# Petition for Writ of Certiorari — Wright v. Allstate Insurance Company (No. 07-777)

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 2007

## Text

Supreme Court, U.S.
FILE

07-7770F°10 27
No. ——__ OF PICE OF 7] ' ERK
IN THE
Supreme Court of the Anited States

THOMAS WRIGHT, M.D.

Petitioner,

ALLSTATE INSURANCE COMPANY
Respondent.

Petition for Writ of Certiorari to the
United States Court of Appeals
For the Fifth Circuit

PETITION FOR WRIT OF CERTIORARI

Robert L. Galloway* Dax O. Faubus

ROB GALLOWAY, PC FAUBUS TAFT

1303 San Jacinto SCARBOROUGH, LLP

Houston, Texas 77002 1010 Lamar, Ste 1020

(713) 646-2927 Houston, Texas 77002
(713) 222-6400

* Counsel of Record

Attorneys for Petitioner

— (202) 789-0096 —- WA:

QUESTIONS PRESENTED

1. Whether the statement in the federally
mandated standard flood insurance policy that “all
disputes arising from the handling of any claim
under the policy are governed exclusively by...
Federal common law” is an express authorization
that allows an insured to bring extra-contractual
claims against an insurer under Federal common
law.

2. Alternatively, whether a federal common-law
right of action to bring extra-contractual claims may
be inferred under provisions of the National Flood
Insurance Act.

TABLE OF CONTENTS

Page
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TABLE OF AUTHORITIES ......... eae aes eee
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CONSTITUTIONAL PROVISION
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STATEMENT ......... I l
REASONS FOR GRANTING OF PETITION ..........5
I. Appellant is entitled to federal

common law claims pursuant to the
express terms of the Standard Flood

PRBUPANCO FOLCY. .............000.0cscccceceece
II. In the alternative, Appellant is
entitled to federal common law claims
because they are implicit in the
Standard Flood Insurance Policy.......10
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APPENDICES

il.

TABLE OF AUTHORITIES
CASES
Chelentis v. Luckenback Steam Ship Co,

GE Sac Ow CI i skaabiddscadeentucaseonces

Clear Field Trust Company v. U.S.,
Ae Chie PE Ci kcnccesandgssouciessnian

Cort v. Ash,
Pi.) BORO Fe.» |. 1 eee renereeeeeE ney err 11,

D’Oench Duhme & Co. v. FDIC, 315 U.S.
447, 472 (1942)

Firestone Tire & Rubber Co. v. Bruch,
489 U.S. 101 (1989)............ Ps A Mend tise

Graham v. Renbrook School,
692 F.Supp. 102 (D.Conn. 1988)...........

Illinois v. City of Milwaukee, Wisconsin,

In re: Adler, Coleman Clearing Corp., 247
BER: GR EP. Fc, BGG. novice cccascccscccvas
Kossick v. United Fruit Co.,
ee Cara Cee © ED ikioe okdndsncpadhoneatnanece

Mallis v. Bankers Trust Co., 615 F.2d 68,
82 (2d Cir. 1980), cert. denied, 449 U.S.
ER eer © RN Ricnccuecaccecusavincaeecisaae

Page

14,15

@ @)

10

10

IV.
Marcus v. AT&T Corp., 938 F. Supp. 1158
(S.D.N.Y. 1996)

National Society of Professional Engineers
v. United States,
435 U.S. 679 (1978)

Pence v. United States, 316 U.S. 332, 338
(1941)

Spence v. Omaha Indemnity Insurance
Company, 996 F.2d 793, 796 (5" Cir.

Texas Industry, Inc. v. Radcliff Materials,
Inc.,
451 U.S. 630 (1981)

Textile Workers Union of America v.
Lincoln Mills of Alabama,
353 U.S. 448 (1957)

Till v. Unifirst Federal Savings and Loan
Assoc.,

653 F.2d 152 (5 Cir. 1981)

Touche Ross & Co. v. Redington,
442 U.S. 560 (1975)

Wright v. Allstate Insurance Company,

415 F.3d 384 (5™ Cir. 2005)..................

Wright v. Allstate Insurance Company, 500
an TEU GEE GE, PPE adc acigaeaxsousati nates

Vs

STATUTES AND REGULATIONS

National Flood Insurance Act 42 U.S.C.
§$4001-4129

National Flood Insurance Act 42 U.S.C.
§4071(a)(1)

National Flood Insurance Act 42 U.S.C.
§4081(a)

National! Flood Insurance Act 42 U.S.C.
§4012a(b)

National Flood Insurance Act 42 U.S.C.
§4104a

28 U.S.C. §1254(1)
353 U.S. 448 (1957)
44 C.F.R. Pt. 61, App. A(1) Art. IX ....... 3,

OTHER AUTHORITIES

Chemerinsky, Erwin, Federal Jurisdiction
(4 ed.), §6.1

Ficid, Martha A., Sources of Law: The
Scope of Federal Common Law, 99
Harv. L. Rev. 881 (1986)

H.R. Rep. 90-1585, 1968 U.S.C.C.A.N.
TEE, CN iis ad ret dy Pa cakeene Gees

13, 14

OPINION BELOW

The opinion of the United States Court of
Appeals for the Fifth Circuit was published on
September 11, 2007, Wright v. Allstate Insurance
Company, 500 F.3d 390 (5th Cir. 2007).

JURISDICTION

The Court of Appeals issued its opinion on
September 11, 2007. Petitioner did not seek
rehearing. The jurisdiction of this Court is invoked
under 28 U.S.C. §1254(1).

The district court had jurisdiction under 42
U.S.C. § 4072. See Wright v. Allstate Ins. Co., 415
F.3d 384, 389 (5th Cir. 2005) (holding that the grant
of exclusive jurisdiction to federal courts for suits
against FEMA also applies to private insurers
issuing standard flood insurance policies).

STATUROTY PROVISION INVOLVED
44 C.F.R. Part 61, Appendix A(1), Article IX states:

This policy and all disputes arising from the
handling of any claim under the policy are
governed exclusively by the flood insurance
regulations issued by FEMA, the National Flood
Insurance Act of 1968, as amended (42 U.S.C.
$4001, et seg.), and Federal common law.

STATEMENT OF THE CASE

This case involves a denial of coverage under
standard flood insurance policy. Petitioner, Dr.
Thomas Wright, purchased the policy’ to cover his

' Allstate issued the policy under the auspices of the National
Flood Insurance Act, 42 U.S.C. §§4001-4129

2

Houston, Texas home. The policy was purchased
from Respondent, Allstate Insurance Company, and
provided through the National Flood Insurance
Program. Under the provisions of the National Flood
Insurance Act,’ the program is administered by the
Federal Emergency Management Agency. Allstate is
known as a Write-Your-Own insurer.®

On June 9, 2001, Tropical Storm Allison hit the
Houston area. Dr. Wright’s home was among those
suffering significant damage. Approximately three
feet of flood water entered his garage and one inch of
flood water entered the remainder of the first floor,
which is higher than the garage in elevation. Water
also entered the home through a roof leak caused by
the storm. Dr. Wright’s non-foundation flood
damages totaled $125,840.23. Dr. Wright filed a

claim with Allstate for these damages. Allstate
concedes that Dr. Wright suffered flood damages and
that such damages are covered under his flood policy.

Allstate assigned Jack Gardner of Pilot
Catastrophe Services to adjust Dr. Wright’s flood
damages. Gardner estimated the covered damage at
$12,580.04. Dr. Wright hired his own adjuster, who
ultimately estimated the covered damage at
$125,840.23.°

2 42 U.S.C. § 4001-4129.

*42 U.S.C. § 4071(aX1), 4081(a).

* Dr. Wright's agent, Pat Wolford, initially estirnated the
covered damage at $233,497.59. However, Wolford

acknowledged that the estimate included damages related to
the roof leak. She later revised the estimate

3

Alistate sent Dr. Wright a proof of loss. The proof
of loss reflected Gardner’s estimate of flood damages
— $12,580.04. Dr. Wright did not execute Allstate’s
proof of loss because it did not accurately reflect his
flood damages. Dr. Wright also believed that he
would be bound by the proof of loss under Article VII
(J) (9) of his flood policy.” But Dr. Wright had ample
time to file his own proof of loss. The original proof
of loss deadline was sixty days following the loss.
The deadline, however, was extended several times.
Initially the deadline was extended to October 2,
2001. Ultimately, the proof of loss deadline was
extended to February 4, 2002.

Dr. Wright timely filed a proof of loss on
December 5, 2001. The proof of loss was properly
sworn but did not state a net amount claimed.
Instead, the proof of loss stated “to be determined.”
Dr. Wright did not include a net amount claimed
because the extent of his flood damage was highly
disputed by Allstate. At the time he submitted his
proof of loss, Allstate had yet to determine the
amount of damage to his foundation and there was
no agreement on the amount of structural damages.
Both Dr. Wright and his hired adjuster understood
that a number must be identified in the proof of loss
as the net amount claimed. The claim was still in
the investigation and negotiation phase and Dr.
Wright and his hired adjuster were still attempting
to ascertain the net amount of Dr. Wright’s flood
damages. At the time he submitted his proof of loss,

°44C.F.R. Part 61, Appendix A(1), Article IX.

4
Dr. Wright had two months to amend his proof of
loss before the February 4, 2002 deadline

But on December 19, 2001, Guy Chapman sent a
letter to Dr. Wright on Allstate’s behalf that stated:

“We are in receipt of a Proof of Loss which was
filed with us on December 5, 2001.

We are accepting this proof in compliance
with the policy conditions concerning the
filing of a proof of loss.”

The third paragraph of the letter reserved Alistate’s
“rights and defenses in connection with the
ascertainment as to the value and loss ....” But,
ironically, the letter had no indication that the proof
of loss was insufficient

Unbeknownst to Dr. Wright, an Alls’ ate
supervisor decided to reject the claim because the
proof of loss was insufficient. But Allstate elected
not to inform Dr. Wright. Even though Dr. Wright
had the absolute right to amend his claim before the
deadline and he had ongoing negotiations with
Allstate before the deadline for amending the proof of
loss, Allstate chose to keep their “rejection” a secret
until the deadline expired. In fact, Dr. Wright only
learned of Allstate’s position after the deadline
passed.

Dr. Wright sued Allstate and Chapman, alleging
breach of contract, violations of the Texas Insurance
Code and Deceptive Trade Practices Act, breach of
the common law duty of good faith and fair dealing,
fraud, and negligent misrepresentation. Dr. Wright
also sought leave to amend his complaint to include

5

federal common law causes of action for fraud and
negligent misrepresentation. The district court
dismissed all of Dr. Wright’s claims except the
breach of contract claim against Allstate, holding
that federal law preempted the state law claims.
The district court also denied Dr. Wright’s request
for leave to amend his complaint. As to the breach of
contract claim, the district court held that Allstate
was equitably estopped from asserting Dr. Wright’s
alleged failure to file an adequate proof of loss as a
basis for the denial of coverage. The district court
awarded Dr. Wright $24,029 in damages as well as
costs and attorney fees.

Both parties appealed. The Fifth Circuit held
that (1) Allstate was not estopped from asserting Dr.
Wright’s failure to file a proof of loss as a basis for
denying his claim and (2) the state law claims were
preempted. Wright v. Allstate Ins. Co., 415 F.3d 384,
391 (5th Cir. 2005). The court also remanded the
issue of the denial of the motion to amend the
complaint because it could not determine the basis
for the district court’s denial. Jd.

