Schell v. National Flood Insurers Ass'n

• Decision Date: 27 August 1981
• Docket Number: Civ. A. No. 80-K-244.
• Citation: 520 F. Supp. 150
• Parties: C. Allen SCHELL, et al., Plaintiffs, v. NATIONAL FLOOD INSURERS ASSOCIATION, Continental National Assurance Co., Secretary of the U.S. Dept. of Housing and Urban Development, U.S. Dept. of Housing and Urban Development, and the United States of America, Defendants.
• Court: U.S. District Court — District of Colorado

520 F. Supp. 150

C. Allen SCHELL, et al., Plaintiffs, v. NATIONAL FLOOD INSURERS ASSOCIATION, Continental National Assurance Co., Secretary of the U.S. Dept. of Housing and Urban Development, U.S. Dept. of Housing and Urban Development, and the United States of America, Defendants.

Civ. A. No. 80-K-244.

United States District Court, D. Colorado.

August 13, 1981.

Supplemental Opinion August 27, 1981.

COPYRIGHT MATERIAL OMITTED

David L. Kofoed, Denver, Colo., for plaintiffs.

Bruce Menk, John R. Trigg, Hall & Evans, Denver, Colo., for all defendants except federal defendants.

R. J. Brumbaugh, Asst. U.S. Atty., Denver, Colo., for federal defendants.

MEMORANDUM OPINION AND ORDER

KANE, District Judge.

Plaintiffs' two-count amended complaint stems from the flood of the Big Thompson Canyon in July, 1976. Plaintiffs allege that defendants committed themselves to publicize to the plaintiffs the availability of flood insurance under the National Flood Insurance Act, 42 U.S.C. §§ 4001-4127. Count I alleges that defendants' failure to publicize negligently and proximately caused injury to the plaintiffs. Count II alleges that plaintiffs were third-party beneficiaries of provisions of express and implied contracts between the defendants that obligated defendants to publicize the availability of the insurance. Under each count plaintiffs seek damages equal to the maximum amount for which they could have been insured under the program.

In May, 1980 both defendant Continental National Assurance Company (CNA) and the federal defendants filed motions to dismiss. I denied these motions without prejudice on June 5, 1980 to allow plaintiff more discovery. The federal defendants then refiled their motion to dismiss on October 22, 1980. CNA filed two motions for summary judgment: on August 21, 1980 on Count I, and on March 20, 1981 on Count II. These motions are now ripe for determination.

Parallel with these motions, the parties have also disputed the issue of personal jurisdiction over defendant National Flood Insurers Association. Plaintiffs served process on CNA, NFIA's Colorado servicing agent, and on James J. Ross, who was an NFIA employee. At a hearing on August 14, 1980 I stated that NFIA had not yet been properly served and I ordered plaintiffs' counsel to make whatever efforts were necessary to serve it. In November, 1980 the assistant U.S. Attorney appeared specially on behalf of NFIA and moved to quash service of process stating that no adequate service had been made. Plaintiff filed a "Motion to Strike the Motion of NFIA to Quash Service of Process," on April 1, 1981 arguing that service on Mr. Ross was adequate to serve NFIA. At an April 2, 1981 status conference I denied this motion and took the motion to quash service of process under advisement. It is now ripe for determination.¹

I. SUBJECT-MATTER JURISDICTION

A. Federal Defendants

Count II of the amended complaint is founded upon an "express or implied contract with the United States," and the amount in controversy with respect to each plaintiff is over $10,000. The Tucker Act, 28 U.S.C. §§ 1346(a), 1491, vests exclusive jurisdiction for such actions against the United States in the Court of Claims. S. J. Groves & Sons Co. v. United States, 495 F.Supp. 201, 206-07 (D.Colo.1980). I therefore do not have jurisdiction to hear Count II as it applies to the federal defendants.

Because Count I alleges negligence by the federal defendants, this court has jurisdiction under the Tort Claims Act, 28 U.S.C. § 1346(b). Section 2675(a), however, requires a claimant first to present his claim to the appropriate federal agency. Because only the first five plaintiffs in this case have so presented their claims, the negligence claims of all of the other plaintiffs against the federal defendants are barred.²

The first five plaintiffs³ in this case filed claims with HUD sometime between September 5, 1978 and November 28, 1978.⁴ The Big Thompson flood occurred on July 31, 1976. Under 28 U.S.C. § 2401(b) a tort claim against the United States is forever barred unless it is presented in writing to the appropriate federal agency "within two years after such claim accrues...."⁵ Because either date of filing is more than two years after the flood, it is questionable whether the first five plaintiffs have complied with § 2401(b). However, the time when a cause of action accrues under this statute must be determined by the court in light of all of the surrounding circumstances. United States v. LePatourel, 593 F.2d 827, 830 (8th Cir. 1979). If a plaintiff first knew or should have known about the alleged wrong after the wrong occurred, the cause of action will accrue on the later date. Zeidler v. United States, 601 F.2d 527, 529-30 (10th Cir. 1979). On this issue there are two crucial unresolved questions of fact: when were the claims first filed with the agency and when did the cause of action first accrue. It is therefore inappropriate for me to grant the federal defendants' motion to dismiss on Count I on statute-of-limitations grounds.⁶

The federal defendants also argue that this action against them is barred by the retention of sovereign immunity under 33 U.S.C. § 702c, which provides:

No liability of any kind shall attach to or rest upon the United States for any damages from or by floods or flood waters at any place....

