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of Public Law 90-448, 82 Stat. 590, enacte on Aug. 1, 1968) provides: "Any person wil willfully violates any of the provisions this title or of the rules and regulations any person who willfully, in a statement o record filed under, or in a property repor issued pursuant to, this title, makes ay untrue statement of a material fact or om to state any material fact * * *, shall upg conviction be fined not more than $5,000 imprisoned not more than 5 years, or both

(Corporate seal

(Title) It applicable) WARNING: Section 1418 of the Housing and Urban Development Act of 1968 (Title XIV

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CHAPTER VII-FEDERAL INSURANCE ADMINISTRA

TION, DEPARTMENT OF HOUSING

AND URBAN DEVELOPMENT

SUBCHAPTER A-NATIONAL INSURANCE DEVELOPMENT PROGRAM

Part
1905 Statewide "FAIR” Plans.
1906 Standard reinsurance contract.
1907 State reimbursement requirement.

SUBCHAPTER B-NATIONAL FLOOD INSURANCE PROGRAM

1909 General provisions.
1910 Land management and use.
1911 Insurance coverage and rates.
1912 Sale of insurance and adjustment of claims.
1914 Areas eligible for the sale of insurance.
1915 Identification of flood-prone areas.

SUBCHAPTER A-NATIONAL INSURANCE DEVELOPMENT PROGRAM

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PART 1905--STATEWIDE "FAIR" piration of a specified period of time PLANS

after an application for inspection and

insurance; Sec. 1905.1 Definitions.

(f) "Eligible property," "eligible risk," 1905.2 Composition and supervision of

or "risk eligible under the Plan" means FAIR Plan.

any real property, personal property, or 1905.3 Coverage and operation of the

mixed real and personal property, poPlan.

tentially insurable under one or more 1905.4 Insurer participation and placement lines of essential property insurance, program.

subject to an inspection to ascertain 1905.5 Inspections and applications for in

insurability and applicable premium surance.

rates; 1905.6 Deemer or binder requirement. 1905.7 Placement action after inspection

(g) "Environmental hazard" means report.

any hazardous condition that might give 1905.8 Prohibition of unnecessary rein

rise to loss under an insurance contract, spections.

but which is beyond the control of the 1905.9 Notice of cancellation or nonre- property owner or tenant; newal.

(h) "Essential property insurance" 1905.10 Impartial selection of adjusters. 1905.11 Coding and reports under the Plan.

means insurance against direct loss to 1905.12 Inapplicability and waiver of regu

property as defined and limited in standlations. ard fire policies and extended coverage

"S:

endorsement thereon, as approved by the AUTHORITY: The provisions of this part

State insurance authority, and insurance 1905 issued under secs. 405-407; 12 U.S.C.

of 1749bbb_1749bbb-21; 5 U.S.C. 553; 34 F.R.

against the perils of vandalism and ma2680, Feb. 27, 1969.

licious mischief. Such insurance shall not

include automobile insurance and shall SOURCE: The provisions of this Part 1905

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not include insurance on such type of appear at 35 F.R. 12114, July 29, 1970, unless

manufacturing risks as may be excluded otherwise noted.

by the State insurance authority; $ 1905.1 Definitions.

(i) "FAIR Plan" or "Plan" means & As used in this part

statewide Plan to assure "fair access to su (a) “Act” means the Urban Property

insurance requirements” that is approved-sha Protection and Reinsurance Act of 1968,

by the Administrator as meeting the cri- l cha codified as title XII of the National teria of Part A of the Act, including such as Housing Act (12 U.S.C. 1749bbb_1749

modifications thereof as the Adminis- 30th

enot ir bbb-21), which authorized the program.

trator may promulgate from time to time Section references are to the National

under this part in accordance with subHousing Act;

section 1214(b) of the Act (12 U.S.C. (b) “Administrator" means the Fed

1749bbb-6(b)); eral Insurance Administrator within the (j) “Inspection facility,” with respect Department of Housing and Urban De- to any State, means any rating bureau velopment, to whom the Secretary has

or other person duly authorized and desdelegated the administration of the pro- ignated to perform inspections under a piares gram (34 F.R. 2680, Feb. 27, 1969);

