# Nguyen v. Hartford Underwriters Insurance Company

> District Court, M.D. Louisiana · January 21, 2021

URL: https://www.frixlaw.com/law-library/cases/10191683

## Case

- **Court:** District Court, M.D. Louisiana
- **Decided:** January 21, 2021
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10191683

## How later opinions describe it (automated extraction)

- explaining “that statutes that are in pari materia may be construed together, so that inconsistencies in one statute may be resolved by looking at another statute on the same subject.”

## Opinion text

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA

KATHLEEN NGUYEN CIVIL ACTION
VERSUS
HARTFORD UNDERWRITERS NO. 17-01351-BAJ-SDJ
INSURANCE COMPANY, ET AL.

RULING AND ORDER
Before the Court is Plaintiff’s Motion for Partial Summary Judgment
(Doc. 20). Defendant opposes the Motion (Doc. 27), and Plaintiff has submitted a
reply to Defendant’s opposition, (Doc. 29). On January 13, 2021, the parties presented
oral argument, after which the Court took the matter under advisement.
For the reasons stated herein, Plaintiff’s Motion is GRANTED.
I. RELEVANT BACKGROUND
A. Overview
This is a flood insurance dispute, one of many in this District flowing from the
historic Baton Rouge flood of August 2016. Defendant is an authorized insurer
participating in the National Flood Insurance Program’s (NFIP) Write-Your-Own
(WYO) Program. Plaintiff is the insured, having purchased a Standard Flood
Insurance Policy (SFIP) from Defendant in March 2017. At issue is whether
Defendant must pay to replace Plaintiff’s exterior wall sheathing after it contacted
floodwater.
Exterior sheathing is building material that is nailed or screwed to the exterior
frame of a house—essentially, the home’s external shell. It comes in different forms—
some more resistant to water damage than others—and rarely attracts attention
because typically it is covered from view with siding or some other exterior wall finish.
Here, however, sheathing takes centerstage due to a disagreement regarding

what proof of loss is required before a flood insurer must pay to replace it. Plaintiff
insists that the SFIP and applicable Federal Emergency Management Agency
(FEMA) guidelines establish that certain types of sheathing—including hers—are
irretrievably damaged upon proof of “mere contact with floodwater.” Defendant
responds that regardless of type, an insurer must only replace sheathing after the
insured proves “evidence of physical change,” which, in Defendant’s view, means
obvious and apparent damage attributable to floodwater. The question ultimately

boils down to contract interpretation, and whether the Court may reference the NFIP
Claims Manual—a FEMA publication expressly intended “to improve clarity of claims
guidance to WYOs … so that policyholders experience consistent and reliable service,”
(Doc. 20-4 at 9)—when determining the scope of coverage under the SFIP.
B. Summary Judgment Evidence
The facts are undisputed. Defendant issued Plaintiff a SFIP (No.
87042037882016) protecting Plaintiff’s home, with policy limits of $250,000 for

building coverage, subject to a $1,250 deductible. On August 16, 2016, during the
policy period, Plaintiff reported a loss to her home due to the historic floods that
devastated large swaths of East Baton Rouge Parish and surrounding parishes.
Defendant acknowledged Plaintiff’s claim and assigned it to an independent adjuster.
On August 20, 2016, the adjuster inspected and photographed Plaintiff’s
property, documenting that Plaintiff’s home was inundated with more than two feet
of floodwater for multiple days. At the time of the inspection, Plaintiff had already
begun removing interior baseboards, drywall, and insulation, including from the
perimeter walls, allowing the adjuster to observe and photograph Plaintiff’s exterior

sheathing. Notably, Plaintiff’s sheathing is “Class 1” fiberboard,1 which, according to
FEMA’s guidance, puts it among building materials that can only be “used in spaces
with conditions of complete dryness.” (Doc. 20-15 at 6, 9). According to FEMA, Class
1 fiberboard is “[n]ot resistant” to water or moisture of any kind, and expressly
“cannot survive the wetting and drying associated with floods.” (Id.).2 Nonetheless,
the adjustor’s report does not indicate any delamination, swelling, crumbling, or other
evidence of obvious and apparent physical damage to Plaintiff’s fiberboard sheathing.

Based on her inspection, the adjuster estimated the replacement cost value
(RCV) of damages to Plaintiff’s home at $113,289.63. On November 17, 2016,
Defendant reviewed and verified the adjuster’s report and approved payment in the
amount of $113,289.63. This initial payment did not include reimbursement for
sheathing.
On July 21, 2017, Plaintiff submitted a supplemental Proof of Loss seeking

payment of the $250,000 policy limit, supported by a 45-page, line-by-line estimate
showing a RCV of $289,016.02. Among Plaintiff’s line-items are six entries

1 The NFIP Claims Manual and FEMA Technical Bulletin 2 (“TB2”)—each of which will be
discussed more fully below—clarify that fiberboard comes in two classes: Class 1 and Class
2. (See Doc. 20-4 at 12; Doc. 20-15 at 6, 9).
2 In contrast, Class 2 fiberboard is slightly more versatile than Class 1 fiberboard due to its
external coating, and may be “used in predominately dry spaces that may be subject to
occasional water vapor and/or slight seepage.” (Doc. 20-15 at 6, 9). Still, however, Class 2
fiberboard also “cannot survive the wetting and drying associated with floods.” (Id.).
corresponding to removal and replacement of exterior sheathing, at a total cost of
$4,823.10. (See Doc. 27-13 at pp. 2, 39, 41). Plaintiff’s July 21 Proof of Loss did not
provide any additional evidence of physical damage to the exterior sheathing.