On remand, the district court once again denied
Dr. Wright’s requested leave to amend the complaint
to add the federal common law claims for fraud and
negligent misrepresentation. The district court
reached this conclusion because it was “not aware by
the pleading or otherwise of any federal common law
cause(s) of action that might be asserted by [Dr.
Wright}.”

Dr. Wright appealed. The Fifth Circuit affirmed
the district court’s denial of leave. Wright v. Allstate

6
Ins. Co., 500 F.3d 390, 392 (5th Cir. 2007). The court
held that the National Flood Insurance Act did not
expressly or implicitly authorize extra-contractual
claims. Jd. In the Fifth Circuit’s view, Dr. Wright
has no remedy under federal common law, despite
the standard flood insurance policy’s language.

REASONS FOR GRANTING THE PETITION

No one disputes that Dr. Wright had a flood
insurance policy. No one disputes that he suffered a
covered loss. No one disputes that Allstate accepted
his proof of loss and led him to believe that he had
done everything to properly raise the claim. And no
one disputes that he had a certain amount of time to
amend his proof of loss if anyone challenged its
sufficiency. The only issue and the essence of this
appeal is whether Allstate may avoid all liability by
purposefully withholding technical complaints with
the proof of loss until after the date which Dr.
Wright is able to amend.

The Fifth Circuit gave Allstate absolute
immunity for this fraudulent conduct and left Dr.
Wright without a remedy simply because, in its view,
Congress had not authorized federal common law
claims. This decision is wrong and dramatically
misinterprets congressional intent. Federal common
law claims are available to Dr. Wright for two
scparate reasons---(1) the federally mandated,
standard flood insurance policy’s language indicates
express congressional authority to authorize federal
common law claims; and. (2) at a minimum, the
policy language illustrates an implicit authorization

7

for a private cause of action. The Fifth Circuit’s
decision improperly rejected both.

I. Appellant is entitled to federal common law
claims pursuant to the express terms of the
Standard Flood Insurance Policy.

Congress specifically intended for federal courts
to develop federal common law in the context of the
National Flood Insurance Act. In fact, the Fifth
Circuit recognized that “the national policies
underlying the [Standard Flood Insurance Policy]
and extensive federal role therein impel our
conclusion that federal common law governs the
claims under flood insurance policies. ...” Spence v.
Omaha Indemnity Insurance Company, 996 F.2d
793, 796 (5th Cir. 1993).

This conclusion is supported by the standard
flood insurance policy’s language, which provides:

This policy and all disputes arising from the
handling of any claim under the policy are
governed exclusively by the flood insurance
regujations issued by FEMA, the National Flood
Insurance Act of 1968, as amended (42 U.S.C.
§4001, et seg.), and Federal common law.

44 C.F.R. Part 61, Appendix A(1), Article IX
(emphasis added). This provision expressly calls for
the development of Federal common law claims to be
brought in disputes arising under the standard flood
insurance policy. As such, the district court should
have allowed Dr. Wright to pursue federal common
law fraud and negligent misrepresentation claims.

8

Federal common law is that law developed by
federal courts “in the absence of directly controlling
constitutional or statutory provisions.” Erwin
Chemerinsky, FEDERAL JURISDICTION (4th ed.), §6.1.
Put another way, the federal common law “refer[s] to
any rule or federal] law created by a court... when
the substance of that rule is not clearly suggested by
federal enactments — constitutional or
congressional.” Martha A. Field, Sources of Law:
The Scope of Federal Common Law, 99 HARV. L. REV.
881, 890 (1986). However, “the vesting of
jurisdiction in the federal courts does not in and of
itself give rise to authority to formulate federal
common law.” Texas Indusiry, Inc. v. Radcliff
Materials, Inc., 451 U.S. 630, 640-41 (1981). Federal
common law has been developed in numerous areas:

Deciding disputes between states;® developing legal
rules to apply statutory and _ constitutional
provisions;’ to protect federal interests;® to develop
admiralty and maritime cases;?’ and most
importantly to fulfill congressional intent."

This Court should acknowledge or create federal
common law fraud and negligent misrepresentation

lilinois v. City of Milwaukee, 406 U.S. 91, 103 (1972).
D’Oench Duhme & Co. v. FDIC, 315 U.S. 447, 472 (1942).
* Clear Field Trust Co. v. United States, 318 U.S. 744 (1943).

° Kossick v. United Fruit Co., 365 U.S. 731 (1961); Chelentis
v. Luckenbach Steam Ship Co., 247 U.S. 372 (1918).

"Textile Workers Union of America v. Lincoln Mills of Ala.,

353 U.S. 448 (1957), Firestone Tire & Rubber Co. v. Bruch, 489
U.S. 101, 110 (1989); National Society of Prof. Eng’rs v. United
States, 435 U.S. 679, 688 (1978).

9

claims. Doing so will serve to protect the federal
government’s interest. Most importantly, however,
the standard flood insurance policy’s language
indicates that FEMA and Congress’ expressly
intended to develop federal common law in the
context of claims arising from the standard flood
insurance policy.

Federal courts have created federal common law
when, as here, Congress has asked them to do so.
This Court has held that “federal common law also
may come into play when Congress has invested
jurisdiction in the federal courts and empowered
them to create governing rules of law.” Texas
Industry, Inc. v. Radcliff Materials, Inc., 451 U.S.
630, 642 (1991). Similarly, in Textile Workers Union
of America v. Lincoln Mills of Aiabama, this Court
held that Congress intended that federal courts
develop common law principles to resolve labor
management disputes that arise under the Taft-
Hartley Act. 353 U.S. 448 (1957). And this Court
has acknowledged that “courts are to develop a
federal common law of rights and allegations under
ERISA plans.” Firestone Tire & Rubber Co. v. Bruch,
489 U.S. 101, 110 (1989); see also National Society of
Professional Engineers v. United States, 435 US.
679, 688 (1978) (reasoning Congress “did not intend
the text of the Sherman Act to delineate the full
meaning of the statute or its application in concrete
situations. The legislative history makes it perfectly
clear that it expected the courts to give shape to the
statute’s broad mandate by drawing on common-law
tradition.”).

10

Finally, federal courts have already developed
fraud and negligent misrepresentation claims in the
context of federal common law. Graham v. Renbrook
School, 692 F.Supp. 102 (D.Conn. 1988) (citing Pence
v. United States, 316 U.S. 332, 338 (1941); In re:
Adler, Coleman Clearing Corp., 247 B.R. 51
(S.D.N.Y., 1999); Mallis v. Bankers Trust Co., 615
F.2d 68, 82 (2d Cir. 1980), cert. denied, 449 U.S. 1123
(1981); Marcus v. AT&T Corp., 938 F. Supp. 1158
(S.D.N.Y. 1996).

The standard flood insurance policy exhibits
congressional intent to expressly authorize federal
common law claims for the fraudulent or negligent
handling of flood insurance claims. The Fifth
Circuit’s holding to the contrary should be reviewed
and reversed.

II. In the alternative, Appellant is entitled to
federal common law claims because they
are implicit in the Standard Flood
Insurance Policy.

Separate and apart from the express
congressional authorization for federal common law
claims found in the language of the standard flood
insurance policy, Dr. Wright also may pursue federal
common law claims because the National Flood
Insurance Act’s language and purpose implies a
private right of action.

This Court has explained that a private remedy
is implied from aé_ statute by examining four
considerations:

11
whether the Plaintiff is “one of the class for
whose especial benefit the statute was
enacted;”

whether “there is any indication of
legislative intent explicit or implicit, either
to create such remedy or to deny one;”

whether it is “consistent with the
underlying purposes of the legislative
scheme to imply such a remedy for the
Plaintiff,” and

“is the cause of action one traditionally
relegated to the state law, in an area
basically of concern of the States.”

Cort v. Ash, 422 U.S. 66, 78 (1975); see also Touche
Ross & Co. v. Redington, 442 U.S. 560, 575 (1975)
(acknowledging that factors are primarily used to
examine congressional intent).

The first prong of Cort considers if the Plaintiff is
a member of the “especial beneficiaries” of the NFIA.
Cort, 422 U.S. at 78. The “especial beneficiary”
status occurs when the statute creates a federal right
in favor of the particular plaintiff. Jd. at 78. To
make this determination, one must review the Act’s
legislative history. Tvll v. Unifirst Federal Savings
and Loan Assoc., 653 F.2d 152, 159 (5th Cir. 1981).

The Fifth Circuit improperly relied on its earlier
holding in Till. There, homeowners sued a federal
savings and loan association because it failed to

require them to obtain flood insurance as required by
42 U.S.C. §§ 4012a(b) and 4104a. The Till Court
considered if the two provisions provided an implicit

12
cause of action. In finding that the provisions did
not provide an implicit cause of action, the court
simply evaluated the language of the two provisions.
It did not determine as a genera} matter that the
National Flood Insurance Act never conferred an
implicit cause of action.

Dr. Wright bases his argument on an entirely
different provision of the Act — 44 C.F.R. Part 61,
Appendix A(1), Article IX (the codification of the
Standard Flood Insurance Policy). This provision,
unlike those at issue in 7%l/, actually does indicate
that insureds, like Dr. Wright, are intended to be
“especial beneficiaries.”

The Housing and Urban Development Act of
1968, which contained the National Flood Insurance
Act’s original text, demonstrates that Dr. Wright is a

beneficiary especial of the standard flood insurance
policy. Congress described the bill as:

The Housing and Urban Development Act of
1968 as approved by the committee reaffirms our
national housing goals and makes extensive
modifications and additions to our housing
programs to accelerate progress. Since the
declaration in the 1949 act that our national
objective was a ‘decent home and a suitable living
environment for every American family’ our
country has invested heavily in the production of
housing for low and moderate income families and
in the improvement of our towns and cities.
While we can- take- pride in _ these
accomplishments, they have fallen far short of
today’s needs. Progress has been repeatedly

13

interrupted by period and tight money and
budgetary pressures on the Federal Government.
Moreover, population growth and migration to our
cities has continued at a high rate, off-setting.
much of the progress which has been made... the
bill serves the important objective of making
major improvements in our present housing
programs.

H.R. Rep. 90-1585, 1968 U.S.C.C.A.N. 2873

Congress’ intent is further evidenced from the
bill’s introduction. Congress sought to “accelerate
progress” in the home market and to provide a
“suitable living environment” for “every American
family.” To accomplish these goals, Congress
promised Americans aid for homeownership,
liberalized FHA financing, urban renewal projects,

flood insurance, and various other programs.
Congress clearly envisioned home owners as this
bill’s “especial beneficiaries.” Congress wanted
Americans buying homes and they wanted them to
do so with certain benefits, like flood insurance.
Under the heading for the NFIA, Title XI ~— National
Flood Insurance, Congress stated:

Heavy losses over the years from hurricanes
in the coastal areas and from storms in inland
areas of the Nation dramatize the lack of
insurance protection against flood damage.
Insurance protection against the risk of
destruction caused by tornadoes and other
natural catastrophes is generally available, but
it is not available against the risk of flood loss.

14
Here, Congress was not suggesting that the Federal
Government needs protection from losses. It is
clearly stating that individuals need protection.

The bill offered further “benefits” in the form of
reduced cost flood insurance. H.R. Rep. 90-1585,
1968 U.S.C.C.A.N 2873, 2968. Put simply, American
citizens were not able to obtain flood insurance at
reasonable rates prior to the passage of the Act in
1968. The result was catastrophic losses for the
American people. To counteract these losses, and to
protect all American citizens from the strain of
having to pay for natural disasters, Congress stepped
in to provide benefits to those who needed it.
Congress wanted to encourage people to obtain this
insurance and termed such protection a “benefit.”
Thus, Dr. Wright is the exact type of beneficiary
envisioned by the Congress in 1968.

