National Flood Insurance Program Administrative Reform Act of 2019

IB Union Calendar No. 209 116TH CONGRESS 1ST SESSION H. R. 3111 [Report No. 116–261] To make administrative reforms to the National Flood Insurance Program to increase fairness and accuracy and protect the taxpayer from program fraud and abuse, and for other purposes. IN THE HOUSE OF REPRESENTATIVES JUNE 5, 2019 Ms. VELA´ZQUEZ introduced the following bill; which was referred to the Committee on Financial Services OCTOBER 28, 2019 Reported with an amendment, committed to the Committee of the Whole House on the State of the Union, and ordered to be printed [Strike out all after the enacting clause and insert the part printed in italic] [For text of introduced bill, see copy of bill as introduced on June 5, 2019] VerDate Sep 11 2014 21:34 Oct 29, 2019 Jkt 099200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6652 E:\BILLS\H3111.RH H3111 kjohnson on DSK79L0C42 with BILLS 2 •HR 3111 RH A BILL To make administrative reforms to the National Flood Insur- ance Program to increase fairness and accuracy and protect the taxpayer from program fraud and abuse, and for other purposes. VerDate Sep 11 2014 21:34 Oct 29, 2019 Jkt 099200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6652 E:\BILLS\H3111.RH H3111 kjohnson on DSK79L0C42 with BILLS 3 •HR 3111 RH Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 3 (a) SHORT TITLE.—This Act may be cited as the ‘‘Na- 4 tional Flood Insurance Program Administrative Reform 5 Act of 2019’’. 6 (b) TABLE OF CONTENTS.—The table of contents for 7 this Act is as follows: 8 Sec. 1. Short title; table of contents. Sec. 2. Pilot program for properties with preexisting conditions. Sec. 3. Penalties for fraud and false statements in the National Flood Insurance Program. Sec. 4. Enhanced policyholder appeals process rights. Sec. 5. Deadline for approval of claims. Sec. 6. Litigation process oversight and reform. Sec. 7. Prohibition on hiring disbarred attorneys. Sec. 8. Technical assistance reports. Sec. 9. Improved disclosure requirement for standard flood insurance policies. Sec. 10. Reserve Fund amounts. Sec. 11. Sufficient staffing for Office of Flood Insurance Advocate. Sec. 12. Federal Flood Insurance Advisory Committee. Sec. 13. Interagency guidance on compliance. Sec. 14. GAO study of claims adjustment practices. Sec. 15. GAO study of flood insurance coverage treatment of earth movement. Sec. 16. Definitions. SEC. 2. PILOT PROGRAM FOR PROPERTIES WITH PRE- 9 EXISTING CONDITIONS. 10 Section 1311 of the National Flood Insurance Act of 11 1968 (42 U.S.C. 4018) is amended by adding at the end 12 the following new subsection: 13 ‘‘(c) PILOT PROGRAM FOR INVESTIGATION OF PRE- 14 EXISTING STRUCTURAL CONDITIONS.— 15 ‘‘(1) VOLUNTARY PROGRAM.—The Administrator 16 shall carry out a pilot program under this subsection 17 VerDate Sep 11 2014 21:34 Oct 29, 2019 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6203 E:\BILLS\H3111.RH H3111 kjohnson on DSK79L0C42 with BILLS 4 •HR 3111 RH to provide for companies participating in the Write 1 Your Own program (as such term is defined in sec- 2 tion 1370(a) (42 U.S.C. 4121(a))) to investigate pre- 3 existing structural conditions of insured properties 4 and potentially insured properties that could result in 5 the denial of a claim under a policy for flood insur- 6 ance coverage under this title in the event of a flood 7 loss to such property. Participation in the pilot pro- 8 gram shall be voluntary on the part of Write Your 9 Own companies. 10 ‘‘(2) INVESTIGATION OF PROPERTIES.