No Proof of Loss No Flood Coverage

Flood Insurance Conditions Must Be Strictly Construed

Catastrophes cause as many legal problems as they cause damage to property. Super Storm Sandy is a catastrophe that seems to prove the proposition.

People who acquire a flood insurance policy based upon, and funded by, the National Flood Insurance Program find that the courts deal differently with the policy conditions strictly, unlike courts who deal with private insurers. As a result they must comply with the conditions.

In Herbert Ruth And Danna Ruth v. Selective Insurance Company Of America, United States District Court, D. New Jersey Civil, 2017 WL 592146, Action No. 15-2616 (JBS/JS) (02/14/2017) the Ruths attempted to collect from a write your own National Flood Insurance policy although they did not submit a proof of loss and did not prove damage to certain property was caused by flood.


In this declaratory judgment action, Plaintiffs Herbert and Danna Ruth seek a declaration that they are entitled to insurance coverage and compensatory damages arising from Defendant Selective Insurance Company of America’s alleged mishandling of their flood claim stemming from Superstorm Sandy.

Plaintiffs Herbert and Danna Ruth own a home in Oceanport, New Jersey (“the Property”) and hold a Standard Flood Insurance Policy (“SFIP”) covering their home with Selective Insurance Company (“Selective”), an insurer who participates in the Federal Emergency Management Agency’s (“FEMA”) “Write Your Own” (“WYO”) flood insurance program. SFIP includes building coverage of $250,000 with a $1,000 deductible, and contents coverage of $11,600 with a $1,000 deductible. Plaintiffs’ home is a single-family home with an unfinished basement. Plaintiffs allege, and Defendants do not dispute, that Plaintiffs paid all premiums when due while the SFIP was in effect.

Plaintiffs notified Selective of damage to their home caused by flooding from Superstorm Sandy on or about October 29, 2012. The basement flooded with approximately five feet of water during the storm. Selective sent an independent adjuster to inspect the Property on November 23, 2012. That same day, Plaintiffs requested an advance payment from Selective for $5,000 in building damage, which request Selective granted.

The independent adjuster submitted a report to Selective on January 27, 2013, recommending that Selective make a payment of $17,175.83 in covered building damage and $1,344.96 in covered contents damage to Plaintiffs. Selective issued two checks to Plaintiffs for $12,176.83 in covered building damage (the adjuster’s recommendation, less the $5,000 advance payment) and $1,344.96 in covered contents damage on February 7, 2013, “representing payment in full under the policy.”

On April 26, 2014, Plaintiffs submitted to Selective additional documentation claiming covered losses to their property in the amount of $45,780.14, including a sworn proof of loss for covered building damage and an estimate from B.C. Moye Consulting, LLC for repairs to the Property that differed from the estimate provided by Selective’s independent adjuster. On May 22, 2014, Selective sent a letter to Plaintiffs denying their request for additional recovery because Plaintiffs had not submitted adequate supporting documents per the NFIP, including itemized room-by-room contractor’s estimates, a signed contract of repair with a contractor, or paid receipts or invoices for repairs. It appears that Plaintiffs never submitted further proof of loss.


Plaintiffs filed this case on April 10, 2015, claiming that Selective “unjustifiably failed and/or refused to perform its obligations under the Policy and wrongfully or unfairly limited coverage and payment on Plaintiffs’ claims” and seeking a declaration that they are entitled to insurance coverage and compensatory damages arising from Selective’s mishandling of their flood claim.

The crux of the parties’ dispute was whether Plaintiffs are entitled to coverage under the SFIP for:

(1)   the cost of replacing two compressors to the central air conditioning system located outside the house, and

(2)   damage to personal property in their garage and basement.

Defendant filed a motion for summary judgment arguing that Plaintiffs are not entitled to coverage under the SFIP for either claim because the compressors were not damaged by flood waters and because Plaintiffs did not submit a sworn proof of loss for the personal property.


Defendant contends that it is entitled to summary judgment because Plaintiffs cannot recover any additional amounts under the SFIP for two reasons: first, because the compressors to the central air conditioning system did not suffer direct physical damage by or from flood, and second, because Plaintiffs did not submit a proof of loss and documentation in support of their claim for additional contents damage.

The NFIP is a federally supervised and guaranteed insurance program presently administered by the Federal Emergency Management Agency (‘FEMA’) pursuant to the [National Flood Insurance Act] and its corresponding regulations. It is well settled that federal common law governs the interpretation of the SFIP at issue here.

As with other insurance policies issued under federal programs, the terms and conditions of the SFIP must be strictly construed because they are direct claims on the Federal Treasury.

First, Plaintiffs cannot recover under the SFIP for alleged damage to the compressors to their central air conditioning system because the compressors did not suffer direct physical damage by or from flood. The plain language of the SFIP insures only “against direct physical loss by of from flood,” which requires “evidence of physical changes to the property” caused by a flood. Nonetheless, Plaintiffs seek to have Selective pay to replace the compressors because they must replace another component of the central air conditioning system that was damaged by floodwaters in the basement, and the air conditioning system will only work if the entire system is replaced all at once. Despite this representation, Mr. Ruth’s admission makes clear that the compressors are not covered losses under the terms of the SFIP. Therefore, Selective is entitled to summary judgment on this part of Plaintiffs’ claim.

Second, Plaintiffs cannot recover for damage to personal property in the garage and basement caused by the flood because they did not file proof of loss or any other documentation for these losses. The Third Circuit has unambiguously held that strict adherence to SFIP proof of loss provisions is a prerequisite to recovery under the SFIP.

Mr. Ruth conceded at his deposition that he did not “declare” or “report” these losses at the time “because it was insignificant compared to the other items” and that he did not even think to seek recovery for them until this action.

Plaintiffs’ failure to follow the NFIP requirement of submitting a sworn proof of loss for these claims bars recovery under the SFIP. Therefore, Selective is entitled to summary judgment on this part of Plaintiffs’ claim, as well.


Anyone who has an NFIP policy must understand that the policy will be strictly construed, as it was in this New Jersey case, and that failure to do so will deprive the insured of the right to indemnity under the flood policy. Their initial claims were paid and then they tried for more without fulfilling the the conditions of the policy and lost.

ZALMA-INS-CONSULT                      © 2017 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant and expert witness specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 49 years in the insurance business.

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About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
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