The insurer successfully moved to dismiss the insured's negligence claim and demand for jury trial, leaving only the insured's breach of insurance contract claim under the National Flood Insurance Program (NFIP). La Mirage Homeowners Association Inc. v. Wright National Flood Ins. Co., 2019 U.S. Dist. LEXIS 147667 (S.D. Tex. Aug 29, 2019).
Hurricane Harvey damaged three of insured homeowner's association condominium's buildings. Wright National Flood Insurance Company was the insurer pursuant to the NFIP when the hurricane damaged the insured's property. The insured alleged that Wright breached the policy by underpaying on the flood loss claims and by not initiating the appraisal the insured demanded. The insured sought recovery for negligence, consequential damage, statutory penalties, attorney's fees and pre-and-post judgment interest.
Wright moved to dismiss the extra-contractual claims and to strike the jury demand.
The NFIP's regulations allowed homeowners to purchase policies either directly from FEMA or from private insurers that functioned as Write Your Own (WYO) providers and fiscal agents of the United States. The Fifth Circuit had previously held that state law tort claims arising from claims handling by a WYO were preempted under federal law. The court, therefore, was faced with the issue of whether the insured's claims of negligence, attorney's fees, statutory penalties, and interest were policy-handling claims which were preempted by federal law.
To determine whether a plaintiff's claims arose from claims handling, courts looked to the status of the insured at the time of the interaction between the parties. If the individual was already covered and in the midst of a non-lapsed policy, the interactions between the insurer and insured were claims-handling subject to preemption. Here, the insured was covered by Wright at the time the dispute arose. Therefore, the insured's extra-contractual allegations were claims-handling claims and preempted.
The Insured's jury demand was based on the negligence claim. Because the negligence claim is preempted, and FEMA is presumed to be paying both the litigation expenses and any resulting damage award of the contractual claim, the insured had no right to a jury trial.
Likewise, the insured's claim for statutory penalties, attorney's fees pre-judgment and post-judgment interest were not recoverable against a WYO carrier. The partial motion to dismiss with prejudice was granted, leaving the insured'clam for breach of contract under the NFIP as the sole claim regaining before the court.
