                                                                                                                           Opinions of the United
2004 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


10-12-2004

CER 1988 Inc v. Aetna Cslty & Surety
Precedential or Non-Precedential: Precedential

Docket No. 03-2833




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                        PRECEDENTIAL     1131 King Street, Suite 204
                                         Christiansted, St. Croix
         UNITED STATES                   USVI, 00820-4971
        COURT OF APPEALS                        Attorneys for Appellee
      FOR THE THIRD CIRCUIT

                                               OPINION OF THE COURT
              No. 03-2833

                                         AM BRO, Circuit Judge
           C.E.R. 1988, INC.
                                                 We address in this appeal whether
                                         the National Flood Insurance Program (the
                   v.
                                         “Program”) is sufficiently comprehensive
                                         to preempt a state tort suit arising from
   THE AETNA CASUALTY AND
                                         conduct related to the Program’s
       SURETY COMPANY,
                                         administration. We conclude that the
                                         overarching purpose of the Program— to
                        Appellant
                                         provide affordable flood insurance in high-
                                         risk areas in order to reduce pressures on
                                         the federal fisc—would be compromised
          On Appeal from the
                                         by state court interference. Thus the
  District Court of the Virgin Islands
                                         plaintiff’s state law tort claims are
          Division of St. Croix
                                         preempted.
  D.C. Civil Action No. 97-cv-00065
   (Honorable Raymond L. Finch)             Factual and Procedural History
                                                The Program is administered by the
                                         Federal Emergency Management Agency
          Argued May 6, 2004
                                         (“FEMA”) pursuant to the National Flood
                                         Insurance Act of 1968 (“NFIA”), 42
Before: BARRY, AMBRO, and SMITH,
                                         U.S.C. § 4001, et seq. C.E.R. 1988, Inc.
           Circuit Judges
                                         (“C.E.R.”) seeks state law remedies for
                                         improper handling of the Program’s
   (Opinion filed: October 12, 2004)
                                         Standard Flood Insurance Policy (the
                                         “Policy”) issued in favor of C.E.R. by
Gerald J. Nielsen, Esquire (Argued)
                                         defendant Aetna Casualty and Surety
Suite 2850
                                         Company (“Aetna”). Aetna is a “Write-
3838 North Causeway Boulevard
                                         Your-Own” (“WYO”) insurance company,
Metairie, LA 70002
                                         meaning that it is a private insurer
       Attorney for Appellant
                                         authorized by FEMA to provide Policies in
                                         its own name. It collects premiums in
Francis J. D’Eramo, Esquire
                                         segregated accounts, from which it pays
Nancy V. Young, Esquire (Argued)
                                         claims and issues refunds. When the funds
Nichols, Newman, Logan & D’Eramo
                                         are inadequate (as frequently occurs),
Aetna pays claims by drawing on letters of         C.E.R.’s losses at $263,757.58.         In
credit issued by the United States                 February 1998 the parties settled C.E.R.’s
Treasury.                                          contract claims for $278,392.      Thus
                                                   only C.E.R.’s tort claims remain. They
         C.E.R. purchased a Policy from
                                                   allege negligent adjustment of C.E.R.’s
Aetna to cover Hamilton House, a property
                                                   insurance claim resulting in lost income
in St. Croix. In September 1995 the
                                                   and business opportunities, tortious bad
property was damaged by flooding during
                                                   faith conduct, and outrageous and reckless
Hurricane Marilyn. C.E.R. received an
                                                   conduct entitling C.E.R. to punitive
insurance payment of $200,000 as a result
                                                   damages. C.E.R. also seeks attorney’s fees
of damage to Hamilton House. One year
                                                   and costs.
later, in September 1996, the facility again
was damaged by flood waters, this time                    In January 2000, Aetna moved for
during Hurricane Hortense. C.E.R. filed a          summary judgment on these claims
claim for $716,916, but the receipts it            alleging, among other defenses, that
submitted in conjunction with the claim,           C.E.R.’s territorial law tort claims are
documenting repairs made since Hurricane           preempted by federal law. In April 2001,
Marilyn, totaled under $20,000.                    the District Court denied Aetna’s motion,
                                                   holding that the tort claims were not
       Given the disparity between the
                                                   preempted and that a genuine issue of
claim amount and the receipt totals, Aetna
                                                   material fact existed as to whether Aetna
required C.E.R. to submit a “Comparison
                                                   had acted in bad faith. Aetna filed a
Estimate” detailing when the relevant
                                                   motion for reconsideration of the
damage occurred.       The Comparison
                                                   preemption issue.      As an alternative
Estimate, prepared by an architect,
                                                   request for relief, it asked the District
reported new losses of $325,300.55
                                                   Court to certify the question for
resulting from Hurricane Hortense.
                                                   interlocutory appeal in accordance with 28
Nonetheless, Aetna’s adjustment company
                                                   U.S.C. § 1292(b). The District Court
refused to consider the estimate and
                                                   pursued that course. We granted Aetna’s
recommended payment in the amount of
                                                   petition for permission to appeal in May
$25,177.61, minus a $750 deductible.
                                                   2003.1
C.E.R. refused the settlement, and Aetna
closed its file on the claim, without                             Discussion
payment, in March 1997.
                                                         Our preemption analysis turns on
       In 1997 C.E.R. filed a seven-count          congressional intent. We must determine
complaint against Aetna, alleging contract
and tort causes of action, in the United
                                                     1
States District Court of the Virgin Islands.          Our standard of review is plenary. Van
Aetna subsequently hired a second                  Holt v. Liberty Mut. Fire Ins. Co., 163
adjustment company, which estimated                F.3d 161, 167 (3d Cir. 1998) (on
                                                   rehearing).

