Gottlandsini LLC v. Fugate, et. al

Filing 25

Judge Rya W. Zobel: ORDER entered granting 18 Motion to Dismiss. Judgment may be entered dismissing the complaint. (Urso, Lisa)

UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS

CIVIL ACTION NO. 11-11907-RWZ

GOTTLANDSINI, LLC
v.
W. CRAIG FUGATE, Administrator, Federal Emergency Management Agency,
and
HARTFORD INSURANCE COMPANY OF THE MIDWEST

ORDER
September 5, 2012
ZOBEL, D.J.

Plaintiff Gottlandsini, LLC, purchased a Standard Flood Insurance Policy
(“SFIP”) from defendant Hartford Insurance Company of the Midwest (“Hartford”) on a
property in Kingston, Massachusetts. It submitted a claim under the policy for alleged
flood damage sustained on April 5, 2010. Hartford denied the claim and plaintiff
appealed the denial to the Federal Emergency Management Agency (“FEMA”). See 44
C.F.R. § 62.20; FEMA Mem. Supp. Mot. Dismiss (hereinafter, “FEMA Mem.”) Ex. A-1,
Appeal Package. FEMA directed Hartford to have a third engineer re-inspect the
property and submit a report to Hartford. FEMA Mem. Ex. A-2, FEMA Ltr. of Mar. 16,
2011. FEMA reviewed the third engineer’s report, concurred with Hartford’s position,
and upheld Hartford’s final determination. FEMA Mem. Ex. A-3, FEMA Ltr. of June 9,
2011. In October 2011, plaintiff brought this action for breach of contract and failure to

pay benefits against Hartford and W. Craig Fugate, in his capacity as FEMA
Administrator. FEMA now moves to dismiss for lack of subject matter jurisdiction
because it has not waived sovereign immunity (Docket # 18). See Murphy v. United
States, 45 F.3d 520, 522 (1st Cir. 1995) (“It is well settled that the United States, as
sovereign, may not be sued without its consent.”).
Plaintiff’s flood insurance policy is regulated under the National Flood Insurance
Program, which is governed by the National Flood Insurance Act (“NFIA”), codified as
42 U.S.C. §§ 4001-4129, and corresponding regulations. Under the NFIA, FEMA
establishes the terms and conditions of the SFIP, but authorizes private insurers (called
“Write Your Own” (“WYO”) Companies) to issue flood insurance policies in their own
name, and adjust, settle, pay and defend all claims arising under such policies. 44
C.F.R. § 62.23(d). “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). It is
undisputed that Hartford is a participating WYO Company.
Congress created a limited waiver of sovereign immunity through 42 U.S.C. §
4072, which states in full:
In the event the program is carried out as provided in section 4071 of this
title, 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
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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.
(emphasis added). Disallowance by FEMA of the plaintiff’s claim is thus a statutory
prerequisite for waiver. See Zion Realty Corp. v. FEMA, No. 07-10830-GAO, 2007 WL
4200963, at *2 (D. Mass. Nov. 27, 2007) (strictly construing section 4072's waiver).
Section 4072's waiver does not apply here. Despite plaintiff’s allegations that it
“had an [SFIP] in effect with, and administered by” both Hartford and FEMA, Compl. ¶¶
7-8, Hartford issued the policy that was in effect during the period of the alleged flood
loss, FEMA Mem. Ex. A, Decl. of Carolyn McGill ¶¶ 4,5, and was solely responsible for
adjusting, investigating, and denying plaintiff’s claim. Id. ¶ 6. See also Valentin v.
Hospital Bella Vista, 254 F.3d 358, 363 (1st Cir. 2001) (when the court conducts a
jurisdictional inquiry under Fed. R. Civ. P. 12(b)(1), “plaintiff’s jurisdictional averments
are entitled to no presumptive weight; the court must address the merits of the
jurisdictional claim by resolving the factual disputes between the parties.”). Thus, the
federal government is not an appropriate party here. See 44 C.F.R. § 62.23(g); Mertz
v. FEMA, Dept. of Homeland Sec., 10-CV-260-AC, 2011 WL 3563113, at * 4 (D. Or.
Feb. 14, 2011) (section 4072's waiver of sovereign immunity “is not applicable to claims
for monies due under policies issued by private insurers pursuant to the WYO
Program,” and citing cases) report and recommendation adopted sub nom. Mertz v.
FEMA, 3:10-CV-00260-AC, 2011 WL 3563130 (D. Or. Aug. 10, 2011).
Plaintiff contends that FEMA “had direct involvement with the analysis and

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denial of [its] claim,” such that FEMA’s actions fall within the provisions of 42 U.S.C. §
4072, because it directed a third engineer to re-inspect the property and provide a
written response to Hartford. Pl. Opp. At 5. FEMA’s upholding of Hartford’s denial
does not convert FEMA into the party making the denial. See Mertz, 2011 WL, at *5 (in
upholding private insurer’s denial of plaintiff’s claim, FEMA “was acting pursuant to its
duty to provide an optional intermediate level of review under the regulations, not as
the insurer under the Policy. The fact that FEMA reviewed the claim does not turn the
WYO Program policy into a policy written by the federal government.”) (citing Bruno v.
Paulison, No. RDB-08-0494, 2009 U.S. Dist. LEXIS 13910, at *19 (D. Md. Feb. 12,
2009) (FEMA's administrative review of Nationwide's disallowance does not trigger the
limited waiver under 42 U.S.C. § 4072.)). See also Murphy, 45 F.3d at 522 (“In general,
statutes waiving sovereign immunity should be strictly construed in favor of the United
States. ‘Courts may not enlarge ... beyond what the language [of the statute creating
the waiver] requires.’”) (internal citations omitted; alterations in original).
FEMA’s directing the involvement of a third engineer likewise does not satisfy
the statutory prerequisite for waiver, especially given that its correspondence with
plaintiff explicitly noted that Hartford was responsible for the decision whether to allow
or deny the claim. See FEMA Mem. Ex. A (explaining that once the third engineer’s
report “has been received by [Hartford], [Hartford] will advise if any further
consideration is to be given in this matter and advise FEMA of the final outcome
concerning [plaintiff’s] claim. Please keep in mind that any adjustment is under the
direction of [Hartford] and is contingent upon the merits of their findings, and
application to the conditions and exclusions of the SFIP.”).
FEMA’s Motion to Dismiss is ALLOWED. Judgment may be entered dismissing
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the complaint.
September 5, 2012
DATE

/s/Rya W. Zobel
RYA W. ZOBEL
UNITED STATES DISTRICT JUDGE

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