JEFFERSON BEACH HOUSE CONDOMINIUM ASSOCIATION v. HARLEYSVILLE INSURANCE COMPANY OF NEW JERSEY

Filing 16

OPINION. Signed by Judge Noel L. Hillman on 9/22/2014. (TH, )

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

JEFFERSON BEACH HOUSE
CONDOMINIUM ASSOCIATION
Plaintiff,

Civil No. 13-6480 (NLH/KMW)

OPINION

v.

HARLEYSVILLE INSURANCE
COMPANY OF NEW JERSEY,
Defendant.

APPEARANCES:
Ross G. Currie, Esquire
Dinsmore & Shohl LLP
1200 Liberty Ridge Drive, Suite 310
Wayne, Pennsylvania 19087
Attorney for Plaintiff Jefferson Beach House Condominium
Association
Benjamin Evan Gordon, Esquire
Stradley Ronon Stevens & Young LLP
2005 Market Street
Suite 2600
Philadelphia, Pennsylvania 19103
Attorney for Defendant Harleysville Insurance Company of
New Jersey
HILLMAN, District Judge
This matter comes before the Court by way of Defendant
Harleysville Insurance Company of New Jersey’s motion [Doc. No.
8] to dismiss Plaintiff’s complaint pursuant to Federal Rule of
Civil Procedure 12(b)(6) for failure to state a claim upon which
relief can be granted.

Plaintiff Jefferson Beach House

Condominium Association (hereinafter, “the Association”) opposes
Defendant’s motion.

The Court has considered the parties’

submissions and decides this matter pursuant to Federal Rule of
Civil Procedure 78.
For the reasons expressed below, Defendant’s motion to
dismiss will be granted in part and denied in part.

I.

JURISDICTION
In this action, the Association asserts a single count for

breach of contract based on Defendant Harleysville Insurance
Company of New Jersey’s alleged wrongful denial of insurance
coverage for damage caused in the aftermath of Hurricane Sandy
in the fall of 2012.

The Court has subject matter jurisdiction

over the Association’s breach of contract claim pursuant to 28
U.S.C. § 1331, as the controversy arises under the laws of the
United States, including the National Flood Insurance Act, 42
U.S.C. § 4001 and 42 U.S.C. § 4072.

See also Van Holt v.

Liberty Mut. Fire Ins. Co., 163 F.3d 161, 167 (3d. Cir. 1998)
(holding that “42 U.S.C. § 4072 vests district courts with
original exclusive jurisdiction over suits by claimants against
[Write Your Own insurance] companies based on partial or total
disallowance of claims for insurance arising out of the National
Flood Insurance Act”).

2

II.

BACKGROUND
The Association’s claims in this action arise from the

partial denial of an insurance claim by Defendant Harleysville
Insurance Company of New Jersey (hereinafter, “Harleysville”)
under a policy Harleysville issued through the National Flood
Insurance Program. (Compl. [Doc. No. 1] ¶¶ 10, 19-20.)

As the

Third Circuit has explained, the National Flood Insurance
Program (“NFIP”) is “a federally supervised and guaranteed
insurance program presently administered by the Federal
Emergency Management Agency (‘FEMA’) pursuant to the [National
Flood Insurance Act of 1968] and its corresponding regulations.”
Van Holt, 163 F.3d at 165 (citing 44 C.F.R. §§ 59.1–77.2).

The

NFIP essentially “guarantees and subsidizes flood insurance.”
Brusco v. Harleysville Ins. Co., No. 14-914, 2014 WL 2916716, at
*1 (D.N.J. June 26, 2014).
“In 1983, pursuant to regulatory authority granted by
Congress in 42 U.S.C. § 4081(a), FEMA created the ‘Write Your
Own’ (‘WYO’) program.”
C.F.R. §§ 62.23–.24).

