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Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 

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PUBLISP. 

UNITED STATES COURT OF APPEALS 

FOR THE TENTH CIRCUIT 

SANDIA OIL COMPANY, INC., a New Mexico ) 

Corporation; SUNWEST BANK OF ) 

ALBUQUERQUE, N.A., ) 

) 

Plaintiffs-Appellees, ) 

) 

v. ) 

) 

JULIUS BECKTON, Director of the ) 

Federal Emergency Management Agency, ) 

) 

Defendant-Appellant. ) 

NOV 1 t1 1989 

ROBERT L. I!OECKER 

Clerk 

No. 86-2387 

Appeal from the United states District Court 

District of New Mexico 

(D.C. Civil No. 85-1077-M) 

Submitted on the briefs: 

Richard K. Willard and John R. Bolton, Assistant Attorneys 

General, civil Division, Department of Justice, Washington, 

D.C.; William L. Lutz, United States Attorney, Albuquerque, 

New Mexico; and Michael Jay Singer, w·. Neil Hammerstrom, 

Jr., and Constance A. Wynn, Attorneys, Civil Division, 

Department of Justice, Washington, D.C., for DefendantAppellant. 

Michael Allison or Franchini, Henderson, Wagner & 01 i ver, 

Albuquerque, New Mexico, for Plaintiffs-Appellees. 

Before McKAY, SEYMOUR, ·and HIGGINBOTHAM,* Circuit Judges. 

PER CURIAM. 

*Honorable Patrick E. Higginbotham, United States Circuit 

Judge for the Fifth Circuit Court of Appeals, sitting by 

designation. 

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Appellate Case: 86-2387 Document: 010110067928 Date Filed: 11/14/1989 Page: 1 
: 

After examining the briefs and appellate record, this 

panel has determined unanimously that oral argument would 

not materially assist the determination of this appeal. See 

Fed. R. App. P. 34(a); 10th Cir. R. 34.1.9. The cause i~ 

therefore ordered submitted without oral argument. 

I 

Plaintiffs commenced this action pursuant to 42 u.s.c. 

§ 4072 for recovery under a Standard Flood Insurance Policy 

(the Policy) for flood damage to a concrete surface. The 

Policy was issued pursuant to the National Flood Insurance 

Program, which is administered by th~ Federal Emergency 

Management Agency (FEMA). The district court granted 

summary judgment for plaintiffs, awarding recovery under the 

Policy. 

The material facts relative to this case are undisputed 

and were the subject of a stipulation by the parties. 

Plaintiff Sandia Oil Company, Inc. (Sandia) owns a gas 

station, partly insured by the Policy. Sandia's gas station 

consists of a large concrete foundation which is completely 

covered by a canopy. The canopy is supported by pillars 

sunk into a concrete foundation. In addition to covering 

its concrete foundation, the canopy also covers gasoline 

pumps and a pay booth. The pay booth has four walls and a 

roof and constitutes a buildlng as defined in the Policy. 

The distance between the top of the pay booth and the bottom 

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Appellate Case: 86-2387 Document: 010110067928 Date Filed: 11/14/1989 Page: 2 
of the canopy is approximately five feet. The pay booth iE 

not directly attached to the canopy covering. 

On June 16 and 17, 1984, a flood, as defined in the 

Policy, caused damage to the concrete foundation underlying 

the canopy. Defendant denied liability for the damage, 

maintaining that only the pay booth was covered by the 

Policy. 

After defendant denied coverage, plaintiffs commenced 

this action in the district court. In permitting plaintiffs 

to recover under the Policy, the district- court determined 

that the damaged structure was an extension of or addition 

to the pay booth and, therefore, covered under the Policy. 

The district court relied on the following provision in the 

Policy: "Building: When the insurance under this policy 

covers a building, such insurance shall include additions 

and extensions attached thereto [and] permanent fixtures 

• forming a part of and pertaining to the services of the 

building." The district court was aware, however, that the 

Policy did not cover "those portions ·of walks, driveways and 

other paved or pouF.ed surfaces outside the formulative walls 

of the building." Id .. The district court entered judgment 

for plaintiffs in the amount of $11,053.80, plus postjudgment interest and costs. 

