The issues concerning filing proofs of loss and statutes of limitation are many and frequent. A very experienced public adjuster complained that a New Jersey attorney who is relatively new to the property insurance world advised his client to fire the public adjuster because the National Flood Insurance Program (NFIP) statute of limitations ends on October 29, 2013. A different public adjuster asked if a proof of loss should always be filed, even if the insurance carrier did not ask for one. I have taught hour-long courses on these issues; they arise after every flood disaster. It never hurts to refresh your base of knowledge, so I am offering a few points and practical observations.
The NFIP has established a one year deadline to file a proof of loss for Superstorm Sandy flood claims. I wrote about this recently in File Flood Proofs of Loss and after Hurricane Ike in A Warning Regarding Federal Flood Proofs Of Loss.
There is no NFIP statute of limitations deadline to file a lawsuit for claims on the anniversary of Superstorm Sandy. The NFIP statute of limitations to file a lawsuit is one year from date of denial — in my opinion — the first denial of a claim. I suppose a flood adjuster could have denied a flood claim the day after Sandy, but we all know they took months to adjust and deny claims.
If you filed a proof of loss and your flood claim was denied, you can file a lawsuit. If you did not receive all the benefits to which you are entitled and do not file a proof of loss, you will lose your lawsuit. If you believe you are entitled to more benefits, file a proof of loss before October 29, 2013. Otherwise, you will forfeit your rights.
You can file flood lawsuits before the one year anniversary if you filed a proof of loss and National Flood denied your claim. But sometimes, not often, the flood claim appeal process resolves the matter, the “adverse” proof of loss is actually accepted and benefits are paid.
What is an “adverse” proof of loss? Experienced adjusters call a proof of loss over which a policyholder and insurance adjuster disagree an adverse proof of loss. You will not see the term “adverse” proof of loss in the NFIP policy and rarely in property insurance treatises. But any adjuster with experience knows an “adverse” anything is usually not a kumbaya moment.
Most insurance company adjusters want policyholders to sign an “agreed to” proof of loss. Many companies require their adjusters to obtain such proofs of loss as a condition for payment. But filing an “adverse” proof of loss is a policyholder’s right, and some insurance claims departments do not know what to do when they receive them.
Typically, a proof of loss is accepted or rejected on a technical basis. It is wrong to reject a proof of loss merely because the insurance company disagrees with the amount of loss. Most get it right, but some insurance company lawyers do not know what they are doing. If the proof of loss is technically sound, but the insurer disagrees with the number, the insurer should not reject the proof of loss. Not rejecting a proof of loss does not mean the insurance company agrees with the amount claimed by the policyholder. Yet, some insurance companies regularly breach their policies by wrongfully rejecting sound proofs of loss because they disagree with the numbers submitted for the claim.
Most insurance policies require the insurance company to respond to a properly completed proof of loss within 30 days by indicating whether it will adjust the loss through payment or invoke options to repair or replace damaged property. If the insurer disagrees with the amount claimed, it should explain why in writing. If the insurer pays for the loss good faith practice should require the insurance company to pay the undisputed amount owed, assuming it does not invoke the option to repair.
Most insurance companies do not act in good faith. They withhold undisputed amounts owed as leverage for negotiation at this point of an adjustment. In response, many states now penalize for such practices. At least NFIP is not withholding undisputed amounts owed.
Policyholders should comply with policy provisions that require a proof of loss to be filed within a certain time frame. Some states override these time requirements, and others are unforgiving, like a train that will absolutely leave you if you are not aboard at the time of departure. The best practice is to file within the deadline.
Some policies require policyholders to file proofs of loss when requested by the insurer. The best practice is not to file a proof of loss if there is a realistic hope of reaching an agreement and the insurer does not request one. Send everything else, but you are not obligated to file a proof of loss in that case. A proof of loss that is not requested is considered an “adverse” proof of loss.
If the adjustment is simply dragging and hope for agreement is waning, most experienced policyholder representatives call the insurance company and alert them that an adverse proof of loss will be filed by a given date. This is a courtesy, letting the company adjuster know he will have to explain the “turd in the punch bowl” to the claim supervisor and respond to the adverse proof of loss. Some insurers want agreement, and others do not care—unless the agreement is on their terms.
Good luck out in the adjustment field. May the insurers agree to all of your proofs of loss.