Summary
In Larmann v. State Farm Ins. Co., 2005 WL 357191 (E.D.La. Feb. 11, 2005), the district court held that “all citizens are charged with the knowledge of the law regarding federal insurance programs” (id. at *4); and in Griffith, the court held that insureds “are deemed to have constructive knowledge of the thirty-day waiting period and all other provisions under the NFIP.” 2010 WL 231743, at *3 (emphasis added).
Summary of this case from Parker v. Miss. Farm Bureau Cas. Ins. Co.Opinion
Civil Action No. 03-2993, Section "T" (2).
February 11, 2005
ORDER AND REASONS
Before the Court are a Motion for Summary Judgment pursuant to Rule 56(b) of the Federal Rules of Civil Procedure filed on behalf of the Defendants, Robert Lewis, Carl Mixon, and Linda Collins. The Court entertained oral arguments on this motion in a hearing on January 26, 2005. The Court, having considered the arguments of the parties, the Court record, the law and applicable jurisprudence is fully advised in the premises and ready to rule.
I. Background:
On October 31, 1991, Plaintiffs bought a house at 103 Marina Lane, Slidell, Louisiana 70460. Upon the purchase of the property, Plaintiffs assumed the existing FHA loan on the property, as well as an existing Standard Flood Insurance Policy (SFIP) issued by Allstate Insurance Company under the National Flood Insurance Program (NFIP). The SFIP issued by Allstate was to expire in January, 1992. As a result, Plaintiffs purchased a similar policy from State Farm, which is the policy at issue. At the time of purchase, the home was a tri-level home: the garage and one back room were located on slab on the first level, the main portion of the house (kitchen, dining room, den) was on the second level on piers, and the bedrooms were on a third level.
Plaintiffs obtained the new policy through State Farm agent Robert Lewis, and the parties agreed to insure the house against flooding for $90,000 on the building and $45,000 on its contents. Mr. Lewis retired on July 31, 1995 and this account was transferred to Carl Mixon on August 1, 1995. Plaintiff did not meet nor did he speak with Mr. Mixon until he wanted to have a boat insured in 1995 or 1996, at which time he inquired about the sufficiency of insurance on the house. The parties did not increase the flood policy limits. From 1997 to 1998, Plaintiffs allegedly made several additions and modifications to the property, specifically adding another garage, a covered patio, and a sunroom/exercise room on the ground level. No permits were obtained in making the additions.
In March, 2000, Carl Mixon moved to another location, at which time Linda Collins became Plaintiffs' agent. Plaintiffs had no contact with Ms. Collins until their house was flooded due to Tropical Storm Isidore on September 26, 2002. Plaintiffs were paid $3,913.67 for all amounts owed under the SFIP for both the building and its contents. Defendants aver that the plaintiffs were only paid this amount because all grounds level property was well below the base flood elevation. Plaintiffs then instituted the instant action for breach of contract and for damages as a result of extra-contractual misrepresentations as to the extent of coverage on the house.
Plaintiffs allege that they specifically asked Mr. Lewis for the "best insurance" available. Plaintiffs also allege that, later, Mr. Mixon assured them that their home was sufficiently covered for the lower levels of their house. Plaintiffs further allege that they notified Mr. Mixon that they would be adding onto their home, to which he allegedly responded that he would return to inspect the house after construction was complete. Plaintiffs aver that they were not informed of any potential problems with their insurance policy until a catastrophe adjuster inspected their property after the impact of Tropical Storm Isidore. Plaintiffs assert that the only items for which they were paid under the policy were some clean-up costs, a hot water heater, a washer and dryer, a freezer, and the food lost in the freezer.
II. ARGUMENTS OF THE RESPECTIVE PARTIES:
A. Arguments of Defendants Robert Lewis, Carl Mixon and Linda Collins in Support of Summary Judgment:
Defendants Robert Lewis, Carl Mixon, and Linda Collins ("Agents") argue in their Motion for Summary Judgment that the extra-contractual claims are preempted by the NFIP. The Agents submit that Congress delegated the specific authority to the Federal Emergency Management Agency (FEMA) to determine the scope of the coverage to be afforded by the SFIP. 42 U.S.C. § 4013 (a). The Agents argue that FEMA strictly limits the coverage on "items of property in a building enclosure below the lowest elevated floor of an elevated post-FIRM building." 44 C.F.R. Pt. 61, App. A(1), Art. III(A)(8). The Agents further argue that FEMA legislatively preempted any potential claims of misrepresentation in 44 C.F.R. Pt. 61.5(e) which states:
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 Federal Government, the Federal Emergency Management agency, or the servicing agent.