On September 3, 2017, Defendant denied Plaintiff’s claim for additional
payment, citing “no documentation to support any further payment.” (Doc. 20-13 at
p. 1). Defendant concedes that, to this day, it has never reimbursed Plaintiff for
sheathing, and Plaintiff has not made any repairs to the sheathing at issue. (Doc. 28
at ¶¶ 9-10).
C. Procedural History
On October 24, 2017, Plaintiff filed this action, alleging breach of contract

based on Defendant’s denial of her claim for payment of the policy limit. (Doc. 1).
On March 6, 2018, Defendant filed its Answer. Notably, among its Affirmative
Defenses, Defendant cites the NFIP Claims Manual and applicable FEMA guidance
bulletins multiple times. Defendant’s Answer states in no uncertain terms that the
Claims Manual “governs claim adjustment aspects of Plaintiff’s SFIP,” and that
Defendant “shall abide by” FEMA Bulletins:
FEMA BULLETINS: Per the Arrangement (Arts. I(5) and (6), II(A)(2)
and (G)), Foremost shall abide by written guidance published by FEMA.
See, https://nfip-iservice.com/nfip_docs.html.
…
FEMA ADJUSTER CLAIMS MANUAL: Foremost asserts that the
FEMA Adjuster Claims Manual, promulgated by FEMA under authority
of the U.S. Congress, governs claim adjustment aspects of Plaintiff’s
SFIP. See, https://www.fema.gov/media-library/assets/documents/2675.
(Doc. 11 at 17).
Additionally, Defendant’s Answer expressly concedes that these materials
must be read in pari materia with the SFIP:
The question of whether the Insured is entitled to additional sums under
the SFIP, and if so, how much, is strictly governed by the policy’s
Declarations Page, and all of the policy’s terms and conditions as
contained in the SFIP at 44 C.F.R. Pt. 61, App. A(1), in pari materia
with all applicable provisions of the Code of Federal Regulations, the
NFIA itself and FEMA’s regulations, Bulletins, and Claims Manual.
(Doc. 11 at 8).
On September 18, 2020, Plaintiff filed the instant Motion for Partial Summary
Judgment. (Doc. 20). Plaintiff’s Motion focuses solely on exterior sheathing and seeks
judgment on two issues: first, that she is entitled to reimbursement of the cost of
replacing her sheathing based exclusively upon proof that floodwater contacted the
sheathing; and second, that Defendant improperly denied her claim to additional
reimbursement based on her failure to submit proof of how she spent her initial
payment. As to each issue, Plaintiff argues that the SFIP is ambiguous, and that the
NFIP Claims Manual clears up the confusion, establishing that fiberboard sheathing
is compensable upon proof of “mere contact with floodwater,” (Doc. 20-2 at p. 15), and
that an insured “who has not completed repairs and is requesting additional payment
is not required to prove how they spent funds previously paid on the same claim.” (Id.
at p. 18).
Defendant objects, and disagrees with Plaintiff’s interpretation of the SFIP.

Initially, Defendant raises two procedural objections: first, that Plaintiff seeks an
impermissible “advisory opinion”; or, alternatively, that Plaintiff lacks standing to
compel Defendant to comply with the terms set forth in the Claims Manual. (Doc. 27
at pp. 4-9). Next, Defendant insists that even if the Court reaches the merits,
Plaintiff’s arguments fail because the SFIP unambiguously requires “evidence of
physical change” to Plaintiff’s sheathing before it is compensable—i.e., obvious and

apparent “physical damage.” (Id. at 23). Defendant asserts that Plaintiff has failed to
provide any such evidence, and therefore must lose. (Id. at 31).
The Court addresses the parties’ arguments below, beginning with
Defendant’s procedural objections.
II. LAW AND ANALYSIS
A. Procedural Objections
1. Plaintiff does not seek an advisory opinion
Off the top, Defendant insists that Plaintiff’s Motion should be denied as an

inappropriate demand for an advisory opinion. (Doc. 27 at pp. 4-6). In support,
Defendant cites cases where courts declined to resolve insurance disputes predicated
on assumptions or hypothetical future events.3 (Id.). Plaintiff responds that
Defendant’s authorities are easily distinguishable because the dispute here is not
hypothetical: “[Plaintiff’s] sheathing is damaged according to FEMA guidance, and