—Under 11 the pilot program under this subsection, a Write Your 12 Own company participating in the program shall— 13 ‘‘(A) provide in policies for flood insurance 14 coverage under this title covered by the program 15 that, upon the request of the policyholder, the 16 company shall provide for— 17 ‘‘(i) an investigation of the property 18 covered by such policy, using common meth- 19 ods, to determine whether preexisting struc- 20 tural conditions are present that could re- 21 sult in the denial of a claim under such pol- 22 icy for flood losses; and 23 ‘‘(ii) if such investigation is not deter- 24 minative, an on-site inspection of the prop- 25 VerDate Sep 11 2014 21:34 Oct 29, 2019 Jkt 099200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6203 E:\BILLS\H3111.RH H3111 kjohnson on DSK79L0C42 with BILLS 5 •HR 3111 RH erty to determine whether such preexisting 1 structural conditions are present; 2 ‘‘(B) upon completion of an investigation or 3 inspection pursuant to subparagraph (A) that 4 determines that such a preexisting structural 5 condition is present or absent, submit a report to 6 the policyholder and Administrator describing 7 the condition; and 8 ‘‘(C) impose a surcharge on each policy de- 9 scribed in subparagraph (A) in such amount 10 that the Administrator determines is appropriate 11 to cover the costs of investigations and inspec- 12 tions performed pursuant to such policies and 13 reimburse Write Your Own companies partici- 14 pating in the program under this subsection for 15 such costs. 16 ‘‘(3) INTERIM REPORT.—Not later than Decem- 17 ber 31, 2023, the Administrator shall submit a report 18 to the Committee on Financial Services of the House 19 of Representatives and the Committee on Banking, 20 Housing, and Urban Affairs of the Senate describing 21 the operation of the pilot program to that date. 22 ‘‘(4) SUNSET.—The Administrator may not pro- 23 vide any policy for flood insurance described in para- 24 graph (2)(A) after December 31, 2024. 25 VerDate Sep 11 2014 21:34 Oct 29, 2019 Jkt 099200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6203 E:\BILLS\H3111.RH H3111 kjohnson on DSK79L0C42 with BILLS 6 •HR 3111 RH ‘‘(5) FINAL REPORT.—Not later than March 31, 1 2025, the Administrator shall submit a final report 2 regarding the pilot program under this section to the 3 Committee on Financial Services of the House of Rep- 4 resentatives and the Committee on Banking, Housing, 5 and Urban Affairs of the Senate. The report shall in- 6 clude any findings and recommendations of the Ad- 7 ministrator regarding the pilot program.’’. 8 SEC. 3. PENALTIES FOR FRAUD AND FALSE STATEMENTS IN 9 THE NATIONAL FLOOD INSURANCE PRO- 10 GRAM. 11 Part C of chapter II of the National Flood Insurance 12 Act of 1968 (42 U.S.C. 4081 et seq.) is amended by adding 13 at the end the following new section: 14 ‘‘SEC. 1349. PENALTIES FOR FRAUD AND FALSE STATE- 15 MENTS IN THE NATIONAL FLOOD INSURANCE 16 PROGRAM. 17 ‘‘(a) PROHIBITED ACTS.—A person shall not know- 18 ingly make a false, fictitious, or fraudulent statement, pro- 19 duction, or submission in connection with the proving or 20 adjusting of a claim for flood insurance coverage made 21 available under this Act. Such prohibited acts include— 22 ‘‘(1) knowingly forging an engineering report, 23 claims adjustment report or technical assistance re- 24 port used to support a claim determination; 25 VerDate Sep 11 2014 21:34 Oct 29, 2019 Jkt 099200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6203 E:\BILLS\H3111.RH H3111 kjohnson on DSK79L0C42 with BILLS 7 •HR 3111 RH ‘‘(2) knowingly making any materially false, fic- 1 titious, or fraudulent statement or representation in 2 an engineering report, claims adjustment report, or 3 technical assistance report to support a claim deter- 4 mination that results in a wrongful denial or sub- 5 stantial payment error of flood insurance coverage; 6 and 7 ‘‘(3) knowingly submitting a materially false, 8 fictitious, or fraudulent claim that results in wrongful 9 payment of flood insurance coverage. 