44 C.F.R. Pt. 61.5(e) (2005) (emphasis added).
The Agents then argue that all citizens are charged with the knowledge of the law regarding federal insurance programs. Federal Crop Ins. Corp. v. Merrill, 332 U.S. 380, 385, 68 S.Ct. 1, 92 L.Ed 10 (1947). Furthermore, citizens seeking to benefit from a federal benefit program are charged with the responsibility of familiarizing themselves with the requirements of that program and "may not rely on the conduct of government agents contrary to the law." Heckler v. Community Health Services of Crawford County, Inc., 467 U.S. 51, 63, 104 S.Ct. 2218, 81 L.Ed.2d 42 (1984). The Agents aver that as a result, extra-contractual claims of negligent misrepresentation and fraud, although not preempted per se by FEMA, are nevertheless impossible of success, and summary judgment is thus proper. Richmond Printing, L.L.C. v. Director, FEMA, 72 Fed. Appx. 92, 2003 WL 21697457 (5th Cir. 2003). The Agents also reference a case from the Eastern District of Pennsylvania that granted the defendant's 12(b)(6) Motion to Dismiss, stating that an insured is charged by law with constructive knowledge of the SFIP and that, as a result, even if an agent intentionally misrepresented the scope of available coverage and the procedure for making a claim under the SFIP, the plaintiff was not entitled to rely on that misrepresentation. Deverant v. Selective Insurance Company, 2004 WL 1171333 at *1 (E.D. Pa. 2004).
B. Arguments of the Plaintiffs in Opposition to Summary Judgment:
Plaintiffs argue that the factual issues surrounding the extent of coverage on their home and surrounding the representations of the Agents to them create issues of material fact such that summary judgment is not proper. Plaintiffs argue that Louisiana has long recognized a duty of due diligence on insurance agents to procure the requested and desired insurance coverages. Plaintiffs state that they had a good faith belief that the flood insurance covered their entire residence, noting that Mr. Lewis either did not know or did not consider their residence to be an elevated building since the application he filled out checked that it was not. It is the Plaintiffs' position that, had he properly informed them that the ground level might not be fully covered by the SFIP, they would not have made the modifications to their property.
Plaintiffs cite Louisiana law to outline the elements of a claim against an insurance agent for failure to obtain the desired coverage. InKaram v. St. Paul Fire Marine Insurance Company, 281 So.2d 728, 730 (La. 1973), the Louisiana Supreme Court stated that the elements of proof required to bring such a claim include (1) an undertaking or agreement by the insurance agent to procure insurance, (2) failure of the agent to use reasonable diligence in attempting to place the insurance or failure to notify the client properly if he has failed to obtain the insurance, and (3) the actions of the agent warranted an assumption by the client that he was properly insured. Plaintiffs contend that the Agents improperly wrote the flood insurance coverages and/or failed to notify the Plaintiffs that the insurance that they believed they had on their property was not in place.
Plaintiffs then attempt to factually distinguish the Supreme Court cases cited by the Agents, noting that Merrill and Heckler do not address the issue of an insurance agent's negligence in procuring insurance for a client. Plaintiffs further attempts to distinguish Deverant, claiming that the plaintiff's allegations of fraud in that case were insufficient since they did not evidence reasonable reliance, which Plaintiffs in this case assert is a state law device. Finally, Plaintiffs distinguishRichmond Printing, since it involves allegations of misrepresentations on the part of claims adjusters and not insurance agents.
Plaintiffs rely upon the Fifth Circuit's holding in Spence v. Omaha Indemnity Ins. Co., 996 F.2d 793 (5th Cir. 1993), which rules that extra-contractual state law claims of fraudulent and negligent misrepresentations on the part of insurance agents are not preempted by the NFIP. Id. at 796. Plaintiffs then note that the holding of Spence was affirmed by the Fifth Circuit in Richmond Printing, holding "[t]hus, as we noted in Spence, the federal interests in seeing federal law applied to such claims are much lower than they are where the claim arises out of coverage of the policy; claims on the policy are paid out of the federal treasury." Id. (citing Spence, 996 F.2d at 796).
III. LAW AND ANALYSIS:
A. Law on Rule 56 Summary Judgment:
The Federal Rules of Civil Procedure provide that a court should grant a motion for summary judgment only "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of Law." Fed.R.Civ.P. 56(c). The party moving for summary judgment bears the initial responsibility of informing the district court of the basis for its motion and identifying those portions of the record that it believes demonstrate the absence of a genuine issue of material fact. Stults v. Conoco, Inc., 76 F.3d 651, 655-56 (5th Cir. 1996) (citing Skotak v. Tenneco Resins, Inc., 953 F.2d 909, 912-13 (5th Cir.) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)), cert. denied, 506 U.S. 832 (1992)). When the moving party has carried its burden under Rule 56(c), its opponent must do more than simply show that there is some metaphysical doubt as to the material facts. The nonmoving party must come forward with "specific facts showing that there is a genuine issue for trial." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (emphasis supplied); Tubacex, Inc. v. M/V RISAN, 45 F.3d 951, 954 (5th Cir. 1995).
