A Jersey City, N.J. man has filed a federal class-action lawsuitagainst a group of insurers he says is denying claims based on anallegedly flawed definition of a “basement.”

The named insurance-company defendants—allissuers of flood policies under the “Write Your Own”program with the Federal Emergency Management Agency—include NewJersey Manufacturers, State Farm, Hartford, Travelers, LibertyMutual, Selective, Assurant, Fidelity National, and PhiladelphiaContributionship. The breach-of-contract suit, filed Dec.13, also leaves the door open to include more WYOinsurers.

The specific claim from Jersey City’s Patrick Donnelly stemsfrom 2011’s Hurricane Irene. Donnelly had a flood policy issuedunder the WYO program by NJM’s New Jersey Re-Insurance Co.

According to court documents, Donnelly filed a flood claim butwas sent a letter from FEMA late in February denying the claimbased on what the suit calls an “erroneous classification ofthe lowest floor of [Donnelly's] building as a 'basement.'”

The lawsuit claims this alleged wrongful denial occurrednumerous times to numerous home and business owners after Irene andSuperstorm Sandy this year.

The suit names the insurers, rather than FEMA, because the claimdenials were made by FEMA “at the request or recommendation of theparticular [WYO] insurance company that issued the [standard floodinsurance policy] to the insured,” alleges Donnelly.

According to court documents, the definition of a basement inDonnelly’s policy was, “Any area of the building, including anysunken room or sunken portion of a room, having its floor belowground level (subgrade) on all sides.”

The lawsuit does not detail the area of Donnelly’s home that wasallegedly mischaracterized by an adjuster.

It is also unclear whether Donnelly suffered flood damage onlyafter Irene, or if he was again flooded by Sandy.

Donnelly’s attorney, Jeffrey Bronster, could not immediately bereached for comment.

According to court records, Donnelly filed an initiallawsuit—naming only New Jersey Re-Insurance Co. as a defendant—onOct. 9, 2012. Sandy struck the Northeast Oct. 29.

In the suit, there is no claim specific to any alleged erroneousclassification of a basement. Rather, Donnelly simply says thedenial was a breach of the insurance contract.

About a month later, NJM responded to the suit by sayingDonnelly has no right of action.

“[Donnelly] is responsible for reading the [flood policy], aswell as any renewal notices, and is presumed to know the provisionsof the policy, including the insurer’s limits of liability,coverages and exclusions,” NJM writes the court.

The insurer has no incentive to act in bad faith during theclaims adjusting process because, as a WYO carrier, it receives afee for every dollar paid to a homeowner under a flood policy,continues NJM.