3 Specifically, Defendant cites two cases: Tribute Real Estate, LLC v. United Artist Theatre
Circuit, Inc., No. 10-cv-106-JJB, 2012 WL 1590042, at *1 (M.D. La. May 4, 2012), and
Paragon Asset Co. Ltd v. Gulf Copper & Mfg. Corp., No. 17-cv-00203, 2020 WL 1892953, at
*1 (S.D. Tex. Feb. 11, 2020). Tribute Real Estate rejected the plaintiff’s request for a judgment
interpreting an insurance policy based on a hypothetical future loss. 2012 WL 1590042, at *1
(declining to issue declaration that “in the event of a covered loss,” Defendant would be
obligated to make a claim under the insurance policy and to contribute the insurance
proceeds towards the cost of repairs). Paragon Asset Company rejected a limitation plaintiff’s
attempt to cap its liability based on an assumption that the damages at issue related to “scrap
assets” incapable of being repaired. 2020 WL 1892953, at *1. In each case, the court
determined that the plaintiff’s proposed relief amounted to an impermissible advisory
opinion.
whether … the NFIP Claims Manual applies to [her] claim for damaged sheathing is
ripe for consideration.” (Doc. 29 at p. 6).
To be sure, the Court lacks authority to “render an advisory opinion on

hypothetical or abstract facts.” Hodgson v. H. Morgan Daniel Seafoods, Inc., 433 F.2d
918, 920 (5th Cir. 1970). This rule “ensure[s] that federal courts determine specific
disputes between parties, rather than hypothetical legal questions, and in doing so,
conserve judicial resources.” Texas v. Travis Cty., 272 F. Supp. 3d 973, 980 (W.D. Tex.
2017) (citing Flast v. Cohen, 392 U.S. 83, 96-97 (1968)), aff'd, 910 F.3d 809 (5th Cir.
2018). Here, however, Plaintiff’s claim is plainly not hypothetical. The uncontroverted
facts establish that she is insured against flood damage according to the terms of the

SFIP issued by Defendant; her home was flooded in August 2016, during the policy
period; floodwater contacted Plaintiff’s exterior fiberboard sheathing but did not
cause observable damage; Defendant’s original November 17, 2016 payment did not
include reimbursement for sheathing; Plaintiff’s July 21, 2017 supplemental Proof of
Loss specifically requested reimbursement for sheathing (to the tune of $4,823.10);
and Defendant has subsequently denied Plaintiff’s request for additional payment

based on Plaintiff’s failure to show how she spent her prior payment.
The issue at hand is whether, based on these concrete facts, the SFIP allows
Plaintiff to recover the cost of her sheathing. Resolving this issue requires weighing
competing interpretations of the SFIP only, not consideration of any hypotheticals or
assumptions. On this record, the Court may not avoid its duty to decide the issue at
hand. See Comer v. Murphy Oil USA, 607 F.3d 1049, 1060–61 (5th Cir. 2010) (Dennis,
J., dissenting) (“Just as courts have an ‘absolute duty ... to hear and decide cases
within their jurisdiction,’ litigants have a corresponding due process right to have
their cases decided when they are properly before the federal courts.” (quoting United

States v. Will, 449 U.S. 200, 215 (1980)).4
2. Plaintiff has standing and does not seek to enforce FEMA’s
rights under the Arrangement
Next, Defendant asserts that Plaintiff lacks “standing” to pursue her summary
judgment motion, or, alternatively, lacks authority “to stand in FEMA’s shoes to
enforce provisions of the NFIP Claims Manual.” (Doc. 27 at p. 8). Defendant reasons
(1) its obligations as a WYO Program carrier—including its obligations to follow the
Claims Manual—are governed by its authorizing contract with FEMA (the
“Arrangement”); (2) Defendant and FEMA are the only parties to the Arrangement,
and the only parties capable of enforcing its obligations; and, therefore, (3) Plaintiff
cannot complain that Defendant has failed to reimburse the cost of her sheathing

according to the Claims Manual’s guidance. (Doc. 27 at 12-14). Plaintiff counters that
she is not attempting to enforce Defendant’s obligations under the Arrangement—
but merely seeks to recover losses attributable to Defendant’s alleged breach of the
SFIP—and that she references the Claims Manual and FEMA Bulletins because

4 Strangely, Defendant also contends that Plaintiff’s Motion amounts to “piecemeal
litigation.” (See Doc. 27 at p. 11). There is no plausible basis for this contention, and nothing
objectionable about Plaintiff’s request for judgment is featured here. Rule 56 expressly
permits Plaintiff to seek summary judgment on any “part” of her claim; Plaintiff’s Motion is
her first (and only) motion for summary judgment; and a judgment on the merits will
materially advance the litigation. See Louisiana CNI, L.L.C. v. Landmark Ins. Co., No. CV
06-112-JJB, 2007 WL 9706513, at *5 (M.D. La. July 31, 2007) (“Courts routinely enter partial
summary judgments.”).
these materials are intended to be read in conjunction with the SFIP when
determining compensable loss. (Doc. 29 at 7-8).
Here, again, Defendant’s objections miss the mark. First, Article III standing

is obviously satisfied when, as here, Plaintiff complains that she is owed additional
money under the SFIP, which Defendant has failed to pay due to an alleged breach,
and a favorable decision will redress Plaintiff’s alleged loss. See Cibolo Waste, Inc. v.
City of San Antonio, 718 F.3d 469, 473 (5th Cir. 2013) (“Article III standing requires
a plaintiff to show: (1) an injury in fact (2) that is fairly traceable to the actions of the
defendant and (3) that likely will be redressed by a favorable decision.” (quotation
marks omitted)).

