Agents Urged to Tell Insureds of Flood Program Lapse

March 1, 2010

Insurance agents with customers waiting to be covered in the federal flood insurance program should tell those customers about the program’s suspension, an insurance expert is advising.

As reported by Insurance Journal, the program could be in limbo for about a week while the Senate finds a way to vote on its extension over the objections of Sen. Jim Bunning, R-Ky. The National Flood Insurance Program (NFIP) will not be able to issue new policies, increase coverage, or approve renewal policies until Congress approves reauthorization.

Generally agents should not be facing an errors and omissions (E&O) exposure since the NFIP is the principal source for flood coverage and its closure, expected to be temporary, is beyond agents’ control, according to Christopher J. Boggs, director of the Insurance Journal Academy of Insurance.

“If you can’t get coverage from what is essentially the main source that provides it, I really don’t see an issue. Now, that could change if the agent doesn’t tell the insured about the problem and something happens,” says Boggs.

If, however, it looks like there is going to be a long delay in the return of the program, Boggs says agents might want to discuss alternative programs such as Lloyd’s of London with their insureds.

The premium will likely be much higher for any alternative program than it is through NFIP, but it’s not a bad idea for an agency to have in its file that coverage was offered but denied, according to Boggs.

Another concern is excess flood policies and Difference in Conditions (DIC) coverages. Both of these forms generally have a deductible equal to the amount available through the NFIP when the structure is located in a Special Flood Hazard Area (SFHA). This could leave an insured with a major out-of-pocket expense, according to Boggs.

“So here, too, the agent should at least offer and get the denial in the file,” he advises.

Boggs, former associate editor of, is now heading Insurance Journal’s new education venture, the Academy of Insurance.

Listings of flood markets are available on

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