Policy Issuance 3-95

June 6, 1995

Subject: 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 to be 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 National Flood Insurance Program (NFIP) policy will be primary so long as the NFIP policy limits equal the maximum amount available.

Inadvertently, Policy Issuance 1-95 did not provide a reasonable period of time for insureds to meet the coverage requirement for the Other Insurance provision in relation to the new NFIP coverage limits available on and after March 1, 1995, as was done in Policy Issuance 2-95 pertaining to Replacement Cost and Coinsurance Provisions.

Policy Statement: Existing insureds (those insured as of February 28, 1995) are allowed through September 30, 1995, or until the first renewal date (or the first policy anniversary date in the case of a 3-year policy) on or after March 1, 1995, whichever is later, to increase their policy limits in light of Article 9.C of the Dwelling Policy or Article 8.C of the General Property Policy and the new higher policy limits available, so as to meet the coverage requirements of the other insurance provision. Policyholders with policies newly issued with effective dates after July 31, 1995, must immediately meet these coverage requirements in light of the new higher policy limits available.

Any flood loss suffered by existing insureds during the period beginning March 1, 1995, and ending September 30, 1995, regardless of renewal date, will be adjusted by applying the Other Insurance provision of Article 9.C of the Dwelling Policy or Article 8.C of the General Property Policy using the statutory limits in effect on February 28, 1995.

Any flood loss suffered by existing insureds that (1) occurs on or after October 1, 1995, and (2) also occurs on or after the first renewal date (or the first policy anniversary date for 3-year policies) that occurs on or after March 1, 1995, will be adjusted based on a proportion of the loss as provided in Article 9.C of the Dwelling Policy or Article 8.C of the General Property Policy if the building coverage limits are not sufficient in light of the new higher limits of coverage.

Whenever this Policy Issuance refers to Article 9.C of the Dwelling Policy and Article 8.C of the General Property Policy, it means Article 9.C of the Dwelling Policy and Article 8.C of the General Property Policy that became effective October 1, 1994, and also includes Article VIII. C of the previous edition of the Dwelling Policy and Article VII. C of the previous edition of the General Property Policy, if applicable.

Insurance companies and agents with such policies are advised to discuss this with affected insureds in order to make them aware of the situation and the possible need for remedial action regarding any necessary coverage adjustments, in order to avoid errors and omissions exposure.

In endorsing policies to increase policy limits, it is important to remember that the new 30-day waiting period also became effective March 1, 1995.

Examples:

  1. Policy renewal date is March 15, 1995 - the policyholder has until September 30, 1995, to increase policy limits.
  2. Three-year policy where three-year term began March 15, 1993 (the first policy anniversary date after March 1, 1995, is March 15, 1995) - the policyholder has until September 30, 1995, to increase policy limits.
  3. Policy renewal date is October 15, 1995 - the policyholder has until October 15, 1995, to increase policy limits.
  4. Three-year policy where three-year term began October 15, 1993 (the first policy anniversary date after March 1, 1995, is October 15, 1995) - the policyholder has until October 15, 1995, to increase policy limits.

Last Modified: Thursday, 25-May-2006 16:32:34 EDT