairly standard; additional living expenses are covered if the dwelling becomes uninhabitable and coverage is for the shortest time to either repair or replace or for the household to relocate. Fair rental value is covered as well, again for the shortest length to repair or replace. As always, expenses that do not continue due to the loss are not covered. The standard civil authority coverage for two weeks is provided if authorities prohibit access to the property due to direct damage or damage to neighboring premises. Cancellation of a lease or agreement is not covered.

Property Not Covered

Under Property Not Covered the HCI policy lists property not eligible for coverage pursuant to the provisions of the Coastal Barrier Resources Act and Coastal Barrier Improvement Act and amendments to both. The resources act protects coastal areas that serve as barriers against wind and tidal forces, and limits such areas from development. The Coastal Barrier Improvement Act renewed the resources act and restricted flood insurance in high-risk, storm-prone coastal areas and barrier islands. The NFIP has the same language but puts it at the end of the section instead of at the beginning.

The HCI policy does not cover property not inside a fully enclosed building. The NFIP policy does not cover property not inside a building, with no indication that the property must be fully enclosed. So if property is in a building under construction that is not complete and that property is damaged there is coverage. The HCI policy wording is such that only personal property that is in a fully enclosed building is covered; property in buildings under construction would not be covered. The NFIP policy does not cover property not inside a building. A building is defined as a property with two or more rigid outside walls and a secure roof on a permanent site, so that if a building was at least halfway constructed and met these parameters, that personal property inside such a building would be covered.

Recreational vehicles not covered under the NFIP policy does not include travel trailers as defined in the policy. In the NFIP policy the limitation of coverage for walls, walkways, driveways, patios and other surfaces includes such features located not only outside the exterior walls of the insured building but outside the building in which the insured unit is located. This is listed in the NFIP policy because the NFIP policy covers condominium units.

The HCI policy does not cover properties that are not participating in the NFIP or its emergency program. Because the NFIP policy is the NFIP this language is unnecessary in that form.

Exclusions

The exclusions in the two policies are not presented in the same order. We will follow the order in the HCI policy. Most of the exclusions are identical and standard. Pollution is excluded on both policies unless required by law or ordinance, but the HCI policy also states that if testing or monitoring is required by law that coverage for such testing will reduce the limits of coverage A.

Conditions

Again as in the exclusions sections, the two policies have things arranged in a different order. We will again follow the HCI policy and discuss the NFIP sections accordingly.

Both policies state that they are not liable for loss that occurs while there is a hazard that is increased by any means within the insured's control or knowledge. The HCI policy goes a step further and specifies that they are not liable for “flood” loss that occurs while there is a “flood” hazard that is increased within the insured's control or knowledge. While it would seem that this opens the NFIP policy to cover more losses, since it is a flood policy it does not broaden coverage significantly.

The loss settlement provisions vary greatly. Under the HCI policy, loss settlement is handled at replacement cost value as long as the building was insured at eighty percent or more of the full replacement cost of the building immediately before the loss, Actual cash value is paid until repairs begin.  The remainder above actual cash value will be paid as repairs or replacement work is performed and expenses are incurred, but no more than the least of the Coverage A amount, replacement cost of the part of the building damaged for like kind and use, or the necessary amount to repair or replace the dwelling. Increased costs for ordinance or law are not included other than what is provided in the Coverage D-Increased Cost of Compliance section.

If coverage is less than eighty percent of the replacement cost limit and less than the maximum policy limit, then the greater of the actual cash value of the damaged part of the building, the proportion of the cost to repair/replace without deduction for depreciation after the deductible has been applied. The calculation for the proportion is the amount of actual insurance divided by eighty percent of the replacement cost. However, if the eighty percent is more than the policy limit, then the proportion is calculated by dividing the amount of insurance by the maximum amount available under the policy.  For example, the property's replacement cost is $200,000. The policy limit is $145,000. Eighty percent of the replacement cost is $160,000. The proportion is determined by dividing the $145,000 by $160,000 resulting in 90% of the loss that will be paid.  If 80% of the replacement cost is more than the maximum amount of insurance, then the coverage A amount is divided by the policy limit. So if coverage A was for $110,000, then $110,000 would be divided by $145,000 and 75% of the loss would be covered. When determining replacement cost of the building before the flood loss, the value of excavation, footings, foundations, supports, piers, underground flues, pipes, wiring and drains, and the increased cost to comply with ordinances is not included.

