Policy Issuance 1-96
February 27, 1996
Subject: Further Clarification of Policy Issuance 1-95 - Other Insurance Provisions
Background: Policy Issuance 1-95 issued on February 1, 1995, interpreted the Other Insurance provision in the new Dwelling Policy and the new General Property Policy forms issued on and after October 1, 1994, as providing that, where there is another flood insurance policy that has a provision stating it is excess insurance, the NFIP policy will be primary so long as the NFIP policy limits equal the maximum amount available.
Policy Issuance 1-95 did not address the issue of how to calculate the proportion to be paid under the new Dwelling Policy or General Property Policy where the other insurance policy states it is excess and the maximum amount of NFIP insurance available was not purchased.
As was explained in Policy Issuance 1-95, the change to the Other Insurance provision in the new Dwelling Policy and General Property policy was inadvertent, resulting from the way the Other Insurance provision in the Residential Condominium Building Association Policy was written. The intent was for the calculation of the proportion of the loss to be paid under these two policy forms to be same as it was in the previous edition of these two policy forms. The previous edition provided for paying the proportion of the loss that the amount of NFIP insurance purchased bears to the maximum amount of NFIP insurance available.
Policy Statement: Where there is another flood insurance policy in addition to the new Dwelling Policy or the new General Property Policy and the other policy has a provision stating it is excess insurance and the NFIP policy limits do not equal the maximum amount available, the NFIP policy will pay the proportion of the loss that the amount of NFIP insurance purchased bears to the maximum amount of NFIP insurance available. It should be noted that the proportion for a large loss could exceed the NFIP policy limit plus the deductible, so that the NFIP policy limit would be paid.
Last Modified: Thursday, 25-May-2006 15:00:10 EDT