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McMullin v. Harleysville Insurance Company, Inc.

United States District Court, D. New Jersey

February 11, 2015



JEROME B. SIMANDLE, Chief District Judge.

Plaintiffs bring this action against their insurers, seeking to recover the insurance benefits purportedly owed to Plaintiffs as a result of the severe damage caused to their commercial property during Hurricane Sandy. (See Compl. at ¶¶ 1-30.) Hartford Insurance Company, Inc. (hereinafter, "Hartford") removed this action from the Superior Court of New Jersey on December 3, 2014. Plaintiffs now move to remand this matter to the state court on the grounds that the Court lacks jurisdiction over Plaintiffs' claims, and due to a procedural defect in Hartford's removal. (See Pls.' Br. [Docket Item 10].) For the reasons that follow, Plaintiffs' motion will be denied. The Court finds as follows:

1. In their Complaint, Plaintiffs generally allege that Hurricane Sandy caused catastrophic damage to their commercial property. (See Compl. at ¶ 20.) Subsequent to the storm, Plaintiffs submitted claims under their flood insurance policy with Hartford, their commercial property policy with Lloyds of London (hereinafter, "Lloyds"), and their businessowners policy with Harleysville Insurance Company (hereinafter, "Harleysville"). (See id. at ¶¶ 3, 5, 8, 21) Despite Plaintiffs' asserted entitlement to insurance coverage and benefits, Plaintiffs allege that Defendants actively avoided "their respective obligations to provide coverage and/or benefits, " opting instead to decline full and/or partial coverage for Plaintiffs' otherwise covered claims. (See id. at ¶¶ 26-30.) Plaintiffs therefore allege that such declination breached the express and implied terms and conditions of Defendants' respective insurance policies.[1] (Id. at 5-7, 10-15.)

2. In the pending motion, Plaintiffs argue that the Court lacks jurisdiction over Plaintiffs' Complaint because Plaintiffs' claims "simply" fail to involve "a substantial' question of federal law." (Pls.' Br. at 4, 7; see also Pls.' Reply at 4.) Indeed, Plaintiffs insist that any issues concerning Plaintiffs' flood insurance policy-questions that Plaintiffs appear to concede arise under federal law-comprise too trivial a portion of Plaintiffs' Complaint for the Court to properly exercise federal question jurisdiction. (Pls.' Br. at 7-8; Pls.' Reply at 6-13.) In addition, Plaintiffs argue that their non-flood claims rely upon "separate acts performed by separate entities [and] based [upon] separate theories, " and therefore lack sufficient relation to support an exercise of supplemental jurisdiction over their remaining, non-flood claims. (Pls.' Reply at 8.) For these reasons, Plaintiffs submit that this action must be remanded to the state court in its entirety or, in the alternative, that Plaintiffs' "separate and independent'" state law claims must "be severed and remanded."[2] (Pls.' Br. at 10.)

3. Defendants counter, however, that the National Flood Insurance Act, namely, 42 U.S.C. § 4072, provides the Court with original and exclusive jurisdiction over Plaintiffs' flood claims against Hartford. (Hartford's Opp'n at 5-8; Harleysville's Opp'n at 4.)[3] In addition, because the crux of this litigation concerns the alleged damage to Plaintiffs' property as a result of Hurricane Sandy, and the subsequent handling of Plaintiffs' insurance claims, Defendants argue that the remaining claims bear sufficient factual relation for purposes of supplemental jurisdiction. (See Harleysville's Opp'n at 5; Hartford's Opp'n at 8.)