                                               2
whether the purposes of the Program will           coverage.
be jeopardized if disputes involving
                                                          In its early years, the Program was
federal flood insurance policies are
                                                   administered under what is known as “Part
governed by state law.2 Because we have
                                                   A” of the NFIA. A pool of private
examined this issue in a previous case,
                                                   insurance companies issued policies and
Van Holt v. Liberty Mutual Fire Insurance
                                                   shared the underwriting risk, with financial
Co., 163 F.3d 161 (3d Cir. 1998) (on
                                                   assistance from the federal Government.
rehearing), our role today is limited.
                                                   As of January 1, 1978, however, the
Although we left open in Van Holt the
                                                   Government bears full responsibility for
question of whether the NFIA preempts
                                                   the Program pursuant to 42 U.S.C. § 4071.
state law, id. at 169 n.6, our reasoning in
                                                   Under “Part B” of the NFIA, FEMA
that case leads us to answer in the
                                                   “carr[ies] out the program of flood
affirmative.
                                                   insurance authorized under [the NFIA]
      I. Overview of the National Flood            through the facilities of the Federal
Insurance Program                                  Government.” Id. The Program is funded
                                                   through the National Flood Insurance Fund
       Congress created the Program to
                                                   established by FEMA in the United States
provide standardized insurance coverage
                                                   Treasury.
for flood damage at or below actuarial
rates. Gowland v. Aetna, 143 F.3d 951,                     Congress authorized FEMA to
953 (5th Cir. 1998). Prior to its enactment,       “prescribe regulations establishing the
few insurance companies offered flood              general method or methods by which
insurance because private insurers were            proved and approved claims for losses may
unable profitably to underwrite flood              be adjusted and paid for any damage to or
policies. The Program was intended to              loss of property which is covered by flood
minimize costs to taxpayers by “limit[ing]         insurance.” 42 U.S.C. § 4019. The
the damage caused by flood disasters               resulting regulatory scheme is set out at 44
through prevention and protective                  C.F.R. §§ 61.1-78.14.      States have no
measures.” Van Holt, 163 F.3d at 165. It           regulatory control over the Program’s
is operated by FEMA and supported by the           operations.3 Linder & Assocs. Inc. v.
federal Treasury. Id. at 165 n.2. The
Program encompasses 4.5 million policies
aggregating $500 billion dollars of                   3
                                                        The insurance industry in the United
                                                   States operates in interstate commerce.
                                                   States may regulate the insurance industry
  2
    Because this decision is not specific to       only to the extent Congress permits. U.S.
the Virgin Islands, we discuss the tensions        Const. art. I, § 8, cl. 3. The McCarren-
between federal and state law rather than          Ferguson Act, 15 U.S.C. § 1011, et seq.,
territorial law. Our analysis, of course,          grants states this power except where
also extends to the latter.                        C o n g r ess enac ts legislatio n th a t

