A Second Disaster Strikes: Will FEMA Pay Again?

Remaining life of the asset in the amount of the FEMA Public Assistance funding received for the hazard that caused the damage (e.g., flood, wind, terrorism). Failure to meet this requirement means risking the loss of all Public Assistance funding for that facility or item if it is damaged by the same hazard again in the future. This could pose a serious challenge to your organization’s operating budget if your disaster losses are substantial, as was the case for FEMA Public Assistance Program applicants in the California Northridge Earthquake of 1994, the New York City 9/11 disaster in 2001, the Florida hurricanes of 2004 and 2005, the Gulf FEMA’s Requirements Continued Insurance Purchase Requirements — All Disasters As a condition for receiving public assistance for a facility, an applicant must obtain and maintain insurance to cover that facility for the hazard that caused the damage. Such coverage must, at a minimum, be in the amount of the estimated eligible project costs for that structure prior to any reduction. If the requirement to purchase insurance is not met, FEMA will not provide assistance for damage sustained in the current disaster. If the applicant does not maintain insurance, FEMA will not provide any assistance for that facility for future disasters. An applicant is exempt from this requirement for: • Projects where the eligible damage is less than $5,000; or • Facilities for which, in the determination of the state insurance commissioner, insurance is not reasonably available, adequate and necessary. (This exemption does not apply to facilities insurable under the NFIP [National Flood Insurance Program], where insurance is considered to be “available and reasonable.”) The commitment by the applicant to purchase and maintain insurance must be documented and submitted to FEMA before project approval. FEMA Public Assistance Guide PA 322, pages 97-98. Coast Katrina and Rita disasters of 2005, and hurricanes Ike and Gustav in 2008. Not only are you faced with buying new property insurance to meet the obtain and maintain requirements — thereby increasing your insurance premiums now and for the future — you could be faced with a highly volatile insurance market, as was the case in the disasters cited. Additional insurance coverage — • Might not be available to you or available in the levels needed to insure the total amounts of your FEMA project grants; • Might be available, but priced at far higher premiums than were the case pre-disaster; • Might be accompanied by substantial increases in deductibles. It is very important to understand FEMA’s insurance requirements and the potential liabilities they pose. The focus of this issue of Disaster Recovery Today is to provide you with an understanding of those requirements, along with FEMA’s process for dealing with insurance. What’s more, we will provide strategies you can use to ensure your recovery. LESSONS FROM KATRINA While the Katrina and Rita disasters in 2005 far exceeded the scope and damages of the 9/11 event, the effects on Public Assistance applicants and the insurance marketplace were all too similar. As applicants slowly moved from response to recovery, FEMA’s obtain and maintain requirements became of paramount concern across the Gulf Coast region.