Williams et al v. Ameris Bank ISAOA et al

Filing 18

ORDER AND OPINION: The Court GRANTS Defendant Selective's motion to dismiss Plaintiffs' claims for declaratory relief. (Dkt. No. 7).AND IT IS SO ORDERED. Signed by Honorable Richard M Gergel on 9/24/24.(ltap, ) Modified document type, edit docket text on 9/25/2024 (sshe, ).

IN THE UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH CAROLINA
CHARLESTON DIVISION
Jeffrey Williams and Kimberly Williams,
v.

Case No. 2:24-cv-04068-RMG

Plaintiffs,
ORDER AND OPINION

Ameris Bank ISAOA and Selective
Insurance Company of the SE,
Defendants.

Before the Court is Defendant Selective Insurance Company of the SE’s (“Selective”)
motion to dismiss Plaintiffs’ claims seeking a declaratory judgment against it. (Dkt. No. 7).
Plaintiffs responded (Dkt. No. 13), and Defendant replied (Dkt. No. 17). For the reasons set forth
below, the Court grants Defendant’s motion.
I.

Introduction

Plaintiffs are owners of real property in Pawleys Island, South Carolina, which is insured
by a Standard Flood Insurance Policy (“SFIP”) issued by Defendant Selective Insurance Company
of the SE (“Selective”). (Dkt. No. 1-1, Exhibit B). As a Write-Your-Own (“WYO”) Program
carrier, Selective participates in the FEMA-administered National Flood Insurance Program
(“NFIP”) by collecting SFIP premiums and depositing the amount outstanding after fees and costs
to the United States Treasury National Flood Insurance Fund. 42 U.S.C. § 4017(b)(2).

While

private insurance carriers handle the administration of claims pursuant to the WYO Program,
FEMA is responsible for the payment of claims. Id. at § 4014.
Plaintiffs’ monthly mortgage payments to Defendant Ameris Bank ISAOA (“Ameris”)
included their flood insurance premium, which Ameris would transmit to Defendant Selective.
(Dkt. No. 1-1, ¶ 9). However, despite receiving notice of the policy’s impending expiration on
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three separate occasions —January 31, 2023 (indicating an expiration date of February 14, 2023),
February 14, 2023 (providing a 29-day grace period for payment of the outstanding premium), and
again on February 24, 2023 (flagging that the policy would lapse on March 15, 2023)—neither
Plaintiffs nor Ameris responded to Selective’s notice nor made payment to satisfy the $845
premium. (Dkt. No. 7-1 at 3).
Just five days after the policy lapsed on March 15, 2023, Selective received a check from
Ameris reflecting the outstanding $845 premium payment. (Dkt. No. 1-1, ¶ 20 & Exhibit D).
Selective notified Plaintiffs and Ameris that the premium payment would be credited as partial
payment towards renewal of coverage on the lapsed policy, but a new, increased premium rate (set
by FEMA) would be applied to the “new” policy. (Id., ¶ 26 & Exhibit E). In addition to various
causes of action levied by Plaintiffs against Defendant Ameris for its failure to timely pay the
insurance premium, Plaintiffs seek a declaration from this court as to:
(a) [t]he legal effect of Selective’s acceptance and deposit of the
premiums in April of 2024 without qualification;
(b) and/or [t]he nature of the current Selective policy as a ‘renewal’
policy or a newly written policy; and/or
(c) [t]he nature of Plaintiffs payment obligations, more specifically as
to whether the renewal term payment should apply, or whether
Plaintiffs are required to pay a new fee policy for the future.
(Dkt. No. 1-1, ¶ 32). The motions are fully briefed and ripe for this Court’s review.
II.

