Section 1 Short title
This Act may be cited as the “National Flood Insurance Program Administrative Reform Act of 2017”.
National Flood Insurance Program Administrative Reform Act of 2017
A BILL
To make administrative reforms to the National Flood Insurance Program to increase fairness and accuracy and protect the taxpayer from program fraud and abuse, and for other purposes.
Sec. 2 Increased cost of compliance coverage
Coverage of properties at high risk of future flood damage— Subsection (b) of section 1304 of the National Flood Insurance Act of 1968 (42 U.S.C. 4011(b)) is amended—
in paragraph (4), by redesignating subparagraphs (A) through (D) as clauses (i) through (iv), respectively, and realigning such clauses, as so redesignated, so as to be indented 6 ems from the left margin;
by redesignating paragraphs (1) through (4) as subparagraphs (A) through (D), respectively, and realigning such subparagraphs, as so redesignated, so as to be indented 4 ems from the left margin;
by striking the subsection designation and all that follows through “The national” and inserting the following:
“(b) Additional coverage for compliance with land use and control measures
“(1) Authority; eligible properties—The national”
in subparagraph (C) (as so redesignated by paragraph (2) of this subsection), by striking “Fund” and all that follows and inserting “Fund to require the implementation of such measures;”;
in subparagraph (D)(iv) (as so redesignated by paragraphs (1) and (2) of this subsection), by striking the period at the end and inserting a semicolon; and
by adding at the end the following new subparagraphs:
“(E) properties that have been identified by the Administrator, or by a community in accordance with such requirements as the Administrator shall establish, as at a high risk of future flood damage; and
“(F) properties that are located within an area identified pursuant to section 1361(e)(1)(A) (42 U.S.C. 4102(e)(1)(A)) by a covered community (as such term is defined in paragraph (3) of such section 1361(e)).”
Coverage amount— Section 1304(b) of the National Flood Insurance Act of 1968 (42 U.S.C. 4011(b)) is amended—
in paragraph (1) (as so designated by subsection (a)(3) of this section), by striking the last sentence (relating to a surcharge); and
by adding at the end the following new paragraph:
“(2) Coverage amount
“(A) Primary coverage—Each policy for flood insurance coverage made available under this title shall provide coverage under this subsection having an aggregate liability for any single property of $30,000.
“(B) Enhanced coverage—The Administrator shall make additional coverage available under this subsection, in excess of the limit specified in subparagraph (A), having an aggregate liability for any single property of up to $60,000.”
Amount of surcharge— Subsection (b) of section 1304 of the National Flood Insurance Act of 1968 (42 U.S.C. 4011(b)), as amended by the preceding provisions of this section, is further amended by adding at the end the following new paragraph:
“(3) Surcharge for coverage
“(A) Primary coverage—The Administrator shall impose a surcharge on each insured of such amount per policy as the Administrator determines is appropriate to provide cost of compliance coverage in accordance with paragraph (2)(A).
“(B) Enhanced coverage—For each flood policy for flood insurance coverage under this title under which additional cost of compliance coverage is provided pursuant to paragraph (2)(B), the Administrator shall impose a surcharge, in addition to the surcharge under subparagraph (A) of this paragraph, in such amount as the Administrator determines is appropriate for the amount of such coverage provided.”
Use of certain materials— Subsection (b) of section 1304 of the National Flood Insurance Act of 1968 (42 U.S.C. 4011(b)), as amended by the preceding provisions of this section, is further amended by adding at the end the following new paragraph:
“(4) Use of certain materials—The Administrator shall require that any measures implemented using amounts made available from coverage provided pursuant to this subsection be carried out using materials, identified by the Administrator, that minimize the impact of flooding on the usability of the covered property and reduce the duration that flooding renders the property unusable or uninhabitable.”
Continued flood insurance requirement— Subsection (b) of section 1304 of the National Flood Insurance Act of 1968 (42 U.S.C. 4011(b)), as amended by the preceding provisions of this section, is further amended by adding at the end the following new paragraph:
“(5) Continued flood insurance requirement—The Administrator may require, as a condition of providing cost of compliance coverage under this subsection for a property, that the owner of the property enter into such binding agreements as the Administrator considers necessary to ensure that the owner of the property (and any subsequent owners) will maintain flood insurance coverage under this title for the property in such amount, and at all times during a period having such duration, as the Administrator considers appropriate to carry out the purposes of this subsection.”