Likewise, the Court is unpersuaded that Plaintiff is seeking to enforce FEMA’s
rights under the Arrangement simply because she references the Claims Manual in
support of her interpretation of the SFIP.5 Plaintiff’s complaint asserts just one claim:

5 Again, Defendant relies on inapposite authorities to support its argument that “Plaintiff is
asking the Court to create a ‘right of action’ to stand in FEMA’s shoes to enforce provisions
of the NFIP Claims Manual.” (Doc. 27 at 13). Defendant quotes extensively from Eodice v.
Selective Ins. Co. of Am., No. 08-cv-151, 2010 WL 11693193 (D.N.J. Feb. 8, 2010), where the
U.S. District Court for the District of New Jersey rejected the plaintiff’s attempt to pursue
an extra-contractual claim of “bad faith” based exclusively on the insurer’s conduct outside
the scope of its obligations under the SFIP. Id. at *6. Observing that the plaintiff failed to
provide any authority “for the proposition that an insured may bring an action for damages
premised solely on a WYO insurer's failure to adhere to the requirements of the Arrangement
that governs the relationship between FEMA and WYO insurers,” the Court refused “to infer
a private right of action for them to enforce the terms of the Arrangement against a WYO
insurer.” Id. (Notably, in Eodice, the plaintiff’s breach of contract claim failed at summary
judgment because Plaintiff did not satisfy the SFIP’s mandatory preconditions for filing suit.
No such impediment exists here).
Eodice, and Defendant’s additional authorities, stand for the basic proposition that
SFIP policy-holders generally may not pursue extra-contractual claims arising from a WYO
insurer’s handling of a flood claim under a SFIP. See id.; see also Psychiatric Sols., Inc. v. Fid.
Nat'l Prop. & Cas. Ins. Co., 652 F. App'x 122, 125 (3d Cir. 2016); Gunter v. Farmers Ins. Co.,
736 F.3d 768, 773 (8th Cir. 2013); Wright v. Allstate Ins. Co., 500 F.3d 390, 394 (5th Cir.
breach of the SFIP based on Defendant’s failure to pay “damages directly caused to
the Property by or from the Flood.” (Doc. 1 at ¶ 33). Plaintiff’s summary judgment
motion focuses on one part of that claim: Defendant’s failure to reimburse for

sheathing. Unquestionably, Plaintiff may pursue her breach of contract claim against
Defendant. Gunter v. Farmers Ins. Co., 736 F.3d 768, 773 (8th Cir. 2013) (“The NFIP
specifically allows a policyholder to sue a WYO insurer for breach of contract[.]”
(citing 42 U.S.C. §§ 4053, 4072)).
Further, it is entirely appropriate (indeed, mandatory) for Plaintiff to support
her interpretation of the SFIP with reference to the Claims Manual. FEMA’s
regulations dictate the terms and conditions of the SFIP, and the same regulations

incorporate the Claims Manual by reference. White Hall on MS River, LLC v.
Hartford Ins. Co. of the Midwest, No. 13-cv-218, 2015 WL 1540436, at *2 (S.D. Miss.
Apr. 7, 2015) (“The FEMA Claims Manual … is incorporated by reference into the
FEMA regulations.” (quoting Suopys v. Omaha Prop. & Cas., 404 F.3d 805, 811 (3d
Cir. 2005)). Thus, not surprisingly, Courts read the SFIP in pari materia with the
Claims Manual to resolve coverage disputes. E.g., Westmoreland v. Fid. Nat. Indem.

Ins. Co., No. 13-cv-564, 2015 WL 3456634, at *3 (M.D. La. May 29, 2015) (deGravelles,
J.) (reading the Claims Manual in pari materia with the SFIP to resolve scope of

2007); Scritchfield v. Mut. of Omaha Ins. Co., 341 F. Supp. 2d 675, 678 (E.D. Tex. 2004); Lopez
v. State Farm Gen. Ins. Co., No. 13-cv-6029, 2014 WL 3894647, at *5 (E.D. La. Aug. 8, 2014);
Fisher v. Beers, No. 13-cv-6632, 2014 WL 3497572, at *2 (E.D. La. July 14, 2014); Howell-
Douglas v. Fid. Nat. Indem. Ins. Co., 24 F. Supp. 3d 579, 580 (E.D. La. 2014); Dickerson v.
State Farm Fire & Cas. Co., No. 06-cv-5181, 2007 WL 1537631, at *2 (E.D. La. May 23, 2007).
A different situation altogether is presented here, where Plaintiff is pursuing a standard
breach of contract claim based on the obligations set forth in the SFIP.
coverage dispute); Davis v. Nationwide Mut. Fire Ins. Co., 811 F. Supp. 2d 1240, 1248
n.8 (E.D. Va. 2011) (referencing the Claims Manual to clarify the SFIP’s definition of
“Post–FIRM Building”).