Legal Standard

Fed. R. Civ. P. 12(b)(6) permits the dismissal of an action if the complaint fails “to state a
claim upon which relief can be granted.” Such a motion tests the legal sufficiency of the complaint
and “does not resolve contests surrounding the facts, the merits of the claim, or the applicability
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of defenses . . . . Our inquiry then is limited to whether the allegations constitute ‘a short and plain
statement of the claim showing that the pleader is entitled to relief.’” Republican Party of N.C. v.
Martin, 980 F.2d 943, 952 (4th Cir.1992) (quotation marks and citation omitted). In a Rule
12(b)(6) motion, the Court is obligated to “assume the truth of all facts alleged in the complaint
and the existence of any fact that can proved, consistent with the complaint's allegations.” E. Shore
Mkts., Inc. v. J.D. Assocs. Ltd. P'ship, 213 F.3d 175, 180 (4th Cir. 1980). However, while the
Court must accept the facts in a light most favorable to the non-moving party, it “need not accept
as true unwarranted inferences, unreasonable conclusions, or arguments.” Id.
To survive a motion to dismiss, the complaint must state “enough facts to state a claim to
relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Although
the requirement of plausibility does not impose a probability requirement at this stage, the
complaint must show more than a “sheer possibility that a defendant has acted unlawfully.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A complaint has “facial plausibility” where the
pleading “allows the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.” Id.
III.

Discussion

Defendant Selective argues that Plaintiffs’ state law claims—that Defendant is estopped
from contesting renewal of the policy where it accepted the late premium payment and/or waived
its right to contest the policy renewal by accepting the late payment—are preempted by federal
law in light of the SFIP’s preemption clause and Fourth Circuit precedent. (Dkt. No. 7-1 at 7-8).
Plaintiffs contend the Fourth Circuit case on which Defendant relies is distinguishable because the
case concerned claims handling, and instead likens the claim at issue to cases involving state law

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tort claims brought against WYO carriers arising from the procurement of policies. (Dkt. No. 13
at 4-7).
In light of controlling Fourth Circuit precedent, this Court finds that Plaintiffs’ claims
against Selective are preempted. In Woodson v. Allstate, the policyholders purchased a SFIP
through Allstate, which later denied the vast majority of the policyholders’ claims after Hurricane
Irene damaged their waterfront property. 855 F.3d 632 (4th Cir. 2017)). The policyholders argued
that WYO carriers operate with autonomy under the NFIP to handle SFIP claims, and thus should
be held liable under state law for the bad faith handling of such claims. Id. at 638. After the district
court found that Allstate had breached their insurance contract with Plaintiffs and violated the
North Carolina Unfair and Deceptive Trade Practices Act, the Fourth Circuit reversed, holding
that “federal law exclusively governs claims made on policies issued under the National Flood
Insurance Program and to disputes arising out of the handling of those claims, thus preempting
state law.” Id. at 631-33.
Plaintiffs disagree that Woodson applies to the facts at issue and instead rely on the Fifth
Circuit’s opinion in Campo v. Allstate Insurance Company, 562 F. 3d 751 (5th Cir. 2009). In the
Fifth Circuit’s view, “federal law does not preempt state-law procurement-based claims” because
such suits do not involve the same federal concerns as suits involving claims handling, which
concern federal funds. Id. at 758. The Tenth Circuit registered its express disagreement with the
Fifth Circuit in Remund v. State Farm Fire and Casualty Company, 483 Fed. App’x. 403 (10th
Cir. 2012).1 The court cited a FEMA bulletin that rejected the Fifth Circuit’s interpretation of the

