IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 16-41165

ROBERT SPONG; KERRY SPONG, 

 Plaintiffs - Appellants

v.

FIDELITY NATIONAL PROPERTY AND CASUALTY INSURANCE 

COMPANY; FIDELITY NATIONAL INSURANCE SERVICES, L.L.C.; 

CRYSTAL BEACH INSURANCE AGENCY, L.L.C.; UNITED STATES OF 

AMERICA, 

 Defendants - Appellees

Appeal from the United States District Court 

for the Southern District of Texas

USDC No. 3:10-CV-228

Before KING, PRADO, and SOUTHWICK, Circuit Judges.

PER CURIAM:*

The plaintiffs’ vacation home near Galveston, Texas, was destroyed by 

Hurricane Ike in 2008. They submitted a proof-of-loss claim to Fidelity under 

the federal insurance policy they obtained on the property. While investigating

the claim, Fidelity discovered that, due to the home’s location, the plaintiffs’ 

 

* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not 

be published and is not precedent except under the limited circumstances set forth in 5TH 

CIR. R. 47.5.4.

United States Court of Appeals

Fifth Circuit

FILED

July 5, 2017

Lyle W. Cayce

Clerk

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insurance policy was void from its inception. The plaintiffs filed suit against 

Fidelity and the Government asserting state-law and Federal Tort Claims Act 

(“FTCA”) claims.

The plaintiffs now appeal the district court’s grant of summary judgment 

for Fidelity and the Government. We AFFIRM.

FACTUAL AND PROCEDURAL BACKGROUND

The facts and legal framework underlying this appeal are extensively 

discussed in our prior opinion from a 2015 appeal. We will repeat those 

essential to the resolution of this appeal. See Spong v. Fid. Nat’l Prop. & Cas. 

Ins. Co., 787 F.3d 296, 299–302 (5th Cir. 2015). In Spong, Fidelity brought an 

interlocutory appeal of the district court’s denial of its motion for summary 

judgment. Id. at 298–99. Fidelity had asserted, among other things, “that the 

Spongs’ claims were preempted by federal law.”1 Id. at 298. We concluded that 

the Spongs’ state-law claims that involve the procurement of insurance were 

not preempted but those involving “claims handling” were preempted. Id. at 

299. We also noted that “even though not preempted, certain claims cannot 

succeed as a matter of law.” Id.

We reviewed “both Fidelity’s federal preemption and reasonable reliance 

arguments.” Id. at 304. We determined that “the issuance of a policy by 

Fidelity was not a representation on which the Spongs could rely.” Id. at 312. 

In light of our analysis on the preemption question, we remanded to the district 

court for reconsideration of Fidelity’s summary judgment motion. Id.

 

1 Fidelity also sought summary judgment on the ground that even if the Spongs’ statelaw claims were not preempted, they failed as a matter of law because the Spongs could not 

establish justifiable reliance. See Spong, 787 F.3d at 302. The district court denied Fidelity’s 

motion on both grounds but certified for interlocutory appeal only the preemption question, 

which involved determining whether our decision in Campo v. Allstate Insurance Co., 562 

F.3d 751 (5th Cir. 2009), remained good law. Id. at 302–03.

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On remand, the district court determined that “any claim involving any 

alleged misrepresentations by Fidelity and detrimental reliance by the Spongs 

fails as a matter of law.” It reached this conclusion based on our holding in

Spong that “[u]nder the rationale of” Federal Crop Insurance Corp. v. Merrill, 

332 U.S. 380 (1947), and Heckler v. Community Health Services, 467 U.S. 51 

(1984), “the Spongs cannot claim ignorance of the statutes and regulations as 

an excuse for relying on Fidelity’s issuance of a policy as a determination or 

representation that their property was not located in the” Coastal Barrier 

Resources System (“CBRS”), an area where property is uninsurable under the 

National Flood Insurance Program (“NFIP”). See Spong, 787 F.3d at 309. 

