The opinion of the court was delivered by: Ware, District Judge.
AMENDED ORDER GRANTING DEFENDANTS' MOTION TO DISMISS
PLAINTIFFS' SECOND CAUSE OF ACTION AND GRANTING DEFENDANTS'
MOTIONS TO STRIKE*fn1
Defendants move to dismiss Plaintiffs' state law claim for breach of
the implied covenant of good faith and fair dealing and to strike their
prayers for punitive and emotional distress damages and attorneys' fees on
the ground that the National Flood Insurance Act of 1968 ("NFIA")
preempts such a state law claim. The Court finds that the state law claim
is barred by the NFIA and dismisses it from this case. In addition,
remedies sought by Plaintiffs are disallowed by NFIA and thus, the Court
orders the prayer for punitive damages, emotional distress damages and
attorneys' fees stricken.
In February 1997, Plaintiffs Robert and Janet Bianchi purchased flood
insurance from Defendant State Farm and Casualty Company through its
authorized agent Ron Emilio. The policy was issued pursuant to the
National Flood Insurance Act ("NFIA") of 1968. Ron Emilio sold to
Plaintiffs a standard State Farm flood insurance policy which insured the
"dwelling" of Plaintiffs' home at 1530 Dana Avenue, Palo Alto,
California, against loss of damage by or from a flood in an amount of up
to $188,100.00. The policy was effective from February 23, 1997 to
February 23, 1998. On February 3, 1998, Plaintiffs' home was flooded when
water from the
nearby San Francisquito Creek overflowed and poured onto Plaintiffs'
property. The flood allegedly damaged both Plaintiffs' dwelling and
personal property in an amount exceeding the limits of the flood insurance
policy. In accordance with the policy, Plaintiffs submitted a written
proof of loss to Defendants on April 27, 1998. In response, Defendant
State Farm tendered a check to Plaintiffs for $75,000.00.
Plaintiffs contend that the $75,000.00 is insufficient to pay the
covered loss. Plaintiffs contend that State Farm has breached the policy
and has in bad faith refused to pay Plaintiffs the full benefits under
the policy. Plaintiffs brought the current action against both State Farm
and its agent, Ron Emilio. Plaintiffs are suing State Farm for breach of
the insurance contract and breach of the covenant of good faith and fair
dealing. Plaintiffs are suing Ron Emilio for negligently procuring an
insurance policy with a coverage limitation that is inconsistent with the
coverage limitation the Bianchis had originally agreed to.
Defendants move to dismiss Plaintiffs' second cause of action for
breach of the implied covenant of good faith and fair dealing. Defendants
also move to strike Plaintiffs' request for emotional distress damages,
exemplary damages and attorneys fees and to strike Plaintiffs'
surrebuttal and notice of newly published case law.
Pursuant to Rule 12(b)(6), Fed.R.Civ.P., a claim may be dismissed as a
matter of law for one of two reasons: "(1) lack of a cognizable legal
theory or (2) insufficient facts under a cognizable legal theory."
Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530, 534 (9th Cir.
1984). When ruling on a motion to dismiss, "[a]ll material allegations in
the complaint are to be taken as true and construed in the light most
favorable to the non-moving party." Sanders v. Kennedy, 794 F.2d 478, 481
(9th Cir. 1986); NL Indus., Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir.
1986). However, the Court will not accept wholly conclusory allegations.
Western Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir. 1981), cert.
denied, 454 U.S. 1031, 102 S.Ct. 567, 70 L.Ed.2d 474 (1981); Kennedy v. H
& M Landing, Inc., 529 F.2d 987, 989 (9th Cir. 1976). Further, when on
the basis of a dispositive issue of law, no construction of factual
allegations of a complaint will support the cause of action, dismissal of
the complaint is appropriate. Executive 100, Inc. v. Martin County,
922 F.2d 1536 (11th Cir. 1991), cert. denied, 502 U.S. 810, 112 S.Ct.
55, 116 L.Ed.2d 32 (1991).
A. Plaintiffs' Claim for Breach of the Covenant of Good Faith and Fair
Dealing is Not Recognized Under the NFIA
The National Flood Insurance Act of 1968 has enabled the availability
of flood insurance due to a joint partnership between the federal
government and the private insurance industry. 42 U.S.C. § 4001(b),
(d). The National Flood Insurance Program is a federally supervised and
guaranteed program that is administered by the Federal Emergency
Management Agency ("FEMA") pursuant to the NFIA and its corresponding
regulations. See 44 C.F.R. § 59.1-77.2. Congress enacted this statute
in order to limit damage caused by flood disasters through prevention and
protective measures, and to make flood insurance "available on reasonable
terms and conditions" to those who qualify. 42 U.S.C. § 4001(a)(1)-(4).
In addressing the issue of whether state or federal law should apply in
resolving disputes arising from a policy issued pursuant to the NFIA, the
5th Circuit in West v. Harris, 573 F.2d 873, 881 (5th Cir. 1978),