How Flood Insurance Differs From Homeowners Or Business Loss

Employment / Personal Injury / Business

In my last blog (“Is Your Insurance Company Giving You Grief, Not Relief?” 12/14/12), I discussed some ways to handle a homeowners or business loss claim.  In particular, state law may give the home or business owner the ability to sue an insurance company for a “bad faith” refusal to pay the claim.  Unfortunately, your options with regard to a flood insurance claim are limited.

Unlike home owners or business loss insurance, flood insurance is underwritten by the federal government and governed by federal law.  Even though a policy may be written by a private insurance company, it is still subject to all the requirements of the National Flood Insurance Act of 1968 (NFIA).  A private “Write-Your-Own” (WYO) insurer is deemed a fiscal agent of the United States and may not issue a policy which deviates from the standard policy approved by the NFIA.  Therefore, flood insurance policyholders may not sue WYO insurance companies under state “bad faith” laws.  Lawsuits are permitted only for the disputed amounts under NFIA guidelines.

Once again, the policy holder must “strictly comply” with the timeframes for submission of a proof of loss.  While the deadline is normally sixty (60) days, FEMA often extends it for widespread disasters like Hurricane Sandy.  The insurance company adjuster may offer to submit a proof of loss on the policy holder’s behalf.  However, the policy holder does not have to accept the adjuster’s proof of loss and may submit a separate proof of loss with adequate support.

When submitting the proof of loss, the policy holder must sign and submit a completed FEMA “Proof of Loss” form 086-0-9 specifying a precise loss figure or “sum certain.”  Click here to download a copy of a Proof of Loss. Sending contractor or public adjuster estimates without the form is as bad as submitting nothing at all.  Without the form, the claim cannot be paid and any further challenge will be moot.  Contractor or public adjuster estimates should accompany the proof of loss to support the amount of damages claimed.  The policy holder should submit the proof of loss by fax, delivery service or other form of delivery providing a written confirmation of receipt. 

If the WYO insurance company denies all or part of a claim after review of the proof of loss, the policy holder may appeal the denial in writing to FEMA within sixty (60) days.  A letter will do.  Be sure to send the proof of loss by Fedex or certified mail to confirm delivery.  However, if FEMA affirms the denial or fails to act, a policy holder must file a lawsuit against the WYO insurer in federal court within one year of the insurance company’s denial.  Some flood insurance policies are written by FEMA itself, but the same procedures will apply. 

Careful review of one’s insurance policy and prompt response to insurance company inaction is necessary to protect your rights.  Our Yardley, PA office will be happy to answer your questions regarding your homeowners or flood insurance coverage.  Call (215) 493-8287 or email [email protected].

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