It is well-established that claim processing and wrongful denial of coverage disputes involving federal flood insurance policies belong in federal court because they present substantial questions of federal law. The U.S. District Court for the Western District of North Carolina recently applied this rule when it denied the insureds’ motion to remand a case to state court in Henderson v. Nationwide Mutual Fire Insurance Company, 3:16-CV-419, 2016 WL 5415290 (W.D.N.C. Sept. 27, 2016). The Henderson Court, however, left open the question of whether disputes solely arising out the “procurement” of federal flood insurance policies likewise involve substantial questions of federal law or are matters of state law that can properly be determined by state courts. This is an issue on which courts around the country are divided.
The National Flood Insurance Program (“NFIP”) is a federal program pursuant to which persons can purchase Standard Flood Insurance Policies (“SFIPs”). SFIPs contain terms mandated by federal regulations. They can be purchased either directly from the Federal Emergency Management Agency (“FEMA”) or from private insurance companies known as “Write Your Own” or “WYO” carriers that are authorized by federal regulation to sell and administer SFIPs under their own names. Read more ›