In this recent case involving flood-insurance payments for damage from a Houston storm, a federal district judge in Houston examined the statute of limitations under a FEMA administered flood-insurance policy.  In Ali Ekhlassi v. National Lloyds Insurance Co. & Auto Club Indemnity Co., No. CV H-17-1257, 2018 WL 341887 (S.D. Tex. Jan. 9, 2018), a lawsuit was filed in January 2017 for insurance payments for a storm that occurred in May 2015.

In May 2015, just after the flood, the insured reported his losses to National Lloyds. A few days later, National Lloyds sent an adjuster to inspect the property. The adjuster estimated losses for “flood loss clean-up and other covered damages,” but found that all other damages were excluded under the policy.  On October 6, 2015, National Lloyds sent the insured a letter stating that he had not yet submitted a proof of loss form for his claim and that it could not process his claim payment until it received his proof of loss. The letter informed the insured that he had 240 days from the date of loss to provide the signed and sworn proof of loss and that National Lloyds was denying payment for “any building and contents items not subject to direct physical loss by or from flood” and “all non-covered items located below the lowest elevated floor of your post-FIRM elevated building.”  The insured provided the sworn proof of loss to National Lloyds in December, 2015.  On January 11, 2016, National Lloyds sent the insured a second letter rejecting the proof of loss, confirming that it would pay only the previously determined amount, and referring the insured to the October 6, 2015 denial letter. One year later, on January 11, 2017, the insured sued National Lloyds and Auto Club alleging breach of contract, violations of Chapters 541 and 542 of the Texas Insurance Code, and violations of the Deceptive Trade Practices Act.

National Lloyds moved for summary judgment asserting the lawsuit had not been timely filed.  The Court began by noting that “FEMA requires strict adherence to all conditions precedent” and that a claimant is required to file suit within one year of receiving a notice of denial.   The insured argued that the October letter had not been a notice of denial.  The Court disagreed and stated plainly that the October letter “made it clear” that is was a denial. Having failed to file suit within one year of the denial notice, the Court granted summary judgment as to all claims.

[Editor’s Note: This case highlights the unique nature of claims under flood-insurance policies and the willingness of Texas courts to strictly enforce them.]

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