Mass. AG Files Federal Brief Urging Court Action on Flood Insurance

In support of a Mississippi lawsuit that alleges the new FEMA flood insurance rates are arbitrary and unlawful, Massachusetts Attorney General Martha Coakley has filed an amicus brief in federal court arguing that FEMA failed to collect accurate data before rolling out its new rates.

“These new rates will devastate many families and businesses throughout Massachusetts. The federal government should delay these changes until FEMA has followed all the steps required by law,” Coakley said in a statement Nov. 15.

“In setting these new flood insurance rates, FEMA not only failed to evaluate their economic impact, but also failed to gather all the data required to ensure the new rates are accurate.”

The brief, filed in U.S. District Court for the Southern District of Mississippi, points out that the sudden jumps in flood insurance costs will increase the risk of a new wave of foreclosures, as struggling homeowners are hit with yet another significant mortgage-related cost.

In addition to failing to weigh the known consumer harm, the brief says that “FEMA ignored the opportunity to use tools provided by Congress,” and has engaged in “bureaucratic ostrich headedness.”

In addition, the attorney general’s brief stated that FEMA has great leeway regarding when and how they set rates under the new law.

Nonetheless, the brief stated, “FEMA has opted to plow forward instead of waiting to make more informed decisions,” according to the brief. FEMA is also pushing out these rates ahead of the required affordability study. The brief urges the court to take action to prevent the “potentially irreversible consequences of arbitrary action by FEMA.”

Officials from Florida and Alabama also recently filed a legal brief supporting Mississippi’s lawsuit.

Coakley has already taken several steps to assist homeowners. Last month, Coakley and Massachusetts’ House Speaker Robert DeLeo filed state legislation that would cap the amount of flood insurance mortgage lenders may require of homeowners.

The proposed legislation, An Act Relative to Flood Insurance, would prohibit creditors from requiring homeowners to purchase flood insurance in an amount that exceeds the outstanding balance of their mortgage, requires coverage for contents, or includes a deductible of less than $5,000.

Tying the amount of coverage to the outstanding mortgage balance, instead of the replacement value of the home, would lower premiums for the homeowners impacted by the new change, the attorney general’s office said. Homeowners would still have the option of purchasing a greater amount of insurance.

In addition, Coakley has called for a delay in the implementation of flood insurance hikes under the Biggert-Waters Flood Insurance Reform Act of 2012. In a letter to Congress sent last month, Coakley requested that the new bill be delayed until FEMA complies with Congress’ mandate to undertake an affordability review and a peer review of the new flood zone maps.

Insurance rates under redrawn flood maps will not only increase for those already in the flood plain, but many homeowners and small businesses will be required to buy flood insurance for the first time, the attorney general’s office said. Some are now required to purchase flood insurance at costs of $10,000 and up.

By eliminating various federal subsidies in the National Flood Insurance Program (NFIP) and requiring the redrawing and expansion of flood zone maps, Biggert-Waters will pose harsh economic consequences for many homeowners and small businesses in Massachusetts and across the country, the attorney general’s office said.

Source: Massachusetts Attorney General’s Office

Massachusetts AG's Amicus Brief