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Houck v. State Farm Fire and Casualty Insurance Co.9/26/2005
Heard June 2, 2005
AFFIRMED
We certified this case from the Court of Appeals pursuant to Rule 204, SCACR. At issue is the liability of Respondent, State Farm Insurance Company, to Appellants, homeowners in Beaufort County (Homeowners), for allowing them to purchase Standard Flood Insurance Policies covering their homes, when Preferred Risk Policies were available for a lower cost. The circuit court granted summary judgment to State Farm, holding it was not liable to Homeowners. We affirm.
FACTS
Homeowners purchased flood insurance policies from State Farm for their homes in Beaufort County (on Hilton Head Island). State Farm issued the policies pursuant to the National Flood Insurance Program (NFIP), a program established by Congress in 1968 under the National Flood Insurance Act and administered by the Federal Emergency Management Agency (FEMA). 42 U.S.C. § 4001 et. seq. In 1983, FEMA promulgated regulations to allow private insurers, called Write-Your-Own insurance companies (WYO), to provide flood insurance under the NFIP. The policies issued are called Standard Flood Insurance Policies (SFIP's), and the terms, rates and costs of such policies are established by FEMA regulations. 44 CFR § 61 et seq. Although WYO companies write the flood insurance policies in their own names, coverage is actually provided by the federal government, with premiums being paid into the National Flood Insurance Fund in the United States Treasury.
State Farm issued SFIP policies to Homeowners through its agent John Mallet. Premiums for flood insurance policies are based upon the flood zone, coverage limits selected by the policy holder, and other risk factors specified in the NFIP manual. Under the NFIP, insureds may, if they meet certain criteria, qualify for a Preferred Risk Policy (PRP). Prior to 1995, coverage limits available under a Preferred Risk Policy were less than that available under SFIP policies. However, in 1995, the federal government increased the coverage limits available under the Preferred Risk Policies from a maximum of $25,000 for contents and $100,000 for buildings, to maximums of $60,000 for contents and $250,000 for the building. This increase in available limits made the PRP's an alternative for many homeowners who were previously not interested due to the low coverage.
Subsequent to the 1995 increase in coverages available under the PRP's, State Farm began inserting brochures into its renewal premium bills, advising insureds of the increased coverage limits available, as well as reduced premiums for Preferred Risk Policies for insured in Zones B, C, and X. Insureds were advised to contact their agents for information. According to the testimony of State Farm's coordinator of flood insurance, FEMA did not require the WYO's to notify insured of the increased coverage available under the Preferred Risk Policies.
Agent Mallet directly informed his clients about the availability of the Preferred Risk Policies if an insured scheduled a "family insurance check-up" or if insureds called with questions about their flood insurance coverage. Appellant, Jacqueline Houck, was notified of her eligibility for a Preferred Risk policy in 1999, after calling Mallet's office to inquire about a hurricane brochure sent by State Farm. Subsequent to speaking with Houck, Mallet increased his efforts to notify insureds in eligible zones of the availability of the PRP.
In June 2001, Homeowners instituted this action contending that from 1995 to the present, State Farm owed them a duty to advise and inform them of their eligibility for a PRP, and to sell them the less expensive policy. Its failure to do so, they asserted, was ne
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