Thus, when the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no "genuine issue for trial." Matsushita Elec. Indus. Co., 475 U.S. at 588. Finally, the Court notes that substantive law determines the materiality of facts, and only "facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
B. Analysis of the Court
The Agents are correct in stating that a citizen seeking to benefit from a federal benefit program is charged with the responsibility of familiarizing himself with the requirements of that program. Heckler, 467 U.S. at 63. The Agents are also correct in stating that all citizens are charged with the knowledge of the law regarding federal insurance programs. Merrill, 332 U.S. at 385. Furthermore, the Plaintiffs' dismissal of Richmond Printing and reliance on the ruling inSpence is misguided. The facts of Richmond Printing involve an action against claims adjusters who allegedly misrepresented to the plaintiffs the process by which they needed to submit a claim under the SFIP. 72 Fed. Appx. at 93. After their claim was denied by FEMA, the plaintiffs filed suit against the private insurance adjusters for fraudulent and negligent misrepresentation. Id. at 93-94.
In its analysis, the Fifth Circuit went into great detail in affirming the decision in Spence. The Court concluded that the plaintiff's state law claims were not preempted by the NFIP because "the federal interests in seeing federal law applied to such [misrepresentation] claims are much lower than they are where the claim arises out of the coverage of the policy; claims on the policy are paid out of the national treasury." Id. at 96 (citing Spence, 996 F.2d at 796). The Court succinctly stated that "Fifth Circuit precedent clearly demonstrates that Richmond's tortious misrepresentation claims against RGA and Meyer are not preempted."
However, the Fifth Circuit affirmed the granting of summary judgment against the plaintiff in that case, ruling that "reasonable reliance is an element of all of Richmond's state law claims and Richmond's reliance on any statements made by RGA and Meyer that contradicted the terms of the SFIP was unreasonable as a matter of law." Id. at 97. Relying on the premises of Merrill and Heckler, the Court ruled that even if the adjusters did make material misstatements that contradicted the SFIP, the plaintiff acted unreasonably as a matter of law in relying on those statements. Id.
Similarly in the case at bar, the plaintiffs may not recover from the Agents who were private parties involved in the program. All of the plaintiffs claims involve allegations of misrepresentations by the Agents as to the amount and extent of coverage on their residence under the SFIP. The provisions of the SFIP are made available to the public through the publication of the Code of Federal Regulations. Thus, the SFIP is different from a typical, privately issued insurance policy because "the insured has an additional outlet to which to turn to obtain information about the terms of the policy." Richmond Printing, 72 Fed. Appx. at 98.
Consequently, the insured is charged with the constructive knowledge of the provisions of the SFIP "regardless of actual knowledge of what is in the regulations or of the hardship resulting from ignorant innocence."Id. (quoting Merrill, 332 U.S. at 385). Any reliance by the plaintiffs on the misrepresentations of the Agents is "unreasonable as a matter of law." Id. (see also Deverant at *1). Therefore, there are no genuine issues of material fact as to the Agents. Summary judgment in favor of the Defendants, Robert Lewis, Carl Mixon, and Linda Collins is proper on Plaintiffs' claims of negligent misrepresentation against them, and as a result they should be dismissed from this action with prejudice.
Accordingly,
IT IS ORDERED that the Motion for Summary Judgment filed on behalf of the Defendants, Robert Lewis, Carl Mixon, and Linda Collins, be and the same hereby is GRANTED.
defendants ask the Court to find as a matter of law that because of the condition of the law, there cannot be the requisite willfulness to constitute the commission of the crimes charged.
Rule 12(b)(3) of the Federal Rules of Criminal Procedure provides a list of motions that must be raised before trial. Subsection (B) provides "a motion alleging a defect in the indictment or information — but at any time while the case is pending, the court may hear a claim that the indictment or information fails to invoke the court's jurisdiction or to state an offense." While defendants do not specifically provide the Court with the procedural basis for the instant motion, the Court construes it as one based on a failure to state an offense.
As stated in United States v. Kay, 359 F.3d 738 (5th Cir. 2004):
As a motion to dismiss an indictment for failure to state an offense is a challenge to the sufficiency of the indictment, we are required to "take the allegations of the indictment as true and to determine whether an offense has been stated."
"[I]t is well settled that an indictment must set forth the offense with sufficient clarity and certainty to apprise the accused of the crime with which he is charged. The test for sufficiency is "not whether the indictment could have been framed in a more satisfactory manner, but whether it conforms to minimum constitutional standards"; namely, that it "[(1)] contain the elements of the offense charged and fairly inform a defendant of the charge against which he must defend, and [(2)], enable him to plead an acquittal or conviction in bar of future prosecutions for the same offense."Id. at 742.
