367 F. Supp. 3d 768
M.D. Tenn.2019Background
- Michael and Beverly Harris bought a house in 2006 financed by Regions; their deed of trust required flood insurance for properties in flood zones.
- Regions contracted with CoreLogic for a flood-zone determination; CoreLogic incorrectly reported the property as not in a flood zone, so the Harrises did not obtain flood insurance before closing.
- FEMA issued a revised FIRM on Sept. 20, 2006; Regions later informed the Harrises their home was in Flood Zone AE and they obtained a pre-FIRM policy from Nationwide based on representations that the house was pre-FIRM and did not need an elevation certificate.
- The house was actually built in 1984 (post-FIRM), required an elevation certificate, and the pre-FIRM policy did not cover the lower floor; a 2010 flood produced uncovered damage and Nationwide denied coverage for the lower floor.
- Plaintiffs sued multiple defendants; after appeals and remand, only negligence and negligent misrepresentation claims against Regions remained; Regions moved to dismiss and the court granted the motion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Regions owed a common-law negligence duty to verify CoreLogic and insurer information based on NFIA | Harris: NFIA imposed duties on Regions to notify borrowers and ensure flood insurance, creating a duty to verify | Regions: No common-law duty exists beyond contractual obligations; NFIA does not create a private duty to borrowers | Court: NFIA does not create the special circumstance to impose a new common-law duty on lenders; negligence claim dismissed |
| Whether plaintiffs stated negligent misrepresentation against Regions for pre-closing flood-zone statements | Harris: Regions misrepresented the property's flood-zone status, inducing purchase | Regions: Claims fail under Rule 9(b); plaintiffs plead no particularized false statements, timing, speaker, or content | Court: Allegations are conclusory and fail Rule 9(b); negligent misrepresentation claim dismissed |
| Whether omission/statement about 2006 FIRM supports misrepresentation | Harris: Regions told them they were in Zone AE in Sept/Oct 2006 and failed to disclose earlier 1981 FIRM status | Regions: The statement that the house was in Zone AE under 2006 FIRM was factually accurate; no affirmative misrepresentation about 1981 FIRM | Court: Plaintiffs plead no representation about 1981 FIRM or facts showing Regions knew of an earlier designation; omission is not actionable as pleaded |
| Whether leave to amend should be granted to cure pleading defects | Harris: Requests leave to file Second Amended Complaint to add particulars | Regions: Amendment would be futile given legal and pleading deficiencies | Court: Proposed amendments would not cure Rule 9(b) or substantive defects; leave denied |
Key Cases Cited
- Harris v. Nationwide Mut. Fire Ins. Co., 832 F.3d 593 (6th Cir. 2016) (held NFIA creates no private federal cause of action and did not decide state-law negligence viability)
- Hofbauer v. Nw. Nat. Bank of Rochester, Minn., 700 F.2d 1197 (8th Cir. 1983) (NFIA lacks private federal cause of action but state courts may consider NFIA as standard of care)
- Bagelmann v. First Nat. Bank, 823 N.W.2d 18 (Iowa 2012) (state supreme court rejected negligence claim based on NFIA duties owed by lender)
- Power & Tel. Supply Co. v. SunTrust Banks, Inc., 447 F.3d 923 (6th Cir. 2006) (Tennessee law generally does not impose common-law duties on banks absent special circumstances)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading must contain factual content allowing reasonable inference of defendant's liability)