The NFIP policy has three methods of loss settlement; Replacement Cost, Special Loss Settlement, and Actual Cash Value. The three different settlement types apply to different types of property. Replacement cost applies to single-family dwellings that are the insured's principal residence and the insured lived there for eighty percent of the 365 days immediately before the loss or the insured lived there for eighty percent of ownership if the dwelling has been owned less than 365 days. If the amount of insurance is eighty percent or more of replacement cost immediately before the loss, then the policy limit is the maximum coverage that applies. If the property is repairable, repairs will be no more than the least of the limit shown on the declarations, the replacement cost of the damaged part of the dwelling using like kind and quality materials or the necessary amount actually spent to repair or replace the damaged part. Depreciation is not deducted. If the structure is rebuilt at a new location, then the cost is limited to what it would have cost to rebuild at the original site. When the full cost of repair exceeds $1,000 or five percent of the amount of insurance that applies to the dwelling, then the carrier is not liable for repairs until the actual repair or replacement is completed. As always, the insured may opt to settle on an actual cash value basis and claim additional coverage if the carrier is notified of the intent to repair within 180 days of the date of loss.

The special loss settlement applies to single-family manufactured or mobile homes or trailers. It must be at least sixteen feet wide when fully assembled and have at least six hundred square feet within its perimeter walls when fully assembled, and be the insured's principal residence as outlined earlier. If the property is totally destroyed, then the least of the lesser of replacement cost, or 1.5 times actual cash value, or the limit of liability will be paid. If the structure is repairable, then it is settled according to the replacement cost parameters.

Actual cash value settlement applies to single-family dwellings not subject to either replacement cost of special loss settlement. It applies to dwellings that at the time of the loss the amount of insurance on the dwelling is less than 80% of its full replacement cost and less than the maximum amount under the NFIP. When this applies, then no more than the actual cash value of the damaged portion is paid or a proportion of the cost to repair or replace without deduction for depreciation and after the deductible has been applied. If 80% of the replacement cost is less than the maximum under NFIP, then the amount of insurance on the dwelling is divided by 80% of the full replacement cost. For example, full replacement cost is $200,000; 80% of that is $160,000. The NFIP maximum is $225,000 and the coverage amount is $150,000. So the proportion is $160,000 divided by $200,000 for 80% of the loss to be paid.

If 80% of the replacement cost is more than the NFIP maximum, the actual amount of insurance is divided by the NFIP maximum. In the second example, where 80% of replacement cost is above the NFIP maximum, replacement cost is $275,000, then 80% of 275,000 is $220,000, NFIP maximum of $215,000, and actual insurance on the dwelling is $200,000. The amount of insurance which is $200,000 is divided by $215,000 so 93% of the claim amount is paid.

Also subject to actual cash value calculations are two-, three- or four-family dwellings, units that are not used exclusively for single-family dwelling purposes, detached garages, personal property, appliances, carpets, carpet pads, outdoor awnings, antennas or aerials of any type and other outdoor equipment, covered property that is abandoned after a loss and remains as debris, and dwellings that are not principal residences.

The NFIP policy has the same wording regarding not including footings, foundations, supports and excavations in the determination of amount of insurance as the HCI policy does. This is standard language in dwelling policies to not include footings, foundations, supports, flues and pipes in that calculation.

The HCI policy provides procedures for mediation when a dispute arises about a flood claim. Either the insured or the carrier may demand a mediation, and the rules established by the Florida Department of Financial Services must be followed. The loss must be $500 or more before the deductible, and there must be more than $500 different between the offered settlement and what the insured requests for settlement amount. Mediation is binding only if both parties agree, and the carrier has not rescinded the offer after three business days of reaching settlement. Settlement may not be rescinded once the settlement check has been cashed or deposited. Costs of mediation are paid by the carrier unless the insured fails to appear. If the carrier fails to appear it will pay the mediator and the insured's expenses.

Each policy has the option of appraisal and the language is fairly standard. The NFIP policy is slightly different in that due to the multiple settlement options, the appraisal clause must address them. Instead of the HCI policy which states: “If you and we fail to agree on the amount of loss, either may request an appraisal of the loss” the NFIP policy states that “If you and we fail to agree on the actual cash value or, if applicable, replacement cost of your damaged property to settle upon the amount of loss, then either may demand an appraisal of the loss”. Minor, but important differences. Likewise in the NFIP policy the appraisers will separately state the actual cash value, replacement cost and amount of loss to each item, and not just the amount of the loss.

