National Flood Lessons: Strict Enforcement of Deadlines Dooms Policyholder’s Flood Claim—A Reopened Claim Does Not Stop the Ticking Time Bomb

Policyholders and public adjusters need to be aware that National Flood Insurance claims are very technical with demanding deadlines that must be met.  While speaking in a webinar last night, I kept repeating the mantra—file the proof of loss exactly right, delivering it on time to the insurer and with all documentation on a filled out NFIP form. Filing a lawsuit on time if there is a dispute was also discussed because even that can be tricky. For example, a written letter indicating the claim is reopened does not mean that a prior written partial denial is to be ignored when determining the one-year limitation to file a federal lawsuit.

A recent Fifth Circuit Court of Appeals decision highlights the critical importance of strictly adhering to these deadlines when dealing with flood insurance claims under the National Flood Insurance Program (NFIP). In Mt. Pleasant Properties, LLC v. Wright National Flood Insurance Company, both the district court and appeals court enforced a one-year statute of limitations to bar the policyholder’s lawsuit despite allegations of confusing communications from the insurer.

Mt. Pleasant Properties held a Standard Flood Insurance Policy (SFIP) with Wright National when Hurricane Zeta struck Mississippi in October 2020. After Mt. Pleasant submitted a claim for flood damage, Wright sent three key letters. In a January 11, 2021 letter, Wright stated that it had not received a proof of loss and gave Mt. Pleasant 10 days to respond. On February 15, 2021, Wright acknowledged receipt of the proof of loss but said it could not be accepted as submitted. On February 23, 2021, it sent a letter citing lack of a properly executed proof of loss. The February 23 denial letter informed Mt. Pleasant that it had one year to file suit. Subsequently, Wright re-opened the claim and settlement discussions ensued. When those discussions broke down, Mt. Pleasant filed its lawsuit on April 4, 2023, two years after the denial of claims letter.

The federal district court granted Wright’s motion to dismiss the lawsuit, finding that the February 23, 2021, letter clearly triggered the one-year statute of limitations under 42 U.S.C. § 4072.¹ The court also ruled that any extracontractual claims were preempted by federal law governing the NFIP. The court rejected Mt. Pleasant’s arguments that Wright’s communications and subsequent discussions were confusing since the claim was reopened, emphasizing that SFIP terms must be “strictly construed and enforced” even if harsh results follow.

The Fifth Circuit affirmed the dismissal, finding no error in the district court’s analysis.² The key points of this ruling were the same as those of the district court. The appeals court reiterated that every SFIP lawsuit must be filed within the one-year limitations period from the date of a partial denial. Subsequent discussions or actions do not change the date or effect of that initial partial or complete denial.

Lessons for Policyholders and Public Adjusters:

1. Adhere strictly to deadlines: The one-year statute of limitations for SFIP lawsuits is rigidly enforced. Do not delay filing suit if a claim is denied.
2. Document all communications: Keep meticulous records of all correspondence with your flood insurer.
3. Respond promptly: Even if communications seem confusing, always respond quickly to insurer requests for information or documentation.
4. Seek competent legal counsel early: Given the complexity of NFIP rules, consult an experienced flood insurance attorney as soon as issues arise with a claim.
5. No extracontractual claims: Courts generally view extracontractual claims as preempted in NFIP cases. Focus on policy-based arguments for payment.
6. Don’t rely on equitable arguments: Courts are unlikely to bend NFIP rules based on fairness concerns. Strict compliance is key.

This recent Mt. Pleasant case serves as a stark reminder that flood insurance under the NFIP operates under unique rules. Policyholders and public adjusters working for policyholders must be vigilant in protecting their rights and following all procedural requirements to the letter.

For example, I corrected our instructions in the webinar, where it said to “send” the proof of loss on time. The rule is that the proof of loss must be “received” on time by the insurer, not the field adjuster or even the independent adjusting firm. I gave a tip that I use overnight delivery without the need for a signature but with proof of delivery from either Federal Express, UPS, or the post office.

Our firm will hold future National Flood webinars for public adjusters working on these very technical claims. Please use this blog to research how to properly complete and deliver a federal flood proof of loss if you missed the webinar.

In the meantime, I would ask all to read Modernizing the National Flood Insurance Program: A Call for Higher Coverage Limits and take some action by following the directions in the blog and asking your congressional representative for higher coverage limits. If enough of us do this and make others aware of the issue, maybe people with the most catastrophic flood claims will finally be able to rebuild their homes and businesses when the next flood disaster strikes.

Thought For The Day  

The difference between a successful space mission and a disaster often comes down to a decimal point. That’s why precision isn’t just important, it’s everything.
—Gene Kranz, NASA flight director

¹ Mt. Pleasant Properties v. Wright National Flood Ins. Co., No. 1:23-cv-88, 2024 WL 1616369 (S.D. Miss. Mar. 21, 2024).
² Mt. Pleasant Properties v. Wright National Flood Ins. Co., No. 24-60170, 2024 WL 4502109 (5th Cir. Oct. 16, 2024).