Flood Insurance Bad-Faith-Handling Claims Denied in Appellate Court
Nielsen & Treas, LLC is an insurance defense firm in Metairie, Louisiana that successfully represented Allstate Insurance Company in a flooding and foundation damage case from Hurricane Irene in 2011. The Woodsons filed an insurance claim with Allstate under the National Flood Insurance Program for damage to their North Carolina home. Allstate denied part of the claim related to foundation damage, and the Federal Emergency Management Agency agreed. The Woodsons improperly filed suit in state court over a year later, but the flood insurance policy required suit be filed in federal court within one year. On appeal, the court found the one-year statute of limitations had not been met and that the National Flood Insurance Act preempted the bad-faith claim under state law,
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Flood Insurance Bad-Faith-Handling Claims Denied in Appellate Court
- 1. Nielsen & Treas LLC
- 2. Nielsen & Treas, LLC, is an established insurance defense firm in Metairie, Louisiana. In Woodson v. Allstate Insurance Company, 855 F.3d 628 (4th Cir. 2017), Nielsen & Treas, LLC, successfully represented the appellant in a case on flooding and foundation damage from 2011’s Hurricane Irene to a house in Albemarle Sound, North Carolina.
- 3. After the storm, the Woodsons filed a claim on a flood insurance policy that had been issued by Allstate Insurance Company under the federal aegis of the National Flood Insurance Program (NFIP). With engineers hired by both parties to inspect the damaged property and provide “proof of loss” documentation, Allstate issued a denial of a major part of the Woodsons' claim with regard to the foundation in February 2012. The Federal Emergency Management Agency (FEMA) agreed with Allstate and affirmed the decision.
- 4. A year later, the Woodsons improperly filed suit in state court, alleging that Allstate had breached its insurance contract and failed to act in good faith in claims handling. The NFIP Standard Flood Insurance Policy (SFIP) that was issued to the plaintiffs mandates that a policyholder must file suit in the U.S. District Court where the property is located within one year of a denial or partial denial of the claim.
- 5. Allstate claimed that the applicable statute of limitations barred the Woodsons’ case. The district court failed to address this limitations issue when it awarded the Woodsons approximately $233,000 on the breach of contract claim. This award was trebled to more than $700,000 because of the alleged bad-faith-handling claim, with nearly $64,000 more added for attorney fees. However, appellate courts from across the country have held that state-law based extra-contractual and bad faith claims are barred and preempted under federal. This is further buttressed by the fact that flood insurance carriers such as Allstate issuing NFIP flood policies have absolutely no financial incentive to not pay every dollar owed under a flood damage claim as flood carries are paid a commission by FEMA for every dollar paid on a flood claim.
- 6. On appeal, the court found that NFIP has a one-year statute of limitation on filed claims that was not met by the appellees. In addition, the National Flood Insurance Act of 1968 preempted the bad-faith-handling claim, which was argued on a matter of state law. With these factors and others under consideration, the district court judgments were reversed.