Steven A. Meyerowitz, Esq., is the Director of FC&SLegal–a Summit Professional Networks Publication–and theEditor-in-Chief of the Insurance Coverage Law Report.

A federal district court in Mississippi has ruled that sovereignimmunity required that it dismiss litigation brought by a number ofinsureds against the U.S. Department of Homeland Security's FederalEmergency Management Agency (“FEMA”), FEMA's administrator, andFEMA's director of claims, where the insureds' claims had beendenied by the “Write Your Own” (“WYO”) insurance carriers that hadissued each of them a standard flood insurance policy (“SFIP”)under the National Flood Insurance Program (“NFIP”).

The Case

The plaintiffs in this case each had purchased an SFIP fromtheir insurance companies to insure real property from flood damagenear the Mississippi River in Bolivar County, Mississippi. Afterflood damage to the area, FEMA issued a bulletin to WYO insurancecarriers containing a start date of the flood relevant for thecommunity, and advised that the insurance companies would need toadjust the claims on an individual basis because information mightindicate that the flood in progress exclusion should not apply to aclaim. FEMA's bulletin indicated that the flooding in BolivarCounty, Mississippi, began on April 25, 2011. The plaintiffsalleged that they had sustained flood damage at dates ranging fromMay 5, 2011 to May 10, 2011 and contended that on April 25, 2011the gauge in Arkansas City – the nearest gauge to the plaintiffs'property used to determine the Mississippi River flood stages – hadrecorded a depth of 33.19 feet, which was almost four feet belowflood stage.

The plaintiffs' insurance companies denied their claims, statingthat the flood was deemed to be in progress prior to theplaintiffs' policies' effective dates. The plaintiffs all appealedthe decision to the NFIP's director of claims, who affirmed theinsurance companies' disallowance of the plaintiffs' claims.

The plaintiffs sued, seeking a declaration from the court thatFEMA's flood in progress date was selected in an arbitrary andcapricious manner and was inaccurate.

FEMA and its administrators moved to dismiss.

The Court's Decision

The court granted the motion.

It explained that federal law provides that when “theAdministrator” adjusts, makes payment, and disallows SFIP claims,policyholders may institute an action against the Administrator onthe claims. 42 U.S.C. § 4072. It added that this limited waiver ofsovereign immunity applied “exclusively” to the situation whereFEMA directly denied an application, and that federalrules provided that when a WYO company issued a SFIP, the company“shall arrange for the adjustment, settlement, payment and defenseof all claims arising from policies of flood insurance … under theProgram, based upon the terms and conditions of the Standard FloodInsurance Policy.” 44 C.F.R. § 62.23(d).

Further, it continued, federal regulations provided:

A WYO company shall act as a fiscal agent of the FederalGovernment, but not as its general agent. WYO Companies are solelyresponsible for their obligations to their insured under any floodinsurance policies issued under agreements entered into with theFederal Insurance Administrator, such that the Federal Governmentis not a proper party defendant in any lawsuit arising out of suchpolicies.

44 C.F.R. § 62.23(g).

The court then ruled that the plaintiffs' allegation that FEMAessentially denied the claims through its selection of a floodstart date was “too tenuous to constitute a waiver of sovereignimmunity.” The individual insurance companies were the entitiesthat processed and disallowed the plaintiffs' claims, it found.Moreover, it added, FEMA's affirmance of the insurance companies'denials “did not waive its immunity, as it did not provide thepolicy or actually disallow the claim.” The statutory waiver simplydid “not apply to the facts of this case,” the court ruled,concluding that the plaintiffs therefore had not asserted a properbasis of jurisdiction over the federal defendants.

The case is McCaskill v. U.S. Dep't of HomelandSecurity, Nos. 2:12CV43–B–A, 2:12cv120–B–A, 2:12CV136–B–A,2:12CV137–B–A, 2:12CV138–B–A (N.D. Miss. Sept. 27, 2013). StevenTodd Jeffreys, Povall & Jeffreys, PA, Cleveland, MS, WilliamHunter Nowell, Povall & Jeffreys, PA, Cleveland, MS, forPlaintiff; Ava Nicola Jackson, U.S. Attorney's Office, Oxford, MS,William T. Treas, Nielsen, Carter & Treas, LLC, Metairie, LA,Michael E. Whitehead, Page, Mannino, Pereisch, Dickinson &Mcdermott, P.L.L.C., Biloxi, MS, for Defendants.