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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,
OMAHA PROPERTY & CASUALTY INSURANCE COMPANY, DEFENDANT.
The opinion of the court was delivered by: Simandle, District Judge:
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.
In this case, plaintiffs Joseph L. Messa, Jr., John McDonald, Carol
McDonald, and 47 West 18th St. Condominium Association ("the
Association") seek compensatory and punitive damages and attorney's fees
from defendant Omaha Property & Casualty Insurance Company ("Omaha"),
arising from a flood that caused damage to their property in February
of 1998. According to the plaintiffs, defendant underpaid their
claim arising from the flood and is responsible for breach of contract
(both under provisions expressly stated in the contract and for breach of
the duty of good faith and fair dealing owed under insurance contracts
pursuant to New Jersey law), as well as for bad faith and punitive damages
under New Jersey tort law. Defendant seeks to dismiss each of the state
law based extra-contractual claims for general damages, incidental
damages, punitive damages, and attorney's fees, claiming that they are
preempted by federal law. For the reasons herein expressed, this Court
agrees that the state law-based, extra-contractual claims are preempted
by federal law, and those claims will be dismissed. Plaintiffs'
contractual claims will remain in the case.
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.
On June 14, 1999, plaintiffs filed a complaint in this Court alleging
In Count I, plaintiffs allege breach of contract, both under the
express terms of the policy and under the duties of good faith
and fair dealing read into every contract under New Jersey law.
According to plaintiffs, defendant breached these duties by refusing to
pay the actual value of the flood damages within a reasonable time, by
failing and refusing to negotiate a good faith settlement of the claim,
and by offering a vastly disproportionate amount of money in settlement
of the claim. In Count II, plaintiffs alleged that defendant acted in
bad faith through the above-named actions as well as through failing to
send correspondence directly to the plaintiffs' address and failing to
forward a full and complete copy of the renewed policy to plaintiffs
(thus requiring them to resort to other means to obtain the policy). In
Count III, plaintiffs allege that defendant's actions were willful,
wanton, reckless, and malicious. Altogether, plaintiffs seek general
damages, interest, costs, reasonable attorney's fees, consequential and
incidental damages, and punitive damages.
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.
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,
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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