Last week I argued a case before the 9^th Circuit Court of Appeals. My client owns a hotel on the Oregon Coast. Several years ago, a hundred year storm flooded the lowest floor of the hotel. My client participated in the National Flood Insurance Program, which is a FEMA backed flood insurance program. The majority of the claim was denied because the bottom floor of the hotel was deemed to be a “basement.” The insurance company also argued that the proof of loss, which was submitted by the insurance company’s agent, was not timely. The District Court agreed with the insurance company and held that despite the insurance company’s appointed agent taking control of the process, essentially my client should have ignored the insurance company’s instructions.

The moral of the story is that if you experience a flood loss and part of the insurance covering the property is part of the National Flood Insurance Program, you shouldn’t believe anything the insurance company tells you. You have an independent obligation to submit the claim irrespective of whether you are told otherwise. The timelines on submitting a claim are tight. The time to submit the claim, including the entirety of your loss, may likely be due before you are able to determine the total repair costs. Because the funds to pay the claim will likely come from the US Treasury, most courts don’t apply the rules that typically benefit the consumer/insured in a standard insurance claim.

Many of you reading this don’t live in a “high risk flood zone.” While that is true, it is important to note that 20% of flood claims come from outside of high risk zones. FEMA also notes that just one inch of water can cause $25,000 in damage to your home. Consult your broker or agent to discuss whether flood insurance is a risk you should protect against. If you do experience a flood, you need to act immediately in order to protect your rights.

We hope that the 9^th Circuit will overturn the District Court’s decision. In any event, if you have a flood loss, you need to understand your rights and likely hire a professional to help you with your claim. If you wait, or if you believe what your insurance company tells you, you risk a denial of your claim.

If you are suffering from insomnia, or just love water related court dramas, you can watch the oral argument here: https://www.ca9.uscourts.gov/media/view_video.php?pk_vid=0000016323