Plan; (c) “Applicant” means any property (k) "Insurer” includes any owner, or his authorized representative, insurance company, or group of comwho duly requests essential property in

panies under common ownership or comsurance for a risk eligible under a FAIR

mon management, authorized to engage aperi Plan;

in the insurance business under the laws stated (d) “Binder” means a temporary and of at least one State; preliminary contract of insurance to pro

(1) “Participating insurer" means any tect owner against loss from the occur

insurer eligible for membership in a Plan rence of an insurable event before a

and fully participating in that Plan. The policy is issued;

term shall not include any insurer in any (e) “Deemer provision" means a provision in a Plan whereby interim coverage for an eligible risk is deemed risk-bearing or potentially risk-bearing in of automatically to attach upon the ex- basis;

prog self"Ur

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State in any year in which such insurer does not participate in the plan on a

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(m) "Person” includes any individual, group of individuals, corporation, partnership, association, or any other organized group of persons;

(n) “Placement facility” means the facility established under a Plan to place or provide essential property insurance to persons making application for one or more lines of such insurance under the Plan;

(0) "Pool” means any pool or association of insurance companies in any State that is formed, associated, or otherwise created for the purposes of sharing risks and of making property insurance more readily available;

(p) “Property owner" or "owner,” with respect to any real property, personal property, or mixed real and personal property, means any person having an insurable interest in such property;

(q) "Secretary” means the Secretary of Housing and Urban Development;

(r) “State” means the several States, the District of Columbia, the Commonwealth of Puerto Rico, the territories and possessions, and the Trust Territory of the Pacific Islands;

(s) “State insurance authority" means the person having legal responsibility for regulating the business of insurance within a State;

(t) “Surcharge” means (1) any condition charge, and (2) any general or other charge added to the basic insurance rates or premium ordinarily applicable to the same class of property; but does not include specific rates that apply to all property in a Plan on the basis of actual self-rating experience;

(u) “Urban area” includes any municipality or other political subdivision of a State, subject to population or other limitations defined in rules and regulations of the Secretary, und such additional areas as may be designated by the State insurance authority; and

(v) “Year" means a calendar year; fiscal year of a company, association, or pool; reinsurance contract year; or such other period of 12 months as may be designated by the Administrator. $ 1905.2 Composition and supervision

of FAIR Plan. (a) The Administrator will periodically review each State's FAIR Plan in its entirety for conformity to statutory criteria (12 U.S.C. 1749bbb-3—1749bbb-6) and this part. Although the number and location of the required elements in a Plan will vary according to the particular

method and procedures used by the State, the required documentation comprising each Plan could include any or all of the following, as relevant:

(1) The State law, where one has been enacted;

(2) The industry agreement or program, if any;

(3) The approval action by the State insurance authority with respect to the industry agreement or program, or by court order or other approval authority, if applicable; and

(4) Implementing rules, regulations, and orders, together with operating procedures and forms.

(b) The Plan shall include a certification by the State insurance authority of the date on which the Plan was placed in effect and on which any amendments to the Plan are effective.

(c) The Plan shall evidence that it has been approved by, and is to be administered under the supervision of, the State insurance authority.

(d) The Plan shall provide for a continuing public education program by participating insurers, agents, and brokers, in order to assure that the Plan receives adequate public attention. For example, a brochure or other publication should be made widely available for distribution through all agents, brokers, and other producers. All participating insurers, agents, and brokers should include such a publication with each notice of cancellation or nonrenewal in order to provide policyholders with the required information concerning the placement of insurance under the Plan. § 1905.3 Coverage and operation of the

