Highmark Federal Credit Union v. Hunter
2012 SD 37
| S.D. | 2012Background
- Highmark Loaned Hunter funds to purchase a manufactured home and lot; she signed a Standard Flood Hazard Determination indicating the property was in a 100-year flood area.
- The FDPA and NFIA require lenders to obtain or ensure flood insurance for properties in special flood hazard areas and to do so at the borrower's expense if the borrower fails to insure.
- No flood insurance was purchased by Hunter or Highmark; a flood damaged the home in 2007.
- Highmark foreclosed on the loan; Hunter counterclaimed that Highmark failed to inform her of the insurance requirement and negligent in not obtaining insurance.
- The circuit court granted summary judgment on Hunter’s counterclaim in May 2011; Highmark sought to dismiss the counterclaim, arguing no statutory or common-law duty.
- Supreme Court analyzes whether the NFIA/FDPA creates a duty or private right of action in a state negligence claim and affirms dismissal of Hunter’s claim as a matter of law.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does NFIA/FDPA create a duty for lenders in negligence actions? | Hunter: NFIA imposes duty to inform and procure insurance. | Highmark: NFIA does not create duty or private right of action. | Duty not recognized; no private right of action. |
| Does NFIA establish a standard of care for state-law negligence claims? | Hunter asserts NFIA duty governs conduct. | Highmark contends statute lacks private enforcement and standard-of-care effect. | NFIA does not set a state-law standard of care for negligence. |
| Can NFIA-derived duty exist despite absence of private remedy for borrowers? | Court should adopt statutory duty despite no private action. | Separation of powers and federalism prevent creating a duty from NFIA absent private action. | No such duty; no private right recognized. |
Key Cases Cited
- Albers v. Ottenbacher, 116 N.W.2d 529 (S.D. 1962) (statutory duty can define negligence standard)
- Hofbauer v. Northwestern National Bank of Rochester, 700 F.2d 1197 (8th Cir. 1983) (NFIA duties and private action not implied in federal statute)
- R.B.J. Apartments, Inc. v. Gate City Sav. & Loan Ass’n, 315 N.W.2d 284 (N.D. 1982) (NFIA does not create private right of action; state duty analysis)
- Small v. South Norwalk Savings Bank, 535 A.2d 1292 (Conn. 1988) (statutory negligence requires class membership and statute’s injury type)
- Wentwood Woodside I, LP v. GMAC Commercial Mortg. Corp., 419 F.3d 310 (5th Cir. 2005) (statutory purpose and enforcement mechanisms influence private remedies)