The United States Court of Appeals for the Fifth Circuit recently upheld the dismissal of a claim by two individuals against an insurance agent who sold them renters’ insurance because they failed to file their claim within one-year after they learned about, or should have known, the facts that gave rise to their claim. Campbell v. Stone Ins., Inc., No. 07-30206 (5th Cir. Dec. 5, 2007) (click here for a copy of the Fifth Circuit decision).

The plaintiffs, Stephen and Jennie Campbell, had purchased renters’ insurance through Stone Insurance, Inc. (the agent) that covered a rental property in New Orleans. The property subsequently suffered extensive flood damage during Hurricane Katrina and the Campbells filed a claim under the renters’ policy. The insurance company, however, denied coverage arguing that flood damage was a non-covered peril under the policy.

The Campbells then sued Stone Insurance, Inc. asserting that the agent had told them that the policy would in fact cover flood damage. The Campbells also claimed that the agent had told them that they did not qualify for flood insurance through the National Flood Insurance Program ("NFIP") because they were renters. The Campbells made this second point, despite the fact that they signed a form when they initially procured the policy that stated that they had been offered renters insurance through the NFIP and rejected it.

The Fifth Circuit agreed with the District Court and upheld the dismissal of these claims based on on the expiration of the one-year statute of limitations set forth in Louisiana Revised Statute §9:5606, which provides that an action for damages against an insurance agency must be brought within one-year from the date the alleged wrongful act is, or should have been, discovered. The Fifth Circuit agreed with the District Court that the Campbells were put on notice of the alleged misrepresentations by the agent when they signed the NFIP insurance rejection form over two years before they filed their action. According to the Fifth Circuit, that form should have alerted the Campbells to the alleged misrepresentations both about the scope of coverage afforded under their policy and about their eligibility for coverage under the NFIP.

We will continue to monitor Katrina-related developments and provide updates at InsureReinsure.com.