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finding FEMA regulations not to be arbitrary, capricious, or manifestly contrary to the statute and therefore affording the regulations controlling weight
Summary of this case from Prastos v. Travelers Ins. Cos.Opinion
Civil Action No. 04-2222.
October 20, 2004
MEMORANDUM
Defendant Federal Emergency Management Agency ("FEMA") moves for dismissal of Plaintiff Natalie Hower's claim for lack of subject matter jurisdiction, pursuant to Federal Rule of Civil Procedure 12(b)(1), and for Hower's failure to state a claim in her complaint, pursuant to Federal Rule of Civil Procedure 12(b)(6). In its Motion, FEMA argues, first, the Court lacks subject matter jurisdiction because there has been no waiver of sovereign immunity to sue FEMA under the National Flood Insurance Act, 42 U.S.C. §§ 4001- 4129 ("NFIA"), and, second, Hower failed to state a claim because the contract that was allegedly breached is with Nationwide, not FEMA.
Pursuant to 5 U.S.C. § 301 et seq., all functions, personnel, and liabilities of the Federal Emergency Management Agency (FEMA) are transferred to the Secretary of the Department of Homeland Security. Therefore, Tom Ridge, Secretary of the Department of Homeland Security, is the proper party defendant. However, the Court will refer to the Defendant as FEMA in this opinion for consistency with the complaint and for simplicity.
As discussed below in greater detail, because the Court finds that there is no waiver of sovereign immunity to sue FEMA in this matter, the Court does not have subject matter jurisdiction over this matter and the matter must be dismissed with prejudice. Because the Court lacks subject matter jurisdiction, FEMA's assertion that Hower fails to state a claim will not be addressed. Therefore, the Court grants FEMA's Motion to Dismiss.
I. BACKGROUND
On or about September 30, 2003, Hower suffered losses and damages cause by flood. On November 17, 2003, Hower filed a proof of loss claim with the carrier of her flood insurance policy, Nationwide Mutual Fire Insurance Company ("Nationwide"), alleging that the flood caused approximately $9,500 worth of property damage. In a letter dated December 22, 2003, Nationwide rejected the claim. On May 20, 2004, Hower sued FEMA seeking damages under the flood insurance policy provided by Nationwide, which Hower alleges is an agent of FEMA.
FEMA filed a Motion to Dismiss on August 2, 2004. Hower responded to this Motion by amending her complaint on August 16, 2004. The Court denied the August 2, 2004 Motion to Dismiss as moot. The current Motion to Dismiss was filed by FEMA on August 25, 2004. Hower filed her response to this Motion on September 7, 2004, and FEMA filed a reply to the response on September 22, 2004.
II. STANDARD OF REVIEW
A federal district court must dismiss any action where there is no subject matter jurisdiction. FED. R. CIV. P. 12(b)(1). This Court's jurisdiction is limited, and there is a presumption that subject matter jurisdiction does not exist. Kokkonen v. Guardian Life Ins. Co., 511 U.S. 375, 377 (1991). The party invoking subject matter jurisdiction, in this case Hower, has the burden of establishing that jurisdiction. Id. Therefore, it is a well settled rule that a court must dismiss any case where it has not been granted jurisdiction by statute or the Constitution. Abdul-Akbar v. McKelvie, 239 F.3d 307, 316 (3d Cir. 2001).
The United States of America cannot be sued unless Congress explicitly waives sovereign immunity. United States Department of Energy v. Ohio, 503 U.S. 607, 615 (1992); United States v. Nordic Village, Inc., 503 U.S. 30, 34 (1992). Without this explicit waiver, federal courts do not have the required statutory or Constitutional authority to exercise jurisdiction. For these reasons, this case must be dismissed.
III. DISCUSSION
The instant matter hinges upon whether the limited waiver of sovereign immunity provided in the National Flood Insurance Act, 42 U.S.C. §§ 4001- 4129 ("NFIA"), applies to the facts of this case. The limited waiver in the NFIA is "upon the disallowance by the Director of any such claim, or upon the refusal of the claimant to accept the amount allowed upon any such claim, the claimant . . . may institute an action against the Director." 42 U.S.C. § 4072. This limited waiver would seem to apply exclusively to the situation where FEMA directly denies an application, not where a private corporation independent of FEMA denies a claim.
In the present case, no disallowance was made by the Director of FEMA, since the flood insurance policy here was issued by Nationwide, and it was Nationwide, not FEMA, that denied Hower's claim. In fact, Nationwide is a participant in the Write Your Own Program ("WYO"), and is not a general agent of the federal government. See 44 C.F.R. § 62.23(g) (stating "WYO Companies shall not be agents of the Federal Government and are solely responsible for their obligations to their insureds"). Therefore, the limited waiver set forth in 42 U.S.C. § 4072 does not apply in this situation, inasmuch as Hower's claim was submitted to Nationwide, and FEMA did not take part in the evaluation or denial of the claim.
WYO Companies are private companies that "arrange for the adjustment, settlement, payment and defense of all claims arising from policies of flood insurance it issues under the Program, based upon the terms and conditions of the Standard Flood Insurance Policy." 44 C.F.R. § 62.23(d).
