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Muratore v. Texas Farmers Insurance Co.

United States District Court, S.D. Texas, Houston Division

May 7, 2019

FREDRJC MURATORE, and LILLIAN MURATORE, Plaintiffs,
v.
TEXAS FARMERS INSURANCE COMPANY, and MCKENZIE SHOAF, Defendants.

          MEMORANDUM AND OPINION

          LEE H. ROSENTHAL CHIEF UNITED STATES DISTRICT JUDGE.

         In November 2018, Fredric and Lillian Muratore sued Texas Farmers Insurance Company and McKenzie Shoaf in state court, asserting common-law negligence, negligent-representation, and contract-breach claims based on flood damage that the plaintiffs' home sustained during Hurricane Harvey. (Docket Entry No. 1-2). The defendants removed. (Docket Entry No. 1). The plaintiffs have moved to remand, challenging this court's federal-question jurisdiction. (Id. at 6-11; Docket Entry No. 7). For the reasons explained below, the court finds that removal was improper and grants the motion to remand. (Docket Entry No. 7). A remand order is separately entered.

         I. Background

         The plaintiffs own a home in Spring, Texas. (Docket Entry No. 1-2 at 3). In 2000, they purchased flood insurance from Texas Farmers, as their mortgage required. (Id.; Docket Entry No. 11 -1 at 3). The plaintiffs renewed the policy each year until 2015, when they paid off their mortgage. (Docket Entry No. 1-2 at 3). The policy expired in May 2016. (Docket Entry No. 11-1 at 3).

         The plaintiffs asked McKenzie Shoaf, an:nsurance agent, to purchase a less expensive flood insurance policy for their home. (Docket Entry No. 1-2 at 3). They purchased a Texas Farmers policy, which was issued in July 2016. (Docket Entry No. 11-1 at 3, 6). The plaintiffs allege that they asked Shoaf for a policy with at least $265, 000 in coverage. (Docket Entry No. 1-2 at 3). The new policy covered up to $400 in flood damage. (Id. at 4; Docket Entry No. 11-1 at 3).

         In August 2017, the plaintiffs' home sustained $250, 000 in flood damage during Hurricane Harvey. (Docket Entry No. 1-2 at 3). The plaintiffs allege that they did not discover the policy's $400 limit until they submitted a claim to Texas Farmers. (Id. at 3-4). The company initially denied the claim, but then sent the plaintiffs checks totaling $400. (Id. at 4).

         In November 2018, the plaintiffs sued Texas Farmers and Shoaf in state court. (Id. at l). In the notice of removal, the defendants asserted that this case presents a federal question because the plaintiffs' standard flood insurance policy issued in July 2016 under the National Flood Insurance Program, and federal law preempts state-law claims arising out of a National Flood Insurance Program policy. (Docket Entry No. 1 at 6-8). The plaintiffs timely moved to remand, arguing that their only claims are under Texas law and that federal-question jurisdiction is not present. (Docket Entry No. 7). The plaintiffs assert that federal preemption does not apply because their claims arise from policy procurement, not claims handling. (Id. at 2).

         II. The Legal Standards

         Defendants may remove a state-court action to federal court when they have articulated a basis for federal jurisdiction and removal is procedurally proper. 28 U.S.C. §§ 1441, 1446(b). The removal statute is strictly construed and ambiguities are interpreted in favor of remand. Manguno v. Prudential Prop. & Cas. Ins. Co., 216 F.3d 720, 723 (5th Cir. 2002). The "removing party bears the burden of showing that federal jurisdiction exists and that removal was proper." Baker v. Hercules Offshore, Inc., 713 F.3d 208, 212 (5th Cir. 2013) (quoting Manguno, 276 F.3d at 723).

         "Because the parties here are all Texas domiciliaries, removal jurisdiction must be based on a federal question." Quinn v. Guerrero, 863 F.3d 353, 358 (5th Cir. 2017). Federal-question jurisdiction exists if a plaintiffs well-pleaded complaint includes a claim arising under federal. Id. at 358-59 (citing Bernhard v. Whitney Nat'l Bank, 523 F.3d 546, 551 (5th Cir. 2008)); 28 U.S.C. § 1331. '"[T]he plaintiff [is] the master of the claim,' so he may confine his arguments to those arising under state law even if federal claims are available." Id. at 359 (quoting Caterpillar Inc. v. Williams, 482 U.S. 386, 391-92 (1987)). Removal jurisdiction is based on the claims in the operative state-court petition when the case is removed. Louisiana v. Am. Nat 7 Prop. Cas. Co., 746 F.3d 633, 636-37 (5th Cir. 2014).

         III. Analysis

         The plaintiffs argue that their claims do not arise from the National Flood Insurance Program policy, but from the defendants' failure to procure enough insurance coverage to protect the value of the home and its contents. (Docket Entry No. 7 at 2). According to the plaintiffs, Texas Farmers and Shoaf "made a tortious misrepresentation wien procuring coverage." (Id. at 3). The plaintiffs do not dispute that Texas Farmers paid them the $400 limit under the policy. (Id. at 4). The plaintiffs argue that because the state-court petition alleges causes of action related to policy procurement and not claim handling, neither the National Flood Insurance Program nor a standard flood insurance policy is implicated, and no federal question exists. (Id. at 7-8).

         The defendants respond that the court has federal-question jurisdiction because federal law governs the policy. (Docket Entry No. 11 at 3, 7-9). This case concerns claim handling and the plaintiffs' state-law causes of action are preempted, the defendants contend, because the plaintiffs asserted contract breach, and the standard flood insurance policy was the only contract between Texas Farmers and the plaintiffs at the time of loss. (Id. at 1-3, 13).

         The National Flood Insurance Act, 42 U.S.C. § 4001 , et seq., established the National Flood Insurance Program "to make flood insurance available on reasonable terms and to reduce fiscal pressure on Federal flood relief efforts." Campo v. Allstate Ins. Co., 562 F.3d 751, 754 (5th Cir. 2009). The Program's "Write-Your-Own" policies allow private insurers like Texas Farmers to sell flood insurance underwritten by the federal government. Id. FEMA regulations specify the terms and ...


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