Ruling Against Regions Bank Eases Flood Policy Claims

By Chris Bruce

Aug. 8 — A federal appeals court Aug. 8 said Regions Bank and other companies must face state-law claims that they bungled a flood-zone determination ( Harris v. Nationwide Mut. Ins. Co., 6th Cir., No. 15-cv-06132, 8/8/16 ).

The ruling by the U.S. Court of Appeals for the Sixth Circuit, and the court's first on the question, makes it easier for policyholders to assert state-law claims in connection with the procurement of flood insurance policies, as opposed to state-law claims with regard to coverage. The latter claims normally are preempted by the National Flood Insurance Act (NFIA).

A district court dismissed Tennessee negligence and breach of fiduciary duty claims by Michael and Beverly Harris, holding the NFIA preempted them, but the Sixth Circuit reversed. The NFIA preempts state-law causes of action for the handling of insurance claims, but not policy-procurement claims, the court said.

“Because plaintiffs were potential future policyholders at the time the alleged wrongs occurred, to the extent that their state-law claims arise solely from the policy-procurement process, the NFIA does not preempt them,” Judge Ralph B. Guy said for a three-judge panel.

The NFIA, enacted to encourage affordable flood insurance, often is held to preempt state-law coverage claims. But some courts have said state-law claims survive if they relate to procurement of the policy, and not claims coverage.

The Fifth Circuit reached that conclusion in a 2015 ruling, saying the key is whether a plaintiff is already covered by a standard policy at the time of alleged wrongdoing, or whether the plaintiff is a “potential future policyholder.”

The Sixth Circuit adopted that approach and reversed the district court, allowing the Harrises to press their claims.

“We agree with the Fifth Circuit’s approach and hold that the NFIA does not preempt policy-procurement claims such as plaintiffs',” the court said.

According to Guy, the Harrises said they never would have purchased their home if they'd known they were in a particular type of flood zone that didn't allow for full coverage of their flood losses.

Regions Bank spokesman Jeremy D. King Aug. 8 declined to comment on the ruling.

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To contact the editor responsible for this story: Mike Ferullo at

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