The second prong of the Cort analysis considers if
an imphed cause of action is within the statute.
Here, the National Flood Insurance Act specifically
references the federal common law as governing
claims arising under the Act. This is “an indication
of legislative intent” to create federal common law
claims. The Amendment to the NFIA preempts
state-based claims but provides for federal common-
law causes of action. As Congress could not have
foreseen FE MA’s preemptive actions, private causes
of action under the federal common law must be a
viable alternative to individuals harmed by their
flood insurance carrier.

The third prong of Cort considers if the remedy in
this case is not inconsistent with the Act’s

15

“underlying legislative purpose.” The standard flood
insurance’ policy provision’s express terms
demonstrates unequivocally that providing Dr.
Wright with federal common law fraud and negligent
misrepresentation claims would not be inconsistent
with the underlying legislative purpose. Stripping
him of the only remaining causes of action he has
against his insurance carrier would deprive him of
that protection. Those damages would be
compensable to Dr. Wright but for the fact that
Allstate fraudulently induced him into filing and not
amending what they claim is a technically deficient
proof of loss. He, therefore, would face further
damage if he could not hold his insurance company
accountable for their tortious conduct in denying his
claims.

Finally, the fourth prong of Cort would not apply

in this case based upon the Amendment to the Act.
As the Fifth Circuit has already found that the
Amendment preempts state law claims, a discussion
about whether or not “the cause of action is one
traditionally relegated to state law” is moot.

The congressional intent evidenced by the bill’s
language offering protection for individuals in flood-
prone regions is significant. Accordingly, Dr. Wright
should be allowed to pursue his federal common law
causes of action under this Court’s holding in Cort.

CONCLUSION

Dr. Wright paid for and obtained flood insurance,
which covered the damages he suffered from Tropical
Storm Allison. Allstate has thus far escaped liability
on a technicality with Dr. Wright’s proof of loss.

16

Allstate created this problem by telling Dr. Wright
he had submitted a proof of loss in compliance with
his policy and then withholding any complaint about
the document’s form until after the deadline for
amendments had passed. Dr. Wright’s only option to
recover any funds under his flood policy is to pursue
federal common law claims. He respectfully prays
that this Court allow him to do so.

This Court should review and reverse the Fifth
Circuit’s holding.

Respectfully submitted,

Robert L. Galloway Dax O. Faubus

RoB GALLOWAY, PC FAUBUS TAFT

1303 San Jacinto SCARBOROUGH, LLP

Houston, Texas 77002 1010 Lamar, Ste 1020

(713) 646-2927 Houston, Texas 77002
(713) 222-6400

December 10, 2007

APPENDIX

TABLE OF CONTENTS

Appendix A:
Memorandum Opinion of the United
States District Court for the Southern
District of Texas, Houston Division
dated March 31, 2004

Appendix B:
Opinion of the United |
Appeals Fifth Circuit «
2005

Appendix C:
Order from the United States Dis
Court for the Southern District of
Texas, Houston Division dated
December 2, 2005

Appendix D:
Opinion of the United Sta
Appeals for tne Fifth Circult

‘ +
Pt ye)

September 11, 2¢
Appendix E:

44 C.F.R. Part
Appendix F:

National F
$4072

APPENDIX A

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION

DR. THOMAS WRIGHT §
Plaintiff 8

§ NO. H-03-0915

ALLSTATE INS.CO. §
And GUY CHAPMAN §

Defendant.

MEMORANDUM OPINION
I.

Before the Court is the plaintiff, Dr. Thomas
Wnight’s, breach of contract suit brought against the
defendant, Allstate Insurance Company concerning flood
damages that he alleges occurred at his residence
luring tropical storm Allison on June 1, 2001. The
Court has heard the testimony of the witnesses,
reviewed the deposition testimonies, examined the
locumentary evidence and determines that the
plaintiff should recover on his claim.

iI.

The plaintiff is the owner of a home in Houston

Trhy« . y . r > « 1. a tT “cy ‘ . » Cannon v. Univ. of Chicago, 441 U.S. 677, 690 n. 13, 99 S.Ct.
1946, 60 L.Ed.2d 560 (1979).

Till, 653 F.2d at 158 n. 13.

5 Td. at 159

t2a

and loan association based on its failure to require
them to obtain flood insurance pursuant to 42 U.S.C.
§§ 4012a(b) and 4104a. To determine whether the
NFIA afforded such borrowers a private cause of
action, we first looked to the statutory language in
sections 4012a(b) and 4104a. We found in that
language ro clear right in favor of the borrowers.
Rather, “(tlhe statutes merely. require lending
institutions to notify borrowers of flood plains and
require appropriate flood insurance.” We then
looked to the NFIA as a whole and determined that
“the principal purpose in enacting the Program was
to reduce, by implementation of adequate land use
controls and flood insurance, the massive burden on
the federal fisc of the ever-increasing federal flood
disaster assistance.””’ Even though Till involved
different sections of the NFIA than those implicated
here, we perceive no reason why our earlier
determination of the Act's purpose should not be
applicable in the instant case

Wright nevertheless urges that Till was
decided incorrectly, insisting that the primary
purpose of the NFIA is to benefit policyholders. To
support this contention, Wright cites congressional
statements regarding the Housing and Urban
Development Act of 1968, which contained the
original text of the National Flood Insurance Act. As
described by Congress in the Introduction to the
Hlousing and Development Act, the purpose of the

™ Id. at 158
*’ Id. at 159

43a

Act is to “accelerate progress” in the home market
and provide a “suitable living environment for every
American family.” Thus, Wright maintains,
Congress clearly envisioned home owners as especial
beneficiaries of the bill. The Introduction of the
Housing and Urban Development Act does not,
however, include a single reference to the NFIA,
flood insurance, or hurricanes. We find more
convincing the discussion contained in congressional
statements, like those cited in Till, that specifically
refer to the NFIA.

Wright's second reference is even _ less
convincing. To demonstrate that the NIFA was
enacted to benefit policyholders, Wright points to the
language contained in the heading of the NFIA, Title
XI, in which Congress stated:

Heavy losses over the year from hurricanes in

the coastal areas and from storms in inland

areas of the Nation dramatize the lack of
insurance protection against flood damage.

Insurance’ protection against risk of

destruction caused by tornadoes and other

natural catastrophes is generally available,
but is not available against the risk of flood
loss.”
At first glance this language might appear to support
Wrights argument, but it is actually just a part of

*® HT R. REP. No. 90-1585 (1968). as renrinted in 1968
U.S.C.C.A.N. 2873, 2873
°2 Id. at 2966

44a

the language cited in Till,’ which goes on to state:

These facts underline the need for a program

which will make insurance against flood

damage available, encourage persons to

become aware of the risk of occupying the

flood plains, and reduce the mounting Federal

expenditures for disaster relief assistance.”
Viewing this statement in its entirety, as we did in
Till, we remain convinced that the primary purpose
of the NFIA is to *397 reduce the financial burden on
the federal fisc.

b. Legislative Intent

To answer the second question of the Cort
analysis, we must examine the legislative history of
the statute and determine whether there is
congressional intent to create or deny a private right
of action.** “[I]n cases where the statutes and
legistative history are silent on the question of a
private remedy, ‘implying a private right of action on
the basis of congressional silence is a hazardous
enterprise, at best.’ ”*

Wright insists that this requirement is
fulfilled, because the SFIP specifically references
federal common law as governing claims arising out
of the insurance policy. Aside from this language,

°° Till, 653 F.2d at 159 n. 14.

“H.R. REP. No. 90-1585 (1968), as reprinted in 1968
U.S.C.C.A.N. 2966-67 (emphasis added).

* Cort v. Ash, 422 US. 66, 78, 95 S.Ct. 2080, 45 L.Ed.2d 26
(1975).

* Till, 653 F.2d at 160 (citing Touche Ross & Co., 442 U.S. 560,
571, 99 S.Ct. 2479, 61 L.Ed.2d 82 (1979)).

45a

however, there is no indication in the legislative
history or elsewhere that Congress intended to
create or permit additional causes of action. Again,
that lone reference to federal common law instructs
courts to consider standard principles of interpreting
insurance contracts when resolving questions
regarding the policy's coverage; it is not an invitation
to courts to fashion additional remedies or causes of
action.*4

We deem it significant that Congress
expressly provided a private remedy for policyholders
in 42 U.S.C. §§ 4053 and 4072. These statutes allow
a policyholder to sue in federal court if he is
dissatisfied with the amount of a claim payment.
That Congress expressly authorized private causes of
action in other sections of the NFIJA weighs against
Wright's theory that Congress implicitly intended
the courts to fashion additional causes of action. As
the Supreme Court recognized in Touche Ross & Co.
vu. Redington,“when Congress wished to provide a
private damages remedy, it knew how to do so.”**

c. Underlying Purpose / State Law Claim

The third and fourth Cort questions are
relevant only if the answers to the first two indicate
congressional intent to create a private remedy.” As
we find no congressional intent to allow extra-

** Dickerson v. State Farm Fire & Cas. Co., Civ. Action No. 06-
5181, 2007 WL 1537631, at *2 (E.D.La. May 23, 2007).

> 442 U.S. at 572, 99 S.Ct. 2479.

*® California v. Sierra Club, 451 U.S. 287, 297, 101 S.Ct. 17’
68 L.Ed.2d 101 (1981).

mJ
qn

46a

contractual claims in flood insurance cases, it is
unnecessary for us to address the last two questions
of the Cort test. If we were to do so, however, tiie
answers to the third and fourth questions would not
change our conclusion. The third question of the Cort
test asks whether creating a cause of action would be
consistent with the underlying purpose of the
legislation. We have already determined that the
overarching purpose of the NFIA is to relieve the
burden on the federal treasury caused by flood
damage. Subjecting the government to. extra-
contractual claims on flood insurance policies would
increase rather than confine the burdens on the
federal government and the federal fisc that the
NFIA was created to mitigate. Inferring a private
right of action would run counter to the underlying
purpose of the Act. The last Cort question, which
recognizes that it may be inappropriate to infer a
cause of action based solely on federal law when a
state law remedy exists,’ is not applicable in this
case, because the NFIA preempts state law claims
that arise under federal flood insurance policies.**
Ill. CONCLUSION

Our review of the language of the NFIA and
the SFIP reveals no express authorization for a
policyholder to bring an extra-contractual claim
against a WYO insurer. Neither do we perceive any
evidence that Congress implicitly intended that
policyholders be able to file claims against WYO

’ Cort, 422 U.S. at 84, 95 S.Ct. 2080.
* Wright v. Allstate, 415 F.3d 384 (5th Cir.2005).

47a

insurers other than those specifically provided for in
the Act. As Wright's extra-contractual claims for
fraud and negligent misrepresentation are neither
explicitly nor implicitly authorized by the NFIA, the
judgment of the district court ts

AFFIRMED.

44a

APPENDIX E

Code of Federal Regulations
Title 44.
Appendix A(1) To Part 61

Federa] Emergency Management Agency, Federal
Insurance Administration

Standard Flood Insurance Policy

DWELLING FORM
Please read the policy carefully. The flood insurance
provided is subject to limitations, restrictions, and
exclusions. This policy covers only:

1. A non-condominium residential building designed
for principal use as a dwelling place of one to four
families, or

2. A single family dwelling unit in a condominium
building.

[. Agreement
The Federal Emergency Management Agency

(FEMA) provides flood insurance under the terms of
the National Flood Insurance Act of 1968 and its

Amendments, and Title 44 of the Code of Federal
Regulations

45a

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

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.

