Although we are over 5 years past Hurricane Sandy, flood insurance coverage issues are still being litigated. I previously wrote about a decision out of the U.S. District Court of the District of New Jersey, Migliaro v. Fidelity National Indemnity Insurance Company.1

Here is a recap of the facts:

  • Plaintiff’s property was damaged by Superstorm Sandy in October 2012.
  • On November 29, 2012, Defendant’s independent adjuster inspected the property.
  • That same day, Plaintiff submitted requests for advance payments in the amount of $25,000 for building damage and $10,000 in contents damage. Defendant paid those amounts.
  • On December 28, 2012, the independent adjuster sent a report to Defendant recommending payment for $74,864.17 in covered building damage and $15,584.94 in covered contents damage.
  • Defendant accepted the recommendation and paid $49,864.17 (the difference between the advance payment and the payment recommendation by the independent adjuster.)
  • On June 28, 2013, Plaintiff submitted a proof of loss in the amount of $236,702.57.
  • On July 15, 2013, Defendant sent a letter titled “Rejection of Proof of Loss”:

The Proof of Loss cannot be accepted under the terms and conditions of the insurance policy for the following reason:

1. The amount claimed is not an accurate reflection of covered damage.

This is not a denial of your claim. Your field adjuster provided you with an estimate and Proof of Loss regarding covered damages. If there are additional covered damages identified, please forward documentation and they will be considered on a supplemental basis and a new corrected estimate and a new Proof of Loss will be provided.

Emphasis added.

  • Plaintiff did not provide additional documentation or submit a proof of loss. On December 13, 2013, Plaintiff filed a complaint in the District of New Jersey for breach of the insurance contract, but that suit was dismissed without prejudice on January 15, 2016.
  • Plaintiff then sued Defendant on July 22, 2015, for breach of the insurance contract.

The issue was whether the Plaintiff’s complaint was barred by the one-year suit limitations period governing claims for Standard Flood Insurance Policy (“SFIP”) benefits against a Write Your Own (“WYO”) company. The trial court granted the insurance company’s motion for summary judgment and dismissed the complaint on the basis that the July 15, 2013, letter was a written denial that triggered the statutory period.

In order to fully understand the court’s ruling, a review of the SFIP language is helpful.
The SFIP’s loss payment provision provided:

2. If we reject your proof of loss in whole or in part you may:
a. Accept our denial of your claim
b. Exercise your rights under this policy; or
c. File an amended proof of loss as long as it is filed within 60 days of the date of the loss.

The SFIP also provided:

You may not sue us to recover money under this policy unless you have complied with all the requirements of the policy. If you do sue, you must start the suit within one year after the date of the written denial of all or part of the claim[.] . . . This requirement applies to any claim that you may have under this policy and to any dispute that you may have arising out of the handling of any claim under the policy.

(Emphasis added.)

On appeal, the Third Circuit Court of Appeals affirmed the trial court’s ruling and held that WYO carrier’s rejection of Plaintiff’s proof of loss constituted a “written denial of all or part of the claim,” thereby triggering the SFIP’s one-year limitation period. The court explained: “Although the rejection of a proof of loss is not per se a denial of the claim in whole or in part, it does constitute a denial of the claim if, as here, the policyholder treats it as such by filing suit against the carrier.”2

1 Migliaro v. Fidelity Nat’l Indem. Ins. Co., No. CV 15-5688, 2017 WL 462631 (D.N.J. Feb. 3, 2017).
2 Migliaro v. Fidelity Nat’l Indem. Ins. Co., 880 F.3d 660, 662 (3d Cir. 2018).