Attributing this knowledge to the Spongs also precluded their vicarious 

liability, negligence, and gross negligence claims. Accordingly, the district 

court granted Fidelity’s motion for summary judgment. 

That same day, the district court also ruled on the Government’s 

converted motion for summary judgment, which it had stayed consideration of 

pending resolution of the earlier appeal. The Government sought dismissal of 

all of the Spongs’ claims against it under the FTCA on several grounds, 

including that the Spongs failed to exhaust their administrative remedies. The 

district court determined there were at least two occasions prior to October 14, 

2009, which “should have motivated the Spongs to investigate the possible 

invalidity of the policy and the potential for injury.” Thus, the court disagreed 

with the Spongs’ assertion that their October 12, 2011, administrative 

complaint was timely and dismissed the action against the Government for 

lack of subject-matter jurisdiction. The Spongs timely appealed. 

Approximately one month after rendering its decision in the underlying 

matter, the same district court granted summary judgment to Fidelity in a 

substantially similar case involving a neighbor of the Spongs whose home was 

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also destroyed by Hurricane Ike.2 See Lobeck v. Licatino, No. CV G-10-423, 

2016 WL 3058300, at *1 (S.D. Tex. May 31, 2016). The Lobeck matter was 

stayed pending our resolution of Spong. Id. Once we resolved that first appeal, 

the Lobeck court relied on it to hold that the claims there of reasonable reliance 

were “unprovable” and that the court was “foreclosed from even considering 

evidence of [the plaintiff’s] actual or inferior ignorance of the law[.]” Id. at *2. 

As to the plaintiff’s contention there was a fact issue “of whether she knew the 

property was within the CBRS,” the district court concluded that Spong 

foreclosed that argument as the plaintiff “had an independent duty to 

determine the property’s eligibility[.]” Id.

Lobeck was timely appealed on June 29, 2016. On March 7, 2017, a panel 

of this court issued a brief per curiam opinion affirming the district court’s 

grant of summary judgment. See Lobeck v. Licatino, No. 16-40967, 2017 WL 

923387, at *1 (5th Cir. Mar. 7, 2017), petition for cert. filed (U.S. June 8, 2017) 

(No. 16-1467). 

DISCUSSION

“We review the district court’s grant of summary judgment de novo, 

applying the same standards as the district court.” Weeks Marine, Inc. v. 

Standard Concrete Prods., Inc., 737 F.3d 365, 368 (5th Cir. 2013). Summary 

judgment is appropriate where “the movant shows that there is no genuine 

dispute as to any material fact and the movant is entitled to judgment as a 

matter of law.” FED. R. CIV. P. 56(a). We may affirm a grant of summary 

judgment “on any ground raised below and supported by the record.” Aryain 

v. Wal-Mart Stores Texas LP, 534 F.3d 473, 478 (5th Cir. 2008).

 

2 In addition to the neighboring locations of the two properties, the overlap between 

the two cases is extensive. For example, the plaintiff in Lobeck asserted virtually all of the 

same claims as the Spongs.

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On appeal, the Spongs appear to challenge both the district court’s grant 

of summary judgment and the prior panel decision in Spong. In fact, many of 

the arguments the Spongs now assert have already been resolved in the first 

appeal. Such arguments overlook the doctrine of the law of the case.3 Relevant 

here, the doctrine “generally precludes reexamination of issues of law or fact 

decided on appeal, either by the district court on remand or by the appellate 

court itself on a subsequent appeal.” Todd Shipyards Corp. v. Auto Transp., 

S.A., 763 F.2d 745, 750 (5th Cir. 1985). Accordingly, we will review only those 

arguments and claims that remain viable.

I. Grant of Summary Judgment for Fidelity was Proper

This appeal arises from the issuance and subsequent renewals of a 

federal Standard Flood Insurance Policy (“SFIP”) that the Spongs obtained for 

their Galveston vacation home under the NFIP. Spong, 787 F.3d at 298. 

