Moffett v. Computer Sciences Corp., Civil No. PJM # 05-1547.

• Decision Date: 29 September 2006
• Docket Number: Civil No. PJM # 05-1547.
• Citation: 457 F.Supp.2d 571
• Parties: Thomas L. MOFFETT, II, et al., Plaintiff's, v. COMPUTER SCIENCES CORPORATION, et al., Defendants.
• Court: U.S. District Court — District of Maryland

457 F.Supp.2d 571

Thomas L. MOFFETT, II, et al., Plaintiff's, v. COMPUTER SCIENCES CORPORATION, et al., Defendants.

Civil No. PJM # 05-1547.

United States District Court, D. Maryland.

September 29, 2006.

Donald W. Marcari, Marcari Russotto and Spencer Chesapeake, VA, Frank D. Lawrence, III, Marcari Russotto and Spencer Chesapeake, VA, Martin H. Freeman, Freeman and Freeman PC, Rockville, MD, for Plaintiff's.

Arthur F. Fergenson, Jay I. Morstein, Holly Drumheller Butler, DLA Piper US LLP, Jamie M. Bennett, Office of the United States Attorney, Monte Fried, Wright Constable and Skeen LLP, Edward J. Hutchins, Jr., Stacey Ann Moffet, Eccleston and Wolf Pc, Jennifer S. Lubinski, Kathleen M. Bustraan, Lord and Whip PA, James D. Skeen, Skeen and Kauffman LLP, Michael J Halaiko, Miles and Stockbridge PC, Baltimore, MD, Tyler Brian Raimo, Computer Sciences Corporation, Falls Church, VA, Robert H. King, Jr., Sonnenschein Nath and Rosenthal LLP, Chicago, IL, Kirk Robert Ruthenberg, Sonnenschein Nath and Rosenthal LLP, Jennifer Caitlin Argabright, Scott Nathan

Auby, W. Neil Eggleston, Debevoise and Plimpton LLP, Elizabeth Treubert Simon, Pamela Anne Bresnahan, Vorys Sater Seymour and Pease LLP, Steuart H Thomsen, Sutherland Asbill and Brennan LLP, Washington, DC, Gerald Joseph Nielsen, Nielsen Law Firm LLC, Metairie, LA, Peter F. Axelrad, Council Baradel Kosmerl and Nolan PA, Annapolis, MD, Natalie Paige Drinkard, Patricia Mchugh Lambert, Steven B. Schwartzman, Patricia Mchugh Lambert, Hodes Ulman Pessin and Katz PA, Towson, MD, Craig Russell Blackman, Samuel J. Arena, Jr., Stradley Ronon Stevens and Young LLP, Philadelphia, PA, William J. Hickey, Godwin and Hickey LLC, Rockville, MD, Debra Anne Nelson, William Lowell Mundy, Mundy and Nelson Huntington, WV, James Hilton Crosby, Crosby Saad LLC, Mobile, AL, William G. Gandy, Wilson Elser Moskowitz Edelman and Dicker, Mclean, VA, Bradish J. Waring, Mary Legare Hughes, Nexsen Pruet LLC, Charleston, SC, for Defendants.

OPINION

MESSITTE, District Judge.

Before the Court are eight motions to dismiss filed by various groups of Defendants. Earlier in these proceedings, the Court heard oral argument on the motions and took the matter under advisement. For the reasons set forth below, all the motions will be GRANTED.

I.

A.

Plaintiff's are 182 Maryland residents who are insureds and family or household members of insureds under the National Flood Insurance Program (NFIP), whose homes suffered damaged as a result of flooding during Hurricane Isabel in September 2003. They have sued various insurance companies; the Federal Emergency Management Agency (FEMA) and a number of its employees; private contractors who assist FEMA in the administration of the NFIP; and insurance adjusters who adjust claims under the NFIP. Plaintiff's allege violations of their due process rights, fraud in both the procurement of NFIP policies and the adjustment of claims under those policies, tortious interference with contract, and breach of contract.

B.

The NFIP is a federally-subsidized program designed to make affordable flood insurance available to the general public at or below actuarial rates. It was established under the National Flood Insurance Act of 1968 (NFIA), see 42 U.S.C. §§ 4001 et seq. In 1978, FEMA took control of the program and assumed all relevant operational responsibilities. See 15 U.S.C. § 2201 (reprinting 1978 Reorganization Plan No. 3); see also 42 U.S.C. § 4071(a); see also Battle v. Seibels Bruce Ins. Co., 288 F.3d 596, 598-600 (4th Cir.2002) (discussing the history and operation of the NFIP). FEMA is authorized to promulgate regulations as to "the general terms and conditions of insurability which shall be applicable to properties eligible for flood insurance coverage," and as to "the general method or methods by which proved and approved claims for losses under such policies may be adjusted and paid." See Battle, 288 F.3d at 599 (citing 42 U.S.C. §§ 4013, 4019). In other words, FEMA writes the policies and makes the rules as to claims made under them.

