Moffett v. Computer Sciences Corp., No. 05-1547, ___ F. Supp. 2d ___ (D. Md., July 6, 2009)

The plaintiffs in this case were Maryland residents seeking to recover damages for flood losses caused by Hurricane Isabel on September 18, 2003. They were insured under the National Flood Insurance Program (NFIP). Under the terms of the Standard Flood Insurance Policy, proofs of loss had to be filed within 60 days of the date of loss, by November 17, 2003. On October 28, 2003, FEMA notified all potentially affected insureds that the deadline for filing proofs of loss was extended until January 17, 2004. The plaintiffs missed the deadline and then requested waivers of the deadline, which FEMA denied. The issue before the Court was whether it had authority to review FEMA's decisions regarding the plaintiffs' individual requests for waiver of the deadline to file proofs of loss. 

The plaintiffs argued the Court has authority to review FEMA's waiver decisions under two theories. Citing 42 U.S.C. § 4072, [fn1] the plaintiffs argued that a waiver request constitutes a “claim” for purposes of section 4072, so the Court has the authority to review FEMA's denials of waivers as well as denials of claims of loss on the merits. Alternatively, the plaintiffs argued that the Court had authority to review FEMA’s waiver decisions under the Administrative Procedure Act, 5 U.S.C. § 702, which provides that “[a] person suffering legal wrong because of agency action, or adversely affected or aggrieved by agency action within the meaning of a relevant statute, is entitled to judicial review thereof.” 5 U.S.C. § 702 (2006).

The defendants argued a “claim” under section 4072 can only mean a timely filed proof of loss for covered losses, not a request for waiver of the time to file the claim. The statute does not define the term “claim,” so the ordinary term prevails. The ordinary meaning of “claim” is to assert a right, and a request for waiver does not assert a right. To the contrary, it acknowledges that no right exists and seeks leave to assert a right. The defendants also argued the Administrative Procedure Act is inapplicable because the plaintiffs have an adequate remedy in section 4072. They further contended the APA does not apply because FEMA's decision to deny the waiver requests is discretionary and the Court lacked a meaningful standard against which to judge the decision.

Based on its interpretation of the word “claim,” the Court determined that it had authority to review the waiver decisions under 42 U.S.C. § 4072. The Court held that the term “claim” was ambiguous, and the ambiguity must be construed favorably to the insured. Accordingly, the Court held that a claim included a request for waiver of a proof of loss deadline.

The Court then concluded that FEMA abused its discretion in denying the plaintiff’s requests for waivers of the proof of loss deadline. FEMA did not publicly disclose that it would grant waivers, nor did it announce the criteria for obtaining waivers. That, concluded the Court, was a problem:

Its failure to disclose that waivers were even available or on what grounds was arbitrary and capricious and, in any case, constituted an abuse of discretion.

The Court therefore finds as a matter of law that all proofs of loss filed by Plaintiffs in this case must be deemed timely [filed].

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[fn1] 42 U.S.C. § 4072 provides:

[T]he Director [Administrator of FEMA] shall be authorized to adjust and make payment of any claims for proved and approved losses covered by flood insurance, and upon the disallowance by the Director of any such claim ... the claimant ... may institute an action against the Director on such claim in the United States district court for the district in which the insured property or the major part thereof shall have been situated, and original exclusive jurisdiction is hereby conferred upon such court to hear and determine such action without regard to the amount in controversy.

Court Slip Opinion