Fidelity is a Write-Your-Own (“WYO”) Program insurance carrier participating 

in the NFIP, which was created by the National Flood Insurance Act of 1968. 

Id. at 299. By statute, WYO-insurance carriers act in a fiduciary capacity as 

the “fiscal agents of the United States[.]” 42 U.S.C. § 4071(a)(1). In performing 

this role, they “issue SFIPs in their own names, and arrange for the 

adjustment, settlement, payment and defense of all claims arising from the 

policies.” Gallup v. Omaha Prop. & Cas. Ins. Co., 434 F.3d 341, 342 (5th Cir. 

 

3 We previously described the doctrine this way:

The doctrine of the law of the case grew out of the practical view that, 

once an appellate court has decided an issue in a particular case both the 

District Court and the Court of Appeals should be bound by that decision in 

any subsequent proceedings in the same case. 

Falcon v. Gen. Tel. Co., 815 F.2d 317, 319–20 (5th Cir. 1987). As with most rules of law, there 

are exceptions to the doctrine, but none apply here. See id. at 320.

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2005). All payments for claims arising from an SFIP are made from the United 

States Treasury. Id.

Given this statutory framework and our prior Spong decision, we must 

determine whether Merrill and Heckler foreclose the Spongs’ claims against 

Fidelity. We begin with a brief review of those cases and our Lobeck decision, 

before addressing the Spongs’ surviving claims.

In Merrill, the Court laid the groundwork for our analysis by stating that 

“anyone entering into an arrangement with the Government takes the risk of 

having accurately ascertained that he who purports to act for the Government 

stays within the bounds of his authority.” Merrill, 332 U.S. at 384. The 

majority opinion further noted that requiring men to “‘turn square corners 

when they deal with the Government,’ does not reflect a callous outlook.” Id.

at 385 (quoting Rock Island A. & L.R. Co. v. United States, 254 U.S. 141, 143 

(1920)). Instead, “[i]t merely expresses the duty of all courts to observe the 

conditions defined by Congress for charging the public treasury.” Id.

The Court later expanded this general rule of constructive knowledge by 

stating that “[p]rotection of the public fisc requires those who seek public funds 

act with scrupulous regard for the requirements of law[.]” Heckler, 467 U.S. at 

63. Thus, participants in federal benefits programs — like the NFIP — have 

a legal duty to “familiarize” themselves with the program’s “legal requirements 

for cost reimbursement.” Id. at 64; see also Wright v. Allstate Ins. Co., 415 F.3d 

384, 388 (5th Cir. 2005). Given the “special nature of the insurance 

relationship” involved under the NFIP, courts have made it clear that an 

“insured has a duty to read and understand the terms of its SFIP.” Richmond 

Printing LLC v. Dir. Fed. Emergency Mgmt. Agency, 72 F. App’x 92, 98 (5th 

Cir. 2003).

Despite extensive briefing and the various issues presented, which 

largely overlap with the ones before us, the Lobeck panel affirmed the district 

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court through brief and clear reasoning:

Lobeck contends that she reasonably relied on Fidelity and 

GIA’s misrepresentations that her property was insurable. 

However, she was insured by the federal government through the 

NFIP; thus Fidelity and GIA were acting as government agents. 

See Spong v. Fidelity National Property and Casualty Insurance 

Company, 787 F.3d 296, 309 (5th Cir. 2015); Richmond Printing, 

LLC v. FEMA, 72 F. App’x 92, [98] (5th Cir. 2003). As the Supreme 

Court has previously stated, “those who deal with the Government 

are expected to know the law and may not rely on the conduct of 

government agents contrary to the law.” See Heckler v. Community 

Health Services, 467 U.S. 51, 63 (1984); Federal Crop Insurance 

Co. v. Merrill, 332 U.S. 380, 384–85 (1947). Consequently, Lobeck 

was charged with the constructive knowledge that her property is 

located in the CBRS, and so her argument fails.

