Mississippi Court Nixes ‘Negligent’ Flood Policy Advice

An insurance company selling federal flood insurance has won a case against a Mississippi homeowner who claimed the insurer was negligent in not informing him that he was eligible to buy a preferred risk policy with more coverage than he had under his regular flood policy.

The U.S. Court of Appeal for the 5th Circuit ruled in favor of Liberty Mutual Fire Insurance Co. against a homeowner who in a Hurricane Katrina claim sought the difference between the coverage he had and the better coverage he could have had under a preferred risk policy at a lower cost. The circuit court reversed the district court and erased a jury award for the homeowner.

While federal law does not preempt state law in insurance procurement disputes, it does in disputes related to claims, according to the circuit court. The court said that since Grissom’s dispute related to his renewal of a policy already in place, the dispute is considered to be one of claims handling, not the initial procurement of the insurance policy, and it therefore is preempted.