10 ‘‘(b) DEFINITION.—For purposes of this section, the 11 term ‘knowingly’ means having actual awareness of the pro- 12 hibitions under this part and acting deliberately in viola- 13 tion of such prohibitions. 14 ‘‘(c) ADMINISTRATIVE REMEDY.—Prior to any legal 15 action being taken related to this section, all administrative 16 remedies shall be exhausted. 17 ‘‘(d) RULE OF CONSTRUCTION.—This section shall not 18 be construed— 19 ‘‘(1) to prevent the Federal Government from 20 bringing action against a company or individual 21 under applicable statutes, including the False Claims 22 Act; and 23 VerDate Sep 11 2014 21:34 Oct 29, 2019 Jkt 099200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6203 E:\BILLS\H3111.RH H3111 kjohnson on DSK79L0C42 with BILLS 8 •HR 3111 RH ‘‘(2) as creating any action, private right of ac- 1 tion, or remedy not otherwise provided by this title or 2 under Federal law. 3 ‘‘(e) STATE ACTION.—Any person found to have vio- 4 lated subsection (a) shall be referred to the appropriate and 5 relevant State licensing agency by the Attorney General.’’. 6 SEC. 4. ENHANCED POLICYHOLDER APPEALS PROCESS 7 RIGHTS. 8 (a) ESTABLISHMENT.—Part C of chapter II of the Na- 9 tional Flood Insurance Act of 1968 (42 U.S.C. 4081 et seq.), 10 as amended by the preceding provisions of this Act, is fur- 11 ther amended by adding at the end the following new sec- 12 tion: 13 ‘‘SEC. 1350. APPROVAL OF DECISIONS RELATING TO FLOOD 14 INSURANCE COVERAGE. 15 ‘‘(a) IN GENERAL.—The Administrator shall establish 16 an appeals process to enable holders of a flood insurance 17 policy provided under this title to appeal decisions, with 18 respect to the disallowance, in whole or in part, of any 19 claims for losses covered by flood insurance. Such appeals 20 shall be limited to the claim or portion of the claim dis- 21 allowed. 22 ‘‘(b) APPEAL DECISION.—Upon a decision in an ap- 23 peal under subsection (a), the Administrator shall provide 24 the policyholder with a written appeal decision. The appeal 25 VerDate Sep 11 2014 21:34 Oct 29, 2019 Jkt 099200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6203 E:\BILLS\H3111.RH H3111 kjohnson on DSK79L0C42 with BILLS 9 •HR 3111 RH decision shall explain the Administrator’s determination to 1 uphold, modify, or overturn the decision. The Administrator 2 may direct the Write Your Own company to take action 3 necessary to resolve the appeal, to include re-inspection, re- 4 adjustment, or payment, as appropriate. 5 ‘‘(c) DEADLINE FOR APPEALS DECISION.—The Ad- 6 ministrator shall issue an appeals decision pursuant to sub- 7 section (b) not later than the expiration of the 120-day pe- 8 riod beginning upon the day on which the Administrator 9 acknowledges receipt of a request by the policyholder to pur- 10 sue an appeal of the initial determination regarding ap- 11 proval, disapproval, or amount of payment by the Adminis- 12 trator. In cases where extraordinary circumstances, as es- 13 tablished by regulation, are demonstrated, the 120-day pe- 14 riod may be extended by additional successive periods of 15 30 days. 16 ‘‘(d) ADMINISTRATIVE REMEDY.—A policyholder shall 17 exhaust all administrative remedies, including submission 18 of disputed claims to appeal under subsection (a), prior to 19 commencing legal action on a disputed claim. 20 ‘‘(e) RULES OF CONSTRUCTION.—This section shall not 21 be construed as— 22 ‘‘(1) making the Federal Emergency Manage- 23 ment Agency or the Administrator a party to the 24 flood insurance contract; or 25 VerDate Sep 11 2014 21:34 Oct 29, 2019 Jkt 099200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6203 E:\BILLS\H3111.RH H3111 kjohnson on DSK79L0C42 with BILLS 10 •HR 3111 RH ‘‘(2) creating any action or remedy not otherwise 1 provided by this title. 