Federal judge rules against multiple states in National Flood Insurance Program case

States lose early attempt to try to force NFIP premiums down

Federal judge rules against multiple states in National Flood Insurance Program case

Catastrophe & Flood


A federal judge has denied a request from Florida and multiple other states for an initial injunction to stop alterations to the National Flood Insurance Program which will result in increased premiums for numerous property owners. However, New Orleans judge Darrel James Papillion, has allowed the case to continue.

Papillion’s ruling, issued last week in a 56-page document, highlighted the potential consequences of halting a risk-rating system that had been in effect since 2021 and fully operational by April 2023. The lawsuit, initiated by Louisiana and involving Florida and eight other states, was officially filed in June 2023.

“The court ... finds that, in light of the particular claims in this case and to the extent plaintiffs are likely to succeed on any of them, any interest the public has in the need for federal agencies to follow the law is outweighed by the public’s interest in the stability of the administration of the National Flood Insurance Program,” wrote Papillion.

Nevertheless, Papillion also ruled that the states and three local governments in Louisiana could continue their legal attempts, rejecting federal arguments for dismissal due to a lack of legal standing. He maintained that the states have demonstrated potential increased costs in rebuilding after floods, should property owners opt out of the National Flood Insurance Program due to elevated premiums.

“The court also finds that Plaintiffs have plausibly substantiated this allegation in a manner sufficient to carry their burden at the motion to dismiss stage,” Papillion wrote.

It’s estimated that FEMA’s new system which will be fully implemented this month, will raise insurance premiums for about 77% of NFIP’s five million policyholders.

The lawsuit, filed in the federal Eastern District of Louisiana, focuses on changes termed “Risk Rating 2.0: Equity in Action.” While federal officials argue that these changes ensure the program’s financial stability and accurately reflect property risks, the lawsuit contends that federal officials violated the Administrative Procedure Act by implementing changes deemed “arbitrary and capricious.”

“The National Flood Insurance program is a disaster. We are disappointed in the ruling, which elevated the government’s admittedly flawed program over people who are facing the loss of their homes and their communities at the hands of FEMA. Our fight is not over yet. As we move through the next phases of litigation, we’re hopeful the courts will recognize FEMA’s unlawful behavior and hold it accountable,” said Attorney General Liz Murrill in a release.

The National Flood Insurance Program is integral in states like Florida and Louisiana, where many homeowners with mortgages are mandated to have flood insurance. Documents submitted in the lawsuit revealed that the program included approximately 1.391 million policies in Florida, with a total coverage nearing $367 billion.

The average NFIP policy nationwide under the Risk Rating 2.0 model has doubled to over $1,800, a $900+ increase from the previous average of $888.

But not everyone will see insurance premium hikes – across the whole country, 23% of policyholders would see immediate decreases in their premiums, according to FEMA.

Aside from Florida and Louisiana, other states involved in the case include Idaho, Kentucky, Mississippi, Montana, North Dakota, South Dakota, Texas, and Virginia. The defendants named in the lawsuit are the US Department of Homeland Security and the Federal Emergency Management Agency (FEMA).

Attorneys from the US Department of Justice contended last year that the plaintiffs exaggerated “skyrocketing costs” following the change in the risk-rating system. They argued that the changes adhere to best practices in the insurance industry and are in line with the National Flood Insurance Act.

However, attorneys representing the states and local governments in Louisiana stressed the detrimental impacts of program changes, underscoring the unprecedented rate hikes faced by policyholders.

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