Henry A. Bagelmann, Jr. And Mary Jo Bagelmann v. First National Bank and Iowa Bankers Mortgage Corporation, 823 N.W.2d 18

Background

Bagelmanns purchased a home in Waverly, Iowa, and were told flood insurance was not required due to a faulty NFIA determination.
LandAmerica (LandAmerica CBE-CIGNA Flood Services predecessor) prepared the initial flood determinations in 2001 and 2003 indicating no insurance was required, though the property lay in a special flood hazard area (AE).
FNB and IBMC later learned in 2008 that the property was in a flood zone and a flood insurance requirement applied, after the June 10, 2008 flood damaged the home.
The Bagelmanns paid for flood determinations in 2001 and 2003 and later sought damages, asserting NFIA violations, contract breaches, negligence, and misrepresentation.
The district court granted summary judgment for the defendants; the Iowa Supreme Court affirms in part and reverses in part, remanding on a potential Restatement (Second) of Torts § 551(2) claim.
The court holds there is no private NFIA right of action or contract-based duty arising from NFIA, but allows potential state-law claims under Restatement § 551(2) to proceed against IBMC on remand.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether NFIA creates a private federal remedy for borrowers against lenders.	Bagelmanns rely on NFIA to support state claims.	FNB/IBMC contend NFIA provides no private action or independent duty.	No private NFIA action exists; no independent NFIA-based duty recognized.
Whether a state-law negligence duty arises from NFIA violations.	Negligence claim based on misdeterminations and failure to notify.	No state duty exists derived from NFIA; federalism concerns apply.	Negligence claim barred against FNB; potential Restatement § 551(2) claim against IBMC on remand.
Whether negligent misrepresentation is viable against FNB for faulty flood determinations.	FNB’s determinations were negligent misrepresentations.	No basis since determinations were by third party and FNB not negligent.	Summary judgment upheld against Bagelmanns on negligent misrepresentation.
Whether the 2001/2003 mortgages or assignment created a contract basis for breach, and whether Bagelmanns were third-party beneficiaries.	Contracts/assignment imply duties to provide accurate determinations.	No contractual duty; no third-party beneficiary status.	Affirmed on breach of contract; no breach for third-party beneficiary; no contractual duty to notify.
Whether the covenant of good faith and fair dealing supports a claim against IBMC.	IBMC delayed notifying of 2008 determination in bad faith.	No contract term to which good-faith duty attaches.	Affirmed on summary judgment for good-faith claim; no contractual basis to IHMC.

Key Cases Cited

Hofbauer v. Northwestern National Bank of Rochester, 700 F.2d 1197 (8th Cir. 1983) (no private federal action under NFIA; NFIA primarily protects lenders)
Paul v. Landsafe Flood Determination, Inc., 550 F.3d 511 (5th Cir. 2008) (NFIA does not create implied borrower private action for erroneous determinations)
Mid-America Nat’l Bank of Chicago v. First Sav. & Loan Ass’n of South Holland, 515 N.E.2d 176 (Ill. App. Ct. 1987) (rejects NFIA as basis for state negligent misrepresentation claims)
Larsen v. United Federal Savings & Loan Ass’n of Des Moines, 300 N.W.2d 281 (Iowa 1981) (lender liable for negligent misrepresentation in appraisal context; borrower reliance)
Garren v. First Realty, Ltd., 481 N.W.2d 335 (Iowa 1992) (lender/appraisal duty; reliance on lender/appraiser for flood zone info)
Guyton v. FM Lending Servs., Inc., 681 S.E.2d 465 (N.C. Ct. App. 2009) (discusses independent state-law duty arising from NFIA context)
Pippin v. Burkhalter, 279 S.E.2d 603 (S.C. 1981) (purpose of NFIA in protecting federally supervised loans)