H.R. 3111 — what changed

removed This Act may be cited as the “National Flood Insurance Program Administrative Reform Act of 2019”.

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

changed “(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 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, 2023, 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, 2024.

“(5) Final report—Not later than March 31, 2025, 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.”

changed Part C of chapter 2 II 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, fictitious, or fraudulent 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 that results in a wrongful denial or substantial payment error of flood insurance coverage; and

“(3) knowingly submitting a materially false, fictitious, or fraudulent claim that results in wrongful payment of flood insurance coverage.

“(b) Definition—For purposes of this section, the term “knowingly” means having actual awareness of the prohibitions under this part and acting deliberately in violation of such prohibitions.

“(c) Administrative remedy—Prior to any legal action being taken related to this section, all administrative remedies shall be exhausted.

“(d) Rule of construction—This section shall not be construed—

“(1) to prevent the Federal Government from bringing action against a company or individual under applicable statutes, including the False Claims Act; and

“(2) as creating any action, private right of action, or remedy not otherwise provided by this title or under Federal law.

changed “(3) “(e) State action—Any person found to have violated subsection (a) shall be referred to the appropriate and relevant State licensing agency by the Attorney General.”

“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 decisions, with respect to the disallowance, in whole or in part, of any claims for losses covered by flood insurance. Such appeals shall be limited to the claim or portion of the claim disallowed.

“(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, modify, or overturn the decision. The Administrator may direct the Write Your Own company to take action necessary to resolve the appeal, to include re-inspection, re-adjustment, or payment, as appropriate.

“(c) Deadline for appeals decision—The Administrator shall issue an appeals decision pursuant to subsection (b) not later than the expiration of the 120-day period beginning upon the day on which the Administrator acknowledges receipt of a request by the policyholder to pursue an appeal of the initial determination regarding approval, disapproval, or amount of payment by the Administrator. In cases where extraordinary circumstances, as established by regulation, are demonstrated, the 120-day period may be extended by additional successive periods of 30 days.

“(d) Administrative remedy—A policyholder shall exhaust all administrative remedies, including submission of disputed claims to appeal under subsection (a), prior to commencing legal action on a disputed claim.

“(e) 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.

“(f) Policyholder litigation—This section shall not be construed to prevent a policyholder from bringing legal action against the Federal Emergency Management Agency or a Write Your Own company following the exhaustion of all administrative remedies and pursuant to applicable statute.”

“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) Joint defense

“(1) Authority—The Administrator and the Write Your Own companies may enter into, and operate under, a joint defense agreement for any claim or lawsuit, or multiple claims or lawsuits, arising under a contract of flood insurance.

“(2) Free flow of information—Under such joint defense agreement, there may be the free flow of information between the Write Your Own companies, the Administrator, the United States Department of Justice, and legal counsel for the Write Your Own companies for the purpose of litigation coordination and to allow the Administrator to perform oversight responsibility of such litigation.

changed “(3) Arrangement—Such joint defense agreement may be included in the arrangement Arrangement between the Administrator and the Write Your Own companies.

“(4) Regulations—The Administrator may issue rules or regulations or provide such formal guidance as the Administrator considers necessary and appropriate in order to further such joint defense agreement with the Write Your Own companies.”

“(c) Disclosure of coverage

“(1) Disclosure sheet—Each policy under the National Flood Insurance Program shall include a standard disclosure sheet that is produced by the Administrator 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 acknowledging that a standard flood insurance policy does not cover basement improvements, such as finished walls, floors, and ceilings, or personal property kept in a basement;

“(D) a statement acknowledging a standard flood insurance policy does not include coverage for personal property, but such coverage may be purchased, for some personal property contained in a basement, as well as personal belongings contained elsewhere in the dwelling;

“(E) a statement of the other types and characteristics of losses that are not covered under the policy;

“(F) a statement that the disclosure sheet provides general information about the policyholder’s standard flood insurance policy;

“(G) a statement that the standard flood insurance policy, together with the 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;

“(H) a statement that, if the policyholder has any questions regarding information in the disclosure sheet or policy, the policyholder 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; and

“(I) any other information that the Administrator determines will be helpful to policyholder in understanding flood insurance coverage.