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The Court is troubled by Plaintiffs’ representation that Campo was “binding on this Court in the
absence of intra-district conflict,” but failed to disclose the Tenth Circuit’s opinion in Remund
that expressly disagrees with Campo. (Dkt. No. 13 at 6).
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SFIP’s preemptive scope, where the Agency reiterated its view that “[t]o the extent there are
conflicts between Federal and state law, FEMA recognizes that application of state laws would
interfere with the implementation of the National Flood Insurance Program and would frustrate
the national purpose and scope of the program.” Id. at 408 n.3 (quoting Edward L. Connor, Acting
Fed. Ins. Adm'r, Nat'l Flood Ins. Program, WYO Program Bulletin No. W–09038, Notice of
FEMA's Intent to Adopt, by Regulation, a Clarification of the Current Express Preemption Clause
of the Standard Flood Insurance Policy (July 16, 2009) . . . available at http://www.nfipiservice.
com/stakeholder/pdf/bulletin/w–09038.pdf). Like the Tenth Circuit, this Court finds FEMA’s own
explanation of its regulations compelling, especially its post-Campo statement that it “understood
and intended its regulations to preempt state law claims related to policy formation, renewal and
administration”—nowhere cabining its preemptive effect to claims handling cases. See id. While
this interpretation is not entitled to special deference in the post-Chevron era, this Court finds
FEMA’s explanation both reasonable and persuasive.
This explanation is bolstered by the plain language of the SFIP’s preemption clause and
FEMA’s promulgating regulation, which read:
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. (emphasis added))
The standard flood insurance policy is authorized only under
terms and conditions established by Federal statute, the
program's regulations, the Administrator's interpretations and
the express terms of the policy itself. Accordingly, representations
regarding the extent and scope of coverage which are not consistent
with the National Flood Insurance Act of 1968, as amended, or the
Program's regulations, are void, and the duly licensed property or
casualty agent acts for the insured and does not act as agent for the
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Federal Government, the Federal Emergency Management Agency,
or the servicing agent. (44 C.F.R. § 61.5(e) (emphasis added))
“[F]ederal law preempts state law not only with respect to policy interpretation and claims
handling under the NFIP, but also with respect to policy issuance and administration, including
the rating, renewal, transfer, non-renewal, cancellation, or reformation of any SFIP contract issued
by a WYO Company on behalf of the NFIP.” Davis v. Nationwide Mut. Fire Ins. Co., 783 F. Supp.
2d 825, 833 (E.D. Va. 2011). “In interpreting the terms of an SFIP, courts employ federal common
law, which ‘draw[s] upon standard principles of insurance law.’” Hampton v. First Protective Ins.,
461 F. Supp. 3d 265, 271 (D.S.C. 2020) (quoting Studio Frames Ltd. v. Standard Fire Ins. Co.,
483 F.3d 239, 244 (4th Cir. 2007)). “Two such cornerstones of insurance law are that (1) a court
is to interpret unambiguous policy language according to its plain meaning, and (2) where disputed
policy language is ambiguous or susceptible to different constructions, a court is to adopt the
construction most favorable to the insured.” Id
At its core, this case involves Selective’s administration of Plaintiffs’ policy, specifically
its “renewal” and “reformation.” Davis, 783 F. Supp. 2d at 833. The express terms of the policy
dictate that the “policy will expire at 12:01 a.m. on the last day of the policy term” and provides
that “[i]f we do not receive the premium requested in the second bill by the revised due date, then
we will not renew the policy” and “[i]n that case, the policy will remain as an expired policy as of
the expiration date shown on the Declarations page.” (Dkt. No. 7-3 at 19). It is undisputed that
neither Plaintiffs nor Defendant Ameris paid the renewal premium by the expiration date. Per the
policy terms, the failure to timely make a premium payment in response to the final notice
regarding the policy’s expiration resulted in its lapse. (Dkt. No. 7-3 at 19). The policy also
addresses the effect of an insufficient premium payment, including the carrier’s ability to cancel
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or reform the policy or to reduce the amount of coverage available under it in line with the reduced
premium payment. (Id. at 17-19). In light of the plain language of the SFIP and FEMA regulations,
the Court finds that Plaintiffs’ state law claims regarding the policy are preempted by federal law.
IV.

Conclusion

In light of the foregoing, the Court GRANTS Defendant Selective’s motion to dismiss
Plaintiffs’ claims for declaratory relief. (Dkt. No. 7).
AND IT IS SO ORDERED.

_s/ Richard M. Gergel_
Richard Mark Gergel
United States District Judge
September 24, 2024
Charleston, South Carolina

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