A federal district court in Florida has denied a flood insurer's motion to dismiss an insured's request for attorneys' fees and costs under the standard flood insurance policy (“SFIP”) the insurer issued under the National Flood Insurance Program (“NFIP”).
The Case
Armando Arevalo alleged that his property suffered flood damage in September 2017 as a result of Hurricane Irma. Mr. Arevalo submitted a claim seeking coverage for the damage under a federally-sponsored standard flood insurance policy (“SFIP”) issued for the property by American Bankers Insurance Company of Florida, a write your own (“WYO”) carrier participating in the National Flood Insurance Program (“NFIP”) under the National Flood Insurance Act.
American Bankers hired an independent adjuster who prepared an estimate and proof of loss, with which Mr. Arevalo disagreed. He sued the insurer, alleging that it 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 flood damages, Mr. Arevalo requested reasonable attorneys' fees, costs, and case expenses incurred in filing and prosecuting his action payable under the Equal Access to Justice Act (“EAJA”).
American Bankers moved to dismiss the request for EAJA attorneys' fees on the ground that American Bankers was not an agency of the United States from which EAJA fees may be obtained.
In response, Mr. Arevalo said that although his lawsuit was not a suit against the federal government, the EAJA should apply to SFIP policyholders because private insurance companies (such as American Bankers) that issued SFIPs acted as “fiscal agents” of the Federal Emergency Management Agency (“FEMA”).
The District Court's Decision
The court denied American Bankers' motion.
In its decision, the court explained that prejudgment interest awards against WYO insurers were not permitted because FEMA regulations detailing the financial relationship between FEMA and WYO companies established that the interest charges against WYO companies in reality were “direct charges against FEMA.”
It then pointed out that, to justify an award of attorneys' fees and costs under the EAJA, a party must be “the prevailing party in any civil action brought by or against the United States or any agency or any official of the United States acting in his or her official capacity. . . .” 28 U.S.C. § 2412(b). The court added that the statute defined “United States” to include “any agency or any official of the United States acting in his or her official capacity.” 28 U.S.C. § 2412(d)(2)(C).
According to the court, the determining factor was not so much whether American Bankers was an “agency” of the United States under the EAJA but, rather, whether the government was the source of the funds to pay an award of attorneys' fees.
Here, the court continued, payment of attorneys' fees might be a direct charge on federal funds if FEMA approved American Banker's request for reimbursement of the attorneys' fees incurred defending this NFIP litigation. It added that this assumed that American Bankers would seek reimbursement for its defense costs from FEMA and that it otherwise had an arrangement with FEMA under which it was entitled to reimbursement.
Either way, the court concluded, it was at least “plausible at this point in the litigation” that attorneys' fees might be paid from federal funds by FEMA. Therefore, it denied American Bankers' motion to strike the request for attorneys' fees under the EAJA.
The case is Arevalo v. American Bankers Ins. Co. of Florida, No: 2:19-cv-159-FtM-99UAM (M.D. Fla. June 13, 2019). Attorneys involved include: For Armando Arevalo, Plaintiff: Samuel W. Bearman, Law Office of Samuel W. Bearman, Pensacola, FL. For American Bankers Insurance Company of Florida, Defendant: Eugene P. Murphy, Joel Ladd McNabney, LEAD ATTORNEYS, Robinson & Cole, LLP, Miami, FL.
Insurance Coverage Law Center Comment
Another federal district court in Florida recently reached a different result. See Insured Can't Get Attorneys' Fees Because Flood Insurer Is Not a U.S. Agency. It Can't Get Interest Because of Sovereign Immunity. Cf. In Hurricane Irma Insurance Coverage Case, Florida Court Dismisses Insured's Claim for Attorneys' Fees
Steven A. Meyerowitz
Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. He may be contacted at [email protected].