Federal common law interpreting the rules and regulations of the National Flood Program is usually not helpful to policyholders. It has truly become a situation where technical, literal rules are followed to the letter of the law rather than any intent or spirit for why the rule was written. In this “form over substance” common law, which federal judges feel compelled to follow, an important lesson is to follow those rules in an exacting manner or risk losing insurance benefits. One recent case held that an attorney at law, while acting with authority for the client, cannot sign the proof of loss form for the policyholder client.1

Here are the simple relevant facts cited by the federal court:

On September 26, 2017, Plaintiff through his counsel submitted a Proof of Loss form dated September 25, 2017 claiming his flood loss totaled $250,000.00…. Plaintiff did not sign the Proof of Loss. …Rather, the document is signed, ‘Duane Cothren by JDS.’ . . .

‘JDS’ refers to Plaintiff’s attorney, J. Douglas Sunseri… When Plaintiff retained Sunseri to represent him, Plaintiff agreed in a document entitled “Fee Agreement and Authority to Represent” that: ‘I [Plaintiff] authorize Attorney to sign any Proof of Loss on behalf of the myself [sic] to preserve my claim with FEMA.’

The reasoning for the law and ruling is important. I am quoting at length so you can appreciate that it is not a case of a mean-spirited judge but a situation where the prior case law seems to compel the result:

‘Where federal funds are implicated, the person seeking those funds is obligated to familiarize himself with the legal requirements for receipt of such funds.’ Cohen v. Allstate Ins. Co., 924 F.3d 776, 780 (5th Cir. 2019) (quoting Wright, 415 F.3d at 388). ‘Claimants dealing with the government are presumed to have full knowledge of the law and cannot rely on the conduct of government officials to the contrary.’. . .

‘[T]he provisions of an insurance policy issued pursuant to a federal program must be strictly construed and enforced[.]’ Gowland, 143 F.3d at 954 (citing Federal Crop Ins. Corp. v. Merrill, 332 U.S. 380 (1947)); see also Wright, 415 F.3d at 387 (‘Under the Appropriations Clause of the Constitution, ‘[m]oney may be paid out only through an appropriation made by law; in other words, the payment of money from the Treasury must be authorized by a statute.’ ‘ (citing Office of Pers. Mgmt. v. Richmond, 496 U.S. 414, 424 (1990))); Cohen, 924 F.3d at 780 (‘Men must turn square corners when they deal with the government. This is especially true when a private party seeks money from the public fisc.’ (cleaned up)); Clark v. Wright Nat’l Flood Ins. Co., 821 F. App’x 342, 344 (5th Cir. 2020)…(‘Because all claims for all policies issued under this program are paid directly from the federal treasury, the provisions of the SFIP policies must be strictly construed and enforced.’. . .

‘An SFIP policyholder may not sue to recover losses covered under the SFIP unless the policyholder first ‘complied with all the requirements of the policy.’ ‘ Clark, 821 F. App’x at 344 (quoting 44 C.F.R. § 61, App. A(1), Art. VII(R)). Here, there is no question of fact that Plaintiff did not sign the Proof of Loss and that it was instead signed by his attorney pursuant to a written agreement.

…The policy requires that the Proof of Loss be ‘signed and sworn to by you,’ and ‘you’ has a very specific definition—one that includes the ‘insured(s) shown on the Declarations Page,’ that insured’s cohabitating spouse, and even certain ‘mortgagee[s] and loss payee[s].’ Id. But, under the clear and unambiguous language of the policy, that definition does not include Plaintiff’s attorney or a mandatary.

Federal common law, which governs these disputes…confirms this interpretation. The Fifth Circuit has said that “an insured’s failure to provide a complete, sworn proof of loss statement, as required by the flood insurance policy, relieves the federal insurer’s obligation to pay what otherwise might be a valid claim.’… see also Wright, 415 F.3d at 387 (‘SFIP policies require that insureds asserting a claim file a POL within 60 days[.] . .. . . Courts have enforced this requirement strictly, holding that failure to timely file a POL complying with the regulatory requirements is a valid basis for denying an insured’s claim.’ (citing Neuser v. Hocker, 246 F.3d 508, 510 (6th Cir. 2001) (‘Our sister circuits have consistently held that FEMA’s proof of loss requirement is to be strictly enforced.’)

I made these warnings long ago and repeatedly over the years. Eight years ago in Proof of Loss Tips for National Flood Claims Involving Superstorm Sandy, I noted the following and suggested policyholders follow a checklist listed in that blog post:

Rule One is to file on time. The National flood proof of loss should be “received” by the flood insurance carrier – not the adjuster – by the one year deadline. Touro indicated that this date could be as early as October 26, 2013. So, you have to send it before that time to meet the time deadline for receipt. The time of a proof being sent is different than the time being “received.” We send Flood Proofs with a “proof of delivery” because there are instances of claims people claiming the proof of loss and materials were received after the deadline.

Rule Two is to fill out the form(s) completely and with adequate backup. Use a Federal OMB approved form, fill in the blanks and provide backup documentation with estimates, invoices, photographs, and anything which will substantiate the amount claimed.

Rule Three–Read the attached checklist. It will prevent all kinds of technical problems and addresses the topic in more detail. The publication is a great public service.

The bottom line is that this court ruling indicates that only the flood policyholders, not their attorneys nor public adjusters, can sign the proof of loss form.

In the longer term, only Congress can change these harsh results by changing federal law. It seems to me that there is a need for change. It is up to us to bring the stories of unfairness to those that write our laws.

Thought For The Day

Without change, something sleeps inside us, and seldom awakens. The sleeper must awaken.
—Frank Herbert
1 Cothren v. American Strategic Ins. Corp., No 17-1725 (M.D. La. Nov. 19, 2021).