Flood Insurance Can’t Cover Hurricane Sandy Yard Debris

The Third Circuit Court of Appeals recently issued a ruling regarding reimbursement under the federal flood insurance program.

In Torre v. Liberty Mutual Fire Insurance Company, the appeals court held that New Jersey homeowners were not entitled to reimbursement for the costs associated with removing non-owned debris that accumulated in their yard during Hurricane Sandy.

The Facts of the Case

Michael and Geraldine Torre (collectively, the Torres) held a Standard Flood Insurance Policy (“SFIP”) issued by Liberty Mutual Fire Insurance Company (Liberty) under the National Flood Insurance Act of 1968. After sustaining significant damage from Hurricane Sandy, the Torres submitted claims under the SFIP.

The Hurricane Sandy insurance dispute concerns whether the policy covers the cost of removing storm-generated debris not owned by the Torres from portions of their land. Liberty paid the Torres a total of $235,751.68, which included the cost of removing debris from their house. However, the insurance company denied a second claim related to the cost of removing sand and other debris deposited on the property around their house. According to the Liberty, such damage was not covered under the insurance policy.

The SFIP’s 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.” The parties disagree on the meaning of the term “insured property.” The Torres argued 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. Meanwhile, Liberty maintained that “insured property” means only the property insured under the SFIP, and that the SFIP does not cover land.

The Court’s Decision

The Third Circuit upheld the district court’s decision

In reaching its decision, the Third Circuit panel focused on the language of the SFIP. As explained by the court:

In sum, 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. And because the entire parcel of land does not constitute “insured property,” the provision of the SFIP requiring Liberty 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.

The court rejected all of the Torres’ arguments to the contrary. It disagreed that the term “property” should be given its ordinary meaning, which they argued includes land. The Third Circuit also rejected the argument that term “insured property” refers to the Torres’ land because that is the property listed on the Declarations Page and thus is the “property” that is insured.

From a policyholder’s perspective, the Third Circuit’s decision appears to be hyper-technical and clearly in error. It is only the first circuit to interpret the term “insured property” this way.