We have a borrower that has presented us with two flood insurance policies for one building. When we questioned why there are two policies, the insurance agent cited the FEMA definition of a single building – a building that is separated from other buildings by intervening clear space or solid, vertical, load-bearing division walls. In this situation it is a commercial building with two separate spaces that they say are separated by solid, vertical, load-bearing division walls.
Does this qualify the spaces into two separate buildings and allow for the two separate NFIP flood policies? If so, is the bank obligated to verify and document this is acceptable? What documentation is commonly used to do this? Should we track both policies or only one?
What about other commercial buildings that have solid, vertical, load-bearing division walls that only have one policy for the entire building? Should we be requiring more policies or is that up to the discretion of the building owner/insurance agent?