On appeal defendant first contends that the district 

court erred in determining that the damage to the concrete 

foundation of Sandia's canopy is covered by the Policy. 

Specifically, defendant contends that because coverage under 

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Appellate Case: 86-2387 Document: 010110067928 Date Filed: 11/14/1989 Page: 3 
the Policy extends only to Sandia's building, defined as the 

"walled and roofed structure," the Policy would cover damage 

only to Sandia's pa:y booth and not to the concrete area 

underlying the canopy. The parties stipulated that· the 

damaged concrete area was not a part of the foundation of 

the pay booth. 

The pertinent coverage provisions of the Policy are 

ambiguous as applied to the facts and circumstances of this 

case, in view of Sandia's unique facilities and operation. 

"Where an insurance policy contains ambiguous or equivocal 

language, [the policy] should be interpreted favorably to 

the insured." Young v. Fidelity Union Life Insurance Co., 

597 F.2d 705, 707 (10th Cir. 1979) (citing Unigard Insurance 

Co. v. Studer, 536 F.2d 1337, 1339 (10th Circuit 1976)); 

accord Atlas Pallet. Inc. v. Gallagher, 725 F.2d 131, 136 

( 1st Cir. 1984) ("insurance contracts are construed 

liberally in the insured's interest and strictly against the 

insurer"). "(E)xceptions from coverage are to be strictly 

construed against the insurer when their application is 

doubtful." Webb v. Allstate Life Insurance Co., 536 F.2d 

336, 340 (10th Cir. 1976) (citing Equitable Fire & Marine 

Insurance co. v. Allied Steel Construction Co., 421 F.2d 

512, 513 (10th Cir. 1970)). "Whether a particular structure 

is covered under the 'additions and extensions' clause of a 

policy of insurance 'depends upon the language of the policy 

as applied to the actual situation and use of the 

property.'" Atlas Pallet, 725 F.2d at 136 (quoting 1 

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Appellate Case: 86-2387 Document: 010110067928 Date Filed: 11/14/1989 Page: 4 
Anderson, Couch on Insurance 2d § 6:17, at 251 (1959) 

(emphasis added)). 

With these principles in mind, we are persuaded that 

the district court correctly interpreted the Policy in this 

case. It is clear from the stipulated facts that the canopy 

and its concrete foundation and the pay booth comprise one 

whole functionally integrated unit, operation, and 

structure. We are further convinced that there is a 

definite and necessary connection, as contemplated by the 

parties to the Policy, ... between the canopy and its concrete 

foundation and the use and purposes of the pay booth, 

allowing the canopy and its concrete foundation to be 

considered an integral part, addition, or extension of the 

pay booth or as a permanent fixture forming a part of and 

pertaining to the services of the pay booth. Accord id. 

("question thus turns on the relative location of the 

structures, their accessibility, and adaptability to some 

common end") . Consequently, like the district court, we 

interpret the Policy as covering the damage to the concrete 

foundation underlyjng the canopy. 

Defendant has raised a point on appeal concerning the 

district court• s reference throughout its opinion to the 

damage sustained by plaintiffs. Specifically, defendant 

argues that the district court mistakenly believed that the 

canopy itself, rather than its concrete foundation, was 

damaged by the flood. We disagree with defendant. The 

district court's opinion demonstrates a precise 

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Appellate Case: 86-2387 Document: 010110067928 Date Filed: 11/14/1989 Page: 5 
understanding of the nature of Sandia's premises and the 

circumstances surrounding the flood and the resulting 

damage. It appears that the district court referred to the 

damage to the concrete foundation as damage to the canopy 

because it viewed the canopy and foundation as a 

structurally integrated unit . .!/ Indeed, the district court 

granted summary judgment on the basis of stipulated facts 

which make it clear that the only damage to Sandia's 

premises resulting in plaintiffs' claim was the damage to 

the concrete foundation of the canopy. Consequently, there 

was no. dispute as to what was damaged; and that fact was 

clear when the district court had before it the independent 

claims adjuster's recommendation that ·plaintiffs be paid 

$11,053.80. The adjuster's report makes it clear that that 

amount covered the damage to the concrete foundation 

underlying the canopy. The district court awarded 

plaintiffs $11,053.80, the exact amount recommended by the 

adjuster and requested by the plaintiffs for the damage to 

the concrete foundation. 