4. When deciding whether an action originally filed in state court alleges a federal claim, courts consider whether the plaintiff's "well-pleaded complaint" contains an essential federal question. See Beneficial Nat'l Bank v. Anderson, 539 U.S. 1, 6 (2003); Rivet v. Regions Bank of La., 522 U.S. 470, 475 (1998). The mere presence of a federal issue in a state claim does not, however, automatically confer federal jurisdiction. See Merrell Dow Pharms., Inc. v. Thompson, 478 U.S. 804, 813 (1986). Rather, federal question jurisdiction arises when state-law claims "implicate significant federal issues." Grable & Sons Metal Prods., Inc. v. Darue Eng'g & Mfg., 545 U.S. 308, 312 (2005). However, "a plaintiff may not defeat removal by [failing] to plead necessary federal questions in a complaint." Franchise Tax Bd. of State of Cal. v. Constr. Laborers Vacation Trust for S. Cal., 463 U.S. 1, 22 (1983).

5. Despite Plaintiffs' position in the pending motion, Plaintiffs' Complaint makes clear that their claims involve, at least in part, a standard flood insurance policy (hereinafter, "SFIP") issued by Hartford, a write-your-own insurer (hereinafter, a "WYO"), pursuant to the National Flood Insurance Program (hereinafter, "NFIP"). (See generally Compl.) Indeed, Plaintiffs specifically appended the NFIP's General Property Form for SFIPs in connection with the pending motion. (See Pls.' Reply, Ex. A.) The Court therefore notes that the NFIP grants original and exclusive jurisdiction to federal district courts for all lawsuits against FEMA or a WYO insurer regarding an NFIP claim. See 42 U.S.C. § 4072; see also Palmieri v. Allstate Ins. Co., 445 F.3d 179, 185-86 (3d. Cir. 2008); Van Holt v. Liberty Mut. Fire Ins. Co., 163 F.3d 161, 167 (3d Cir. 1998). Indeed, all SFIPs, including the disputed SFIP in this instance, contain the following provision:

This policy and all disputes arising from the handling of any claim under the policy are governed exclusively by the flood insurance regulations issued by FEMA, the National Flood Insurance Act of 1968..., and Federal common law.

44 C.F.R. pt. 61, app. (A)(1), art. IX (emphasis added). (see also Pls.' Reply, Ex. A at 17.) Federal law therefore preempts all state law causes of action that, as here, arise from the handling of SFIP claims by a WYO insurance company. See Palmieri, 445 F.3d at 187.

6. Therefore, although Plaintiffs' Complaint nowhere references federal law, Plaintiffs' allegations nonetheless implicate federal law to the extent Plaintiffs assert claims against Hartford, a WYO insurance provider governed by the National Flood Insurance Act, 42 U.S.C. §§ 4001-4131 (hereinafter, the "NFIA"). Indeed, three counts of Plaintiffs' Complaint squarely concern Hartford's purportedly improper handling of Plaintiffs' SFIP claim. (See Compl. at ¶ 3 (alleging that Hartford issued a flood insurance policy for the disputed property), 5-7, 10-12 (alleging that Hartford breached the insurance policy, and its fiduciary duty, by "refusing to honor" Plaintiffs' claims).) Consequently, though couched in slightly varied terms, the substance of Plaintiffs' claims against Hartford arise under federal law, and the Court, accordingly, possesses original and exclusive federal jurisdiction over such claims under 42 U.S.C. § 4072.[4] See Van Holt, 163 F.3d at 176; see also Bd. of Directors of Rough Riders Landing Homeowners Ass'n, Inc. v. Signature Grp., LLC, 989 F.Supp.2d 239, 242 (E.D.N.Y. 2013) (generally noting that claims concerning the disallowance of flood claims fall within the core provisions of the NFIA, and denying the plaintiff's motion to remand); Residences at Bay Point Condo. Ass'n, Inc. v. Standard Fire Ins. Co., No. 13-2380, 2013 WL 6252692 (D.N.J. Dec 04, 2013) (same). In addition, because Plaintiffs' allegations concerning the mishandling of their SFIP claim require the interpretation of federal law, Plaintiffs' claims also depend upon the resolution of a "substantial question of federal law, '" and the Court therefore possesses federal question jurisdiction under 28 U.S.C. § 1331, as well. Morris v. Simsol Ins. Servs., No. 13-2514, 2013 WL 6590584, at *4 (W.D. La. Dec. 16, 2013) (denying a motion to remand under 42 U.S.C. § 4072 and 28 U.S.C. § 1331, because the plaintiff's claims concerned, in part, the mishandling of an NFIP flood claim). For all of these reasons, the Court concludes that it has federal jurisdiction over Plaintiffs' claims arising from the adjustment of Plaintiffs' federal flood insurance policy with Hartford, [5] and therefore turns to whether the Court's jurisdiction extends to the entire litigation.