Il. Definitions

A. In this policy, "you" and "your" refer to the
insured(s) shown on the Declarations Page of this
policy and your spouse, if a resident of the same
household. Insured(s) includes: Any mortgagee and
loss payee named in the Application and
Declarations Page, as well as any other mortgagee or
loss payee determined to exist at the time of loss in
the order of precedence. "We," "us," and "our" refer to
the insurer.

Some definitions are complex because they are
provided as they appear in the law or regulations, or
result from court cases. The precise definitions are
intended to protect you.

46a

Flood, as used in this flood insurance policy, means:

1. A general and temporary condition of partial or
complete inundation of two or more acres of normally
dry land area or of two or more properties (one of
which is your property) from:

a. Overflow of inland or tidal waters,

b. Unusual and rapid accumulation or runoff of
surface waters from any source,

c. Mudflow.

2. Collapse or subsidence of land along the shore ofa
lake or similar body of water as a result of erosion or
undermining caused by waves or currents of water
exceeding anticipated cyclical levels that result in a
flood as defined in A.1.a. above.

B. The following are the other key definitions we use
in this policy:

1. Act. The National Flood Insurance Act of 1968 and
any amendments to it.

2. Actual Cash Value. The cost to replace an insured
item of property at the time of loss, less the value of
its physical depreciation.

47a

3. Application. The statement made and signed by
you or your agent in applying for this policy. The
application gives information we use to determine
the eligibility of the risk, the kind of policy to be
issued, and the correct premium payment. The
application is part of this flood insurance policy. For
us to issue you a policy, the correct premium
payment must accompany the application.

4. Base Flood. A flood having a one percent chance of
being equaled or exceeded in any given year.

5. Basement. Any area of the building, including any
sunken room or sunken portion of a room, having its
floor below ground level (subgrade) on all sides.

6. Building.

a. A structure with two or more outside rigid walls
and a fully secured roof, that is affixed to a
permanent site;

b. A manufactured home (a "manufactured home,"
also known as a mobile home, is a structure: built on
a permanent chassis, transported to its site in one or
more sections, and affixed to a permanent
foundation); or

c. A travel trailer without wheels, built on a chassis
and affixed to a permanent foundation, that is
regulated under the community's floodplain

48a

management and building ordinances or laws.

Building does not mean a gas or liquid storage tank
or a recreational vehicle, park trailer or other similar
vehicle, except as described in B.6.c. above.

7. Cancellation. The ending of the insurance
coverage provided by this policy before the expiration
date.

8. Condominium. That form of ownership of real
property in which each unit owner has an undivided
interest in common elements.

9. Condominium Association. The entity made up of
the unit owners responsible for the maintenance and
operation of:

a. Common elements owned 1n undivided shares by
unit owners; and

b. Other real property in which the unit owners have
use rights; where membership in the entity is a
required condition of unit ownership.

10. Declarations Page. A computer-generated
summary of information you provided in the
application for insurance. The Declarations Page also
describes the term of the policy, limits of coverage,
and displays the premium and our name. The
Declarations Page is e part of this flood insurance

policy.

11. Described Location. The lecation where the
insured building(s) or personal property are found.
The described location is shown on the Declarations
Page.

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.

13. Dwelling. A building designed for use as a
residence for no more than four families or a single-
family unit in a building under a condominium form
of ownership.

14. Elevated Building. A building that has no
basement and that has its lowest elevated floor
raised above ground level by foundation walls, shear
walls, posts, piers, pilings, or columns.

15. Emergency Program. The initial phase of a
community's participation in the National Flood
Insurance Program. During this phase, only limited
amounts of insurance are available under the Act.

16. Expense Constant. A flat charge you must pay on
each new or renewal policy to defray the expenses of
the Federal Government related to flood insurance.

50a

17. Federal Policy Fee. A flat charge you must pay on
each new or renewal policy to defray certain
administrative expenses incurred in carrying out the
National Flood Insurance Program. This fee covers
expenses not covered by the Expense Constant.

18. Improvements. Fixtures, alterations,
installations, or additions comprising a part of the
insured dwelling or the apartment in which you
reside.

19. Mudflow. A river of liquid and flowing mud on
the surface of normally dry land areas, as when
earth is carried by a current of water. Other earth
movements, such as landslide, slope failure, or a
saturated soil mass moving by liquidity down a
slope, are not mudflows.

20. National Flood Insurance Program (NFIP). The
program of flood insurance coverage and floodplain
management administered under the Act and
applicable Federal regulations in Title 44 of the Code
of Federal Regulations, Subchapter B.

21. Policy. The entire written contract between you
and us. It includes:

a. This printed form;

b. The application and Declarations Page;

Sla
c. Any endorsement(s) that may be issued; and

d. Any renewal certificate indicating that coverage
has been instituted for a new policy and new policy
term.

Only one dwelling, which you specifically described
in the application, may be insured under this policy.

22. Pollutants. Substances that include, but are not
limited to, any solid, liquid, gaseous, or thermal
irritant or contaminant, including smoke, vapor,
soot, fumes, acids, alkalis, chemicals, and waste.
"Waste" includes, but is not limited to, materials to
be recycled, reconditioned, or reclaimed.

23. Post-FIRM Building. A building for which
construction or substantial improvement occurred
after December 31, 1974, or on or after the effective
date of an initial Flood Insurance Rate Map (FIRM),
whichever is later.

24. Probation Premium. A flat charge you must pay
on each new or renewal policy issued covering
property in a community the NFIP has placed on
probation under the provisions of 44 CFR 59.24.

25. Regular Program. The final phase of a
community's participation in the National Flood
Insurance Program. In this phase, a Flood Insurance
Rate Map is in effect and full limits of coverage are

avallable under the Act.

26. Special Flood Hazard Area. An area having
special flood or mudflow, and/or flood-related erosion
hazards, and shown on a Flood Hazard Boundary
Map or Flood Insurance Rate Map as Zone A, AO,
A1-A30, AE, A99, AH, AR, AR/A, AR/AE, AR/AH,
AR/AO, AR/A1-A30, V1-V30, VE, or V.

27. Umit. A single-family unit you own in a
condominium building

28. Valued Policy. A policy in which the insured and
the insurer agree on the value of the property
insured, that value being payable in the event of a
total loss. The Standard Flood Insurance Policy is
not a valued policy.

We insure against direct physical loss by or from
flood to

ry } | ; ; } .
1. The dwelling at the described location, or for a
period of 45 days at another location as set forth in

Ii1.C.2.b., Property Removed to Safety

2. Additions and extensions attached to and in

contact with the dwelling by means ofa rigid exterior

53a

wall, a solid load-bearing interior wall, a stairway,
an elevated walkway, or a roof. At your option,
additions and extensions connected by any of these
methods may be separately insured. Additions and
extensions attached to and in contact with the
building by means of a common interior wall that is
not a solid load-bearing wall are always considered
part of the dwelling and cannot be separately
insured.

3. A detached garage at the described location.
Coverage is limited to no more than 10% of the limit
of liability on the dwelling. Use of this insurance is
at your option but reduces the building limit of
liability. We do not cover any detached garage used
or held for use for residential (i.e., dwelling),
business, or farming purposes.

4. Materials and supplies to be used for construction,
alteration, or repair of the dwelling or a detached
garage while the materials and supplies are stored in
a fully enclosed building at the described location or
on an adjacent property.

5. A building under construction, alteration, or repair
at the described location.

a. If the structure is not yet walled or roofed as
jescribed in the definition for building (see II.B.6.a.)

then coverage applies:

o4a
(1) Only while such work is in progress; or

(2) If such work is halted, only for a period of up to
90 continuous days thereafter.

b. However, coverage does not apply until the
building is walled and roofed if the lowest floor,
including the basement floor, of a non-elevated
building or the lowest elevated floor of an elevated
building is:

(1) Below the base flood elevation in Zones AH, AE,
A1-A30, AR, AR/AE, AR/AH, AR/A1-A30, AR/A,
AR/AO: or

(2) Below the base flood elevation adjusted to include
the effect of wave action in Zones VE or V1-V30.

The lowest floor levels are based on the bottom of the
lowest horizontal structural member of the floor in
Zones VE or V1-V30 and the top of the floor in Zones
AH, AE, Al-A80, AR, AR/AE, AR/AH, AR/A1-A30,
AR/A, AR/AO.

6. A manufactured home or a travel trailer as
described in the Definitions section (see I1.B.6.b. and
11.B.6.c.)

If the manufactured home or travel trailer is in a
special flood hazard area, it must be anchored in the

following manner at the time of the loss:

55a

a. By over-the-top or frame ties to ground anchors; or

b. In accordance with the manufacturer's
specifications; or

c. In compliance with the community's floodplain
management requirements unless it has_ been
continuously insured by the NFIP at the same

described location since September 30, 1982.

7. The following items of property which are covered
under Coverage A only:

a. Awnings and canopies;

b. Blinds;

c. Built-in dishwashers;

d. Built-in microwave ovens;

e. Carpet permanently installed over unfinished
flooring;

f. Central air conditioners:

gy. Elevator equipment;

h. Fire sprinkler systems;

06a
i. Walk-in freezers;
j. Furnaces and radiators;
k. Garbage disposal units;
1. Hot water heaters, including solar water heaters;
m. Light fixtures;

n. Outdoor antennas and aerials fastened _ to
buildings;

o. Permanently installed cupboards, bookcases,
cabinets, paneling, and wallpaper;

p. Plumbing fixtures;

q. Pumps and machinery for operating pumps;
r. Ranges, cooking stoves, and ovens;

s. Refrigerators; and

t. Wall mirrors, permanently installed.

8. Items of property in a building enclosure below the
lowest elevated floor of an elevated post-FIRM
building located in Zones Al-A30, AE, AH, AR, AR/A,
AR/AE, AR/AH, AR/A1-A30, V1-V30, or VE, or in a

basement, regardless of the zone. Coverage is limited

57a

to the following:

a. Any of the following items, if installed in their
functioning locations and, if necessary for operation,
connected to a power source:

(1) Central air conditioners;

(2) Cisterns and the water in them;

(3) Drywall for walls and ceilings in a basement and
the cost of labor to nail it, unfinished and unfloated
and not taped, to the framing;

(4) Electrical junction and circuit breaker boxes;

(5) Electrical outlets and switches;

(6) Elevators, dumbwaiters and related equipment,
except for related equipment installed below the base
flood elevation after September 30, 1987;

(7) Fuel tanks and the fuel in them;

(8) Furnaces and hot water heaters;

(9) Heat pumps;

(10) Nonflammable insulation in a basement;

(11) Pumps and tanks used in solar energy systems;

58a

(12) Stairways and staircases attached to the
building, not separated from it by _ elevated
walkways;

(13) Sump pumps;

(14) Water softeners and the chemicals in them,
water filters, and faucets installed as an integral
part of the plumbing system;

(15) Well water tanks and pumps;

(16) Required utility connections for any item in this
list; and

(17) Footings, foundations, posts, pilings, piers, or
other foundation walls and anchorage systems
required to support a building.

b. Clean-up.

B. Coverage B--Personal Property
1. If you have purchased personal property coverage,
we insure against direct physical loss by or from

flood to personal property inside a building at the
described location, if:

a. The property is owned by you or your household
family members; and

59a

b. At your option, the property is owned by guests or
servants.

