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A LEGAL WATERSHED: THE FUTURE OF FLOOD INSURANCE IN FLORIDA AND BEYOND

Wednesday, April 3, 2024   /   by Richard Eimers

A LEGAL WATERSHED: THE FUTURE OF FLOOD INSURANCE IN FLORIDA AND BEYOND

National Flood Insurance Program.pngBy Richard Eimers, April 3, 2024

 
In Tallahassee, Florida, a federal judge denied a preliminary injunction requested by Florida and other states to halt changes to the National Flood Insurance Program. The alterations have resulted in increased premiums for numerous property owners. However, the judge allowed the broader legal dispute to proceed. U.S. District Judge Darrel James Papillion, based in New Orleans, issued a detailed 56-page ruling, expressing concerns about potential disruptions to the program's stability if an injunction were granted against the risk-rating system implemented since 2021.

The lawsuit, initiated by Louisiana and joined by Florida and eight other states in June 2023, alleges violations of the Administrative Procedure Act, claiming the changes were arbitrary and capricious. Papillion ruled that while the injunction was denied, the states and three local governments in Louisiana could continue their lawsuit, rejecting federal arguments of a lack of legal standing. He noted the potential for increased rebuilding costs post-flood if property owners abandon their National Flood Insurance Program policies due to heightened costs. The lawsuit centers on changes termed "Risk Rating 2.0: Equity in Action," with federal officials asserting they aimed to make the program actuarially sound and reflect property-specific risks. The National Flood Insurance Program is crucial in states like Florida and Louisiana, where many mortgage-holders are mandated to carry flood insurance, not typically included in standard property insurance.

According to lawsuit documents, Florida had about 1.391 million policies under the program, totaling nearly $367 billion in coverage. This legal battle unfolds amid rising property insurance costs in Florida, covering risks such as wind and fire damage. Other states involved in the case include Idaho, Kentucky, Mississippi, Montana, North Dakota, South Dakota, Texas, and Virginia, with defendants including the U.S. Department of Homeland Security and the Federal Emergency Management Agency (FEMA). Last year, U.S. Department of Justice attorneys contended that plaintiffs overstated cost increases after the risk-rating system change, citing that 19% of premiums decreased and 70% increased by less than $10 monthly. They argued that these changes align with best practices in the insurance industry and fulfill FEMA's mandate under the National Flood Insurance Act. Nonetheless, attorneys for the states and local governments in Louisiana highlighted the "crippling effects" of program changes, emphasizing unprecedented rate hikes experienced by policyholders under the new system.

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