“(2) Acknowledgment sheet—Each policy application under the National Flood Insurance Program shall include an acknowledgment sheet on which the policyholder shall affirmatively—

“(A) acknowledge that the policyholder received the disclosure sheet required under paragraph (1);

“(B) accept or decline coverage for personal property;

“(C) accept or decline other optional coverage that may be available;

“(D) acknowledge the policyholder’s understanding that the standard flood insurance policy, together with the 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

“(E) acknowledge that the policyholder has been provided and has reviewed a summary, which may be the policy declarations page, of the total cost, amount and extent of insurance coverage provided under the policy.

“(d) Rule of construction—This section shall not be construed to void or alter the coverage terms of the underlying standard flood insurance policy and the corresponding endorsements. In the event that the customer does not affirmatively acknowledge the requirements under subsection (c)(2), a Write Your Own company may still issue the policy on behalf of the National Flood Insurance Program under such terms.”

Section 1318 of the National Flood Insurance Act of 1968 (42 U.S.C. 4025) is amended to read as follows:

“1318. Federal Flood Insurance Advisory Committee

“(a) 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”).

“(b) Membership

“(1) Members—The Committee shall consist of—

“(A) the Administrator of the Federal Emergency Management Agency (in this section referred to as the “Administrator”), or the designee thereof; and

“(B) additional members appointed by the Administrator or the designee of the Administrator, who shall include—

“(i) three representatives of Write Your Own companies;

“(ii) 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;

“(iii) one representative of the financial or insurance sectors who is involved in risk transfers, including reinsurance, resilience bonds, and other insurance-linked securities;

“(iv) one actuary with demonstrated high-level knowledge of catastrophic risk insurance;

“(v) two insurance agents or brokers with demonstrated experience with the sale of flood insurance under the National Flood Insurance Program, one of whom shall have demonstrated expertise in the challenges in insuring low-income communities;

“(vi) one insurance claims specialist;

“(vii) one representative of a recognized consumer advocacy organization; and

“(viii) one representative from an academic institution who has demonstrated expertise in insurance.

“(2) 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.

“(c) Duties—The Administrator shall submit, and the Committee shall review and make recommendations 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, the public-private partnership under the Write Your Own arrangement, general best insurance practices, and any significant changes proposed to be made regarding the operation of the National Flood Insurance Program.

“(d) 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”).

“(e) Compensation—Members of the Committee shall receive no additional compensation by reason of their service on the Committee. Members may be reimbursed by the Federal Government for travel expenses, including per diem in lieu of subsistence, at rates consistent with rates authorized for employees of Federal agencies under subchapter 1 of chapter 57 of title 5, United States Code, while away from home or regular places of business in performance of service for the Committee.

“(f) Meetings and actions

“(1) 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.

“(2) Initial meeting—The Administrator, or a person designated by the Administrator, shall request and coordinate the initial meeting of the Committee.

changed “(g) Transparency; FACA—To the greatest extent possible, the Committee shall operate in a transparent manner that adheres to the requirements of the Federal Advisory Committee Act, with the exception that the Committee shall be permitted to freely communicate both during and between meetings under subsection paragraph (f) in a confidential manner to discuss non-public information regarding the operations of the National Flood Insurance Program and other sensitive and non-public issues. If such communication occurs, the Committee shall, to the greatest extent possible, report a summary of such discussions in an appropriate public manner.

changed “(h) Staff of FEMA—Upon the request of the Chairperson, the Administrator may detail, on a nonreimbursable non-reimbursable basis, personnel of the Federal Emergency Management Agency to assist the Committee in carrying out its duties.

“(i) Powers—In carrying out this section, the Committee may hold hearings, receive evidence and assistance, provide information, and conduct research, as it considers appropriate.

“(j) 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—

“(1) the recommendations made by the Committee;

“(2) actions taken by the Federal Emergency Management Agency to address such recommendations to improve the insurance aspects of the national flood insurance program; and

“(3) any recommendations made by the Committee that have been deferred or not acted upon, together with an explanatory statement.

“(k) Rule of construction—This section shall not be construed to eliminate or alter any requirement on the Administrator associated with the notification or consultation of specified individuals or groups of individuals as required elsewhere by statute.”