Williams v. Standard Fire Ins. Co.

892 F.Supp.2d 615

Ellen WILLIAMS and Ellen Malone, Plaintiffs

v.The STANDARD FIRE INSURANCE COMPANY and CoreLogic, Inc., Defendants.

No. 3:12cv354.

United States District Court, M.D. Pennsylvania.

Aug. 30, 2012.

Order Denying Reconsideration Sept. 24, 2012.

Carl J. Guagliardo, Selingo Guagliardo, Kingston, PA, David J. Selingo, Law Offices of David J. Selingo, Kingston, PA, for Plaintiffs.

Craig Russell Blackman, Stradley, Ronon, Stevens & Young, Lauren P. McKenna, Philadelphia, PA, for Defendants.

MEMORANDUM

JAMES M. MUNLEY, District Judge.

Before the court for disposition is Defendant Standard Fire Insurance Company's motion for summary judgment. The motion has been fully briefed and is ripe for disposition.

Background

On June 10, 2010, plaintiffs purchased real property located at Pole 297 Lakeside Drive, Harvey's Lake, Luzerne County, Pennsylvania. (Doc. 1–2, Ex. A to Notice of Removal, Complaint, (hereinafter “Compl.”) ¶ 5). Plaintiffs purchased the property for $379,000, and located on the property was a single-family home. ( Id.)

Prior to the purchase of the home, Defendant CoreLogic provided plaintiffs with certification that the property's flood risk rated zone was “C.” ( Id. ¶ 7). Based upon this zone designation, plaintiffs agreed to purchase the property and were able to obtain financing for purchase of the property through RBS Citizens, N.D. ( Id. ¶¶ 8, 11).

Defendant Standard Fire Insurance Company is a wholly-owned subsidiary of Travelers Insurance Company (hereinafter “Standard Fire” or “defendant”). ¹ ( Id. ¶ 3). Defendant is in the business of selling insurance. ( Id.)

The seller of the real property had a flood insurance policy issued by the defendant. ( Id. ¶ 9). Prior to the sale of the property, the seller transferred the policy to the plaintiffs. ( Id.) Defendant approved the transfer based upon information that the property was in a flood zone rated “C” per CoreLogic's certification. ( Id.) After the policy had been transferred to the plaintiffs, defendant renewed it twice, once on August 30, 2010 and then on August 20, 2011. ( Id. ¶ 10).

If CoreLogic had not indicated that the property was located in a flood zone “C,” plaintiffs would not have been able to obtain financing or insurance for the property. ( Id. ¶¶ 12–13).

Subsequently, the parties learned that the property was not in a flood risk rated zone “C”. ( Id. ¶ 15). Defendant indicated that it would return all of the insurance premiums that plaintiff had paid because the property is actually not eligible for flood insurance due to its not belonging to a flood risk rated zone “C”. ( Id.) Plaintiffs' property is thus not insured for flood loss and they still owe over $200,000 on their mortgage. ( Id. ¶ 16). Because of the flood risk zone, the property is not worth the mortgaged value. ( Id.) Plaintiffs own a property that cannot be insured or mortgaged, which reduces its marketability. ( Id.)

Based upon these factual averments, plaintiffs instituted the instant action. They assert two counts against defendant. Count I asserts a cause of action for detrimental reliance. Plaintiffs allege that they detrimentally relied upon defendant's agreement to insure the property. Plaintiffs relied upon this agreement in purchasing the property, and as a result suffered a substantial financial loss. ( Id. ¶¶ 17–21). Count II asserts a negligence cause of action. Plaintiffs allege that defendant was negligent in, inter alia, failing to investigate the insurability of the property and confirm the flood zone. ( Id. ¶¶ 23–27).

After answering the complaint, Defendant Standard Fire filed the instant motion for summary judgment. Defendant argues that the plaintiffs' claims are preempted and barred by federal law. Additionally, defendant argues that even if the claims were not preempted and barred, they would fail as a matter of law. The parties have briefed these issues bringing the case to its present posture.

Jurisdiction

This court has jurisdiction pursuant to the diversity jurisdiction statute, 28 U.S.C. § 1332. The plaintiffs are citizens of Pennsylvania. (Doc. 1, Not. of Removal ¶ 5). Defendant CoreLogic is a citizen of California or Delaware for purposes of federal jurisdiction, and Defendant Standard Fire is a citizen of Connecticut. ( Id. ¶¶ 6–7). Because we are sitting in diversity, the substantive law of Pennsylvania shall apply to the instant case. Chamberlain v. Giampapa, 210 F.3d 154, 158 (3d Cir.2000) ( citing Erie R.R. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938)).

