The Fifth Circuit Court of Appeals recently reversed a Louisiana district court’s grant of overhead and profit costs under a National Flood Insurance Program policy, holding that the district court improperly awarded overhead and profit costs to policyholders who sold their home unrepaired.
In Dwyer v. Fidelity National Property & Casualty Insurance, Co., plaintiffs sued Fidelity claiming that it failed to properly pay flood insurance benefits after Hurricane Katrina destroyed their house. Before repairing the flood damage, plaintiffs sold their home. The district court found in favor of the plaintiffs and awarded more than $55,000 to the plaintiffs for overhead and profit costs. The Fifth Circuit reversed, finding that “[o]verhead and profit is a pass-through cost intended to reimburse homeowners for the expense of using a general contractor. Since the [plaintiffs] sold their home unrepaired, they never incurred and will never incur the cost of a general contractor.” Consequently, the court held that the plaintiffs are not entitled to overhead and profit costs.