Order Code RS22945
September 5, 2008
Flood Insurance Requirements for Stafford
Edward C. Liu
American Law Division
The Robert T. Stafford Disaster Relief and Emergency Assistance Act (the Stafford
Act) imposes flood insurance requirements upon eligibility for disaster assistance in two
general cases: (1) if the entity seeking disaster assistance has received disaster assistance
in the past, or (2) if the entity seeking disaster assistance is a state or local government
or private nonprofit located in a federally designated special flood hazard area (SFHA)
as determined under the National Flood Insurance Act of 1968. The requirements
imposed by the Stafford Act operate independently of each other, and a potential
applicant for disaster assistance may fall into both categories. This report will discuss
the specific requirements imposed in each situation after briefly discussing the history
of flood insurance and the relevant types of disaster assistance.
Overview of Federal Flood Insurance
Federally funded flood insurance was first made available in a pilot program under
the Federal Flood Insurance Act of 1956 (FFIA), P.L. 84-1016, 70 Stat. 1078.1 Twelve
years later, Congress supplanted the FFIA with the National Flood Insurance Act of 1968
(NFIA).2 Like the earlier FFIA, the NFIA authorized the federal government to insure
individuals against damage to or losses of real or personal property caused by floods in
the United States. Unlike its predecessor, the NFIA imposed a mandatory purchase
requirement if federal financial assistance, including loans made by federally regulated
lenders, was offered in designated special flood hazard areas (SFHA).3 Flood insurance
One commentator noted that “the [Federal Flood Insurance Act] did not succeed in selling a
single insurance policy” and that, after only one year, Congress failed to appropriate adequate
funding for the program, ultimately leading to its “effective termination” by “financial
starvation.” David A. Grossman, Flood Insurance: Can A Feasible Program Be Created? 34
LAND ECONOMICS 352 (Nov. 1958).
Codified at 42 U.S.C. § 4001 et seq.
See 42 U.S.C. § 4012a(a). While this mandate is relevant to the discussion of previous disaster
offers financial reimbursement to policy holders in the event that a flood damages or
destroys covered property. Although traditional homeowners’ insurance policies may
cover damage caused by other hazards (i.e. fires, windstorms, or tornados), flood damage
is generally not covered under homeowners’ policies.4 Currently, federal flood insurance
policies are sold under the National Flood Insurance Program (NFIP) to homeowners,
renters, and businesses covering “structures and their contents.”5
Overview of Federal Disaster Assistance
The Stafford Act authorizes, but does not require, the President to offer federal
assistance to repair or replace damaged real property and its contents in the event of a
major disaster, including a flood.6 The assistance provided can be classified, and will be
discussed, according to the type of applicant involved: (1) state or local governments, (2)
private nonprofits, and (3) individuals and households.
The first two categories of applicants are generally eligible for repair and rebuilding
assistance under § 406 of the Stafford Act,7 which authorizes assistance to repair facilities
owned by state or local governments and private nonprofits that provide critical services.8
Examples of such nonprofits include hospitals, schools, fire departments, museums, and
shelters.9 An applicant under § 406 may also choose to receive a slightly reduced in-lieu
contribution, if it would be in the public interest not to rebuild or repair the structure.
The third category of applicants, individuals and households, is eligible for major
disaster assistance under § 408 of the Stafford Act.10 Assistance is available to provide
housing assistance in the form of rent subsidies, actual units, and financial assistance to
repair or replace destroyed housing or to build new housing.11
Requirements for Previous Recipients of Disaster Assistance
Flood insurance may be a prerequisite for federal disaster assistance if the damaged
or destroyed property had been previously restored or improved using federal disaster
assistance. In some cases, the receipt of past federal disaster assistance creates an
relief recipients below, it is not the focus of this report, and operates independently of the
requirements found in the Stafford Act.
In its findings supporting the NFIA, Congress noted that a variety of factors made it difficult
for the insurance industry to offer affordable flood insurance. 42 U.S.C. § 4001(b).
44 C.F.R. § 61.3.
The definition of a major disaster in the Stafford Act specifically includes flooding. 42 U.S.C.
Codified at 42 U.S.C. § 5172.
42 U.S.C. § 5172(a)(1), (3).
44 C.F.R. § 206.222(e).
Codified at 42 U.S.C. § 5174.
42 U.S.C. § 5174(c).
obligation on the part of the recipient to prospectively maintain flood insurance on the
property. Any flood damage incurred during any period in which flood insurance for such
property has lapsed is not eligible for federal disaster assistance. The circumstances in
which prospective flood insurance will be required are discussed below in the context of
specific classes of recipients.
State and Local Governments. Section 311(a) of the Stafford Act requires all
recipients of § 406 assistance to obtain adequate insurance on repaired or rebuilt property.
For example, imagine that a city receives flood disaster assistance to rebuild a damaged
police station. Under § 311(a) of the Stafford Act,12 the city must promise to obtain and
maintain flood insurance on that police station as a condition of receiving that assistance.
