Eddins v. Omega Ins. Co., Civ. A. No. 1:92CV105-S-G.
| Decision Date | 07 July 1993 |
| Docket Number | Civ. A. No. 1:92CV105-S-G. |
| Parties | James EDDINS, et ux, Plaintiffs, v. OMEGA INSURANCE COMPANY, Defendant. |
| Court | U.S. District Court — Northern District of Mississippi |
Armstrong Walters, Walters and Walters, Columbus, MS, for plaintiffs.
F.M. Bush, III, G. Kay Trapp, Phelps Dunbar, Tupelo, MS, Nancy Scott Degan, Paul L. Peyronnin, Phelps Dunbar, New Orleans, LA, for defendant.
This cause is before the court on the motion of the defendant for partial summary judgment. This court has exclusive federal question jurisdiction pursuant to 42 U.S.C. § 4053. The issue before the court is whether punitive damages are recoverable against the defendant for certain acts involving an insurance policy issued by the defendant under the National Flood Insurance Program (NFIP).
On or about April 9, 1990, the plaintiffs obtained a flood insurance dwelling policy from the defendant. In rapid succession, the plaintiffs' insured home was flooded three different times. The first occurred around December 22, 1991, for which the plaintiffs were paid $12,568.00. No repairs were made after the December flood. The second flood occurred in February of 1991. Although the plaintiffs did not complete a proof of loss form, the defendant retained adjuster Al Moody to investigate an oral complaint from the plaintiffs that their home had received foundation damage. Mr. Moody did not find any structural damage, but contacted local engineer, Mr. A.K. Rosenhan, to determine whether the plaintiffs' house had sustained any structural or foundation damage from the February flood. Mr. Rosenhan reported that the abnormal alignment of the home had not been caused by the flood waters. The final flood occurred on or about May 27, 1991, for which the plaintiffs were paid $2,787.65. The plaintiffs have sued to recover from the defendant compensatory damages for structural damages allegedly sustained by their home during the February 1991 flood, and punitive damages against the defendant for its arbitrary failure to pay the compensatory damages.
The Fifth Circuit in West v. Harris, 573 F.2d 873 (5th Cir.1978), held that federal law controls cases brought under the National Flood Insurance Act of 1968.
Since the flood insurance program is a child of Congress, conceived to achieve policies which are national in scope, and since the federal government participates extensively in the program both in a supervisory capacity and financially, it is clear that the interest in uniformity of decision present in this case mandates the application of federal law. Thus, a prevailing plaintiff in a suit on a flood insurance policy issued pursuant to the National Flood Insurance Act is not entitled to recover the statutory penalty and attorney's fees allowed by state insurance law for arbitrary denial of coverage.
Id., 573 F.2d at 881 (citations omitted) (emphasis added); see, Gulf Coast Inv. Corp. v. Secretary of Housing, 509 F.Supp. 1321, 1325 (E.D.La.1980) (). There is no authorization within the statutes or the regulations of the National Flood Insurance Act which allow the recovery of punitive damages.
The National Flood Insurance Act established a pool of private insurance companies which shoulder the administrative implementation of the program. The objective of the program is to provide affordable flood insurance. The private insurance companies receive a percentage of the premiums paid and are exposed to a minimum of any risk of loss because the Federal Government acts as a guarantor and pays all allowable claims.
Punitive damages punish a defendant who has acted willfully or in gross disregard of a...
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