The United States District Court in Mississippi determined a case against the flood insurer involving procurement claims were properly remanded to the state court after it had been removed to federal court. Simmons v. Miss. Farm Bureau Cas. Ins. Co., 2013 U.S. Dist. LEXIS 105932 (N.D. Miss. July 29, 2013).
The insured homeowners filed a complaint to recover for defendant insurer's alleged misrepresentations and failure to procure a flood insurance policy that would have covered flood damage to Plaintiffs' property. The Write Your Own carrier removed the case to federal district court. There was no diversity jurisdiction, so the court considered whether it had subject matter jurisdiction based upon federal question jurisdiction.
Plaintiffs alleged they were not seeking coverage under the Standard Flood Insurance Policy (SFIP) issued by the insurer or recovery on the basis of a contract from National Flood Insurance Program funds, but were instead seeking tort damage from their insurance agent's own funds and/or its errors and omissions coverage for the agent's tortious conduct in failing to procure the specific coverage explicitly requested and represented to have been procured.
Plaintiffs alleged they had a longstanding fiduciary relationship with the insurer and its agent. Plaintiffs sought flood insurance from the insurer and its agent on property they were about to purchase. Plaintiffs submitted an application for the coverage and paid the premium payment to the insurer's agent. Plaintiffs' property then suffered flooding during Hurricane Katrina. Only after the flooding occurred did Plaintiffs receive a copy of the policy.
Coverage was denied because an exclusion barred coverage for a flood already in progress at the time the policy terms began.
Plaintiffs did not seek recovery for any denial of coverage, but rather for the conduct of the insurer in the representations made about the policy and in the procurement of the policy. Such procurement-related claims sounded in state law. Therefore, the court found that Plaintiffs' complaint did not present a federal question claim, but instead presented state-law tort claims that fell within the procurement-related SFIP claims not preempted by federal law, as the claims alleged negligence on the part of the insurer.
