National Flood Insurance Program to cover oil in hurricane-driven flood waters, FEMA says

Keith L. Martin in the Insurance & Financial Advisor: If oil from the massive spill in the Gulf of Mexico is mixed with flood waters, it will be covered under the National Flood Insurance Program. The Federal Emergency Management Agency (FEMA) recently issued a memo on the matter, indicating “oil in flood water is not new for the NFIP, especially in riverline flooding.” The memo, written by FEMA’s Director of Claims, James A. Sadler, said in the past, the mixing of both oil and other pollutants in flood waters has resulted in damage caused by a storm.

Oil has spewed from beneath what was the Deepwater Horizon oil rig, co-owned by BP and Transocean, since April 20, causing worries along the Gulf Coast of the added threat to property along with possible hurricane activity.

FEMA outlined several parameters of the coverage in its memo, including that under the terms of the general property form of its Standard Flood Insurance Policy (SFIP), damage caused by pollutants is limited to $10,000. Furthermore, damage to ground, soil, or land caused by flood, oil or flood water mixed with oil is not covered.

While the NFIP will cover such hurricane-related claims, it must also be reauthorized by Congress, which allowed the federal program to lapse as of June 1, the beginning of the hurricane season. Legislators are expected to reauthorize the program as part of a comprehensive jobs bill currently being debated, with coverage retroactive to the expiration date….

A worker cleans up oily waste on Elmer's Island, just west of Grand Isle, La., May 21, 2010. Shot by Petty Officer 3rd Class Patrick Kelley, Wikimedia Commons via Flickr, under the Creative Commons Attribution 2.0 Generic license