Beginning on August 9, 2016 and lasting through August 31, 2016, numerous parishes in Southeast Louisiana1 experienced prolonged, torrential rainfall and flooding. By the end of the days-long Great Flood event of 2016, several states were included in disaster declarations due to the same weather system. Though flooding to this extent is usually associated with a hurricane or tropical storm, this one was not. Regardless, flood damage is often covered by a Standard Flood Insurance Policy (SFIP) issued through National Flood Insurance Program (NFIP) fiscal agents known as Write Your Own (WYO) companies or by the Federal Emergency Management Agency (FEMA) directly through an NFIP Direct Servicing Agent (Direct). The NFIP is provided under the National Flood Insurance Act of 1968, amended (NFIA)2 and the SFIP is regulated under 44 C.F.R. §§ 61 and 62.
In the immediate aftermath, many in the flood affected areas notified their flood insurance carrier of flood damage to their property. Typically, once a claim is noticed the WYO or Direct agent will deploy an adjuster to investigate the flood loss. Shortly thereafter, usually within 60 days as provided for in an SFIP,3 the agent will notify the policyholder of its determination of the policy benefits and proceeds available.
Running parallel to this process is a 60-day deadline under the SFIP4 in which a policyholder must submit a sworn proof of loss stating the claim for damages (referred to as the Proof of Loss deadline). When there is widespread catastrophic flooding, the Federal Insurance Administrator may, and often will, extend the proof of loss deadline provision of the SFIP in writing,5 usually in the form of a FEMA bulletin. On August 28, 2017, FEMA issued its fifth extension of the proof of loss deadline for the Louisiana Mid-Summer Severe Storms, providing a proof of loss deadline of December 31, 2017.6 Note that failure to submit a timely proof of loss is grounds for denial of a claim and for dismissal of any lawsuit in pursuit of such claim.7
It is important to distinguish the difference between the proof of loss deadline (the deadline in which to submit a flood claim under the SFIP to the WYO or Direct agent for flood damages), and the lawsuit deadline (the deadline in which to file a lawsuit against a WYO or Direct agent tasked to adjust, settle, pay and defend all claims arising under the policy).8 Due to the Federal Insurance Administrator’s ability to extend or revise the deadline for the submission of the sworn proof of loss, the proof of loss deadline does not necessarily accrue prior to the lawsuit deadline.
Some policyholders have mistakenly assumed that the extension of the proof of loss deadline also extends the lawsuit deadline. The proof of loss extensions state: “This waiver is issued pursuant to 44 CFR 61.13(d) and the SFIP. This waiver does not alter any other terms or conditions of the SFIP.”9 That would include, as other terms or conditions of the SFIP, the Suit Against Us provision.10 Further, there are no extensions or revisions made to that particular provision. It is FEMA’s position that the NFIA does not authorize it to extend the deadline for a lawsuit related to the SFIP as the suit limitation is codified to accrue within one year of notice of the denial in whole or part:
[U]pon the disallowance by the Director of any such claim, or upon the refusal of the claimant to accept the amount allowed upon any such claim, the claimant, within one year after the date of mailing of notice of disallowance or partial disallowance by the Director, may institute an action against the Director on such claim. . . .11
However, WYO and Direct agents have historically taken the position that the one year lawsuit deadline is triggered once the agent issues a denial of all or part of the noticed flood loss, which denial could be based upon the agent’s own estimate of damages, notwithstanding the policyholder’s proof of loss or claim submitted. The courts have repeatedly held, in Katrina litigation12 and in subsequent Sandy litigation,13 it is the written letter of denial (full or partial) of the claim, as submitted by the policyholder via of a sworn proof of loss, which triggers the running of the lawsuit deadline.
Even so, it is important to know what constitutes a notice of disallowance, in whole or in part, to determine the lawsuit deadline of the Louisiana Mid-Summer Severe Storms deadline.
Generally, a letter from the WYO or Direct agent notifying the policyholder it is denying all or a portion of the claim for flood damages in response to a timely submitted proof of loss and advising of the suit limitations deadline from the date of the letter, would be a good indication that the claim has been denied. If there is any doubt, it would be wise to consult an attorney as there has been much confusion regarding the lawsuit denial trigger under a flood policy.
As many of the claim determination letters would begin to issue in late November and December 2016, now is the time to review claims correspondence from the WYO or Direct agent to determine the one year lawsuit deadline. And again, the proof of loss deadline (for all claims, including supplemental claims) for the Louisiana Mid-Summer Severe Storms (August 9 – 31, 2016) is December 31, 2017.
2 42 U.S.C. § 4001, et seq.
5 The SFIP cannot be “altered, varied, or waived other than by the express written consent of the Federal Insurance Administrator.” 44 C.F.R. Section 61.13(a), (d).
7 Villemarette v. FEMA et al., 2014 U.S. Dist. LEXIS 113667 (E.D. La.).
8 44 C.F.R. §§ 62.23(d), (i)(6).
12 Qader v. FEMA, 543 F. Supp. 2d 558 (E.D. La. 2008).
13 Kroll v. Johnson, No. 14-2496, 2014 WL 4626009 (D.N.J. September 15, 2014).