In a timely reminder to insureds as flood season comes upon us, last Tuesday the Fifth Circuit held that an insured’s renewal premium was paid several hours too late and coverage was precluded as a matter of law.  In Worthen v. Fidelity National Property and Casualty Insurance Co., 2012 WL 715248(5th Cir. (Tex.) March 6, 2012), the insured’s flood policy expired at 12:01 a.m. on August 10, 2008 and it was undisputed that all renewal notices and reminders were received.  The policy provided a 30 day grace period to renew without a lapse in coverage.  And on the morning of September 9, 2008, while Hurricane Ike was bearing down on the Texas coast, the insured called his agent to renew the policy and issued payment that same morning around 9:00 a.m.  The residence was damaged by flood waters and the claim was denied based on the assertion that the policy lapsed at 12:01 a.m. September 9, 2008 and a 30 day waiting period applied to preclude coverage for the loss.  This lawsuit followed.

The trial court granted judgment in favor of the insured finding that the premium payment was made on the 30th day after lapse and as a result, coverage was continuous under the policy.  The insurer appealed and the Fifth Circuit examined the issue applying rules of insurance contract interpretation.  The insured argued that the policy’s grace period provision is ambiguous because it does not provide a specific date and time for the renewal premium deadline.  In addressing the issue, the court examined FEMA’s Flood Insurance Manual and based on the examples provided therein, concluded that the policy terms were not ambiguous and the policy lapsed at 12:01 a.m. on September 9, 2008 and no coverage was in force when Hurricane Ike damaged the insured property.  Accordingly, judgment in favor of the insured was reversed.

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