Lapsed Insurance Policy Negated Flood Claim

Facts: On April 28, 2005, an insurance company notified a Mississippi site owner that her policy had expired on April 25, but could be reinstated without any lapse in coverage if she paid the company $1,464 within 30 days. The owner did not pay on time. Instead, on Aug. 23, 2005, she submitted a new application for flood insurance, paying $317 for another policy. On August 30, the company issued the new policy, giving it an effective date of Sept. 22, 2005. However, after the owner's site was destroyed by Hurricane Katrina on August 29, the insurance company denied the owner's claim because the policy had expired for lack of payment and, consequently, was not in effect on the date of loss.

The owner sued, arguing that she was entitled to coverage because the company had violated federal law by failing to mail the renewal notice on time. By “on time,” the owner meant that the company did not provide sufficient time for her to receive the notice prior to the renewal premium's due date.

Decision: The U.S. District Court for the Southern District of Mississippi ruled for the insurance company.

Reasoning: The court agreed that the insurance company didn't mail the renewal notice on time. But it also found that the owner provided no evidence that she would have paid the $1,464 premium even if she had received timely notice. She did not pay the premium when the company told her it was due and owing, even though she was told that by paying the premium no lapse in coverage would occur.

• Jones v. Mississippi Farm Bureau Mutual Insurance Co., August 2008