                                               3
Aetna Cas. & Sur. Co., 166 F.3d 547, 550           61.13(d) & (e), 62.23 (c) & (d). In
(3d Cir. 1999) (“It is well settled that           essence, the insurance companies serve as
federal common law governs the                     administrators for the federal program. It
interpretation of [Policies]. Accordingly,         is the Government, not the companies, that
neither the statutory nor decisional law of        pays the claims. And when a claimant
any particular state is applicable to the          sues for payment of a claim, “the
case at bar . . . . [W]e interpret the             responsibility for defending claims will be
[Policy] in accordance with its plain,             upon the Write Your Own Company and
u n a m b i g uous meaning, rem ainin g            defense costs will be part of the . . . claim
cognizant that its interpretation should be        expense allow anc e.” 4        44 C .F.R.
uniform throughout the country and that            § 62.23(i)(6).
coverage should not vary from state to
                                                          Our Court recently evaluated the
state.”) (quotations omitted).
                                                   NFIA in Van Holt. In light of the strong
       Pursuant to 42 U.S.C. § 4081(a),            federal interests intertwined with the
FEMA created the WYO program whereby               administration of the Program, we
Policies may be issued by private insurers         concluded that federal courts are the
like Aetna. Though FEMA may issue                  appropriate and exclusive arbiters of
Policies directly, more than 90% are               Policy-related disputes.
written by WYO companies.            These
                                                           As noted, Van Holt is markedly
private insurers may act as “fiscal agents
                                                   similar to today’s case. The plaintiff in
of the United States,” 42 U .S.C.
                                                   Van Holt filed successive claims with its
§ 4071(a)(1), but they are not general
                                                   WYO insurance provider, Liberty Mutual,
agents. Thus they must strictly enforce the
                                                   for flood damage.         Liberty Mutual
provisions set out by FEMA and may vary
                                                   concluded that the claims were fraudulent
the terms of a Policy only with the express
                                                   and refused to approve the damages
written consent of the Federal Insurance
                                                   claimed from the second flood. The Van
Administrator. 44 C.F.R. §§ 61.4(b),
                                                   Holts sued Liberty Mutual in the United
                                                   States District Court for the District of
                                                   New Jersey, alleging that it had committed
“specifically relates to the business of
                                                   state law torts. Our Court initially held
insurance.” 15 U.S.C. § 1012(b). In
                                                   that the District Court lacked subject
Barnett Bank of Marion County v. Nelson,
                                                   matter jurisdiction over the state law
517 U.S. 25 (1996), the Supreme Court
held that the exception for acts relating to
the business of insurance should be
                                                        4
construed broadly, noting that “[t]he word               42 U.S.C. § 4072 authorizes suit
‘relates’ is highly general.” Id. at 38.           against the FEMA Director upon the
W i t h o u t d o u b t t h e N FI A is            disallowance of a claim. By regulation,
c o n g r e ssionally-enacted legislatio n         the WYO company is sued in place of the
relating to the business of insurance.             FEMA Director.