Sec. 3 Pilot program for properties with preexisting conditions
Section 1311 of the National Flood Insurance Act of 1968 (42 U.S.C. 4018) is amended by adding at the end the following new subsection:
“(c) Pilot program for investigation of preexisting structural conditions
“(1) Voluntary program—The Administrator shall carry out a pilot program under this subsection to provide for companies participating in the Write Your Own program (as such term is defined in section 1370(a) (42 U.S.C. 4121(a))) to investigate preexisting structural conditions of insured properties and potentially insured properties that could result in the denial of a claim under a policy for flood insurance coverage under this title in the event of a flood loss to such property. Participation in the pilot program shall be voluntary on the part of Write Your Own companies.
“(2) Investigation of properties—Under the pilot program under this subsection, a Write Your Own company participating in the program shall—
“(A) provide in policies for flood insurance coverage under this title covered by the program that, upon the request of the policyholder, the company shall provide for—
“(i) an investigation of the property covered by such policy, using common methods, to determine whether preexisting structural conditions are present that could result in the denial of a claim under such policy for flood losses; and
“(ii) if such investigation is not determinative, an on-site inspection of the property to determine whether such preexisting structural conditions are present;
“(B) upon completion of an investigation or inspection pursuant to subparagraph (A) that determines that such a preexisting structural condition is present or absent, submit a report to the policyholder and Administrator describing the condition; and
“(C) impose a surcharge on each policy described in subparagraph (A) in such amount that the Administrator determines is appropriate to cover the costs of investigations and inspections performed pursuant to such policies and reimburse Write Your Own companies participating in the program under this subsection for such costs.
“(3) Interim report—Not later than December 31, 2021, the Administrator shall submit a report to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate describing the operation of the pilot program to that date.
“(4) Sunset—The Administrator may not provide any policy for flood insurance described in paragraph (2)(A) after December 31, 2022.
“(5) Final report—Not later than March 31, 2023, the Administrator shall submit a final report regarding the pilot program under this section to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate. The report shall include any findings and recommendations of the Administrator regarding the pilot program.”
Sec. 4 Penalties for fraud and false statements in the National Flood Insurance Program
Part C of chapter 2 of the National Flood Insurance Act of 1968 (42 U.S.C. 4081 et seq.) is amended by adding at the end the following new section:
“1349. Penalties for fraud and false statements in the National Flood Insurance Program
“(a) Prohibited acts—A person shall not knowingly make a false or misleading statement, production, or submission in connection with the proving or adjusting of a claim for flood insurance coverage made available under this Act. Such prohibited acts include—
“(1) knowingly forging an engineering report, claims adjustment report or technical assistance report used to support a claim determination;
“(2) knowingly making any materially false, fictitious, or fraudulent statement or representation in an engineering report, claims adjustment report, or technical assistance report to support a claim determination;
“(3) knowingly submitting a materially false, fictitious, or fraudulent claim.
“(b) Civil enforcement—The Attorney General may bring a civil action for such relief as may be appropriate whenever it appears that any person has violated or is about to violate any provision of this section. Such action may be brought in an appropriate United States district court.
“(c) Referral to Attorney General—The Administrator shall expeditiously refer to the Attorney General for appropriate action any evidence developed in the performance of functions under this Act that may warrant consideration for criminal or civil prosecution.
“(d) Penalties
“(1) Civil monetary penalty—Any person who violates subsection (a) shall be subject to a civil penalty of not more than $10,000 for each violation, which shall be deposited into the National Flood Insurance Fund established under section 1310 (42 U.S.C. 4017).
“(2) Suspension and debarment—Any person who violates subsection (a) shall not be eligible, for a period of not less than 2 years and not to exceed 5 years, to—
“(A) receive flood insurance coverage pursuant to this title; or
“(B) provide services in connection with the selling, servicing, or handling of claims for flood insurance policies provided pursuant to this title.
“(3) Other penalties—The penalties provided for in this subsection shall be in addition to any other civil or criminal penalty available under law.”