Both policies contain the standard language regarding other insurance that states the policy will pay only the proportion of the loss that the limit bears to the total amount of insurance covering this loss, and that if the other policy states it is excess than this policy is primary. If the other policy states it is excess coverage, then this policy is primary. After this the NFIP policy diverges. It states that if there is other coverage that includes flood coverage not issued under the flood act, that no more than the amount of insurance the insured is entitled to will be paid subject to three provisions. The first provision states that it will pay only the proportion that this policy bears to the total amount of coverage, unless one of the other provisions apply. The second provision states that if the other policy states it is excess that this policy is primary. The third provision is unique to the NFIP policy. It states that this policy is primary subject to its deductible, up to the deductible in the other flood policy. When the other deductible is reached, then this policy pays in proportion to the total amount of both policies for the remainder of the loss. For example, the other policy has limits of $110,000 with a $5,000 deductible. The NFIP policy has a limit of $160,000 with a deductible of $2,000. The amount of loss is $40,000. The NFIP policy will pay first; the deductible for the other policy is $5,000 and the NFIP deductible is $2,000 so the after the application of the NFIP deductible, the NFIP policy will pay $3,000 of the other policy's deductible. Then, the two policies will pay proportionally. The total amount of coverage available for the loss is $110,000 plus $160,000 or $270,000. The other policy of $110,000 is divided by $270,000 for 40% of the loss. The NFIP policy of $160,000 divided by $270,000 is 60% of the loss. Therefore the other policy will pay 40% of the $40,000 loss, or $16,000 and the NFIP policy will pay 60% or $24,000 of the loss. The final clause states that if there is other insurance in the name of the condominium association that covers the same property covered in this policy, that this policy is excess over that policy.

The mortgage clause between the two policies is similar with some phrasing differences but the intent is the same. The HCI policy states that the mortgagee must notify the carrier of any foreclosure proceedings, and that if the mortgagee is paid they may pay the whole principal and accrued interest on the property. The carrier will then receive full assignment and transfer of the mortgage and all securities held as collateral for the debt. If the mortgagee or its representative intentionally conceals or misrepresents material facts or circumstances, engages in fraudulent conduct, or makes false statements the carrier will not provide any coverage to the mortgagee. The HCI policy will notify the mortgagee 45 days before cancellation or nonrenewal while the NFIP policy will provide 30 days' notice of cancellation or nonrenewal.

Misrepresentation of material facts and fraudulent conduct will void either policy. The HCI policy states that it will not void a policy based on credit information in public records whether or not the information was disclosed if the policy has been in effect for 90 days. Not only will the NFIP void a current policy for fraudulent conduct or misrepresentation, but it will also refuse to issue a new NFIP policy. Also, if the policy was located in a community not participating in the NFIP on the inception date, and the community did not join or re-enter the program during the policy term and before the loss occurred, or if the property was not eligible for coverage, the policy will be voided.

Cancellation and nonrenewal policies vary between the two policies. The HCI policy contains a nonpayment provision that does not appear in the NFIP policy. If payment is not made, HCI can cancel the policy with 45 days' notice. They may also cancel with 45 days' notice if the policy has not been in effect for 90 days and the insured has made a material misstatement or misrepresentation, failed to comply with underwriting requirements and the property has not been insured with HCI for at least 5 years prior to the date of notice. Cancellation is in accordance with the NFIP guidelines, but this policy may enforce a 25% minimum earned premium upon cancellation. However, if the policy was not accepted from the lender, or the policy was purchased for a loan closing that did not occur or the policy was cancelled before the effective date no minimum earned premium will apply. Cancellation by the insured falls under the NFIP procedures.

Under HCI the policy will be nonrenewed if the community stops participating in the NFIP program or the building has been declared ineligible under the flood act. If the carrier decides to nonrenew, the insured is give written notice including reasons for nonrenewal at least 120 days before expiration. Renewal notices will be issued 45 days before the expiration date of the policy. Proof of mailing is sufficient notice.