Van Holt, 163 F.3d at 165 (citing 44
The WYO program authorizes “private

insurance companies like [Harleysville] [to] write their own
insurance policies.”
C.F.R. § 62.23).

Van Holt, 163 F.3d at 165 (citing 44

Through the WYO program, Harleysville and

other private insurance companies, “administer[] standard form
policies, pay[] any excess from premiums to the federal
3

government, and act[] as ‘fiscal agents’ of the United States.” 1
Brusco, 2014 WL 2916716, at *1 (citing 44 C.F.R. § 62 App. A
(2013)).

WYO companies “remit the insurance premiums to the

Flood Insurance Administration (‘FIA’)” but they “may keep funds
required to meet current expenditures, which are limited to five
thousand dollars.”

Van Holt, 163 F.3d at 165 (citing 44 C.F.R.

Pt. 62, App. A., Art. VII(B)).

“When WYO companies deplete

their net premium income, a phenomenon that occurs regularly
because the companies must forfeit a significant portion of the
proceeds from premiums, they draw money from FEMA through
letters of credit to disburse claims.”

Van Holt, 163 F.3d at

165 (citing 44 C.F.R. Pt. 62, App. A, Art. IV(A)).

Accordingly,

“regardless [of] whether FEMA or a WYO company issues a flood
insurance policy, the United States treasury funds pay off the
insureds’ claims.”

Van Holt, 163 F.3d at 165.

In this case, Plaintiff is a condominium association
authorized to act on behalf of the unit owners within the
condominium building located at 120 South Jefferson Avenue in
Margate City, New Jersey.

(Compl. ¶ 9.)

The Association is

the named insured on a Standard Flood Insurance Policy (“SFIP”),

1

Under the NFIP and the WYO Program, “[a]ll subsidized flood
insurance must be sold as a standard, unaltered policy, and the
terms of the policy are governed by the NFIA and its
corresponding regulations.” Brusco, 2014 WL 2916716, at *1.
4

Policy Number 99041500582012, issued by Harleysville through the
NFIP, operative from January 30, 2012 through January 30, 2013
(hereinafter, “the Jefferson Beach SFIP”).

(Id. ¶ 10.)

The

Association alleges that on or about October 29, 2012, the
residential condominium building described by the Jefferson
Beach SFIP sustained direct physical loss and damages due to
flooding caused by Hurricane Sandy.

(Id. ¶ 15.)

Specifically,

the Association asserts that the resulting flooding from
Hurricane Sandy caused “damage to the parking garage,
necessitating the removal and replacement of four (4) storm
damaged glass block window panels and one (1) masonry block wall
on the east elevation of the building.”

(Id. ¶ 16.)

The

Association obtained a proposal from Dean Adams Custom Builder,
LLC, 2 Proposal No. 008-13, (hereinafter, “the Dean Adams
Proposal”), regarding these damages which estimated the cost of
repairs to be approximately $33,264.00.

(Id. ¶ 16.)

The Association alleges that it submitted a timely claim to
Harleysville for the damages caused by the flooding related to
Hurricane Sandy, including those damages covered by the Dean

2

The complaint indicates that the quote for repairs was from
“Quality Coastal Homes.” (Compl. ¶ 16.) Attached to the
complaint as Exhibit B [Doc. No. 1-3] is a copy of Proposal
#008-13. It appears that “Quality Coastal Homes” is a merely a
slogan or description utilized by the business that submitted
Proposal #008-13 - Dean Adams Custom Builder, LLC. The header
of the proposal specifically says “Dean Adams Custom Builder,
LLC” and the same is used as the business’s website.
5

Adams Proposal.

(Id. ¶ 17.)

According to the complaint, on or

about November 11, 2012, Harleysville inspected the property
through independent adjuster Edward Adkins.

(Id. ¶ 18.)

The

Association alleges that Mr. Adkins generated an estimate of the
damages after his inspection which did not include repairs for
the damages sought by the Association in the Dean Adams
Proposal.

