Class-Action Flood Suit Filed Over Definition of ‘Basement’

A Jersey City, N.J. man has filed a federal class-action, breach-of-contract lawsuit against a group of nine insurers he says is denying claims based on their flawed definition of a “basement.”

 The named insurance-company defendants—all issuers of flood policies under the “Write Your Own” (WYO) program with the Federal Emergency Management  Agency (FEMA)—are New Jersey Manufacturers (NJM), State Farm, The Hartford, Travelers, Liberty Mutual, Selective, Assurant, Fidelity National and Philadelphia Contributorship.

Patrick Donnelly’s specific claim stems from 2011, when he had a flood policy issued under the WYO program by NJM’s New Jersey Re-Insurance Co.

After Hurricane Irene, Donnelly filed a flood claim but was sent a denial letter from FEMA last February based on what the suit calls an “erroneous classification of the lowest floor of [Donnelly’s] building as a ‘basement.’” 

The lawsuit claims this alleged wrongful denial has occurred numerous times to home and business owners after Irene and Superstorm Sandy. 

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

NJM responded to the suit by saying it has no incentive to act in bad faith during the claims-adjusting process because, as a WYO carrier, it receives a fee for every dollar paid to a homeowner under a flood policy.

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