Burkhalter v. Hartford Underwriters Ins. Co.

JERRY BURKHALTER, ET AL. v. HARTFORD UNDERWRITERS INSURANCE COMPANY, ET AL.

CIVIL ACTION NO. 17-01086-BAJ-SDJ

UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF LOUISIANA

July 22, 2021

FILING APPLIES TO:

17-cv-01086-BAJ-SDJ Burkhalter, et al., v. Hartford Underwriters Insurance Company

17-cv-01129-BAJ-RLB Kozero, et al., v. American National Property and Casualty Company

17-cv-01140-BAJ-RLB Henderson, et al., v. American National Property and Casualty Company

17-cv-01233-BAJ-EWD Armstrong, et al., v. Liberty Mutual Fire Insurance Company

17-cv-01235-BAJ-EWD Poynor, et al., v. Liberty Mutual Fire Insurance Company

17-cv-01264-BAJ-EWD Neal v. Liberty Mutual Fire Insurance Company

17-cv-01265-BAJ-EWD James, Jr., et al., v. Liberty Mutual Fire Insurance Company

17-cv-01266-BAJ-EWD Bresee, et al., v. Liberty Mutual Fire Insurance Company

17-cv-01303-BAJ-EWD Smith v. Liberty Mutual Fire Insurance Company

17-cv-01336-BAJ-RLB Turner, et al., v. American National Property and Casualty Company

17-cv-01589-BAJ-RLB Aucoin, et al., v. Bankers Specialty Insurance Company

17-cv-01599-BAJ-RLB Williams v. Bankers Specialty Insurance Company

RULING AND ORDER

Each of the cases captioned above arises from the historic Baton Rouge flood of August 2016. They are among dozens of similar flood insurance disputes that remain pending in this Court.

The issue presently before the Court is whether a write-your-own (WYO) carrier's failure to issue a written denial of an insured's claim under the Standard Flood Insurance Policy ("SFIP")¹ divests the Court of jurisdiction over a lawsuit seeking to enforce payment of that claim. The issue arises because in each of the above-captioned cases, the Defendant insurer has failed to issue a written denial, even at this late date. The parties have submitted show cause briefing, in which insurers and insureds alike universally agree that the Court maintains jurisdiction despite the missing denial letters.² For reasons explained below, the parties' briefing misses the mark, and fails to establish that jurisdiction is satisfied. Accordingly, the Court will sua sponte dismiss each of the above-captioned actions for lack of jurisdiction.

I. RELEVANT BACKGROUND

As recounted in the Court's show cause orders, the fact of the missing denial letters—and the legal issue of whether a missing denial letter divests the Court of jurisdiction—moved centerstage following three separate pretrial conferences inwhich counsel reported a missing denial letter.³ In each instance, the issue was raised for the first time after nearly four years of litigation. In each instance, counsel characterized the missing denial as a "jurisdictional" impediment, and invited the Court to devise a "creative" solution. In each instance, the Court rejected counsels' invitation to engage in jurisdictional gerrymandering, and issued an expedited briefing deadline to address the parties' jurisdictional concerns. In each instance, the parties settled rather than submit briefs as ordered.

Smelling a rat, the undersigned reviewed all remaining flood cases pending in this section. On July 8, 2021, the undersigned issued show cause orders in those cases where the record was ambiguous regarding the existence of a written denial—sixteen show cause orders, total. (Doc. 19). On July 12, 2021, the Court supplemented its July 8 Show Cause Order, requiring the parties to specifically brief whether the record in each case established a satisfactory "written denial," as that term is defined by the U.S. Court of Appeals for the Third Circuit in Migliaro v. Fid. Nat'l Indem. Ins. Co., 880 F.3d 660 (3d Cir. 2018). (Doc. 21).⁴ Collectively, these show cause orders required the parties to jointly submit proof of a written denial or, alternatively, show cause why, absent a written denial, the individual actions should not be dismissed for lackof jurisdiction. (Docs. 19, 21).

Among the sixteen cases in which the Court entered a show cause order, only four returned proof of a written denial. In the twelve remaining cases—captioned above—it is now revealed that the Defendant insurer has never issued a written denial of the Plaintiffs' claims, either before or after Plaintiffs filed suit.⁵ Put differently, in each of the above-captioned cases, Plaintiffs jumped the gun, and initiated litigation before the Defendants denied their claims. Thereafter, the Defendants sat on their heels, allowing these actions to proceed for nearly four years without raising the issue.

As will be explained, the fact of the missing denials is fatal to the viability of these actions.

II. DISCUSSION

A. Controlling Standards

i. Jurisdiction

"Federal courts are courts of limited jurisdiction. They possess only that power authorized by [the] Constitution and statute, which is not to be expanded by judicial decree." Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994) (citations omitted). "Federal courts, both trial and appellate, have a continuing obligation to examine the basis for their jurisdiction. The issue may be raised by parties, or by thecourt sua sponte, at any time." MCG, Inc. v. Great W. Energy Corp., 896 F.2d 170, 173 (5th Cir. 1990).