(Id.)

The complaint explains that Harleysville paid

damages in the amount of $22,702.00 according to Mr. Adkins’s
estimate on April 11, 2013.

(Id.)

The Association contends

that on April 11, 2013 Harleysville also issued a partial denial
letter to the Association denying coverage for the damages to
the glass block window panels and masonry block wall. 3
20.)

(Id. ¶

The Association claims that, as evidenced by the letter,

“Harleysville’s denial of coverage was based on certain coverage
limitations” set forth in the Jefferson Beach SFIP.

(Id.)

In this case, the Association contends that the Jefferson
Beach SFIP represents a valid and binding contract between the
Association and Harleysville under which Harleysville promised
and had a duty to provide insurance coverage for all direct
physical loss by or from flood in exchange for the Association’s
payment of premiums and fulfillment of certain other conditions

3

A copy of Harleysville’s April 11, 2013 partial denial
letter is attached to the complaint as Exhibit C.
6

contained in the Jefferson Beach SFIP.

(Id. ¶ 24.)

The

Association represents that it met all relevant conditions
required to obtain insurance coverage under the Jefferson Beach
SFIP, but that Harleysville breached the parties’ contract by
“failing to compensate Plaintiff for the damages” reflected in
the Dean Adams Proposal for the glass block window panels and
the masonry block wall.

(Id. ¶¶ 25-26.)

III. DISCUSSION
Harleysville now moves to dismiss the Association’s
complaint pursuant to Federal Rule of Civil Procedure 12(b)(6).
In considering a motion to dismiss a complaint for failure to
state a claim upon which relief can be granted pursuant to Rule
12(b)(6), a court must accept all well-pleaded allegations in
the complaint as true and view them in the light most favorable
to Plaintiff.
2005).

Evancho v. Fisher, 423 F.3d 347, 350 (3d Cir.

It is well settled that a pleading is sufficient if it

contains “a short and plain statement of the claim showing that
the pleader is entitled to relief.”

FED. R. CIV. P. 8(a)(2).

A district court, in weighing a motion to dismiss, asks
“‘not whether a plaintiff will ultimately prevail but whether
the claimant is entitled to offer evidence to support the
claims[.]’”

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 563 n.8

(2007) (quoting Scheuer v. Rhoades, 416 U.S. 232, 236 (1974));
7

see also Ashcroft v. Iqbal, 129 S. Ct. 1937, 1953 (2009) (“Our
decision in Twombly expounded the pleading standard for ‘all
civil actions[.]’”) (citation omitted).

First, under the

Twombly/Iqbal standard, a district court “must accept all of the
complaint’s well pleaded facts as true, but may disregard any
legal conclusions.”

Fowler v. UPMC Shadyside, 578 F.3d 203,

210-11 (3d Cir. 2009) (citing Iqbal, 129 S. Ct. at 1949).
Second, a district court “must then determine whether the
facts alleged in the complaint are sufficient to show that the
Plaintiff has a ‘plausible claim for relief.’”
at 211 (citing Iqbal, 129 S. Ct. at 1950).

Fowler, 578 F.3d

“[A] complaint must

do more than allege the plaintiff’s entitlement to relief.”
Fowler, 578 F.3d at 211; see also Phillips v. County of
Allegheny, 515 F.3d 224, 234 (3d Cir. 2008) (“The Supreme
Court’s Twombly formulation of the pleading standard can be
summed up thus: ‘stating ... a claim requires a complaint with
enough factual matter (taken as true) to suggest’ the required
element.

This ‘does not impose a probability requirement at the

pleading stage,’ but instead ‘simply calls for enough facts to
raise a reasonable expectation that discovery will reveal
evidence of’ the necessary element.”) (citing Twombly, 550 U.S.
at 556).

“The defendant bears the burden of showing that no

claim has been presented.”

Hedges v. U.S., 404 F.3d 744, 750

(3d Cir. 2005).
8

IV.