                                               4
claims.    On rehearing, however, we               summary judgment to Liberty Mutual on
reversed path, concluding that the District        the merits. Id. at 168–69. Although the
Court had jurisdiction. 163 F.3d at 167.           issue was briefed, we declined to decide
                                                   whether the NFIA preempts state law
        Our decision turned on the collapse
                                                   claims related to an insurance contract. Id.
of two distinctions. First, we declined to
                                                   at 169 n.6.
distinguish between suits against FEMA,
over which jurisdiction plainly existed, and              That issue is back and squarely
suits against WYO companies. Though                before us today. We must determine
the language of the statute speaks                 whether the federal goals of uniform
explicitly only of suits against FEMA, we          affordable flood insurance and reduced
held that “a suit against a WYO company            aggregate pressure on the federal Treasury,
is the functional equivalent of a suit             which informed our decision in Van Holt,
against FEMA,” id. at 166, because a               counsel extension of our holding in that
WYO company is a fiscal agent of the               case to preclude interference with Policies
United States. 42 U.S.C. § 4071(a)(1).             not only by state courts, but also by state
Moreover, “FEM A regulations require a             law.5
WYO company to defend claims but
                                                          II. Preemption
assure that FEMA will reimburse the
WYO company for defense costs.” Van                        The reasoning of our decision in
Holt, 163 F.3d at 166 (citing 44 C.F.R.            Van Holt compels the conclusion that
§ 62.23(i)(6)). Second, we held that               state-law claims are preempted by the
district courts have original exclusive            NFIA. The uniformity touted in that
jurisdiction over cases arising from
improper handling of Policy claims even if
                                                      5
they “do[] not explicitly allege that [the              We note that the immediate effect of
WYO carrier] violated the insurance                our decision is limited, as a relevant Policy
policy contract.”      Id. at 167.       We        provision has since been changed. FEMA
emphasized that the causes of action in            National Flood Insurance Program, 65
that case, though they “sound[ed] in tort,”        Fed. Reg. 60,758, 60,767 (Oct. 12, 2000)
alleged “impropriety in the investigation          (codified at 44 C.F.R. pt. 61, app. A (1),
and adjustment of [the] insurance claim”           art. IX). A new regulation, which took
and therefore were “intimately related to          effect on December 31, 2000, amends an
the disallowance of the[] insurance claim.”        insured’s Policy to include language
Id. Put differently, we reasoned that a            providing that “all disputes arising from
claim may sound in tort but nonetheless be         the handling of any claim under the policy
one in contract.                                   are governed exclusively by the flood
                                                   insurance regulations issued by FEMA, the
       After concluding that federal
                                                   National Flood Insurance Act of 1968, as
jurisdiction was proper, we affirmed in
                                                   amended (42 U.S.C. § 4001, et seq.) and
Van Holt the District Court’s award of
                                                   Federal common law.” Id.

