District Court Applies FEMA Bulletin to Foreclose Appraisal in Hurricane Sandy Case

In Prastos v. Travelers Ins. Co., Plaintiff sued his insurance company for breach of contract and claimed that the insurer refused to provide coverage for property damages allegedly caused by Hurricane Sandy. Plaintiff demanded an appraisal in light of the insurance policy terms, and the insurer objected. The insurer cited FEMA Bulletin (“FEMA Bulletin”) W-13029 in arguing that appraisal is prohibited where disputes remain as to both the scope and value of the loss, which both parties admitted still existed. Plaintiff countered, however, that it was not necessary for the Court to resolve all outstanding issues and that appraisal could move forward as to value.

Under the FEMA Bulletin, the appraisal process cannot be invoked if the insured and insurer cannot agree on the scope of the loss. Further, a claim cannot be partially resolved by the appraisal process and partially resolved by other means, such as FEMA appeal or litigation. Thus, appraisal is only appropriate where it will result in complete resolution of the entire claim. Here, the Court reasoned that the FEMA bulletin clearly applied because disputes still existed as to the scope and value for the loss, and appraisal would not result in complete resolution of the entire claim. Thus, Plaintiff’s motion to compel appraisal was denied.