NATIONAL FLOOD INSURANCE PROGRAM REQUIRES SECOND SWORN PROOF OF LOSS TO PAY SUPPLEMENTAL CLAIM

In Ferraro v. Liberty Mutual Fire Insurance Company, 2015 WL 4666106 (5th Cir August 6, 2015), the Fifth Circuit Court of Appeals upheld the district court’s summary judgment in favor of Liberty Mutual based on federal law construing the National Flood Insurance Program (NFIP.)  Liberty’s adjuster had recommended a payment of $103,826 for flood damages to the Ferraros’ home due to Hurricane Issac, and prepared a proof of loss. The Ferraros signed it, and added the handwritten notation “will supplement later.”  Liberty paid the entire amount.  The Ferraros later submitted their public adjuster’s report to Liberty for $320,436, but failed to include a second sworn statement in proof of loss. Apparently, according to the Court, “A Liberty Mutual adjuster told them no additional forms were necessary to support their claim.”  The carrier issued no additional payments.

The Ferraros filed suit under the flood policy for property damage, loss of use, depreciation, mold and damage remediation, debris clean-up and removal cost of compliance, and any other available damages. Liberty moved for summary judgment on the basis that the Ferraro’s were barred from pursuing the instant suit because they did not comply the insurance policy’s requirements to provide a complete signed sworn-to proof of loss within 240 days of the loss.  The trial court agreed and granted a case dispositive summary judgment against the Ferraros.

The Fifth Circuit recognized that whether an insured must submit an additional proof of loss to recover additional amounts on a preexisting claim under the NFIP was a matter of first impression in that Circuit.  The summary judgment was upheld because the NFIP puts at stake the government’s liability on the claim, and thereby implicates sovereign immunity even though it is an insurance carrier that administers the claim.  The Court noted: “Payments made pursuant to such policies are ‘a direct charge on the public treasury.’”  Therefore, the provisions in the policy must be “strictly construed and enforced.”  The Court followed the precedents of the First and Eighth Circuits and held that an additional signed and sworn proof of loss is required.  Additionally, the public adjuster’s report was insufficient to satisfy this requirement because it is not signed and sworn to by the Insured.