Standard of review

Granting summary judgment is proper if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. See Knabe v. Boury, 114 F.3d 407, 410 n. 4 (3d Cir.1997) (citing Fed. R. Civ. P. 56(c)). “[T]his standard provides that the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247–48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) (emphasis in original).

In considering a motion for summary judgment, the court must examine the facts in the light most favorable to the party opposing the motion. Int'l Raw Materials, Ltd. v. Stauffer Chem. Co., 898 F.2d 946, 949 (3d Cir.1990). The burden is on the moving party to demonstrate that the evidence is such that a reasonable jury could not return a verdict for the non-moving party. Anderson, 477 U.S. at 248, 106 S.Ct. 2505 (1986). A fact is material when it might affect the outcome of the suit under the governing law. Id. Where the non-moving party will bear the burden of proof at trial, the party moving for summary judgment may meet its burden by showing that the evidentiary materials of record, if reduced to admissible evidence, would be insufficient to carry the non-movant's burden of proof at trial. Celotex v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Once the moving party satisfies its burden, the burden shifts to the nonmoving party, who must go beyond its pleadings, and designate specific facts by the use of affidavits, depositions, admissions, or answers to interrogatories showing that there is a genuine issue for trial. Id. at 324, 106 S.Ct. 2548.

Discussion

The parties agree that the insurance policy involved in the instant case was issued pursuant to the National Flood Insurance Program (hereinafter “NFIP”), a federally supervised and guaranteed insurance program. Van Holt v. Liberty Mut. Fire Ins. Co., 163 F.3d 161, 165 (3d Cir.1998). The NFIP is administered by the Federal Emergency Management Agency (“FEMA”) pursuant to the National Flood Insurance Act (hereinafter “NFIA” or “Act”). “Congress created the program to, among other things, limit the damage caused by flood disasters through prevention and protective measures, spread the risk of flood damage among many private insurers and the federal government, and make flood insurance available on reasonable terms and conditions to those in need of it.” Id. (citing 42 U.S.C. § 4001(a)) (quotation and footnote omitted). The NFIP helps to provide flood insurance with reasonable terms and conditions for property located in flood-prone areas. Id. at n. 2. Under this program, insured's claims are paid off out of the United States Treasury. Id.

In administering the NFIP, FEMA has created a “Write Your Own” (“WYO”) policy program. Under this program, private insurance companies, such as Defendant Standard Fire write their own insurance policies. Id. FEMA, however, sets the terms and conditions of the flood insurance policies, and the policies must generally be issued without alteration as a Standard Flood Insurance Policy (hereinafter “SFIP”). Id. at 165–66. The “cost incurred in the adjustment and payment of any claims for losses” under an SFIP are paid from the National Flood Insurance Fund. 42 U.S.C. § 4017(d)(1).

The policy that was retroactively revoked in the instant case was an SFIP. It was originally issued to Geraldine Insalaco, who owned the property prior to plaintiffs. (Doc. 18, Statement of Facts, ¶¶ 19–20). Upon buying the property, the policy was transferred to the plaintiffs. ( Id. ¶ 20). After the plaintiffs became the policy holder, it was renewed twice by defendant. ( Id. ¶ 22).

Defendant raises two general arguments. First, it argues that plaintiffs' claims are preempted by federal law. Second, it argues that even if the claims are not preempted, they fail as a matter of law. We will address these issues separately.

I. Preemption

The defendant argues that the plaintiffs' state causes of action are preempted by federal law. It should first be noted that “[a]ny preemption analysis begins with the ‘basic assumption that Congress did not intend to displace state law.’ ” Padalino v. The Standard Fire Ins. Co., 616 F.Supp.2d 538, 543 (E.D.Pa.2008) (quoting Bldg. & Constr. Trades Council of Metro. Dist. v. Assoc. Builders & Contracts. of Mass./R.I., Inc., 507 U.S. 218, 224, 113 S.Ct. 1190, 122 L.Ed.2d 565 (1993)). Nonetheless, the following three types of federal preemption exist: 1) express preemption; 2) conflict preemption and 3) field preemption. After a careful review, we find that none of these types of preemption apply. We will address them separately.

A. Express preemption

Express preemption applies where Congress includes explicit language in a statute setting forth an intent to preempt conflicting state law. Lorillard Tobacco Co. v. Reilly, 533 U.S. 525, 541, 121 S.Ct. 2404, 150 L.Ed.2d 532(2001) (“State action may be foreclosed by express language in a constitutional enactment.”). “It is easy to glean that federal law expressly preempts state law when a statute or regulation contains explicit language...