Suopys v. Omaha Prop & Cslty

Opinions of the United

2005 Decisions States Court of Appeals

for the Third Circuit

4-15-2005

Suopys v. Omaha Prop & Cslty

Precedential or Non-Precedential: Precedential

Docket No. 04-1996

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PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 04-1996

ALLEN B. SUOPYS,

Appellant

v.

OMAHA PROPERTY & CASUALTY

On Appeal from the United States District Court

for the District of New Jersey

(D.C. No. 02-cv-05743)

District Judge: Honorable Garrett E. Brown, Jr.

Argued January 25, 2005

Before: SCIRICA, Chief Judge, RENDELL,

and FISHER, Circuit Judges.

(Filed April 15, 2005)

Kenneth P. Westreich (Argued)

Swain & Westreich

3100 Highway 138, Building 2

Wall, NJ 07719

Attorney for Appellant

Gerald J. Nielsen (Argued)

3838 North Causeway Boulevard, Suite 2850

Metairie, LA 70002

Attorney for Appellee

OPINION OF THE COURT

FISHER, Circuit Judge.

Allen B. Suopys (“Suopys”) appeals from an order of the

United States District Court for the District of New Jersey granting

summary judgment in favor of Omaha Property & Casualty

(“Omaha”). Suopys claims that he sustained property losses that are

covered by the Standard Flood Insurance Policy (“SFIP”) issued to

him by Omaha in its capacity as a “Write-Your-Own” Program

Company participant in the National Flood Insurance Program

(“NFIP”). This appeal presents the question of whether under the

SFIP, the 60-day period for filing proof of loss, including the filing

of an adjuster’s report in lieu of proof of loss, is waivable absent the

consent of the Federal Emergency Management Agency (“FEMA”).

The District Court determined that Suopys’s claim was barred for

failure to timely submit proof of loss or, alternatively, found no

coverage for the damage at issue. We will affirm on the former

ground and, in doing so, make explicit that the 60-day period for

filing proof of loss must be strictly construed.

I.

The National Flood Insurance Act of 1968, 42 U.S.C.

§§ 4001-4129, established the NFIP. The NFIP is underwritten by the

2

United States Treasury in order to provide flood insurance below

actuarial rates. 42 U.S.C. § 4017 (2003); see also Van Holt v. Liberty

Mutual, 163 F.3d 161, 154 n.2 (3d Cir. 1998). The NFIP is

administered by FEMA and the Federal Insurance Mitigation

Administration (‘FIMA”). 42 U.S.C. § 4011 (2003); 44 C.F.R.

§§ 59.1-77.2 (2003).

The SFIP is codified at 44 C.F.R. Pt. 61, App. A (2003) and

is incorporated into the Code of Federal Regulations by reference at

44 C.F.R. § 61.13(a) (2003). The SFIP and all disputes arising from

the handling of any claim under the policy are governed by the flood

insurance regulations promulgated by FEMA, the National Flood

Insurance Act of 1968, 42 U.S.C. §§ 4001-4129, and federal common

law. 44 C.F.R. Pt. 61, App. A(1), Art. 11 (2000) / Art. IX (2003).

FEMA provides for marketing and claims adjustment of the SFIP by

Write Your Own (“WYO”) Companies, who operate as fiscal agents

of the United States. 44 C.F.R. §§ 61.13(f), 62.23 (2003); 42 U.S.C.

§ 4071(a)(1) (2003) (authorizing FEMA director to utilize insurance

companies as fiscal agents of the United States).

The WYO Companies are bound to adjust claims in

accordance with the terms of the SFIP. The SFIP requires that in

adjusting claims, the WYO Company apply its own company

standards guided by NFIP Claims manuals issued by FEMA. 44

C.F.R. § 62.23(i)(1) (2003). WYO carriers may not alter, amend, or

waive any provision or condition of the SFIP absent express written

consent from the Federal Insurance Administrator. 44 C.F.R. Pt. 61,

App. (A)(1), Art. 9(D) (2000) / Art. VII(D) (2003); 44 C.F.R.

