When it comes to claims, the National Flood Insurance Program is in need of major legal reform that only Congress can address. The claims system is form over substance. When it comes to the stupid reasons insurance benefits can legally be disallowed, the National Flood Insurance Program is in a league by itself. The most recent example of how an entire flood claim for all damages can be denied is an innocuous letter denying part of the contents claim because photographs of some content items were not provided.1

Here are the case facts cited by the federal judge:

On November 20, 2016, Defendant sent a letter to Plaintiffs stating that content items that were not supported by photographs were not able to be included in [their] claim.”… The November 20, 2016 letter also advised Plaintiffs of their appeal rights and the time frame to do so. Id. Plaintiffs appealed the denial of the claim for additional contents to Federal Emergency Management Agency.

…On June 26, 2017, FEMA responded to Plaintiffs’ appeal, concurring with Defendant s decision to deny additional contents payments…. On December 26, 2017, Plaintiffs sent Defendant a revised proof of loss and replacement cost proof of loss in the amount of $247,749.15….On January 8, 2018, Defendant responded by letter acknowledging receipt of Plaintiffs’ second Proof of Loss Statement and stated that (‘[a] letter was previously sent to the insured denying payment for contents items that were not supported by photographs.’…After receiving this letter Plaintiff filed suit on January 8, 2019….

Eight years ago, in Avoiding the National Flood Statute of Limitation Trap, I wrote that some courts had ruled that a national flood claim statute of limitation could arguably be avoided because the flood claim cannot be denied until a proof of loss is filed. That is obviously not the current state of the law because this court noted that federal flood law will tolerate harsh results based on the literal letter of the law written by Congress:

The United States Court of Appeals for the Fifth Circuit established that the SFIP ‘must be strictly construed and enforced.’ Gowland v. Aetna, 143 F.3d 951, 954 (5th Cir. 1998). ‘The terms of the SFIP are dictated by FEMA, and cannot be waived or modified by [any party],’ including the defendant insurer. Wright v. Allstate Ins. Co., 415 F.3d 384, 388 (5th Cir. 2005). These strict rules of construction cannot be relaxed, even if a harsh result follows..

Having read that introduction to the analysis, it was easy to anticipate that the flood policyholder was not going to win:

42 U.S.C. Section 4072 provides that a claimant ‘may institute an action only within one year after the date of mailing of notice of disallowance or partial disallowance.’ Bourgue v. National Flood Insurance Program, 480 F.Supp. 3d 733 (M.D. La. May 10, 2018); see also 42 U.S.C. § 4072. And failure to file a lawsuit within one year of the written denial of the flood loss claim bars recovery. Cohen v. Allstate lns, Co., 924 F.3d 776 (5th Cir. 2019).

Here, the language in the November 20, 2016 letter acted as the trigger for the one-year limitation period. The letter stated that ‘Federal Law allows you to appeal this decision within 60 days of the date of this denial letter.’…Like the letter in Cohen, it denied coverage for all or part of Plaintiffs’ property claims, while expressing a willingness to reconsider that disposition upon receipt of additional documentation….

Moreover, the January 8, 2018, letter stated that ‘[a] letter was previously sent to the insured denying payment for content items that were not supported by photographs.’…In fact, it also stated that its previous denial stands. Id. Therefore, Plaintiffs had one year from November 20, 2016, when they received the letter, or until November 20, 2017 to file suit… Accordingly, Plaintiffs’ lawsuit is barred as untimely because they did not file suit until January 8, 2019.

There is currently a reintroduced bill in Congress to reform the National Flood Insurance Program which includes claims reforms. Whether it passes, given current politics, is anybody’s guess. But there is a very real need to reform the claims law because flood policyholders cannot expect to receive good faith claims treatment. They can only expect harsh treatment under current law, and the courts have literally told them that.

Thought For The Day

Man is the unnatural animal, the rebel child of nature, and more and more does he turn himself against the harsh and fitful hand that reared him.
—H. G. Wells
1 McInnis v. Liberty Mutual Fire Ins. Co., No 19-00012 (M.D. La. Dec. 16, 2021).