A federal judge ruled Thursday that Louisiana and nine other states can move forward with a legal challenge to the nation’s controversial new system for setting flood insurance rates, which is provoking sharp increases for many homeowners.
While ruling that the lawsuit could move forward, US District Judge Darrel James Papillion also declined a request to immediately intervene and halt the new system, known as Risk Rating 2.0, saying that would do more harm than good.
Papillion also limited the number of plaintiffs and claims that could be part of the lawsuit. Only the 10 states taking part in the suit as well as St. Tammany, Livingston and Washington parishes can now be included. Claims from a number of other parishes, municipalities, levee districts and other entities were dismissed.
A separate notice issued by the court in connection with the case encouraging the states and federal government to try to reach a settlement.
Attorney General Liz Murrill, who had argued the case in court herself while still solicitor general, said in a statement “our fight is not over yet.”
“We are disappointed in the ruling, which elevated the government’s admittedly neglected program over people who are facing the loss of their homes and their communities at the hands of FEMA,” she said. “As we move through the next phase of litigation, we’re hopeful the courts will recognize FEMA’s unlawful behavior and hold it accountable.”
FEMA, which oversees the National Flood Insurance Program, said it does not comment on active litigation.
Papillion, of the eastern district for Louisiana, explained his rationale for declining to intervene immediately, saying: “Any interest the public has in the need for federal agencies to follow the law is outweighed by the public’s interest in the stability of the administration of the National Flood Insurance Program.” He pointed to the tens of millions of dollars spent to institute the new system, among other complications.
The lawsuit filed in June reflects deep concern from Louisiana officials that the flood insurance increases, combined with property insurance hikes, could provoke a raft of home foreclosures and gradually reshape parts of the housing market.
At a September hearing, Murrill called the new system “a hurricane” that was “catastrophic in its own right.”
FEMA argues that the changes are necessary to better reflect the actual risk of each individual home and help set the deeply invested flood insurance program on a financially sound path.
Projections released last year showed the average single-family home in Louisiana seeing a 134% increase. Especially flood-prone areas will see much higher increases, with Plaquemines Parish projected at the time to be hit with the state’s highest at 545% on average. Orleans was projected to see 99% increases, Jefferson 150% and St. Louis. Tammany 126%.
The highest projected percentage increase in the nation at the ZIP code level in the April 2023 data was Plaquemines Parish’s 70082, with average increases of 1.098%.
Premium increases for existing policies are phased in over time at 18% per year. New policies are priced at the full rates immediately.
Risk Rating 2.0 began in October 2021 for new policies and April 2022 for renewals.
It uses an intricate algorithm to compute the premium, incorporating a range of data such as cost to rebuild, distance from water, construction type and ground elevation. But much of the data is proprietary and not available publicly, leading to criticism that the new program lacks transparency.
Michael Hecht, head of regional economic development organization Greater New Orleans Inc., which leads the national Coalition for Sustainable Flood Insurance, said in a statement in response to Thursday’s ruling “we hope that this legal process helps to untangle outstanding concerns about Risk Rating 2.0 .”
He said the coalition hopes it “leads to cooperation and collaboration towards the common goal of a sustainable program that accurately accounts for risk, reduces risk exposure, respects mitigation measures, and promotes economic prosperity.”
This story was updated on March 29 to include responses from Greater New Orleans Inc. and FEMA.