ANALYSIS
In the instant motion, Harleysville seeks the dismissal of

all of the Association’s claims.

With respect to Count I,

Harleysville challenges the sufficiency of the complaint to
establish a claim for breach of contract under federal law.
Specifically, Harleysville argues that the Association does not
state a claim for breach of contract because the parking garage
located below the first elevated level of the condominium
building is an “enclosure” which is thus subject to expressly
limited coverage as set forth in the Jefferson Beach SFIP 4 at
Section III(A)(8).

(Mem. of Law of Defendant Harleysville in

Supp. of Mot. to Dismiss Compl. Pursuant to Rule 12(b)(6) [Doc.
No. 8-1] (hereinafter, “Harleysville’s Mem.”), 9).

Harleysville

takes the position that it appropriately denied coverage for the
damaged glass block window panels and the masonry block wall on
the east elevation of the building because these “damaged items

4

As noted supra, under the NFIP and the WYO Program, “[a]ll
subsidized flood insurance must be sold as a standard, unaltered
policy, and the terms of the policy are governed by the NFIA and
its corresponding regulations.” Brusco, 2014 WL 2916716, at *1.
With respect to residential condominium buildings, Appendix A(3)
to 44 C.F.R., Pt. 61, sets forth the terms of the Standard Flood
Insurance Policy – Residential Condominium Building Association
Policy (“SFIP-RCBAP”). The Court notes that the Jefferson Beach
SFIP referred to throughout this Opinion and attached as Exhibit
A to the complaint is a SFIP-RCABP issued pursuant to the NFIA
and in accordance with its regulations.
9

are located in a parking garage below the lowest elevated level”
of the building, and these items do not fall within the limited
coverage provided for by Section III(A)(8)(a)(1)-(17).

(Id.)

Accordingly, Harleysville contends it did not breach the
insurance contract at issue.

(Id. at 6-9.)

In addition to its breach of contract claim, the
Association also seeks attorney’s fees and costs, and all other
legal and equitable relief the Court deems appropriate.
Harleysville argues that the Association cannot recover
attorney’s fees, costs, or any other legal or equitable relief
because such relief is outside the scope of the coverage
provided for in the Jefferson Beach SFIP and such claims are
preempted by federal law.
A.

(Harleysville’s Mem. 10-13.)

The Association’s Breach of Contract Claim

Federal common law governs the interpretation of SFIPs
issued pursuant to the National Flood Insurance Program.

Linder

& Assocs., Inc. v. Aetna Cas. & Sur. Co., 166 F.3d 547, 550 (3d
Cir. 1999) (“It is well settled that federal common law governs
the interpretation of the SFIP at issue here.”).

Accordingly,

standard insurance law principles are utilized to construe
SFIPs, and under these principles SFIPs are interpreted
according to their plain, unambiguous meaning.

Id.

Where the

policy language is clear, it must be given effect and the court
must refrain from “tortur[ing] the language to create
10

ambiguities.”

Id.

However, exclusions and ambiguities in SFIPs

are strictly construed against the insurer.

Id.

Thus, where

“the policy is susceptible to two constructions,” the Court
“will adopt the one more favorable to the insured.

Id.; see

also Aschenbrenner v. U.S. Fid. & Guar. Co., 292 U.S. 80, 84-85
(1934) (observing that “[t]he phraseology of contracts of
insurance is that chosen by the insurer and the contract in
fixed form is tendered to the prospective policyholder who is
often without technical training, and who rarely accepts it with
a lawyer at his elbow.

So if its language is reasonably open to

two constructions, that more favorable to the insured will be
adopted, and unless it is obvious that the words are intended to
be used in their technical connotation they will be given the
meaning that common speech imports.”).