Sec. 5 Enhanced policyholder appeals process rights
Establishment— Part C of chapter II of the National Flood Insurance Act of 1968 (42 U.S.C. 4081 et seq.), as amended by the preceding provisions of this Act, is further amended by adding at the end the following new section:
“1350. Approval of decisions relating to flood insurance coverage
“(a) In general—The Administrator shall establish an appeals process to enable holders of a flood insurance policy provided under this title to appeal the decisions of their insurer, with respect to the disallowance, in whole or in part, of any claims for proved and approved losses covered by flood insurance. Such appeals shall be limited to the claim or portion of the claim disallowed by the insurer.
“(b) Appeal decision—Upon a decision in an appeal under subsection (a), the Administrator shall provide the policyholder with a written appeal decision. The appeal decision shall explain the Administrator’s determination to uphold or overturn the decision of the flood insurer. The Administrator may direct the flood insurer to take action necessary to resolve the appeal, to include re-inspection, re-adjustment, or payment, as appropriate.
“(c) Rules of construction—This section shall not be construed as—
“(1) making the Federal Emergency Management Agency or the Administrator a party to the flood insurance contract; or
“(2) creating any action or remedy not otherwise provided by this title.”
Repeal— Section 205 of the Bunning-Blumenauer-Bereuter Flood Insurance Reform Act of 2004 (42 U.S.C. 4011 note) is hereby repealed.
Sec. 6 Deadline for approval of claims
in subsection (a), by striking “The Administrator” and inserting “Subject to other provisions of this section, the Administrator”; and
by adding at the end the following new subsection:
“(d) Deadline for approval of claims
“(1) In general—The Administrator shall provide that, in the case of any claim for damage to or loss of property under flood insurance coverage made available under this title, a final determination regarding approval of a claim for payment or disapproval of the claim be made, and notification of such determination be provided to the insured making such claim, not later than the expiration of the 90-day period (as such period may be extended pursuant to paragraph (2)) beginning upon the day on which such claim was made. Payment of approved claims shall be made as soon as possible after such approval.
“(2) Extension of deadline—The Administrator shall provide that the period referred to in paragraph (1) may be extended by a single additional period of 15 days in cases where extraordinary circumstances are demonstrated. The Administrator shall, by regulation, establish criteria for demonstrating such extraordinary circumstances and for determining to which claims such extraordinary circumstances apply.”
Applicability— The amendments made by subsection (a) shall apply to any claim under flood insurance coverage made available under the National Flood Insurance Act of 1968 (42 U.S.C. 4001 et seq.) pending on the date of the enactment of this Act and any claims made after such date of enactment.
Sec. 7 Litigation process oversight and reform
In general— Part C of chapter II of the National Flood Insurance Act of 1968 (42 U.S.C. 4081 et seq.), as amended by the preceding provisions of this Act, is further amended by adding at the end the following new section:
“1351. Oversight of litigation
“(a) Oversight—The Administrator shall monitor and oversee litigation conducted by Write Your Own companies arising under contracts for flood insurance sold pursuant to this title, to ensure that—
“(1) litigation expenses are reasonable, appropriate, and cost-effective; and
“(2) Write Your Own companies comply with guidance and procedures established by the Administrator regarding the conduct of litigation.
“(b) Denial of reimbursement for expenses—The Administrator may deny reimbursement for litigation expenses that are determined to be unreasonable, excessive, contrary to guidance issued by the Administrator, or outside the scope of any arrangement entered into with a Write Your Own company.
“(c) Litigation strategy—The Administrator may direct litigation strategy for claims arising under a contract for flood insurance sold by a Write Your Own company.
“(d) Substitution—If at any time, the Administrator determines there is a conflict of interest between the Write Your Own company and the National Flood Insurance Program, or it is in the best interest of the United States, the Administrator may promptly take any necessary action to be substituted for the WYO company in any action arising out of any claim arising under a contract for flood insurance sold by a Write Your Own company.”
Implementation— The Administrator of the Federal Emergency Management Agency shall initiate compliance with section 1352(d) of the National Flood Insurance Act of 1968, as added by the amendment made by subsection (a) of this section, not later than the expiration of the 12-month period beginning on the date of the enactment of this Act.
