Recovery of Attorney’s Fees in Federal Flood Cases Under the Equal Access to Justice Act?

Shane Smith | Property Insurance Coverage Law Blog | September 2, 2019

A recent Southern District of Florida decision addressed this issue.1

A property in Islamorada, Florida, which was owned by the estate of Raymond K. Hampson, was damaged by Hurricane Irma in September 2017. The personal representative for the estate, Timothy R. Hampson (“Hampson”) made a claim for damages under the standard flood insurance policy (“SFIP”) covering the property. When Hampson sued Wright National Flood Insurance Company, a Write Your Own (“WYO”) carrier, for breach of the insurance contract, Hampson also sought an award of attorney’s fees, costs and case expenses under the Equal Justice to Access Act (the “EAJA”), 28 U.S.C. § 2412.

In 1980, Congress enacted the EAJA and significantly expanded the federal government’s liability to pay the attorney’s fees of parties that prevail against the government in litigation or administrative proceedings.

A party may recover attorney’s fees and costs under the EAJA as the prevailing party in a case “brought by or against the United States. . . unless the court finds that the position of the United States was substantially justified.”2 The statute defines “United States” to include “any agency and any official of the United States acting in his or her official capacity.”3

Wright filed a motion to dismiss Hampson’s claims for attorneys’ fees, costs, and case expenses under the EAJA. Wright argued that Hampson could not recover attorneys’ fees, costs, and case expenses under the EAJA against a WYO carrier.

Chief District Judge K. Michael Moore of the Southern District of Florida agreed:4

[A]ttorney’s fees are not recoverable under the EAJA in cases for breach of an SFIP brought against a WYO program insurance carrier participating in the United States Government’s NFIP because WYO carriers are not considered “agencies” under the EAJA. Dwyer v. Fidelity Nat’l Prop. & Cas. Ins. Co., 565 F.3d 284, 289(5th Cir. 2009) (“[S]erving as a fiscal agent and a participant in a heavily regulated federal program did not transform Fidelity into a federal agency under the EAJA.”). The EAJA must be applied according to its express terms and attorney’s fees against a WYO carrier in a suit for SFIP funds may not be maintained under the EAJA. Id. at 289–90.

District Courts in this circuit have uniformly found that a plaintiff is not entitled to attorney’s fees and costs under the EAJA. See e.g.Cosgrove v. Wright Nat’l Flood Ins. Co., No.4:18-cv-10117-KMM, Paperless Order Denying Plaintiff’s Request for EAJA Fees (S.D. Fla. June 3, 2019), ECF No. 29 (holding that EAJA fees were not recoverable against a WYO Company because it was not an “agency” under the EAJA); Island Club Condo., Inc. v. Wright Nat’l Flood Ins. Co., 4:18-cv-10303-JLK (S.D. Fla. May 9, 2019), ECF No. 16 (granting motion to dismiss claim for attorney’s fees under the EAJA because “serving as ‘fiscal agents,’ without more, does not convert WYO insurers into official government agencies”); Chatman v. Wright Nat’l Flood Ins. Co., No. 3:17-CV-00125-HES-PDB, 2017 WL 3730558, at *1–2 (M.D. Fla. June 21, 2017) (granting motion to dismiss claim for attorney’s fees pursuant to the EAJA because Wright National Flood Insurance Company, a WYO carrier participating in the NFIP, “is not an agency of the United States as required by the EAJA”)(citation omitted); Perdido Sun Condo. Ass’n v. Nationwide Mut. Ins. Co., 2007 WL 2565990, at *4 (N.D. Fla. Aug. 30, 2007). Here, Plaintiff brings a claim for breach of an SFIP against Defendant, a WYO carrier participating in the NFIP pursuant to the NFIA. Compl.¶¶ 1–5. Thus, Plaintiff’s claims for attorney’s fees, costs, and case expenses pursuant to the EAJA are dismissed.

