Two recent cases address a homeowner's ability to sue for an incorrect flood zone determination. Both cases confirmed the homeowner has no private cause of action under the National Flood Insurance Program for an alleged inaccurate flood determination. The door was left open, however, for state, common law claims under Mississippi law.
In the first case, Paul v. Landsafe Flood Determination Inc., 2008 WL 6051629 (5th Cir. Dec. 2, 2008), Landsafe was hired by the mortgage lender to ascertain whether plaintiff's home was located in a flood zone. When Landsafe determined the home was not situated in a flood zone, the lender did not require plaintiff to obtain flood insurance. After Hurricane Katrina damaged her home, plaintiff learned she was indeed situated in a flood zone. Plaintiff sued Landsafe, alleging negligence and negligent misrepresentation. The district court granted summary judgment to Landsafe. The Fifth Circuit, acknowledging that some aspects of its decision had not yet been addressed by Mississippi law, reversed. The court explained,
. . . issues arising in Mississippi from flood-zone determinations are similar to those in the termite inspection and auditor report precedents. Admittedly, reliance is a different issue when flood insurance is required and is not an option. We do not consider what reliance would mean in circumstances such as this. It is enough to hold that the erroneous flood-zone determination was the kind of professional opinion, developed in the course of a party's business and supplied for the guidance of others in a transaction, on which justifiable and detrimental reliance by a reasonably foreseeable person might be shown to have occurred.
Id. *7. Landsafe, therefore, failed to demonstrate its entitlement to judgment under Mississippi law. The case was remanded for further proceedings.
Just three days later, a federal district court in Mississippi reached virtually the same decision in Kelly v. Washington Mutual, 2008 U.S. Dist. LEXIS 98653 (S.D. Miss. Dec. 5, 2008). Based on Washington Mutual's (WaMu) determination her home was not within a flood zone, the homeowner canceled her flood policy. Thereafter, Hurricane Katrina severely damage plaintiff's property. Plaintiff then discovered her property was actually located within the special flood hazard area. Plaintiff sued WaMu for negligence, misrepresentation and breach of contract. WaMu moved to dismiss on the grounds that plaintiff had no private right of action against it and that no duty was owed to plaintiff regarding the flood zone determination.
The district court first noted the National Flood Insurance Act did not create a private cause of action for alleged inaccurate flood determination. Turning to the state common law claims, the court noted the recent decision in Paul. In the end, given the absence of NFIA claims, the court declined to exercise supplemental jurisdiction over plaintiff's remaining state law claims. Therefore, these claims were remanded to the state court.