Sec. 8 Prohibition on hiring disbarred attorneys
Part C of chapter II of the National Flood Insurance Act of 1968 (42 U.S.C. 4081 et seq.), as amended by the preceding provisions of this Act, is further amended by adding at the end the following new section:
“1352. Prohibition on hiring disbarred attorneys
“The Administrator may not at any time newly employ in connection with the flood insurance program under this title any attorney who has been suspended or disbarred by any court, bar, or Federal or State agency to which the individual was previously admitted to practice.”
Sec. 9 Underpayment of claims by Write Your Own companies
Section 1345 of the National Flood Insurance Act of 1968 (42 U.S.C. 4081) is amended by adding at the end the following new subsection:
“(f) Underpayment of claims by WYO companies—The Administrator shall establish penalties for companies participating in the Write Your Own program knowingly underpaying claims for losses covered by flood insurance made available under this title, which penalties shall be commensurate, with respect to the amount of the penalty, to the penalties applicable to overpayment of such claims by a similar amount by such companies.”
Sec. 10 Technical assistance reports
Use— Section 1312 of the National Flood Insurance Act of 1968 (42 U.S.C. 4019), as amended by the preceding provisions of this Act, is further amended by adding at the end the following new subsection:
“(e) Use of technical assistance reports—When adjusting claims for any damage to or loss of property which is covered by flood insurance made available under this title, the Administrator may rely upon technical assistance reports, as such term is defined in section 1312A, only if such reports are final and are prepared in compliance with applicable State and Federal laws regarding professional licensure and conduct.”
Disclosure— The National Flood Insurance Act of 1968 is amended by inserting after section 1312 (42 U.S.C. 4019) the following new section:
“1312A. Disclosure of technical assistance reports
“(a) In general—Notwithstanding section 552a of title 5, United States Code, upon request by a policyholder, the Administrator shall provide a true, complete, and unredacted copy of any technical assistance report that the Administrator relied upon in adjusting and paying for any damage to or loss of property insured by the policyholder and covered by flood insurance made available under this title. Such disclosures shall be in addition to any other right of disclosure otherwise made available pursuant such section 552a or any other provision of law.
“(b) Direct disclosure by Write Your Own companies and direct servicing agents—A Write Your Own company or direct servicing agent in possession of a technical assistance report subject to disclosure under subsection (a) may disclose such technical assistance report without further review or approval by the Administrator.
“(c) Definitions—For purposes of this section, the following definitions shall apply:
“(1) Policyholder—The term “policyholder” means a person or persons shown as an insured on the declarations page of a policy for flood insurance coverage sold pursuant to this title.
“(2) Technical assistance report—The term “technical assistance report” means a report created for the purpose of furnishing technical assistance to an insurance claims adjuster assigned by the National Flood Insurance Program, including by engineers, surveyors, salvors, architects, and certified public accounts.”
Sec. 11 Improved disclosure requirement for standard flood insurance policies
Section 100234 of the Biggert-Waters Flood Insurance Reform Act of 2012 (42 U.S.C. 4013a) is amended by adding at the end the following new subsections:
“(c) Disclosure of coverage
“(1) Disclosure sheet—Each policy under the National Flood Insurance Program shall include a disclosure sheet that sets forth, in plain language—
“(A) the definition of the term “flood” for purposes of coverage under the policy;
“(B) a description of what type of flood forces are necessary so that losses from an event are covered under the policy, including overflow of inland or tidal waves, unusual and rapid accumulation or runoff of a surface any source, and mudflow;
“(C) a statement of the types and characteristics of losses that are not covered under the policy;
“(D) a summary of total cost and amount of insurance coverage, and any other information relating to such coverage required to be disclosed under section 1308(l) of the National Flood Insurance Act of 1968 (42 U.S.C. 4015(l));
“(E) a statement that the disclosure sheet provides general information about the policyholder’s standard flood insurance policy;
“(F) a statement that the standard flood insurance policy, together with the application, endorsements, and declarations page, make up the official contract and are controlling in the event that there is any difference between the information on the disclosure sheet and the information in the policy; and
“(G) a statement that if the policyholder has any questions regarding information in the disclosure sheet or policy he or she should contact the entity selling the policy on behalf of the Program, together with contact information sufficient to allow the policyholder to contact such entity.
