April 5, 2006 - Assembly Panel Passes Mandatory Flood Insurance Legislation

April 5, 2006
Written for the web by C. Johnson, Internet News Producer

The state Assembly Committee on Insurance has approved a bill that would require property owners in levee-protected or flood-prone areas to carry flood insurance.

Assembly Bill 1898, sponsored by Assemblyman Dave Jones, D-Sacramento, would apply to residents in the Sacramento and San Joaquin river watersheds. That would affect residents in 14 counties.

"When the levees fail and the floods come, gosh forbid, it is the taxpayers thorughout the state who are going to end up bailing out those who live in the areas like mine protected from the levees," Jones said. "I think it's a fundamental fairness issue. Everyone has a role to play and one role for those who live in these areas is to purchase flood insurance."

The flood-zone determination would be based on state Department of Water Resources maps. The proposed law would not apply to those who live where there is 200-year flood protection.

Property owners could purchase flood coverage under the National Flood Insurance Program.

Mortgage bankers and insurance companies find fault with AB 1898. "There's no enforcement mechanism for properties that are owned free and clear or for situtations where the property has a mortgage on it that went into effect prior to the effective date of the bill," said Pat Zenzola of the California Mortgage Bankers Association.

A provision of AB 1898 that would have required mortgage lenders to enforce the flood insurance requirement was removed.

If the bill becomes law, it would take effect July 1, 2007.