A current case1 shows that every technical step regarding proof-of-loss requirements in the flood process must be followed, even if the steps are futile. Federal law regarding flood claims is draconian. It is the worst law against policy holders. The attempts at legal reform of the damage processes have fallen on deaf ears. It’s a “heads I win, tails you lose” situation if a flood policyholder challenges any claim decision.
Here are the facts of the case:
On September 14, 2021, the plaintiff’s property allegedly suffered flood damage. Under the SFIP, the insured is required to provide a signed and sworn proof of loss within 60 days of the flood loss. Defendant was notified of the flood loss on September 23, 2021, and on September 25, 2021, an independent adjuster hired by Defendant inspected the property. The adjuster determined that the flood general permit was not in place at the property on September 14, 2021. On November 10, 2021, the defendant issued a letter denying the plaintiff’s flood claim. Plaintiff never provided a signed and sworn proof of loss prior to the expiration of the 60-day proof of loss deadline on November 13, 2021.
Despite the denial, the national flood carrier filed a motion for summary judgment, alleging that the policyholder failed to file a proof of loss within the 60-day limit. The common law of the vast majority of jurisdictions is that a policyholder does not file anything after a full denial of the claim – the law does not require people to do an unnecessary act. But federal law overseeing national flood claims is different. The judge ruled for the insurer and found:
Under the SFIP, an insured may not apply for coverage unless it has met all of the requirements of the policy, including the requirement to submit a sworn proof of loss… In reviewing flood insurance claims, the Eleventh Circuit has held that strict compliance with the proof of loss requirement is a condition precedent to recovery under the SFIP… Substantial compliance is not sufficient because any payments to policyholders are deducted from the federal treasury.
. . .
Here, Plaintiff does not dispute that Plaintiff failed to provide a timely sworn proof of loss. Instead, the plaintiff alleges that the defendant repudiated the agreement when it denied the plaintiff’s loss on November 10, 2021, three days before the deadline for the plaintiff to file a sworn proof of loss. Thus, Plaintiff argues, Defendant’s alleged repudiation relieves Plaintiff of the requirement to submit a proof of loss or, at the very least, creates an issue of material fact precluding summary judgment. The court disagrees.
… Defendant’s denial letter stated that there was no general permit for flooding on the property and called upon Plaintiff to submit additional information that might support Plaintiff’s claim, further proving that Defendant had no intention of denying the policy. The plaintiff has failed to present any evidence to the contrary. (Citation omitted)
The bottom line is that when dealing with national flood insurance claims, a policyholder must dot every “i” and cross every “t” or expect that the regulators of the national flood program will try to evade the promise to pay. FEMA and the National Flood Program are the worst government actors if you question any decision they make.
I have been writing publicly about this very issue for over a decade. In a 2009 article, Federal flood evidence of loss on Friday and a flood case that shows how unfair it can be to fight the national flood in courtI noted how difficult it is for policyholders to get out in advance when challenging national flooding:
The options remaining to resolve the dispute are usually litigation or adjudication. The problem with suing National Flood is the unavailability of attorneys’ fees and the usual high costs of federal litigation. The policyholder may win the lawsuit, but have no money after attorneys’ fees and costs because the disputes are usually not that big.
This spring I noted recent reforms and questioned the integrity of those running this national insurance program in the Are some executives running the National Flood Insurance Program corrupt?:
Knowing that National Flood customers were relying on National Flood’s own words to prove that more money was owed, National Flood administrators simply changed the manual to cheat their customers of money that was excessively owed. That is not right.
Congress should conduct an investigation and reform the National Flood Insurance Program. The CEO should “clean house” to get administrators who demand privacy. It is obviously driven in part by those who see to it that policyholders will be put off because of technical requirements and who will change the rules in the middle of the stream to win at all costs.
The claims management of national flood claims is a technical nightmare for policyholders. Insurance claims should be resolved in substance – did a flood damage the property – and not technical and unimportant paper reports. The common law does not provide equitable relief to policyholders, and Congress must do something for the public the program was designed to protect.
I asked a referee if he could give me a technical foul for thinking bad things about him. Of course he didn’t say. I said, well, I think you stink. And he gave me a technical. You can’t trust them.
1 Arocha v. Wright National Flood Ins. Co.No. 22-cv-60469 (SD Fla. Aug. 8, 2022).