Certainly, taking all the allegations as true, the Government has alleged the necessary elements for conspiracy to defraud the United States in contravention of 18 U.S.C. § 371 and tax evasion in contravention of 26 U.S.C. § 7201. "A § 371 conspiracy requires an agreement between two or more persons to commit a crime and an overt act by at least one in furtherance of the agreement." United States v. Bordelon, 871 F.2d 491, 493 (5th Cir. 1989). The crime must be one against the United States. Here, as noted above, the Government has alleged that the defendants conspired "to defraud the United States by impeding, impairing, obstructing, and defeating the lawful government functions of the Internal Revenue Service of the Treasury Department in the ascertainment, computation, assessment, and collection of the revenue: to wit, defendants Harold E. Molaison's and David C. Loeb's 1996 income and self employment taxes." (Indictment ¶ 9). Furthermore, as previously stated, there is alleged at least one overt act done within the six-year statute of limitations. Thus, the indictment is sufficient with regard to Count One.
Likewise, as set forth above, the elements of the crime of tax evasion are (1) the existence of a tax deficiency; (2) willfulness; and (3) an affirmative act constituting evasion or attempted evasion of the tax. United States v. Bishop, 264 F.3d 535, 545 (5th Cir. 2001). Considering the difference alleged in the indictment between the income declared by the defendants for 1996 and the income alleged by the government and the tax liability based thereon, clearly the Government has alleged a tax deficiency on the part of both defendants. Likewise, the allegations concerning the filing in 1998 of the income tax form reporting the purchase of the replacement property in 1997 as well as the allegations of fraud in 2000, if taken as true, would constitute evasion or attempted evasion of the tax. As to the second element — willfulness — if the allegations are taken as true, which is required in the context of a motion to dismiss for failure to state an offense, it is clear that the indictment alleges this element as well with respect to both defendants.
The gravamen of defendants' motion, however, asks the Court to eschew the requirement to take the allegations as true — defendants contend that objectively the Court should find that they had a possessory interest sufficient to trigger their right to claim a § 1103 election. The Court is unwilling to do so. The language of the contract states clearly that the defendants were "to receive an undivided 25% in and to any recovery I/we may have in this matter, whether such recovery is obtained by settlement, compromise or judgment over and beyond in any residual wet land value in said property, all according to the provisions of La.R.S. 37:218." This provision does not state that defendants were granted 25% of the property; they were to receive 25% of any recovery whether by settlement, compromise or judgment beyond the residual wetland value, which had been assessed as $500 an acre. While defendants' argument that the taking by the Government had resulted in the landowners' deprivation of the usus and fructus of the land, leaving the only value in the abusus is a valid description of the legal effect of the declaration of the property as wetlands by the Government, it does not provide the basis for the argument that there was a transfer in that facet of ownership by virtue of the language of the contract.
Furthermore, pursuant to La.Rev.Stat. 37:218, the Louisiana statute concerning contingency fee contracts, defendants were precluded from obtaining the land itself. As stated by Judge Wisdom in Deshotels v. United States, 450 F.2d 961 (5th Cir. 1971) cert. denied 406 U.S. 920 (1972), a contingent fee coupled with an interest is "language indicative of special agency relationship and not transfer of present possessory interest." Id. at 966. In Deshotel, the Court described the effect of La.Rev.Stat. 37:218:
The effect of the statute was two-fold: first to legitimize the contingency fee contract, allowing the attorney to sue for his fee after successfully litigating his client's claim; second, to allow the parties to agree that the client cannot unilaterally end the litigation. In adjudicating contracts under this statute the Louisiana courts have held that contractual language to the effect that the attorney has a vested right in a portion of the expect recovery does not in fact presently vest anything. See Tennant v. Russell, 1949, 214 La. 1046, 39 So.2d 726. As the Court said in Succession of Vlaho, La.App. 1962, 140 So.2d 226,
. . . the attorney has no vested interest in the client's suit or claim and obtains no vested interest therein even where the contract in express terms grants such an interest to him.Id. at 965-66. Furthermore, the "unequivocal conveyance" that was found in McClung v. Atlas Oil Co., 1921, 148 La. 674, 87 So. 515 is not present in the language of this contract of employment.
Nonetheless, the Court does not by this ruling intend to eviscerate the defendants' defense with respect to "willfulness" in any respect. It has broached this subject only as a result of the defendants' argument seeking the dismissal based on this legal premise. Obviously, the defendants are entitled to argue to a jury as fact finder whether they had the requisite intent to commit the crimes alleged based on this contract. Accordingly
IT IS ORDERED that the Motion to Dismiss Indictment — Ownership Interest by Operation of Law (Doc. 18) is DENIED.