Lobeck, 2017 WL 923387, at *1. 

The same result follows here. On remand, the district court determined 

that eight of the Spongs’ claims required proof of actual misrepresentation and 

must be dismissed. Likewise, the court determined that the Spongs’ gross 

negligence claim failed due to the constructive knowledge attributed to the 

Spongs as participants in the NFIP. As to the Spongs’ negligence claim against 

Fidelity, the district court noted that under federal law, Fidelity owes its duty 

to the United States to “protect against improper expenditures of federal 

funds.” All of these determinations are consistent with the rationale of Merrill

and Heckler and guided by our prior decisions in Spong and Lobeck. See Spong, 

787 F.3d at 309–12.

Regarding their Texas Deceptive Trade Practices Act (“DTPA”) 

unconscionability claim, the Spongs argue that “reliance is not an element of” 

such a claim. Fidelity, on the other hand, asserts that “there cannot be a 

disparity in the knowledge of the” parties “upon which to predicate a Texas 

DTPA claim” under the Merrill/Heckler rationale. A brief review of Texas law 

tilts the argument in Fidelity’s favor. 

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An “[u]nconscionable action or course of action” is defined as “an act or 

practice which, to a consumer’s detriment, takes advantage of the lack of 

knowledge, ability, experience, or capacity of the consumer to a grossly unfair 

degree.” TEX. BUS. & COM. CODE § 17.45(5). To prove this claim, “a plaintiff 

must show that the defendant’s acts took advantage of her lack of knowledge 

and ‘that the resulting unfairness was glaringly noticeable, flagrant, complete 

and unmitigated.’” Ins. Co. of N. Am. v. Morris, 981 S.W.2d 667, 677 (Tex. 

1998) (quoting Chastain v. Koonce, 700 S.W.2d 579, 584 (Tex. 1985)).

Given the Spongs’ imputed knowledge, Fidelity correctly argues that the 

unconscionability claim was properly dismissed. In Spong, we concluded it was 

“incumbent upon the Spongs to determine whether their property was eligible 

for a SFIP.” 787 F.3d at 309. We also determined that, at the time the Spongs 

obtained the SFIP, they were “in possession of essentially the same facts as 

Fidelity.” Id. at 310. Therefore, an essential element of the claim — a lack of 

knowledge — is absent. Moreover, there is no evidence that Fidelity attempted 

to take advantage of the Spongs, let alone to a “grossly unfair degree.” 

Though the Spongs circumstances are unfortunate, “[t]he principles 

unique to governmental insurance policies that require a strict construction of 

their terms and requirements can sometimes create ostensibly inequitable 

results.” Jacobson v. Metro. Prop. & Cas. Ins. Co., 672 F.3d 171, 176 (2d Cir. 

2012). In a factually analogous case, we emphasized “that the National Flood 

Insurance Program is federally subsidized and enables consumers to obtain 

flood insurance which virtually would be impossible to purchase in the 

marketplace.” Gowland v. Aetna, 143 F.3d 951, 955 (5th Cir. 1998). Similar 

to Gowland, requiring the Spongs “to turn square corners when dealing with 

the Treasury ‘does not reflect a callous outlook. It merely expresses the duty 

of all courts to observe the conditions defined by Congress for charging the 

public treasury.’” Id. (quoting Merrill, 332 U.S. at 385).

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The district court properly dismissed all claims against Fidelity.

II. Claims Against the Government are Time-Barred

The FTCA provides that “[a] tort claim against the United States shall 

be forever barred unless it is presented in writing to the appropriate Federal 

agency within two years after such claim accrues[.]” 28 U.S.C. § 2401(b). 

Under federal law, a plaintiff’s claim generally accrues “when the plaintiff 

knows or has reason to know of the injury which is the basis of the action.” 

