Barnett v. Fidelity National Property & Casualty Co.

157 So. 3d 51, 12 La.App. 3 Cir. 1415, 2013 WL 1809872, 2013 La. App. LEXIS 856
CourtLouisiana Court of Appeal
DecidedMay 1, 2013
DocketNo. 12-1415
StatusPublished

This text of 157 So. 3d 51 (Barnett v. Fidelity National Property & Casualty Co.) is published on Counsel Stack Legal Research, covering Louisiana Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Barnett v. Fidelity National Property & Casualty Co., 157 So. 3d 51, 12 La.App. 3 Cir. 1415, 2013 WL 1809872, 2013 La. App. LEXIS 856 (La. Ct. App. 2013).

Opinion

AMY, Judge.

|, After the plaintiffs sustained damage to their Cameron Parish beach house as a result of Hurricane Ike, their flood insurance provider declared the policy void ab initio. They filed suit against their insurance'agency and the flood insurance provider, seeking damages for tort and contractual claims. The trial court denied pre-trial exceptions regarding subject matter jurisdiction and preemption by federal law. After trial, the trial court found in favor of the plaintiffs, awarding damages and apportioning fault equally between the defendants. We affirm the judgment of the trial court.

Factual and Procedural Background

The plaintiffs, Kay and Barry- Barnett, own a beach house in Cameron Parish. Their original dwelling on that property was destroyed in 2005 by Hurricane Rita. Although Travelers. Insurance Company had issued a policy on the property to the plaintiffs under the National Flood Insurance Program (NFIP), Travelers informed them after Hurricane Rita that their property could not be insured under that pro[53]*53gram given its location within a Coastal Barrier Resource System (CBRS).

Thereafter, Mr. Barnett contacted Gary Pearce, an agent at Insurance Unlimited of Louisiana, Inc., to inquire about the possibility of obtaining NFIP flood insurance for their property. Mr. Barnett explained that he did so after learning that a neighbor had been able to insure his property through the agency. Mr. Pearce forwarded the Barnett application to Fidelity National Property and Casualty Insurance Company, a Write Your Own (WYO) Program carrier |2participating in the NFIP.1 Fidelity subsequently issued the policy, purportedly effective on July 2, 2008.

However, after the plaintiffs’ house sustained damage as a result of Hurricane Ike in September 2008, Fidelity issued a December 2008 notice of cancellation indicating that the policy was cancelled, retroactive to the policy inception date of July 2, 2008. The record establishes that the basis for the cancellation was a determination that the property was located within a CBRS zone.

The Barnetts filed suit against Fidelity and Insurance Unlimited, seeking damages for breach of contract, breach of warranty, negligence, and negligent misrepresentation. The trial court rejected exceptions and a motion for summary judgment filed by Fidelity, wherein it asserted that the trial court lacked subject matter jurisdiction and that the matter was preempted by federal law as the policy was issued pursuant to the NFIP. The trial court also denied a motion for summary judgment filed by Insurance Unlimited wherein it had alleged that the plaintiffs failed to inform the agency of the home’s location in a CBRS.

After a trial on the merits, the trial court rendered judgment in favor of the plaintiffs. In reasons for ruling, the trial court found that Insurance Unlimited was negligent in failing to follow federal guidelines in processing the plaintiffs’ application. It found that both Insurance Unlimited and Fidelity were |snegligent in failing to determine that the property was in a CBRS zone and that they had negligently misrepresented the validity of the flood insurance policy issued and the insurability of the property under the NFIP. The trial court determined that the plaintiffs relied on those negligent misrepresentations, believing that they had a valid policy in place at the time of Hurricane Ike and that the defendants also breached fiduciary duties owed to the plaintiffs. The defendants’ negligence, negligent misrepresentation, and breach of fiduciary duties, the trial court concluded, were causes-in-fact of the harm suffered by the plaintiffs. The risk of the harm suffered was found to be within the scope of the duties owed by the defendants. The trial court assessed fault equally to the defendants.

[54]*54With regard to damages, the trial court found that the plaintiffs sustained in excess of $50,000.00 in damages stemming from the conduct of the defendants. However, given the plaintiffs’ pre-trial stipulation and waiver of jury demand under La.Code Civ.P. art. 1732(1), the judgment reduced the damages awarded to $50,000.00.

Both defendants have appealed the judgment.

Discussion

Fidelity — Subject Matter Jurisdiction and Preemption

The plaintiffs advanced state-law-based claims against Fidelity, asserting that they relied on the representation of a flood insurance policy. In pre-trial exceptions, and again on appeal, Fidelity asserts that the state court lacked subject matter jurisdiction insofar as the claim stems from a policy involving the NFIP. \4See 42 U.S.C. §§ 4071-72. It also asserts that any state-law claims are preempted by operation of the NFIP. See 44 C.F.R. § 61.5(e).

The trial court denied Fidelity’s exceptions regarding the existence of federal question jurisdiction and preemption, rejecting its claims throughout this litigation. The trial court resolved the jurisdiction and preemption issues by relying on Campo v. Allstate Insurance Company, 562 F.3d 751 (5th Cir.2009),2 |swherein the [55]*55United States Court of Appeals, Fifth Circuit recognized the federal statutory and regulatory framework of the NFIP and the federal question jurisdiction and preemption implications of that body of law. However, the Fifth Circuit recognized a distinction between state-law claims arising from claims handling, which implicate both jurisdiction and preemption concerns, and those state-law claims stemming from policy procurement, which do not have such implications. Id. Under the guidance of Campo, the trial court found that the plaintiffs advanced claims strictly related to policy procurement. Thus, the trial court ultimately resolved this matter under the plaintiffs’ state-law claims. After review, we find that the trial court correctly determined that this case involves policy procurement.

In this case, Fidelity declared the policy to be cancelled and did so retroactive to the inception date.3 At trial, Fidelity’s Vice President of Claims, | JDeborah Price, affirmed that the policy was determined to be void from its inception. When the plaintiffs’ counsel inquired whether it was “as if it never existed basically,” Ms. Price replied “[cjorrect.” While denying the existence of the policy at issue, Fidelity seeks to avail itself of the jurisdictional and preemptive qualities of the federal' statutory scheme applicable to that very policy.

We note that, in Landry v. State Farm Fire & Casualty Company, 428 F.Supp.2d 531 (E.D.La.2006), the United States District Court for the Eastern District of Louisiana considered a case in which the insurer posed , the preemption issue in the context of a plaintiffs claim against an agent and NFIP insurer for failure to procure contents coverage as part of the insured’s flood insurance policy issued under the NFIA. Even for this discrete aspect of coverage, the district court concluded that the matter was one involving procurement insofar as it “involve[d] the initial obtaining of coverage.” Id. at 535.

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157 So. 3d 51, 12 La.App. 3 Cir. 1415, 2013 WL 1809872, 2013 La. App. LEXIS 856, Counsel Stack Legal Research, https://law.counselstack.com/opinion/barnett-v-fidelity-national-property-casualty-co-lactapp-2013.