Long Beach Rd. Holdings, LLC v. Foremost Ins. Co.
| Decision Date | 17 May 2019 |
| Docket Number | 2:14-cv-01801 (ADS)(AYS) |
| Parties | LONG BEACH ROAD HOLDINGS, LLC, Plaintiff, v. FOREMOST INSURANCE COMPANY, Defendant. |
| Court | U.S. District Court — Eastern District of New York |
APPEARANCES:
Michael J. Khader P.C.
Co-Counsel for the Plaintiff
The Law Offices of Michael J. Mauro, Esq., P.C.
c/o WSA, 1 Raddison Plaza, 8th Floor
New Rochelle, NY 10801
By: Michael James Mauro, Esq., Of Counsel.
Yifei He, Esq., Of Counsel.
This case is scheduled for trial on May 20, 2019 regarding the claim of plaintiff Long Beach Road Holdings, LLC (the "Plaintiff") that defendant Foremost Insurance Company (the "Defendant") breached a contract between the parties by denying the Plaintiff reimbursement under an insurance policy issued through a federally subsidized flood insurance program.
Presently before the court is a motion in limine by the Defendant seeking an order barring the introduction of certain evidence at trial pursuant to Federal Rule of Evidence ("Rule") 401. For the following reasons, the Court grants the Defendant's motion, in part, and denies the Defendant's motion, in part.
The National Flood Insurance Act of 1968 ("NFIA" or the "Act"), 42 U.S.C. §§ 4001-4127, was enacted with a legislative "recogni[tion] that 'many factors have made it uneconomic for the private insurance industry alone to make flood insurance available to those in need of such protection on reasonable terms and conditions,'" Jacobson v. Metro. Prop. & Cas. Ins. Co., 672 F.3d 171, 174 (2d Cir.2012) (quoting 42 U.S.C. § 4001(b)). Thus, under the Act, "'the federal government provides flood insurance subsidies and local officials are required to adopt and enforce various management measures.'" Id. (quoting Palmieri v. Allstate Ins. Co., 445 F.3d 179, 183 (2d Cir. 2006)).
Within the purview of the Act is a program known as the National Flood Insurance Program ("NFIP"), which is administered by the Federal Emergency Management Agency ("FEMA"), and is "supported by taxpayer funds, which pay for claims that exceed the premiums collected from the insured parties." Jacobson, 672 F.3d at 174 (citing Van Holt v. Liberty Mut. Fire Ins. Co., 163 F.3d 161, 165 n. 2 (3d Cir.1998)). Under the NFIP, "FEMA is authorized to promulgate regulations [1] as to 'the general terms and conditions of insurability which shall be applicable to properties eligible for flood insurance coverage,' and [2] as to 'the general method or methods by which proved and approved claims for losses under such policies may be adjusted and paid.'" Moffett v. Computer Scis. Corp., 457 F.Supp.2d 571, 573 (D. Md. 2006) (citing Battle v. Seibels Bruce Ins.Co., 288 F.3d 596, 599 (4th Cir.2002)). "In other words, FEMA writes the policies and makes the rules as to claims made under them." Id.
Relevant here, FEMA established the precise terms and conditions of coverage available under the NFIP in the form of a so-called Standard Flood Insurance Policy ("SFIP"). See 44 C.F.R. § 61.13 (); see also Van Holt, 163 F.3d at 165-66 (); Moffett, 457 F.Supp.2d at 573( that "[t]he terms and conditions of coverage are fixed by FEMA regulation in the form of [an SFIP] and do not vary ..."); Eodice v. Selective Ins. Co. of Am., No. 08-cv-151, 2010 U.S. Dist. LEXIS 13090, at *2 (D.N.J. Feb. 8, 2010) (same).
"In 1983, FEMA created the Write Your Own ["WYO"] program, which allows private insurance companies to issue and administer SFIPs in their own names as 'fiscal agent[s] of the Federal Government.'" Ravasio v. Fid. Nat'l Prop. & Cas. Ins. Co., 81 F.Supp.3d 274, 277 (E.D.N.Y.2015) (Spatt, J.) (quoting 42 U.S.C. § 4071(a)(1)). Accordingly, private insurance companies may "write their own" federally-underwritten SFIPs, Van Holt, 163 F.3d at 165, but in doing so, assume "significant administrative responsibilities under the NFIP," Moffett, 457 F.Supp.2d at 574. "For the policies they issue, [WYO companies] are responsible for the adjustment, settlement, payment and defense of all claims." Id.; see 44 C.F.R. §§ 62.21(a), 62.23. "The Government, in return, ... reimburse[s] the WYO insurer for claims paid under the SFIPs and related litigation costs, and pay[s] the WYO insurer a flat 3.3% commission on claims paid." Eodice, 2010 U.S. Dist. LEXIS 13090, at *2. Thus, under the WYO program, "the private insurance companies administer the federal program," but ultimately, "'it is the Government, notthe companies, that pays the claims.'" Ravasio, 81 F.Supp.3d at 277 (quoting Jacobson, 672 F.3d at 175); see Gunter v. Farmers Ins. Co., 736 F.3d 768, 770 (8th Cir.2013) () (citations omitted).