We affirm the district court's determination of 

defendant's liability . 

.lJ If the district court's use of the word "canopy" did 

not encompass the concrete foundation underlying the canopy 

itself, we believe that the district court simply misspoke 

when it ref erred to plaintiffs' damage as "damage to the 

canopy. " We are convinced that the district court 

understood and was not confused about what was actually 

damaged in this case, in view of the fact that damage to the 

concrete foundation of the canopy was not even disputed by 

the parties. 

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Appellate Case: 86-2387 Document: 010110067928 Date Filed: 11/14/1989 Page: 6 
II 

Defendant next argues that the district court erred in 

awarding post-judgment interest. At our request, the 

parties have briefed the effect of the recent Supreme Court 

case Loeffler v. Frank, 108 s.ct. 1965 (1988), on the waiver 

of sovereign immunity for awards of post-judgment interest 

against FEMA. 

Under the traditional "no-interest" rule, 'the United 

States is generally immune from awards of interest on claims 

against it. Library of .congress v. Shaw, 106 s.ct. 2957, 

2963 (1986). Nevertheless, the no-interest rule is 

inapplicable 1) in a takings case where interest is 

constitutionally required, 2) where fnterest awards are 

specifically provided for in statute or contract or 

otherwise expressly consented to, and 3) "where the 

Government has cast off the cloak of sovereignty and assumed 

the status of a private commercial enterprise." Id. at 2963 

& n.5. The first exception has no application in this case. 

Plaintiffs argue that Congress expressly consented to 

awards of interest against FEMA by allowing suits against -· 

the agency under 42 u.s.c. § 4072. Purported waivers of 

sovereign immunity are strictly construed, especially when 

dealing with interest awards: 

In analyzing whether Congress has waived the 

immunity of the United States, we must construe 

waivers strictly in favor of the sovereign, see 

McMahon v. United States, 342 u. S. 25, 27, 72 

s.ct. 17, 19, 96 L.Ed. 26 (1951), and not enlarge 

the waiver " 'beyond what the language requires, ' " 

Ruckelshaus v. Sierra Club, 463 U.S. 680, 685-686, 

103 s.ct. 3274, 3278, 77 L.Ed.2d 938 (1983), 

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Appellate Case: 86-2387 Document: 010110067928 Date Filed: 11/14/1989 Page: 7 
quoting Eastern Transportation co. v. Unitec 

states, 272 u.s. 675, 686, 47 s.ct. 289, 291, 71 

L.Ed. 472 (1927). The no-interest rule provides 

an added gloss of strictness upon these usual 

rules. 

"[T]here can be no consent by implication or · by use of ambiguous language. Nor can an 

intent on the part of the framers of a 

statute or contract to permit the recovery of 

interest suffice where the intent is not 

translated into affirmative statutory or 

contractual terms. The consent necessary to 

waive the traditional immunity must be 

express, and it must be strictly construed." 

United . States v. N, Y. Rayon Importing Co,, 

329 u.s., at 659, 67 s.ct., at 604. 

Library of Congress v. Shaw, 106 s.ct •. at •2963. In Shaw, 

the supreme Court strictly construed§ 706(k) of Title VII, 

which makes the United States "liable for costs the same as 

a private person" in employment discrimination suits, to 

deny an award of interest against the Library of congress. 

Id. at 2966. By no stretch of the language in§ 4072 can it 

be construed as expressly consenting to interest awards 

against FEMA. See In re Estate of Lee, 812 F.2d 253, 256 

(5th Cir. 1987). 

We therefore turn to the third exception to the nointerest rule and consider whether the government has cast 

off the cloak of sovereign immunity by giving FEMA's flood 

insurance program the status of a commercial enterprise. 

