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Harris v. Nationwide Mutual Fire Insurance Co.

United States District Court, M.D. Tennessee, Nashville Division

May 8, 2018

MICHAEL H. HARRIS and BEVERLY D. HARRIS, Plaintiffs,
v.
NATIONWIDE MUTUAL FIRE INS. CO., DAVID W. VANDENBERGH, FIRST AMERICAN FLOOD DATA SERVICES, FIRST AMERICAN CORPORATION, FIRST AMERICAN CORELOGIC, INC., REGIONS BANK, AMSOUTH BANK, N.A., GEORGE V. LOGAN and DOROTHY A. LOGAN, Defendants.

          MEMORANDUM AND ORDER

          ALETA A. TRAUGER, United States District Judge

         Pending before the court is a Motion for Leave to Amend (Docket No. 168), filed by the plaintiffs, Michael and Beverly Harris. Defendants Regions Financial Corporation and Regions Bank, as successor by merger to AmSouth Bank, N.A. (collectively “Regions”) have filed a Response in opposition (Docket No. 169), to which the plaintiffs have filed a Reply (Docket No. 173). Defendants CoreLogic Flood Services, LLC f/k/a First American Flood Data Services, First American Corporation, and First American CoreLogic, Inc. (collectively, “CoreLogic”)[1]

         have also filed a Response in opposition (Docket No. 170), to which the plaintiffs have filed a Reply (Docket No. 174). For the reasons discussed herein, the motion will be granted in part and denied in part.

         BACKGROUND & PROCEDURAL HISTORY

         On August 21, 2006, Michael and Beverly Harris purchased from George and Dorothy Logan a house on the Cumberland River. Pursuant to the National Flood Insurance Act of 1968, 42 U.S.C. 4001 et seq. (“NFIA”), buyers securing loans for houses in flood zones are required by lenders to purchase flood insurance. Flood zones are determined by the Federal Emergency Management Agency (“FEMA”) and demarcated on Flood Insurance Rate Maps (“FIRMs”). The Harrises had obtained a mortgage through Regions, and, prior to the closing on August 21, 2006, Regions contracted with CoreLogic, a flood certification company, to provide a flood zone determination for the house. The 1981 FIRM in place at the time showed that the house was in a flood zone. But CoreLogic incorrectly determined that the house was not in a flood zone and that flood insurance was thus not required. The Harrises did not purchase flood insurance.

         On September 20, 2006, a month after the closing, FEMA issued a revised FIRM. Regions informed the plaintiffs that, pursuant to the revised FIRM, their house was located in a flood zone and that they had forty-five days to secure flood insurance. The plaintiffs hired David Vandenbergh, an insurance agent, to obtain a policy, which he procured from Nationwide Mutual Fire Insurance Company (“Nationwide”). The Harrises were told that their house was a “pre-FIRM” property because it was built before the 1981 FIRM.[2] The practical effect of this determination was that the Harrises were not required, as a precondition to purchasing the policy, to obtain an elevation certificate showing that the house was sufficiently elevated above the base flood zone. In fact, the Harrises' house was built in 1984, making it a “post-FIRM” property that did require an elevation certificate, although the Harrises had no knowledge of this fact at the time of purchasing the flood insurance.

         In May 2010, a 1000-year flood struck Tennessee. The Harrises' house was filled with sixteen inches of water. The Harrises filed a claim under their policy with Nationwide but were told that their rating information was incomplete, because their house required an elevation certificate. An elevation analysis was conducted, and a flood adjuster determined that the bottom floor of the Harrises' home was not insured under the policy because it was situated below the base flood-zone elevation. As a result, Nationwide did not cover damages sustained to the bottom floor of the house, including damage to the Harrises' personal property therein.

         On May 2, 2011, the plaintiffs filed a Complaint in this court. (Docket No. 1.) CoreLogic filed a Motion to Dismiss (Docket No. 25), which was granted (Docket No. 54). The court held that the common law negligence claims against CoreLogic were precluded by the NFIA. Regions then filed its own Motion to Dismiss (Docket No. Docket No. 60), which also was granted. (Docket No. 80.)[3] On appeal, the Sixth Circuit reversed, issuing a narrow holding that the NFIA did not foreclose state common law claims, without ruling on the merits of the Harrises' claims. (Docket No. 174-1.) Upon remand, the case was assigned to the undersigned judge. On March 22, 2018, the Harrises filed a Motion for Leave to Amend Complaint, which is presently before the court. (Docket No. 168.)

         LEGAL STANDARD

         Federal Rule of Civil Procedure 15(a) governs amending pleadings before trial. A party may amend a pleading once as a matter of course within (a) twenty-one days after serving it, or (b) if the pleading is one to which a responsive pleading is required, twenty-one days after service of a responsive pleading or twenty-one days after service of a motion under Rule 12(b), (e) or (f), whichever is earlier. Fed.R.Civ.P. 15(a)(1). In all other cases, a party may only amend a pleading by obtaining the opposing party's written consent or receiving leave of the court. Fed.R.Civ.P. 15(a)(2). Where it is requested, “[t]he court should freely give leave when justice so requires.” Id.

         The district court has broad discretion to determine “when justice so requires.” Martin v. Assoc. Truck Lines, Inc., 801 F.2d 246, 248 (6th Cir. 1986). A motion to amend may be denied where there is “undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of amendment, etc.” Riverview Health Inst. LLC v. Med. Mut. of Ohio, 601 F.3d 505, 520 (6th Cir. 2010) (quoting Foman v. Davis, 371 U.S. 178, 182 (1962)). A proposed amendment is futile if the amendment could not withstand a Rule 12(b)(6) motion to dismiss or a Rule 12(c) motion for judgment on the pleadings. Rose v. Hartford Underwriters Ins. Co., 203 F.3d 417, 420 (6th Cir. 2000) (citing Thiokol Corp. v. Dept. of Treasury, State of Mich., Revenue Div., 987 F.2d 376, 382-83 (6th Cir. 1993)); see also Kottmyer v. Maas, 436 F.3d 684, 689 (6th Cir. 2006) (“A Rule 12(c) motion for judgment on the pleadings for failure to state a claim upon which relief can be granted is nearly identical to that employed under a Rule 12(b)(6) motion to dismiss.”). Stated differently, allowing an amendment that would subsequently be dismissed under a Rule 12(b)(6) motion or a Rule 12(c) motion for judgment on the pleadings does not serve the interests of justice.

         ANALYSIS

          1. Claims against CoreLogic

         The plaintiffs bring a claim of negligent misrepresentation under Tennessee law against CoreLogic. The thrust of their claim is that CoreLogic was negligent in its initial determination that the house was not in a flood zone, where flood insurance was required, and that they were damaged by CoreLogic's negligent determination because they would not have purchased the house, had they known it was in a flood zone.

         Tennessee has adopted Section 552 of the Restatement (Second) of Torts “as the guiding principle in negligent misrepresentation actions against other professionals and business persons.” Bethlehem Steel Corp. v. Ernst & Whinney, 822 S.W.2d 592, 595 (Tenn. 1991). The Tennessee Supreme Court, in discussing the requirements for recovery under Section 552, has held that liability for ...


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