United States District Court, D. New Jersey
Ross G. Currie, Esquire, Dinsmore & Shohl LLP, Wayne, Pennsylvania, Attorney for Plaintiff Jefferson Beach House Condominium, Association.
Benjamin Evan Gordon, Esquire, Stradley Ronon Stevens & Young LLP, Philadelphia, Pennsylvania, Attorney for Defendant Harleysville Insurance Company of New Jersey.
NOEL L. HILLMAN, District Judge.
This matter comes before the Court by way of Defendant Harleysville Insurance Company of New Jersey's motion [Doc. No. 8] to dismiss Plaintiff's complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted. Plaintiff Jefferson Beach House Condominium Association (hereinafter, "the Association") opposes Defendant's motion. The Court has considered the parties' submissions and decides this matter pursuant to Federal Rule of Civil Procedure 78.
For the reasons expressed below, Defendant's motion to dismiss will be granted in part and denied in part.
In this action, the Association asserts a single count for breach of contract based on Defendant Harleysville Insurance Company of New Jersey's alleged wrongful denial of insurance coverage for damage caused in the aftermath of Hurricane Sandy in the fall of 2012. The Court has subject matter jurisdiction over the Association's breach of contract claim pursuant to 28 U.S.C. § 1331, as the controversy arises under the laws of the United States, including the National Flood Insurance Act, 42 U.S.C. § 4001 and 42 U.S.C. § 4072. See also Van Holt v. Liberty Mut. Fire Ins. Co., 163 F.3d 161, 167 (3d. Cir. 1998) (holding that "42 U.S.C. § 4072 vests district courts with original exclusive jurisdiction over suits by claimants against [Write Your Own insurance] companies based on partial or total disallowance of claims for insurance arising out of the National Flood Insurance Act").
The Association's claims in this action arise from the partial denial of an insurance claim by Defendant Harleysville Insurance Company of New Jersey (hereinafter, "Harleysville") under a policy Harleysville issued through the National Flood Insurance Program. (Compl. [Doc. No. 1] ¶¶ 10, 19-20.) As the Third Circuit has explained, the National Flood Insurance Program ("NFIP") is "a federally supervised and guaranteed insurance program presently administered by the Federal Emergency Management Agency (FEMA') pursuant to the [National Flood Insurance Act of 1968] and its corresponding regulations." Van Holt, 163 F.3d at 165 (citing 44 C.F.R. §§ 59.1-77.2). The NFIP essentially "guarantees and subsidizes flood insurance." Brusco v. Harleysville Ins. Co., No. 14-914, 2014 WL 2916716, at *1 (D.N.J. June 26, 2014).
"In 1983, pursuant to regulatory authority granted by Congress in 42 U.S.C. § 4081(a), FEMA created the Write Your Own' (WYO') program." Van Holt, 163 F.3d at 165 (citing 44 C.F.R. §§ 62.23-.24). The WYO program authorizes "private insurance companies like [Harleysville] [to] write their own insurance policies." Van Holt, 163 F.3d at 165 (citing 44 C.F.R. § 62.23). Through the WYO program, Harleysville and other private insurance companies, "administer standard form policies, pay any excess from premiums to the federal government, and act as fiscal agents' of the United States." Brusco, 2014 WL 2916716, at *1 (citing 44 C.F.R. § 62 App. A (2013)). WYO companies "remit the insurance premiums to the Flood Insurance Administration (FIA')" but they "may keep funds required to meet current expenditures, which are limited to five thousand dollars." Van Holt, 163 F.3d at 165 (citing 44 C.F.R. Pt. 62, App. A., Art. VII(B)). "When WYO companies deplete their net premium income, a phenomenon that occurs regularly because the companies must forfeit a significant portion of the proceeds from premiums, they draw money from FEMA through letters of credit to disburse claims." Van Holt, 163 F.3d at 165 (citing 44 C.F.R. Pt. 62, App. A, Art. IV(A)). Accordingly, "regardless [of] whether FEMA or a WYO company issues a flood insurance policy, the United States treasury funds pay off the insureds' claims." Van Holt, 163 F.3d at 165.
In this case, Plaintiff is a condominium association authorized to act on behalf of the unit owners within the condominium building located at 120 South Jefferson Avenue in Margate City, New Jersey. (Compl. ¶ 9.) The Association is the named insured on a Standard Flood Insurance Policy ("SFIP"), Policy Number XXXXXXXXXXXXXX, issued by Harleysville through the NFIP, operative from January 30, 2012 through January 30, 2013 (hereinafter, "the Jefferson Beach SFIP"). (Id. ¶ 10.) The Association alleges that on or about October 29, 2012, the residential condominium building described by the Jefferson Beach SFIP sustained direct physical loss and damages due to flooding caused by Hurricane Sandy. (Id. ¶ 15.) Specifically, the Association asserts that the resulting flooding from Hurricane Sandy caused "damage to the parking garage, necessitating the removal and replacement of four (4) storm damaged glass block window panels and one (1) masonry block wall on the east elevation of the building." (Id. ¶ 16.) The Association obtained a proposal from Dean Adams Custom Builder, LLC,  Proposal No. 008-13, (hereinafter, "the Dean Adams Proposal"), regarding these damages which estimated the cost of repairs to be approximately $33, 264.00. (Id. ¶ 16.)
The Association alleges that it submitted a timely claim to Harleysville for the damages caused by the flooding related to Hurricane Sandy, including those damages covered by the Dean Adams Proposal. (Id. ¶ 17.) According to the complaint, on or about November 11, 2012, Harleysville inspected the property through independent adjuster Edward Adkins. (Id. ¶ 18.) The Association alleges that Mr. Adkins generated an estimate of the damages after his inspection which did not include repairs for the damages sought by the Association in the Dean Adams Proposal. (Id.) The complaint explains that Harleysville paid damages in the amount of $22, 702.00 according to Mr. Adkins's estimate on April 11, 2013. (Id.) The Association contends that on April 11, 2013 Harleysville also issued a partial denial letter to the Association denying coverage for the damages to the glass block window panels and masonry block wall. (Id. ¶ 20.) The Association claims that, as evidenced by the letter, "Harleysville's denial of coverage was based on certain coverage limitations" set forth in the Jefferson Beach SFIP. (Id.)
In this case, the Association contends that the Jefferson Beach SFIP represents a valid and binding contract between the Association and Harleysville under which Harleysville promised and had a duty to provide insurance coverage for all direct physical loss by or from flood in exchange for the Association's payment of premiums and fulfillment of certain other conditions contained in the Jefferson Beach SFIP. (Id. ¶ 24.) The Association represents that it met all relevant conditions required to obtain insurance coverage under the Jefferson Beach SFIP, but that Harleysville breached the parties' contract by ...