Ramming v. United States, 281 F.3d 158, 162 (5th Cir. 2001) (quoting Brown 

v. Nationsbank Corp., 188 F.3d 579, 589–90 (5th Cir. 1999)). This application 

of the discovery rule means that a cause of action accrues “when the plaintiff[s]

discover[ed], or, in the exercise of reasonable diligence should have discovered, 

the fact of the injury and its cause.” Young v. United States, 727 F.3d 444, 447 

(5th Cir. 2013) (alteration in original) (quoting Bush v. United States, 823 F.2d 

909, 911 (5th Cir. 1987)).

Recently, the Court held that the FTCA’s two-year statute of limitations 

“is not a jurisdictional requirement.” United States v. Kwai Fun Wong, 135 S. 

Ct. 1625, 1633 (2015). According to the Court, “[t]he time limits in the FTCA 

are just time limits, nothing more. Even though they govern litigation against 

the Government, a court can toll them on equitable grounds.” Id. The Spongs 

do not argue they are entitled to equitable tolling so we do not address that 

issue. 

Instead, the Spongs contend that genuine issues of material fact exist as 

to when their claims accrued. The Spongs argue that they did not discover 

their injury until October 14, 2009, when they received a denial letter from 

Fidelity, which rendered their October 12, 2011, complaint timely. The district 

court rejected this argument and cited at least two “storm warnings” that put 

the Spongs on notice of the possible invalidity of the policy. The first was the 

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March 2006 closing on the property, where the Spongs received an elevation 

certificate, which indicated the property was within the “Coastal Barrier 

Act[.]” The second was a thunderous warning: Fidelity’s informing the Spongs

on January 27, 2009, “that it may not honor their insurance claim because the 

property was located in the CBRS[.]” 

The district court determined either of these events “provided ample 

evidence of the possible existence of a claim for misrepresentation against . . .

Fidelity[.]” Given that the Spongs waited until almost two years after 

receiving the October 14, 2009, denial letter from Fidelity, the district court 

concluded the claims were untimely and that it lacked subject-matter 

jurisdiction. Accordingly, the court granted summary judgment for the 

Government and dismissed all claims against it. 

Beyond these warnings, the Government contends that a September 25, 

2009, letter sent from the Fish and Wildlife Service (“FWS”) to the Spongs 

served as an “explicit notification” to the Spongs regarding whether their 

property was eligible for SFIP coverage. According to the Government, the 

letter indicated the Spongs’ home was within the CBRS and explained a 

clerical error by the agency which previously stated otherwise. The

Government thus asserts that the subsequent October 14 denial letter sent by 

Fidelity “merely confirmed what [the Spongs] already knew or should have 

known: that their flood insurance application had relied on an erroneous 

statement by the [FWS], and that their policy was invalid at its inception 

because their property was . . . located within the [CBRS].” 

We hold that the September 25, 2009, letter, which was emailed to the 

Spongs on September 29, 2009, began the accrual for the Spongs’ tort claim 

against the Government. The letter expressly provided the Spongs notice that 

their federal insurance policy was invalid and explained the FWS’s prior 

erroneous determination. At that point, it was undisputed that the Spongs 

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knew or had reason to know of the injury which was the basis for their cause 

of action against the Government. See Ramming, 281 F.3d at 162. Given that,

the October 14, 2009, denial letter was, as the Government asserts, “little more 

than a predictable formality.” 

Although the district court mistakenly but understandably 

characterized the statute of limitations at 28 U.S.C. § 2401(b) as jurisdictional, 

its grant of summary judgment was proper because there is no genuine issue 

of material fact as to whether the Spongs’ FTCA claims were submitted within 

the two-year statute of limitation. The undisputed evidence shows that by 

September 29, 2009, the Spongs were on notice regarding the accrual of their 

tort claim. 

AFFIRMED.

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