Third Circuit Rules that Rejection of Homeowner’s Proof of Loss Under a Standard Flood Insurance Policy is The Equivalent of a “Denial of a Claim” When An Insured Files Suit

In Migliaro v. Fidelity, No. 17-1434, the U.S. Court of Appeals for the Third Circuit recently ruled that “[a]lthough the rejection of a proof of loss [under a Standard Flood Insurance Policy (“SFIP”)] is not per se a denial of the claim in whole or in part, it does constitute a denial of the claim if, as here, the policyholder treats it as such by filing suit against the carrier.”

On June 28, 2013, New Jersey homeowner Anthony Migliaro filed a proof of loss with his flood carrier, Fidelity National Indemnity Insurance Company, claiming that he suffered $236,702.57 in damages resulting from Hurricane Sandy. By that date, Fidelity had paid Migliaro $90,449.11 (as recommended by its independent adjuster). 

On July 15, 2013, Fidelity sent Migliaro a letter denying his proof of loss on the basis that it did not accurately reflect the covered damage. Fidelity’s July 15, 2013 letter stated that it was “not a denial of [the] claim,” and invited Migliaro to submit additional documentation to support his initial proof of loss. Further, by law Migliaro had the right to seek an appraisal of the loss or file an amended proof of loss within sixty days. Despite having these options, on July 22, 2015, a little more than two years after receiving Fidelity’s letter, Migliaro filed suit against Fidelity for breach of the insurance contract. 

Pursuant to a SFIP, an insured may only bring a suit against his carrier if he desires to challenge a denial of his claim. Accordingly, the Court of Appeals found that although Fidelity’s rejection of Migliaro’s proof of loss included the statement that it was not a denial of his claim, Migliaro’s action of filing suit acknowledged Fidelity’s rejection as a written denial.  Because the standardized language of the Flood Policy states that an insured has “one year after the date of the written denial of all or part of the claim” to file suit (which Migliaro failed to do), the Court of Appeals affirmed the District Court’s ruling dismissing Migliaro’s action as being time barred by the policy’s one-year statute of limitations.