In Brown v. State Farm Insurance Company, Defendants State Farm Insurance Company and Colonial Claims Corporation filed motions to dismiss an action based on damage from Hurricane Sandy to an insured’s home in New Jersey. In the underlying action, Plaintiffs, Christopher and Felicia Brown, submitted a claim for damages exceeding $250,000 after their house was declared uninhabitable as a result of damages caused by Hurricane Sandy. State Farm had sold Plaintiffs a homeowner’s insurance policy and a flood insurance policy as part of a comprehensive package of insurance. Plaintiffs mistakenly believed that their flood insurance policy was issued to them by State Farm as a “Write Your Own” (“WYO”) carrier. Under FEMA’s “WYO” program, private insurance companies can write their own insurance policies, and the U.S. treasury funds pay off the insureds’ claims. State Farm denied coverage with the exception of a $2,900 payment for roof damage, and Plaintiffs filed suit for breach of contract.
In granting State Farm’s motion to dismiss, the Court noted that the flood insurance policy was issued to Plaintiffs directly from FEMA, and consequently Plaintiffs must seek relief from FEMA. As for the homeowner’s policy, the Court found that Plaintiffs’ claims were barred by the policy’s limitation of suit provision. The Court also dismissed Plaintiffs’ claims against Colonial, the adjuster, because the claims were preempted by federal law as the flood insurance policy that formed the basis of the claim was issued by FEMA. Thus, the Court reinstated FEMA upon the docket and held that the case for flood insurance benefits could proceed against FEMA.