Buildings and Equipment: Mastering One of the Most Complex Categories of Work



“The maximum amount of NFIP coverage for commercial properties is currently $500,000 per building and $500,000 for contents – for a total potential reduction in FEMA Public Assistance funding on an uninsured facility of $1 million.”

...eligible damages and type of hazard that caused them. This includes the costs of any Section 406 hazard mitigation projects for that facility.

Failure to obtain and maintain insurance — in perpetuity — in the amount and of the type required will result in that facility being ineligible to receive any future federal disaster relief funding. This is true regardless of how much — or how little (from $5,000 up) — funding is involved. For example, one facility for which an applicant had received federal funding for just over $5,000 in damages resulting from a declared disaster a decade prior to 2005 then incurred nearly $1 million in damages following hurricanes Katrina and Rita. Unfortunately, the applicant had neither obtained nor maintained insurance for the $5,000 in previous federal assistance, and the facility was deemed ineligible for funding.

It may be possible to obtain a waiver from your state insurance commissioner if the appropriate type and extent of coverage is not reasonably available and/or adequate to protect against a similar future loss to the property. The Stafford Act requires that “In making a determination with respect to availability, adequacy, and necessity… the President shall not require greater types and extent of insurance than are certified to him as reasonable by the appropriate state insurance commissioner responsible for regulation of such insurance.” 10 Each state handles this issue differently, and it is worth contacting your state’s insurance commissioner and emergency management office to make sure they are aware of the state’s right to waive obtain and maintain requirements.

The realities of obtaining and maintaining insurance, especially given the typically increased costs of insurance following a disaster of any magnitude, can mean that in some cases, it may make more sense to forego current federal funding if the short-term gain does not balance out the long-term costs. A close partnership between your organization’s FEMA grant management decision makers and the risk management department will help to facilitate these sorts of determinations.