After flood coverage was denied, the insured sued under state law theories. See Worthen v. Galveston Ins. Associates, 2010 U.S. Dist. LEXIS 94925 (S.D. Tex. Sept. 13, 2010). The district court dismissed the state law claims on preemption grounds.
The insured purchased a flood policy on August 10, 2007 for his home located on the Texas Gulf coast. The policy was placed by Galveston Insurance Associates and issued by Fidelity National Property and Casualty Insurance Company pursuant to the National Flood Insurance program. Fidelity sent a renewal notice to the insured in June 2008, which the insured admitted he received. Galveston Insurance thereafter contacted the insured about paying the premium in order to renew the policy. On August 22, Galveston Insurance forwarded an expiration letter to the insured reminding him that his policy had expired on August 10, 2008.
The insured finally made payment for a new policy on September 9, 2008. On September 11, Fidelity issued the flood policy, but not effective until October 9, 2008. Hurricane Ike struck on September 13, causing flood damage to the insured's home. When the insured submitted his claim, Fidelity denied coverage.
The insured sued under a variety of theories, including extra-contractual claims for unfair insurance policies, deceptive trade practices, promissory estoppel, negligent misrepresentation, negligence, knowledge and attorney fees. Fidelity move to dismiss. The insured conceded his extra-contractual and tort claims were preempted and barred by federal law. But he argued his "procurement-based claims", as opposed to "claims handing disputes" against the insurer, were valid.
The court disagreed. Insurers offering flood insurance could not alter the terms offered by the National Flood Insurance Program. Further, the insured was charged by statute with constructive knowledge of the content of the program. Under the National Flood Insurance Program, when the premium payment was received within 30 days of the policy expiration, the same policy would issue. Therefore, on September 9, the insured was covered by his expired policy and qualified for a reissued policy under the same terms. Hence, the insured had no procurement claims since he had coverage under the Program. Paying the premium on the 30th day after expiration was timely. Nevertheless, the fact that Fidelity issued a policy effective October 10, 2008 did not alter the result. Accordingly, Fidelity's motion to dismiss the extra-contractual claims was granted.