Additionally, it is beyond strange to ignore the Claims Manual and relevant
FEMA Bulletins when, as here, the Defendant specifically invokes these materials as
affirmative defenses to Plaintiff’s claim to additional payment, stating that the Claims
Manual “governs claim adjustment aspects of Plaintiff’s SFIP,” that Defendant “shall
abide by” FEMA Bulletins, and that coverage under the SFIP is determined “by the
policy’s Declarations Page, and all of the policy’s terms and conditions as contained
in the SFIP … , in pari materia with all applicable provisions of the Code of Federal

Regulations, the NFIA itself and FEMA’s regulations, Bulletins, and Claims
Manual.” (Doc. 11 at 8, 17).6
B. Merits
To recall, Plaintiff seeks summary judgment on two issues: first, that she is
entitled to reimbursement of the cost of replacing her sheathing based exclusively
upon proof that floodwater contacted the sheathing; and second, that Defendant

6 At oral argument, the Court questioned Defendant regarding its obvious change of position
since filing its Answer. Counsel responded that Defendant’s positions were not contradictory
because Defendant did not anticipate this particular dispute when it filed its Answer. This
explanation is hardly convincing. Rather, it appears Defendant invokes the Claims Manual
and FEMA Bulletins when beneficial or convenient, but objects when Plaintiff does the same.
Defendant is reminded that in the law, as in life, “what is sauce for the goose is normally
sauce for the gander.” Heffernan v. City of Paterson, N.J., 136 S. Ct. 1412, 1418 (2016). Here,
the Court determines that the normal goose/gander rule applies, and that these materials
inform its analysis of Plaintiff’s claim to additional compensation, just as they would inform
the Court’s analysis of Defendant’s defenses against such a claim.
improperly denied her claim to additional reimbursement based on her failure to
submit proof of how she spent her initial payment.. Each issue requires an
interpretation of the SFIP.

1. Summary Judgment Standard
The Court may grant summary judgment only “if the movant shows that there
is no genuine dispute as to any material fact and the movant is entitled to judgment
as a matter of law.” Fed. R. Civ. P. 56(a). If the movant bears its burden of showing
that there is no genuine issue of fact, the nonmoving party “must do more than simply
show that there is some metaphysical doubt as to the material facts.” Matsushita
Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). In other words, the

nonmovant must identify “specific facts showing that there is a genuine issue for
trial,” id. (emphasis in original), and cannot meet its burden with “conclusory
allegations,” “unsubstantiated assertions,” or “by only a ‘scintilla’ of evidence.” Little
v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994). “Where the record taken as a
whole could not lead a rational trier of fact to find for the non-moving party, there is
no ‘genuine issue for trial.’” Matsushita Elec. Indus. Co., 475 U.S. at 587.
When ruling on motions for summary judgment, the Court views all inferences

drawn from the factual record in the light most favorable to the nonmoving party. Id.
2. Construction and Interpretation of the SFIP
The flood insurance policy at issue is a SFIP, administered pursuant to the
NFIP. The SFIP and all disputes arising from claims under it are governed by FEMA
flood insurance regulations and federal common law. 44 C.F.R. Pt. 61, App. A(1), Art.
IX. “The FEMA Claims Manual … is incorporated by reference into the FEMA
regulations.” White Hall on MS River, LLC, 2015 WL 1540436, at *2. When
addressing coverage disputes, the SFIP is read in pari materia with the FEMA
Claims Manual. Westmoreland, 2015 WL 3456634, at *3.

Additionally, the scope of coverage under the SFIP is subject to interpretation
by the Federal Insurance Administrator. 44 C.F.R. 61.4. And “FEMA's interpretation
of its own regulations is given ‘controlling weight unless it is plainly erroneous or
inconsistent with the regulation.’” Worthen v. Fid. Nat'l Prop. & Cas. Ins. Co., 463
Fed. Appx. 422, 426 (5th Cir. 2012) (quoting Stinson v. United States, 508 U.S. 36, 45
(1993) (internal citation and quotation omitted)). …
While federal common law governs, the Fifth Circuit has applied “general

principles of state insurance law” to aid the interpretation of the SFIP. These
principles include:
(1) if the language of a policy is clear and unambiguous, it is accorded
its natural meaning; (2) if the meaning of a policy provision is
susceptible to different constructions, the one most favorable to the
insured prevails; (3) insurance contracts are to be reasonably construed
in accordance with the objective and intent of the parties; (4) in
determining the most reasonable construction of contested provisions,
the court may draw from the provisions, the policy as a whole, and the
apparent objectives of the parties in entering the contract; and (5) in the
end, if the meaning of the policy terms remains unclear, the policy is
generally construed in the insured's favor to promote the policy's
objective of providing coverage.
Worthen, 463 Fed. Appx. at 425–26 (citing Hanover Bldg. Materials, Inc. v. Guiffrida,
748 F.2d 1011, 1013 (5th Cir. 1984)).
Finally, the Court is guided by “the requirement that a policy of insurance
issued pursuant to a federal program must be strictly construed and enforced.”
Monistere v. State Farm Fire & Cas. Co., 559 F.3d 390, 394 (5th Cir. 2009) (quotation
marks and alterations omitted).
Because insurance companies act as “fiscal agents” of the government
under the National Flood Insurance Program, all policy awards deplete
federally allocated funds. In re Estate of Lee, 812 F.2d 253, 256 (5th Cir.
1987). Therefore, “‘not even the temptations of a hard case’ will provide
a basis for ordering recovery contrary to the terms of a regulation, for to
do so would disregard ‘the duty of all courts to observe the conditions
defined by Congress for charging the public treasury.’” Forman v. Fed.
Emergency Mgmt. Agency, 138 F.3d 543, 545 (quoting Office of Pers.
Mgmt. v. Richmond, 496 U.S. 414, 420 (1990)).
Id.
3. Under the SFIP, Plaintiff’s sheathing was damaged upon
contact with floodwaters
The first issue is whether the SFIP allows Plaintiff to recover the cost of
replacing her sheathing based exclusively upon proof of mere contact with floodwater.
Answering this question requires an analysis of the SFIP’s scope of coverage
provisions, which may be found at Articles I (Agreement) and III (Property Covered),
and the SFIP’s definition of “direct physical loss by or from flood,” which may be found
at Article II (Definitions).
a. Disputed SFIP Provisions7
In relevant part, the disputed provisions read as follows:
SFIP Article I (Agreement):
We will pay you for direct physical loss by or from flood to your insured
property if you:
1. Have paid the correct premium;
2. Comply with all terms and conditions of this policy; and

