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Ryan v. Selective Insurance Company of America

United States District Court, D. New Jersey

June 23, 2014

WILLIAM A. RYAN and ANTHONY J. RYAN, Plaintiffs,
v.
SELECTIVE INSURANCE COMPANY OF AMERICA, a/k/a/ SELECTIVE INSURANCE GROUP, INC.; MERRIMACK MUTUAL FIRE INSURANCE COMPANY; BAY STATE INSURANCE COMPANY; JOHN DOES 1-10, and JOHN DOES 11-20, Defendants.

MEMORANDUM OPINION AND ORDER

KEVIN McNULTY, District Judge.

Plaintiffs William A. Ryan and Anthony J. Ryan ("Plaintiffs") own two single-family residences in Brick, New Jersey, that were destroyed by tidal flooding and high winds during Hurricane Sandy. (Complaint [ECF No. 1-1] at ¶ 6 to Count One, ¶ 8 to Count Nine). They are suing their insurers, who have denied coverage. Counts one through eight, directed against defendant Selective Insurance Company of America ("Selective"), [1] are based on the allegation that Selective issued two policies of flood insurance (one for each property) that should have covered flood damage experienced during Sandy. ( Id. at ¶ 7-9 to Count 2 One).[2]

Selective has filed a motion to dismiss counts three through eight of the complaint, as well as all claims for "extra-contractual relief, " pursuant to Federal Rule of Civil Procedural 12(b)(6). It has also moved to quash Plaintiffs' jury demand pursuant to Fed.R.Civ.P. 39(a)(2). [ECF No. 9].

Plaintiffs have since voluntarily dismissed counts three through eight. [ECF No. 11]. Plaintiffs have not filed any response to the other components of Selective's motion. Accordingly, unfortunately without the benefit of adversary briefing, I address the remaining issues: whether the claims for extracontractual relief in counts one and two should be dismissed, and whether Plaintiffs have the right to a jury trial in this action. I do so on the papers, without oral argument. See Fed.R.Civ.P. 78(b).

ANALYSIS

Selective states that the two policies it issued are Standard Flood Insurance Policies ("SFIP"). It issues such policies as a participant in the "Write-Your-Own" policy program under the National Flood Insurance Program ("NFIP"). ( See Selective's Br. Supp. Mot. [ECF No. 9-1] at 1).

The National Flood Insurance Act, 42 U.S.C. § 4001 et seq., authorizes the director of the Federal Emergency Management Agency ("FEMA") to promulgate regulations "for the general terms and conditions of insurability which shall be applicable to properties eligible for flood insurance coverage, " 42 U.S.C. §§ 4013, 4019, and to use private insurers such as Selective as "fiscal agents of the United States, " id. at § 4081. The standardized terms and conditions of all SFIP policies are set forth in 44 C.F.R. Part 61, Appendix A(1). Private insurers like Selective may furnish SFIPs, with terms and conditions dictated by the governing regulations, via the "Write-Your-Own" program. See 44 C.F.R. § 62.23(d); 44 C.F.R. pt. 61 app. A(1).

1. Motion to Dismiss Claims for Extra Contractual Relief

The first part of Selective's pending motion seeks dismissal of Plaintiffs' claims for "extra-contractual relief." By that, Selective means incidental damages, consequential damages, punitive and exemplary damages, statutory treble damages, interest, attorney's fees and costs. (Selective Br. at 11).

As noted above, the only remaining counts against Selective are Counts One and Two. These essentially seek a declaratory judgment of coverage and damages for breach of contract. (Complaint at Counts One and Two). Because Counts One and Two do not seek punitive damages or statutory treble damages, I will disregard that part of Selective's argument and deny that part of its motion as moot. Counts One and Two do, however, seek "reasonable counsel fees, " "costs of court, " "interest as provided by the Rules of Court, " "incidental damages, " and "consequential damages." I will therefore consider Selective's motion insofar as it seeks to dismiss those claims for damages.

Selective bases its argument on the policy language of Article I of 44 C.F.R. Pt. 61 app. A(1), which says that policyholders are to be covered for "direct physical loss by or from flood." Citing district court case law, it contends that any relief other than compensation for "direct physical loss" is therefore beyond the scope of coverage. (See Selective's Br. at 12). Selective adds that the question of authorization has a Constitutional dimension under the Appropriations Clause. That Constitutional provision dictates that "money may be paid out only through an appropriation by law; in other words, the payment of money from the Treasury must be authorized by statute.'" Norman v. Fid. Nat'l Ins. Co., 354 F.Appx. 934, 937 (5th Cir. 2009) (quoting Wright v. Allstate Ins. Co., 415 F.3d 384, 387 (5th Cir. 2005)).

Attorney's fees

Cole v. N.H. Ins., 2012 U.S. Dist. LEXIS 2513 (N.D. Miss. Jan. 9, 2012) does not support Selective's contention. That court ruled that state law claims not based on a SFIP insurer's alleged breach of contract (i.e., failure to provide coverage) are preempted. The case says nothing about what type of damages are recoverable in a coverage suit. 2012 U.S. Dist. 2513 at *3847. The same holds true of the terse opinion in Wang v. Fid. Nat'l Ins. Program, 2007 U.S. Dist. LEXIS 92263, *13 (E.D. La. Dec. 17, 2007).

Selective's position is partially supported, albeit with little reasoning, by Cook v. USAA Gen. Indem. Co., 2008 U.S. Dist. LEXIS 103967, *14-16 (N.D. Cal. Dec. 16, 2008). There, the United States District Court for the Northern District of California relied on a published opinion holding that determined that the National Flood Insurance Act permits only a narrow cause of action to recover disallowed amounts under a breach of contract claim, 42 U.S.C. § 4072. See Bianchi v. State Farm Fire & Cas. Co., 120 F.Supp.2d 837, 841-842 (N.D. Cal. 2000). Bianchi therefore held that punitive damages, emotional distress damages, and attorneys' fees are all unrecoverable because they are not provided for by statute. Relying on Bianchi, ...


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