Federal Flood Claim—File a Timely Proof of Loss Even If Claim Denied

A recent case1 shows that every technical step regarding proof of loss requirements in the flood claims process has to be followed, even if the steps are meaningless. Federal law regarding flood claims is draconian. It is the worst law against policyholders. Attempts at legal reform of the claims processes have fallen on deaf ears. It is a “heads I win, tails you lose” situation if a flood policyholder challenges any claims decision.

Here are the facts of the case:

On September 14, 2021, Plaintiff’s property allegedly sustained 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 retained by Defendant inspected the property. The adjuster determined that general condition of flooding did not exist at the property on September 14, 2021. On November 10, 2021, Defendant issued a letter denying Plaintiff’s flood claim. Plaintiff never provided a signed and sworn proof of loss before the expiration of the 60-day proof of loss deadline of November 13, 2021.

Despite the denial, the national flood carrier filed a motion for summary judgment, arguing that the policyholder failed to file a proof of loss within the 60-day time limit. The common law for the vast majority of jurisdictions does not make a policyholder file anything after a complete denial of the claim—the law does not require people to do a needless act. But federal law overseeing national flood claims is different. The judge ruled for the insurer, finding:

Under the SFIP, an insured may not file suit for coverage unless it has complied with all requirements of the policy, including the requirement to submit a sworn proof of loss….In adjudicating flood insurance claims, the Eleventh Circuit has held that strict adherence to 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 drawn from the federal treasury.

. . .

Here, Plaintiff does not dispute that Plaintiff has failed to provide a timely sworn proof of loss. Instead, Plaintiff argues that Defendant repudiated the contract when it denied Plaintiff’s loss on November 10, 2021, three days before the deadline for Plaintiff to submit a sworn proof of loss. Thus, Plaintiff argues, Defendant’s alleged repudiation relieves Plaintiff of the requirement to submit a proof of loss statement or, at the very least, creates an issue of material fact precluding summary judgment. The Court disagrees.

… Defendant’s denial letter stated it determined that there was no general condition of flood on the property and invited Plaintiff to submit additional information that might support Plaintiff’s claim, further evincing that Defendant did not intend to repudiate the policy. Plaintiff has failed to put forth any evidence to the contrary. (Citations omitted)

The bottom line is that when dealing with national flood insurance claims, a policyholder has to dot every “i” and cross every “t” or expect that the regulators of the national flood program will try to escape the promise to pay. FEMA and the National Flood Program are the worst governmental actors if you challenge any decision they make.

I have publicly written about this very issue for over a decade. In a 2009 article, Federal Flood Proofs of Loss Due on Friday and a Flood Case Showing How Unfair it Can Be to Fight National Flood in Court, I noted how difficult it is for policyholders to come out ahead when challenging national flood:

The alternatives left to resolve the dispute are usually litigation or appraisal. The problem with litigating against National Flood is the unavailability of attorney’s fees and the usual high expense of federal litigation. The policyholder can win the lawsuit, but have no money after attorney’s fees and costs because the disputes are not usually that large.

This spring, I noted recent efforts at reform and questioned the integrity of those running this national insurance program in Are Some Managers Running the National Flood Insurance Program Corrupt?:

Knowing that National Flood customers were relying upon National Flood’s own words to prove more monies were owed, National Flood administrators simply changed the manual to cheat its customers out of monies overwise owed. That is not right.

Congress should conduct an investigation and reform the National Flood Insurance Program. The Executive should ‘clean house’ to get administrators who will demand integrity. It is obviously being run in part by those who look to shortchange policyholders by technical requirements and who will change the rules mid-stream to win at all costs.

The claims administration of national flood claims is a technical nightmare for policyholders. Insurance claims should be resolved on the merits—did a flood damage the property—and not technical and inconsequential paper filings. The common law is not providing equitable relief for policyholders, and Congress needs to do something for the public that the program was designed to protect.