L.3. Increased Cost of Compliance as Non-Federal Cost Share

Increased Cost of Compliance coverage is available to most NFIP policyholders and can be used as non-federal cost share. To qualify for Increased Cost of Compliance, a community must determine that a home or business has sustained substantial damage or the structure meets the local community’s repetitive loss provision. The NFIP Increased Cost of Compliance claim payment from a flood event may be used to contribute to the non-federal cost share requirements so long as the claim is made within the timelines allowed by the NFIP. Increased Cost of Compliance payments can only be used for costs that are eligible for Increased Cost of Compliance benefits, which are elevation, floodproofing, relocation or demolition (or any combination of these activities). For example, Increased Cost of Compliance coverage cannot pay for property acquisition but can pay for structure demolition or relocation. In addition, federal assistance cannot be provided where Increased Cost of Compliance assistance is available. If the Increased Cost of Compliance payment exceeds the required non-federal share, the federal assistance award will be reduced to the difference between the cost of the activity and the Increased Cost of Compliance payment.

If an Increased Cost of Compliance payment is used as a subapplicant’s non-federal cost share, the NFIP policyholder must assign that part of the Increased Cost of Compliance benefit that pertains to the property to the subapplicant. The NFIP policyholder can only assign the Increased Cost of Compliance benefit to the subapplicant; in no case can the policyholder assign the Increased Cost of Compliance benefit to another individual. Steps for the assignment of Increased Cost of Compliance coverage can be found in FEMA P-1080, Answers to Frequently Asked Questions About Increased Cost of Compliance (Feb. 2017).

In some cases, individual policyholders can take advantage of federal assistance to supplement the cost of mitigation activities in their community. Policyholders can assign their Increased Cost of Compliance benefits to their community and enable the community to file a single claim on behalf of a community mitigation project. FEMA will count the Increased Cost of Compliance claim monies as non-federal matching assistance in mitigation subapplications because Increased Cost of Compliance coverage is a direct contract between the policyholder and the insurer. The community can then use FEMA mitigation assistance to help pay for any additional portion of the cost of elevation, floodproofing, relocation or demolition that is more than the Increased Cost of Compliance claim payment. Policyholders and community officials must work closely together at every stage of this process.

Individual participation in a FEMA-assisted community mitigation project is voluntary and the community is required to provide mitigation assistance to any property owner whose Increased Cost of Compliance payment was counted toward the matching assistance.

Policyholders should follow these steps for the assignment of Coverage D:

1. The policyholder consents to the assignment of the Increased Cost of Compliance claim payment.
2. The community official provides the policyholder with an Assignment of Coverage D Form.
3. The policyholder signs the form and provides the signed form to the community official.
4. The community official sends a copy of the completed form, along with the community’s signed declaration of substantial damage to the NFIP at the following address:
   
   
   NFIP Bureau and Statistical Agent
   8400 Corporate Drive, Suite 350
   Landover, MD 20785
   
   
5. The NFIP maintains a database of the increased cost of compliance information submitted by the community. The Bureau then sends the documents to the appropriate Write Your Own company with instructions. The company will then assign an adjuster.
6. The assigned adjuster contacts the policyholder to notify them of receipt of the claim and contacts the local community official to coordinate and help complete the claim.
7. The adjuster receives/reviews the contract for demolition, elevation, relocation or floodproofing to determine the cost.
8. The adjuster has the community official sign the proof of loss once the claim value has been determined.
9. The adjuster sends the final report, along with the proof of loss, to the insurance company for payment.
10. The insurance company issues the check to the community and advises the NFIP of the amount of the claim payment.

For additional information on increased cost of compliance, visit the FEMA “Increased Cost of Compliance Coverage” webpage.