Charles Mathis – Property Insurance Coverage Law Blog – September 25, 2014
On September 15, 2014, United States District Judge, Faith S. Hochberg issued an Order in Kroll v. Johnson, which held the statute of limitations on Superstorm Sandy flood claims is one year from the date the insurance company denies the policyholder’s proof of loss.1
As is the story with thousands of residents on the East Coast, the plaintiffs, Lawrence and Diana Kroll suffered a flood loss to their home during Superstorm Sandy on October 29, 2012. The Krolls, who had a Standard Flood Insurance Policy (“SFIP”) issued by the National Flood Insurance Program (“NFIP”), “allege that they promptly reported the damage, subsequently submitted a sworn ‘proof of loss’ statement, and that defendant denied full coverage.” After their claim was denied, they filed suit against the defendant. Shortly thereafter, the defendant moved to dismiss plaintiff’s lawsuit, “alleging that a one-year statute of limitations bars Plaintiffs’ claims.”
After the plaintiffs initially reported their claim to the defendant, an adjuster from the Federal Emergency Management Agency (“FEMA”) inspected the property:
[F]ollowing the adjuster’s inspection, Plaintiffs were told that their property was a seasonal residence because they did not live there at least 80% of the year. As a result, Plaintiffs were eligible for the actual cash value, rather than the higher replacement cost value of the repairs to their property. Plaintiffs disputed this conclusion via latter, and in response FEMA issued a denial letter on January 14, 2013.
In filing their motion to dismiss, the defendant relied on the January 14, 2013 denial letter as the date starting the one-year limitations period, stating that the plaintiffs’ lawsuit, filed fifteen months later, was time barred.
In opposition to Defendant’s motion, Plaintiffs also include an April 19, 2013 letter from FEMA to Plaintiffs, acknowledging receipt of Plaintiffs’ proof of loss and partially denying Plaintiffs’ asserted losses.
The statute which governs all plaintiffs’ claims under the NFIP is 42 U.S.C. § 4072; the pertinent section of the statute states:
[T]he Administrator shall be authorized to adjust and make payment of any claims for proved and approved losses covered by flood insurance, and upon the disallowance by the Administrator of any such claim, or upon the refusal of the claimant to accept the amount allowed upon any such claim, the claimant, within one year after the date of mailing of notice of disallowance or partial disallowance by the Administrator, may institute an action against the Administrator on such claim in the United States district court for the district in which the insured property or the major part thereof shall have been situated, and original exclusive jurisdiction is hereby conferred upon such court to hear and determine such action without regard to the amount in the controversy.2
The defendant argued that the January 14, 2013 letter “constituted a ‘notice of disallowance or partial disallowance.’” Countering that argument, plaintiffs’ argued that the statute of limitations would not run until one year after April 19, 2013, when their proof of loss was denied.
Plaintiffs contend that the statute ties the limitations period to a mailing on ‘such claims’ and that ‘such claims’ refers back to the statute’s authorization of the FEMA Administrator to make payments on ‘claims for proved and approved losses.’ In order to receive payment on claims, policyholders under the NFIP are required to submit a proof of loss. Claims are not for ‘proved … losses’ until they are supported by the required proof of loss. Thus, only a notice of disallowance for a claim supported by proof of loss triggers the statute of limitations.3
Ultimately, the court sided with the plaintiffs while relying on a persuasive case out of the Eastern District of Louisiana, Qader v. FEMA.4 The Kroll court stated that normally a proof of loss must be submitted within 60 days of a loss, but noted the FEMA had extended the deadline of Superstorm Sandy claims for two years. The court referenced the plaintiffs’ arguments and stated, “the proof-of-loss extension creates a two-step appeals process available to policyholders whose initial claim is denied based solely on an adjustor’s report: first, by filing a proof of loss; second, by filing federal suit.” Citing Qader, the court also stated that defendant’s arguments and, “reading of § 4072 would render the proof-of-loss extension meaningless.”
This decision is fantastic news for policyholders still fighting with their Write Your Own (“WYO”) insurance carriers over Superstorm Sandy flood damage. At least at my office, this is cause for celebration.
As always, I’ll leave you with a (mildly) related tune, here’s Rare Earth with I Just Want to Celebrate:
1 Kroll v. Johnson, No. 14-2496, 2014 WL 4626009 (D.N.J. September 15, 2014).
2 Id. at 4. (emphasis added). See also 42 U.S.C. § 4072.
3 Id. at 4. (Internal citations omitted).
4 Qader v. FEMA, 543 F.Supp.2d 558 (E.D.La.2008).