§ 61.13(d) (2003).

The SFIP requires that an insured claiming damages for flood

loss provide the WYO carrier with proof of loss within 60 days from

3

the date of the alleged loss. 44 C.F.R. Pt. 61 App. A(1), Art. 9(J)

(2000) / VII(J) (2003).

II.

Suopys seeks flood insurance coverage for damage to his

Forked River, New Jersey summer home sustained on or about June

21, 2001, due to Tropical Storm Allison. Suopys timely notified

Omaha of the property damage. By early July 2001, Omaha’s claims

adjuster inspected the property and observed damage including

moisture in the house, water around the doors and carpet edges and

upheaval of the concrete slab on which the house was situated. The

adjuster indicated that the claim for $12,962.44 (the amount after

depreciation and deductibles) should be paid by Omaha within two

months of its receipt. Having not received payment by September

2001, Suopys inquired of the adjuster as to the status of his claim and

was informed by the adjuster that payment would be forthcoming.

Omaha notified Suopys by letter dated September 27, 2001,

that his claim remained open beyond the 60-day period for submitting

a proof of loss and indicated that it could either close the claims file

without payment, or close it with a possible payment if a proof of loss

was received by October 5, 2001. Omaha requested that Suopys

contact the adjuster to determine his response given that Omaha did

not have authority under the SFIP to act on any request for an

extension of time to file a proof of loss. Omaha’s letter also

contained a reservation of all rights under the policy.

On October 2, 2001, Suopys provided the adjuster with a

signed and notarized proof of loss and the National Flood Insurance

Program Final Report (“Adjuster’s Report”). Omaha received the

proof of loss and Adjuster’s Report on October 4, 2001. Shortly

thereafter, Omaha determined that there was no SFIP coverage for the

4

claimed damage as it was not caused by Tropical Storm Allison or by

a flood. Rather, as the adjuster’s revised report reflected, although

there was a general and temporary condition of flooding as a result of

Tropical Storm Allison, the concrete slab upheaval resulted from

possible subterrain flooding or ground movement over time.1 By

1

The relevant provisions of the SFIP regarding exclusions

from coverage due to “earth movement”are as follows:

We only provide coverage for direct physical loss by

or from flood which means we do not cover:

B. Losses from other casualties,

including loss caused by:

1. Theft, fire, windstorm, wind,

explosion, earthquake, land sinkage,

landslide, destabilization or movement

of land resulting from the

accumulation of water in sub-surface

land areas, gradual erosion, or any

other earth movement except such

mudslides ... or erosion as is covered

under the peril of flood.

***

3. Land subsidence ... unless, subject to

additional deductibles as provided for

at Article 7, (a) there is a general and

temporary condition of flooding in the

area, (b) the flooding is the proximate

cause of the land subsidence ... (c) the

land subsidence ... occurs no later than

72 hours after the flood has receded,

and (d) the insured building must be

insured, at the time of the loss, for at

5

letter dated December 11, 2001, Omaha denied Suopys’s claim on the

ground that there was no general condition of flooding at the property

on the reported date of loss, which is required to trigger SFIP

coverage.2

Suopys filed a Complaint in the District Court asserting that

Omaha breached its contract with Suopys in denying flood insurance

coverage and sought benefits under the SFIP.3 Omaha sought

summary judgment on the ground that Suopys’s claim was barred for

failure to submit a sworn proof of loss within 60 days of the date of

least 80 percent of its replacement cost

or the maximum amount of insurance

available under the [NFIP].

44 C.F.R. Pt. 61 App. A(1), Art. 3(B) (2000) (emphasis in original).

See also 44 C.F.R. Pt. 61, App. A(1), Art. V(C) (2003).

2

Suopys subsequently requested that Omaha re-evaluate its

denial of coverage. Both Omaha and Suopys retained experts to

determine whether the cause of the structural damage to the property

was a result of “earth movement” excludable from coverage or

whether it met the narrow land subsidence exception to the earth

movement exclusion. See 44 C.F.R. Pt. 61 App. A(1) Art. 3 (2000).

