United States District Court, M.D. Florida, Fort Myers Division
OPINION AND ORDER [1]
SHERI
POLSTER CHAPPELL UNITED STATES DISTRICT JUDGE.
Before
the Court is Wright National Flood Insurance Company's
Motion to Dismiss Claims for Fees and Costs Under the Equal
Access to Justice Act (Doc. 7) filed on October 11, 2019 and
Plaintiff's Response in Opposition (Doc. 15) filed on
October 29, 2019. For the reasons set forth below, the Motion
is denied.
BACKGROUND
In this
single-claim Complaint for Breach of Contract (Doc. 1),
Plaintiff Martin Shapiro seeks relief for flood damage caused
to his property on or about September 10-11, 2017, by
Hurricane Irma. Plaintiff submitted a claim to Defendant
seeking coverage for the damage under a federally-sponsored
Standard Flood Insurance Policy (SFIP) issued by Defendant
Wright National Flood Insurance Company (Wright) for the
property under the National Flood Insurance Act, 42 U.S.C.
§ 4001, et seq. Defendant hired an independent
adjuster who prepared an estimate which Plaintiff disagreed
with. Plaintiff alleges that Defendant has failed or refused
to pay the full amount due under the Policy or otherwise
failed or refused to comply with the terms and provisions of
the Policy. In addition to its flood damages, Plaintiff's
requested relief includes reasonable attorney's fees,
costs, and case expenses incurred in filing and prosecuting
this action payable under the Equal Access to Justice Act
(EAJA). (Doc. 1, at 5).
Defendant
moves to dismiss the request for EAJA attorney's fees,
costs, and case expenses pursuant to Federal Rule of Civil
Procedure 12(b)(6) because defendant is not an agency of the
United States from which EAJA fees may be obtained. Although
this lawsuit is not a suit against the federal government,
Plaintiff nevertheless responds that the EAJA should apply to
SFIP policyholders because private insurance companies (such
as Wright) that issue SFIPs merely carry out the duties as
“fiscal agents” of the Federal Emergency
Management Agency (FEMA).
A.
The National Flood Insurance Program
Wright
National Flood Insurance Company, a private insurance
company, is a Write-Your-Own (WYO) Program carrier
participating in the United States government's National
Flood Insurance Program (NFIP). Congress created the NFIP
under the National Flood Insurance Act of 1968, 42 U.S.C.
§ 4001, et seq. to limit the damage caused by
flooding by spreading the risk among private insurers and the
federal government. FEMA administers the program and has
established, by regulation, the Standard Flood Insurance
Policy, 44 C.F.R. § 61.13.
By
statute, the Director of FEMA is authorized to promulgate
regulations “for the general terms and conditions of
insurability which shall be applicable to properties eligible
for flood insurance coverage.” 42 U.S.C. §§
4013, 4019. Pursuant to FEMA regulations, “all policies
issued under the NFIP must be issued using the terms and
conditions of the SFIP found in 44 C.F.R. Part 61, Appendix
A.” 42 U.S.C. §§ 4013, 4019. The Director of
FEMA is authorized to use private insurance companies as
“fiscal agents of the United States” and to enter
into any necessary contracts with insurance companies to
implement the NFIP. 44 C.F.R. § 62.23(g).
FEMA
created the WYO program in 1983 pursuant to regulatory
authority granted to it by Congress. Battle v. Seibels
Bruce Ins. Co., 288 F.3d 596, 599 (4th Cir. 2002).
“The WYO Program is a program whereby private insurance
companies are allowed to issue, under their own names as
insurers, flood insurance policies under the Government
Program.” Id. (citing 44 C.F.R. § 62.23).
“Insurance companies which participate in the WYO
Program are known as ‘WYO Companies.'”
Id.Importantly, “all flood insurance policies
issued by WYO Companies under the WYO Program must mirror the
terms and conditions of the SFIP, ” and the terms and
conditions of the SFIP “cannot be varied or waived
other than by the express written consent of the Federal
Insurance Administrator.” Id.A WYO company
issuing flood insurance coverage is responsible for the
“adjustment, settlement, payment and defense of all
claims arising from policies of flood insurance it issues
under the [NFIP], based upon the terms and conditions of the
[SFIP].” Id.
“Premiums
collected by WYO Companies, after deducting fees and costs,
must be deposited in the National Flood Insurance Fund in the
United States Treasury.” Battle, 288 F.3d at
599 (citing 42 U.S.C. § 4017(d)). “When the funds
retained by WYO Companies are insufficient to satisfy
outstanding claims and refunds, the WYO Companies must draw
upon letters of credit from FEMA.” Id. at
599-600 (citing 44 C.F.R. Pt. 62, App. A, Art. IV (A)).
Simply put, “premiums collected on policies written by
WYO Companies do not belong to those companies.”
Id. at 600 (citing Newton v. Capital Assurance
Co., 245 F.3d 1306, 1311 (11th Cir. 2001)). Claim
payments made by WYO companies under the SFIP “are a
direct charge on the United States Treasury, ” and are
not paid out of the WYO carrier's own funds.
Id.; see also in re Van Holt, 163
F.3d 161, 165 (3d Cir. 1998).
B.
The No-Interest Rule Case
Although
the Eleventh Circuit has not considered the exact issue
raised in this case - whether attorney's fees and costs
are payable to WYO companies under the EAJA - the Eleventh
Circuit has considered an analogous issue of prejudgment
interest awards. In Newton v. Capital Assurance Co.,
the Eleventh Circuit cited Van Holt for the
proposition that for jurisdictional purposes a suit against a
WYO company is the “functional equivalent” of a
suit against FEMA. Newton, 245 F.3d at 1309. The
Newton case involved whether prejudgment interest
awards (in that case awarded after a bench trial) in suits
against WYO companies selling federally-sponsored SFIP
policies violate the “no- interest rule” - a
sovereign immunity principle that the United States is immune
from an interest award in the absence of express
congressional consent to the award. Id. at 1309. The
court held that the no-interest rule prohibits the award of
prejudgment interest against WYO companies because the
regulations detailing the financial relationship between FEMA
and WYO companies establish that the interest charges against
WYO companies are in reality “direct charges against
FEMA.” Id. at 1311.
[Defendant] also points out the functionary status of the WYO
companies in relation to FEMA. Under the statute, WYO
companies act as the “fiscal agents of the United
States, ” 42 U.S.C. § 4071(a)(1); see
also44 C.F.R. § 62.23(f) (characterizing the
relationship between the federal government and WYO companies
as “one of a fiduciary nature” and intended to
“assure that any taxpayer funds are accounted for and
appropriately expended”). WYO companies may not alter
the terms of SFIPs, or insert flood coverage into other
policies. 44 C.F.R. § 62.23(c), (h)(6). Finally, they
must adjust claims under NFIP guidelines. Id. §
62.23(i)(1).
[Defendant] persuades us with these points - FEMA's
inevitable liability for claims and its substantial
administrative oversight - to join our fellow circuits in
concluding that the line between a WYO company and FEMA is
too thin to matter for the ...