“(2) Acknowledgment sheet—Each policy under the National Flood Insurance Program shall include an acknowledgment sheet that sets forth, in plain language—
“(A) a statement of whether or not there is a basement in the property to be covered by the policy;
“(B) a statement of whether or not the policy provides coverage for the contents of the property covered by the policy;
“(C) a statement that the standard flood insurance policy, together with the application, endorsements, and declarations page, make up the official contract and are controlling in the event that there is any difference between the information on the acknowledgment sheet and the information in the policy; and
“(D) a statement that if the policyholder has any questions regarding information in the acknowledgment sheet or policy he or she should contact the entity selling the policy on behalf of the Program, together with contact information sufficient to allow the policyholder to contact such entity.
“(3) Required signatures—Notwithstanding section 1306(c) of the National Flood Insurance Act of 1968 (42 U.S.C. 4013(c)), a policy for flood insurance coverage under the National Flood Insurance Program may not take effect unless the disclosure sheet required under paragraph (1) and the acknowledgment sheet required under paragraph (2), with respect to the policy, are signed and dated by the policyholder and the seller of the policy who is acting on behalf of the Program.”
Sec. 12 Reserve Fund amounts
Section 1310 of the National Flood Insurance Act of 1968 (42 U.S.C. 4017) is amended by adding at the end the following new subsection:
“(g) Crediting of Reserve Fund amounts—Funds collected pursuant to section 1310A may be credited to the Fund under this section to be available for the purpose described in subsection (d)(1).”
Sec. 13 Sufficient staffing for Office of Flood Insurance Advocate
In general— Section 24 of the Homeowner Flood Insurance Affordability Act of 2014 (42 U.S.C. 4033) is amended by adding at the end the following new subsection:
“(c) Staff—The Administrator shall ensure that the Flood Insurance Advocate has sufficient staff to carry out all of the duties and responsibilities of the Advocate under this section.”
Timing— The Administrator of the Federal Emergency Management Agency shall take such actions as may be necessary to provide for full compliance with section 24(c) of the Homeowner Flood Insurance Affordability Act of 2014, as added by the amendment made by subsection (a) of this section, not later than the expiration of the 180-day period beginning on the date of the enactment of this Act.
Sec. 14 Federal Flood Insurance Advisory Committee
Establishment— There is established an advisory committee to be known as the Federal Flood Insurance Advisory Committee (in this section referred to as the “Committee”).
Membership—
Members— The Committee shall consist of—
the Administrator of the Federal Emergency Management Agency (in this section referred to as the “Administrator”), or the designee thereof;
the Secretary of the Treasury, or the designee thereof; and
additional members appointed by the Administrator or the designee of the Administrator, who shall be—
two representatives of the property and casualty insurance sector;
one individual who served in the past, or is currently serving, as an insurance regulator of a State, the District of Columbia, the Commonwealth of Puerto Rico, Guam, the Commonwealth of the Northern Mariana Islands, the Virgin Islands, American Samoa, or any federally-recognized Indian tribe;
one representative of the financial or insurance sectors who is involved in risk transfers, including reinsurance, resilience bonds, and other insurance-linked securities;
one actuary with demonstrated high-level knowledge of catastrophic risk insurance;
two insurance professionals with demonstrated experience with the sale of flood insurance under the National Flood Insurance Program;
two representatives of catastrophic risk insurance programs;
one insurance claims specialist;
one representative of a recognized consumer advocacy organization;
one individual having demonstrated expertise in the challenges in insuring low-income communities;
one representative from an academic institution who has demonstrated expertise in insurance; and
such other recognized experts in the field of insurance as the Administrator considers necessary.
Qualifications— In appointing members under paragraph (1)(C), the Administrator shall, to the maximum extent practicable, ensure the membership of the Committee has a balance of members reflecting geographic diversity, including representation from areas inland or with coastline identified by the Administrator as at high risk for flooding or as areas having special flood hazards.
Duties— The Committee shall review, and make recommendations to the Administrator, upon request, on matters related to the insurance aspects of the National Flood Insurance Program, including ratemaking, technology to administer insurance, risk assessment, actuarial practices, claims practices, sales and insurance delivery, compensation and allowances, generally and based on the complexities of the program, and best insurance practices.