Furthermore, § 311(b) makes that flood insurance a prerequisite of future disaster relief.
If the policy subsequently lapses, and a second flood damages the police station, that
damage would not be eligible for assistance under § 406.13
Under § 311(b), disqualification for future disaster assistance is not limited to cases
where the prior and current disasters are of the same variety. Assistance under § 406 is
unavailable in any type of major disaster if the applicant has not complied with all
insurance requirements imposed as conditions of previous disaster assistance.14 But only
insurance related to the earlier disaster is required.15 To extend the previous example, a
police station initially damaged by a fire must maintain fire insurance in order to receive
assistance in any type of later disaster, e.g. a flood. The police station’s lack of flood
insurance after the initial fire would not disqualify the property for assistance during the
Private Nonprofits. Since private nonprofits also receive disaster assistance under
§ 406, the flood insurance requirements for private nonprofits that have previously
received disaster assistance are the same as those for state and local governments
discussed above. If a private nonprofit has been damaged in a flood and uses federal
assistance to make repairs, it must purchase and maintain flood insurance in order to
remain eligible for future disaster assistance.
Individuals and Households. Section 311 does not apply to federal disaster
assistance to individuals and households under § 408. However, individuals and
households that have previously received flood disaster assistance under § 408 may be
subject to a similar prospective flood insurance requirement in order to be eligible for
future disaster relief.16 The terms of this flood insurance requirement are similar to the
terms of § 311. Homes that were damaged in a flood and repaired or replaced using
federal disaster assistance must obtain and maintain sufficient flood insurance as a
Codified at 42 U.S.C. § 5154.
42 U.S.C. § 5154(a), (b). States are permitted to satisfy the insurance requirement by acting
as self insurers for state owned property. 42 U.S.C. § 5154(c).
See 42 U.S.C. § 5154(b) (stating that all insurance requirements must be met, not merely those
implicated by the present disaster).
44 C.F.R. § 206.252(d) and 206.253(b)(1).
42 U.S.C. § 5154a(a). Individuals and households are only required to get prospective flood
insurance if they receive assistance for property located in an SFHA.
condition of receiving the assistance.17 This purchase requirement operates independently
of the NFIA’s mandatory purchase requirement that may be triggered by the receipt of
other types of federal financial assistance.18
Individuals and households are only disqualified from federal disaster assistance if
the previous disaster and the current disaster are both floods. A home that was repaired
after an earthquake and subsequently damaged by a flood will not be denied assistance
even if it was not covered by either a flood or earthquake insurance policy at the time of
the flood. Similarly, a home that is first damaged by a flood, but later damaged by an
earthquake, is also eligible for disaster assistance regardless of whether it is covered by
Requirements in Special Flood Hazard Areas
A Special Flood Hazard Area (SFHA) is an area that has been determined by the
Federal Emergency Management Agency (FEMA) to have a 1% or greater likelihood of
flooding in any given year.19 The risk assigned to an area impacts the cost of flood
insurance policies.20 For applicants under § 406 of the Stafford Act, flood insurance can
also be a prerequisite for disaster assistance within an SFHA.
The Importance of Community Participation. Under the NFIA, no flood
insurance policies may be provided within a community unless that community
participates in the NFIP.21 Participation in the NFIP requires a community to enact
adequate land use controls intended to limit or mitigate damage in the event of a flood.22
Importantly, the NFIA also prohibits federal officers from authorizing “financial
assistance for acquisition or construction purposes” in an SFHA if the community does
not participate in the NFIP.23 The NFIA also explicitly includes flood disaster assistance
within the definition of “financial assistance.”24 Therefore, a flood victim in an SFHA is
only eligible for federal disaster assistance if the community participates in the NFIP.
Individual and household flood victims may be eligible for a special group flood insurance
policy backed by the NFIP. This policy provides coverage for three years and disaster assistance
may reimburse the premiums. 44 C.F.R. § 206.119(d).
See supra note 3 and accompanying text.
44 C.F.R. § 59.1. FEMA is the agency charged with evaluating the risk of flooding for
purposes of the NFIP. 42 U.S.C. 4011(a).
See 44 C.F.R. § 61.9 (establishing different chargeable rates for flood insurance policies based
upon risk of flooding).
The term community means any governmental entity with “the authority to adopt and enforce
flood plain management regulations for the areas within its jurisdiction.” 44 C.F.R. § 59.1.
42 U.S.C. § 4022(a)(1). Criteria for land use controls are defined in 44 C.F.R. § 60.1 et seq.
42 U.S.C. § 4106(a).
The definition of “financial assistance for acquisition or construction purposes” excludes
Stafford Act assistance “other than assistance under such Act in connection with a flood.” 42
U.S.C. § 4003(a)(4) (emphasis added).