This exception to the no-interest rule was the focus of the 

Court's opinion in Loeffler: 

Congress, however, has waived the sovereign 

immunity of certain federal entities from the 

times of their inception by including in the 

enabling legislation provisions that they may sue 

and be sued. In FHA v. Burr, 309 U.S. 242, 245, 

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Appellate Case: 86-2387 Document: 010110067928 Date Filed: 11/14/1989 Page: 8 
60 s.ct. 488, 490, 84 L.Ed. 724 (1940), the Court 

explained: 

" (SJ uch waivers by Congress of governmental 

immunity .•• should be liberally construed . • • • Hence, when Congress establishes such 

an agency, authorizes it to engage in 

commercial and business transactions with the 

public, and permits it to •sue and be sued,' 

it cannot be lightly assumed that 

restrictions on that authority are to be 

implied." 

Loeffler, 108 s.ct. at 1969. Based on the Postal Service's 

status as a commercial entity and the existence of a- sueand-be-sued clause in its organic statute, the Court 

determined in Loeffler that interest was recoverable against 

the Postal Service to the same extent as against a private 

party. Id. at 1970. 

Unlike the Postal Service at issue in Loeffler, FEMA 

does not have a statutory provision allowing the agency to 

sue and be sued generally in relation to the flood insurance 

program. Section 4072 limits a claimant's ability to sue on 

a flood insurance policy. Insurance claims must initially 

be submitted to the Director of FEMA. After total or 

partial disallowance of a claim, the claimant has one year 

to file an action:· Exclusive original jurisdiction of such 

suits -lies in the federal district courts. 42 u.s.c. § 

4072; Spielman v. FEMA, 609 F.Supp. 111, 112 (D. Minn. 

1985); Possessky v. National Flood Insurers Ass•n, 507 

F.Supp. 913, 915 (D.N.J. 1981). Section 4072 • s waiver of 

immunity has been strictly construed not to allow a jury 

trial against the government. Yonker v. Guifrida, 581 

F.Supp. 1243, 1245-46 (D. W. Va. 1984); Latz v. Gallagher, 

9 

Appellate Case: 86-2387 Document: 010110067928 Date Filed: 11/14/1989 Page: 9 
562 F.Supp. 690, 693 (W.D. Mich. 1983); Kolner v. Director, 

FEMA, 547 F.Supp. 828, 829-30 (N.D. Ill. 1982). While § 

4072 limits suits against FEMA, it has no provision at all 

for suits by the agency. 

Nevertheless, absence of a general sue-and-be-sued 

clause is not necessarily fatal to appellees' claim that 

FEMA' s flood insurance program is a commercial enterprise. 

The Loeffler court noted that "authorization of suits 

against federal entities engaged in commercial activities 

may.amount to a waiver of sovereign immunity from awards of 

interest when such awards are an incident of suit. " 108 

s.ct. at 1969 (emphasis added). The Court cited standard 

Oil Co. v. United . States, 267 U.S. 76 (1925), in which 

interest was allowed on an insurance claim against the 

Bureau of War Risk Insurance. The Bureau had no general 

sue-and-be-sued clause, but Congress had provided for suits 

on insurance claims. In Standard Oil, the Court c.oncluded: 

"When the United States went into the insurance business, 

issued policies in familiar form and provided that in case 

of disagreement it_,might be sued, it must be assumed to have 

accepted the ordinary incidents of suits in such business." 

267 U.S. at 79. 

The Standard Oil case was distinguished in United 

States v. Worley, 281 U.S. 339 f1930), dealing with an 

insurance program designed to provide death or disability 

coverage to members of the armed services. In contrast to 

the Standard Oil insurance program, which was intended to be 

10 

Appellate Case: 86-2387 Document: 010110067928 Date Filed: 11/14/1989 Page: 10 
self-sufficient and in fact resulted in a large profit to 

the government, the premiums paid in Worley were inadequate. 

"The Congress intended that the United States should bear, 

and undoubtedly it [did bear], a large part of the cost." 

Worley. 281 U.S. at 343. Worley suggests that unless a 

governmental entity engages in business-type activity with a 

business-minded purpose, it will not be treated as engaging 

in commercial activities. 

In our view, FEMA' s flood insurance program is not a 

commercial vent.ure, . but rather constitutes the subsidized 

variety of insurance program within the ambit of Worley. 