Other federal courts that have considered this matter have routinely dismissed claims similar to this one on the grounds that the limited waiver of sovereign immunity in the NFIA is not satisfied in such situations. McCulloch v. Delta Lloyds Insurance Co., No. H-01-3747 (S.D. Tex. Jan. 2, 2003); Tollini v. State Farm, No. C99-3383 MJJ (N.D. Cal. Feb. 9, 2000); Aycock v. FEMA, C.V. 92-H-171-NE (N.D. Ala. June 10, 1993); Godchaux v. Aetna Casualty and Surety Co., No. 89-1449-H (E.D. La. Sept. 5, 1989); Fortenberry v. FEMA, C.A. W85-0211 (S.D. Miss. July 29, 1986); Rushing v. FEMA, C.A. W85-0210(b) (S.D. Miss. July 29, 1986).
The applicable federal regulations consistently state that if a claim is issued under a WYO policy, the WYO Company stands in for FEMA and is the proper party to be sued. See 44 C.F.R. § 61.13(f) ("Standard Flood Insurance Policies issued by WYO Companies may be executed by the issuing WYO Company as Insurer, in the place and stead of the Federal Insurance Administrator"); 44 C.F.R. § 62.23(d) ("A WYO Company issuing flood insurance coverage shall arrange for the adjustment, settlement, payment and defense of all claims arising from policies"); 44 C.F.R. § 62.23(i)(6) ("[T]he responsibility for defending claims will be upon the [WYO] Company"). In Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), the Supreme Court held that regulations propounded by a federal agency with explicit authorization from Congress, such as the ones described above, are given "controlling weight unless they are arbitrary, capricious, or manifestly contrary to the statute." 467 U.S. at 844; see 42 U.S.C. § 4011(a) (stating "the Director of the Federal Emergency Management Agency is authorized to establish and carry out a national flood insurance program"). The Court does not find FEMA's regulations in this matter to be "arbitrary, capricious, or manifestly contrary to the statute," and, thus, the cited regulations are given controlling weight.
Notwithstanding the above, Hower cites to Van Holt v. Liberty Mutual Fire Insurance Co., 163 F.3d 161 (3d Cir. 1998), and argues that Van Holt implicitly recognizes the limited waiver in the NFIA applies to cases where the insured sues FEMA for a breach of contract signed with a WYO Company. In Van Holt, the Court of Appeals for the Third Circuit ruled that a suit against a WYO Company is the "functional equivalent of a suit against FEMA in so far as a WYO Company is a fiscal agent of the United States." 163 F.3d at 166 (citing 42 U.S.C. § 4071(a)(1)). Furthermore, the court of appeals noted that an indemnity relationship exists between FEMA and the WYO Companies by referencing that FEMA will reimburse the defense costs if WYO defends a claim and flood insurance claims are ultimately paid for out of the public treasury. Id. at 167. While cognizant of the duty to follow precedent, the Court finds Van Holt to be inapplicable to the present matter.
Upon close scrutiny, it appears that Van Holt merely stated the proposition that federal courts have jurisdiction over suits by policyholders against WYO Companies, not that the limited waiver of sovereign immunity applies whenever a policy holder could sue a WYO Company. The issue in the Van Holt case was "whether the federal courts have subject-matter jurisdiction over a complaint by an insured predicated on the [NFIA] but actually sounding in tort." Van Holt, 163 F.3d at 163. The court of appeals did not address whether NFIA's limited waiver of sovereign immunity applied when a WYO Company, not FEMA, denies the claim, nor does this Court find that the court of appeals intended for Van Holt to be interpreted as expansively as Hower argues here.
The specific language in the NFIA requires a disallowance by the Director before a claimant has the right to sue the government. 42 U.S.C. § 4072. Under the WYO Program it is private insurance companies who are fiscal agents of the government, not general agents. As such, the WYO Companies "are solely responsible for their obligations to their insureds under any flood insurance policies issued." 44 C.F.R. § 62.23(g). In this case, the Director of FEMA did not disallow Hower's claim. The disallowance was a decision by Nationwide. The Court of Appeals for the Third Circuit in Van Holt did not treat the WYO Company as an extension or general agent of the Director making the actions of the WYO Company the equivalent of the actions of the Director. 163 F.3d at 165. Instead, the court of appeals held that, because the federal government is fiscally responsible for reimbursing the WYO Company, the NFIA vests the district courts with subject matter jurisdiction over suits against the WYO Company.
Hower's alleged corollary is contradictory to the statute and the reasonable interpretation of the statute by FEMA and numerous other courts, and is not an implicit finding in Van Holt. Therefore, the Court holds that it lacks subject matter jurisdiction over the claims asserted by Hower here. IV. CONCLUSION
For the foregoing reasons, the Court grants FEMA's Motion to Dismiss. An appropriate Order consistent with this Memorandum follows.
ORDER
AND NOW, this 20th day of October, 2004, upon consideration of the Motion to Dismiss (Docket #9) of Defendant Federal Emergency Management Agency ("FEMA"), Plaintiff Natalie Hower's Response in Opposition to the Motion to Dismiss (Docket #10), and Defendant FEMA's Reply to Response (Docket #11), for the reasons set out in the accompanying Memorandum, it is hereby ORDERED the Motion to Dismiss is GRANTED, andIt is further ORDERED that the above action is DISMISSED with prejudice and the case is CLOSED for statistical purposes.