SECTION 5.4904. Flood Insurance

(a) The following words and terms when used in this section shall have the following meanings unless the context clearly indicates otherwise:

(1) Actual cash value--The replacement cost of an insured property at the time of loss, less the value of physical depreciation for the property.

(2) The terms constructed, altered, remodeled, and enlarged--Refer to any building activity or action on a structure that would require the insured or applicant to obtain a certificate of compliance, prior to the structure being considered to be an insurable property eligible for insurance coverage from the Association.

(3) Repair--The reconstruction or restoration of a structure that is deteriorated or damaged.

(b) The Association may not issue or renew a policy unless evidence is shown that a flood insurance policy is in effect for the insurable property if:

(1) the structure is constructed, altered, remodeled, or enlarged on or after September 1, 2009;

(2) all or any part of the insurable property is located in any of the following zones designated by the National Flood Insurance Program (NFIP):

(A) Zone V;

(B) Zone VE;

(C) Zones V1 - V30; and

(3) flood insurance is available for the insurable property from the NFIP.

(c) This section does not apply to:

(1) the repair of a structure; and

(2) insurable corporeal movable property located on or above the third floor of a structure.

(d) The flood insurance policy required under subsection (b) of this section must provide the following coverage:

(1) if replacement cost coverage is available through the NFIP for the property to be insured by the Association, the flood insurance policy must provide coverage for the property in an amount at least equal to the lesser of:

(A) ninety percent of the amount of insurance for the property insured under the Association policy; or

(B) the maximum coverage amount available under the NFIP for the property; or

(2) if replacement cost coverage is not available through the NFIP for the property to be insured by the Association, the flood insurance policy must provide coverage for the property in an amount at least equal to the lesser of:

(A) ninety percent of the actual cash value for the property; or

(B) the maximum coverage amount available under the NFIP for the property.

(e) A flood insurance policy required under subsection (b) of this section must be maintained throughout the entire period the Association policy is in effect.

(f) For purposes of this section, a flood insurance policy is considered to be in effect upon application and presentment of payment of the premium for the flood insurance policy to the NFIP or a participating "write your own insurance company" regardless of any applicable waiting period that may apply to the flood insurance policy.

(g) The agent shall maintain and submit to the Association at its request documentation demonstrating proof of the flood insurance coverage, or proof of the unavailability of flood insurance coverage required under this section, that was relied upon by the agent in completing the Association's application for insurance coverage as set forth in §5.4902(b) of this division (relating to Additional Requirements). Acceptable proof shall include a copy of the flood insurance policy declarations page, or a copy of the flood insurance policy, or written or printable electronic evidence from the NFIP or the participating "write your own insurance company" that the flood insurance is unavailable through the NFIP. The Association may specify additional types of documentation that may be used to demonstrate compliance with this subsection. Proof must be maintained either in writing or in an electronic format that may be printed by the agent. Documentation must be maintained for a period of not less than five years following the date of the submission of the application for Association coverage. The Association may also allow the requested proof to be submitted electronically in a manner that is acceptable to the Association.

(h) Each agent offering or selling a Texas windstorm and hail insurance policy in an area subject to this section must offer NFIP flood insurance coverage to the prospective insured if that coverage is available.

(i) If the Association determines that a structure does not have flood insurance as required by this section, the Insurance Code §2210.203(a-1), and §5.4902(b) of this division, the Association may cancel insurance coverage on the structure. The Association shall provide notice of the cancellation not later than the 30th day before the effective date of the cancellation. In accordance with §5.4001(d)(3)(A)(ii) of this subchapter (relating to Plan of Operation), the notice of cancellation must state the reason for cancellation and provide the policyholder with notice of their right to appeal the Association's action. If the policyholder, or the policyholder's agent, provides the Association prior to the date of the cancellation of the policy with proof of flood insurance coverage, or proof of the unavailability of flood insurance coverage, as required by this section, the Insurance Code §2210.203(a-1), and §5.4902(b) of this division, the Association shall rescind the cancellation notice and continue coverage under the policy.

Source Note: The provisions of this §5.4904 adopted to be effective February 24, 2010, 35 TexReg 2160