Chairperson— The members of the Committee shall elect one member to serve as the chairperson of the Committee (in this section referred to as the “Chairperson”).
Compensation— Members of the Committee shall receive no additional compensation by reason of their service on the Committee.
Meetings and actions—
In general— The Committee shall meet not less frequently than twice each year at the request of the Chairperson or a majority of its members, and may take action by a vote of the majority of the members in accordance with the Committee’s charter.
Initial meeting— The Administrator, or a person designated by the Administrator, shall request and coordinate the initial meeting of the Committee.
Staff of FEMA— Upon the request of the Chairperson, the Administrator may detail, on a nonreimbursable basis, personnel of the Federal Emergency Management Agency to assist the Committee in carrying out its duties.
Powers— In carrying out this section, the Committee may hold hearings, receive evidence and assistance, provide information, and conduct research, as it considers appropriate.
Reports to Congress— The Administrator, on an annual basis, shall report to the Committee on Financial Services of the House of Representatives, the Committee on Banking, Housing, and Urban Affairs of the Senate, and the Office of Management and Budget on—
the recommendations made by the Committee;
actions taken by the Federal Emergency Management Agency to address such recommendations to improve the insurance aspects of the national flood insurance program; and
any recommendations made by the Committee that have been deferred or not acted upon, together with an explanatory statement.
Sec. 15 Interagency guidance on compliance
The Federal entities for lending regulation (as such term is defined in section 3(a) of the Flood Disaster Protection Act of 1973 (42 U.S.C. 4003(a))), in consultation with the Administrator of the Federal Emergency Management Agency, shall update and reissue the document entitled “Interagency Questions and Answers Regarding Flood Insurance” not later than the expiration of the 12-month period beginning on the date of the enactment of this Act and not less frequently than biennially thereafter.
Sec. 16 GAO study of claims adjustment practices
The Comptroller General of the United States shall conduct a study of the policies and practices for adjustment of claims for losses under flood insurance coverage made available under the National Flood Insurance Act, which shall include—
a comparison of such policies and practices with the policies and practices for adjustment of claims for losses under other insurance coverage;
an assessment of the quality of the adjustments conducted and the effects of such policies and practices on such quality;
identification of any incentives under such policies and practices that affect the speed with which such adjustments are conducted; and
identification of the affects of such policies and practices on insureds submitting such claims for losses.
Sec. 17 GAO study of flood insurance coverage treatment of earth movement
The Comptroller General of the United States shall conduct a study of the treatment, under flood insurance coverage made available under the National Flood Insurance Act, of earth movement and subsidence, including earth movement and subsidence caused by flooding, which shall include—
identification and analysis of the effects of such treatment on the National Flood Insurance Program and insureds under the program;
an assessment of the availability and affordability of coverage in the private insurance market for earth movement and subsidence caused by flooding;
an assessment of the effects on the National Flood Insurance Program of covering earth movement and subsidence caused by flooding; and
a projection of the increased premiums that would be required to make coverage for earth movement losses actuarially sound and not fiscally detrimental to the continuation of the National Flood Insurance Program.
Sec. 18 Definitions
National Flood Insurance Act of 1968— Subsection (a) of section 1370 of the National Flood Insurance Act of 1968 (42 U.S.C. 4121(a)) is amended—
in paragraph (14), by striking “and” at the end;
in paragraph (15), by striking the period at the end and inserting a semicolon; and
by adding at the end the following new paragraphs:
“(16) the term “Write Your Own Program” means the program under which the Federal Emergency Management Agency enters into a standard arrangement with private property insurance companies to sell contracts for flood insurance coverage under this title under their own business lines of insurance, and to adjust and pay claims arising under such contracts; and
“(17) the term “Write Your Own company” means a private property insurance company that participates in the Write Your Own Program.”
Biggert-Waters Flood Insurance Reform Act of 2012— Subsection (a) of section 100202 of the Biggert-Waters Flood Insurance Reform Act of 2012 (42 U.S.C. 4004(a)) is amended by striking paragraph (5) and inserting the following new paragraph:
“(5) Write Your Own—The terms “Write Your Own Program” and “Write Your Own company” have the meanings given such terms in section 1370(a) of the National Flood Insurance Act of 1968 (42 U.S.C. 4121(a)).”