As many Gulf Coast residents unfortunately know, standard homeowner’s insurance policies do not include coverage for flooding. In order to assist property owners in Louisiana and other states in protecting themselves against floods from hurricanes, tropical storms, and other severe weather, Congress created the National Flood Insurance Program (NFIP) in 1968. NFIP offers flood insurance to homeowners, renters, and commercial property owners in communities that participate in the NFIP. In order for a community to be eligible to participate, it must agree to adopt and enforce certain building standards that are designed to reduce the risk of flood damage. According to the NFIP, flood damage is reduced by nearly $1 billion each year as a result of the floodplain management standards implemented by these communities. Also, structures that are built to NFIP standards experience approximately 80 percent less damage annually than those not built to the standards. The Federal Emergency Management Agency (FEMA) manages the administrative functions of the NFIP, including the claims process. As one Katrina victim recently learned, homeowners who file claims under the NFIP must closely follow the rules contained in their policies.
Violet Collins, a resident of New Orleans, maintained a flood insurance policy through the NFIP to cover her house and its contents. The structure was insured for $225,000 and the contents for $12,500. When the home sustained flood damage during Hurricane Katrina, Collins contacted FEMA to provide notification of the damage. FEMA sent an adjuster to her house to inspect the damage and arrange for payment from FEMA. Collins later submitted additional documentation for damage that the adjuster had overlooked, and FEMA issued her two more checks. Some time later, Collins filed a suit against the NFIP which alleged that the payments on her flood claims were insufficient. The NFIP filed a motion for summary judgment on the basis that Collins failed to file a proof of loss as required by the insurance policy and was therefore barred from seeking additional money. The district court granted NFIP’s motion, and Collins appealed.
After reaffirming that it must “strictly construe and enforce” the flood policy’s requirements, the Fifth Circuit Court of Appeals asserted that “an insured’s failure to provide a complete, sworn proof of loss statement, as required by the flood insurance policy, relieves the federal insurer’s obligation to pay what otherwise might be a valid claim.” Gowland v. Aetna, 143 F.3d 951, 954 (5th Cir. 1998). The court noted that, ordinarily, the proof must be submitted within 60 days of the loss, but that FEMA extended the window for Hurricane Katrina claims to one year. Nevertheless, Collins never submitted any proof of loss; the court examined Collins’s arguments for why she was not required to file one. Her first argument was that FEMA had waived the requirement altogether, a contention that the court quickly dispensed with by citing well-settled case law on the same question. Second, Collins asserted that the NFIP waived the filing requirement in a letter she received from an insurance adjuster. However, the court concluded this was not possible because “federal regulations provide that no provision of the policy may be altered, varied, or waived without the express written consent of the Federal Insurance Administrator,” which was not given. Finally, Collins argued that because she suffers from a debilitating eye disease, she was excused from observing the filing requirement. In response, the unsympathetic court stated that “Collins, however, fails to explain why Louisiana tort law would apply to her claim for flood insurance proceeds or why, if applicable, this would exempt her from our precedent requiring strict compliance with the … proof-of-loss requirements.” Accordingly, the court affirmed the district court’s dismissal of Collins’s suit.
This case serves as a reminder that, even in the aftermath of such massive natural disasters as Hurricane Katrina, flood victims are still expected to follow the specific requirements of their NFIP insurance policies when seeking payment for flood-related losses. Although it may seem cruel to reject a flood victim’s appeal for a fair pay-out, the courts have put policyholders on notice that they will not entertain requests to alter the terms of the policies. For this reason, victims of any flood should seek the help of a qualified attorney who can help them navigate the steps required to fully collect on their flood insurance policies.