Flood Policy Limitation of Action Provision Destroys Bad Faith Suit
Post number 5376
Flood Policy Limitation of Action Provision Followed Strictly
Posted on June 19, 2026 by Barry Zalma
In Wayne Gularte, et al. v. Wright National Flood Insurance Company, No. 5:26-cv-01426-PCP, United States District Court, N.D. California (June 15, 2026) Wayne and Doris Gularte alleged that their property sustained flood damage between January 17 and March 23, 2023. They submitted claims to Wright National Flood Insurance Company, which paid part of the claim but denied additional claimed structural losses by email on June 18, 2023.
The Gularte plaintiffs filed suit in state court on December 30, 2025, seeking $12,500 for unpaid structural losses. Wright removed the action to federal court and moved to dismiss.
LAW:
A complaint in Federal Court must plead enough facts to state a plausible claim for relief under Federal Rule of Civil Procedure 8(a)(2), and dismissal under Rule 12(b)(6) is appropriate when the complaint lacks a cognizable legal theory or sufficient supporting facts.
Under the National Flood Insurance Program and Standard Flood Insurance Policies, an insured must sue within one year after the insurer mails notice of disallowance.
DISCUSSION:
Wright showed that it issued the relevant flood policy through the NFIP and submitted the policy terms and denial letter with its motion. Because the complaint challenged the denial of insurance benefits, the court found those documents incorporated by reference and considered them without converting the motion into one for summary judgment.
“Only when the plaintiff pleads itself out of court—that is, admits all the ingredients of an impenetrable defense—may a complaint that otherwise states a claim be dismissed under Rule 12(b)(6).” Durnford v. MusclePharm Corp., 907 F.3d 595, 604 (9th Cir. 2018).
ANALYSIS:
The court concluded that the claim was untimely. Wright denied the disputed portion of the claim on June 18, 2023, but plaintiffs did not file suit until December 30, 2025, more than one year after the denial. Because the incorporated materials made the limitations bar apparent, plaintiffs had pleaded themselves outside the available period for suit.
CONCLUSION:
The court granted Wright National Flood Insurance Company’s motion to dismiss because the insureds filed suit well outside the one-year limitations period governing SFIP claim disputes. When a motion to dismiss is based on the running of the statute of limitations, it can be granted only if the assertions of the complaint, read with the required liberality, would not permit the plaintiff to prove that the statute was tolled or that the claims were timely.
ANALYSIS
Wright participated in the United States Government’s National Flood Insurance Program (NFIP), which allows it to issue Standard Flood Insurance Policies (SFIPs) on behalf of the federal government. It submits several exhibits along with its motion, including a document confirming coverage of plaintiffs’ property under the NFIP, the terms of an SFIP, and a copy of the denial letter sent to plaintiffs. Because plaintiffs’ complaint alleges an unlawful denial of their insurance claim, it necessarily relies on the terms of the policy and the insurer’s denial letter.
If an insurer denies a claim, SFIP policyholders must file any action within one year of the mailing of the notice of disallowance. The record before the Court demonstrated that plaintiffs filed the action over a year and a half after their claim was denied. Since the complaint includes no allegations from which the Court could conclude that plaintiffs were excused from filing their lawsuit within one year of the denial. Their claim was, therefore,time-barred.
The USDC granted Defendant’s motion to dismiss.
ZALMA OPINION
Every insurance policy insuring against the risk of loss of real or personal property or damage caused by flood, contain a private limitation of action provision. NFPA policies contain a one-year private limitation of action from the date of denial. Gularte, by its complaint, filed the action more than one year after the denial and established the suit was time barred.
(c) 2026 Barry Zalma & ClaimSchool, Inc.
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