Legal Battle Highlights Distinction Between Insurance Agents and Federal Policy Regulations in Flood Insurance Case

A recent ruling by a Connecticut federal judge has underscored critical legal nuances in the relationship between insurance agents and federal policy regulations. This judicial decision emerged from the case of Gerald J. Candeloro v. Allstate Insurance Co., et al., spotlighting alleged negligence and professional malpractice by an Allstate insurance agent, Jason Garoppolo. The court permitted claims involving negligence, professional malpractice, and breach of contract to move forward, while dismissing allegations of breach of fiduciary duty, unfair insurance practices, and bad faith against the agent. The plaintiff, Gerald J. Candeloro, owns property in Mystic, Connecticut, for which he has continuously acquired FEMA flood insurance since 2000 through Allstate. The crux of the dispute lies in the lapsing of Candeloro's flood insurance policy, initially obtained on September 14, 2021, and which was set to expire on September 29, 2022. Despite repeated attempts by Candeloro to renew the policy from August to October 2022, failure to act in a timely manner led to the expiration of his insurance coverage. This resulted in the mortgage company acquiring temporary coverage at an additional cost to Candeloro, alongside other financial repercussions.

The litigation moved to federal court, with Garoppolo seeking dismissal of all counts save for breach of contract, citing the preclusion by federal law under the National Flood Insurance Act (NFIA) and FEMA’s Standard Flood Insurance Policy (SFIP) framework. However, U.S. District Judge Kari A. Dooley found the defense unpersuasive. Citing FEMA’s guidelines and a precedential Fifth Circuit ruling in Campo v. Allstate Ins. Co., the court determined that claims related to agent conduct in the procurement or renewal of flood insurance policies are not federally preempted. FEMA’s bulletins clarify that such disputes, distinct from those involving a Write-Your-Own (WYO) insurer, do not fall under federal jurisdiction. Consequently, the court rejected Garoppolo’s motion to dismiss based on federal preemption and allowed the state-law claims to proceed.

Further into the proceedings, the court addressed the merits of several claims separately. The claim of breach of fiduciary duty was dismissed, as Connecticut law does not recognize a fiduciary duty in standard commercial dealings between an insurance agent and client. There was no evidence indicating a relationship of exceptional trust that typically necessitates such legal obligations. The court also dismissed allegations of violations under the Connecticut Unfair Trade Practices Act (CUTPA) and the Connecticut Unfair Insurance Practices Act (CUIPA), due to a lack of specificity in the complaint regarding which legal provisions were violated. Attempts by Candeloro to bring new statutory references during briefings were disregarded as improper amendments post-complaint filing. Additionally, the claim of bad faith was dismissed owing to insufficient differentiation between agent actions and those of Allstate, alongside a lack of evidence showing dishonest intent or ill-will requisite for establishing bad faith under Connecticut law.

Ultimately, the remaining claims around negligence, professional malpractice, and breach of contract continue to unfold in the legal arena. This case accentuates the significant divide between legal responsibilities shouldered by insurance agents versus those by federally regulated entities under the NFIA. It punctuates the ongoing accountability of agents within the domain of state law when dealing with the procurement and renewal of flood insurance under federally influenced but not governed circumstances. The case is actively progressing in the United States District Court for the District of Connecticut, remaining a pivotal point of reference for the legal distinction between agents' operational duties and federal flood insurance policies. As flood insurance awareness broadens and premiums increase, such legal precedents will shape the landscape of accountability and practice in insurance acquisition.