Opinion ID: 65349
Heading Depth: 2
Heading Rank: 3

Heading: Campo's Claims Are Procurement-Related

Text: Federal law preempts state law tort claims arising from claims handling by a WYO. [17] We thus must first determine whether the district court was correct in holding that Campo's suit is related to claims handling. If we conclude that it is, we must affirm the district court's grant of summary judgment. Campo contends that his claims instead relate to insurance procurement and are not preempted by federal law. If we conclude that his claims do relate to procurement, we must then determine whether preemption of state-law claims extends to procurement. Allstate contends that Campo's suit addresses policy renewal, or reinstatement, which in its view is akin to claims handling. At least three district judges in this Circuit have reached a contrary conclusion. First, in Landry v. State Farm Fire & Casualty Co., the plaintiffs renewed their State Farm-issued SFIP each year and alleged that they requested, and were assured by their State Farm agent, that they would have full coveragethe best coverage available. [18] After Hurricane Katrina, the plaintiffs learned they did not have contents coverage and subsequently sued for negligent failure to provide coverage. [19] The plaintiffs asserted that the case involved procurement and State Farm contended that it was a handling issue because policy renewal is heavily regulated by FEMA. [20] The district court rejected State Farm's argument, ruling that even though many aspects of [the Program] are heavily regulated by FEMA[,] ... the obtaining of coverage does not involve the interpretation or management of an active SFIP. [21] The court held that the case present[ed] a question of policy procurement, in that it involve[d] the initial obtaining of coverage. [22] Next, in Meza v. All State Insurance Co., the plaintiffs' mortgage company paid their insurance premiums out of an escrow account maintained for that purpose. [23] When the plaintiffs paid off their mortgage in full, they advised their Allstate agent of this fact and apparently expected that future policy documents would be sent directly to them. [24] Neither the agent nor anyone else made arrangements to reflect this change. [25] As a result, Allstate sent renewal information to the mortgage company, which did not forward it to the plaintiffs. [26] After Hurricane Katrina, Allstate advised the plaintiffs that they did not have flood insurance. [27] The plaintiffs sued, claiming that Allstate's failure to notify and advise them of their policy's termination caused them to have no insurance in August 2005. The district court held that the plaintiffs presented a procurement case: Upon cancellation of the mortgage[, the] policy had to be renewed or otherwise re-procured for plaintiffs. [28] The court was [un]willing to create a new subcategory of `administration of an existing [Program] policy' cases. [29] Third, in Jackson v. State Fire & Casualty Insurance Co., the plaintiffs continuously renewed their flood insurance for several years, allegedly thought that they had flood insurance, but, after Hurricane Katrina, learned that their SFIP had not been renewed. [30] The plaintiffs sued State Farm and their State Farm agent under Louisiana law for errors and omissions and for breach of their fiduciary duties in procuring flood insurance coverage. [31] The district court, relying on Landry, determined that a cause of action as to a failure to procure flood insurance renewal was not a handling claim. [32] We approve of the approach taken by the district courts in these cases [33] and hold that Campo's claims are related to procurement rather than handling. To the extent that this case involves handling of a claim, it is merely a fictitious claim in the sense that the act of filing a claim on an expired policy, i.e., a dormant policy, is equivalent to filing no claim at all. At the relevant time, Campo's policy had expired subject to restoration only in the event that he paid the premium within the extended grace period. Allstate was thus by definition incapable of handling any new claims based on post-expiration occurrences. Contrary to the dissent's principal fallacy, Campo could not have continued his coverage by paying his renewal premium at any time between August 13 and December 12, 2005. Campo's coverage had expired; there was thus nothing to continue. Instead, as a former policyholder, Campo would have had to procure flood insurance. One way for him to do this was to pay his renewal premium to Allstate by December 12, which would have caused his expired policy to be reinstated. The mere fact that Allstate, for a time, mistakenly acted as though a claim existed does not make it so. It is thus impossible for Campo's claims to fall within the category of handling. To hold otherwise would permit insurers like Allstate to ensure unilaterally that disputes would be classified as preempted handling-related suits by simply acting as though they were handling claims when in fact none existed as a matter of law. Even though this is not a matter of initial procurement, the discrete facts of this case nevertheless demonstrate that it is procurement-related: Allstate's alleged misrepresentations occurred when Campo's only relationship with Allstate was that of both a former and a potential future policyholder. Further, Allstate's representations were allegedly of a kind that could lull parties like Campo into believing that they would receive indemnity without having to submit any additional payment, thus affirmatively dissuading them from paying their delinquent premiums to reinstate expired coverage, i.e., to procure insurance, while the shot clock of the grace period ticked away. In light of the peculiar and unusual circumstances of this case, we hold that Campo's state-law claims are not related to the handling of an insurance claim, but rather concern a species of insurance procurement. [34]