Persona! property is also covered for a period of 45
days at another location as set forth in III.C.2.b.,
Property Removed to Safety.

Personal property in a building that is not fully
enclosed must be secured to prevent flotation out of
the building. If the personal property does float out
during a flood, it will be conclusively presumed that
it was not reasonably secured. In that case there is
no coverage for such property.

2. Coverage for personal property includes the
following property, subject to B.1. above, which is
covered under Coverage B only:

a. Air conditioning units, portable or window type;

b. Carpets, not permanently installed, over
unfinished flooring;

c. Carpets over finished flooring;
d. Clothes washers and dryers;

e. "Cook-out" grills;

f. Food freezers, other than walk-in, and food in any

60a

freezer; and

g. Portable microwave ovens and_ portable
dishwashers.

3. Coverage for items of property in a building
enclosure below the lowest elevated floor of an
elevated post-FIRM building located in Zones Al-
A30, AE, AH, AR, AR/A, AR/AE, AR/AH, AR/A1-A30,
V1-V30, or VE, or in a basement, regardless of the
zone, is limited to the following items, if installed in
their functioning locations and, if necessary for
operation, connected to a power source:

a. Air conditioning units, portable or window type;
b. Clothes washers and dryers; and

c. Food freezers, other than walk-in, and food in any
freezer.

4. If you are a tenant and have insured personal
property under Coverage B in this policy, we will
cover such property, including your cooking stove or
range and refrigerator. The policy will also cover
improvements made or acquired solely at your
expense in the dwelling or apartment in which you
reside, but for not more than 10% of the limit of
liability shown for personal property on _ the
Declarations Page. Use of this insurance is at your
option but reduces the personal property limit of

6la
liability.

5. If you are the owner of a unit and have insured
personal property under Coverage B in this policy,
we will also cover your interior walls, floor, and
ceiling (not otherwise covered under a_ flood
insurance policy purchased by your condominium
association) for not more than 10% of the limit of
liability shown for personal property on the
Declarations Page. Use of this insurance is at your
option but reduces the personal property limit of
liability.

6. Special Limits. We will pay no more than $2,500
for any one loss to one or more of the following kinds
of personal property:

a. Artwork, photographs, collectibles, or
memorabilia, including but not limited to, porcelain
or other figures, and sports cards;

b. Rare books or autographed items;

c. Jewelry, watches, precious and semi-precious
stones, or articles of gold, silver, or platinum;

d. Furs or any article containing fur which
represents its principal value; or

e. Personal property used in any business.

62a

7. We will pay only for the functional value of
antiques.

C. Coverage C--Other Coverages
1. Debris Removal.
a. We will pay the expense to remove non-owned
debris that is on or in insured property and debris of
insured property anywhere.
b. If you or a member of your household perform the
removal work, the value of your work will be based

on the Federal minimum wage.

c. This coverage does not increase the Coverage A or
Coverage B Limit of Liability.

2. Loss Avoidance Measures

a. Sandbags, Supplies, and Labor

(1) We will pay up to $1,000 for costs you incur to
protect the insured building from a flood or
imminent danger of flood, for the following:

(a) Your reasonable expenses to buy:

(i) Sandbags, including sand to fill them;

(ii) Full for temporary levees;

63a

(iii) Pumps; and

(iv) Plastic sheeting and lumber used in connection
with these items.

(b) The value of work, at the Federal minimum wage,
that you or a member of your household perform.

(2) This coverage for Sandbags, Supplies and Labor
only applies if damage to insured property by or from
flood is imminent and the threat of flood damage is
apparent enough to lead a person of common
prudence to anticipate flood damage. One of the
following must also occur:

(a) A general and temporary condition of flooding in
the area near the described location must occur, even
if the flood does not reach the building; or

(b) A legally authorized official must issue an
evacuation order or other civil order for the
community in which the building is located calling
for measures to preserve life and property from the
peril of flood.

This coverage does not increase the Coverage A or
Coverage B Limit of Liability.

b. Property Removed to Safety

64a

(1) We will pay up to $1,000 for the reasonable
expenses you incur to move insured property to a
place other than the described location that contains
the property in order to protect it from flood or the
imminent danger of flood.

Reasonable expenses include the value of work, at
the Federal minimum wage, you or a member of your
household perform.

(2) If you move insured property to a location other
than the described location that contains the
property, in order to protect it from flood or the
imminent danger of flood, we will cover such
property while at that location for a period of 45
consecutive days from the date you begin to move it
there. The personal property that is moved must be
placed in a fully enclosed building or otherwise
reasonably protected from the elements.

Any property removed, including a moveable home
described in II.6.b.and c., must be placed above
ground level or outside of the special flood hazard
area.

This coverage does not increase the Coverage A or
Coverage B Limit of Liability.

3. Condominium Loss Assessments.

a. If this policy insures a unit, we will pay, up to the

65a

Coverage A limit of liability, your share of loss
assessments charged against you by the
condominium association in accordance with the
condominium association's articles of association,
declarations and your deed.

The assessment must be made as a result of direct
physical loss by or from flood during the policy term,
to the building's common elements.

b. We will not pay any loss assessment charged
against you:

(1) And the condominium association by any
governmental body;

(2) That results from a deductible under the
insurance purchased by the condominium association
insuring common elements;

(3) That results from a loss to personal property,
including contents of a condominium building;

(4) That results from a loss sustained by the
condominium association that was not reimbursed
under a flood insurance policy written in the name of
the association under the Act because the building
was not, at the time of loss, insured for an amount
equal to the lesser of:

(a) 80% or more of its full replacement cost; or

66a

(b) The maximum amount of insurance permitted
under the Act;

(5) To the extent that payment under this policy for a
condominium building loss, in combination with
payments under any other NFIP policies for the
same building loss, exceeds the maximum amount of
insurance permitted under the Act for that kind of
building; or

(6) To the extent that payment under this policy for a
condominium building loss, in combination with any
recovery available to you as a tenant in common
under any NFIP condominium asscciation policies
for the same building loss, exceeds the amount of
insurance permitted under the Act for a single-
family dwelling.

Loss assessment coverage does not increase the
Coverage A Limit of Liability.

D. Coverage D--Increased Cost of Compliance

1. General.

This policy pays you to comply with a State or local
floodplain management law or ordinance affecting
repair or reconstruction of a structure suffering flood
damage. Compliance activities eligible for payment
are: elevation, floodproofing, relocation, or demolition

67a

(or any combination of these activities) of your
structure. Eligible floodproofing activities are limited
to:

a. Non-residential structures.

b. Residential structures with basements that satisfy
FEMA's standards published in the Code of Federal
Regulations [44 CFR 60.6 (b) or (c) J.

2. Limit of Liability.

We will pay you up to $30,000 under this Coverage
1D--Increased Cost of Compliance, which only applies
to policies with building coverage (Coverage A). Our
payment of claims under Coverage D is in addition to
the amount of coverage which you selected on the
application and which appears on the Declarations
Page. But the maximum you can collect under this
policy for both Coverage A--Building Property and
Coverage D--Increased Cost of Compliance cannot
exceed the maximum permitted under the Act. We do
not charge a separate deductible for a claim under
Coverage D.

2. Limit of Liability.

We will pay you up to $20,000 under this Coverage
D--Increased Cost of Compliance, which only applies
to policies with building coverage (Coverage A). Our
payment of claims under Coverage D is in addition to

68a

the amount of coverage which you selected on the
application and which appears on the Declarations
Page. But the maximum you can collect under this
policy for both Coverage A--Building Property and
Coverage D--Increased Cost of Compliance cannot
exceed the maximum permitted under the Act. We do
not charge a separate deductible for a claim under
Coverage D.

3. Eligibility

a. A structure covered under Coverage A--Building
Property sustaining a loss caused by a flood as
defined by this policy must:

(1) Be a "repetitive loss structure." A repetitive loss
structure is one that meets the following conditions:

(a) The structure is covered by a contract of flood
insurance issued under the NFIP.

(b) The structure has suffered flood damage on two
occasions during a 10-year period which ends on the
date of the second loss.

(c) The cost to repair the flood damage, on average,
equaled or exceeded 25% of the market value of the
structure at the time of each flood loss.

(d) In addition to the current claim, the NFIP must
have paid the previous qualifying claim, and the

69a

State or community must have a cumulative,
substantial damage provision or repetitive loss
provision in its floodplain management law or
ordinance being enforced against the structure; or

(2) Be a structure that has had flood damage in
which the cost to repair equals or exceeds 50% of the
market value of the structure at the time of the flood.
The State or community must have a substantial
damage provision in its floodplain management law
or ordinance being enforced against the structure.

b. This Coverage D pays you to comply with State or
local floodplain management laws or ordinances that
meet the minimum standards of the National Flood
Insurance Program found in the Code of Federal
Regulations at 44 CFR 60.3. We pay for compliance
activities that exceed those standards under these
conditions:

(1) 3.a.(1) above.

(2) Elevation or floodproofing in any risk zone to
preliminary or advisory hbase flood elevations
provided by FEMA which the State or loca!
government has adopted and is enforcing for flood-
damaged structures in such areas. (This includes
compliance activities in B, C, X, or D zones which are
being changed to zones with base flood elevations.
This also includes compliance activities in zones
where base flood elevations are being increased, and

70a

a flood-damaged structure must comply with the
higher advisory base flood elevation.) Increased Cost
of Compliance coverage does not apply to situations
in B, C, X, or D zones where the community has
derived its own elevations and is enforcing elevation
or floodproofing requirements for flood-damaged
structures to elevations derived solely by the
community.

(3) Elevation or floodproofing above the base flood
elevation to meet State or local "freeboard"
requirements, i.e., that a structure must be elevated
above the base flood elevation.

c. Under the minimum NFIP criteria at 44 CFR
60.3(b)(4), States and communities must require the
elevation or floodproofing of structures’ in
unnumbered A zones to the base flood elevation
where elevation data is obtained from a Federal,
State, or other source. Such compliance activities are
also eligible for Coverage D.

d. This coverage will also pay for the incremental
cost, after demolition or relocation, of elevating or
floodproofing a structure during its rebuilding at the
same or another site to meet State or local floodplain
management laws or ordinances, subject to
Exclusion D.5.g. below.

e. This coverage will also pay to bring a flood-
damaged structure into compliance with state or

Tla

local floodplain management laws or ordinances even
if the structure had received a variance before the
present loss from the applicable floodplain
management requirements.

4. Conditions.

a. When a structure covered under Coverage A--
Building Property sustains a loss caused by a flood,
our payment for the loss under this Coverage D will
be for the increased cost to elevate, floodproof,
relocate, or demolish (or any combination of these
activities) caused by the enforcement of current State
or local floodplain management ordinances or laws.
Our payment for eligible demolition activities will be
for the cost to demolish and clear the site of the
building debris or a portion thereof caused by the
enforcement of current State or Jocal floodplain
management ordinances or laws. Eligible activities
for the cost of clearing the site will include those
necessary to discontinue utility service to the site
and ensure proper abandonment of on-site utilities.

b. When the building is repaired or rebuilt, it must
be intended for the same occupancy as the present
building unless otherwise required by current
floodplain management ordinances or laws.