                                               5
decision would be seriously jeopardized if         Policy, no express provision existed.6
state tort claims were permitted to proceed,       Thus C.E.R.’s claims under review are not
even if those claims were resolved in              expressly preempted. See, e.g., Scherz v.
federal court. We reasoned there that              S.C. Ins. Co., 112 F. Supp. 2d 1000,
“Congress would want federal courts to             1004–05 (C.D. Cal. 2000); Spence v.
adjudicate disputes over federal flood             Omaha Indem. Ins. Co., 996 F.2d 793, 796
insurance policies for which the federal           n.20 (5th Cir. 1993).
government would be responsible.” Van
                                                           While a stronger case, we decline
Holt, 163 F.3d at 167. By the same token,
                                                   also to rely on field preemption. This form
Congress would want federal law to
                                                   of preemption exists if “federal law so
govern those disputes. And what Congress
                                                   thoroughly occupies a legislative field as
intends is the crux of our preemption
                                                   to make reasonable the inference that
analysis.
                                                   Congress left no room for the States to
       “ ‘ Cons i d e ra t i o n under t he        supplement it.”        Cipollone v. Ligget
Supremacy Clause starts with the basic             Group, Inc., 505 U.S. 504, 516 (1992)
assumption that Congress did not intend to         (internal quotations and citation omitted).
displace state law.’” Bldg. & Const.               The Fifth Circuit Court of Appeals opined
Trades Council of Metro. Dist. v. Assoc.           in the seminal case of West v. Harris, 573
Builders & Contractors of Mass./R.I., Inc.,
507 U.S. 218, 224 (1993) (quoting
                                                     6
Maryland v. Louisiana, 415 U.S. 725, 746               Arguably the Policy now contains such
(1981)). The Court may nonetheless                 a provision. The amended provision reads:
conclude that the Program preempts state           “This policy and all disputes arising from
law under one or more of three theories:           the handling of any claim under the policy
express preemption, field preemption               are governed exclusively by the flood
(sometimes referred to as “implied                 insurance regulations issued by FEMA, the
preemption”), and conflict preemption.             National Flood Insurance Act of 1968, as
Green v. Fund Asset Mgmt., L.P., 245 F.3d          amended (42 U.S.C. § 4001, et seq.), and
214, 222 (3d Cir. 2001). This case falls           Federal common law.” 44 C.F.R. pt. 61,
squarely within the third category.                app. A(1), art. IX (2002). The principal
                                                   differences between the current provision
       It is easy to glean that federal law
                                                   and its predecessor are the addition of the
expressly preempts state law when a
                                                   term “exclusively” and the express
statute or regulation contains explicit
                                                   inclusion of disputes arising from claims
language to that effect. Morales v. Trans
                                                   handling. Cf. 44 C.F.R. pt. 61, app. A(1),
World Airlines, Inc., 504 U.S. 374, 383
                                                   art. X (1985) (“This policy is governed by
(1992). But when C.E.R. purchased its
                                                   the flood insurance regulations issued by
                                                   FEMA, the National Flood Insurance Act
                                                   of 1968, as amended (42 U.S.C. § 4001, et.
                                                   seq.) and Federal common law.”).

                                               6
F.2d 873 (5th Cir. 1978), that “Congress              Court has urged caution in its application:
h a s u n d e r t a k e n to e s t a b li s h a       “[B]ecause the States are independent
comprehensive flood insurance program                 sovereigns in our federal system, we have
under the control of [FEMA] to achieve                long presumed that Congress does not
policies national in scope.” Id. at 881–82.           cavalierly pre-empt state-law causes of
While the case predates Part B of the                 action.” Medtronic, Inc. v. Lohr, 518 U.S.
statute, its reasoning is only more                   470, 485 (1996). A court will deem state
persuasive given the expansion of federal             law preempted only if that is the “clear and
involvement in the Program.7 But because              manifest purpose of Congress.”            Id.
conflict preemption is the narrower and,              (internal quotations and citation omitted).
we believe, clearer path, we do not decide
                                                              Thus the first step in determining
whether Congress has sought to occupy the
                                                      whether C.E.R.’s claims are preempted is
field of federal flood insurance.
                                                      to evaluate the statute and regulations for
       Conflict preemption, the final form,           evidence of congressional intent. We
occurs “when [1] it is impossible to                  begin by examining the first, narrower
comply with both the state and the federal            prong of conflict preemption: state law is
law, or [2] when the state law stands as an           preempted when it would be impossible
obstacle to the accomplishment and                    simultaneously to comply with state and
execution of the full purposes and                    federal law. In this context, we note that
objectives of Congress.” Green, 245 F.3d              the standards used to analyze ordinary
at 222 (citation omitted). Despite the                insurance claims differ from those applied
generality of this language, the Supreme              to Policy claims. In the realm of private
                                                      insurance, common law doctrines (such as
                                                      “reasonable           expectations,”
      7
        In West, the Court deemed the                 “notic e/preju dice,” and “su bstantial
plaintiff’s case preempted on this basis.             compliance”) govern the evaluation of
However, West “did not expressly address              claims. By contrast, a WYO insurer must
whether the NFIA preempts independent                 strictly follow the claims processing
state law tort claims; it only ruled on the           standards set out by the federal
availability of a state-based remedy for              Government.
what is directly justiciable under the
                                                             The important consequence is that
NFIA, i.e., a breach of contract claim.”
                                                      a WYO insurer may be unable to comply
Scherz, 112 F. Supp. 2d at 1006. The
                                                      both with state law and with the federal
holding in West encompassed only “the
                                                      guidelines that it is bound to follow. In
statutory penalty and attorney’s fees
                                                      these cases, state law is preempted. C.E.R.
allowed by state insurance law for
                                                      has not, however, alleged that Aetna
arbitrary denial of coverage.” West, 573
                                                      followed federal law in violation of a
F.2d at 881. More importantly, our Court
                                                      conflicting state law doctrine. On the
never adopted West’s rule before or after
                                                      contrary, it has argued that Aetna failed to
the statute was amended.