7 The SFIP appears at Appendix A(1) to Title 44, Part 61 of the Code of Federal Regulations.
44 C.F.R. Pt. 61, App. A(1).
3. Have furnished accurate information and statements.
We have the right to review the information you give us at any time and
to revise your policy based on our review.
SFIP Article III (Property Covered):
We insure against direct physical loss by or from flood to:
1. The dwelling at the described location[.]
SFIP Article II (Definitions):
12. Direct Physical Loss By or From Flood. Loss or damage to insured
property, directly caused by a flood. There must be evidence of physical
changes to the property.
b. Arguments and analysis
The only dispute is what proof of loss is required before Defendant must
compensate Plaintiff for sheathing.8 Not surprisingly, the SFIP itself does not address
sheathing directly: it is written in general terms, and applicable to various forms of
real and personal property. By contrast, the Claims Manual addresses sheathing
expressly, providing specific guidance regarding whether and when an insurer must
pay for sheathing.
The first issue, then, is whether the Court may reference the Claims Manual,

and benefit from its guidance. Plaintiff argues that the Claims Manual is fair game
because the SFIP is ambiguous regarding what proof of loss is required for sheathing.
Defendant argues that the Claims Manual is off limits because the SFIP
unambiguously requires proof of obvious and apparent damage before an insurer is

8 The Parties agree that sheathing is a component of Plaintiff’s “dwelling,” and, as such, is
compensable, provided that Plaintiff has satisfied the SFIP’s prerequisite conditions for
payment. Further, Defendant concedes that Plaintiff has otherwise satisfied all prerequisite
conditions for payment.
required to pay for sheathing.
As an initial matter, the Court is not convinced it must find ambiguity in the
SFIP before referencing the Claims Manual. SFIP Article IX (What Law Governs)

provides, in relevant part, that claim-related disputes are governed by FEMA flood
insurance regulations. The Claims Manual is incorporated by reference into the
FEMA regulations, White Hall on MS River, LLC, 2015 WL 1540436, at *2, and,
therefore, carries the full force and effect of law, Batterton v. Francis, 432 U.S. 416,
425 n.9 (1977). On this basis, courts read the SFIP “in pari materia”9 with the Claims
Manual. E.g., Westmoreland, 2015 WL 3456634, at *3; Davis, 811 F. Supp. 2d at 1248
n.8. Strictly speaking, this analysis may occur absent an initial determination of

ambiguity in the SFIP. E.g., Westmoreland, 2015 WL 3456634, at *3 (construing the
SFIP in pari materia with the Claims manual without first determining that the SFIP
is ambiguous).
In any event, the SFIP’s definition of “Direct Physical Loss By or From Flood”
is ambiguous for purposes of this dispute. Critically, “Direct Physical Loss By or From
Flood Plaintiff” requires “evidence of physical changes to the property.” Yet, the SFIP

does not define, or otherwise elaborate on, the embedded term “physical changes.” In
Defendant’s view, “physical changes” means obvious and apparent damage—or
“proved damage”—to any given building component, including sheathing. (Doc. 27 at

9 The U.S. Supreme Court instructs that “all acts in pari materia are to be taken together, as
if they were one law.” United States v. Stewart, 311 U.S. 60, 64 (1940) (quoting United States
v. Freeman, 44 U.S. 556, 564 (1845)); see also BLACK'S LAW DICTIONARY (11th ed. 2019)
(explaining “that statutes that are in pari materia may be construed together, so that
inconsistencies in one statute may be resolved by looking at another statute on the same
subject.”).
31).10 But “physical changes” is not synonymous with obvious and apparent damage.
Indeed, plain English dictates that physical change occurs when something that was
once dry becomes wet. This interpretation, however, would create compensable

claims for all building materials that contact floodwater, even materials that
withstand inundation. To avoid this absurd (and costly) result, the Court looks to the
Claims Manual for clarification regarding whether and when sheathing is
compensable.
As noted by Plaintiff, the NFIP Claims Manual speaks directly to the point. In
relevant part, Claims Manual Section 30.2 provides guidance for “Determining
Coverage of Damage to Perimeter Wall Sheathing,” and states:

FEMA published Technical Bulletin 2- Flood Damage-Resistant
Materials Requirements for Buildings Located in Special Flood Hazard

