MCMULLIN et al v. HARLEYSVILLE INSURANCE COMPANY, INC. et al

Filing 25

MEMORANDUM OPINION FILED. Signed by Chief Judge Jerome B. Simandle on 2/11/15. (js)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY

BRIAN MCMULLIN, MICHELLE
MCMULLIN, GBW REALTY, INC.,
and GRACE & THE DUDES, LLC,
Plaintiffs,

HONORABLE JEROME B. SIMANDLE

Civil Action No.
14-7537 (JBS/KMW)

v.
HARLEYSVILLE INSURANCE
COMPANY, INC., THE HARTFORD
INSURANCE COMPANY OF THE
MIDWEST, CERTAIN UNDERWRITERS
AT LLOYD'S LONDON SUSCRIBING
TO POLICY NUMBER CSWBIFIC0782,
BROOKS INSURANCE AGENCY, and
THE DEMONACO AGENCY, INC.,

MEMORANDUM OPINION

Defendants.
SIMANDLE, Chief Judge:
Plaintiffs bring this action against their insurers,
seeking to recover the insurance benefits purportedly owed to
Plaintiffs as a result of the severe damage caused to their
commercial property during Hurricane Sandy. (See Compl. at ¶¶ 130.)

Hartford Insurance Company, Inc. (hereinafter, “Hartford”)

removed this action from the Superior Court of New Jersey on
December 3, 2014.

Plaintiffs now move to remand this matter to

the state court on the grounds that the Court lacks jurisdiction
over Plaintiffs’ claims, and due to a procedural defect in
Hartford’s removal. (See Pls.’ Br. [Docket Item 10].)

For the

reasons that follow, Plaintiffs’ motion will be denied.

The

Court finds as follows:
1.

In their Complaint, Plaintiffs generally allege that

Hurricane Sandy caused catastrophic damage to their commercial
property.

(See Compl. at ¶ 20.)

Subsequent to the storm,

Plaintiffs submitted claims under their flood insurance policy
with Hartford, their commercial property policy with Lloyds of
London (hereinafter, “Lloyds”), and their businessowners policy
with Harleysville Insurance Company (hereinafter,
“Harleysville”).

(See id. at ¶¶ 3, 5, 8, 21)

Despite

Plaintiffs’ asserted entitlement to insurance coverage and
benefits, Plaintiffs allege that Defendants actively avoided
“their respective obligations to provide coverage and/or
benefits,” opting instead to decline full and/or partial
coverage for Plaintiffs’ otherwise covered claims.
¶¶ 26-30.)

(See id. at

Plaintiffs therefore allege that such declination

breached the express and implied terms and conditions of
Defendants’ respective insurance policies.1

1

(Id. at 5-7, 10-15.)

In addition, Plaintiffs allege that the insurance brokers and
agents responsible for arranging Plaintiffs’ insurance coverage,
Brooks Insurance Agency (hereinafter, “Brooks”) and the Demonaco
Agency, Inc. (hereinafter, “Demonaco”), breached their fiduciary
obligations, and committed professional negligence and fraud, by
recommending the disputed insurance policies and failing to
timely process certain premium payments. (See Compl. at 7-10,
15-17.)
2 

2.

In the pending motion, Plaintiffs argue that the Court

lacks jurisdiction over Plaintiffs’ Complaint because
Plaintiffs’ claims “simply” fail to involve “a ‘substantial’
question of federal law.”
Reply at 4.)

(Pls.’ Br. at 4, 7; see also Pls.’

Indeed, Plaintiffs insist that any issues

concerning Plaintiffs’ flood insurance policy—questions that
Plaintiffs appear to concede arise under federal law—comprise
too trivial a portion of Plaintiffs’ Complaint for the Court to
properly exercise federal question jurisdiction.
7-8; Pls.’ Reply at 6-13.)

(Pls.’ Br. at

In addition, Plaintiffs argue that

their non-flood claims rely upon “separate acts performed by
separate entities [and] based [upon] separate theories,” and
therefore lack sufficient relation to support an exercise of
supplemental jurisdiction over their remaining, non-flood
claims.

(Pls.’ Reply at 8.)

For these reasons, Plaintiffs

submit that this action must be remanded to the state court in
its entirety or, in the alternative, that Plaintiffs’ “‘separate
and independent’” state law claims must “be severed and
remanded.”2

(Pls.’ Br. at 10.)

2

Plaintiffs also argue that Hartford violated the rule of
unanimity by removing this action to federal district court
without first obtaining the consent of Harleysville and Lloyds.
(See Pls.’ Br. at. 10-12.) A violation of the rule of unanimity,
however, constitutes a procedural defect subject to waiver if
the plaintiff fails to object within 30 days after removal. See
28 U.S.C. § 1447(c); Lewis v. Rego Co., 757 F.2d 66, 68 (3d Cir.
1985). As stated above, Hartford removed this action on
3 

3.