The Hampson court cited an earlier Middle District of Florida case but disagreed with the holding in that case:5

Plaintiff relies on Arevalo v. Am. Bankers Ins. Co. of Fla., No. 219CV159FTM99UAM, 2019 U.S. Dist. LEXIS 99000, 2019 WL 2476644, at *3 (M.D. Fla. June 13, 2019) to support its arguments that attorney’s fees and costs are warranted. Therein, the Middle District of Florida found that “it is not so much whether American Bankers is an ‘agency’ of the United States under the Act. Rather, it seems to matter more whether the government is the source of the funds or who would pay an award of attorney’s fees.” Id. Therefore, the Middle District of Florida concluded that “it is at least plausible at this point in the litigation that attorney’s fees may be paid from federal funds by FEMA.” Id. However, this Court disagrees and declines to depart from the case law in this circuit and other courts finding that a WYO carrier is not an agency of the United States as required by the EAJA.

The Hampson holding demonstrates that a policyholder cannot recover attorney’s fees, costs and expenses from a WYO carrier under the EAJA in Hurricane Irma flood insurance cases filed in the Southern District of Florida.
1 Hampson v. Wright National Flood Ins. Co., No. 4:19-cv-10083 (S.D. Fla. Aug. 12, 2019).
2 28 U.S.C. § 2412(d)(1)(A), (b).
3 28 U.S.C. § 2412(d)(2)(C).
4 Hampson v. Wright National Flood Ins. Co., No. 4:19-cv-10083 (S.D. Fla. Aug. 12, 2019) at *3-4.
5 Id. at *4, fn 3.

Will Your Next Insurance Coverage Dispute be Heard in Georgia’s Business Court?

Abby Vineyard | Barnes & Thornburg LLP | April 24, 2019

In 2020, Georgia corporate policyholders may have a new court to hear insurance coverage disputes. The Georgia General Assembly passed House Bill 239 on Day 40 of the legislative session, outlining how Georgia’s new statewide business court will operate.

The court will have jurisdiction over claims falling under Georgia’s Uniform Commercial Code, Business Corporation Code, Trade Secrets Act, Uniform Securities Act, and—of particular relevance to policyholders—over contract claims “between businesses arising out of business transactions or relationships” and more. The amount in controversy must exceed $500,000, but the court will also have the powers of a court of equity and thus be able to hear declaratory judgment actions.

There will be one division and one judge, appointed by the governor, who will have at least 15 years of experience as a complex business litigator or judge. The court may be located in Atlanta or Macon, both large metropolitan areas.

A plaintiff can initiate an action in business court, or a case can be transferred to the business court with all parties’ consent. If less than all parties consent, a party may move to transfer the case but must overcome the presumption of the case remaining in the original court. The filing fee is a hefty $3,000, which is paid by the plaintiff or allocated among the transferring parties.

However, the court has wide latitude in deciding which cases it wants to hear: the bill states that the court has the power to transfer any case filed in business court to the state or superior court and reject any petitions to transfer to the business court, even if such claims are within its jurisdiction. Additionally, a defendant may petition the court to move the case to the state or superior court, which compels the court to transfer the case unless the contract at issue specifically states that disputes must be litigated in business court.

So, what does this mean for policyholders? It depends.

In some ways, this is a positive development in that it provides for streamlined litigation without the common issue of an overcrowded docket. The court will not have to split time presiding over criminal, domestic, or other non-business-related civil matters. And the judge will be a seasoned business litigator or judge, offering an expertise and familiarity with nuanced contract issues that not all judges have.

However, there are a few drawbacks that might outweigh the benefits of filing suit in business court. Given the court’s considerable leeway over its docket, the policyholder has no guarantee that the case will remain in business court, and the unusually high filing fee makes this a bigger risk than normal. Without having seen this court in action, it is hard to imagine how many cases the single-judge court will agree to take on. A carrier’s ability to compel a transfer in the absence of a policy provision prohibiting such an action also makes for less stability. It will be interesting to see how many cases filed in business court actually remain in business court.