Accordingly, any

ambiguity in the language of the Jefferson Beach SFIP should be
construed in favor of the Association as the insured.
Relevant to deciding the present motion, the Court notes
that the Jefferson Beach SFIP generally “insure[s] against
direct physical loss by or from flood 5 to: [inter alia] 1. The

5

The Jefferson Beach SFIP defines a “direct physical loss by
or from flood” as “[l]oss or damage to insured property,
directly caused by a flood. There must be evidence of physical
changes to the property.” (See Jefferson Beach SFIP, Ex. A to
Pl.’s Compl., Section II(B)(12).)
11

residential condominium building 6 described on the Declarations
Page 7 at the described location, 8 including all units within the
building and the Improvements within the units.”

(Jefferson

Beach SFIP, Ex. A to Pl.’s Compl. [Doc. No. 1-2], Section
III(A)(1).)

The “Building Description” set forth in the

attached Flood Policy Declarations Page describes the property
at issue as “Other Residential Three or More Floors Elevated
with Enclosure High Rise.”

(Flood Policy Declarations Page, Ex.

A to Pl.’s Compl. [Doc. No. 1-2] 1.)
The Coverage and Rating section of the Flood Policy
Declarations Page notes, however, that “[t]his is an elevated
building ... [and] [c]overage is limited below the lowest

6

The Jefferson Beach SFIP defines a “residential condominium
building” as a “building, owned and administered as a
condominium, containing one or more family units and in which at
least 75 percent of the floor area is residential.” (See
Jefferson Beach SFIP, Ex. A to Pl.’s Compl. [Doc. No. 1-2],
Section II(B)(25).)
7

The Jefferson Beach SFIP specifies that the “Declarations
Page” is “[a] computer-generated summary of information you
provided in the application for insurance. The Declarations
Page also describes the term of the policy, limits of coverage,
and displays the premium and our name. The Declarations Page is
part of this flood insurance policy.” (See Jefferson Beach
SFIP, Ex. A to Pl.’s Compl. [Doc. No. 1-2], Section II(B)(10).)
8

The Jefferson Beach SFIP provides that the “Described
Location” constitutes “[t]he location where the insured building
or personal property are found. The described location is shown
on the Declarations Page.” (See Jefferson Beach SFIP, Ex. A to
Pl.’s Compl. [Doc. No. 1-2], Section II(B)(11).)
12

elevated floor.

See property not covered in Standard Flood

Insurance Policy.”

(Id.)

Section III(A)(8) of the Jefferson

Beach SFIP itself specifically describes the limited coverage
provided for “[i]tems of property in a building enclosure below
the lowest elevated floor of an elevated 9 post-FIRM 10 building
..., or in a basement 11[.]”

This coverage is

limited to ... [a]ny of the following items, if
installed in their functioning locations and, if
necessary for operation, connected to a power
source: (1) Central air conditioners; (2) Cisterns
and the water in them; (3) Drywall for walls and
ceilings in a basement and the cost of labor to
nail it, unfinished and unfloated and not taped, to
the framing; (4) Electrical junction and circuit
breaker boxes; (5) Electrical outlets and switches;
(6) Elevators, dumbwaiters and related equipment,
except for related equipment installed below the
base flood elevation after September 30, 1987; (7)
Fuel tanks and the fuel in them; (8) Furnaces and
hot water heaters; (9) Heat pumps; (10)
9

The Jefferson Beach SFIP defines an “Elevated Building” as
“[a] building that has no basement and that has its lowest
elevated floor raised above ground level by foundation walls,
shear walls, posts, piers, pilings, or columns.” (See Jefferson
Beach SFIP, Ex. A to Pl.’s Compl. [Doc. No. 1-2], Section
II(B)(13).)
10

The Jefferson Beach SFIP further defines a “Post-FIRM
Building” as “[a] building for which construction or substantial
improvement occurred after December 31, 1974, or on or after the
effective date of an initial Flood Insurance Rate Map (FIRM),
whichever is later.” (See Jefferson Beach SFIP, Ex. A to Pl.’s
Compl. [Doc. No. 1-2], Section II(B)(22).)
11

