490_C029

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FLOOD IN PROGRESS VOIDED POLICY

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In the case of Drewett v. Aetna Casualty & Surety Company, 539 F. (2d) 496 (5th Cir. 1976), Drewett's house rested above the ground on wooden stilts. He had secured insurance when the water was a few feet up the stilts but before it had reached the living quarters of the house. A few days after the policy was issued, a levee broke, causing the water to rise further and flood the living quarters. The court held the "loss in progress" principle applicable to policies issued under the National Flood Insurance Program and denied recovery to Drewett. This case served as a precedent in the following lawsuit handled by a Louisiana court.

In this instance, a Louisiana homeowner applied for Flood insurance on his house and contents on April 25 and a policy was issued effective that date. The property was damaged by rising flood waters shortly thereafter. Other testimony revealed that a flood was in progress as early as April 17 and posed an immediate threat to the insured's property as early as April 20, when travel between his yard and the nearest road had to be made by boat.

The National Flood Insurers Association had made insurance available in the area on April 23, two days before the insured applied, with an immediate effective date. The trial court ruled in favor of the insured with its finding that the normal 15-day waiting period between application and policy effective date under the National Flood Insurance Program had been waived under the provisions of the National Flood Insurance Act. The Act, as amended, provided: "The effective date and time of any new or added coverage, or of any increase in the amount of coverage, shall be 12:01 am (standard time) of the 16th calendar day after the date of application, provided that this waiting period is waived during the 30 day period following the date of the initial community eligibility in the emergency and regular programs."

The United States Court of Appeals, however, found nothing stated in the purpose for or operation of the emergency program to the effect that an insurer must reimburse persons for losses which had already begun at the time application was made for insurance. It applied the principles established in the Drewett case and ruled that, since the flood that damaged the property was in progress on the date that insurance was applied for, the contract of insurance could not take effect. The insurer was found not liable for the property damage but was ordered to refund the paid premium.

(Summers, Plaintiff, Appellee, Cross-Appellant v. Harris, Secretary of United States Department of Housing and Urban Development, Defendant, Appellant, Cross-Appellee. U.S. Court of Appeals, Fifth Circuit. No. 76-1193. May 26, 1978. CCH 1978 Fire and Casualty Cases 533.)