Opinion
Civil Action No. 02-2930 C/W 02-3006, Section "A" (1)
January 27, 2003
ORDER AND REASONS
Before the Court is a Motion To Dismiss and Motion to Strike Pursuant to Federal Rule of Civil Procedure 12(b)(6) and 12(f) (Rec. Doc. 9) filed by defendant Allstate Insurance Company ("Allstate"). Plaintiff, Richard A. Thalheim, Jr., opposes the motion. The motion, set for hearing on January 15, 2003, is before the Court on the briefs without oral argument. For the reasons that follow, the motion is GRANTED IN PART AND DENIED IN PART.
Background
Plaintiff brought these consolidated law suits against Allstate following flood damage sustained to his property during tropical storm Allison in June 2001. Allstate participates as a write-Your-Own Carrier ("WYO") in the U.S. Government's National Flood Insurance Program ("NFIP"). Allstate ultimately paid plaintiff $90,125.09, a sum far below what he alleges his claim was worth. In addition to alleging a breach of contract claim for additional funds owed pursuant to the policy, Plaintiff's petitions seek various other elements of extra-contractual damages, i.e., penalties and attorneys fees under Louisiana law and general damages (inconvenience, annoyance, upset, worry, anxiety, concern and displacement). Plaintiff also seeks prejudgment interest.By way of the instant motion, Allstate seeks a partial dismissal of Plaintiff's claims. Specifically, Allstate asserts that Plaintiff's extra-contractual damages are not permitted because the policy at issue is an NFIP policy governed solely by federal law. Allstate cites numerous cases from district courts in this District which support its position, as well as West v. Harris, 573 F.2d 873 (5th Cir. 1978), from the Fifth Circuit (regarding statutory penalties and attorney's fees).
In opposition, Plaintiff argues that federal law does not bar tort claims against an NFIP carrier and that Spence v. Omaha Indemnity Insurance Co., 996 F.2d 793 (5th Cir. 1993), firmly supports that contention. With the exception of Spence, all of Plaintiff's cited authorities, some of which provide full support for Plaintiff's position, originate outside of the Fifth Circuit.
Discussion
The National Flood Insurance Act of 1968 makes flood insurance available through a program with large-scale participation by the federal government. West v. Harris, 573 F.2d 873, 880 (5th Cir. 1987) (citing 42 U.S.C. § 4001 (b), (d)). This program is carried out to the maximum extent practicable by the private insurance industry. Id. The flood insurance program is a "child of Congress" conceived to achieve policies of a national scope. Id. at 881. Because the federal government participates so extensively in the program, both supervisory and financially, federal law will apply to most claims arising out of the federally-backed flood insurance policy. See id. But see Spence v. Omaha Idem. Ins. Co., 996 F.2d 793 (5th Cir. 1993) (allowing a state law fraudulent misrepresentation claim).
In West, the Fifth Circuit held that a plaintiff could not recover state law statutory penalties and attorney's fees for arbitrary denial of coverage in conjunction with a NFIP policy claim. 573 F.2d at 881. The court allowed, however, an award of prejudgment interest on the breach of contract claim. Id. at 882.
In In re Estate of Lee, the Fifth Circuit held that in a suit against the Director of FEMA the federal government was the real party in interest. 812 F.2d 253, 255 (5th Cir. 1987). Therefore, sovereign immunity attached precluding an award of prejudgement interest. Id. The NFIP itself, as opposed to the Write-Your-Own carrier, was named as defendant in Estate of Lee. Estate of Lee might very well be the death knell for Plaintiff's prejudgment interest claim but given the uncertainty in the viability of this aspect of West, this Court will follow Judge Fallon's approach in Cage v. State Farm Fire Casualty Co., 1997 WL 40641 (E.D. La. Jan. 31, 1997), a case decided well afterWest and Estate of Lee. In Cage, Judge Fallon distinguished "legal interest" from other non-pecuniary elements of damage that would not be allowed under federal law. 1997 WL 40641, at *2. Like Judge Fallon, this Court will allow Allstate to re-urge this aspect of its motion by way of a post-trial motion if Plaintiff ultimately prevails on his claim.
However, in Spence v. Omaha Indemnity Insurance Co., the Fifth Circuit held that plaintiffs could bring a tortious misrepresentation claim against their Write-Your-Own carrier for alleged fraud in statements made about the coverage afforded under their policy. 996 F.2d at 796. In deciding Spence, the Fifth Circuit did not overrule West and even invoked it for the proposition that federal law continues to govern national flood insurance policies. Id. at 796 n. 14. Given that Spence involved a tort claim whereas West involved statutory penalties and attorney's fees, the two cases are not necessarily in conflict. Therefore, West still controls in this circuit with respect to any claim for statutory penalties and attorney's fees. Thus, Plaintiff's claims for these elements of damage must be dismissed.
The more difficult question, however, is whether plaintiff's other elements of extra-contractual non-pecuniary damages are allowable in light of Spence. The Court can't help but note that post-Spence, four other judges in this District have held that such non-pecuniary damages are not allowed in conjunction with an NFIP claim. Durkin v. State Farm Mut. Ins. Co., 3 F. Supp.2d 724 (E.D. La. 1997) (Vance, J.); Cage v. State Farm Fire Cas. Co., 1997 WL 40641 (E.D. La. Jan. 31, 1997) (Fallon, J.); Stock v. State Farm Ins. Co., 1997 WL 40629 (E.D. La. Jan. 30, 1997) (Duval, J.); Schopen v. State Farm Ins. Co., 1996 WL 696444 (E.D. La. Dec. 2, 1996) (Mentz, J.); Levy v. Omaha Prop. Cas., 1996 WL 680251 (E.D. La. Nov. 21, 1996) (Duval, J.). While none of these decisions specifically addresses how Spence affects the analysis, this Court adopts the approach followed by its colleagues in this District. Plaintiff failed to distinguish these cases from his own but instead chose to rely on authorities from other jurisdictions.
In Cohen v. State Farm Fire Casualty, cited by Plaintiff, the district criticized the Durkin case for failing to address Spence. 68 F. Supp.2d 1151, 1158 (C.D. Calif. 1999).
The Court will consider, however, a motion by Plaintiff to reassert the non-pecuniary elements of damage if, during the course of this litigation, new relevant authority within this circuit is published.
Accordingly;
IT IS ORDERED that the Motion To Dismiss and Motion to Strike Pursuant to Federal Rules of Civil Procedure 12(b)(6) and 12(f) (Rec. Doc. 9) filed by defendant Allstate Insurance Company should be and is hereby GRANTED IN PART AND DENIED IN PART. The motion is GRANTED insofar as Allstate seeks dismissal of Plaintiff's claims for non-pecuniary general damages, penalties, and attorney's fees. The motion is DENIED as to pre-judgment interest.