The federal government provides flood insurance protection principally through private insurance companies. These flood policies require that the insured file a sworn proof of loss within 60 days from the date of the damage. In the circumstances of Katrina, there has been a great desire to assist policyholders in obtaining their coverage benefits. FEMA apparently has responded by relaxing the period within which to file a claim and, if necessary, to bring suit.
In the past, court have strictly enforced the 60-day deadline within which to file a proof of loss — i.e., a failure to comply has resulted in a total forfeiture of coverage. Flood victims always are sympathetic plaintiffs, but the courts have not always been responsive. For example, the Eleventh Circuit, in a decision issued three months before Katrina, held that a policyholder forfeited coverage by not submitting the proof of loss within 60 days, even though the insurance adjuster first came to the policyholder’s property 90 days after the loss. Lucien v. US Security Ins. Co. (11th Cir. June 8, 2005).
On September 21, 2005, FEMA promulgated guidelines for the adjustment of Katrina-related losses. Moroever, FEMA has authorized payment of claims based on an adjuster’s report alone, rather than requiring a separate proof-of-loss submission. If the policyholder does not agree with the adjuster’s analysis of the covered loss, the policyholder then must file a proof of loss and that proof of loss must be submitted within twelve months of the date of loss. (Note that the twelve-month period is from the loss date not the date of the adjuster’s report.) If the insurer then denies the policyholder’s claim based on the proof of loss, the policyholder is required to file its lawsuit within twelve months of the date of claim denial.
This revised process applies to all flood-events between August 23, 2005 and December 31, 2005.
Individuals and businesses that suffered loss from Katrina should not wait until the adjuster comes knocking to put a marker down, that is, even if one is not be in a position to submit the full proof of loss, it is still advisable to submit a partial proof of loss, noting that the entire amount of the loss is not yet determined. Personally, I would not be comfortable in allowing the 60-day period to elapse if I knew I had flood coverage and the adjuster had not yet arrived (as the Lucien case shows). FEMA has a guide to submitting claims, and the insurers have set up a website that seeks to provide comprehensive contact information for flood insurers.
One must be careful that in submitting a claim for flood that one is not undermining a claim under a property or homeowners policy. Accordingly, it is advisable in submitting the proof of loss to the flood program to temporize by stating that “[Policyholder] submits this proof of loss to comply with the requirements of its flood-insurance policy, although it is uncertain at this time the extent to which the items claimed were caused by flood or caused by another hazard covered by other insurance policies.”
For the moment, protective claims should be submitted to any possibly available insurance, flood, property, or homeowners.
Actually, on this score, it appears the feds have already loosened the chains and allowed claims to proceed without formal proof of loss, at least in cases that appear to be total losses.
http://www.fema.gov/news/newsrelease.fema?id=19018
[MM Note: This was posted before I reported per the updated entry that the proof of loss period had been extended.]
FEMA has relaxed the requirement of submitting a proof of loss (only) where the adjuster agrees that there is a total loss and the policyholder agrees with the valuation (noting that we’re within the 60 day period right now).
FEMA’s notice is misleading in that it does not otherwise extend the period for filing a proof of loss for others. I agree that it seems that FEMA has dispensed with the need for proofs of loss generally under the wording of its release, but the context makes it reasonably clear to me that that’s not what is meant. Accordingly, my feeling is that until FEMA says, everybody has an extra 60 days to file a proof of loss or says that, if you give notice of a claim, you don’t need to file a proof of loss, prudence counsels treating the 60 day proof-of-loss deadline as still being a real one.
Outside of the flood-insurance context, courts also have strictly enforced proof-of-loss provisions, Chong v. American Fam. Ins. Co., (Ohio Ct. App. Sept. 23, 2005), available at http://www.sconet.state.oh.us/rod/newpdf/6/2005/2005-ohio-5022.pdf.
New Law.com blog: Insurance Scrawl
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AIG has now been sued by a consumer group because (according to the suit) it has not facilitated the submission of claims by its policyholders. For information about this suit, see http://www.insurance-reform.org/pr/Karinaclassactionrelease.pdf
Does it matter what the “feds” are allowing? Or does it matter what the contract says and what the precedent in the courts is? Meaning, can relaxed standards lead to policyholders not filing then later being held accountable?
The question is asked whether policyholders might be whipsawed in some fashion by some claims being denied by the claimshandlers and then later court opinions (for somebody else) saying that coverage should be afforded in identical circumstances.
Generally, the policyholder does not automatically get the benefit of more favorable legal developments, unless he, she, or it files suit within the statute-of-limitations period. So, if the claim is denied, a new case is decided, and suit brought within the limitations period, then the court will rule the same way. In those circumstances, the policyholder may get interest on the amount that should have been paid earlier, and it is possible the policyholder may be able to pursue a claim for bad faith (that the law previously was unclear is not an absolute defense for insurance companies).
On the other hand, if suit is brought after the statute of limitations expires, then the claim usually is extinguished, unless there is a legislative change in the rules in terms of substance or statute of limitations. (There has been various litigation on this type of question in California dealing with the Northridge earthquake.)
FEMA has commented on the difference between “flood” and other perils, including wind-driven rain. See http://www.fema.gov/news/newsrelease.fema?id=19938
http://www.iiaba.net/VU/NonMember/LawsuitImplications.htm is another, pro-insurer review of the legal issues involved in these claims.
Policyholders should note also that requirements that govern the National Flood Insurance Program may not apply directly to them (as opposed to insurers participating in the Write-Your-Own (WYO) program), including submission of a proof of loss. See Pecarovich v. Allstate Ins. Co., http://www.ca9.uscourts.gov/coa/memdispo.nsf/pdfview/060605/$File/03-56420.PDF (9th Cir. 2005). Even if there are valid and substantial arguments on these points for policyholders, the better part of valor is to avoid the question altogether by preparing proofs of loss and related documentation. See generally 44 CFR 62.23(i)(1).
For updated information on appealing claims determinations, see http://www.fema.gov/news/newsrelease.fema?id=21941
Perfect post. Thnx