                                                  7
comply                  with    a   federal               refused to reimburse WYO carriers for
requirement—specifically, the requirement                 their defense costs, insurers would leave
t h a t “ t h e [ c ]o m p a n y ’ s [ c ] l ai m s       the Program, driving the price of insurance
[d]epartment verifies the correctness of the              higher. The alternative, remuneration for
coverage interpretations and                              losses incurred in such suits, would
r e a s o n a b l e n e s s of the p a y m e n ts         directly burden the federal Treasury.9
recommended by the adjusters.” 44 C.F.R.                  And, indeed, our decision in Van Holt
§ 62.23(i)(2).                                            relied on the belief that “FEMA
                                                          reimburses the WYO companies for their
         Accordingly, we rely instead on the
                                                          defense costs.” Van Holt, 163 F.3d at 165.
second variation of conflict preemption:
we conclude that the application of state                         Our understanding that expensive
tort law would impede Congress’s                          litigation will draw on federal funds is
objectives. Indisputably a central purpose                confirmed by FEMA’s regulations and
of the Program is to reduce fiscal pressure               policies interpreting and implementing the
on federal flood relief efforts. See, e.g.,               NFIA. Congress statutorily authorized
Till v. Unifirst Fed. Sav. & Loan Ass’n.,                 FEMA to enter into “arrangements” with
653 F.2d 152, 159 (5th Cir. 1981)                         private insurance companies. 42 U.S.C.
(“Clearly, the principal purpose in enacting              §§ 4071(a)(1), 4081(a). FEMA, in turn,
the Program w as to reduc e, by                           specified the terms of these Arrangements
implementation of adequate land use                       in the regulations governing the Program.
controls and flood insurance, the massive                 Among other things, the Arrangement in
burden on the federal fisc of the ever-                   effect when C.E.R. purchased its Policy
i n c reasing federal flood disaste r                     provided that FEMA could reimburse a
assistance.”). State tort suits against WYO               WYO company for “payments as a result
companies, which are usually expensive,                   of awards or judgments for punitive
undermine this goal.8 Allowing suits to                   damages arising under the scope of this
proceed, Aetna contends, results in one of                Arrangement and policies of flood
two consequences—both bad. If FEMA                        insurance issued pursuant to this


    8                                                      9
      To be sure, the federal Government                     Congress has authorized reimbursement
also has an interest in preventing fraud by               for “cost[s] incurred in the adjustment and
its insurers. But because a WYO insurer                   payment of any claims for losses.” 42
profits by paying a claim, the ordinary                   U.S.C. § 4017(d)(1). Moreover, pursuant
rationale for state tort law is largely                   to 44 C .F.R. § 62.23(i)(6), “the
inapplicable to the Program’s context.                    responsibility for defending claims will be
WYO insurers act as “fiduciary” or                        upon the Write Your Own Company and
“fiscal” agents of the United States. 42                  defense costs will be part of the
U.S.C. § 4071(a)(1). They receive a flat                  unallocated or allocated claim expense
3.3% commission on all claims paid.                       allowance . . . .”

