FEMA Cancels Nonprofit, Government Deductible Plan

August 27, 2007

The Federal Emergency Management Agency has rescinded an insurance policy that could have left nonprofits and public entities responsible for millions of dollars if another major storm hit the New Orleans area.

Gil Jamieson, the agency’s associate deputy administrator for Gulf Coast recovery, said it caused a “real furor down here. This was not the message we wanted to send to the business community.”

A June 4 memo said that once FEMA paid an insurance deductible for a nonprofit or government entity, the organization or agency would have to start paying its own deductible in the next disaster. Some larger nonprofits have multimillion dollar deductibles and are used to FEMA help.

There was also a requirement that groups getting FEMA aid carry insurance coverage at least to the value of their public assistance grants. That raised concerns due to the limited availability of insurance since the 2005 hurricanes.

While the stricter insurance coverage rules have been scrapped, previously existing insurance requirements remain in place. FEMA plans to look at the requirements again after consulting the local business community.

Jamieson said the original goal was to ensure agencies and organizations didn’t buy the cheapest high-deductible policies and leave the federal government to pay after a disaster.

Information from: The Times-Picayune, www.timespicayune.com

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