November 2009


After a catastrophe, accusations tend to fly – even when a loss involves something as unpredictable as Mother Nature. The U.S. Army Corps of Engineers, for example, was faulted for their failure to properly design and maintain the levee system around the city of New Orleans when storm surge and high winds from Katrina breached the levees, resulting in more than 80 percent of the city remaining submerged for weeks.

Could that happen in your community?  Probably not to the same extent that it occurred in low-lying  portions of Louisiana, but flooding events can and do happen.  And when they do, injured parties inevitably cast about for whom to assign the blame.

When rain storms come with such intensity as to challenge the effectiveness of local storm drains, neighboring homes and sometimes entire communities can suffer severely.  Even knee deep water can cause considerable damage to a home, townhome or condominium.   Despite a flood’s ability to produce catastrophic damage, flooding events are specifically excluded on a condo association’s Master Policy. This may come as a surprise to some – particularly considering that a burst water pipe (which can produce a “flood-like” event inside a home) is typically covered.  Naturally occurring rain water which collects and moves horizontally into a condominium or townhouse project is treated differently, however.  It’s considered a “flood” – and the water extraction and resulting damage is specifically excluded.

Excluded, that is – unless your Association has flood coverage.

If your Association is in a special flood hazard area, you would likely know it.  Lenders, under intense pressure from FannieMae, GinnieMae, FreddieMac and the FHA would be clamoring for evidence of flood protection.   Unfortunately, just being outside a special flood hazard zone does not mean you are immune. According to FEMA, a surprising 25% of flooding events occur in areas outside those deemed to have a special flood hazard exposure.

While coverage can be offered via private insurance markets, flood insurance is most commonly provided by the National Flood Insurance Program (NFIP), under the umbrella of the Department of Homeland Security: NFIP is the Federal Government’s answer to this very wet dilemma.   For condominium associations, the coverage is typically provided under a Residential Condominium Building Association Policy (also called RCBAP).   Your Association can purchase RCBAP coverage whether or not you are located in a specified flood hazard area, so long as your local community participates. 

The RCBAP can provide replacement cost coverage on a building up to a maximum limit of $250,000 per unit.   (A four-unit building, for example, can be insured up to $1,000,000).   Insuring to value is very essential.   If you insure for less than 80% of the replacement cost, the coinsurance clause will reduce the amount of the policy’s payment in the event of a loss. 

If your Association maintains earthquake insurance, you may also speak to your earthquake insurance broker about the cost of adding flood coverage to your earthquake policy.  The cost, when available, is typically minimal. 

If your Association is not currently insured for the peril of flood, we encourage you to look into it.  Even if the Board decides against purchasing the coverage, you will be able to offer proof of having investigated the available options – and your rationale for electing not to purchase – in the event that a catastrophe occurs and your Association’s membership is looking for a place to point the finger.


Important Flood Facts
  • Nearly 25% of flood insurance claims come from low-to-moderate risk areas.
  • Only two inches of water in your home can cost $7,800 or more in damage.

  • In 2007, flooding occured in all 50 states.
  • There is a 30-day waiting period on new flood insurance policies (under the National Flood Insurance Program.)
  • Disaster assistance, if it's available, is typically a loan you must repay with interest.
  • In high-risk areas, there is at least a 1/4 chance of flooding during a 30-year mortgage.
  • Everyone lives in a flood zone.
  • Flood insurance is mandatory if you live in a high risk area and have a mortgage from a federally regulated or insured lender.

*From the Nation Flood Insurance Program

This letter contains only a general description of coverage and is not a statement of contract. For a more detailed description of the policy conditions and exclusions, please consult the policy itself.
For more information please visit us at:
or call us today at: (800) 966-9566