Fourth Circuit Rules That Claims Against Insurer Are Time-Barred And Preempted By National Flood Insurance Program
05.31.17
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(Article from Insurance Law Alert, May 2017)
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The Fourth Circuit ruled that homeowners’ claims against their property insurer were time barred and, in any event, preempted by federal law relating to flood insurance. Woodson v. Allstate Ins. Co., 855 F.3d 628 (4th Cir. May 3, 2017).
The Woodsons sought coverage from Allstate for hurricane-related damage to their home. Following an inspection of the damage, Allstate denied most of the claim. Less than one year after the denial, the Woodsons filed suit against Allstate in North Carolina state court, alleging breach of contract and bad faith. Shortly thereafter (but more than one year after the claim denial), Allstate removed the case to federal court and argued that the suit was barred by the applicable one-year statute of limitations. The district court did not address the limitations issue and entered judgment for the Woodsons on both claims. The Fourth Circuit reversed, ruling that the claims were time barred and that the bad faith claim was preempted by federal law.
The National Flood Insurance Program governs all flood insurance, whether issued by FEMA directly or by authorized private insurers that use the standardized agreement. Under the standard form policy, a homeowner must sue in federal court within one year after the date of claim denial. The Fourth Circuit held that the Woodsons’ suit was time barred because more than one year had elapsed between the claim denial and Allstate’s removal of the case to federal court. The court rejected the notion that the federal statute of limitations should be equitably tolled by the filing of a complaint in state court.
The court also ruled that the bad faith claim was preempted by federal law, noting that the policy expressly provided that “all disputes arising from the handling of any claim under the Policy are governed exclusively by the flood insurance regulations issued by FEMA, the National Flood Insurance Act of 1968 . . . and federal common law.”