The Jefferson Beach SFIP sets forth that a “Basement” is
“[a]ny area of the building, including any sunken room or sunken
portion of a room, having its floor below ground level
(subgrade) on all sides.” (See Jefferson Beach SFIP, Ex. A to
Pl.’s Compl. [Doc. No. 1-2], Section II(B)(5).)
13

Nonflammable insulation in a basement; (11) Pumps
and tanks used in solar energy systems; (12)
Stairways and staircases attached to the building,
not separated from it by elevated walkways; (13)
Sump pumps; (14) Water softeners and the chemicals
in them, water filters, and faucets installed as an
integral part of the plumbing system; (15) Well
water tanks and pumps; (16) Required utility
connections for any item in this list; and (17)
Footings, foundations, posts, pilings, piers, or
other foundation walls and anchorage systems
required to support the building.
(See Jefferson Beach SFIP, Ex. A to Pl.’s Compl. [Doc. No. 1-2],
Section III(A)(8)(a)(1)-(17)); see also 44 C.F.R. Pt. 61, App.
A(3), Art. III(A)(8)(a)(1)-(17).
The coverage dispute between the parties here centers on
whether the damaged glass block window panels and masonry block
wall constitute part of the overall structure of the insured
property or whether they constitute “items of property in a
building enclosure below the lowest elevated floor” such that
the coverage is limited to only specified items.

In partially

denying coverage for the Association’s claim, Harleysville’s
April 11, 2013 letter notes that the Jefferson Beach SFIP
“limits property covered below the lowest elevated floor of
post-FIRM elevated buildings[.]”

(Harleysville’s Denial Letter,

Ex. C to Pl.’s Compl. [Doc. No. 1-4] 1.)

The letter further

explains that Harleysville was “denying payment for all noncovered property located below the elevated floor, pursuant to
the” Jefferson Beach SFIP.

(Id.)

14

Specifically, Harleysville’s

letter explained that “[t]he Independent Adjuster’s final report
indicate[d] [the Association] ... requested payment for a block
wall that is not a part of the structure” and accordingly,
Harleysville denied payment for the block wall.

(Id. at 2.)

The Association contends Harleysville’s denial was improper
because the damage occurred to exterior portions of the building
that are covered under the Jefferson Beach SFIP because the
damage occurred to the structure itself.
In the present motion, Harleysville asserts that the
Jefferson Beach SFIP “explicitly provides limited coverage ...
for an ‘enclosure’ below the lowest elevated level of the
subject property[,]” and argues that the parking garage where
the damage occurred clearly falls within the definition of an
“enclosure” in the National Flood Insurance Program Flood
Insurance Manual (the “FIM”) issued by FEMA.
Mem. 7.)

(Harleysville’s

Accordingly, Harleysville contends that it properly

“denied coverage for the damaged items which are located in a
parking garage below the lowest elevated level and which items
therefore fall outside the express coverage limits of the”
Jefferson Beach SFIP.

(Id. at 9.)

Harleysville argues that it

did not breach the Jefferson Beach SFIP because the Policy
“specifically limits building coverage in the enclosure below
the lowest elevated level of a post-FIRM elevated building to
those items specifically enumerated at” Section III(A)(8)(a)(1)15

(17), and the damage did not occur to any items enumerated in
that list.
In opposing Harleysville’s motion, the Association argues
that the coverage limitations set forth in Section III(A)(8) of
the Jefferson Beach SFIP “do not preclude the Association’s
claim for damages to the exterior [of the parking garage], i.e.,
the actual structure of the Property[.]”

(Pl.’s Br. in Opp’n to

Def.’s Mot. to Dismiss [Doc. No. 11] (hereinafter, “Pl.’s
Opp’n”), 6.)

