Flood Insurance – Know Your Policy

Coastal Texans – you have to know your flood insurance policies.  This is perfectly illustrated in a 2016, Southern District, Galveston Division, opinion.  It is styled, Lobeck v. Licatino, et al.

The case was decided on a summary judgment.

In a nutshell, Lobeck bought property that, unknown to her, was located within the boundaries of the Coastal Barrier Resources System (CBRS).  Lobeck’s mortgage loan required her to maintain flood insurance on the property so she innocently procured an NFIP through the Defendants in this case.  The policy was subsequently reissued and then renewed the following year.  During the renewal year Hurricane Ike completely destroyed the building on the property and only then was Lobeck informed that her policy was void and had never afforded overage.  She received nothing for her property damage.  Consequently, Lobeck filed suit alleging that the Defendants knew or should have known that the property was ineligible for flood insurance under the NFIP, that the policy was void when issued, and that the policy offered absolutely no coverage.  According to Lobeck, the express and implicit misrepresentations of the Defendants, upon which she ignorantly, but reasonably relied, caused her losses.

The relevant case law is found in a few cases.  In one, the United States Supreme Court held that all citizens are charged with the knowledge of the law regarding federal insurance programs, like NFIP.  In another case, the Supreme Court held that citizens seeking to benefit from a federal benefit program, like NFIP, are charged with familiarizing themselves with the requirements of the program “and may not rely on the conduct of government agents contrary to the law.”  A case in the Fifth Circuit declared that a prospective NFIP holder cannot rely on a WYO’s representations to determine a property’s NFIP insurability, but instead has his own duty to determine whether its location in the CBRS disqualifies it.  A Federal Court in Louisiana held that under this reasoning any reliance by a Plaintiff on misrepresentations of private insurance agents regarding the scope of coverage afforded by an NFIP are unreasonable as a matter of law, and therefore, cannot raise a genuine issue of material fact to avoid summary judgment.

In applying these cases to the facts in this case Lobeck’s claims could never succeed.  Even assuming Lobeck had no actual knowledge of any of the impediments to her procurement of a valid NFIP on her property, the law precludes her from using it to her advantage.  She is presumed to know the law.  As a result, before Lobeck bought the property she “knew” that to purchase a valid NFIP the intended property had to be outside the barriers of the CBRS.  Nevertheless, she bought property she “knew or should have known” was within the CBRS and as a result uninsurable.  Then she applied for an NFIP she “knew or should have known” would be invalid if and when issued.  She, therefore, “knew or should have known” that when she received the NFIP from Fidelity it was void and provided no coverage.  As a legal consequence of Lobeck’s constructive knowledge she cannot fault others for their negligent or fraudulent misrepresentations resulting in the absence of insurance coverage or hold them accountable for her losses.

Judgement for Defendants.