NJ Federal Court Finds State Law Preempted by NFIA and Holds that Suits Against “Write Your Own” Insurers are the Functional Equivalent of Suits Against FEMA in Determining Statute of Limitations.

In Brusco v. Harleysville Ins. Co., the plaintiff-insured brought breach of contract claims on two counts, one pursuant to state law, and the other to the National Flood Insurance Act. Plaintiff had purchased a Standard Flood Insurance Policy (SFIP) for his residential property on the New Jersey shore. On Oct. 29, 2012, that property was damaged when it was struck by Hurricane Sandy. In the wake of the storm, Plaintiff submitted a claim for damages, but asserted that his claim was improperly adjusted and that he did not receive the appropriate payment for damage done to the property. Defendant insurer sought dismissal of both causes of action for failure to state a claim, contending that both were barred by the statute of limitations, or in the alternative, that Plaintiff’s demand for consequential damages and attorney’s fees were not covered by the policy and were preempted by the National Flood Insurance Act (NFIA). Plaintiff did not oppose the motion. The Court found that Plaintiff’s state law claim was preempted by the NFIA, stating that “allowing [Plaintiff] to proceed on a state law claim would directly hinder Congressional objectives in creating a federally subsidized standard form of flood insurance”. Further, the Court found that Federal regulations provided that “all disputes arising from the handling of any claim under the policy are governed exclusively by the flood insurance regulations issued by FEMA, the [NFIA}, and Federal common law.” Quoting 44 C.F.R. § 61 app. A(1) (Emphasis in opinion). Regarding the federal breach of contract claim, the Insurer argued that the NFIA’s applicable statute of limitations required that a claim be filed against the FEMA administrator within one year of the date of the mailing of notice or disallowance of a claim. The Court cited Third Circuit caselaw which stated that suits against “write your own” (WYO) insurers are the functional equivalent to suits against FEMA for purposes of the NFIA. Therefore, the one-year statute of limitations in the NFIA also governs actions against WYO companies. The Court considered a denial letter attached as an exhibit by the Insurer in determining the date at which the Plaintiff’s claim was “improperly adjusted” and, consequently, when the statute of limitations began running. As the denial letter was dated December 13, 2012 and the suit was not brought until February 12, 2014, the Court properly dismissed Plaintiff’s claim under the NFIA. The Court further dismissed Plaintiff’s claim for legal fees and consequential damages as moot.