Assuming the governor signs the bill, the court will begin taking cases on August 1, 2020. Of course, it goes without saying that this development is of interest beyond policyholder v. carrier disputes. Any entity that has a business-related dispute arise in Georgia should at least consider the merits of litigating in business court instead of traditional court. Whether litigating in business court makes sense will be a case-by-case inquiry.

Is Equipment Installed As Part Of Building Renovations A “Product” Or “Construction”?

Joshua Lane | Ahlers Cressman & Sleight | March 20, 2019

A statute of repose terminates the right to file a claim after a specified time even if the injury has not yet occurred.[1] The construction statute of repose bars claims arising from construction, design, or engineering of any improvement upon real property that has not accrued within six years after substantial completion.[2] But what constitutes an “improvement upon real property” necessitating application of the six-year bar, and when does the bar NOT apply?

The Washington Court of Appeals recently addressed these questions in Puente v. Resources Conservation Co., Int’l.[3] There, the personal representative of the estate of Javier Puente sued several parties after Mr. Puente, an employee of a manufacturer, suffered fatal boric acid burns in 2012 while performing maintenance on a pump system installed at the manufacturer’s facility in 2002. The estate alleged claims of negligence and liability under the Washington Product Liability Act (WPLA).[4] The trial court granted summary judgment to defendants, concluding that the installed pump system constituted a statutory “improvement upon real property” and the six-year statute of repose applied. The estate appealed.

The Court of Appeals reversed, concluding that the faulty pump system equipment, while “integral” to the manufacturing process at issue, was not so integrated into the facility as to render it an integral part of the building structure. Indeed, the court held that the equipment was an “accoutrement … to the manufacturing process taking place within the” building.[5]

The Court looked to the Washington Supreme Court decision in Condit v. Lewis Refrigeration Co.[6] There, the Court concluded that the conveyer belt and refrigeration unit that caused the injury to the plaintiff was not an improvement upon real property but was engineered and designed as part of the “manufacturing process taking place within the improvement.”[7]

The Court of Appeals went on to contrast the decisions in Pinneo v. Stevens Pass, Inc.[8] and Yakima Fruit & Cold Storage Co. v. Central Heating & Plumbing Co.[9], where the improvement was found to be an integral part of the building structure and the statute of repose applied. In Pinneo, the operator of the Stevens Pass ski area retained a contractor to replace and install a ski lift.[10] In Yakima Fruit, the repair of a building refrigeration system required the removal of an entire floor of the building structure and could not be accomplished with either the system or the building remaining intact.[11]

The Court in Puente determined that the pump system at issue was more akin to the conveyer belt and refrigeration unit in the Condit case than the ski lift in Pinneo or building refrigeration system in Yakima Fruit because the pump system was not necessary to the function of the building and was not part of the building’s “construction” but “simply ‘house[d]’ within the … building.”[12] Accordingly, the Court concluded that the lawsuit was subject to product liability law and not the six-year statute of repose that would bar the claim under the construction law statute.

The determination of whether a mechanical system within a building constitutes an “improvement upon real property” and is therefore subject to the six-year statute of repose hinges on whether the system must be integrated into and become a part of the building itself.

Comment: The extent of equipment’s “integration” within a structure – much like the degree to which property is a fixture or merely chattel – is not merely a theoretical academic question but has serious liability implications for the equipment’s owner. In addition to keeping in mind the statute of repose, when considering actions and defenses arising out of the installation of equipment in construction projects that is not integral to building operations, counsel should carefully consider whether product liability or construction law applies. Varying applications will have significant effect on the law governing particular claims and defenses.

[1]Major League Baseball Stadium Pub. Facilities Dist. v. Huber, Hunt & Nichols-Kiewit Constr. Co., 176 Wn.2d 502, 511, 296 P.3d 821 (2013).

[2]RCW 4.16.300; RCW 4.16.310.

