The Federal Emergency Management Agency has clarified that in the event of a declared flooding disaster, National Flood Insurance Program coverage will apply even if oil from the British Petroleum deep well blowout in the Gulf of Mexico is mixed with flood waters.
The NFIP will bill BP for reimbursement for any claims it pays for covered properties affected by flood waters mixed with oil from the BP spill.
In a memorandum issued to insurance industry Write Your Own flood program particpants, James A Sadler, director of Claims for the NFIP, said that oil in flood water is not a new development for the flood insurance program. However, in order for coverage to apply there must first be a definitional flood as described in the Standard Flood Insurance Policy (SFIP), Sadler wrote.
Damage caused by the oil in flood waters is covered subject to the provisions of the SFIP.
Other stipulations provided by Sadler in the memo include:
- Coverage for commercial buildings and contents must be purchased separately and the limit for damage caused by pollutants is $10,000.
- Homes and contents are covered up to the policy limits.
- NFIP only pays for direct physical loss by or from flood.
- Condominium contents are covered to the policy limits.
- Damage to ground, soil, or land caused by flood, oil, or flood water mixed with oil is not covered.
- The cost of complying with any local or state ordinance including one that requires special removal methods for oil is specifically excluded (certain floodplain management mitigation requirements are exceptions).
- There is no coverage for testing for or monitoring of pollutants unless there is a law or ordinance requiring it.
- If the policyholder makes any claim against any person who caused the loss and recovers any money, the policyholder must pay FEMA or the WYO back first before the policyholder may keep any of that money.