The legislative history of the statute reveals Congress's 

intent to underwrite the insurance coverage: 

Any Federal "subsidy" which will accrue under the 

insurance program to the benefit· of property 

owners now occupying the flood plain is defensible 

only as part of an interim solution to long-range 

readjustments in land use. Because such 

assistance should not prejudice these needed longrange adjustments, the case for temporary partial 

subsidization of the cost of flood premiums for 

existing properties in high-hazard zones is not at 

all valid for new properties in the same zones. 

1968 U.S. Code Cong. & Admin. News 2873, 2969. It is true 

that Congress envfsioned the program as eventually becoming 

self-sufficient. From the existing statutory structure and 

the available evidence, however, it appears that this goal 

has not been realized. 

FEMA is instructed to estimate the premiums required to 

make flood insurance available on an actuarial basis. 42 

U.S.C. § 4014(a)(l). However, it must also estimate 

reasonable rates which would encourage prospective insureds 

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Appellate Case: 86-2387 Document: 010110067928 Date Filed: 11/14/1989 Page: 11 
to purchase flood insurance and which would be consistent 

with the purposes of the flood insurance program, even if 

those rates fall below actuarial rates. 42 u.s.c. § 

4014(a)(2). FEMA prescribes by regulation the actual rates 

to be charged, and has specific authority "where necessary" 

to charge less than the actuarial rates calculated under§ 

4014(a)(l). 42 U.SaC. § 4015(a)(l). In calculating 

premiums, FEMA is directed to disregard certain risks to 

properties in parts of Louisiana, and in areas which have 

partially ,completed flood protection systems. 42 u.s.c. § 

4014 (d), (e). 

When flood insurance was being provided through private 

insurers under Part A of the National Flood Insurance 

Program, 

payments" 

the federal government made "premium equalization 

into an industry flood insurance pool to 

compensate for premiums set at less than an actuarial rate. 

42 U.S.Co § 4054. It also provided for "reinsurance" 

covering losses in excess of the risk assumed by the 

industry pool. 42 u.s.c. § 4055. Now that FEMA has 

switched to a Part_,B flood insurance program operated by the 

government, the ultimate risk bearer for all expenses of the 

program is the National Flood Insurance Fund. 42 u.s.c. § 

4017(d). The Director of FEMA has authority to borrow up to 

$500,000,000 from the United states Treasury (or 

$1,ooo,000,000 with the President's approval) for deposit in 

the Fund. 42 u.s.c. § 4016. Congress periodically 

appropriates money to repay the loans. Since 1980, Congress 

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Appellate Case: 86-2387 Document: 010110067928 Date Filed: 11/14/1989 Page: 12 
appears to have appropriated substantial amounts for that 

purpose. Pub. L. 96-526, 94 Stat. 3053 (1980) 

($575,000,000); Pub. L. 97-101, 95 Stat. 1425 (1981) 

($373,000,000); 

($39,159,000); 

($37,521,000); 

($200,205,000); 

($92,852,000). 

Pub. 

Pub. 

Pub. 

Pub. 

L. 

L. 

L. 

L. 

97-272, 

98-45, 

98-371, 

99-160, 

96 Stat. 

97 Stat. 

98 Stat. 

99 stat. 

1169 

228 

1224 

918 

(1982) 

(1983) 

(1984) 

(1985) 

-If Congress intended FEMA's flood insurance program to 

be a "commercial enterprise," it certainly made a poor 

investment_. Indeed, the program was set up originally 

because it was "uneconomic for the private insurance 

industry alone to make flood insurance available to those in 

need of such protection on reasonable terms and conditions." 

42 U.S.C. § 400l(b) (1). It is unlikely that Congress 

intended to accomplish what the private insurance industry 

could not without any burden on the public fisc. The flood 

insurance program was intended from the beginning to be, not 

a commercial enterprise, but rather a subsidized insurance 

program of the sort in Worley. designed to accomplish 

important national goals at some cost to the. national 

treasury. Thus, because we find no evidence that FEMA has 

been thrust into the commercial world, and no explicit 

waiver of sovereign immunity, we reverse the award of postjudgment interest entered against FEMA in this case. 

AFFIRMED in part, REVERSED in part. 

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