When a home suffers serious damage during a flood, the financial strain of the loss can have a devastating impact on a family’s financial security.  Although insurance coverage can provide the funds to rebuild or repair flood damage, homeowners can make the mistake of presuming their standard homeowners insurance policy covers losses caused by flooding.  However, this specific peril requires property owners to purchase a special flood policy.  This coverage is provided by the National Flood Insurance Program (NFIP) often through private insurers under the Write-Your-Own (WYO) program.  Because flood damage claims under such policies are paid by the U.S. Treasury, policyholders have a special need for legal representation in coverage lawsuits because courts strictly construe these types of policies to mitigate the depletion of public funds.

A recent federal court decision out of Louisiana, Moreland v. Fidelity National Indemnity Insurance Company, deals with an important issue for homeowners who live in high-risk flood zones.  The homeowner filed a claim under a WYO policy after Hurricane Isaac made landfall.  The insurer hired a so-called independent adjuster who concluded that all of the damage to the property was caused by flooding.  The inspector also determined that some of the loss was the result of prior damage from an earlier flood that was never repaired.  The report only included losses caused by the prior flood that appeared to have been fixed prior to the flood at issue in the current claim. 

The carrier issued a check to the insured in the amount of $54,892 for structural damage but included a letter partially denying the claim.  The insurer excluded any damage from the prior flood claim that was not repaired.  When the insured appealed the denial to FEMA, the federal agency upheld the insurer’s decision.  The insurer relied on two separate grounds to justify its denial for damage that had not been addressed after the prior flood.  First, the insurer pointed out that Article VII(K)(2)(e) authorizes an insurance company to request a complete inventory of damaged or lost property, including evidence demonstrating prior flood damage has been repaired.  Second, the carrier contended FEMA’s Adjuster Claims Manual mandates that an adjuster not include prior unrepaired damage in the adjustment process.

The appellate court rejected both of these arguments along with the underlying assumption that the SFIP excludes coverage for damage caused by a prior flood when payment was made but the repairs not performed.  The court dispelled the argument involving Article VII(K)(2)(e) by reasoning that a provision empowering the insurer to obtain information about prior repairs does not mean that the insured is required to perform such work to obtain coverage for a subsequent loss.  With regard to the FEMA manual, the court indicated that the provision applies only to procedures for the adjuster not the scope of coverage.

The analysis used by the court also considered the general structure of exclusions under the SFIP.  The structure of the SFIP includes specific exclusions under Articles IV and V including fences, forgone profits, cash, and land.  Because the drafters of the program language chose to expressly articulate these exclusions, the court indicated it was reasonable to assume any failure to list unrepaired prior damage was intentional.  In sum, the court ruled that the FHIP did not exclude unrepaired flood damage from a prior claim even if insurance proceeds were paid for such repairs.

You can reach Miami Insurance Claims Lawyer J.P. Gonzalez-Sirgo by dialing his direct number at (786) 272-5841, calling the main office at (305) 461-1095, or Toll Free at 1 (866) 71-CLAIM or email Attorney Gonzalez-Sirgo directly at [email protected].

J.P. Gonzalez-Sirgo
J.P. Gonzalez-Sirgo, P.A.
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