As seen at Insurance Journal:
Michael and Lucille Catchot sued Nationwide Mutual Insurance Co. and their agent, Michael Felsher, for refusing to cover more than $79,000 in damage to their Ocean Springs home, most of which the company blamed on Katrina’s storm surge.
The couple claims they paid the premium on their flood policy two or three days before it was set to lapse, on Aug. 14, 2005, by dropping off a check for $319 in the mail slot at Felsher’s office.
Nationwide, however, claims the Catchots missed the deadline for renewing their flood policy by one day. Felsher wrote the couple a new flood policy that didn’t take effect until Sept. 14.
In the interim, Katrina slammed into the Gulf Coast on Aug. 29 and severely damaged the Catchots’ home. The couple didn’t find out that their flood policy had lapsed until after the storm, when Nationwide rejected their claim.
The article does mention that the NFIP is the actual underwriter of the flood coverage in question. Nationwide’s role is that of an intermediary.
Even though I’m not a lawyer or a coverage expert, it seems to me that if it is the case that one of Nationwide’s staff forgot to forward the premium check on quickly enough, the company ought to fill in the gap. True, it’s incumbent on the insured to make premium payments on time, but you can’t just cause a customer’s coverage to lapse because you didn’t clear your inbox as quickly as you could have.
It’s still possible that the claimants are misremembering when they made their payment — I don’t know the specifics of this case — but if their story is anywhere close to reality, I find it rather sad that bureaucracy trumps fairness and awareness of the inefficiency of systems.