[3]5 Wn. App.2d 800, 428 P.3d 415 (2018).

[4]Chapter 7.72 RCW.

[5]5 Wn. App.2d 800 at 813 .

[6]101 Wn.2d 106, 676 P.2d 466 (1984).

[7]Id. at 112.

[8]14 Wn. App. 848, 545 P.2d 1207 (1976).

[9]81 Wn.2d 528, 503 P.2d 108 (1972).

[10]Pinneo, 14 Wn. App. at 849

[11]Yakima Fruit, 81 Wn.2d at 529-31.

[12]Puente, 5 Wn. App.2d 800 at 812.

Suit Limitation Provision Upheld

Tred R. Eyerly | Insurance Law Hawaii | February 25, 2019

    The policy’s one year suit limitation provision was upheld, depriving insureds of benefits under the policy. Oswald v. South Central Mut. Ins. Co., 2018 Minn. App. Unpub. LEXIS 1077 (Dec. 24, 2018). 

    The Oswalds’ hog barn burned down on June 21, 2016. Arson was a possible cause. 

    The Oswalds were insured under a combination policy issued by North Star Mutual Insurance Company and South Central Mutual Insurance Company. Central provided coverage for basic perils, broad perils, and limited perils, which included fire losses. The Central policy required property claims to be brought within one year after the loss. By endorsement, the North Star policy required suits be brought within two years after the loss. Presumably, the claims was denied, although the decision does not state this.

    During the investigation of the cause of the fire, the Oswalds attempted to serve a complaint on Central on June 1, 2017, alleging breach of contract, unjust enrichment, and breach of good faith and fair dealing. The Oswalds failed to properly serve Central and moved to dismiss their complaint without prejudice. The dismissal was granted. The Oswalds then filed an almost identical complaint on September 25, 2017, and properly served the complaint. Central file a motion to dismiss because the suit was filed past the one-year limitation contained in the policy. The motion was granted. 

    On appeal, the court found the one-year limitation was not inherently unreasonable. While investigating the cause of the fire, the Oswalds still managed to file a complaint before the one-year deadline. Had the Oswalds properly served Central, they would have commenced a suit regarding their current claims within the one-year limitations period. Nor was there any statute prohibiting the one-year limitation period. 

    The Oswalds also argued that the policy was ambiguous. The policy continuously referred to the two insurance companies as “we” or “us” instead of including a clear delineation between the two companies. But the policy also clarified that all its terms “applied to both companies listed on the declarations unless otherwise designated.” 

    The Oswalds contended that the policy did not provide a clear and unambiguous limitations period. However, the one-year limitation was clearly stated within the policy conditions. 

    Finally, the one-year limitation was not tolled due to either fraudulent concealment or equitable principles. The Oswalds failed to identify an affirmative statement which concealed a fact, defeating their argument for tolling the one-year limitation due to fraudulent concealment. Equitable tolling was inappropriate when there were no circumstances beyond the plaintiffs’ control that prevented service of a complaint within the limitations period. Here, the Oswalds attempted to commence a suite within the one-year limit, but failed for reasons within their control. Thus, equitable tolling was inappropriate. 

    Consequently, the lower court’s dismissal was affirmed. 

Construction Law Practice Tip: Determining the Scope of a Subrogation Waiver

Pierre Grosdidier | Haynes and Boone LLP | February 27, 2019

In Exxon Mobil Corp. v. Insurance Company of the State of Pennsylvania, the Texas Supreme Court opined once again on the issue of the extent to which an insurance provision incorporates the terms of an extrinsic contract.[1] The insurance provision in this case was a standard Texas Department of Insurance Form WC 42 03 04 A waiver of subrogation endorsement, but Exxon Mobil’s holding is valid for any insurance provision, including additional insured provisions, that incorporates terms of an extrinsic contract.

