Flood Insurance Does Not Cover Debris Removal From Insureds’ Land

By | May 13, 2015

A federal appeals court in Philadelphia recently ruled that a standard flood insurance policy from the National Flood Insurance Program does not cover the cost of cleaning up storm-generated debris not owned by the homeowners from their land.

The U.S. Court of Appeals for the Third Circuit issued the ruling on March 26. The decision affirms the previous order of the U.S. District Court for the District of New Jersey entering summary judgment in favor of defendant Liberty Mutual Fire Insurance. Liberty Mutual had issued the National Flood Insurance Program Dwelling Form Standard Flood Insurance Policy to the plaintiffs, Michael S. Torre and Geraldine A. Torre of Mantoloking, New Jersey.

The court documents show that the Torres (husband and wife) own land and a house in the Jersey Shore community of Mantoloking, New Jersey. They hold a National Flood Insurance Program Dwelling Form Standard Flood Insurance Policy (SFIP) issued by Liberty Mutual Fire Insurance, a Write Your Own insurance carrier that administers the federal flood insurance program.

According to the court documents, the Torres’ property sustained substantial damage during Superstorm Sandy, and they submitted claims under the SFIP for that damage to Liberty Mutual.

Liberty Mutual administered a total payment to the Torres of $235,751, which included the cost of removing debris from their house. The Torres then sought an additional payment of $15,520 for the cost of removing sand and other debris deposited on their land in front of and behind their house. Liberty Mutual denied that claim on the ground that the SFIP does not cover it.

The Torres sued Liberty Mutual in New Jersey state court seeking payment of the $15,520, and Liberty Mutual removed the lawsuit to the U.S. District Court for the District of New Jersey. The Torres then filed an amended complaint asserting a claim against the Federal Emergency Management Agency (FEMA) as well, but they voluntarily withdrew that claim.

The parties filed motions for summary judgment after agreeing that there were no material facts in dispute because the sole issue before the District Court was one of contractual interpretation. The District Court granted Liberty Mutual’s motion and entered judgment in Liberty Mutual’s favor. The Torres then appealed to the U.S. Court of Appeals for the Third Circuit which reached this latest ruling.

The U.S. Court of Appeals for the Third Circuit noted that the sole issue on appeal is whether the SFIP covers expenses for removing debris not owned by the Torres from their land outside their house.

The debris-removal provision states that “[w]e will pay the expense to remove non-owned debris that is on or in insured property and debris of insured property anywhere.” (44 C.F.R. Pt. 61, App. A(1), Art. III(C)(1)(a) 2009)

‘Insured Property’

The federal appeals court noted that this appeal turns on the meaning of the term “insured property.” The Torres argue that “insured property” means not only the specific structures and items of property that are insured by the SFIP (such as their house) but their entire parcel of land. Liberty Mutual, by contrast, argued that “insured property” means only the property insured under the SFIP and that the SFIP does not cover land.

The federal appeals court stated that the SFIP does not define the term “insured property,” so that the court had to interpret that term as it appears in the SFIP’s debris-removal provision. The court noted that it appears to be the first Court of Appeals to do so.

The federal appeals court stated: “it is clear that Liberty’s interpretation of ‘insured property’ is the only reasonable one when viewed in light of the SFIP as a whole.”

“We begin with the common-sense observation that the term ‘insured property’ means property that is insured,” the federal appeals court stated. “Not surprisingly, that is FEMA’s understanding of the term as well.” The court notes that FEMA’s Flood Adjuster’s Claims Manual, which is incorporated by reference into the FEMA regulations, explains with regard to debris removal that “[i]nsured property means property we insure—i.e., the described building and covered contents.”

The court also noted that the SFIP specifies in great detail which items of property it covers and which it does not. The court said Article III(A), titled “Coverage A—Building Property,” provides coverage for damage to a dwelling and other specified structures as well as various items of property associated with those structures.

Conversely, Article IV is titled “Property Not Covered” and specifies what property the SFIP does not insure. Article IV specifies that “[w]e do not cover . . . “[l]and, land values, lawns, trees, shrubs, plants, [or] growing crops.” Article IV also specifies that the SFIP does not cover, inter alia, “[f]ences, retaining walls, seawalls, [or] bulkheads,” or “[t]hose portions of walks, walkways, decks, driveways, patios and other surfaces . . . located outside the perimeter, exterior walls of the insured building.”

The federal appeals court stated that the SFIP provides coverage for certain structures and other items of property but not for an entire parcel of land. “The entire parcel of land thus cannot constitute ‘insured property’ because it is not insured by the SFIP at all,” the court ruled.

And because the entire parcel of land does not constitute “insured property,” the provision of the SFIP requiring Liberty Mutual to pay for the removal of non-owned debris that is “on or in insured property” does not apply to the expenses the Torres incurred in removing non-owned debris from their land outside their home, according to the court.

“In sum, we conclude that the term ‘insured property’ clearly and unambiguously means property that is insured under the SFIP, that land is not insured under the SFIP, and that the SFIP thus does not cover costs the Torres incurred in removing debris not owned by them from their land outside their home,” the federal appeals court ruled.

The case is Michael S. Torre; Geraldine A. Torre, Appellants v. Liberty Mutual Fire Insurance Company; Federal Emergency Management Agency, No. 14-2733, U.S. Court of Appeals for the Third Circuit opinion filed: March 26, 2015, on Appeal from the U.S. District Court for the District of New Jersey.

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