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Click here for the full text of this decision FACTS:The Gallups purchased a Standard Flood Insurance Policy from Omaha Property and Casualty Co. for their home in Covington, La. The SFIP was issued under Federal Emergency Management Agency rules governing the National Flood Insurance Program. Omaha was a “write your own” insurer, meaning it could issue SFIPs in their own names and arrange for the adjustment, settlement, payment and defense of all claims arising from the policies. In 2000, FEMA proposed an amendment to the SFIP, which added a provision stating that all disputes arising from the handling of any claim under the policy were to be governed exclusively by the flood insurance regulations issued by FEMA, the National Flood Insurance Act of 1968 and federal common law. The Gallups’ home was flooded on Dec. 24, 2002. After inspection by an architect and an engineer, the Gallups filed a proof of loss claim with Omaha for $210,000, the replacement value of their home. Omaha inspected the home and determined the claim was only worth $9,000, which is what the company paid. Tropical Storm Bill flooded the Gallups’ home again in June 2003. The Gallups filed a claim for $209,000 with Omaha. Omaha denied the claim after attempts to settle for a minimal amount failed. The Gallups sued for breach of contract, breach of the duty of good faith and fair dealing, common-law bad faith, and statutory bad-faith under Louisiana law. All claims related to both the 2002 and the 2003 floods. Upon Omaha’s motion to dismiss, the district court examined the case as one asking whether FEMA was authorized to issue the flood-insurance regulations in its grant of authority from Congress. The district court determined that FEMA was not authorized to preempt state laws on extra-contractual claims against insurers. The district court denied Omaha’s motion to dismiss. HOLDING:Reversed and remanded. The court finds its holding in Wright v. Allstate Ins. Co., 415 F.3d 384 (5th Cir. 2005), governs this case. In Wright, the court held that Spence v. Omaha Indemnity Ins. Co., 996 F.2d 793 (5th Cir. 1993), did not support the conclusion that state law tort claims are not preempted by the NFIA. “[T]he issue of whether the NFIA preempted state law tort claims was not before the court in Spence, and the court did not address it. . . . We held in Wright that”state law tort claims arising from claims handling by a WYO are preempted by federal law.’ . . . The case does not rely on the 2000 regulation at issue in this case, but notes that”[w]hile no circuit has yet addressed whether this amendment is effective as an express preemption of state law claims, it can obviously be so argued.’ . . . Wright also observed that two other circuits have held that federal law preempts state law tort claims based on a WYO’s handling of an insurance claim[.]“ The court thus holds that state law tort claims arising from claims handling by a WYO are preempted by the NFIA. It “necessarily follows,” the court continues, that the NFIA gives FEMA authority to promulgate regulations to that effect. OPINION:Davis, J.; Davis, Smith and Dennis, JJ.

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