In light of our holding that Suopys did not timely file proof of loss in

order to trigger flood insurance coverage, we do not address the

substance of the coverage dispute regarding “earth movement.”

3

The District Court had jurisdiction pursuant to 42 U.S.C.

§ 4072 given that Suopys sought as damages payment of United

States Treasury funds from Omaha in its capacity as a fiscal agent of

FEMA pursuant to 42 U.S.C. § 4071 (2003). See Linder & Assoc.,

Inc. v. Aetna, 166 F. 3d 547, 550 n.3 (3d Cir. 1999).

6

the alleged flood loss. Suopys countered that he complied with the

terms of the SFIP regarding proof of loss in light of the

representations made by Omaha in its September 27, 2001

correspondence indicating that it would accept the proof of loss if

filed by October 5, 2001 (despite the fact that more than 60 days had

passed). He argued that Omaha’s representation constituted a waiver

of his obligation to submit proof of loss within 60 days of the date of

the claimed flood loss or, alternatively, that Omaha waived the proof

of loss requirement by accepting the adjuster’s report in lieu of the

proof of loss.

The District Court concluded that Suopys’s claim was barred

for failure to submit a proof of loss within 60 days of the date of the

loss and that there was no waiver of that 60-day filing requirement.

Although the failure to timely file the proof of loss standing alone

warranted entry of summary judgment in favor of Omaha, the District

Court further held that Omaha would be entitled to summary

judgment because the claimed property damage was not covered

under the flood insurance policy as it was caused by earth movement

rather than by land subsidence.

III.

Our jurisdiction over this appeal is premised on 28 U.S.C.

§ 1291. We apply plenary review to the grant of summary judgment

in favor of Omaha. Van Holt, 163 F.3d at 167 (3d Cir. 1998).

IV.

Federal common law governs the interpretation of the SFIP.

Linder, 166 F.3d at 550. The SFIP is construed in accordance with

its plain, unambiguous meaning, in order to fashion uniform

interpretation throughout the country and avoid state to state coverage

7

variances. Id. While we apply standard insurance principles to

construe the SFIP, general doctrines of waiver and estoppel do not

apply when the insurer is an agent of the United States. Id.; Gowland

v. Aetna, 143 F.3d 951, 955 (5th Cir. 1998) (quoting Office of

Personnel Management v. Richmond, 496 U.S. 414, 425 (1990)

(“Any exercise of a power granted by the Constitution to one of the

other branches of Government is limited by a valid reservation of

congressional control over funds in the Treasury.”).

Because any claim paid by a WYO Company is a direct

charge to the United States Treasury, strict adherence to the

conditions precedent to payment is required. Federal Crop Ins. Corp.

v. Merrill, 332 U.S 380, 384-85 (1947) (holding that insured must

strictly comply with all terms and conditions of federal insurance

policy and recognizing duty of courts to observe conditions defined

by Congress for charging the public treasury); Van Holt, 163 F.3d at

165; Flick v. Liberty Mutual, 205 F.3d 386 (9th Cir.), cert. denied,

531 U.S. 927 (2000) (strict compliance applied to policies written by

WYO Companies under the NFIP because flood loss claims are paid

from United States Treasury).

Mindful of these principles, we address the merits of Suopys’s

two-fold waiver argument: (1) Omaha waived the 60-day period for

providing proof of loss when in its September 27, 2001

correspondence to Suopys, it represented it would accept a proof of

loss if submitted by October 5, 2001, and (2) Omaha waived the proof

of loss requirements in accepting a signed and notarized adjuster’s

report on October 4, 2001.

A.

As to whether Omaha waived the 60-day period for providing

proof of loss when in its September 27, 2001 correspondence to

8

Suopys, it represented it would accept a proof of loss if submitted by

October 5, 2001, the SFIP provides:

J. Requirements in Case of Loss

4. Within 60 days after the loss, send us

a proof of loss, which is your

statement of the amount you are

claiming under the policy signed and

sworn to by you, and which furnishes

us with the following information. . . .

