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MESSA v. OMAHA PROPERTY & CASUALTY INSURANCE CO.

March 8, 2000

JOSEPH L. MESSA, JR., JOHN MCDONALD AND CAROL MCDONALD, H/W, 47 WEST 18TH ST. CONDOMINIUM ASS'N, PLAINTIFFS,
V.
OMAHA PROPERTY & CASUALTY INSURANCE COMPANY, DEFENDANT.



The opinion of the court was delivered by: Simandle, District Judge:

OPINION

The National Flood Insurance Program uses private insurers acting as fiscal agents of the United States Treasury to adjust and pay flood insurance claims for covered losses. This case raises the issue of whether an insured who is dissatisfied with the amount offered upon its flood loss may bring claims for extra-contractual causes of action (such as bad faith and punitive damages) against the insurer arising under state law, or whether such extra-contractual actions for improper claims processing are preempted by federal law.
I. Background
The facts as alleged are as follows. Plaintiffs Joseph Messa, Carol McDonald, and John McDonald are citizens and residents of Pennsylvania and co-own a condominium unit located at 47 West 18th Street in Ocean City, New Jersey ("the insured property"). The Association is an organization located in Pennsylvania but which serves the interests of the owners of the insured property. Defendant Omaha is organized and exists under the laws of the State of Nebraska and has its principal place of business in Omaha, Nebraska, and it does continuous and systematic business in the State of New Jersey. This Court has diversity jurisdiction pursuant to 28 U.S.C. § 1332. This Court also has federal question jurisdiction because the case involves the alleged breach of a Standard Flood Insurance Policy ("SFIP") issued pursuant to the National Flood Insurance Program ("NFIP"). Van Holt v. Liberty Mutual Fire Ins. Co., 163 F.3d 161, 166 (3d Cir. 1998).
On June 3, 1995, plaintiffs entered into a contract with defendant for insurance for direct physical loss by or from a flood for a period of one year and renewable thereafter at yearly intervals, Residential Condominium Building Association Policy No. 3006469286 ("the Policy"). The policy was renewed for several years, and was renewed again for the term of June 3, 1997 to June 3, 1998. The policy limit is $250,000.00.
On February 5, 1998, a violent storm struck the southeastern coast of New Jersey, producing high winds, rain, and dangerously high levels of water and tidal flooding, leading to a Presidential emergency declaration, under FEMA 1206 DR-NJ. As a direct result of this storm, according to the complaint, the insured property sustained severe and extensive flood damage which will require its owners to expend substantial sums in repair and replacement costs and costs associated with preventing against additional deterioration. Plaintiffs provided prompt notice to the defendant, who sent an adjustor, Paul Scull, to conduct an inspection of the insured property on March 11, 1998. Scull set the total claim payable at $6,664.73.
Upon receipt of defendant's Proof of Loss Report from Scull, plaintiffs immediately notified defendant of plaintiff's disagreement with the estimate and informed defendant of their intention to secure the opinion of an independent engineer. On June 3, 1998, plaintiff Messa forwarded to defendant a copy of the report of F.A. Vinciguierra, P.E., an independent structural engineer, who projected the total costs at $71,500. According to plaintiffs, through defendant's alleged use of dilatory and bad faith tactics, defendant has refused, and continues to refuse, to offer and pay a reasonable sum in settlement of plaintiffs' claim, thereby violating the express terms of the contract, defendant's New Jersey state law obligations of good faith and fair dealing (read into contracts by New Jersey law), and the intent of the parties in the formation of the contract.

Now before the Court is defendant's motion to dismiss the state law-based, extra-contractual claims for failure to state a claim pursuant to Fed.R.Civ.P. 12(b)(6).*fn1 For the reasons stated herein, defendant's motion will be granted.

II. Discussion

A. Standards Upon a Motion to Dismiss

A motion to dismiss under Rule 12(b)(6) for failure to state a claim upon which relief can be granted does not attack the merits of the case, but merely tests the legal sufficiency of the Complaint. See Nami v. Fauver, 82 F.3d 63, 65 (3d Cir. 1996). When considering a Rule 12(b)(6) motion, the reviewing court must accept as true all well-pleaded allegations in the Complaint and view them in the light most favorable to the plaintiff. See Scheuer v. Rhodes, 416 U.S. 232, 236 (1974); Jordan v. Fox, Rothschild, O'Brien & Frankel, 20 F.3d 1250, 1261 (3d Cir. 1994). In considering the motion, a district court must also accept as true any and all reasonable inferences derived from those facts. See Oshiver v. Levin, Fishbein, Sedran & Berman, 38 F.3d 1380, 1384 (3d Cir. 1994). A court may not dismiss the Complaint "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957).
The question before the court is not whether the plaintiffs will ultimately prevail; rather, it is whether they can prove any set of facts in support of their claims that would entitle them to relief. See Hishon v. King & Spalding, 467 U.S. 69, 73 (1984). However, while the rules do not dictate that a "claimant set forth an intricately detailed description of the asserted basis for relief, they do require that the pleadings give the defendant fair notice of what the plaintiff's claim is and the grounds upon ...

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