Insurance Law

Agent, insurer liability for failure to procure flood insurance

By David Rossmiller

This decision in a little long in the tooth, blogosphere-wise, but I've had it sitting around for a while and was reminded of it when I saw it recapped in Mealey's recently.  U.S. District Court Judge Peter Beer, of the Eastern District of Louisiana, granted partial summary judgment on May 2 to State Farm and one of its agents, Nora Vaden, over a claim that they were negligent in failing to procure a flood insurance policy for the homeowner, Liselotte Morice.  Here's a copy of the very short order written by Judge Beer.  

According to the order, Morice maintained a flood insurance policy since 1987 on a rental property in Metairie, Louisiana.  In 2003, she allegedly wanted to transfer her coverage from one property to the other, and contacted Vaden, her agent, about doing so.  She also allegedly completed a flood insurance application, but State Farm has no record of receiving an application for flood insurance on the property and has no record of receiving a policy premium to purchase flood insurance for the second property. 

After Hurricane Katrina hit in 2005, Morice spoke with Vaden at a State Farm mobile disaster claims office, where she learned she had no flood insurance on the second property.  She sued in state court, and State Farm removed the lawsuit to federal court based on diversity of citizenship. 

The basis for the judge's decision was that Morice should have known as early as 2004 that no flood policy was in effect.  She thought that higher premiums withdrawn directly from her account, she said, meant the payments were going for flood insurance.  However, they apparently were merely a rate increase on the insurance she already had.  According to Judge Beer's order, she admitted she received no confirmation of the flood policy, nor did she receive any documentation from Vaden about the supposed flood coverage.  The claims were therefore pre-empted by a Louisiana statute creating a one-year limitations periods for suits involving agent negligence.

Full post as published by Insurance Coverage Law Blog on June 16, 2008 (boomark / email).