FEMA's Failure to Inform Public Constituted an Abuse of Discretion
(September, 2009) By Tamiya N. Wilkes, Associate.
For more information, contact Paul Farquharson.
Moffett v. Computer Science Corporation, No. PJM 05-1547 (D.
Md. August 2009)
In September 2003, Hurricane Isabel struck Maryland causing
many residents to suffer severe property damage. At that time, several Maryland
residents were insured by the Federal Emergency Management Agency ("FEMA") and
several independent insurance carriers under the National Flood Insurance
Program. The terms and conditions of the flood insurance coverage were fixed by
FEMA regulation in the form a Standard Flood Insurance Policy ("SFIP"). The
SFIP, required insureds, within sixty days of flood loss, to submit a proof of
loss form detailing the nature, cause, and monetary value of any damage in order
to collect on a claim.
Plaintiffs, Maryland residents seeking to recover for flood
losses caused by Hurricane Isabel, failed to file proof of loss forms within
sixty days of flood loss, as required by the SFIP; therefore, their claims were
denied. At the time of denial, Plaintiffs were unaware that: 1) federal
regulations permitted them to request waiver of the deadline for filing proofs
of loss; and 2) the Federal Insurance Administrator had authority to grant such
waiver requests, at his discretion. See 44 C.F.R. § 61.13(d) (2008).
In 2007, four years after Hurricane Isabel, FEMA announced
that in 2004, it had granted waivers of the proof of loss filing deadline and,
for the first time, it publicly articulated the criteria for receiving such
waivers. Upon finding out about the waivers, Plaintiffs, whose claims had
previously been denied for failing to timely file a proof a loss form, requested
waiver of the proof of loss filing deadlines. FEMA subsequently denied
Plaintiffs' waiver requests, causing Plaintiffs to seek judicial review of
FEMA's decision.
FEMA opposed judicial review of its decision to deny the
waiver requests by arguing that the Federal District Court only had authority to
review denials of claims of loss on the merits, not denials of waiver requests.
Plaintiffs, in turn, argued that the waiver requests constituted "claims" which
may be reviewed by the United States District Court, pursuant to 42 U.S.C. §
4072 (2006).
The Court considered the term "claim" to be ambiguous and
adopted the construction that was most favorable to the insured, therefore the
Court held that a request for a waiver of proof of loss deadline to submit a
claim for payment of the loss itself is a "claim" and therefore is reviewable by
a federal district court.
The Court reviewed such denials under the arbitrary,
capricious, and abuse of discretion standard and held that, because the criteria
for obtaining waivers was not publicly known, FEMA's failure to disclose that
such waivers were available was arbitrary and capricious and constituted an
abuse of discretion.
The Court found that, as a matter of law, all proof of loss
forms filed by Plaintiffs must be deemed timely filed.
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