In addition to seeking policy benefits it asserted that Wright National owed and court supervision of the appraisal process for its contractual claim, La Mirage sought to recover for negligence, consequential damages, statutory penalties, attorneys' fees, and pre- and post-judgment interest.

Wright National moved to dismiss La Mirage's extra-contractual claims and to strike its jury demand.

In response, La Mirage contested the authorities that Wright National relied on for dismissing costs and interest and asserted that its jury demand was tied to its negligence claim, which it contended was outside the scope of Wright National's arrangement with the Federal Emergency Management Agency ("FEMA") under 44 C.F.R. pt. 62, app. A. art III(D) (2016), which stated that certain actions were not reimbursable by the federal government if it was an "action[] by the Company that . . . involve[d] issues of insurer/agent negligence."

The District Court's Decision

The district court granted Wright National's motion, finding that La Mirage's claims of negligence, attorneys' fees, statutory penalties, and interest were policy-handling claims that were preempted by federal law.

In its decision, the district court explained that, to decide whether an insured's claims under a flood insurance policy issued under the NFIP arose from "claims handling," it had to look to the "status of the insured at the time of the interaction between the parties." The district court added that if the insured already was covered and in the midst of a non-lapsed insurance policy, the interactions between the insured and the insurer were "claims-handling" subject to preemption.

Here, the district court observed, La Mirage was insured by Wright National at the time the dispute arose. Indeed, the district court continued, La Mirage's negligence claim was based on Wright National's alleged "denial, delay, refusal and/or failure to pay" a claim.

Therefore, the district court ruled, La Mirage's extra-contractual allegations were "claims-handling" claims and, as such, were preempted.

The district court was not persuaded by La Mirage's contention that its negligence claim fell outside the scope of Wright National's arrangement with FEMA, noting that the basis for that claim – Appendix A to 44 C.F.R. pt. 62 – had been removed from the Code of Federal Regulations in 2016, before Hurricane Harvey damaged La Mirage's property.

Next, the district court explained that La Mirage's jury demand was based on its negligence claim, and because its negligence claim was preempted, and FEMA was presumed to be paying both the litigation expenses and any resulting damage award of the contractual claim, La Mirage's jury demand was moot.

The district court also decided that La Mirage's request to recover statutory penalties and attorneys' fees against Wright National was barred, reasoning that a "write your own" ("WYO") insurer under the National Flood Insurance Act such as Wright National was not subject to those claims.

The district court also ruled that, as Wright National argued, pre-judgment and post-judgment interest were not recoverable against a WYO carrier.

Accordingly, the district court concluded, even if La Mirage prevailed on its sole remaining breach of contract claim, Wright National was entitled, as a matter of law, to dismissal of La Mirage's claims for negligence, attorneys' fees, statutory penalties, and interest.

The case is La Mirage Homeowners Association, Inc. v. Wright National Flood Ins. Co., No. 2:19-CV-138 (S.D. Tex. Aug. 29, 2019). Attorneys involved include: For La Mirage Homeowners Association, Inc., Plaintiff: William John Chriss, LEAD ATTORNEY, Of Counsel, The Snapka Law Firm, Corpus Christi, TX; Kathryn Snapka, The Snapka Law Firm, Corpus Christi, TX. For Wright National Flood Insurance Company, Defendant: Alexander Spotswood deWitt, LEAD ATTORNEY, Freeborn & Peters LLP, Richmond, VA; Valerie Anne Henderson, Baker Donelson et al, Houston, TX.