5. Exclusions.

Under this Coverage D (Increased Cost of

72a

Compliance) we will not pay for:

a. The cost to comply with any floodplain
management law or ordinance in communities
participating in the Emergency Program.

b. The cost associated with enforcement of any
ordinance or law that requires any insured or others
to test for, monitor, clean up, remove, contain, treat,
detoxify or neutralize, or in any way respond to, or
assess the effects of pollutants.

c. The loss in value to any insured building or other
structure due to the requirements of any ordinance
or law.

d. The loss in residual value of the undamaged
portion of a building demolished as a consequence of
enforcement of any State or local floodplain
management law or ordinance.

e. Any Increased Cost of Compliance under this
Coverage D:

(1) Until the building is elevated, floodproofed,
demolished, or relocated on the same or to another
premises; and

(2) Unless the building is elevated, floodproofed,
demolished, or relocated as soon as_ reasonably
possible after the loss, not to exceed two years.

f. Any code upgrade requirements, e.g., plumbing or
electrical wiring, not specifically related to the State
or local floodplain management law or ordinance.

g. Any compliance activities needed to bring
additions or improvements made after the loss
occurred into compliance with State or local
floodplain management laws or ordinances.

h. Loss due to any ordinance or law that you were
required to comply with before the current loss.

i. Any rebuilding activity to standards that do not
meet the NFIP's minimum requirements. This
includes any situation where the insured has
received from the State or community a variance in
connection with the current flood loss to rebuild the
property to an elevation below the base flood
elevation.

j. Increased Cost of Compliance for a garage or
carport.

k. Any structure insured under an NFIP Croup Flood
Insurance Policy.

l. Assessments made by a condominium association
on individual condominium unit owners to pay
increased costs of repairing commonly owned
buildings after a flood in compliance with State or

74a
local floodplain management ordinances or laws.

6. Other Provisions.

a. Increased Cost of Compliance coverage will not be
included in the calculation to determine whether
coverage meets the 80% insurance-to-value
requirement for replacement cost coverage as set
forth in VII. General Conditions, V. Loss Settlement.

b. All other conditions and provisions of the policy
apply.

[V. Property Not Covered
We do not cover any of the following:
1. Personal property not inside a building;

2. A building, and personal property in it, located
entirely in, on, or over water or seaward of mean
high tide if it was constructed or substantially
improved after September 30, 1982;

3. Open structures, including a building used as a
boathouse or any structure or building into which
boats are floated, and personal property located in,
on, or over water;

4. Recreational vehicles other than travel trailers
described in the Definitions section (see I[I.B.6.c.)

75a

whether affixed to a permanent foundation or on
wheels;

5. Self-propelled vehicles or machines, including
their parts and equipment. However, we do cover
self-propelled vehicles or machines not licensed for
use on public roads that are:

a. Used mainly to service the described location or

b. Designed and used to assist handicapped persons,
while the vehicles or machines are inside a building
at the described location;

6. Land, land values, lawns, trees, shrubs, plants,
growing crops, or animals;

7. Accounts, bills, coins, currency, deeds, evidences of
debt, medals, money, scrip, stored value cards,
postage stamps, securities, bullion, manuscripts, or
other valuable papers;

8. Underground structures and equipment, including
wells, septic tanks, and septic systems;

9. Those portions of walks, walkways, decks,
driveways, patios and other surfaces, all whether
protected by a roof or not, located outside the
perimeter, exterior walls of the insured building or
the building in which the insured unit is located;

76a

10. Containers, including related equipment, such as,
but not limited to, tanks containing gases or liquids;

11. Buildings or units and all their contents if more
than 49% of the actual cash value of the building is
below ground, unless the lowest level is at or above
the base flood elevation and is below ground by
reason of earth having been used as insulation
material in conjunction with energy efficient building
techniques;

12. Fences, retaining walls, seawalls, bulkheads,
wharves, piers, bridges, and docks;

13. Aircraft or watercraft, or their furnishings and
equipment;

14. Hot tubs and spas that are not bathroom fixtures,
and swimming pools, and their equipment, such as,
but. not limited to, heaters, filters, pumps, and pipes,
wherever located;

15. Property not eligible for flood insurance pursuant
to the provisions of the Coastal Barrier Resources
Act and the Coastal Barrier Improvement Act and
amendments to these Acts;

16. Personal property you own in common with other
unit owners comprising the membership of a
condominium association.

V. Exclusions

A. We only pay for direct physical loss by or from
flood, which means that we do not pay you for:

1. Loss of revenue or profits;

2. Loss of access to the insured property or described
location;

3. Loss of use of the insured property or described
location;

4. Loss from interruption of business or production;

5. Any additional living expenses incurred while the
insured building is being repaired or is unable to be
occupied for any reason;

6. The cost of complying with any ordinance or law
requiring or regulating the construction, demolition,
remodeling, renovation, or repair of property,
including removal of any resulting debris. This
exclusion does not apply to any eligible activities we
describe in Coverage D--Increased Cost of
Compliance; or

~

7. Any other economic loss you suffer.

B. We do not insure a loss directly or indirectly

caused by a flood that is already in progress at the

time and date:

1. The policy term begins; or

2. Coverage is added at your request.

C. We do not insure for loss to property caused
directly by earth movement even if the earth
movement is caused by flood. Some examples of
earth movement that we do not cover are:

1. Earthquake;

2. Landslide:

wo

Land subsidence;

4. Sinkholes;
5. Destabilization or movement of land that results
from accumulation of water in subsurface land area;

or

6. Gradual erosion.

We do, however, pay for losses from mudflow and
land subsidence as a result of erosion that are
specifically covered under our definition of flood (see

1f1.A.1.¢c. and II.A.2.)

[). We do not insure for direct physical loss caused

79a
directly or indirectly by any of the following:
1. The pressure or weight of ice;
2. Freezing or thawing;
3. Rain, snow, sleet, hail, or water spray;

4. Water, moisture, mildew, or mold damage that
results primarily from any condition:

a. Substantially confined to the dwelling; or

b. That is within your control, including but not
limited to:

(1) Design, structural, or mechanical defects;

(2) Failure, stoppage, or breakage of water or sewer
lines, drains, pumps, fixtures, or equipment; or

(3) Failure to inspect and maintain the property after
a flood recedes;

5. Water or water-borne material that:

a. Backs up through sewers or drains;

b. Discharges or overflows from a sump, sump pump
or related equipment; or

5Va
c. Seeps or leaks on or through the covered property;

unless there is a flood in the area and the flood is the
proximate cause of the sewer or drain backup, sump
pump discharge or overflow, or the seepage of water;

6. The pressure or weight of water unless there is a
flood in the area and the flood is the proximate cause
of the damage from the pressure or weight of water;

7. Power, heating, or cooling failure unless the
failure results from direct physical loss by or from
flood to power, heating, or cooling equipment on the
described location;

8. Theft, fire, explosion, wind, or windstorm;

S. Anything you or any member of your household do
or conspires to do to deliberately cause loss by flood;

or

i0. Alteration of the insured property’ that
significantly increases the risk of flooding.

E. We do not insure for loss to any building or
personal property located on land leased from the
Federal Government, arising from or incident to the
flooding of the land ty the Federal Government,
where the lease expressly holds the Federal

Government harmless under flood insurance issued
under any Federal Government program

Sla

F. We do not pay for the testing for or monitoring of
pollutants unless required by law or ordinance.

VI. Deductibles

A. When a loss is covered under this policy, we will
pay only that part of the loss that exceeds your
deductible amount, subject to the limit of lability
that applies. The deductible amount is shown on the
Declarations Page

However, when a building under construction,
alteration, or repair does not have at least two rigid
exterior walls and a fully secured reof at the time of
loss, your deductible amount will be two times the
deductible that would otherwise apply to a completed

building.

-
B. In each loss from flood, separate deductibles apply
to the building and personal property insured by this
policy

C; The deductible does N¢ yT apply to

>.2. Loss Avoidance Measure

pent
=
ms
c

2. I1I.C.3. Condominium Loss Assessments: or

3. II1.D. Increased Cost of Compliance

82a
VII. General Conditions

A. Pair and Set Clause

In case of loss to an article that is part of a pair or
set, we will have the option of paying you:

1. An amount equal to the cost of replacing the lost,
damaged, or destroyed article, minus its
depreciation, or

2. The amount that represents the fair proportion of
the total value of the pair or set that the lost,
damaged, or destroyed article bears to the pair or
set.

B. Concealment or Fraud and Policy Voidance

1. With respect to all insureds under this policy, this
policy:

a. Is void:
b. Has no legal force or effect;
c. Cannot be renewed: and

d. Cannot be replaced by a new NFIP policy, if,
before or after a Joss, you or any other insured or

your agent have at any time:

83a

(1) Intentionally concealed or misrepresented any
material fact or circumstance;

(2) Engaged in fraudulent conduct; or

(3) Made false statements; relating to this policy or
any other NFIP insurance.

2. This policy will be void as of the date wrongful acts
described in B.l.above were crmmitted.

3. Fines, civil penalties, and imprisonment under
applicable Federal laws may also apply to the acts of
fraud or concealment described above.

4. This policy is also void for reasons other than
fraud, misrepresentation, or wrongful act. ‘This policy
is void from its inception and has no legal force
under the following conditions:

a. If the property is located in a community that was
not participating in the NFIP on the policy's
inception date and did not join or reenter the
program during the policy term and before the loss
occurred; or

b. If the property listed on the application is
otherwise not eligible for coverage under the NFIP.

C. Other Insurance

Sida

1. If a loss covered by this policy is also covered by
other insurance that includes flood coverage not
issued under the Act, we will not pay more than the
amount of insurance you are entitled to for lost,
damaged, or destroyed property insured under this
policy subject to the following:

a. We will pay only the proportion of the loss that the
amount of tnsurance that applies under this policy
bears to the total amount of insurance covering the
loss, unless C.1.b. or c. immediately below applies.

b. If the other policy has a provision stating that it is
excess insurance, this policy will be primary.

ec. This policy will be primary (but subject to its own
deductible) up to the deductible in the other flood
policy (except another policy as described in C.1.b.
above). When the other deductible amount is
reached, this policy will participate in the same
preportion that the amount of insurance under this
policy bears to the total amount of both policies, for
the remainder of the loss.

2. If there is other insurance in the name of your
condominium association covering the same property
covered by this policy, then this policy will be in
excess over the other insurance.

D. Amendments, Waivers, Assignment

85a

This policy cannot be changed nor can any of its
provisions be waived without the express written
consent of the Federal Insurance Administrator. No
action we take under the terms of this policy
constitutes a waiver of any of our rights. You may
assign this policy in writing when you transfer title
of your property to someone else except under these
conditions:

1. When this policy covers only personal property; or

2. When this policy covers a structure during the
course of construction.

E. Cancellation of the Policy by You

1. You may cance] this policy in accordance with the
applicable rules and regulations of the NFIP.

2. If you cancel this policy, you may be entitled to a
full or partial refund of premium also under the
applicable rules and regulations of the NFIP.

F. Non-Renewal of the Policy by Us

Your policy will not be renewed:

1. If the community where your covered property is
located stops participating in the NFIP, or

2. If your building has been declared ineligible under

86a

section 1316 of the Act.
G. Reduction and Reformation of Coverage

1. If the premium we received from you was not
enough to buy the kind and amount of coverage you
requested, we will provide only the amount of
coverage that can be purchased for the premium
payment we received.

2. The policy can be reformed to increase the amount
of coverage resulting from the reduction described in
G.1. above to the amount you requested as follows:

a. Discovery of Insufficient Premium or Incomplete
Rating Information Before a Loss:

(1) If we discover before you have a flood loss that
your premium payment was not enough to buy the
requested amount of coverage, we will send you and
any mortgagee or trustee known to us a bill for the
required additional premium for the current policy
term (or that portion of the current policy term
following any endorsement changing the amount of
coverage). If you or the mortgagee or trustee pay the
additional premium within 30 days from the date of
our bill, we will reform the policy to increase the
amount of coverage to the originally requested
amount effective to the beginning of the current
policy term (or subsequent date of any endorsement
changing the amount of coverage).

