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Fifth Circuit Holds Negligent Misrepresentation Claims Under Federal Standard Flood Insurance Policy Not Preempted by Federal Law
Insurance Law Update
April 2009
Fifth U.S. Circuit Court of Appeals
In Campo v. Allstate Ins. Co, __ F.3d __, 2009 WL 682619 (5th Cir. (La.) March 17, 2009), the Fifth U.S. Circuit Court of Appeals held that negligent misrepresentation claims made against a carrier are not preempted by federal law, even if the carrier participates in the National Flood Insurance Program created by federal law and issues a standard flood insurance policy (SFIP) underwritten by the federal government.
Merlin Campo’s SFIP was issued by Allstate. He let the policy lapse despite receiving a renewal notice with a policy expiration date of August 13, 2005. Hurricane Katrina destroyed Campo’s home on August 29, 2005. Campo filed a claim during the policy’s 30-day grace period. Because of the hurricane, the Federal Emergency Management Agency extended policy renewal deadlines on all SFIPs an additional 90 days, which for Campo was December 12, 2005. On October 29, 2005, Allstate notified Campo that the program would cover his loss and advanced $2,500 for living expenses. Allstate did not indicate payment was conditional upon timely receipt of the premium. When Campo did not pay the premium in December, Allstate demanded return of the advance and denied coverage. The Fifth Circuit stated that federal law preempts claims administration disputes only, but found that Campo’s claim, alleging that Allstate’s negligent misrepresentations caused him to fail to pay the premium, was related to policy procurement. The court further found that because Campo’s policy had lapsed, his complaint related to procuring a new policy and not the administration of an existing policy. Accordingly, the court held that the claim was not preempted and was governed instead by Louisiana law.
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