Campo v. Allstate Ins. Co.

• Decision Date: 17 March 2009
• Docket Number: No. 07-31165.,07-31165.
• Citation: 562 F.3d 751
• Parties: Merlin S. CAMPO, Plaintiff-Appellant, v. ALLSTATE INSURANCE COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

562 F.3d 751

Merlin S. CAMPO, Plaintiff-Appellant, v. ALLSTATE INSURANCE COMPANY, Defendant-Appellee.

No. 07-31165.

United States Court of Appeals, Fifth Circuit.

March 17, 2009.

Perry M. Nicosia (argued), Nicosia, Licciardi & Nunez, Chalmette, LA, for Plaintiff-Appellant.

Gerald Joseph Nielsen, Michael D. Breinin and John Dennis Carter (argued), Nielsen Law Firm, Metairie, LA, for Defendant-Appellee.

Appeal from the United States District Court for the Eastern District of Louisiana.

Before WIENER, GARZA, and DeMOSS, Circuit Judges.

WIENER, Circuit Judge:

Plaintiff-Appellant Merlin Campo appeals the district court's grant of summary judgment in favor of defendant-appellee Allstate Insurance Company ("Allstate"). Campo held a Standard Flood Insurance Policy ("SFIP") issued by Allstate as a Write-Your-Own ("WYO") carrier participating in the National Flood Insurance Program (the "Program"). This policy expired just before Hurricane Katrina destroyed Campo's home. He asserts that Allstate's negligent misrepresentations in violation of Louisiana law caused him not to reinstate the expired policy. Campo contends that the district court erred in holding that federal law preempted his claims because they were related to claims handling. Concluding that Campo's claims are instead related to policy procurement and not preempted by federal law, we reverse the district court's grant of Allstate's motion for summary judgment and remand for further proceedings.

I. FACTS AND PROCEEDINGS

On August 29, 2005, Hurricane Katrina destroyed appellant Merlin Campo's home located in St. Bernard Parish, Louisiana. Prior to August 2005, and for over twenty years, Campo held a SFIP through Allstate, which issued the policy as a WYO carrier. Campo's 2004-2005 coverage period ended, however, on August 13, 2005, the date when Campo's $1,237 premium to reinstate coverage for 2005-2006 was due. The policy included a 30-day grace period for payments, so that if Campo paid the premium by September 13, he would have avoided a gap in coverage.¹ Because of Hurricane Katrina, however, the Federal Emergency Management Agency ("FEMA") extended this deadline for an additional ninety days—until December 12, 2005 for purposes of Campo's policy. Campo had received a renewal notice before August 13, 2005 and knew that his policy would expire on that date, but he did not pay the premium by then.

Campo filed a claim under the expired policy shortly after Katrina struck on August 29, 2005. On October 29, 2005, Allstate sent Campo a letter indicating that it had (1) evaluated his claim and (2) requested the Program to issue a check payable to Campo for the policy limit of $98,200, and Allstate sent Campo an advance check of $2,500 for additional living expenses under the policy.² Allstate did not inform Campo that these payments were conditional on Allstate's eventual timely receipt of the $1,237 renewal premium. Although Campo phoned Allstate representatives multiple times during this period, the representatives never mentioned anything to Campo about the delinquent premium payment.

On December 12, 2005, the extended grace period expired without Campo ever having submitted his premium. Then, on December 28, Allstate sent Campo a letter stating that "coverage cannot be extended for this claim" and instructing Campo to repay the $2,500 it had advanced. Allstate sent another letter on January 27, 2006, confirming that the claim was denied because its "records indicate that this policy lapsed August 13, 2004[sic]. As no policy was in force at the time of this loss, we are unable to extend coverage or payment consideration."

Campo filed this diversity suit in federal district court, alleging that Allstate and its representatives made negligent misrepresentations that prevented Campo from renewing his policy.³ Campo and Allstate filed cross-motions for summary judgment. Although the district court's opinion admonished Allstate for setting "an example of bungling by the defendant of a degree that this Court has previously not witnessed in the multitude of Katrina cases on its docket," it held that Campo's claims were handling-related, and thus preempted by federal law. Accordingly, the court granted Allstate's motion and denied Campo's. This timely appeal followed.⁴

II. ANALYSIS

A. Standard of Review

We review de novo a district court's grant of summary judgment.⁵ Summary judgment is appropriate only if there is no genuine issue of material fact.⁶ In determining whether a genuine issue of material fact exists, courts view all facts and draw all inferences therefrom in favor of the non-moving party.⁷ The court's role at the summary judgment stage is not "to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial."⁸

