REVISED April 30, 2012IN THE UNITED STATES COURT OF APPEALSFOR THE FIFTH CIRCUIT
No. 11-60260JAMES P. GRISSOM,Plaintiff - Appelleev.LIBERTY MUTUAL FIRE INSURANCE COMPANY,Defendant - AppellantAppeal from the United States District Courtfor the Southern District of MississippiBefore STEWART, CLEMENT, and GRAVES, Circuit Judges.EDITH BROWN CLEMENT, Circuit Judge:JamesGrissompurchased flood insurance for his home in Pascagoula,MississippiundertheFederalNationalFloodInsurance Program (“NFIP”).Grissom was eligible for a preferred risk insurance policy, but did not knowabouthiseligibility. Following the destruction of his home in HurricaneKatrina,GrissomsuedLiberty Mutual for negligent misrepresentation torecoverthedifferencebetweenthecoveragehehadand the coverage he could
United States Court of AppealsFifth Circuit
F I L E D
April 23, 2012Lyle W. CayceClerk
No. 11-602602havepurchasedunderthepreferredriskpolicy. The district court concludedthatGrissom’sclaimwasnotpreemptedbyfederallawandsentthecasetothe jurywhichawardedGrissom $212,900 in compensatory damages. WeREVERSEtherulingofthedistrictcourtwithinstructions to DISMISSGrissom’s claim.
FACTS AND PROCEEDINGS
In1977Grissomfirstpurchasedflood insurance through the FederalEmergencyManagementAgency’s(“FEMA”)WriteYourOwn(“WYO”)floodinsuranceprogramundertheNationalFloodInsurance Act. Liberty Mutual wasGrissom’sWYOinsuranceproviderwhenHurricaneKatrinaseverelydamagedhis property. This court has previously discussed the WYO program:ByenactingtheNationalFloodInsuranceActof 1968, Congressestablishedthe Program to make flood insurance available onreasonabletermsandtoreducefiscalpressureonFederalfloodreliefefforts.FEMAadministerstheProgram.WithintheProgram,theWYOprogram allows private insurers to issue flood insurancepoliciesintheirownnames.Underthisframework,theFederalgovernmentunderwritesthepolicies and private WYO carriersperformsignificantadministrativefunctionsincluding“arrang[ing]fortheadjustment,settlement,paymentand defense of all claimsarisingfromthepolicies.”WYOcarriersmust issue policiescontainingthe exact terms and conditions of the [Standard FloodInsurancePolicy(“SFIP”)]setforthinFEMAregulations.Additionally,FEMAregulationsgovernthemethodsbywhichWYOcarriersadjustandpayclaims.AlthoughWYOcarriersplayalargerole,thegovernmentultimatelypaysaWYOcarrier’sclaims.WhenclaimantssuetheirWYOcarriersfor payment of a claim, carriersbearthe defense costs, which are considered“partofthe...claimexpenseallowance”;FEMAreimburses these costs. Yet, if “litigationisgroundedinactionsbythe[WYO]Companythataresignificantlyoutsidethescope of this Arrangement, and/or involves issues ofagent negligence,” then such costs will not be reimbursable to theWYO carrier.
Campo v. AllstateIns. Co.
,562F.3d751,754(5thCir.2009)(internalcitationsomitted).WYO insurance companies are subject to the
Federal Emergency
No. 11-602603
Management Agency, Federal Insurance Administration, FinancialAssistance/ Subsidy Arrangement
(the“Arrangement”),asetofterms andconditionsbetweenFEMAandtheprivateinsurersgoverningtheprogram.44C.F.R. pt. 62 app. A.In 1989 a preferred risk policy became available for the flood zone onwhichGrissom’shomewaslocated,butGrissomisunsureifhewaseverexplicitlyofferedthepreferredrisk policy. ThereisnoindicationthatLibertyMutual affirmatively informed Grissom he was eligible for preferred coverage.In2004herenewedhisLibertyMutualpolicywithcovered total loss of up to$121,200fora$531premium.Had he been enrolled in the preferred risk policy,hewouldhavehad$350,000intotalcoveredlossfora$317premium.The 2004renewalnoticefromLibertyMutualmentionedtheexistenceofpreferredratepolicies, but did not indicate whether Grissom was eligible.In August 2005, Grissom’s home was destroyed by Hurricane Katrina.Liberty Mutual paid Grissom’s $121,200 claim, the policy maximum. GrissomthensuedLibertyMutualinMississippi state court to recover the differencebetweenthecoveragehehadandthecoverage he could have had under thepreferredriskpolicy.Liberty Mutual removed the case to the Southern DistrictofMississippiwhichdeniedLibertyMutual’sRule12andRule56motionsandsubmitted the case to the jury. Liberty Mutual appeals.
STANDARD OF REVIEW
LibertyMutualisnotappealingfactsdetermined by the jury, but ratherthelegalconclusionsofthedistrictjudgewhichwereview
denovo
.
City of NewOrleans v. Mun. Admin. Servs.
,376F.3d501,506(5thCir.2004)(“Wereviewconclusions of law–including contractual interpretations–
de novo
.”).Determiningwhetherfederal funds were at stake is based on whether theArrangement—acontract—boundFEMAtopaytheexpenses.The federal
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Grissom v Liberty Mutual Fire Insurance Co
Federal court ruling on federal flood insurance sales and claims.
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