A common scenario after Sandy was that folks ended up with all sorts of debris scattered across their properties that had been deposited by the powerful storm. Things like boats, docks, parts of structures and plants and sand were left everywhere and were in need of removal at sometimes substantial costs. So it would stand to reason then that property owners’ flood policies would cover the removal of non-owned debris from their properties right? Well, not according to a recent U.S. Court of Appeals for the Third Circuit opinion on this topic.1
This issue first peaked my interest in November 2012, in the wake of Super-storm Sandy, and I wrote about how questions will arise as to who pays for the removal of debris that is not owned by property owners but is located on their property following the storm. In my post, So I Have A Boat In My Front Yard Following Super Storm Sandy; Will My Flood Insurer Cover The Removal Of It And Other Non-Owned Debris?, I discussed how the Standard Flood Insurance Policy (SFIP) generally excludes land from coverage. I also discussed how questions may arise whether the terminology of the SFIP is ambiguous regarding coverage for removal of non-owned debris that is not on or in the dwelling, but is otherwise on the insured property.
In Torre, the policyholder’s property suffered damage from Super-storm Sandy, and part of the claim involved removal of non-owned debris that was deposited by Sandy outside the exterior perimeter walls of the building/structure. Article III (C) of the SFIP stated:
We will pay the expense to remove non-owned debris on or in insured property and owned debris anywhere
In April of 2014, the Federal District Court in the Torre case had interpreted the policy in favor of the insurance carrier—resulting in no coverage for the removal of the non-owned debris from the land. The trial court ruled a standard flood policy did not cover the cost of removing non-owned debris that was left by Super-storm Sandy outside the insured building/structure. The court granted Liberty Mutual’s motion for summary judgment and held that the policy did not cover the removal of non-owned debris that was not on or in the insured structure. The court reasoned that when the language of Article III (c) is read in the context of the whole SFIP, “debris removal is covered only if the debris is on or in the building.”
The U.S. Court of Appeals for the Third Circuit recently affirmed the trial court decision. The panel found that while the policy provided coverage for certain structures and other items of property, it didn’t cover the entire parcel of land. As a result, the entire parcel of land couldn’t be considered "insured property" because it isn’t insured by the policy at all.
"In sum, we conclude that the term ‘insured property’ clearly and unambiguously means property that is insured under the SFIP, that land is not insured under the SFIP, and that the SFIP thus does not cover costs the Torres incurred in removing debris not owned by them from their land outside their home," the panel said.
Although a debris removal provision in the Torres’ SFIP offered coverage for expenses stemming from the removal of debris they didn’t own that was on or in an insured property, the parties had disputed the meaning of the term "insured property," according to the opinion.
The Torres claimed that “insured property” meant not only the specific structures and items of property that are insured by the SFIP, such as their house, but their entire parcel of land. Liberty, meanwhile, contended that the SFIP did not cover land. The panel noted that it appeared to be the first Court of Appeals to evaluate the term "insured property" as it appears in the SFIP’s debris-removal provision.
The Torres claimed that interpreting “insured property” to mean both buildings and the land is consistent with the purpose of the National Flood Insurance Act of 1968 to “protect real property which includes the land and any structure erected on the land.” But the panel disagreed, saying the SFIP has long provided that it does not cover land. According to the court, the SFIP did not cover the expense of removing non-owned debris in the policyholder’s lot or any land outside the perimeter walls of the structure.
Even after this opinion, I am still left with some questions. Why does the SFIP have the words “on or in insured property,” but does not define the term “insured property” and does define building and other key terms? The claim involved non-owned debris on the “insured property,” but not necessarily on or in the “building.” Why would the SFIP say it covers removal of non-owned debris from “on” “insured property” if it were meant to say it covers removal of non-owned debris from “on” the “building”? Is there not an ambiguity when the term “insured property” is not defined in the policy?
1 Torre, v. Liberty Mutual Fire Ins. Co., No. 14-2733 (3rd Cir. March 26, 2015).