United States District Court, S.D. Texas, Corpus Christi Division
S. MORALES UNITED STATES DISTRICT JUDGE.
the Court is Defendant's Rule 12(b)(6) Partial Motion to
Dismiss ("Partial Motion to Dismiss") filed on July
31, 2019. (D.E. 18). Defendant moves to dismiss both
Plaintiffs negligence claim and its demand for a jury trial,
fees, costs of suit, and prejudgment and post-judgment
interest. Defendant seeks to leave pending only Plaintiffs
breach of insurance contract claim under the National Flood
Insurance Program ("NFIP"). Plaintiff filed a
response on August 21, 2019. (D.E. 23). After considering the
motion, response, pleadings, and applicable law, the Court
herein GRANTS the Partial Motion to Dismiss.
Harvey made landfall in Texas in August 2017. Plaintiff La
Mirage Homeowners Association, Inc., insures multiple
condominium properties in Texas on behalf of condominium
owners. (D.E. 16, ¶ 6). Defendant Wright National Flood
Insurance Company, pursuant to the NFIP, was Plaintiffs
insurance provider when Hurricane Harvey damaged Plaintiffs
property. (D.E. 16, ¶¶ 5-6). Plaintiff alleges that
Defendant breached the insurance contract by underpaying on
Plaintiffs flood loss claims on three of Plaintiff s
condominium buildings and by not initiating the appraisal
Plaintiff demanded. (D.E. 16, ¶¶ 7-10). In addition
to seeking policy benefits owed and court supervision of the
appraisal process for its contractual claim, Plaintiff seeks
recovery for negligence, consequential damages, statutory
penalties, attorney's fees, and pre-and post-judgment
interest. (D.E. 16, p. 5-8).
pending motion, Defendant moves to dismiss Plaintiffs
extra-contractual claims and to strike its jury demand. (D.E.
18). Plaintiff contests the authorities that Defendant relies
on for dismissing costs and interest and asserts that the
jury demand is tied to its negligence claim, which it
contends is outside the scope of Defendant's arrangement
with FEMA under 44 C.F.R. pt. 62, app. A. art III(D) (2016).
(D.E. 16, ¶ 10; 23). That regulation states that certain
actions are not reimbursable by the federal government if it
is an "action by the Company that. . . involve[s]
issues of insurer/agent negligence." 44 C.F.R. pt. 62,
app. A. art III(D).
STANDARD OF REVIEW
test of pleadings under Rule 12(b)(6) is devised to balance a
party's right to redress against the interests of all
parties and the court in minimizing expenditure of time,
money, and resources devoted to meritless claims. Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 558 (2007).
Federal Rule of Civil Procedure 8(a)(2) requires only "a
short and plain statement of the claim showing that the
pleader is entitled to relief." Furthermore,
"[p]leadings must be construed so as to do
justice." Fed.R.Civ.P. 8(e). The requirement that the
pleader show that she is entitled to relief requires
"more than labels and conclusions[;] a formulaic
recitation of the elements of a cause of action will not
do." Twombfy, 550 U.S. at 555 (citing
Papasan v. Attain, 478 U.S. 265 (1986)).
requires factual allegations sufficient to raise the
entitlement to relief above the level of mere speculation.
550 U.S. at 555. Those factual allegations must then be taken
as true, even if doubtful. Id. The Supreme Court,
elaborating on Twombly, stated, "The
plausibility standard is not akin to a 'probability
requirement,' but it asks for more than a sheer
possibility that a defendant has acted unlawfully."
As her oft v. Iqbal, 556 U.S. 662, 678 (2009).
"Threadbare recitals of the elements of a cause of
action, supported by mere conclusory statements, do not
established the NFIP through the National Flood Insurance Act
of 1968 ("NFIA"). See 42 U.S.C.
§§ 4001-4033. The NFIP provides flood insurance
coverage and is operated by the Federal Emergency Management
Agency ("FEMA"), an agency of the Department of
Homeland Security. Ferraro v. Liberty Mut. Fire Ins.
Co., 796 F.3d 529, 531 (5th Cir. 2015). Because it is a
federal program, the NFIP draws funds from the federal
treasury to cover all approved claims. Id. As such,
the NFIP's regulations implicate sovereign immunity, and
"the provisions of an insurance policy issued pursuant
to a federal program must be strictly construed and
enforced." Id. (citations omitted). Homeowners
can purchase policies either directly from FEMA or from
private insurers that function as Write Your Own
("WYO") providers and fiscal agents of the United
States. Id. (citing 42 U.S.C. § 4071(a)(1)).
2005, courts interpreted the Fifth Circuit's case law as
holding that state law claims are not preempted by the NFIP.
Gallup v. Omaha Prop. & Cas. Ins. Co., 434 F.3d
341, 344 (5th Cir. 2005) (citations omitted)! But in
Wright v. Allstate Ins. Co., 415 F.3d 384 (5th Cir.
2005), the Fifth Circuit expressly held that "state law
tort claims arising from claims handling by a WYO are
preempted under federal law." Id. at 390; 44
C.F.R. Part 61, App. A(1) art. IX (stating that the
"[flood] policy and all disputes arising from the
handling of any claim under the policy are governed
exclusively by the flood insurance regulations issued by
FEMA, the National Flood Insurance Act of 1968, as amended
(42 U.S.C. § 4001 et seq.), and the Federal common
law."); accord Grissom v. Liberty Mut. Fire Ins.
Co., 678 F.3d 397, 400 (5th Cir. 2012); Campo v.
Allstate Ins. Co., 562 F.3d 751, 754(5thCir.
question before the Court is whether Plaintiffs claims of
negligence, attorney's fees, statutory penalties, and
interest are policy-handling claims which are thereby
preempted by federal law. To decide whether a plaintiffs claims
arise from "claims handling," courts look to the
"status of the insured at the time of the interaction
between the parties." Grissom, 678 F.3d at
400-01. "If the individual is already covered and in the
midst of a non-lapsed insurance policy, the interactions
between the insurer and insured . . . are
'claims-handling' subject to preemption."
Id. In the case at hand, Plaintiff was insured by
Defendant at the time the dispute arose. (D.E. 16, ¶
5-6). Indeed, Plaintiffs negligence claim is based on
"Defendant's denial, delay, refusal and/or failure
to pay"-a claim regarding how the insurance agent
managed and processed Plaintiffs claim under its active
policy. (D.E. 16, ¶ 12). Therefore, Plaintiffs
extra-contractual allegations are "claims-handling"
claims and, as such, are preempted.
acknowledges in its Response that this is not a
policy-procurement claim. (D.E. 23, ¶ 5). Instead,
Plaintiffs argument against preemption is that its negligence
claim falls outside the scope of Defendant's arrangement
with FEMA. Plaintiffs argument is without merit. See
Spong v. Fid. Nat. Prop. & Cas. Ins. Co., 787 F.3d
296, 307 (5th Cir. 2015) (finding that claims contending the
defendant was "liable for the manner in which it denied
or processed their claim for flood damage, or the reasons it
gave for denying coverage and voiding the policy" were
preempted). Plaintiffs argument is based on Appendix A to 44
C.F.R. pt. 62, (D.E. 12, ¶ 4), an appendix which was
removed from the Code of Federal Regulations in 2016, ...