Defendants counter, however, that the National Flood

Insurance Act, namely, 42 U.S.C. § 4072, provides the Court with
original and exclusive jurisdiction over Plaintiffs’ flood
claims against Hartford.

(Hartford’s Opp’n at 5-8;

Harleysville’s Opp’n at 4.)3

In addition, because the crux of

this litigation concerns the alleged damage to Plaintiffs’
property as a result of Hurricane Sandy, and the subsequent
handling of Plaintiffs’ insurance claims, Defendants argue that
the remaining claims bear sufficient factual relation for
purposes of supplemental jurisdiction.

(See Harleysville’s

Opp’n at 5; Hartford’s Opp’n at 8.)
4.

When deciding whether an action originally filed in

state court alleges a federal claim, courts consider whether the
plaintiff's “well-pleaded complaint” contains an essential
December 3, 2014; Plaintiffs, however, did not raise any rule of
unanimity issue until January 8, 2015, 36 days following
removal. Such delay waived Plaintiffs’ ability to challenge
Hartford’s removal on procedural grounds. See Lewis, 757 F.2d
at 68. In so concluding, the Court follows the weight of
authority finding the three day extension under Federal Rule of
Civil Procedure 6(d) ineffective “to extent the § 1447(c) time
period.” Ramos v. Quien, 631 F. Supp. 2d 601, 609 (E.D. Pa.
2008); see also Gola v. City of Phila., No. 09-5037, 2011 WL
2313147, at *2 n.1 (E.D. Pa. June 30, 2011) (same); N.J. Dep't
of Envtl. Prot. v. Exxon Mobil Corp., 381 F. Supp. 2d 398, 401–
02 (D.N.J. 2005) (same). The Court therefore rejects
Plaintiffs’ procedural argument as a basis to remand this
action.
3 Lloyds filed no formal brief in opposition to Plaintiffs’
motion, but filed a brief submission indicating that it opposes
Plaintiffs’ “attempt to remand this action to state court” for
the reasons set forth in Hartford’s and Harleysville’s
Oppositions. [Docket Item 18.]
4 

federal question. See Beneficial Nat’l Bank v. Anderson, 539
U.S. 1, 6 (2003); Rivet v. Regions Bank of La., 522 U.S. 470,
475 (1998).

The mere presence of a federal issue in a state

claim does not, however, automatically confer federal
jurisdiction.

See Merrell Dow Pharms., Inc. v. Thompson, 478

U.S. 804, 813 (1986).

Rather, federal question jurisdiction

arises when state-law claims “implicate significant federal
issues.” Grable & Sons Metal Prods., Inc. v. Darue Eng’g & Mfg.,
545 U.S. 308, 312 (2005). However, “a plaintiff may not defeat
removal by [failing] to plead necessary federal questions in a
complaint.” Franchise Tax Bd. of State of Cal. v. Constr.
Laborers Vacation Trust for S. Cal., 463 U.S. 1, 22 (1983).
5.

Despite Plaintiffs’ position in the pending motion,

Plaintiffs’ Complaint makes clear that their claims involve, at
least in part, a standard flood insurance policy (hereinafter,
“SFIP”) issued by Hartford, a write-your-own insurer
(hereinafter, a “WYO”), pursuant to the National Flood Insurance
Program (hereinafter, “NFIP”).

(See generally Compl.)

Indeed,

Plaintiffs specifically appended the NFIP’s General Property
Form for SFIPs in connection with the pending motion.
Pls.’ Reply, Ex. A.)

(See

The Court therefore notes that the NFIP

grants original and exclusive jurisdiction to federal district
courts for all lawsuits against FEMA or a WYO insurer regarding
an NFIP claim.

See 42 U.S.C. § 4072; see also Palmieri v.
5 

Allstate Ins. Co., 445 F.3d 179, 185–86 (3d. Cir. 2008); Van
Holt v. Liberty Mut. Fire Ins. Co., 163 F.3d 161, 167 (3d Cir.
1998). Indeed, all SFIPs, including the disputed SFIP in this
instance, contain the following provision:
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. pt. 61, app. (A)(1), art. IX (emphasis added). (see
also Pls.’ Reply, Ex. A at 17.)

Federal law therefore preempts

all state law causes of action that, as here, arise from the
handling of SFIP claims by a WYO insurance company.

See

Palmieri, 445 F.3d at 187.
6.