2 ‘‘(f) POLICYHOLDER LITIGATION.—This section shall 3 not be construed to prevent a policyholder from bringing 4 legal action against the Federal Emergency Management 5 Agency or a Write Your Own company following the ex- 6 haustion of all administrative remedies and pursuant to 7 applicable statute.’’. 8 (b) MAINTENANCE OF LITIGATION RIGHTS.—Section 9 1341 of the National Flood Insurance Act of 1968 (42 10 U.S.C. 4072) is amended by adding after the period at the 11 end the following: ‘‘For purposes of this section, the time 12 from which the Administrator has acknowledged receipt of 13 a request by the policyholder to pursue an appeal of the 14 initial determination regarding approval, disapproval, or 15 amount of payment by the Administrator until the Admin- 16 istrator mails a final determination of such appeal shall 17 not be considered towards the one year statute of limitation 18 under this Act. However, this section shall not be construed 19 as creating any action or remedy not otherwise provided 20 by this title.’’. 21 (c) REPEAL.—Section 205 of the Bunning-Bereuter- 22 Blumenauer Flood Insurance Reform Act of 2004 (42 23 U.S.C. 4011 note) is hereby repealed. 24 VerDate Sep 11 2014 21:34 Oct 29, 2019 Jkt 099200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6203 E:\BILLS\H3111.RH H3111 kjohnson on DSK79L0C42 with BILLS 11 •HR 3111 RH SEC. 5. DEADLINE FOR APPROVAL OF CLAIMS. 1 (a) IN GENERAL.—Section 1312 of the National Flood 2 Insurance Act of 1968 (42 U.S.C. 4019) is amended— 3 (1) in subsection (a), by striking ‘‘The Adminis- 4 trator’’ and inserting ‘‘Subject to other provisions of 5 this section, the Administrator’’; and 6 (2) by adding at the end the following new sub- 7 section: 8 ‘‘(d) DEADLINE FOR APPROVAL OF CLAIMS.— 9 ‘‘(1) IN GENERAL.—The Administrator shall pro- 10 vide that, in the case of any claim for damage to or 11 loss of property under flood insurance coverage made 12 available under this title, an initial determination re- 13 garding approval of a claim for payment or dis- 14 approval of the claim be made, and notification of 15 such determination be provided to the insured making 16 such claim, not later than the expiration of the 120- 17 day period (as such period may be extended pursuant 18 to paragraph (2)) beginning upon the day on which 19 the policyholder submits a signed proof of loss detail- 20 ing the damage and amount of the loss. Payment of 21 approved claims shall be made as soon as possible 22 after such approval. 23 ‘‘(2) EXTENSION OF DEADLINE.—The Adminis- 24 trator shall— 25 VerDate Sep 11 2014 21:34 Oct 29, 2019 Jkt 099200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6203 E:\BILLS\H3111.RH H3111 kjohnson on DSK79L0C42 with BILLS 12 •HR 3111 RH ‘‘(A) provide that the period referred to in 1 paragraph (1) may be extended by additional 2 successive periods of 30 days in cases where ex- 3 traordinary circumstances are demonstrated; 4 and 5 ‘‘(B) establish, by regulation, criteria for 6 demonstrating such extraordinary cir- 7 cumstances.’’. 8 (b) APPLICABILITY.—The amendments made by sub- 9 section (a) shall apply to any claim under flood insurance 10 coverage made available under the National Flood Insur- 11 ance Act of 1968 (42 U.S.C. 4001 et seq.) pending on the 12 date of the enactment of this Act and any claims made after 13 such date of enactment. 14 SEC. 6. LITIGATION PROCESS OVERSIGHT AND REFORM. 15 (a) IN GENERAL.—Part C of chapter II of the National 16 Flood Insur [Text truncated for display. Full text available on Congress.gov.]