Plan. (a) At a minimum, the Plan shall provide for insurance against direct loss to property as defined and limited in standard fire policies and in (1) extended coverage, and (2) vandalism and malicious mischief endorsements thereon, as approved by the State insurance authority. It shall not include automobile insurance nor such types of manufacturing risks as may be excluded by the State insurance authority. The Plan shall specifically provide for insurance against direct loss to property that is being constructed or rehabilitated (including builder's risk coverage). To avoid the need for amendment to the Plan and delays in securing new approval action, the Plan should provide for the inclusion of such additional lines of property insurance as from

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time to time may be designated essential provide that the placement facility shall by the Administrator pursuant to section assist in seeking to place the excess 1203(a) (2) of the Act, 12 U.S.C. 1749bbb- portion. 2(a) (2),

(d) As soon after May 1 of each year bu (b) The Plan shall specify its geo- as practicable, each State insurance augraphic area of coverage. If the entire thority under whose jurisdiction a Plan in State is not designated as the area of has been put into operation shall notify - 1 coverage, the Plan must specify_by the Administrator of the names of all name, by population size, or by class- insurers that are fully participating (on i the political subdivisions and other areas a risk-bearing basis) in the FAIR Plan eligible under the Plan. The area of cov- of such State on that date in accordance de erage may not be limited to communities with the conditions of the Standard Rethat have a blighted or deteriorating area insurance Contract in effect at that time. See or an area approved by the Secretary for For a Plan in which participation by inan urban renewal project.

surers is voluntary, the notification shall com (c) Each State insurance authority include an estimate by the authority of under whose jurisdiction a Plan has been the aggregate premium volume of essenput into operation shall keep the Ad- tial property insurance written by parministrator fully and currently informed ticipating insurers in relation to the total of any modifications or changes in the premium volume in such lines written by con organization or operation of the Plan in all property insurers in the State. his State, whether or not such changes (e) Federal riot reinsurance will be directly affect the availability of cover- offered only to those insurers that (1) age under the Plan.

have direct writings in one or more lines $ 1905.4 Insurer participation and place

of essential property insurance and (2) ment program.

are actually or potentially risk-bearing

members of any pool organized under the (a) The Plan's placement program Plan, as certified by the State insurance may take any of a variety of forms; for

56

authority. example, it may involve a syndicated or direct writing pool, an assigned risk

$ 1905.5 Inspections and applications for fac

insurance. facility, a reinsurance pool or association, or combinations of the foregoing. (a) The Plan shall designate one or

(b) The Plan shall not discriminate more inspection facilities, which may also against, shall provide for full coopera- operate as placement facilities if tion with, and shall seek cooperation

desirable, from all agents and brokers licensed to (b) The Plan shall make its inspection write property lines in the State. The and placement facilities readily available inclusion of agents and brokers on FAIR and accessible to the general public by Plan governing boards is encouraged. providing a central source of information

(c) The Plan shall include one or more on the services it provides and on all-industry placement facilities, doing the manner of application. To assure the business with every insurer participating public's access to such information, the in the Plan, to perform the following telephone information number of the functions for properties meeting reason- Plan shall be listed alphabetically as able underwriting standards:

"FAIR Plan(1) in the white sections (1) Upon request by or on behalf of and (2) under "Insurance” in the classia property owner requesting an inspec

fied sections of the telephone directories tion under the Plan, distribute the placement or risks equitably among the in

of each city where these facilities main

tain an office. surers with which it does business; and (2) Place insurance up to the full in

(c) The Plan shall require that there por ti surable value of the risk to be insured

will be an inspection of any eligible risk with one or more insurers with which it that is submitted to a placement facility Mundet is doing business, except to the extent

or to a servicing insurer if such facility at tot be that deductibles, percentage participa

or insurer is unwilling to write coverage tion clauses, and other underwriting de

at regular rates. The Plan may not revices are employed to meet special prob

quire as a precondition for obtaining an lems of insurability. In the case of very

inspection that the property owner make large risks not accommodated by the

a showing or certification that he has Plan (e.g., those whose full insurable

been unable to obtain insurance in the value exceeds $1,500,000), the Plan shall

regular market.

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