After his property insurance claims for Superstorm Sandy damage were denied in part, a property owner sued his flood insurance carrier, insurance adjusters and investigators, and others for alleged bad faith in handling the property owner's claims. The property owner sued in part under the Racketeer Influenced Corrupt Organizations Act.
The defendants defended with a motion to dismiss based at least in part on a contention that they didn't do it, but if they did, they are immune anyway. Unfortunately for the property owner, as it turns out, the National Flood Insurance Program apparently immunized every other cause of action for bad faith claim handling. His lawsuit was addressed by the Eastern District of New York. Melanson v. U.S. Forensic, LLC, 183 F.Supp.3d 376 (E.D.N.Y. 2016).
The District Court held that this was a case of first impression. That means that the answer to the question of immunity was open to the Judge. To be clear, the question of immunity from RICO liability here was whether there is immunity under the National Flood Insurance Program or not, for bad faith handling of claims which may otherwise be actionable under federal flood insurance policies.
A related question following from that one is whether any such immunity extends beyond the flood insurance carrier to investigators and adjusters and the other parties that the property owner alleged were parties to the alleged bad faith handling of his property claim.
The District Court's answer was "immunity." For all. The Court essentially ruled that the NFIP immunizes every other cause of action for bad faith claim handling, so it must immunize RICO causes of action too. Melanson v. U.S. Forensic, LLC, 183 F.Supp.3d 376, 390-93, 395 (E.D.N.Y. 2016).
Assuming that this decision stands, it raises further questions. This question is among the rest raised by this decision: Will every federal statute which addresses insurance confer immunity for insurance bad faith claim handling? And another question like it: Will this mean immunity in every case regardless of the facts of any case?
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