The Association contends that the “whole point of

the [c]omplaint is that the damage was done to the building
exterior, i.e., to the parking garage itself, which is clearly
and unambiguously part of the actual ‘residential condominium
building described on the Declarations Page at the described
location’ and therefore covered under the” Jefferson Beach SFIP.
(Pl.’s Opp’n 1-2.)

The Association acknowledges that the

coverage limitations highlighted by Harleysville apply to
certain items of property in an enclosure, but takes the
position that the damage in this case “was incurred to the
enclosure itself” and is therefore covered under the Jefferson
Beach SFIP.

(Id. at 2-3.)

The Association further points out that the complaint
expressly alleges that the Jefferson Beach SFIP “covers all
exterior portions of the building described in the Declarations
Page irrespective of whether it is below the lowest elevated
16

floor of the building[.]”
(emphasis omitted).

(Pl.’s Opp’n 8) (citing Compl. ¶ 14)

The Association also argues that the

complaint specifically identifies the subject damage to the
parking garage as necessitating “the removal and replacement of
four ... storm damaged glass block window panels and one ...
masonry block wall on the east elevation of the building.”
(Pl.’s Opp’n 8) (citing Compl. ¶ 16.)

“These damages – to the

actual exterior structure of the building described in
Declarations Page – do not fall within the coverage limitations”
of Section III(A)(8).

(Pl.’s Opp’n 8.)

According to the

Association, the “masonry wall and window panels were part of
the enclosure itself” and the enclosure, as part of the overall
structure, is explicitly covered under the Jefferson Beach SFIP
as part of the residential condominium building described on the
Declarations Page at the described location.

(Id. 8-9.) 12

While Harleysville contends that the damaged glass block
window panels and the masonry block wall are not covered under
the Jefferson Beach SFIP because the damage occurred below the
lowest elevated floor of the Association’s elevated post-FIRM
building pursuant to Section III(A)(8), the Association has pled

12

Alternatively, the Association argues that to the extent
the Jefferson Beach SFIP coverage terms are “in any way
ambiguous, the terms of the Policy must be construed in favor of
coverage (i.e., in favor of the Association) and against
Harleysville.” (Pl.’s Opp’n at 6.)
17

a plausible claim for relief here under Section III(A)(1),
however.

Section III(A)(1) specifically insures “against direct

physical loss by or from flood to ... [t]he residential
condominium building described on the Declarations Page at the
described location[.]”

The attached Flood Policy Declarations

Page, which is expressly included as “part of this flood
insurance policy[,]” describes the residential condominium
building at issue here as “Other Residential Three or More
Floors Elevated With Enclosure High Rise.”
Accepting the facts of the complaint as true and viewing
them in the light most favorable to the Association, the
complaint sufficiently alleges that the denied portion of its
insurance claim sought coverage for damages that occurred to the
exterior wall on the east elevation of the building the building
at the parking garage level – specifically glass block window
panels and a masonry block wall.

The Court is satisfied that

the complaint adequately pleads damage to the structure of the
parking garage – an enclosure – which is expressly covered under
the Jefferson Beach SFIP pursuant to the building description on
the Declarations Page.
Moreover, as Harleysville’s April 11, 2013 letter makes
clear, the denial of the Association’s claim was based, inter
alia, on the independent adjuster’s determination that the
Association sought “payment for a block wall that [was] not a
18

part of the structure.”

(Harleysville’s Denial Letter, Ex. C to

Pl.’s Compl. [Doc. No. 1-4] 1.)

It thus appears that had the

adjuster found otherwise, Harleysville would likely have paid
the Association claim for these damages as part of the overall
structure of the insured building.

Taking the facts alleged in

the complaint as true and viewing them in the light most
favorable to the Association, it appears that the Association is
entitled to offer evidence to support the claim that this damage
was structural, should have been covered, and Harleysville’s
denial was a breach of the parties’ insurance contract.

The

complaint sets forth sufficient facts to raise a reasonable
expectation that discovery will reveal evidence demonstrating
that this damage was structural and should have been covered
under the Jefferson Beach SFIP.