87a

(2) If we determine before you have a flood loss that
the rating information we have is incomplete and
prevents us from calculating the additional}
premium, we will ask you to send the required
information. You must submit the information
within 60 days of our request. Once we determine
the amount of additional premium for the current
policy term, we will follow the procedure in G.2.a.(1)
above.

(3) If we do not receive the additional premium (or
additional information) by the date it is due, the
amount of coverage can only be increased by
endorsement subject to any appropriate waiting
period.

b. Discovery of Insufficient Premium or Incomplete
Rating Information After a Loss:

(1) If we discover after you have a flood loss that your
premium payment was not enough to buy the
requested amount of coverage, we will send you and
any mortgagee or trustee known to us a bill for the
required additional premium for the current and the
prior policy terms. If you or the mortgagee or trustee
pay the additional premium within 30 days of the
date of our bill, we will reform the policy to increase
the amount of coverage to the originally requested
amount effective to the beginning of the prior policy
term.

88a

(2) If we discover after you have a flood loss that the
rating information we have is incomplete and
prevents us from calculating the additional
premium, we will ask you to send the required
information. You must submit the information before
your claim can be paid. Once we determine the
amount of additional premium for the current and
prior policy terms, we will follow the procedure in
G.2.b.(1) above.

(3) If we do not receive the additional premium by
the date it is due, your flood insurance claim will be
settled based on the reduced amount of coverage.
The amount of coverage can only be increased by
endorsement subject to any appropriate waiting
period.

3. However, if we find that you or your agent
intentionally did not tel! us, or falsified, any
important fact or circumstance or did anything
fraudulent relating to this insurance, the provisions
of Condition B. Concealment or Fraud and Policy
Voidance apply.

H. Policy Renewal

1. This policy will expire at 12:01 a.m. on the last day
of the policy term.

2. We must receive the payment of the appropriate

89a

renewal premium within 30 days of the expiration
date.

3. If we find, however, that we did not place your
renewal notice into the U.S. Postal Service, or if we
did mail it, we made a mistake, e.g., we used an
incorrect, incomplete, or illegible address, which
delayed its delivery to you before the due date for the
renewal premium, then we will follow’ these
procedures:

a. If you or your agent notified us, not later than one
year after the date on which the payment of the
renewal premium was due, of non-receipt of a
renewal notice before the due date for the renewal
premium, and we determine that the circumstances
in the preceding paragraph apply, we will mail a
second bill providing a revised due date, which will
be 30 days after the date on which the bill is mailed.

b. If we do not receive the premium requested in the
second bill by the revised due date, then we will not
renew the policy. In that case, the policy will remain
an expired policy as of the expiration date shown on
the Declarations Page.

4. In connection with the renewal of this policy, we
may ask you during the policy term to recertify, on a
Recertification Questionnaire we will provide to you,
the rating information used to rate your most recent
application for or renewal of insurance.

90a

I. Conditions Suspending or Restricting Insurance

We are not liable for loss that occurs while there is a
hazard that is increased by any means within your
control or knowledge.

J. Requirements in Case of Loss
In case of a flood loss to insured property, you must:
1. Give prompt written notice to us;

2. As soon as reasonably possible, separate the
damaged and undamaged property, putting it in the
best possible order so that we may examine it;

3. Prepare an inventory of damaged property
showing the quantity, description, actual cash value,
and amount of loss. Attach all bills, receipts, and
related documents;

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:

a. The date and time of loss;

b. A brief explanation of how the loss happened;

c. Your interest (for example, “owner") and the
interest, if any, of others in the damaged property;

d. Details of any other insurance that may cover the
loss;

e. Changes in title or occupancy of the covered
property during the term of the policy;

f. Specifications of damaged buildings and detailed
repair estimates;

gy. Names of mortgagees or anyone else having a lien,
charge, or claim against the insured property;

h. Details about who occupied any insured building
at the time of loss and for what purpose; and

t. The inventory of damaged personal property
described in J.3. above.

5. In completing the proof of loss, you must use your
own judgment concerning the amount of loss and
justify that amount.

6. You must cooperate with the adjuster or
representative in the investigation of the claim.

7. The insurance adjuster whom we hire to
investigate your claim may furnish you with a proof

92a

of luss 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.

8. We have not authorized the adjuster to approve or
disapprove claims or to tell you whether we will
approve your claim.

9. 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.

K. Our Options After a Loss

Options we may, in our sole discretion, exercise after
loss include the following:

1. At such reasonable times and places that we may
designate, you must:

a. Show us or our representative the damaged
property;

b. Submit to examination under oath, while not in
the presence of another insured, and sign the same;
and

c. Permit us to examine and make extracts and
copies of:

(1) Any policies of property insurance insuring you
against loss and the deed establishing your
ownership of the insured real property;

(2) Condominium association documents including
the Declarations of the condominium, its Articles of
Association or Incorporation, Bylaws, rules and
regulations, and other relevant documents if you are
a unit owner in a condominium building; and

(3) All books of accounts, bills, invoices and other
vouchers, or certified copies pertaining to the
damaged property if the originals are lost.

2. We may request, in writing, that you furnish us
with a complete inventory of the lost, damaged or
destroyed property, including:

a. Quantities and costs;

b. Actual cash values or replacement cost (whichever
is appropriate);

c. Amounts of loss claimed;

d. Any written plans and specifications for repair of
the damaged property that you can reasonably make

available to us: and

e. Evidence that prior flood damage has been
repaired.

3. If we give you written notice within 30 days after
we receive your signed, sworn proof of loss, we may:

a. Repair, rebuild, or replace any part of the lost,
damaged, or destroyed property with material or
property of like kind and quality or its functional
equivalent; and

. ;
b. Take all or any part of the damaged property at
the value that we agree upon or its appraised value

¥ No Renefit LO Bailes

No person or organization, other than you, having
custody of covered property will benefit from this
insurance

Ay | SS Payme nt

1. We will adjust all losses with you. We will pay you
unless some other person or entity 1s named in the
policy or is legally entitled to receive payment. Loss
will be payable 60 days after we receive your proof of
loss (or within 90 days after the insurance adjuster

files the adjuster’s report signed and sworn to by you
in lieu of a proof of loss) and

a. We reach an agreement with you;

b. There is an entry of a final
f an

ec. There is a hl

VII.

provided in \

eo

2. If we reject your proof of

you may:

}
appraisal awa

,
juagment, or

ir in. part

i Accept our

ir claim:

b. Exercise your nghts un

{

amenaea of loss

ot the ioss.

c. File an proof 1s long

within 60 days of the date

AL: may permit you to keep damaged property

: , . , ae

nsured under tniSs policy atter a loss, and we wiil

. +} + Pa 7. y . ~~ P —_ la a

reduce the amount of the loss proceeds payable to
you under the policy by the value of the salvage

96a

If you and we fail to agree on the actual cash value
or, if applicable, replacement cost of your damaged
property to settle upon the amount of loss, then
either may demand an appraisal of the loss. In this
event, you and we will each choose a competent and
impartial appraiser within 20 days after receiving a
written request from the other. The two appraisers
will choose an umpire. If they cannot agree upon an
umpire within 15 days, you or we may request that
the choice be made by a judge of a court of record in
the state where the covered property is located. The
appraisers will separately state the actual cash
value, the replacement cost, and the amount -of loss
to each item. If the appraisers submit a written
report of an agreement to us, the amount agreed
upon will be the amount of loss. If they fail to agree,
they will submit their differences to the umpire. A
decision agreed to by any two will set the amount of
actual cash value and loss, or if it applies, the
replacement cost and loss.

Each party will:
1. Pay its own appraiser; and

2. Bear the other expenses of the appraisal and
umpire equally.

Q@. Mortgage Clause

97a

The word "mortgagee" includes trustee.

Any loss payable under Coverage A--Building
Property will be paid to any mortgagee of whom we
have actual notice, as well as any other mortgagee or
loss payee determined to exist at the time of loss, and
you, as interests appear. If more than one mortgagee
is named, the order of payment will be the same as
the order of precedence of the mortgages.

If we deny your claim, that denial will not apply to a
valid claim of the mortgagee, if the mortgagee:

1. Notifies us of any change in the ownership or
occupancy, or substantial change in risk of which the
mortgagee is aware;

2. Pays any premium due under this policy on
demand if you have neglected to pay the premium;
and

3. Submits a signed, sworn proof of loss within 60
days after receiving notice from us of your failure to

do so.

All of the terms of this policy apply to the mortgagee.

The mortgagee has the right to receive loss payment
even if the mortgagee has started foreclosure or
similar action on the building.

98a

If we decide to cancel or not renew this policy, it will
continue in effect for the benefit of the mortgagee
only for 30 days after we notify the mortgagee of the
cancellation or non-renewal.

If we pay the mortgagee for any loss and deny
payment to you, we are subrogated to all the rights
of the mortgagee granted under the mortgage on the
property. Subrogation will not impair the right of the
mortgagee to recover the full amount of the
mortgagee's claim.

R. Suit Against Us

You may not sue us to recover money under this
policy unless you have complied with all the
requirements of the policy. If you do sue, you must
start the suit within one year after the date of the
written denial of all or part of the claim, and you
must file the suit in the United States District Court
of the district in which the covered property was
located at the time of loss. This requirement applies
to any claim that you may have under this policy and
to any dispute that you may have arising out of the
handling of any claim under the policy.

S. Subrogation
Whenever we make a payment for a loss under this

policy, we are subrogated to your right to recover for
that loss from any other person. That means that

99a

your right to recover for a loss that was partly or
totally caused by someone else is automatically
transferred to us, to the extent that we have paid you
for the loss. We may require you to acknowledge this
transfer in writing. After the loss, you may not give
up our right to recover this money or do anything
that would prevent us from recovering it. If you
make any claim against any person who caused your
loss and recover any money, you must pay us back
first before you may keep any of that money.

T. Continuous Lake Flooding

1. If an insured building has been flooded by rising
lake waters continuously for 90 days or more and it
appears reasonably certain that a continuation of
this flooding will result in a covered loss to the
insured building equal to or greater than the
building policy limits plus the deductible or the
maximum payable under the policy for any one
building loss, we will pay you the lesser of these two
amounts without waiting for the further damage to
occur if you sign a release agreeing:

a. To make no further claim under this policy;
b. Not to seek renewal of this policy;

c. Not to apply for any flood insurance under the Act
for property at the described location; and

100a

d. Not to seek a premium refund for current or prior
terms.

If the policy term ends before the insured building
has been flooded continuously for 90 days, the
provisions of this paragraph T.1. will apply when the
insured building suffers a covered loss before the
policy term ends.

