A property securing a commercial loan is half in flood zone AE and half in zone X. The convinence store is entirely in zone X, but the covered gas station pumps are in zone AE. The gas station pumps and their canopy are separate from the convenience store. Is flood insurance required under the NFIP?

The flood rules apply to loans secured by buildings or mobile homes located or to be located in areas determined by the Director of the Federal Emergency Management Agency to be have special flood hazards. Under these rules, a bank shall not make, increase, extend, or renew a loan unless the building or mobile home is covered by flood insurance for the term of the loan. The term “building” means a walled and roofed structure, other than a gas or liquid storage tank, that is principally above ground and affixed to a permanent site. It must have two or more rigid and load-bearing walls and a fully supported roof.

In this case, the convenience store is a building within the definition, but the gas pumps are not. The latter, though they have a canopy and are arguably roofed, do not form a walled structure.

Since the convenience store is not located in a special flood hazard area, flood insurance is not required for it. While the gas pumps are located in a special flood hazard area, they are not considered to be a building, and thus flood insurance is not required for them.

The result would be different, however, if the canopy was attached to the convenience store instead of being a stand-alone structure. Under the NFIP flood rules, if it is attached to the convenience store by a rigid exterior wall, the canopy and store would be considered one building. If the canopy is in a special flood hazard area, the store is as well.

This entry was posted on Tuesday, December 3rd, 2013 at 2:47 pm.