Therefore, although Plaintiffs’ Complaint nowhere

references federal law, Plaintiffs’ allegations nonetheless
implicate federal law to the extent Plaintiffs assert claims
against Hartford, a WYO insurance provider governed by the
National Flood Insurance Act, 42 U.S.C. §§ 4001-4131
(hereinafter, the “NFIA”).

Indeed, three counts of Plaintiffs’

Complaint squarely concern Hartford’s purportedly improper
handling of Plaintiffs’ SFIP claim.

(See Compl. at ¶ 3

(alleging that Hartford issued a flood insurance policy for the
disputed property), 5-7, 10-12 (alleging that Hartford breached
the insurance policy, and its fiduciary duty, by “refusing to
honor” Plaintiffs’ claims).)

Consequently, though couched in
6 

slightly varied terms, the substance of Plaintiffs’ claims
against Hartford arise under federal law, and the Court,
accordingly, possesses original and exclusive federal
jurisdiction over such claims under 42 U.S.C. § 4072.4

See Van

Holt, 163 F.3d at 176; see also Bd. of Directors of Rough Riders
Landing Homeowners Ass’n, Inc. v. Signature Grp., LLC, 989 F.
Supp. 2d 239, 242 (E.D.N.Y. 2013) (generally noting that claims
concerning the disallowance of flood claims fall within the core
provisions of the NFIA, and denying the plaintiff’s motion to
remand); Residences at Bay Point Condo. Ass’n, Inc. v. Standard
Fire Ins. Co., No. 13-2380, 2013 WL 6252692 (D.N.J. Dec 04,
2013) (same).

In addition, because Plaintiffs’ allegations

concerning the mishandling of their SFIP claim require the
interpretation of federal law, Plaintiffs’ claims also depend
upon the resolution of a “‘substantial question of federal
law,’” and the Court therefore possesses federal question
4

Plaintiffs’ assertion of a state tort claim against Hartford
for breach of fiduciary duty requires no different conclusion.
(See Compl. at 10-12.) To the contrary, the Court of Appeals
has specifically concluded that the NFIA vests federal district
courts with exclusive and original jurisdiction over both
federal law contract and state law tort claims arising from the
adjustment of flood insurance polices. See Van Holt, 163 F.3d
at 176 (“We now determine that Congress, had it considered the
specific question, would have intended to confer original
exclusive jurisdiction on the district court over claims
sounding in tort arising out of the investigation or adjustment
of insurance policies arising out of the administration and sale
of insurance under the NFIA.”) Therefore, this claim also falls
within the confines of the Court’s original and exclusive
jurisdiction.
7 

jurisdiction under 28 U.S.C. § 1331, as well.

Morris v. Simsol

Ins. Servs., No. 13-2514, 2013 WL 6590584, at *4 (W.D. La. Dec.
16, 2013) (denying a motion to remand under 42 U.S.C. § 4072 and
28 U.S.C. § 1331, because the plaintiff’s claims concerned, in
part, the mishandling of an NFIP flood claim).

For all of these

reasons, the Court concludes that it has federal jurisdiction
over Plaintiffs’ claims arising from the adjustment of
Plaintiffs’ federal flood insurance policy with Hartford,5 and
therefore turns to whether the Court’s jurisdiction extends to
the entire litigation.
7.

“[I]n any civil action of which the district courts

have original jurisdiction, the district courts shall have
supplemental jurisdiction over all other claims that are so
related to claims in the action within such original
jurisdiction that they form part of the same case or controversy
under Article III of the United States Constitution.” 28 U.S.C.
§ 1367(a).

In order to evaluate the propriety of supplemental

jurisdiction in this instance, the Court must determine whether
5

As stated above, the operative inquiry concerns whether
Plaintiffs’ well-pleaded Complaint arises, even if only in part,
under federal law. Plaintiffs’ efforts to informally resolve
their dispute with Hartford and/or Hartford’s partial payment
therefore bears no impact on whether the allegations arise under
federal law, particularly because the claims against Hartford
remain pending in this litigation. (See Pls.’ Br. at 7 (arguing
that claims against Hartford are “not ‘in the forefront of this
case’ and ‘could be properly handled by the state court’”
because dispute with Hartford has purportedly been resolved in
part).)
8 

the circumstances of this action meet three requirements.
28 U.S.C. § 1367.

See

First, “‘[t]he federal claim must have

substance sufficient to confer subject matter jurisdiction on
the court.’”

Lyon v. Whisman, 45 F.3d 758, 760 (3d Cir. 1995)

(citation omitted).

Second, the federal claim and pendent state

law claims “‘must derive from a common nucleus of operative
facts.’”

Id. (citation omitted).