An employee of contractor Savage Refinery Services suffered an injury in an Exxon Mobil refinery (Figure). The employee received benefits from The Insurance Company of the State of Pennsylvania, Savage’s workers’ compensation carrier (“Carrier”) and sued Exxon Mobil in a third-party over action. The employee settled with Exxon Mobil and the latter sued the Carrier to secure a declaration that the Carrier had waived its subrogation rights in a Form WC 42 03 04 A endorsement to Savage’s workers’ compensation policy.[2] Absent a waiver, the Carrier’s subrogation rights grant it a “first money” right to any payment by a third-party (here, Exxon Mobil) to an employee who received benefits from the Carrier.[3] It is not unusual in a construction project that a workers’ compensation carrier waives its subrogation rights in exchange for a policy premium.[4] Personal injury lawsuits allegedly settle more easily and for less in the absence of subrogation rights.[5] And, from the carrier’s perspective, the increased premium buys one less dispute to litigate.

By its terms, the endorsement waived the Carrier’s subrogation rights relative to the party named in the endorsement’s Schedule (the “who”); “‘with respect to bodily injury arising out of the operations described in the Schedule,’” (the “what”); and where the named insured (here, Savage) was “required by a written contract to obtain th[e] waiver” (the “where”).[6] The Schedule did not expressly name Exxon Mobil. The incompleteness of the waiver meant that the Court also had to examine the terms of the parties’ Service Contract.

In their Service Contract, Exxon Mobil and Savage agreed to indemnify each other only for their own negligence, and Savage agreed to waive “‘all rights of subrogation and/or contribution against [Exxon Mobil] . . . to the extent liabilities are assumed by [Savage].’”[7] Therefore, Savage had no obligation to indemnify Exxon Mobil for claims that arose from Exxon Mobil’s tortious conduct. The key question was whether this limitation on Savage’s indemnity obligation conditioned its waiver of subrogation.

The Court held that the scope of the endorsement (like that of any insurance policy) was first determined from its four corners. If the endorsement or policy pointed to an extrinsic document, that document would be referred to only “‘to the extent required by the policy,’” that is, in this case, the endorsement.[8] 

Savage’s endorsement specified the “what” (bodily injury) and required a referral to the parties’ Service Contract to determine the “who” and the “where.” The Service Contract defined the “who” as Exxon Mobil, and the “where” as “‘operations [in Texas] where [Savage is] required by a written contract to obtain th[e] waiver from [the Carrier].’” The endorsement did not require any further inquiry and, therefore, imposed no qualifier on 2 whether Exxon Mobil or Savage was ultimately responsible for the injury. For this reason, the Court upheld the validity of the subrogation waiver as to the injured employee’s claim.[9] 

The Court contrasted the facts and its analysis in Exxon Mobil with those in, inter alia, Deepwater Horizon. [10] In that case, various BP entities, acting as operator, sought coverage as an additional insured under various insurance policies held by Transocean entities, the drilling contractor. As the Court explained, the insurance policies

at issue in Deepwater Horizon extended “insured” status to “[a]ny person or entity to whom the ‘Insured’ is obliged by oral or written ‘Insured Contract’ … to provide insurance such as afforded by [the] Policy.” The policies defined an “Insured Contract” as “any written or oral contract or agreement entered into by the ‘Insured’ … and pertaining to business under which the ‘Insured’ assumes the tort liability of another party to pay for ‘Bodily Injury’ [or] ‘Property Damage’ … to a ‘Third Party’ or organization.[11] 

The crucial difference between the two cases, therefore, was the location of the assumption of liability qualifier. In Exxon Mobil, the qualifier was in the Service Contract, and there was no need to reach it to circumscribe the scope of the subrogation waiver. The consequence was that the Exxon Mobil waiver was valid regardless of which party caused the employee’s injury. Conversely, in Deepwater Horizon, the qualifier was in the insurance policy and had to be factored into the scope of the additional insured provision. In that case, BP was an additional insured with respect to above-surface pollution, for which Transocean had assumed liability, but not with respect to below-surface pollution, for which the driller had not.[12]