Payment for NFIP policies is expected at time of application or renewal, so there are no cancellation or nonrenewal for nonpayment provisions. The insured may cancel the policy in accordance with the NFIP regulations, and the insured may be entitled to a full or partial refund, again in accordance with NFIP rules and regulations. Policies will not be renewed if the community stops participating in the NFIP or if the building has been declared ineligible, the same as in the HCI policy. Policies automatically expire on the last day of the policy term, and payment must be received within 30 days of the expiration date in order for the policy to renew. Next is unusual language that addresses the failure of the NFIP to mail the renewal notice of if they made a mistake and used an incorrect or incomplete address so that the insured did not receive the notice before the premium due date, that certain procedures will be followed. If the insured does not receive the notice if the insured or the agent notifies the NFIP no later than one year after the date the premium was due of non-receipt of a renewal notice, and the NFIP determines that mailing was an issue, they will mail a second notice with a revised due date which will be 30 days after the date the bill is mailed. If they do not receive the premium by the date on the second bill, then the policy remains nonrenewed as of the original expiration date. The insured may also be requested to complete a questionnaire recertifying rating information that was used to establish the rate for the policy.

Duties after a loss are similar between the two policies but there are some differences, although the duties in general are fairly common and standard. The HCI policy requires the insured to make necessary repairs to prevent further losses; show the damaged property to the carrier, submit to examination under oath if required including public adjusters and associates, partners or directors if the insured is a company, and provide receipts for additional living expenses. The NFIP policy requires the insured to separate the damaged from the undamaged property and put it in the best possible order for examination, give details as to who occupied the building at the time of loss and for what purpose, the adjuster may provide a proof of loss form and assist with completion but this is a courtesy, and the insured must provide a proof of loss within 60 days even if the adjuster does not assist with completion, adjusters are not authorized to approve or disapprove claims, and the NFIP may accept the adjuster's report instead of the insured's proof of loss.

“Our Options after a Loss” is a section in the NFIP policy that does not appear in the HCI policy. These options are at the sole discretion of the NFIP. They include the insured's showing of damaged property, submitting to examination under oath, allowing examination and copying of policies and deeds of ownership and condominium association documents as well as books of accounts, bills, invoices and other documents, providing a complete inventory including quantities, costs, plans for repair of property, evidence that damaged property has been repaired, the option to repair, rebuild or replace any damaged property with like kind and quality if written notice is provided within 30 days of receipt of the proof of loss, and take any part of the damaged property at an agreed upon value. Some of these requirements are included in the HCI duties after a loss.

The subrogation clauses differ between the two policies. The HCI policy allows the insured to waive the rights in writing before a loss, and if not waived it may require an assignment of rights based on the payments made by the carrier. If such an assignment is sought, the insured must sign and deliver all papers to the carrier and cooperate in the assignment. On the other hand the NFIP policy is automatically subrogated to the insured's rights of recovery against another party. The right is automatically transferred to the extent of payment for the loss. The NFIP may require acknowledgement of the transfer in writing, and after the loss the insured may not do anything that would give up the carrier's right to recover funds or would prevent such recovery. If the insured makes a claim against the person who caused the loss and recovers any money, the insured is to reimburse the carrier for any payments before retaining any of the recovered funds.

A notice provision exists in the HCI policy that states that if the carrier needs access to an insured, claimant or the insured property, that 48 hours' notice will be given before scheduling a meeting or onsite inspection. If notice has not been given then the insured or claimant may deny access to the property. The 48-hour notice requirement may be waived by the insured or the claimant.

Each policy has a fairly standard liberalization clause. The HCI policy states that the clause does not apply to changes implemented through introduction of a subsequent edition of the policy. The NFIP policy is the same except it does not have the wording regarding changes in subsequent policies. Both policies state that the insured may not abandon any damaged or undamaged property to the carrier. This is where the HCI policy ends. The NFIP policy however has some additional conditions.

The NFIP policy states that it is not liable for any loss that occurs when there is a hazard that has been increased by any means within the insured's control or knowledge. If the insured knows of an increase in hazard he should rectify the situation or advise the carrier of change in condition of the property.

A pair and set clause is in the NFIP policy; if loss occurs to a pair or set, the NFIP has the option of paying an amount equal to the cost of replacing the lost, damaged, or destroyed article minus depreciation, or the amount that represents the fair proportion of the total value of the pair or set that the lost, damaged or destroyed article bears to the pair or set. This is the standard pair and set clause. With some pairs or sets the remaining parts are still usable, so the amount to replace the damaged item would work well. With other sets the pair may be useless once part of the pair is damaged; then the amount of the proportion of value of the damaged part to the entire set might be the better settlement option.

Reduction and reformation of coverage is a large section in the NFIP policy.