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Marks Real Estate Co., LLC v. Jewell

United States District Court, W.D. Louisiana, Alexandria Division

September 14, 2018


          JUDGE DRELL




         The Marks Real Estate Company, LLC (“Marks”) contacted insurance agent Richard Jewell about placing a flood insurance policy on a structure in Rapides Parish. Jewell obtained a policy through Wright National Flood Insurance Company (“Wright National”). The structure suffered flood damage, but Wright National denied the claim on the grounds the structure was built entirely over water and, therefore, ineligible for insurance.

         Marks filed suit against Wright National and Mr. Jewell in state court, and Wright National removed the case based on an assertion of federal question jurisdiction. Before the court is Marks' Motion to Remand (Doc. 17) that argues the court lacks federal question jurisdiction. Marks makes the alternative argument that, even if the court has jurisdiction over the claims against Wright National, it should sever and remand the state law claims against Mr. Jewell. For the reasons that follow, it is recommended that the motion to remand be denied.

         Relevant Allegations

          Marks contacted Mr. Jewell in December 2016 about placing a flood insurance policy on property owned by Marks in Boyce, Louisiana. Complaint, ¶ 3. The property is built with three of its four walls suspended above the Kincaid Reservoir, with the fourth wall built and secured on shore. ¶ 4. Jewell indicated to Marks that he would place a flood insurance policy on the property, and he applied for a Standard Flood Insurance Policy (“SFIP”) written by Wright National, a “write your own” carrier that participates in the National Flood Insurance Program. ¶ 5.

         The application “was completed solely by Jewell, ” and he indicated on the application that the property was built partially over water. Wright National accepted the application, Marks paid the premium, and a policy was issued for a term of one year. ¶¶ 5-6. A few months later, a strong system of storms, with associated flooding, struck the area. The property sustained significant flood damage. ¶¶ 7-8.

         Marks informed Mr. Jewell of the damage, and Jewell initiated the claims process with Wright National. A third-party claims adjuster inspected the property and told Marks that it was his opinion that the property was constructed entirely over water so should have never been covered by the policy. Wright National then hired an engineering firm to create a report, and the firm wrote that all of the building was situated over water with the exception of one wall, which was supported by a bulkhead on the shore. Wright National then sent Marks a denial of claim letter. It stated that the property was not covered by the policy because reports and photos indicated that the structure was built directly over the water, and the policy does not cover a building or contents is the building is located entirely, in, on, or over water. ¶¶ 7-14; Doc. 1, Ex 4.

         Marks alleges that Wright National's denial of its claim “represents a breach of the contract entered into between Marks Real Estate and Wright to provide flood insurance coverage under the policy pursuant to La. Civ. Code art. 1994.” ¶ 15. Marks also alleges that it relied on Wright National's contractual agreement to its detriment, and it asserts that Wright National was negligent in providing a putative flood insurance policy on property that Wright now says was not insurable from the inception of the policy. ¶¶ 16-17. Marks alleges that Wright National, by its breach of contract, negligence, and promise to Marks, is liable to Marks for damages including those covered under the policy, less any applicable deductible, plus attorney's fees, penalties, and other damages. ¶ 21.

         Marks alleges similar claims against Mr. Jewell. The petition alleges that Jewell was negligent in relation to his procurement of the policy and breached his fiduciary duty to secure the requested coverage. He is also accused of making a negligent misrepresentation that he had procured valid flood insurance, and Marks alleges that it relied to its detriment on Mr. Jewell's promise to procure a valid policy. Marks seeks similar damages and penalties from Mr. Jewell. ¶¶ 18-20, 22.

         The National Flood Insurance Act

         The National Flood Insurance Act (NFIA) was established to make flood insurance available on reasonable terms. FEMA administers the program, but private insurers (known as “write our own” or WYO insurers) issue flood insurance policies in their own names. The WYO insurers perform the administrative functions, including adjusting and settling of claims, but the government ultimately pays a claim. Campo v. Allstate Ins. Co., 562 F.3d 751, 754 (5th Cir. 2009).

         WYO carriers must issue policies that contain the exact terms and conditions of the Standard Flood Insurance Policy (“SFIP”) set forth in FEMA regulations. The SFIP includes a provision that: “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, as amended (42 U.S.C. 4001, et seq.), and Federal common law.” 44 C.F.R. Part 61, App. A(1), art. IX (What Law Governs). The federal court for the district where ...

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