                                                      8
Arrangement provided that prompt notice             Program, on balance, would better be
of any claim for punitive damages [was              served by requiring claimants to resolve
submitted].” 44 C.F.R. pt. 62, app. A, art.         their disputes by means of the remedies
III(D) (1985).     The Write-Your-Own               FEMA provides. 11
Claims Manual issued by FEMA to WYO
companies also provided explicitly that the
Government would reimburse a WYO                    44 C.F.R. pt. 62, app. A, art. III(D)(2)
company for punitive damages under                  specifies that FEMA will reimburse a
appropriate circumstances. FEMA, Write-             WYO company for “payments as a result
Your-Own Claims M anual 19 (1986 ed.).              of litigation [that arise] under the scope of
Thus it appears that FEMA ordinarily will           this Arrangement.” In other words, we see
be responsible financially for the costs of         no inconsistency in holding that FEMA
defending a lawsuit against a WYO                   envisioned that claimants could sue WYO
company. 10 The efficiency goals of the             insurers, but intended federal law to
                                                    govern those disputes.
                                                          11
                                                             This reasoning is bolstered by
       10
          Relying on these and similar              FEMA’s express statements to this Court
provisions, C.E.R. argues that FEMA                 in its amicus brief in Van Holt. While the
anticipated that WYO insurers would be              Van Holt amicus brief was produced in
sued under state law for actions arising            conjunction with litigation rather than a
from their administration of Policies. We           rulemaking, the Supreme Court has
reject C.E.R.’s approach because we see             deemed appellate briefs worthy of
no reason why litigation based on                   deference. Geier v. Am. Honda Motor
improper claims-handling must mean state            Co., 529 U.S. 861, 883-84 (2000) (“[T]he
law litigation. In fact, the updated Policy         agency’s own views should make a
set out at 44 C.F.R. pt. 61, app. A(1),             difference. We have no reason to suspect
indicates the contrary interpretation. In its       that the Solicitor General’s representation
current form, the Policy appears explicitly         of [the agency’s] views reflects anything
to preempt state law tort suits, 44 C.F.R.          other than ‘the agency’s fair and
pt. 61, app. A(1), art. IX (2002), but              considered judgment on the matter.’ The
nonetheless contemplates that lawsuits              failure of the Federal Register to address
against FEMA and WYO insurers may                   pre-emption is thus not determinative.”)
proceed. Article VII.R provides: “If you            (citation omitted). Cf. Horn v. Thoratec
[sue us], you must start the suit within one        Corp., 376 F.3d 163, 177 (3d Cir. 2004)
year of the date of the written denial of all       (“Our preemption conclusion is reenforced
or part of the claim, and you must file the         by the informed analysis found in the
suit in the United States District Court of         FDA’s amicus curiae brief.”). FEMA’s
the district in which the insured property          amicus brief in Van Holt principally
was located at the time of loss.” 44 C.F.R.         addressed the disruption to the Program
pt. 61, app. A(2), art. VII(R). Moreover,           that would result from concurrent