2. If your insured building is subject to continuous
lake flooding from a closed basin lake, you may elect
to file a claim under either paragraph T.1. above or
T.2. (A "closed basin lake" is a natural lake from
which water leaves primarily through evaporation
and whose surface area now exceeds or has exceeded
one square mile at any time in the recorded past.
Most of the nation's closed basin lakes are in the
western half of the United States where annual
evaporation exceeds annual precipitation and where
lake levels and surface areas are subject to
considerable fluctuation due to wide variations in the
climate. These lakes may overtop their basins on
rare occasions.) Under this paragraph T.2., we will
pay your claim as if the building is a total loss even
though it has not been continuously inundated for 90
days, subject to the following conditions:

a. Lake flood waters must damage or imminently
threaten to damage your building.

b. Before approval of your claim, you must:

10la

(1) Agree to a claim payment that reflects your
buying back the salvage on a negotiated basis; and

(2) Grant the conservation easement described in
FEMA's "Policy Guidance for Closed Basin Lakes" to
be recorded in the office of the local recorder of deeds.
FEMA, in consultation with the community in which
the property is located, will identify on a map an
area or areas of special consideration (ASC) in which
there is a potential for flood damage from continuous
lake flooding. FEMA. will give the community the
agreed-upon map showing the ASC. This easement
will only apply to that portion of the property in the
ASC. It will allow certain agricultural and
recreational uses of the land. The only structures it
will allow on any portion of the property within the
ASC are certain simple agricultural and recreational
structures. If any of these allowable structures are
insurable buildings under the NFIP and are insured
under the NFIP, they will not be eligible for the
benefits of this paragraph T.2. If a U.S. Army Corps
of Engineers certified flood control project or
otherwise certified flood control project later protects
the property, FEMA will, upon request, amend the
ASC to remove areas protected by those projects. The
restrictions of the easement will then no longer apply
to any portion of the property removed from the ASC;
and

(3) Comply with paragraphs T.l.a. through T.1.d.

above.

c. Within 90 days of approval of your claim, you must
move your building to a new location outside the
ASC. FEMA will give you an additional 30 days to
move if you show there is sufficient reason to extend
the time.

d. Before the final payment of your claim, you must
acquire an elevation certificate and a floodplain
development permit from the local floodplain
administrator for the new location of your building.

e. Before the approval of your claim, the community
having jurisdiction over your building must:

(1) Adopt a permanent land use ordinance, or a
temporary moratorium for a period not to exceed 6
months to be followed immediately by a permanent
land use ordinance, that is consistent with the
provisions specified in the easement required in
paragraph T.2.b. above.

(2) Agree to declare and report any violations of this
ordinance to FEMA so that under Section 1316 of the
National Flood Insurance Act of 1968, as amended,
flood insurance to the building can be denied; and

(3) Agree to maintain as deed-restricted, for purposes
compatible with open space or agricultural or
recreational use only, any affected property the

103a

community acquires an interest in. These deed
restrictions must be consistent with the provisions of
paragraph T.2.b. above, except that, even if a
certified project protects the property, the land use
restrictions continue to apply if the property was
acquired under the Hazard Mitigation Grant
Program or the Flood Mitigation Assistance
Program. If a non-profit land trust organization
receives the property as a _ donation, that
organization must maintain the property as deed-
restricted, consistent with the provisions of
paragraph T.2.b. above.

f. Before the approval of your claim, the affected
State must take all action set forth in FEMA's
"Policy Guidance for Closed Basin Lakes."

g. You must have NFIP flood insurance coverage
continuously in effect from a date established by
FEMA until you file a claim under paragraph T.2. If
a subsequent owner buys NFIP insurance that goes
into effect within 60 days of the date of transfer of
title, any gap in coverage during that 60-day period
will not be a violation of this continuous coverage
requirement. For the purpose of honoring a claim
under this paragraph T.2, we will not consider to be
in effect any increased coverage that became
effective after the date established by FEMA. The
exception to this is any increased coverage in the
amount suggested by your insurer as an inflation
adjustment.

104a

h. This paragraph T.2. will be in effect for a
community when the FEMA Regional Director for
the affected region provides to the community, in
writing, the following:

(1) Confirmation that the community and the State
are in compliance with the conditions in paragraphs
T.2.e. and T.2.f. above, and

(2) The date by which you must have flood insurance
in effect.

U. Duplicate Policies Not Allowed

1. We will not insure your property under more than
one NF IP policy.

If we find that the duplication was not knowingly
created, we will give you written notice. The notice
will advise you that you may choose one of several
options under the following procedures:

a. If you choose to keep in effect the policy with the
earlier effective date, you may also choose to add the
coverage limits of the later policy to the limits of the
earlier policy. The change will become effective as of
the effective date of the later policy.

b. If you choose to keep in effect the policy with the
later effective date, you may also choose to add the

105a

coverage limits of the earlier policy to the limits of
the later policy. The change will be effective as of the
effective date of the later policy.

In either case, you must pay the pro rata premium
for the increased coverage limits within 30 days of
the written notice. In no event will the resulting
coverage limits exceed the permissible limits of
coverage under the Act or your insurable interest,
whichever is less. We will make a refund to you,
according to applicable NFIP rules, of the premium
for the policy not being kept in effect.

2. Your option under Condition U. Duplicate Policies
Not Allowed to elect which NFIP policy to keep in
effect does not apply when duplicates have been
knowingly created. Losses occurring under such
circumstances will be adjusted according to the
terms and conditions of the earlier policy. The policy
with the later effective date must be canceled.

V. Loss Settlement
1. Introduction
This policy provides three methods of settling losses:
Replacement Cost, Special Loss Settlement, and

Actual Cash Value. Each method is used for a
different type of property, as explained in a-c. below.

a. Replacement Cost Loss Settlement, described in

106a

V.2. below, applies to a single-family dwelling
provided:

(1) It is your principal residence, which means that,
at the time of loss, you or your spouse lived there for
80% of:

{a) The 365 days immediately preceding the loss; or

(b) The period of your ownership, if you owned the
dwelling for less than 365 days; and

(2) At the time of loss, the amount of insurance in
this policy that applies to the dwelling is 80% or
more of its full replacement cost immediately before
the loss, or is the maximum amount of insurance
available under the NFIP.

b. Special Loss Settlement, described in V.3. below,
applies to a_ single-family dwelling that is a
manufactured or mobile home or a travel trailer.

c. Actual Cash Value loss settlement applies to a
single-family dwelling not subject to replacement
cost or special loss settlement, and to the property
listed in V.4. below.

2. Replacement Cost Loss Settlement

The following loss settlement conditions apply to a
single-family dwelling described in V.1.a. above:

107a

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. If the dwelling is rebuilt at a new location, the cost
described above is limited to the cost that would have
been incurred if the dwelling had been rebuilt at its
former location.

c. When the full cost of repair or replacement is more
than $1,000, or more than 5% of the whole amount of
insurance that applies to the dwelling, we will not be
liable for any loss under V.2.a. above or V.4.a.(2)
below unless and until actual repair or replacement
is completed.

d. You may disregard the replacement cost
conditions above and make claim under this policy
for loss to dwellings on an actual cash value basis.

108a

You may then make claim for any additional liability
according to V.2.a., b., and c. above, provided you
notify us of your intent to do so within 180 days after
the date of loss.

e. If the community in which your dwelling is located
has been converted from the Emergency Program to
the Regular Program during the current policy term,
then we will consider the maximum amount of
available NFIP insurance to be the amount that was
available at the beginning of the current policy term

3. Special Loss Settlement

a. The following loss settlement conditions apply to a
single-family dwelling that:

(1) is a manufactured or mobile home or a trave!
trailer, as defined in L1.B.6.b. and c.,

(2) is at least 16 feet wide when fully assembled and
has an area of at least 600 square fect within its
perimeter walls when fully assembled, and

(3) 1s your principal residence as specified in V.1L.a.(1
above.

b. If such a dwe!ling is totally destroyed or damaged
to such an extent that, in our judgment, it is not
economically feasible to repair, at least to its pre-

damage condition, we will, at our discretion pay the

least of the following amounts:

(1) The lesser of the replacement cost of the dwelling
or 1.5 times the actual cash value, or

(2) The building limit of liability shown on your
Declarations Page.

c. If such a dwelling is partially damaged and, in our
judgment, it is economically feasible to repair it to its
pre-damage condition, we will settle the loss
according to the Replacement Cost conditions in
V.2.above.

4. Actual Cash Value Loss Settlement

The types of property noted below are subject to
actual cash value (or in the case of V.4.a.(2), below,
proportional) loss settlement.

a. A dwelling, at the time of loss, when the amount of
insurance on the dwelling is both less than 80% of its
full replacement cost immediately before the loss and
less than the maximum amount of insurance
available under the NFIP. In that case, we will pay
the greater of the following amounts, but not more
than the amount of insurance that applies to that
dwelling:

(1) The actual cash value, as defined in II.B.2., of the
damaged part of the dwelling; or

110a

(2) A proportion of the cost to repair or replace the
damaged part of the dwelling, without deduction for
physical depreciation and after application of the
deductible.

This proportion is determined as follows: If 80% of
the full replacement cost of the dwelling is less than
the maximum amount of insurance available under
the NFIP, then the proportion is determined by
dividing the actual amount of insurance on the
dwelling by the amount of insurance that represents
80% of its full replacement cost. But if 80% of the full
replacement cost of the dwelling is greater than the
maximum amount of insurance available under the
NFIP, then the proportion is determined by dividing
the actual amount of insurance on the dwelling by
the maximum amount of insurance available under

the NFIP.
b. A two-, three-, or four-family dwelling.

c. A unit that is not used exclusively for single-family
dwelling purposes.

d. Detached garages.

e. Personal property.

f. Appliances, carpets, and carpet pads.

llla

g. Outdoor awnings, outdoor antennas or aerials of
any type, and other outdoor equipment.

h. Any property covered under this policy that is
abandoned after a loss and remains as debris
anywhere on the described location.

i. A dwelling that is not your principal residence.
5. Amount of Insurance Required

To determine the amount of insurance required for a
dwelling immediately before the loss, we do not
include the value of:

a. Footings, foundations, piers, or any other
structures or devices that are below the undersurface
of the lowest basement floor and support all or part
of the dwelling;

b. Those supports listed in V.5.a. above, that are
below the surface of the ground inside the foundation
walls if there is no basement; and

c. Excavations and underground flues, pipes, wiring,
and drains.

Note: The Coverage D--Increased Cost of
Compliance limit of liability is not included in the
determination of the amount of insurance required.

112a

VIII. Liberalization Clause

If we make a change that broadens your coverage
under this edition of our policy, but does not require
any additional premium, then that change will
automatically apply to your insurance as of the date
we implement the change, provided that this
implementation date falls within 60 days before or
during the policy term stated on the Declarations
Page.

1X. What Law Governs

This policy and all disputes arising from the
handling of any claim under the policy are governed
exclusively by the flood insurance regulations issued
by FEMA, the National Flood Insurance Act of 1968,
as amended (42 U.S.C. 4001, ct seq.), and Federal
common law.

In Witness Whereof, we have signed this policy below
and hereby enter into this Insurance Agreement.

ll3a

APPENDIX F

United States Code Annotated
Title 42. The Public Health and Welfare
Chapter 50. National Flood Insurance
Subchapter II: Organization and Administration of
Flood Insurance Program
Part B. Government Program with Industry
Assistance
§ 4072. Adjustment and payment of
claims; judicial review; limitations;
jurisdiction
In the event the program is carried out as provided
in section 4071 of this title, the Director shall be
authorized to adjust and make payment of any
claims for proved and approved losses covered by
flood insurance, and upon the disallowance by the
Director of any such claim, or upon the refusal! of
the claimant to accept the amount allowed upon any
such claim, the claimant, within onc year after the
date of mailing of notice of disallowance or partial
disallowance by the Director, may institute an action
against the Director on such claim in the United
States district court for the district in which the
insured property or the major part thereof shall
have been situated, and _ original exclusive
jurisdiction is hereby conferred upon such court to
hear and determine such action without regard to
the amount in controversy.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386010_0375%3A1. Public record. Not legal advice.