Federal Flood Statute Doesn't Preempt Negligence Claims Against Flood Determiners

Friday, March 30, 2018 4:00 am
April 2018 - Volume 46 Number 4

The National Flood Insurance Act doesn’t preclude a property owner from suing a flood determiner for professional negligence if the flood determiner improperly determines that a property is not in a Special Flood Hazard Area.

Facts: Matthew and Carolynn Fonder bought property in South Dakota, near the Missouri River. As required by the National Flood Insurance Act (NFIA), the Fonders’ lender, Wells Fargo Bank, N.A., selected a third-party flood determiner to determine whether the Fonders’ property was in a Special Flood Hazard Area (SFHA). The third-party flood determiner, Wells Fargo Insurance, Inc. Flood Services (Wells Flood Services), concluded that the property was not in an SFHA. Accordingly, the lender did not require the Fonders to buy flood insurance or itself buy flood insurance on the Fonders’ behalf. Nor did the Fonders buy flood insurance on their own.

About three weeks later, the Missouri River flooded the Fonders’ home, filling it with three to five feet of standing water for months. The flooding completely destroyed the home. The Fonders’ insurance company retained a different flood determiner, who concluded that the home was indeed in an SFHA. The Federal Emergency Management Agency (FEMA) came to the same conclusion.

The lender subsequently initiated foreclosure proce[..]