***

6. The insurance adjuster whom we hire

to investigate your claim may furnish

you with a proof of loss form, and she

or he may help you complete it.

However, this is a matter of courtesy

only, and you must still send us a

proof of loss within 60 days after the

loss even if the adjuster does not

furnish the form or help you complete

it . . . .

44 C.F.R. Part 61, App. (A)(1), Art. 9(J) (2000) / Art. VII(J) (2003)

(italics added).4

4

The parties dispute which version of the SFIP applies to

Suopys’s claim. Suopys’s SFIP had an effective date of

December 26, 2000, and was in the form codified at 44 C.F.R. Pt. 61,

App. A(1) (2000), subject to the liberalization clause of that policy

found at Article 10 (which gives the policyholder the benefit of

9

Strictly construed, the SFIP clearly and unambiguously

requires that proof of loss be submitted by the insured within 60 days

of the claimed flood loss. The SFIP places the onus on the insured to

file the proof of loss within 60 days regardless of the representations

and assistance, or lack thereof, provided by the insurer or its adjuster.

Dawkins v. Witt, 318 F.3d 606 (4th Cir. 2003) (60-day proof of loss

filing period strictly enforced even where Hurricane Fran made it

extremely difficult for insured parties to comply with the time limit);

Phelps v. FEMA, 785 F.2d 13 (1st Cir. 1986) (government insurance

agency not barred from asserting defense of insured’s failure to file

written proof of loss even where misrepresentations of the agency

induced the failure). This, coupled with the directive that a WYO

Company may not alter, amend, or waive any provision or condition

of the SFIP absent express written consent from the Federal Insurance

Administrator,5 defeats Suopys’s claim that Omaha’s September 27,

subsequent policy amendments). That liberalization clause

effectively incorporated the December 31, 2000 revisions to the SFIP

to the extent that they extend or broaden the coverage afforded to

Suopys without additional premium. Federal Emergency

Management Agency, National Flood Insurance Program (NFIP);

Insurance Coverage and Rates, 65 Fed. Reg. 60, 758 (Oct. 12, 2000)

(to be codified at 44 C.F.R. Parts 59 and 61). The primary purpose

of the December 31, 2000 amendments to the SFIP was to render the

SFIP in plain language and restructure its format to resemble the

homeowner’s policy. Id. at 60,759. We agree with Omaha’s

contention that regardless of which SFIP language applies, Suopys

failed to comply with the proof of loss requirements.

5

44 C.F.R. Pt. 61, App. (A)(1), Art. 9(D) (2000) / Art. VII(D)

(2003); 44 C.F.R. § 61.13(d) (2003).

10

2001 representations constituted a waiver of the 60-day requirement.6

Thus, we join a number of other Courts of Appeals in holding that

strict adherence to SFIP proof of loss provisions, including the 60-day

period for providing proof of loss, is a prerequisite to recovery under

the SFIP. See Phelps, 785 F.2d 13 (1st Cir. 1986); Dawkins, 318 F.3d

606 (4th Cir. 2003); Gowland, 143 F.3d 951 (5th Cir. 1998); Neuser

v. Hocker, 246 F.3d 508 (6th Cir. 2001) (failure to comply with 60-

day filing requirement for proof of loss was bar to recovery); Mancini

v. Redland Ins. Co., 248 F.3d 729 (8th Cir. 2001) (failure to submit

a signed and sworn proof of loss entitled insurer to judgment as a

matter of law); Flick, 205 F.3d 986 (9th Cir. 2000), and Sanz v. U.S.

Security Ins. Co., 328 F.3d 1314 (11th Cir. 2003) (failure to file a

proof of loss within 60 days without obtaining a written waiver of that

requirement from FEMA precluded recovery).

B.

