Federal judge rules against multiple states in National Flood Insurance Program case | Insurance business America
Disaster and flood
By Matthew Sellers
A federal judge has rejected a request from Florida and several other states for an initial preliminary injunction to stop changes to the National Flood Insurance Program that would result in higher premiums for many property owners. However, New Orleans Judge Darrel James Papillion allowed the trial to continue.
Papillion’s ruling, issued last week in a 56-page document, highlighted the potential consequences of discontinuing a risk assessment system that had been in place since 2021 and was fully operational until April 2023. The lawsuit, initiated by Louisiana and spanning Florida and eight other states, was formally filed in June 2023.
“The Court…concludes that given the unique claims in this case and to the extent that plaintiffs are likely to succeed on any of those claims, the public’s interest in the need for federal agencies to comply.” “Upholding the law outweighs the public’s interest in the stability of administration of the National Flood Insurance Program,” Papillion wrote.
Still, Papillion also ruled that the states and three local governments in Louisiana could continue their legal attempts, rejecting federal arguments for dismissal for lack of legal standing. He claimed that states have demonstrated potentially higher costs to rebuild after floods if property owners opt out of the National Flood Insurance Program due to increased premiums.
“The Court further finds that Plaintiffs have plausibly substantiated this claim in a manner sufficient to bear their burden at the motion to dismiss stage,” Papillion wrote.
It is estimated that FEMA’s new system, which will be fully implemented this month, will increase insurance premiums for about 77% of the NFIP’s five million policyholders.
The lawsuit, filed in the Eastern District of Louisiana, focuses on changes called “Risk Rating 2.0: Equity in Action.” While federal officials argue that these changes ensure the program’s financial stability and accurately reflect ownership risks, the lawsuit alleges that federal officials violated the Administrative Procedure Act by making changes that are considered “arbitrary and capricious.”
“The national flood insurance program is a disaster. We are disappointed by the ruling, which highlights the administration’s admittedly flawed program over people at risk of losing their homes and communities at the hands of FEMA. Our fight is not over yet. As we move through the next phases of the litigation, we hope the courts recognize FEMA’s unlawful conduct and hold them accountable,” Attorney General Liz Murrill said in a news release.
The National Flood Insurance Program is a staple in states like Florida and Louisiana, where many homeowners with mortgages are required to purchase flood insurance. Documents filed as part of the lawsuit showed the program covered approximately 1.391 million policies in Florida, with total coverage of nearly $367 billion.
The average NFIP policy nationwide has doubled to over $1,800 under the Risk Rating 2.0 model, an increase of over $900 from the previous average of $888.
But not everyone will see an increase in insurance premiums — nationwide, 23% of policyholders would see an immediate reduction in their premiums, according to FEMA.
In addition to Florida and Louisiana, Idaho, Kentucky, Mississippi, Montana, North Dakota, South Dakota, Texas and Virginia are also involved in the case. The defendants named in the lawsuit are the U.S. Department of Homeland Security and the Federal Emergency Management Agency (FEMA).
U.S. Justice Department lawyers claimed last year that plaintiffs had exaggerated “skyrocketing costs” after changing the risk assessment system. They argued that the changes reflect best practices in the insurance industry and are consistent with the National Flood Insurance Act.
However, attorneys representing states and local governments in Louisiana emphasized the adverse effects of the program changes and underscored the unprecedented rate increases facing policyholders.
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2024-04-02 11:43:24
www.insurancebusinessmag.com