Accordingly, Harleysville’s

motion to dismiss Count I of the complaint will be denied.
B.

Attorney’s Fees, Costs, and Other Forms of Relief

The Association’s complaint also seeks attorney’s fees and
costs, and all other legal and equitable relief which the Court
deems to be appropriate.

Harleysville similarly seeks to

dismiss the Association’s request for all such relief.

Here,

the Jefferson Beach SFIP expressly sets forth that “[t]his
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
19

1968, as amended (43 U.S.C. 4001, et seq.), and Federal common
law.”

(Jefferson Beach SFIP, Ex. A to Pl.’s Compl. [Doc. No. 1-

2], Section X.)

With respect to a request for attorney’s fees

and costs, Rule 54 of the Federal Rules of Civil Procedure
states that “costs against the United States, its officers, and
its agencies may be imposed only to the extent allowed by law.”
FED. R. CIV. P. 54.
Harleysville argues that neither the National Flood
Insurance Act, nor the Jefferson Beach SFIP authorize a
policyholder to bring an extra-contractual claim against a WYO
company for attorney’s fees and costs.
12.)

(Harleysville’s Mem. 11-

Harleysville also points out that multiple courts have

found that “absent ... authorization by the NFIA ... or the
SFIP, extra-contractual claims cannot succeed against a WYO
company.”

(Id. at 11.) (citing C.E.R. 1988, Inc. v. Aetna Cas.

& Sur. Co., 386 F.3d 263, 270 (3d Cir. 2004)).
Multiple courts in this District have reached a similar
conclusion.

See, e.g., Messa v. Omaha Property & Cas. Ins. Co.,

122 F. Supp. 2d 513, 522 (D.N.J. 2000) (concluding that
“plaintiffs are not entitled to receive compensatory, punitive,
or consequential damages, or attorney's fees, for alleged bad
faith during the National Flood Insurance Program claims
handling process, because federal law does not provide for those
remedies in this type of case.”); 3608 Sounds Ave. Condo. Ass’n
20

v. South Carolina Ins. Co., 58 F. Supp. 2d 499, 502 (D.N.J.
1999) (explaining that “[a]long with the principle that federal
law governs claims arising under th[e] [National Flood
Insurance] Act, it is also well established that plaintiffs who
assert flood insurance claims cannot recover penalties and
attorney's fees because federal law preempts such state law
claims.”) (citing cases). Significantly, the Association readily
concedes that the “National Flood Insurance Act does not permit
the recover of attorneys’ fees as damages in actions against a
‘Write Your Own’ insurer[.]” 13

(Pl.’s Opp’n 14.)

Accordingly,

Harleysville’s motion will be granted to the extent the
Association seeks attorney’s fees and costs, and other legal or
equitable relief that is not recoverable pursuant to the
National Flood Insurance Act.

13

The Association argues, however, that “nothing in the
statute precludes awarding attorneys’ fees as otherwise provided
by law” such as via Federal Rule of Civil Procedure 11(c).
(Pl.’s Opp’n 15.) Notwithstanding the dismissal of the
Association’s request for attorney’s fees, costs, and other
relief under the National Flood Insurance Act, Federal Rule of
Civil Procedure Rule 11(c) authorizes sanctions against a party
that violates Rule 11(b), and these sanctions may include
attorney’s fees. Rule 11 sanctions are imposed at the
discretion of the Court, and remain available in this case
should the Association have a sufficient basis to bring a motion
for such sanctions at a future time consistent with Rule 11.

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V.

CONCLUSION
For the foregoing reasons, Harleysville’s motion to dismiss

is granted in part and denied in part.

An Order consistent with

this Opinion will be entered.

Dated: September 22, 2014
At Camden, New Jersey

s/ Noel L. Hillman
NOEL L. HILLMAN, U.S.D.J.

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