The National Flood Insurance Program is fraught with difficulties regarding the collection of amounts when there is a disagreement. One important lesson is that a partial denial, even an innocuous one made before a formal proof of loss, may trigger the start of the one-year statute of limitations to file a lawsuit.

The federal flood insurer made this argument when sending an amount it determined was owed only 55 days after the flood loss:

Plaintiff’s suit against American Bankers is untimely. American Bankers first issued the partial denial of Plaintiff’s claim on October 23, 2021. The October 23, 2021 letter advised Plaintiff that American Bankers was denying coverage for prior unrepaired damages, debris and sand in the yard, and items located below the first elevated floor. See Exhibit 1. Additionally, the letter further explained that if Plaintiff wished ‘to take further action concerning this denial, the Policyholder Rights document attached to this letter explains your options…’ See Exhibit 1. Specifically, Plaintiffs were advised they could file suit in the Federal District Court where the damage occurred within one (1) year of when ‘your insurer first denied all or part of your claim (42 U.S.C. § 4072; 44 C.F.R. § 62.22).’ After receiving Plaintiff’s supplemental proof of loss dated July 26, 2022, American Bankers issued another letter dated September 26, 2022, rejecting Plaintiff’s proof of loss and reiterating the basis for its partial denial, specifically referring to its October 23, 2021 letter. Plaintiff’s filing of this lawsuit on September 25, 2023 occurred more than one (1) year after American Bankers first denied part of Plaintiff’s claim on October 23, 2021. Consequently, Plaintiff’s claims are time barred and subject to dismissal.

The federal judge agreed, finding:

The Court first considers the October 23, 2021 letter. The letter instructed Plaintiff: ‘[I]f you wish to take further action concerning this denial, the Policyholder Rights document attached to this letter explains your options, several of which require prompt action.’ The letter specifically ‘denied a portion of [Plaintiff’s] claim based upon the appliable provisions of the Standard Flood Insurance Policy (SFIP).’ Courts, including the Fifth Circuit, have repeatedly held that letters with similar language constitute ‘notice[s] of disallowance’ that begin the one-year prescriptive period under the National Flood Insurance Act. Accordingly, the October 23, 2021 letter clearly constitutes a ‘written denial’ or ‘notice of partial disallowance’ that began the one-year prescriptive period. 1

The bottom line is that federal flood claims are very difficult. The laws favor the flood insurance carrier and are strictly construed so that many claims are lost on very technical details.

Thought For The Day

Details create success.
—Zig Ziglar

1 Hebert v. American Bankers Ins. Co. of Fla., No. 23-5514, 2024 WL 3226109 (E.D. La. June 28, 2024).