State and Local Governments. If the community does not participate in the
NFIP, FEMA has interpreted federal law to prohibit any building assistance to affected
state and local governments.25 If the community is participating, an applicant for § 406
assistance may still be subject to a reduction in assistance for failing to have sufficient
flood insurance. Provided that an area has been designated as an SFHA for more than one
year, § 406(d) reduces the amount of assistance to an uninsured applicant by the
maximum amount a flood insurance policy would have provided.26 In-lieu contributions
to uninsured facilities in an SFHA are completely barred rather than reduced.27
Having flood insurance would not necessarily increase the amount of assistance a
damaged structure could receive under § 406. This is because § 312 of the Stafford Act
mandates that assistance be reduced by the amount of insurance proceeds a covered entity
actually receives.28 Therefore, a structure with adequate flood insurance may not be
subject to reduced assistance under § 406(d), but would be subject to reduced assistance
under § 312. In this way, § 406(d) of the Stafford Act essentially acts as a presumption
that any public structure in an SFHA for more than one year will have flood insurance;
accordingly, the amount of assistance is reduced as though such flood insurance was in
Private Nonprofits. Like state and local governments that suffer flood damage,
some private nonprofits are eligible for construction assistance under § 406.30 Private
nonprofit applicants are also subject to the § 406(d) flood insurance requirement if the
damaged structure has been located in an SFHA for more than one year.31 The amount
of the reduction in this case is the same as it is for similarly situated state and local
But § 406(d)(3) of the Stafford Act appears to create an exception for private
nonprofits located in non-participating communities. Under this provision, the reduction
in assistance shall not apply if the only reason the applicant does not have adequate flood
insurance is that flood insurance is not available because the community does not
participate in the NFIP.32 This exception appears to be in conflict with a separate
provision of the NFIA that prohibits any assistance to facilities located in a nonparticipating community that is also located in an SFHA.33 It is possible to read §
406(d)(3) as implicitly repealing the NFIA insofar as they conflict with each other. The
See 42 U.S.C. § 4106(a), 44 C.F.R. § 206.252(b).
42 U.S.C. § 5172(d).
42 U.S.C. § 5172(c).
42 U.S.C. § 5155.
See 54 Fed. Reg. 11614 (“[A]ll buildings and their contents in an identified flood plain will be
treated as if they were fully covered by the standard flood insurance policy available through the
NFIP.”) (emphasis added).
Eligible nonprofits must provide “critical services.” 42 U.S.C. § 5172(a)(3).
42 U.S.C. § 5172(d)(1).
42 U.S.C. § 5172(d)(3).
42 U.S.C. § 4106(a).
exception in § 406(d)(3) of the Stafford Act was enacted after the general prohibition
located in the NFIA.34 Section 406(d)(3) also deals with a particular factual scenario and
type of assistance rather than the NFIA’s broad language. Furthermore, it was arguably
incongruous for Congress to make an exception to the reduction imposed by § 406(d) if
it also intended the blanket preclusion of assistance under the NFIA to apply in these
situations. In order to avoid reading § 406(d)(3) as meaningless, one could argue that it
necessarily also created an exception to the general prohibition contained in the NFIA.35
Nevertheless, FEMA has construed the exception in § 406(d)(3) as illusory. FEMA
regulations state that the NFIA prohibition clearly prohibits any assistance to entities in
non-participating communities that are also located in an SFHA.36 In comments
accompanying those regulations, they also noted that
private nonprofit facilities in special flood hazard areas which are not covered by
flood insurance solely because of the local government’s failure to participate in [the
NFIP] are exempted from [the reduction in § 406(d)]. However, even though this
exemption is reflected in [current regulations], it is misleading ... because the Flood
Disaster Protection Act of 1973 prohibits Federal assistance in special flood hazard
areas of nonparticipating communities.37
Affected private nonprofit facilities may become retroactively eligible for assistance under
§ 406 if the community later becomes a participating community within six months of the
flood disaster in which the facility was damaged.38
Individuals and Households. Assistance to individuals and households located
within an SFHA will not be limited solely because the applicant lacks adequate flood
insurance. However, like state and local governments and private nonprofits, individuals
and households that seek federal assistance to repair or rebuild housing located within an
SFHA are ineligible for disaster relief if the community does not participate in the NFIP.
However, FEMA regulations permit individuals and households to be eligible if the
community begins participating in the NFIP within six months of a flood disaster.39
The NFIA prohibition was enacted as § 202 of the Flood Disaster Protection Act of 1973, P.L.
93-234, whereas § 406(d)(3) was enacted as part of the Disaster Relief and Emergency Assistance
Amendments of 1988, P.L. 100-707.
See, e.g., CRS Report 97-589, Statutory Interpretation: General Principles and Recent Trends,
at 10, 26-27, by George Costello.
44 U.S.C. § 206.252(b).
54 Fed. Reg. 11,614 (emphasis added).
44 U.S.C. § 206.252(b).
44 U.S.C. § 206.110(k)(2).