Superstorm Sandy Flood Statute of Limitation Trap

Superstorm Sandy has raised many coverage issues regarding flood insurance. A big looming trap for the unwary is the National Flood Insurance one year statute of limitations. The statute of limitations was not affected by the extension of the flood proofs of loss to eighteen months. Accordingly, a "limitations trap" will probably catch a number of people who think they have no deadlines to worry about until next April.

Responding to a letter regarding this issue last week, National Flood Insurance claims guru, Russ Tinsley, warned of the trap:

If a Standard Flood Insurance Policy (SFIP) policyholder sends a Proof of Loss to their flood carrier and that Proof of Loss is rejected by the carrier or the claim is denied in whole or in part, the policyholder should refer to the SFIP GENERAL CONDITIONS, paragraph M. Loss Payment, subparagraph 2., (which is in Section VII of the Dwelling form and General Property form, and Section VIIII of the RCBAP), which reads:

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.

Your question refers to “the Statute of Limitation requirement for lawsuits”. The relevant language of the SFIP is found at GENERAL CONDITIONS, paragraph R., Suit Against Us (which is in Section VII of the Dwelling form and General Property form, and Section VIIII of the RCBAP), and 42 U.S.C. § 4072. The insured has one year from the date of denial of all or any part of their claim to initiate a lawsuit seeking additional amounts under their SFIP in the United States District Court which encompasses the location of the insured property and damaged on the date of loss. While any amounts claimed and at issue in a lawsuit must be supported by a timely and complete Proof of Loss meeting the requirements of General Condition (J) of all forms of the SFIP, the extension of the deadline to submit a Proof of Loss does not alter the one-year deadline from a denial for initiating a lawsuit, as the one year time limit was established by Congress, not FEMA. (emphasis added)

So, figure out when the first denial occurred. You have to file a lawsuit within one year of that date.

Do not get caught in the flood statute of limitations trap! It will happen to many long before April 28, 2014.