                                                9
       This analysis is consistent with the           reach the same result by a straighter
decisions of other courts.12 But we can               path—we can simply extrapolate from our
                                                      decision in Van Holt. The reasoning
                                                      proceeds as follows. First, no one disputes
jurisdiction, but it also noted the                   that federal law preempts state contract
importance of uniformity in the law. Brief            law with respect to the interpretation of
for FEMA at 8–9, Van Holt (No.                        Policy language. Linder & Assocs. Inc. v.
97-5098), available at 1998 WL                        Aetna Cas. & Sur. Co., 166 F.3d 547, 550
34104122 (“Under the Panel’s reasoning,               (3d Cir. 1999) (“It is well settled that
the 50 States would become co-                        federal common law governs the
administrators of the program along with              interpretation of [Policies].”). We need
FEMA, a result Congress plainly did not               make only one logical step to extend this
intend when it enacted § 4019 vesting                 rule to the case at hand—namely, we must
such administrative power in FEMA, and                hold that a tort claim of the kind alleged by
when it specifically amended § 4072 to                C.E.R. is equivalent to a contractual claim
make federal jurisdiction exclusive . . . .”).        that turns on the interpretation of a Policy.
                                                      That step we have already taken. Van Holt
  12                                                  held that a state claim “sounding in tort”
    The vast majority of courts have found
                                                      but “intimately related to the disallowance
that the NFIA preempts state law. Gibson
                                                      of [an] insurance claim” is essentially a
v. Am. Bankers Ins. Co., 289 F.3d 943, 949
                                                      contractual claim and therefore within the
(6th Cir. 2002) (“[M]ost courts have
                                                      exclusive jurisdiction of the federal
consistently found that NFIA preempts
                                                      courts.13 163 F.3d at 167.
state law claims that are based on the
handling and disposition of [Policy]
claims.”). The most notable exception is
                                                        13
Spence v. Omaha Indem. Ins., 996 F.2d                     We do not consider Aetna’s argument
793 (5th Cir. 1993). That case, however,              that enforcement of a tort judgment against
arose from misrepresentation in the                   a WYO company would violate the
procurement of a Policy. Our case, by                 Appropriations Clause of the United States
contrast, involves misrepresentation in the           Constitution, art. I, § 9, cl. 7, because it
adjustment of a claim made under a Policy.            would burden a program enacted and
Several courts have distinguished Spence              funded by Congress. Courts ordinarily
on this basis. See, e.g., Messa v. Omaha              should not pass on constitutional questions
Prop. & Cas. Ins. Co., 122 F. Supp. 2d                when a decision may be reached on non-
513, 521 (D.N .J. 2000 ) (“Po licy                    constitutional grounds. Escambia County
procurement is an entirely different                  v. McMillan, 466 U.S. 48, 51 (1984).
creature than claims handling”). We need              While preemption derives from the
not decide today whether a case alleging              Supremacy Clause and thus is formally a
misrepresentation in claims procurement               “constitutional question,” Chi. & N.W.
would also be preempted.                              Transp. Co. v. Kalo Brick & Tile Co., 450

                                                 10
                                                                    Conclusion
U.S. 311, 317 (1981), “the basic question
                                                            We conclude that C.E.R.’s claims,
involved in [preemption claims] is never
                                                     based on territorial tort law, are
one of interpretation of the Federal
                                                     incompatible with the objectives of the
Constitution but inevitably one of
                                                     NFIA and therefore are preempted. We
comparing two statutes.” Swift & Co. v.
                                                     thus reverse the District Court’s denial of
Wickham, 382 U.S. 111, 120 (1965). Thus
                                                     summary judgment to Aetna and remand
we treat preemption as “‘statutory’ for
                                                     to the Court to dismiss with prejudice
purposes of our practice of deciding
                                                     C.E.R.’s tort claims.
statutory claims first to avoid unnecessary
constitutional adjudications.”          N.J.
Payphone Ass’n v. Town of West New
York, 299 F.3d 235, 239 n.2 (3d Cir. 2002)
(quoting Douglas v. Seacoast Prods., Inc.,
431 U.S. 265, 272 (1977)).
       No similar exception applies to the
Appropriations Clause, which— though it
may entail analysis of a statute—is an
unsettled area of constitutional law. See,
e.g., Maryland Dep’t of Human Res. v.
United States Dep’t of Agric., 976 F.2d
1462, 1485–86 (4th Cir. 1992) (Hall, J.,
dissenting)(“[C]onstitutional questions
will not be decided unless absolutely
necessary to a decision of the case . . . .
The majority offers no reason why this
prudential constraint should be ignored in
the case before us. Indeed, although I
express no opinion on the merits of the
majority’s analysis of the Appropriations
Clause, it appears to me that this area of
the law is far from settled. The uncertainty
surrounding the issue counsels even
greater restraint.”) (quotations omitted). In
deciding preemption, we look principally
to the text of the statute and to                    decision for Aetna based on the
congressional intent. By contrast, the               Appropriations Clause would create new
boundaries of Appropriations Clause                  law; our preemption decision applies
analysis are as yet undeveloped.           A         existing law to a regulatory framework.

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