The NFIA further creates a private right of action for insureds against the administrator of the SFIP to be brought in federal court within one year after the cause of action accrues:
[U]pon the disallowance by the Administrator of any such claim [for losses covered by an SFIP], or upon the refusal of the claimant to accept the amount allowed upon any such claim, the claimant, within one year after the date of mailing of notice of disallowance or partial disallowance by the Administrator, may institute an action against the Administrator on such claim in the United States district court for the district in which the insured property or the major part thereof shall have been situated, and original exclusive jurisdiction is hereby conferred upon such court to hear and determine such action without regard to the amount in controversy.
42 U.S.C. § 4072; see Moffett, 457 F.Supp.2d at 575 () (citing 44 C.F.R., Part 61, App. A(1), Art. VII(P); 42 U.S.C. § 4072).
On October 25, 2012, the Defendant, a WYO insurance carrier, issued an SFIP to the Plaintiff providing for $450,000 in flood coverage for a commercial property located in Island Park (hereinafter, the "Policy"). The Plaintiff obtained the Policy in conjunction with a loan on the property. The Defendant furnished the Plaintiff with a number of documents, including a set of declarations and a certificate of insurance, indicating that the Policy became effective on October 25, 2012. In addition, the Plaintiff was billed for and paid a $2,192 premium in connection with the Policy.
On October 29, 2012, flooding caused by SuperStorm Sandy damaged the Plaintiff's property in an estimated amount of $262,205.78. The Defendant sent the Plaintiff an advancepayment of $40,000 for the claimed damage but refused to fully reimburse the Plaintiff because it believed that the NFIP regulations specify that the Policy was not legally effective at the time of the loss.
On March 20, 2014, the Plaintiff filed an action for breach of contract seeking to recover damages for the full amount of losses claimed under the Policy. The Defendant counterclaimed seeking return of the $40,000 advance payment it alleges the Plaintiff improperly received.
On April 25, 2019, the Defendant filed the instant motion in limine seeking to preclude the Plaintiff from introducing evidence, testimony, or argument that the Policy was in lawful force and effect prior to the date prescribed by NFIP regulations.
"The purpose of a motion in limine is to facilitate an efficient trial 'by enabling the Court to rule in advance of trial on the relevance of certain forecasted evidence, as to issues that are definitely set for trial, without lengthy argument at, or interruption of, the trial.'" Pavone v. Puglisi, No. 08-cv-2389, 2013 WL 245745, at *1 (S.D.N.Y. Jan. 23, 2013) (quoting Palmieri v. Defaria, 88 F.3d 136, 141 (2d Cir. 1996)). "Evidence should be excluded on a motion in limine only when the evidence is clearly inadmissible on all potential grounds." Jean-Laurent v. Hennessy, 840 F. Supp. 2d 529, 536 (E.D.N.Y. 2011) (citation omitted). "The Federal Rules of Evidence ... provide that '[i]rrelevant evidence is not admissible' and define 'relevant evidence' as that 'having any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence.'" Romanelli v. Long Island R. Co., 898 F. Supp. 2d 626, 629 (S.D.N.Y. 2012) (quoting Fed. R. Evid. 401, 402). However,relevant evidence may be excluded "if its probative value is substantially outweighed by a danger of . . . unfair prejudice, confusion of the issues, [or] misleading the jury." Fed. R. Evid. 403.
The Defendant moves to exclude a litany of evidence on the ground that they are irrelevant in light of NFIP regulations. Specifically, the Defendant contends that the Court should prohibit the Plaintiff from introducing essentially all of the documents underlying its claim, because the relevant regulations dictate that an SFIP obtained in connection with a loan cannot become effective until the loan closes, and in this case, the loan did not close until November 2, 2019. As it will explain, the Court concurs with the Defendant's reading of the regulations but disagrees that exclusion is the proper remedy.
Before proceeding to the substance of the Defendant's relevance challenge, the Court...
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