The U.S. Fourth Circuit Court of Appeals has held that a state law bad faith law suit pled within a year of a claim denial does not toll the federal statute of limitations applicable to flood policies. Woodson v. Allstate Ins. Co., 855 F.3d 628, 630 (4th Cir. 2017).
The insureds made a claim under their flood policy, which the insurer denied. The insureds sued for breach of contract and bad faith handling of their claims in state court, which the insurer removed. The trial court found that the insurer had breached the terms of the policy and acted in bad faith in denying the claim. The insurer appealed.
The Fourth Circuit reversed. It first noted that federal law is clear that any challenge to a denial of coverage under a flood policy must be instituted in federal court within one year of the denial. The court noted that the insured’s case was removed to federal court more than a year after the insurer denied coverage, rendering the claim time-barred. The court attached no value to the fact that the claim was originally filed in state court within the one-year statute of limitations. The insured argued that because the insurer was a private “write-your-own” company providing flood insurance, federal law allows state law bad faith claims. The Fourth Circuit, however, concluded that regardless of the propriety of the insured’s argument, the insured’s argument was rooted in federal law, which requires that any claim on the policy or arising out of a write-your-own insurer’s handling of a claim under the policy must be filed within one year, something the insured failed to do.