The United States Court of Appeals for the Third Circuit issued the first federal court decision that generally defines "written denial of all or part of the claim" under a standard flood insurance policy (SFIP) issued under the National Flood Insurance Program (NFIP). The case is Migliaro v. Fid. Nat'l Indem. Ins. Co., No. 17-1434, 2018 U.S. App. LEXIS 2097 (3d Cir. Jan. 29, 2018)
Anthony Migliaro purchased an SFIP for his New Jersey property from Fidelity National Indemnity Insurance Company under the Write Your Own program administered by the Federal Emergency Management Agency (FEMA). The covered property flooded in 2012 as a result of Superstorm Sandy. An adjuster was deployed to assess the damage, and recommended a payment of $90,500. Fidelity accepted the adjuster's assessment and paid Migliaro the quoted price for the damage. Migliaro later submitted a sworn proof of loss seeking additional compensation. In July of 2013, that proof of loss was rejected by Fidelity by letter, citing that the amount claimed was not an accurate reflection of covered damage, and mentioning that the adjuster provided a loss estimate that Fidelity followed. Fidelity also mentioned that Migliaro could send in documentation to back up his claimed losses that would be considered on a supplemental basis. Instead of providing additional documentation or another proof of loss, Migliaro filed suit against Fidelity. In September 2014, Migliaro filed a motion for voluntary dismissal, which the court granted without prejudice. In July 2015, he filed a second complaint against Fidelity in the same court.
Fidelity argued that the suit was barred by the SFIP's one-year statute of limitations, and that the letter from Fidelity was a "written denial of all or part of a claim" which should trigger the statute of limitations. Since Migliaro's second complaint was not filed until two years after, he received the letter rejecting the claim.
Migliaro argued that he had never received a "written denial of all or part of his claim" so the statute of limitations had never began to run.
The SFIP provided that if the insureds proof of loss is rejected by the insurer the insured may (a.) accept the denial of the claim (b.) exercise their rights under the applicable policy or (c.) file an amended proof of loss as long as it is filed within sixty days of the date of loss. The policy also provide that the insured agrees not to sue the insurer to recover money under the policy unless all policy requirements had been complied with, and that if a suit is brought, it must be started within one year after the date of the written denial of all or part of the claim.
The court affirmed and held that a written rejection of a proof of loss constitutes a denial of claim if the policyholder filed suit against the carrier, thereby accepting the written rejection of a proof of loss as a written denial of the claim.
The Fidelity argument that the rejection of a proof of loss was per se denial of a claim was rejected by the court in the discussion. The court pointed out that the policy allowed three responses after a proof of loss was rejected, refuting the argument that the rejection of the proof of loss was a per se claim denial.
The court then rejected Migliaro's argument that because he had exercised his rights of suing Fidelity under option (b.) he had not chosen option (a.) and accepted the rejection as a denial of the claim. The court found that Migliaro's argument meant that he viewed the July 2013 letter rejecting his proof of loss as a written denial of claim because the policy limited the private right of action against the carrier to "a suit challenging the complete or partial denial of his claim." The court determined that the very act of bringing suit insinuated that Migliaro believed his claim had been denied.
The Third Circuit added that the statement in the July letter that it was "not a denial" of the claim was "technically true at the time it was made" because at the time of the letter Migliaro still had the opportunity to receive additional compensation for his claim. When Migliaro failed to seek an appraisal, file an amended proof of loss within 60 days, or submit additional documentation, he effectively "closed the door" on his claim.
Because the initial complaint by Migliaro was dismissed without prejudice, the court must treat it as if it had never existed, for statute of limitations purposes. Since the second complaint was almost two years after the July 2013 letter, the one-year statute of limitations depicted in the SFIP had lapsed and the court had properly dismissed the suit as a breach of the statute of limitations.
Editor's Note: Here, since the policy only allowed a suit after a claim had been denied, the filing of a suit was an admission that the claim had been denied. If Migliaro had read the policy thoroughly and complied with one of his three options after the proof of loss was rejected, he might have been able to recover more for his Superstorm Sandy losses.
The court here also provided a workable definition of "written denial of all or part of the claim" and categorically determined that the rejection of a proof of loss does not constitute a "written denial of all or part of the claim", since the policy provides other routes to take in order to get your proof of loss approved after a rejection letter is received.