Third, the Court must

consider whether Plaintiffs’ claims “‘would ordinarily be
expected’” to arise in one judicial proceeding.

Id. (citation

omitted).
8.

Given Plaintiffs’ allegations, the Court finds it

appropriate to exercise supplemental jurisdiction over the
entirety of Plaintiffs’ Complaint.

First, for the reasons

stated above, the Court finds that Plaintiffs’ federal flood
claims possess the requisite substantiality, particularly given
the pervasive federal scheme under which such claims arise.

See

Signature Grp., LLC, 989 F. Supp. 2d 239, 242 (quoting
Southpointe Villas Homeowners Ass’n, Inc. v. Scottish Ins.
Agency, Inc., 213 F.Supp.2d 586, 590 (D.S.C. 2002)) (finding
that flood claims implicate “both a ‘uniquely federal interest’
(particularly, given that ‘the United States ... bears the risk
of any potential premium refund’) and a federal policy
requiring” uniform interpretation of the NFIA, and the
regulations promulgated thereunder).
9 

Second, despite

Plaintiffs’ assertions, Plaintiffs’ claims rely upon an
inextricably linked and identical factual predicate, as the
Complaint itself explains.

Indeed, Plaintiffs’ Complaint

principally hinges upon Plaintiffs’ assertions that Defendants
improperly handled Plaintiffs’ insurance claims in the aftermath
of Hurricane Sandy (id. at 5-7), in breach of Defendants’
express and implied obligations under their respective insurance
policies. (Id. at 7-17.)

The common threads through Plaintiffs’

Complaint concern the nature of the damage to Plaintiffs’
commercial property, and whether such damage entitled Plaintiffs
to insurance benefits under one and/or all of Plaintiffs
insurance policies with Defendants.

Indeed, Plaintiffs’ non-

flood claims rely upon allegations substantively identical to
those alleged in connection with Plaintiffs’ flood claims.
(Compare Compl. at 5-7.)

The Court therefore concludes that

Plaintiffs’ non-flood state law claims share a factual predicate
common, if not identical, to Plaintiffs’ federal flood claims.
See Morris, 2013 WL 6590584, at *4 (finding supplemental
jurisdiction “clearly available” as to the plaintiff’s
essentially “identical” non-flood claims). Finally, with regard
to the third requirement, the Court follows the numerous federal
courts that have deemed non-flood claims asserted in connection
with federal flood claims logically litigated together for the
purposes of supplemental jurisdiction. (Harleysville’s Opp’n at
10 

5 (citing a litany of cases finding supplemental jurisdiction
appropriate under analogous circumstances).)

Indeed, the Court

finds the retention of such claims in a single action warranted
and rationally expected, particularly where, as here, the claims
rely upon substantively identical allegations.6
WL 6590584, at *4.

See Morris, 2013

For all of these reasons, the Court finds it

appropriate to exercise supplemental jurisdiction over
Plaintiffs’ state non-flood claims.
9.

In sum, because the Court possesses original and

supplemental jurisdiction over Plaintiffs’ Complaint pursuant to
42 U.S.C. § 4072, 28 U.S.C. § 1331, and 28 U.S.C. § 1367(a),

6

Plaintiffs’ assertion of direct claims against their insurance
broker and agent compels no contrary conclusion. Indeed,
Plaintiffs’ breach of fiduciary duty claim against the insurance
broker and agent similarly hinges upon such entities involvement
in Defendants’ purportedly improper handling of Plaintiffs’
insurance claims. (See generally Compl. at 7-10.) Therefore, the
Court finds that this claim also bears sufficient factual
commonality for the purposes of supplemental jurisdiction. The
Court notes, however, that Plaintiffs’ professional negligence
and fraud claims against DeMonaco, Plaintiffs’ insurance agent,
appear to concern only DeMonaco’s handling of Plaintiffs’
commercial property insurance with Lloyds. (See id. at 15-17.)
That fact alone, however, does not warrant the severance of
these claims, nor the remand of this action in its entirety,
because such claims will invariably rely upon at least some
facts common to Plaintiffs’ other claims. Consequently, in the
interests of judicial economy, the Court finds the exercise of
supplemental jurisdiction over these claims appropriate. See De
Asencio v. Tyson Foods, Inc., 342 F.3d 301, 308 (3d Cir. 2003)
(noting that supplemental jurisdiction “promotes ‘judicial
economy, convenience and fairness to litigations’”) (citation
omitted).
11 

Plaintiffs’ motion to remand will be denied.

An accompanying

Order will be entered.

February 11, 2015
Date

s/ Jerome B. Simandle
JEROME B. SIMANDLE
Chief U.S. District Judge

12