10 Defendant argues throughout its opposition that Plaintiff’s proposed interpretation of the
SFIP, which would require only proof of contact with floodwater to recover for damaged
sheathing, is inconsistent with federal statutes authorizing the NFIP, specifically 42 U.S.C.
§§ 4019 and 4072. The Court pauses briefly to address this point.
In relevant part, Section 4019 states:
The Administrator is authorized to prescribe regulations establishing the
general method or methods by which proved and approved claims for losses
may be adjusted and paid for any damage to or loss of property which is covered
by flood insurance made available under the provisions of this chapter.
42 U.S.C. § 4019(a). In turn, Section 4072 states: “the Administrator shall be authorized to
adjust and make payment of any claims for proved and approved losses covered by flood
insurance.” 42 U.S.C. § 4072.
Based on these sections, Defendant insists that loss under the SFIP must necessarily
require proof of physical change, thus categorically prohibiting an insured from proving loss
based solely on proof of mere contact with floodwater. (See Doc. 27 at 18, 27, 30).
The Court cannot accept Defendant’s argument because there is simply no way to read
these Sections as Defendant proposes. Rather than creating a categorical rule requiring a
certain kind of proof to establish loss, these Sections specifically and permissively authorize
FEMA to implement regulations by which claims will be adjusted and paid for damaged
property. The Claims Manual is included among those regulations, White Hall on MS River,
2015 WL 1540436, at *2, and provides specific guidance for adjusting sheathing-related
claims.
Areas in Accordance with the New National Flood Insurance Program
(TB2) to provide communities enforcing their local floodplain
management requirements with guidance on which building materials
FEMA considers flood damage-resistant. Using TB2, FEMA has
developed the following guidance on the adjustment of claims
for perimeter wall sheathing.
A. Class 1 or 2 Sheathing
When Class 1 or 2 sheathing material is damaged directly by
contact with floodwaters, the material is not salvageable. It is not
necessary for a qualified professional, such as an engineer, to document
the flooded sheathing material’s condition. However, such professional
services may be appropriate to investigate possible exclusions or to
recommend methods of repair.
(Doc. 20-4 at 12 (emphasis added)).
In turn, FEMA’s Technical Bulletin 2 (TB2) explains that Class 1 and Class 2
fiberboard sheathing each “cannot survive the wetting and drying associated
with floods.” (Doc. 20-15 at 6 (emphasis added)).
Plaintiff’s sheathing is Class 1 fiberboard. Reading the SFIP in pari materia
with the NFIP Claims Manual, the Court concludes that compensable loss to Class 1
sheathing is established upon proof of “mere contact” with floodwater. Indeed, this is
the only logical interpretation.
First, this interpretation is consistent with the SFIP’s requirement that the
insured show “evidence of physical changes to the property” in order to establish flood
damage. Unavoidably, a change from dry to wet is a physical change.
Second, per the Claims Manual, compensable loss upon proof of “mere contact”
with floodwater is specifically limited to Class 1 and Class 2 building materials, thus
avoiding the absurd result that would follow from allowing recovery for any property
contacted by floodwater, regardless of its resistance to inundation.
Finally, Defendant’s contrary interpretation—that compensable loss to Class
1 sheathing requires proof of obvious and apparent damage—is completely at odds
with FEMA’s guidance. After all, if Class 1 building materials are “[n]ot resistant” to

water of any kind and “cannot survive the wetting and drying associated with floods,”
as stated in TB2,11 then, necessarily, Class 1 fiberboard sheathing “is damaged
directly by contact with floodwaters” and “is not salvageable,” as stated in the Claims
Manual. Again, the Claims Manual is incorporated among FEMA’s regulations, and
cannot be discarded simply because Defendant now finds its guidance inconvenient,
and beneficial to Plaintiff.
In sum, reading the SFIP in pari materia with the Claims Manual and TB2

establishes that Class 1 fiberboard sheathing is compensable upon proof that it came
into contact with floodwater. Here, the summary judgment evidence establishes that
Plaintiff’s home was inundated with more than two feet of floodwater for multiple
days, removing any doubt that floodwater contacted her sheathing. Thus, under the
SFIP, Plaintiff is entitled to reimbursement for her fiberboard sheathing, provided
she has otherwise satisfied the SFIP’s requirements for additional payment

(discussed below).

11 In another reversal, Defendant contends that the Court should disregard TB2 because the
Claims Manual does not state “that it is incorporating and/or adopting anything specifically
at all from TB2.” (Doc. 27 at 34). This argument is borderline specious, even putting aside
Defendant’s about-face. The Claims Manual expressly states that its “guidance on the
adjustment of claims for perimeter wall sheathing” was developed “[u]sing TB2.” (Doc. 20-4
at 12). Further, it is impossible to read the Claims Manual without reference to TB2 because
the Claim’s Manual’s guidance reflects that sheathing comes in five distinct classes, but does
not explain how these classes are determined. TB2 fills the gap. Clearly, FEMA intended the
Claims Manual to incorporate TB2.
4. Under the SFIP, Defendant improperly denied Plaintiff’s
request for additional reimbursement based on Plaintiff’s
failure to provide proof of how she spent the initial payment
The next issue is whether Defendant improperly denied Plaintiff’s claim to
additional reimbursement based on Plaintiff’s failure to submit proof of how she spent
her initial payment. Answering this question requires an analysis of the SFIP’s
Replacement Cost Loss Settlement Clause, which may be found at Article VII(V)(2).
a. Disputed SFIP Provision
The SFIP’s Replacement Cost Loss Settlement Clause states:
2. Replacement Cost Loss Settlement
The following loss settlement conditions apply to a single-family
dwelling described in V.1.a. above:
a. We will pay to repair or replace the damaged dwelling after
application of the deductible and without deduction for depreciation, but
not more than the least of the following amounts:
(1) The building limit of liability shown on your Declarations Page;
(2) The replacement cost of that part of the dwelling damaged, with
materials of like kind and quality and for like use; or
(3) The necessary amount actually spent to repair or replace the
damaged part of the dwelling for like use.
b. Arguments and analysis
Plaintiff asserts that the SFIP’s Replacement Cost Loss Settlement Clause is
ambiguous regarding whether an insured must prove how she spent her initial
payment before recovering a supplemental reimbursement for unrepaired items. And,
again, Plaintiff contends that the Claims Manual provides express guidance, stating
that an insured “who has not completed repairs and is requesting additional payment
is not required to prove how they spent funds previously paid on the same claim.”
(Doc. 20-4 at 15).
Defendant’s response is perfunctory, and difficult to discern. First, Defendant
asserts that “[t]he Court need not address this argument based on the numerous

