FEMA, state commissioner butt heads over flood insurance legality

A lawsuit over flood premium hikes could help solve affordability issues, but FEMA says states lack legal standing.

FEMA, state commissioner butt heads over flood insurance legality

Catastrophe & Flood


Mississippi Insurance Commissioner Mike Chaney recently told AM Best he is “certain” his state’s lawsuit against the Federal Emergency Management Agency will put a stop to steep flood insurance rate hikes. However, FEMA filed a court brief this week strongly objecting to the lawsuit on the grounds that Chaney lacks jurisdiction.

Chaney, joined by various insurance officials in South Carolina, Florida, Alabama, and Louisiana, is arguing that raising flood insurance rates without completing a legally mandated affordability study casts Mississippi and other states as an “aggrieved party.”

However, FEMA maintains in its brief that Chaney and the Mississippi Insurance Department “has no procedural right to completion of the report.” Furthermore, the Biggert-Waters Act of 2012 only gives Congress the authority to delay rate hikes, which means Mississippi “cannot show redressability because only Congress can remedy the department’s claimed harm.”

Chaney appears unperturbed by FEMA’s legal allegations, however.

“If we have a court date by the end of the year, we feel very good that our standing in the court will uphold, and we think that we will prevail,” he told AM Best.

At stake are impending rate increases of up to 3,000% for affected policyholders. While representatives from Southern and Northeastern states rally for a legislative fix, Congress has made it clear it will not consider the matter until at least next year.

Meanwhile, both producers and regulators in other states say they have given up hope on both a legal or congressional save.

“How are they going to correct this?” asked Sean Johnson, sales manager at Gretna, La.-based Johnson Insurance. “If you lost your house, do they go back and pay your mortgage and get your house back? [Legislators] sure as heck don’t understand the ramifications or how to correct them.”

Instead of waiting on Congress or the Mississippi lawsuit, Johnson said he is advising as many people as possible to get elevation certificates and to start thinking of other ways to save up for their skyrocketing flood premiums.
In Florida, state Sen. Jeff Brandes is pushing a bill that would encourage private insurance carriers to enter the flood market.

“Who knows what federal law is going to be in six months or a year? We’ve basically abandoned all hope for the federal law and focused on creating our own options,” Brandes said. “I believe [private insurers] are going to be more fiscally and actuarially sound, and they recognize that. We will create a private market that has not existed for the last four years.”

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