7. "[I]n any civil action of which the district courts have original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution." 28 U.S.C. § 1367(a). In order to evaluate the propriety of supplemental jurisdiction in this instance, the Court must determine whether the circumstances of this action meet three requirements. See 28 U.S.C. § 1367. First, "[t]he federal claim must have substance sufficient to confer subject matter jurisdiction on the court.'" Lyon v. Whisman, 45 F.3d 758, 760 (3d Cir. 1995) (citation omitted). Second, the federal claim and pendent state law claims "must derive from a common nucleus of operative facts.'" Id. (citation omitted). Third, the Court must consider whether Plaintiffs' claims "would ordinarily be expected'" to arise in one judicial proceeding. Id. (citation omitted).

8. Given Plaintiffs' allegations, the Court finds it appropriate to exercise supplemental jurisdiction over the entirety of Plaintiffs' Complaint. First, for the reasons stated above, the Court finds that Plaintiffs' federal flood claims possess the requisite substantiality, particularly given the pervasive federal scheme under which such claims arise. See Signature Grp., LLC, 989 F.Supp.2d 239, 242 (quoting Southpointe Villas Homeowners Ass'n, Inc. v. Scottish Ins. Agency, Inc., 213 F.Supp.2d 586, 590 (D.S.C. 2002)) (finding that flood claims implicate "both a uniquely federal interest' (particularly, given that the United States... bears the risk of any potential premium refund') and a federal policy requiring" uniform interpretation of the NFIA, and the regulations promulgated thereunder). Second, despite Plaintiffs' assertions, Plaintiffs' claims rely upon an inextricably linked and identical factual predicate, as the Complaint itself explains. Indeed, Plaintiffs' Complaint principally hinges upon Plaintiffs' assertions that Defendants improperly handled Plaintiffs' insurance claims in the aftermath of Hurricane Sandy (id. at 5-7), in breach of Defendants' express and implied obligations under their respective insurance policies. (Id. at 7-17.) The common threads through Plaintiffs' Complaint concern the nature of the damage to Plaintiffs' commercial property, and whether such damage entitled Plaintiffs to insurance benefits under one and/or all of Plaintiffs insurance policies with Defendants. Indeed, Plaintiffs' nonflood claims rely upon allegations substantively identical to those alleged in connection with Plaintiffs' flood claims. (Compare Compl. at 5-7.) The Court therefore concludes that Plaintiffs' non-flood state law claims share a factual predicate common, if not identical, to Plaintiffs' federal flood claims. See Morris, 2013 WL 6590584, at *4 (finding supplemental jurisdiction "clearly available" as to the plaintiff's essentially "identical" non-flood claims). Finally, with regard to the third requirement, the Court follows the numerous federal courts that have deemed non-flood claims asserted in connection with federal flood claims logically litigated together for the purposes of supplemental jurisdiction. (Harleysville's Opp'n at 5 (citing a litany of cases finding supplemental jurisdiction appropriate under analogous circumstances).) Indeed, the Court finds the retention of such claims in a single action warranted and rationally expected, particularly where, as here, the claims rely upon substantively identical allegations.[6] See Morris, 2013 WL 6590584, at *4. For all of these reasons, the Court finds it appropriate to exercise supplemental jurisdiction over Plaintiffs' state non-flood claims.

9. In sum, because the Court possesses original and supplemental jurisdiction over Plaintiffs' Complaint pursuant to 42 U.S.C. § 4072, 28 U.S.C. § 1331, and 28 U.S.C. § 1367(a), Plaintiffs' motion to remand ...

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