Although the language of this section is very broad, courts have held that it only applies when the alleged government negligence is connected with a flood control project. Graci v. United States, 456 F.2d 20, 23-27 (5th Cir. 1971), cert. denied, 412 U.S. 928, 93 S.Ct. 2752, 37 L.Ed.2d 155 (1973); see also Callaway v. United States, 568 F.2d 684, 686-87 (10th Cir. 1978). I hold that the National Flood Insurance Act should not be considered a flood control project under § 702c. The federal defendants cite Britt v. United States, 515 F.Supp. 1159 (M.D.Ala.1981), in support of their argument that flood insurance is a flood control project. That case held that § 702c barred suit against the United States for damages that resulted when plaintiffs relied upon a federal flood hazard map in deciding where to build their houses. Flood hazard maps, like physical flood control projects, are intended to prevent flood damages. Because the National Flood Insurance Act is directed at compensation for, rather than prevention of, flood damages, see 42 U.S.C. § 4001(a), I hold that 33 U.S.C. § 702c does not apply to this case.

The federal defendants also cite 28 U.S.C. § 2680(a), (h) in support of their argument that Count I is barred by sovereign immunity. Section 2680(a) bars any claim by plaintiffs that the federal defendants improperly executed the National Flood Insurance Act, particularly 42 U.S.C. § 4020. Section 2680(a) does not bar claims based on an alleged breach of a duty beyond that imposed by statute.

Section 2680(h) bars any claim arising out of a misrepresentation by federal officials. I reject the federal defendants' argument that this provision applies to their failure to inform plaintiffs of the availability of insurance. See Ramirez v. United States, 567 F.2d 854, 856-57 (9th Cir. 1977) (en banc); Ingham v. Eastern Air Lines, Inc., 373 F.2d 227, 238-39 (2d Cir.), cert. denied, 389 U.S. 931, 88 S.Ct. 295, 19 L.Ed.2d 292 (1967).

In summary, I have jurisdiction to hear the first five plaintiffs' tort claims against the federal defendants, but only to the extent that they are based on alleged breaches of duty that are not based on any statute or regulation, and only if these plaintiffs can successfully demonstrate that they complied with the two-year limitation of 28 U.S.C. § 2401(b).

B. Non-federal Defendants

If this court has subject-matter jurisdiction over the federal defendants, then I can exercise pendent jurisdiction over the nonfederal defendants,⁷ because the claims against them stem from a "common nucleus of operative fact" and are such that plaintiff "would ordinarily be expected to try them all in one judicial proceeding." United Mine Workers v. Gibbs, 383 U.S. 715, 725, 86 S.Ct. 1130, 1138, 16 L.Ed.2d 218 (1966). If, however, this court does not have jurisdiction over any of the claims against the federal defendants, then it will be necessary to determine whether there is an independent basis for jurisdiction over the non-federal defendants. To avoid later uncertainty, I consider this question now.

The National Flood Insurance Act imposes no statutory obligation upon the non-federal defendants to publicize the availability of flood insurance. See Pennsylvania v. National Association of Flood Insurers, 520 F.2d 11, 18 (3d Cir. 1975). In spite of this lack of statutory obligation, I find that this court still has jurisdiction over the claims against CNA and NFIA under 28 U.S.C. § 1331(a). Congress intended the National Flood Insurance Program to be uniform throughout the country. See 42 U.S.C. § 4001. Because of this intent, I hold that actions stemming from contract with federal agencies under the flood insurance program are governed by federal common law. See United States v. Seckinger, 397 U.S. 203, 209-10, 90 S.Ct. 880, 884, 25 L.Ed.2d 224 (1970); United States v. County of Allegheny, 322 U.S. 174, 183, 64 S.Ct. 908, 913, 88 L.Ed. 1209 (1944); Pennsylvania v. National Association of Flood Insurers, 378 F.Supp. 1339, 1345 n.15 (M.D.Pa.1974), aff'd in part, rev'd in part on other grounds, 520 F.2d 11 (3d Cir. 1975). See generally Anno., The Supreme Court and the Post-Erie Federal Common Law, 31 L.Ed.2d 1006, 1025-26 (1973). Because federal common law controls, this court has jurisdiction under 28 U.S.C. § 1331(a). Illinois v. City of Milwaukee, 406 U.S. 91, 99-100, 92 S.Ct. 1385, 1390-1391, 31 L.Ed.2d 712 (1972) (partially overruled on other grounds, City of Milwaukee v. Illinois, ___ U.S. ___, 101 S.Ct. 1784, 68 L.Ed.2d 114 (1981)).⁸

II. PERSONAL JURISDICTION OVER NFIA

The federal defendants have asserted that NFIA has never...