When a National Flood Insurance Program (“NFIP”) insured is not satisfied with the payment for flood-related losses, the NFIP insured is directed to three options:1

  1. The NFIP insured may file an appeal with the Federal Emergency Management Agency (“FEMA”) within 60 days of the NFIP insurer’s written denial or partial denial of the requested claim amount.2
  2. The NFIP insured can invoke the Appraisal Provision of her policy. NOTE: The NFIP insured may not file option one above, the appeal with FEMA, if the Appraisal Provision is invoked.
  3. The NFIP insured may file a lawsuit within one year of the date of the written denial of all or part of the NFIP insured’s claim. NOTE: The filing of a lawsuit precludes option one, the appeal, and option two, the appraisal process, as those are considered pre-litigation administrative remedies.

Options one and two are not forks in the road for NFIP insureds. They are both long, costly routes that often lead right back to litigation road, option three, which clearly and quickly cuts across either pre-litigation entrance when a dispute arises regarding the proper adjustment of the NFIP insured’s claim. Another important route consideration is that the one-year statute of limitation for filing a lawsuit against the NFIP insurer does not toll and any time lost in failed or less than satisfactory outcomes through these pre-litigation options often put the NFIP insured in a very tight spot when faced with preserving the right to sue.

In my experience, from Hurricanes Katrina, Ike, Sandy, Harvey, the Louisiana August 2016 Flood, and the many other storms and flooding events in the last two years, though supplemental payments are recoverable through the appeal process for some claims, most flood claim denial letters include full or partial denial of the claims due to the exclusionary language of the flood policy or a determination of no coverage under the flood policy. These denials are based on legal conclusions of contract interpretation, which typically are not resolved through appraisal and should be properly argued on appeal by a licensed attorney.

Further, it is expected and common that many NFIP insureds do not have the resources after a catastrophe to stand up against the NFIP insurers and adjusters paid from the same tax funded program the insureds’ claim is to be paid. Though the NFIP is set up to pay NFIP insurers and adjusters from the program, there is no program guarantee that the NFIP insured will recover any costs associated with pursuing rightful payment of due and owing flood policy proceeds and benefits.

For those NFIP insureds recently affected by Hurricanes Florence and Michael, the written denial letters and inadequate payments are currently being issued and many are facing the “what now?” One important factor is—time matters. For those in North Carolina, South Carolina, and Virginia affected by Hurricane Florence, though FEMA has extended the flood policy’s 60-day proof of loss3 deadline to 365 days from the date of loss,4 which ranges from September 14 – 17, 2018, the statute of limitation to file a lawsuit is one year from the date of the written denial of all or part of the NFIP insured’s claim, which will vary for NFIP insureds. And for those in Florida, Georgia, South Carolina, North Carolina, and Virginia affected by Hurricane Michael, though FEMA also has extended the flood policy’s 60-day proof of loss deadline to 365 days from the date of loss,5 which ranges from October 10 – 11, 2018, the statute of limitation to file a lawsuit remains one year from the date of the written denial of all or part of the NFIP insured’s claim, which again will vary for NFIP insureds. In determining which option is best for pursuing your flood claim, it is important to keep these deadlines in mind.

Prompt recovery is why we pay for insurance. Many of my commercial clients need prompt resolutions to their NFIP flood claims as many of their NFIP policies provide the primary layer of their flood coverage and their losses often quickly exceed that layer triggering their excess policies.

Also, many homeowners sustaining damage by both flood and wind face extensive delays when both insurers deny coverage by attempting to shift liability to the other. These are common legal issues that do not benefit from the additional time and expense expended in taking the loop. There are many factors for NFIP insureds to consider when determining which option works best for their claim and each claim has its own unique set of facts. Wise counsel may very well prevent an unnecessary and costly detour through the horseshoe.

It isn’t the mountain ahead that wears you out; it’s the grain of sand in your shoe.
—Robert W. Service
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1 See, NFIP Claims Handbook, October 2017, 10/17 FEMA F-687, pp 9-11.
2 “Requested claim amount,” See, NFIP Claims Handbook, October 2017, 10/17 FEMA F-687, pp 6-7. 2.3.1 Supporting Your Claim Requires a Proof of Loss You must support your flood claim with a Proof of Loss detailing the information required by your flood insurance policy. You must submit a completed and signed Proof of Loss with all supporting documentation to your insurance company within 60 days of the loss. The Proof of Loss includes a detailed estimate of the cost to replace or repair the damaged property. In most cases, the adjuster provides you with a suggested Proof of Loss. It is your responsibility to make sure your Proof of Loss is complete, accurate, and filed in a timely manner to meet the requirements of your policy.
3 See, NFIP Claims Handbook, October 2017, 10/17 FEMA F-687, pp 6-7. 2.3.1 Supporting Your Claim Requires a Proof of Loss.
4 See, FEMA Bulletin W-18018, September 18, 2018.
5 See, FEMA Bulletin W-18026, October 16, 2018.