As to whether Omaha’s acceptance of the adjuster’s report

constituted a waiver, Suopys relies on the following provision of the

SFIP as amended effective 12/31/00:

6

Omaha has a policy of continuing to examine claims despite

an insured’s non-compliance with policy requirements given that

facts may surface that would support Omaha making a request for

waiver from FEMA. But the mere fact that an insurer continues its

investigation does not constitute a waiver of policy requirements. See

generally Wagner v. Director FEMA, 847 F.2d 515, 520 (9th Cir.

1988) (“Holding that FEMA may inadvertently extend the limitations

period by answering claimants’ inquiries or by considering new

information ‘would contravene a strong public policy to encourage an

insurance company to reconsider its original denial when confronted

with potentially new facts.’. . . .”) (citation omitted).

11

At our option, we may accept the adjuster’s report of

the loss instead of your proof of loss. The adjuster’s

report will include information about your loss and

the damages you sustained. You must sign the

adjuster’s report. At our option, we may require you

to swear to the report.

44 C.F.R. Pt. 61, App. A.(1), VII(J)(9) (2003). See also 65 Fed. Reg.

at 60,775 (October 12, 2000). This provision only applies to claims

under $7500, which Suopys’s $12,962.44 claim exceeded. FEMA’s

regulations are controlling regarding the application of the SFIP by

WYO Companies. 44 C.F.R. Pt. 61, App. A(1), Art. 11 (2000) / Art.

IX (2003). The FEMA Claims Manual, which is incorporated by

reference into the FEMA regulations (44 C.F.R. § 62.23), limits SFIP

Article VII(J)(9) (2003) and Article 9(J)(7) (2000) to claims with a

maximum value of $7500.7

7

Both the version of the Claims Manual effective at the time

of Suopys’s loss and the current Claims Manual

(www.fema.gov/nfip/authreq.htm at ¶q) limit such claims to $7500.

The current version requires:

q. Proof of Loss. A Proof of Loss form (page A-29)

signed by the insured is required on every claim on

which any payment is recommended. On claims up to

$7,500, the NFIP Final Report form (page A-25) will

suffice for this purpose. On claims over $7,500, a

separate Proof of Loss form must be obtained. If the

insured qualifies for replacement cost coverage, the

adjuster must submit the Statement as to Full Cost of

Repair or Replacement (shown on page A-31) for the

additional amount recoverable under the replacement

cost provisions. If the insured qualifies for Increased

12

Suopys suggests that the above-quoted SFIP which became

effective December 30, 2000 (65 Fed. Reg. at 60,758), eliminated the

$7500 limitation. Compare 44 C.F.R. Pt. 61, Art. 9(J)(7) (2000)8.

We disagree. Both versions of the SFIP make clear that acceptance

of the adjuster’s report is at the option of the insurer. Moreover, the

implementation of either version of this SFIP provision is subject to

the limitations imposed by FEMA. 42 U.S.C. § 4019 (FEMA

establishes the rules governing adjustment and payment of proved and

approved claims for losses). The $7500 limitation imposed by FEMA

is binding on Suopys. Suopys’s claim was for $12,962.44.

Consequently, in the absence of a written waiver from FEMA, Omaha

was barred from accepting the adjuster’s report in place of proof of

loss. 44 C.F.R. Pt. 61, App. (A)(1), Art. 9(D) (2000) / Art. VII(D)

(2003); 44 C.F.R. § 61.13(d) (2003).

Cost of Compliance (ICC), the Increased Cost of

Compliance Proof of Loss form (shown on page A-

13) must be submitted. The insured has 60 days from

the date of loss to proffer the proof.

8

The SFIP as issued to Suopys on December 26, 2000,

provided:

We may, at our option, waive the requirement for the

completion and filing of a proof of loss in certain

cases, in which event you will be required to sign and,

at our option, swear to an adjuster’s report of the loss

which includes information about your loss and the

damages sustained, which is needed by us in order to

adjust your claim.

44 C.F.R. Pt. 61 Art. 9(J)(7) (2000) (italics added).

13

IV.

For the foregoing reasons, we will affirm the grant of

summary judgment in favor of Omaha based upon Suopys’s failure

to strictly comply with SFIP provisions regarding proof of loss.

14