Foster v. Fed. Emergency Mgmt. Agency

• Decision Date: 15 September 2015
• Docket Number: No. 14–CV–1750 JFB AKT.,14–CV–1750 JFB AKT.
• Citation: 128 F.Supp.3d 717
• Parties: Thomas FOSTER and Coralie J. Foster, Plaintiffs, v. The FEDERAL EMERGENCY MANAGEMENT AGENCY, et al., Defendants.
• Court: U.S. District Court — Eastern District of New York

128 F.Supp.3d 717

Thomas FOSTER and Coralie J. Foster, Plaintiffs,

v.The FEDERAL EMERGENCY MANAGEMENT AGENCY, et al., Defendants.

No. 14–CV–1750 JFB AKT.

United States District Court, E.D. New York.

Signed Sept. 15, 2015.

Gary B. Port, George Samuel Sava, Port and Sava, Lynbrook, NY, for Plaintiffs.

James Halleron Knapp, Thomas A. McFarland, United States Attorneys Office, Central Islip, NY, Gail M. Kelly, Anne Marie Esposito, Conway Farrell Curtin and Kelly P.C., Anne Marie Esposito, Conway Farrell Curtin & Kelly, P.C., Joseph L. Francoeur, Wilson Elser, New York, NY, Michael B. Beers, Butler Snow LLP, Montgomery, AL, A. David Fawal, Butler Snow LLP, Birmingham, AL, Patrick T. Bergin, Butler Snow LLP, Gulfport, MS, Sheryl Parker, Wilson Elser Moskowitz Edelman & Dicker LLP, West Harrison, NY, for Defendants.

MEMORANDUM AND ORDER

JOSEPH F. BIANCO

, District Judge:

On March 18, 2014, plaintiffs Thomas Foster and Coralie J. Foster ("plaintiffs" or "the Fosters") filed this flood insurance action, bringing claims against the Federal Emergency Management Agency ("FEMA"), Allstate Insurance Company ("Allstate"), and Alan Aronson (collectively, "defendants"). Allstate Insurance Company is a "Write Your Own" ("WYO") flood insurance carrier and the issuer of a flood insurance policy covering plaintiff's residence in Cedarhurst, New York. The instant action rises from Allstate's denial of plaintiffs' insurance claim seeking coverage for the damage their property sustained during Hurricane Sandy.

Plaintiffs bring the following claims against FEMA: (1) a request for relief under 28 U.S.C. §§ 2201

, 2202 and a judgment by the Court that the defendants are obligated to pay their insurance claim in full; (2) breach of contract; (3) negligence; (4) breach of fiduciary duty; (5) aiding and abetting a breach of fiduciary duty; (6) unjust enrichment by FEMA; (7) promissory estoppel; (8) respondent superior and vicarious liability by agents and employees of FEMA; (9) intentional infliction of emotional distress; (10) negligent infliction of emotional distress; (11) breach of express and implied covenants; and (12) equitable estoppel.

FEMA now moves to dismiss plaintiffs' claims against it for lack of subject matter jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1)

, because sovereign immunity shields federal agencies from suit and FEMA has not waived its immunity, and for failure to state a claim upon which relief can be granted pursuant to Federal Rule of Civil Procedure 12(b)(6) because: (1) plaintiffs failed to exhaust administrative remedies under the Federal Tort Claims Act ("FTCA");¹ (2) plaintiffs' promissory estoppel claim is not actionable against the federal government; (3) plaintiffs' claims of breach of fiduciary duty (and aiding and abetting breach of fiduciary duty) fail, because the Fosters did not have a fiduciary relationship with FEMA; and (4) plaintiffs' claims for unjust enrichment and breach of express and implied covenants are insufficiently pled and are likely encompassed within the breach of contract claim. For the reasons discussed below, the Court grants FEMA's motion to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1)

, and also grants FEMA's motion to dismiss plaintiffs' FTCA claims. Accordingly, the plaintiffs' claims against FEMA are dismissed.²

I. BACKGROUND

A. Facts

The following facts are taken from the complaint, and are not findings of fact by the Court. Instead, the Court will assume the facts to be true and, for purposes of the pending motion to dismiss, will construe them in a light most favorable to the plaintiff, the non-moving party. The Court also considers the exhibits and affidavits attached to the parties' moving papers for purposes of considering FEMA's motion under Rule 12(b)(1)

.

1. The National Flood Insurance Program

Congress passed the National Flood Insurance Act ("NFIA") in 1968, codified at 42 U.S.C. § 4001 et seq.,

with the purpose of instituting "a reasonable method of sharing the risk of flood losses" by subsidizing flood insurance through private insurers. 42 U.S.C. §§ 4001(a) -(b). NFIA established the National Flood Insurance Program ("NFIP"), which is "administered by [FEMA and] supported by the federal treasury, which pays for claims that exceed the revenues collected by private insurers from flood insurance premiums." Palmieri v. Allstate Ins. Co., 445 F.3d 179, 183 (2d Cir.2006). The NFIP includes two separate types of government-financed flood insurance. Under the first, known as the "Direct program" or the "Government program," NFIP policyholders are insured directly by FEMA. In the Direct program, "the government ‘run[s] the NFIP itself—offering federally underwritten policies—with the potential for administrative assistance from private insurers.’ " Id. at 183 (quoting Downey v. State Farm Fire & Cas. Co., 266 F.3d 675, 678 (7th Cir.2001) ) (citing 42 U.S.C. §§ 4071 –4072 ). Under the second program (the "WYO program"), which is authorized under 42 U.S.C. § 4081(a), NFIP policyholders are insured by participating WYO companies. "Although FEMA may issue policies directly under the Government Program, ‘more than 90% are written by WYO companies.’ " Id. (quoting C.E.R. 1988, Inc. v. Aetna Cas. and Surety Co., 386 F.3d 263, 267 (3d Cir.2004) ).