NFIP insurance is marketed to the public in one of two ways: directly by FEMA or through the "Write-Your-Own Program" ("WYO Program") under which a private carrier markets the insurance in its own name. Over 90% of NFIP policies are written by WYO carriers. C.E.R.1988, Inc. v. Aetna Cas. & Sur. Co., 386 F.3d 263, 267 (3d Cir.2004). The WYO carriers have significant administrative responsibilities under the NFIP. For the policies they issue, they are responsible for the adjustment, settlement, payment and defense of all claims. 44 C.F.R. § 62.23(d). However, the program does not utilize a traditional reimbursement mechanism; the Federal Government actually pays the claims and covers adjustment and defense costs. See C.E.R., 386 F.3d at 267. WYO carriers act as "fiscal agents" of the Government. 42 U.S.C. § 4071(a)(1). When a WYO carrier collects a premium, it deducts fees and costs and deposits the remainder in the United States Treasury. See 42 U.S.C. § 4017(d); 44 C.F.R. Part 62, App. A, Art. IV(A). Thus, payment on a claim constitutes a direct charge on the Treasury. See 44 C.F.R. § 62.23(f); C.E.R., 386 F.3d at 267 ("It is the Government, not the companies, that pays the claims"). When WYO carriers are required to defend claims, they are reimbursed by FEMA for their defense costs. 44 C.F.R. § 62.23(i)(6); C.E.R., 386 F.3d at 268 (citations omitted). The carriers are compensated for their services by a 3.3% commission on claims paid. 44 C.F.R. Pt. 62, App. A, Art. 111(C)(1). This compensation system has been devised to minimize the risk that the carriers might be inclined to undervalue claims. See, e.g., C.E.R., 386 F.3d at 270 n. 8; Bruinsma v. State Farm Fire & Cas. Co., 410 F.Supp.2d 628, 631 (D.Mich.2006) ("These features of the National Flood Insurance Program remove all disincentive from the insurance company to deny meritorious claims").

The terms and conditions of coverage are fixed by FEMA regulation in the form of a Standard Flood Insurance Policy ("SFIP") and do not vary whether the policy is marketed by FEMA or a WYO company. See 44 C.F.R. §§ 61.4(b), 61.13(d)-(e), 62.23(c)-(d); Battle, 288 F.3d at 599 ("[A]ll flood insurance policies issued by WYO Companies under the WYO Program must mirror the terms and conditions of the SFIP, which terms and conditions cannot be varied or waived other than by the express written consent of the Federal Insurance Administrator" (citations omitted)). The SFIP is published in the Code of Federal Regulations at 44 C.F.R. Part 61, App. A(1). It is a singlerisk policy that limits coverage to "direct physical loss by or from flood." Id. Art. II(B)(12). It also contains a lengthy list of losses that are not covered. Id. Arts. IV, V.

The SFIP sets forth a number of preconditions to collecting on a claim, the most important of which is the filing of a proper "proof of loss" within 60 days of the flood loss, in which the insured must give detailed written notice identifying the property damaged, how and when the damage occurred, and the property's value. Id. Art. VII(J). Insureds have access to the services of adjusters as a "courtesy," id. Art. VII(J)(7),(8), but the SFIP makes clear that the insured has the ultimate responsibility for complying with the policy terms to ensure payment on covered losses, see id. Art. VII(J)(5), (7), (8) ("5. In completing the proof of loss, you must use your own judgment concerning the amount of loss and justify that amount ... 7. The insurance adjuster whom we hire to investigate your claim may furnish you with a proof of loss form, and she or he may help you complete it. However, this is a matter of courtesy only, and you must still send us a proof of loss within 60 days after the loss even if the adjuster does not furnish the form or help you complete it. 8. We have not authorized the adjuster to approve or disapprove claims or to tell you whether we will approve your claim").

If an insured is dissatisfied with the handling of a claim, he or she may seek recourse from the WYO company, submit to a binding appraisal process (resolving valuation disputes only, not coverage disputes), or bring an action in a federal district court. Id. Art. VII(P); 42 U.S.C. § 4072 ("In the event the program is carried out as provided in section 1340 [42 U.S.C. § 4071], the Director shall be authorized to adjust and make payment of any claims for proved and approved losses covered by flood insurance, and upon the disallowance by the Director of any such claim, 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 Director, may institute an action against the Director 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"). Although the provision conferring jurisdiction on the courts speaks only in terms of "an action against the Director," "a suit against a WYO company is the functional equivalent of a suit against FEMA" since a WYO carrier is a fiscal agent of the government. C.E.R., 386 F.3d at 268.

Several other provisions of the SFIP and NFIP regulations are relevant to the present case. First, in 2000, FEMA added an express preemption clause to the SFIP:

This policy and all disputes arising from the handling of any claim under the policy are governed exclusively by the flood insurance regulations issued by FEMA, the National Flood Insurance Act of 1968 ... and Federal common law.

44 C.F.R. Part 61, App. A(1) Art. IX.

Second, FEMA has promulgated a regulation that voids any representations inconsistent with the express terms of the SFIP:

The standard flood insurance...