Importantly, "[a] case or controversy must be ripe for decision, meaning that it must not be premature or speculative. That is, ripeness is a constitutional prerequisite to the exercise of jurisdiction." Shields v. Norton, 289 F.3d 832, 834-35 (5th Cir. 2002) (emphasis added, footnotes omitted).

Article III of the United States Constitution provides that federal courts have the power to decide only actual cases or controversies. The justiciability doctrines of standing, mootness, political question, and ripeness all originate in Article III's 'case' or 'controversy' language. The ripeness doctrine also is drawn from prudential reasons for refusing to exercise jurisdiction. The ripeness doctrine's basic rationale is to prevent the courts, through avoidance of premature adjudication, from entangling themselves in abstract disagreements.

Choice Inc. of Texas v. Greenstein, 691 F.3d 710, 714-15 (5th Cir. 2012) (quotation marks, citations, and alterations omitted).

"A case is generally ripe if any remaining questions are purely legal ones; conversely, a case is not ripe if further factual development is required." Id. (quoting New Orleans Pub. Serv., Inc. v. Council of City of New Orleans, 833 F.2d 583, 587 (5th Cir. 1987)). A case that is not ripe must be dismissed for lack of subject matter jurisdiction. Shields, 289 F.3d at 837; accord Choice, 691 F.3d at 718; New Orleans Pub. Serv., Inc., 833 F.2d at 588.

ii. SFIP Construction And Relevant Terms

The U.S. Court of Appeals for the Fifth Circuit has repeatedly advised that the SFIP "must be strictly construed and enforced." Gowland v. Aetna, 143 F.3d 951, 954 (5th Cir. 1998). "The terms of the SFIP are dictated by FEMA, and cannot be waivedor modified by [any party]," including the defendant insurer. Wright v. Allstate Ins. Co., 415 F.3d 384, 388 (5th Cir. 2005). These strict rules of construction cannot be relaxed, even if a "harsh" result follows. Id. at 387 (5th Cir. 2005) (discussing Gowland, 143 F.3d at 955); accord Cohen v. Allstate Ins. Co., 924 F.3d 776, 782 (5th Cir. 2019) ("[N]ot even the temptations of a hard case will provide a basis for ordering recovery contrary to the terms of a regulation, for to do so would disregard the duty of all courts to observe the conditions defined by Congress for charging the public treasury." (alterations omitted; quoting Forman v. Fed. Emergency Mgmt. Agency, 138 F.3d 543, 545 (5th Cir. 1998)).⁶

In relevant part, the SFIP provides:

You may not sue us to recover money under this policy unless you have complied with all the requirements of the policy. If you do sue, you must start the suit within one year after the date of the written denial of all or part of the claim ... . This requirement applies to any claim that you may have under this policy and to any dispute that you may have arising out of the handling of any claim under the policy.

SFIP, art. VII(R) ("Suit Against Us"). Interpreting precisely this provision, the Fifth Circuit recently affirmed that an insured must "turn square corners," and that the Court "must ... narrowly construe when a policyholder may bring suit." Cohen, 924 F.3d at 780 (quotation marks omitted)).⁷

B. Discussion

It is now clear—for the first time, after nearly four years of litigation—that the Plaintiffs in each of the above-captioned actions filed suit before obtaining a written denial of their claim, in direct violation of the SFIP's requirement that any suit for coverage "must start ... after the date of the written denial of all or part of the claim." SFIP, art. VII(R) (emphasis added). By prematurely filing suit, Plaintiffs deprived the Defendant insurers of an opportunity to adjust their claim within 60 to 90 days, as required under the SFIP.⁸ See SFIP, art. VII(M)(1) (Loss Payment). Simply put, at the time of filing, Plaintiffs' claims were speculative—and therefore not ripe—because the possibility remained that the Defendant insurers would adjust Plaintiffs' claims favorably. In other words, when Plaintiffs sued, they were merely guessing that their insurers would deny coverage. More than guesswork is required to establish a ripe, justiciable case under Article III of the U.S. Constitution. Shields, 289 F.3d at 837; accord Choice, 691 F.3d at 718; New Orleans Pub. Serv., Inc., 833 F.2d at 588. Lacking any written denial whatsoever, Plaintiffs' claims are not ripe and must be dismissed for lack of subject matter jurisdiction. Shields, 289 F.3d at 835("[R]ipeness is a constitutional prerequisite to the exercise of jurisdiction.").⁹

The parties' show cause briefing fails to convince the Court otherwise. For their part, the Defendant insurers encourage the Court to look past the ripeness inquiry, and to exercise jurisdiction under 42 U.S.C. § 4072, 28 U.S.C. § 1331, 28 U.S.C. § 1337, and/or 28 U.S.C. § 1331. (Doc. 22 at 2-7)....