Under the WYO program, private insurance companies have the authority to sell federally backed Standard Flood Insurance Policies (SFIPs) pursuant to the procedures outlined in 44 C.F.R. § 62.23

. A SFIP is a "flood insurance policy issued by the Federal Insurance Administrator or an insurer pursuant to an arrangement with the Federal Insurance Administrator pursuant to Federal statutes and regulations." 44 C.F.R. § 59.1. Specifically, the Code of Federal Regulations provides that "[a] WYO Company is authorized to arrange for the issuance of flood insurance in any amount within the maximum limits of coverage specified in ... [the federal regulations]" and "shall arrange for the adjustment, settlement, payment and defense of all claims arising from policies of flood insurance it issues under the Program." 42 C.F.R. § 62.23(c), (d).

Under the terms of the WYO program the "Federal Insurance Administrator will enter into arrangements with [WYO] companies whereby the Federal Government will be a guarantor in which the primary relationship between the WYO Company and the Federal Government will be one of a fiduciary nature, i.e., to assure that any taxpayer funds are accounted for and appropriately expended." 44 C.F.R. § 62.23(f)

; see also C.E.R. 1988, 386 F.3d at 267 (noting that the WYO "private insurers may act as fiscal agents of the United States, but they are not general agents. Thus they must strictly enforce the provisions set out by FEMA and may vary the terms of a Policy only with the express written consent of the Federal Insurance Administrator.") (internal citations and quotations omitted).³ Furthermore, the regulations state that "[a] WYO Company shall act as a fiscal agent of the Federal Government, but not as its general agent. WYO Companies are solely responsible for their obligations to their insured under any flood insurance policies issued under agreements entered into with the Federal Insurance Administrator, such that the Federal Government is not a proper party defendant in any lawsuit arising out of such policies." 44 C.F.R. § 62.23(g).

NFIP policyholders, participating in either the WYO program or the Direct program, "may appeal a decision, including a determination of any insurance agent, adjuster, insurance company, or any FEMA employee or contractor with respect to a claim, proof of loss, and loss estimate" directly with FEMA pursuant to the procedures outlined in 44 C.F.R. § 62.20

. 44 C.F.R. § 62.20(b) -(e).

2. The Fosters' Insurance Claim

When Hurricane Sandy hit Long Island on October 29, 2012, the Fosters' residence, located at 428 Rugby Road, Cedarhurst, New York ("the property") sustained property damage in excess of $220,000. (Compl. ¶¶ 2, 30.) The property is located within a Flood Zone, and the Foster's mortgage with J.P. Morgan Chase requires flood insurance. (Id. ¶ 31.) The Foster's flood insurance policy ended on September 11, 2012, but included a 30–day grace period in which to extend coverage. (Id. ¶ 31.) The Fosters negotiated the terms of their insurance renewal with Allstate insurance broker Alan Arson between September 11, 2012 and October 11, 2012. (Id. ¶ 32.) On October 22, 2012, Allstate issued the Fosters a flood insurance policy (the "policy"), which listed the effective date of the policy as October 23, 2012. (Id. ¶ 33.) At the time of issue, the Fosters allege that Allstate and Arson did not inform them that "the policy was a new policy or that there was any lapse or gap in coverage from the previous policy" or "that a 30–day rule would apply, which prohibited coverage ... for a thirty (30) day period." (Id. ¶ 32.) The policy was issued through the NFIP's WYO program. (Id. ¶¶ 3, 9.) The policy provided for coverage of up to $200,000 for the residence's structure and up to $80,000 for the contents of the home. (Id. ) The policy has a $1,000 deductible. (Id. ¶ 33.)

On November 4, 2012, the Fosters filed an insurance claim seeking coverage for the damage their property sustained during Hurricane Sandy. (Id. ¶ 33.) After an Allstate adjuster inspected the Fosters' property, Allstate sent them an advance check in the amount of $10,000 on or around November 26, 2012. (Id. ¶ 34.) Allstate sent the Fosters a second $10,000 check on or around December 5, 2012. (Id. ¶ 35.) Around January 25, 2013, the Fosters received a payment from Allstate in the amount of $42,349.77 covering the structural damage to their property, and another payment of $27,693.14 on or around March 12, 2013 covering the damages to the contents of their residence. (Id. ¶¶ 43, 45.)

However, on March 21, 2013, an Allstate employee notified the Fosters that their flood insurance claim was denied in full. (I...