The National Flood Insurance Program has been controversial to say the least. Part of the program allows commercial insurance companies to act as agents for the federal government in producing Standard Flood Insurance policies and managing claims under a write your own program (“WYO”). The program, under its enabling law, the National Flood Insurance Act, requires a sworn proof of loss as a condition precedent to coverage. In a recent case, the Ninth Circuit addressed whether a WYO carrier was estopped from denying a claim where the policyholder did not file a sworn proof of loss for the full amount claimed.

In Surfsand Resort, LLC v. Nationwide Mutual Fire Insurance Co., No. 18-35607 (9th Cir. Nov. 18, 2019) (Not for Publication), the policyholder claimed that the insurer owed it a substantial payment under its flood insurance policy. The insurer only paid the lesser amount of the claim for which the policyholder submitted a sworn proof of loss. The district court granted summary judgment to the insurance company and the circuit court affirmed.

In affirming, the court noted that the policyholder never filed a signed and sworn proof of loss for the amount claimed and that the proof of loss was a condition precedent to coverage under the Standard Flood Insurance Policy.

The court rejected the policyholder’s request to excuse its failure to file a proof of loss based on a claimed equitable estoppel for allegedly inconsistent statements received from the insurance company’s representative about how to file the claim. The court held that the policyholder did not meet the stringent test for estoppel, especially here where a claim under a Standard Flood Insurance Policy in a WYO context is a claim against the federal government. The court found that none of the statements purportedly attributable to the insurance company’s representative constituted affirmative misconduct. Moreover, held the court, the Standard Flood Insurance Policy imposed a nondelegable duty on the policyholder to submit a proof of loss, which the policyholder could not avoid by pointing at the statements made by the representative. The court also found that the representative reminded the policyholder of its nondelegable duty to file a proof of loss numerous times. The court held that there was no triable issue of material fact and affirmed the grant of summary judgment.

The lesson here is that strict compliance with proof of loss requirements should not be overlooked.