A current appellate determination in Woodland Villas Condominiums v. Wright Nationwide Flood Insurance coverage Firm 1 highlights a harsh actuality for policyholders searching for to get well below the Nationwide Flood Insurance coverage Program (NFIP). Strict compliance with federal procedural necessities, particularly the federal proof of loss requirement, can override substantive claims for damages, even when there isn’t any actual dispute concerning the loss itself.
On this case, Woodland Villas, a condominium affiliation in Louisiana, sustained in depth flood injury from Hurricane Ida. The affiliation submitted what it believed to be a compliant Proof of Loss kind. This doc, titled “Sworn Assertion in Proof of Loss,” was signed by an architect retained to help with the rebuilding and insurance coverage declare. The proof of loss bore his skilled seal. The affiliation argued that this submission fulfilled its obligations below the Normal Flood Insurance coverage Coverage necessities. Their place was that the doc outlined the claimed quantities and damages intimately, and using an expert architect to arrange and seal it gave the submission credibility and evidentiary worth. 2
Wright Nationwide Flood Insurance coverage Firm, a Write-Your-Personal (WYO) Program service performing on behalf of FEMA, disagreed. It contended {that a} legitimate Proof of Loss should be each “signed and sworn to by the insured,” not by a third-party skilled. Wright argued that the doc submitted by Woodland Villas was not notarized and didn’t comprise a declaration made below penalty of perjury. It argued that assembly considered one of these two necessities was the one acceptable methodology below federal regulation to fulfill the “sworn to” requirement. Additional, it was not signed by a board member or anybody approved by the condominium affiliation of their official capability. Primarily based on these technical deficiencies, Wright moved for abstract judgment, asserting that Woodland did not adjust to a situation precedent to cost. 3
The trial court docket agreed with Wright and granted abstract judgment, a call later affirmed on attraction. The Fifth Circuit dominated that the architect’s seal and the title of the doc had been inadequate to fulfill the SFIP’s inflexible requirements. Citing long-standing precedent, the court docket emphasised that the U.S. Treasury funds the NFIP and, subsequently, calls for strict compliance with its laws. The failure to offer both a notarized or penalty-of-perjury sworn assertion by the insured voided the affiliation’s skill to get well further quantities, no matter whether or not the type of the submission prejudiced the insurer.
This determination is a warning for policyholders and particularly condominium associations and their property managers. It demonstrates that even the place there isn’t any query of the loss itself, and even the place the insurer has been given detailed data, the dearth of a correctly executed Proof of Loss can bar restoration. Within the context of condominiums, the place boards typically delegate declare duties to managers or exterior professionals, this case illustrates the very important significance of making certain that statutory necessities are noticed to the letter.
I additionally recommend that solely a lawyer or a licensed public adjuster ought to put together an insurance coverage declare for a condominium. Different professionals will not be licensed to do that.
Whereas the court docket’s ruling could also be doctrinally appropriate below present regulation, it exposes a deeper flaw in how FEMA administers the NFIP. The reliance on inflexible formalities over substantive justice permits insurers to keep away from funds on in any other case legitimate claims. There was no declare right here of fraud, late discover, and even that Wright lacked information of the loss or its magnitude. As an alternative, the protection rested purely on who signed the doc and in what kind. This type-over-substance method leaves policyholders susceptible, particularly within the chaotic aftermath of disasters, and undermines the elemental function of a federal insurance coverage security internet.
The NFIP is lengthy overdue for reform. As at present administered, it too typically turns into a entice for the unwary, utilizing technicalities to disclaim professional claims. Congress and FEMA should acknowledge that the regulation’s function must be to indemnify losses and to not search for a procedural escape hatch. Woodland Villas had actual damages and submitted them in good religion. That ought to matter greater than whether or not the declaration was notarized or included the magic phrases “below penalty of perjury.” Till reform happens, policyholders should be meticulous in complying with each formal requirement, or danger being left with nothing.
I’ve written and warned about this matter earlier than in NFIP Escapes Cost with Kind-Over-Substance Guidelines—The Want For Reform of the Nationwide Flood Insurance coverage Program, and Flood Insurance coverage Claims With Corrosion and Collapse—A Name For Reform.
Thought For The Day
“The spirit of the regulation, not its letter, should information our justice.”
—Oliver Wendell Holmes Jr.
1 Woodland Villas Condominiums v. Wright Nationwide Flood Ins. Co., No. 24-30722 (5th Cir. Might 1, 2025).
2 Woodland Villas Condominiums v. Wright Nationwide Flood Ins. Co., No. 24-30722 [Brief of Woodland Villas] (5th Cir.).
3 Woodland Villas Condominiums v. Wright Nationwide Flood Ins. Co., No. 24-30722 [Brief of Wright National Flood] (5th Cir.).