genuine issues precluding summary judgment explained above.” (Doc. 27 at 37).
Obviously, this argument fails in light of the preceding analysis.
Next, Defendant contends that Plaintiff has not shown that her claim for
supplemental compensation was denied “because of a lack of incurred costs.” (Doc. 27
at 38). In the same breath, however, Defendant concedes that its September 3, 2017
denial letter demanded “copies of paid invoices, receipts, cancelled checks, credit card
receipts for actual incurred costs for repairs.” (Id. at 37-38). Defendant makes no

attempt to reconcile these contradictory statements.
Finally, and in any event, Defendant asserts that the Replacement Cost Loss
Settlement Clause is not ambiguous and allows Defendant to request proof of
incurred costs before paying additional reimbursements, reflecting the “general
insurance principle … that the policyholder is entitled to indemnity and cannot profit
from a loss.” (Doc. 27 at 39).

Here, again, the SFIP is ambiguous in the context of this dispute, though not
for the reasons stated in Plaintiff’s Motion. Quite simply, the SFIP’s Replacement
Cost Loss Settlement clause does not address this situation, where the insured has
received an initial payment, repaired her home with the proceeds, and seeks an
additional reimbursement for damaged items that have not been repaired.
And, again, reading the SFIP in pari materia with the Claims Manual clears
up the confusion. Section 43 of the Claims Manual is devoted entirely to “Requests
for Additional Payment.” (Doc. 20-4 at 15). Subsection 43.1 specifically addresses
“Handling of Requests for Additional Payment Prior to Repairs,” and states:

A policyholder who has not completed repairs and is requesting
additional payment is not required to prove how they spent
funds previously paid on the same claim. If a policyholder has
not completed the repair or replacement of items damaged by a
covered loss, NFIP insurers may not deny requests for
additional payment solely because the policyholder did not
provide evidence that all amounts previously paid on the claim,
plus the value of the deductible(s) and any applicable physical
depreciation, were spent to repair or replace covered flood
damage. NFIP insurers must evaluate such requests for additional
payments using the same methods, procedures, and requirements used
to evaluate the initial requests for payment.
(Id. (emphasis added)).
The Claims Manual removes any ambiguity regarding whether an insurer may
require proof of how a prior reimbursement was spent before providing an additional
payment to reimburse an unrepaired item: the insured “is not required to prove how
they spent funds previously paid on the same claim,” and the insurer “may not deny
requests for additional payment solely because the policyholder did not provide
evidence that all amounts previously paid on the claim … were spent to repair or
replace covered flood damage.”
All that remains is to apply this interpretation to the facts of the case. Here,
the summary judgment evidence establishes that Plaintiff’s fiberboard sheathing was
damaged by contact with floodwater, yet was not included among the items
reimbursed in Defendant’s initial November 2016 payment. Thereafter, in July 2017,
Plaintiff submitted a supplemental Proof of Loss, supported by a finely detailed, 45-
page line-item estimate that included costs corresponding to removal and
replacement of exterior sheathing. (See Doc. 27-13 at pp. 2, 39, 41). In September
2017, Defendant denied payment citing “no documentation to support any further

payment” (Doc. 20-13 at p. 1), and now admits that the basis of its denial was
Plaintiff’s failure to provide evidence of “actual incurred costs for repairs.” (Doc. 27 at
37-38). To this day, Defendant has not reimbursed Plaintiff for sheathing, and
Plaintiff has not made any repairs to her sheathing.
On this record, the Court concludes that Defendant improperly denied
Plaintiff’s claim for reimbursement of sheathing, in contradiction of its obligations
set forth in the SFIP and the Claims Manual. Here, again, Plaintiff is entitled to

judgment in her favor.
III. CONCLUSION
Having shown that there is no genuine dispute as to any material fact and that
Plaintiff is entitled to judgment as a matter of law,
IT IS ORDERED that Plaintiff’s Motion for Partial Summary Judgment (Doc.
20) is GRANTED, and that Plaintiff is entitled to recover from Defendant the
replacement cost value of her exterior sheathing.

Baton Rouge, Louisiana, this 21st day of January, 2021

_______________________________________
JUDGE BRIAN A. JACKSON
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10191683. Public record. Not legal advice.