B. Statutory and Regulatory Framework

By enacting the National Flood Insurance Act of 1968, 42 U.S.C. § 4001 et seq., Congress established the Program to make flood insurance available on reasonable terms and to reduce fiscal pressure on federal flood relief efforts. FEMA administers the Program.⁹ Within the Program, the WYO program allows private insurers to issue flood insurance policies in their own names. Under this framework, the federal government underwrites the policies and private WYO carriers perform significant administrative functions including "arrang[ing] for the adjustment, settlement, payment and defense of all claims arising from the policies."¹⁰ WYO carriers must issue policies containing the exact terms and conditions of the SFIP set forth in FEMA regulations.¹¹ Additionally, FEMA regulations govern the methods by which WYO carriers adjust and pay claims.¹² Although WYO carriers play a large role, the government ultimately pays a WYO carrier's claims.¹³ When claimants sue their WYO carriers for payment of a claim, carriers bear the defense costs, which are considered "part of the ... claim expense allowance";¹⁴ FEMA reimburses these costs.¹⁵ Yet, if "litigation is grounded in actions by the [WYO] Company that are significantly outside the scope of this Arrangement, and/or involves issues of agent negligence," then such costs will not be reimbursable to the WYO carrier.¹⁶

C. Campo's Claims Are Procurement-Related

Federal law preempts "state law tort claims arising from claims handling by a WYO."¹⁷ We thus must first determine whether the district court was correct in holding that Campo's suit is related to claims handling. If we conclude that it is, we must affirm the district court's grant of summary judgment. Campo contends that his claims instead relate to insurance procurement and are not preempted by federal law. If we conclude that his claims do relate to procurement, we must then determine whether preemption of state-law claims extends to procurement.

Allstate contends that Campo's suit addresses policy renewal, or reinstatement, which in its view is akin to claims handling. At least three district judges in this Circuit have reached a contrary conclusion. First, in Landry v. State Farm Fire & Casualty Co., the plaintiffs renewed their State Farm-issued SFIP each year and alleged that they requested, and were assured by their State Farm agent, that they would have "full coverage"—the "best coverage available."¹⁸ After Hurricane Katrina, the plaintiffs learned they did not have contents coverage and subsequently sued for negligent failure to provide coverage.¹⁹ The plaintiffs asserted that the case involved procurement and State Farm contended that it was a handling issue because policy renewal is heavily regulated by FEMA.²⁰ The district court rejected State Farm's argument, ruling that even though "many aspects of [the Program] are heavily regulated by FEMA[,] ... the obtaining of coverage does not involve the interpretation or management of an active" SFIP.²¹ The court held that the "case present[ed] a question of policy procurement, in that it involve[d] the initial obtaining of coverage."²²

Next, in Meza v. All State Insurance Co., the plaintiffs' mortgage company paid their insurance premiums out of an escrow account maintained for that purpose.²³ When the plaintiffs paid off their mortgage in full, they advised their Allstate agent of this fact and apparently expected that future policy documents would be sent directly to them.²⁴ Neither the agent nor anyone else made arrangements to reflect this change.²⁵ As a result, Allstate sent renewal information to the mortgage company, which did not forward it to the plaintiffs.²⁶ After Hurricane Katrina, Allstate advised the plaintiffs that they did not have flood insurance.²⁷ The plaintiffs sued, claiming that Allstate's failure to notify and advise them of their policy's termination caused them to have no insurance in August 2005. The district court held that the plaintiffs presented a procurement case: "Upon cancellation of the mortgage[, the] policy had to be renewed or otherwise re-procured for plaintiffs."²⁸ The court was "[un]willing to create a new subcategory of `administration of an existing [Program] policy' cases."²⁹

Third, in Jackson v. State Fire & Casualty Insurance Co., the plaintiffs "continuously renewed" their flood insurance for several years, allegedly thought that they had flood insurance, but, after Hurricane Katrina, learned that their SFIP had not been renewed.³⁰ The plaintiffs sued State Farm and their State Farm agent under Louisiana law for errors and omissions and for breach of their fiduciary duties in procuring flood insurance coverage.³¹ The district court, relying on Landry, determined that a cause of action as to a "failure to procure flood insurance renewal" was not a "handling" claim.³²

We approve of the approach taken by the district courts in these cases³³ and hold that Campo's claims are related to procurement rather than handling. To the extent that this case involves handling of a "claim," it is merely a "fictitious claim" in the sense that the act of...