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Nationwide wins flood insurance coverage dispute

Posted On: Nov. 19, 2019 1:39 PM CST


An Oregon resort is not entitled to more than $396,000 in coverage under the National Flood Insurance Act because it never filed a signed and sworn proof of loss for that amount, said a federal appeals court Monday in affirming a lower court ruling.

Providing the loss documentation is required for Surfsand Resort in Cannon Beach, Oregon, to recover these funds under its standard flood insurance policy, said the ruling by the 9th U.S. Circuit Court of Appeals in San Francisco in Surfsand Resort LLC v. Nationwide Mutual Fire Insurance Co.; Harleysville Insurance Co.

Columbus, Ohio-based Nationwide Mutual Fire Insurance Co. and affiliate Harleysville Insurance Co. had issued a standard flood insurance policy to the resort under the National Flood Act, according to the underlying June 2018 ruling by the U.S. District Court in Portland, Oregon. The policy imposed “restricted coverage on building items located in a ‘basement,’” according to the ruling.

In December 2015, Pacific Ocean tidal waters overflowed and damaged the bottom level of hotel rooms at the resort, according to the District Court ruling.

The insurers paid the resort $98,765.08 under the policy but refused to pay an additional $396,234.92 on the basis the damage had occurred in the basement, according the complaint in the case.

The District Court ruled in the insurers’ favor on the basis the resort had not filed an additional proof of loss. The resort appealed the ruling, which was affirmed by a unanimous three-judge appeals court panel.

“The District Court did not err” said the 9th Circuit. “The record reflects that the only Proof of Loss form submitted claimed $98,765.08,” which Nationwide paid promptly.

“With respect to the $396,234.92, Surfsand ‘failed to comply strictly with the terms and conditions that Congress has established for payment,”’ the ruling said, in citing an earlier ruling. Because of this, “We need not resolve” the question of whether the basement exclusion applied.

Surfsand Resort attorney Jim Guse of Barker Martin P.C. in Portland, who leads his firm’s insurance coverage practice, said in a statement, “The Court's decision is a difficult one for insureds. In the context of FEMA policies, insurers and their agents have almost unfettered discretion to misrepresent policy requirements for submitting a claim. In the event of a loss insureds should move quickly and ensure they understand what is required of them and avoid relying on any instructions from the insurer or its agents.”

Nationwide’s attorney had no comment.