Opinion ID: 64718
Heading Depth: 2
Heading Rank: 1

Heading: The district court's mode of analysis

Text: The district court concluded that the Monisteres were entitled to an award of $86,787.34. This was the amount available under Coverage A of the Monisteres' policy after deducting what State Farm already paid. We review the method by which that amount was calculated. Article VII(V)(2) of the Monisteres' policy establishes the means of calculating compensable damages in the event of flood loss: A. We will pay to repair or replace the damaged dwelling after application of the deductible and without deduction for appreciation, 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. The Monisteres' building limit of liability, also known as Coverage A, was capped at $227,000 for direct physical loss. See 44 C.F.R. pt. 61, app. A(1), art. III(A). Direct physical loss is defined under the policy as [l]oss or damage to insured property, directly caused by a flood. There must be evidence of physical changes to the property. Id. at art. II(A)(12). In determining the Monisteres' direct physical loss, the district court utilized the judicially created constructive total loss doctrine. See Greer v. Owners Ins. Co., 434 F.Supp.2d 1267, 1279 (N.D.Fla. 2006). In Greer, it was said that a constructive total loss occurs when a building, although still standing, is damaged to the extent that ordinances or regulations in effect at the time of the damage actually prohibit or prevent the building's repair, such that the building has to be demolished. Id. [2] Applying this definition, the district court awarded the Monisteres their building coverage limits, holding that the home was rendered a constructive total loss by the flood damage, because [the court was] convinced that requiring them to elevate the home ..., plus the cost to repair it, could have clearly and easily exceeded the market value of the home pre-Katrina. The court justified this conclusion based on the evidence, on logic, [and] on common sense. The district court's common sense view did not give sufficient meaning to the regulations that control us. Certainly, the Monisteres were required to (re)build at a higher elevation. The very real costs associated with that requirement are covered only to the extent permitted by policy and regulatory language. We have already quoted the relevant policy language. Payment for direct physical lossesthe coverage under which the additional amounts were awarded beloware made for the lesser of the coverage limit ($227,600), the replacement cost of that part of the dwelling damaged (depends on adequately documented proof of loss, the largest timely submitted being about $155,000, and the evidence to support that amount), or the amount actually spent to repair (building an entirely new home cost $535,000). Article VII(V)(2) of the policy; 44 C.F.R. pt. 61, app. A(1)-(2)(J)(4), art. II(A)(12). By utilizing the constructive total loss doctrine, the district court overrode these requirements. [3] The home was effectively a total loss, but that was due to the costs that regulatory authorities imposed for rebuilding. Such costs were specifically addressed in Coverage D of the Monisteres' policy, capped at $30,000. The Monisteres concede that they were paid the full amount of compliance coverage. The district court was without authority to balance equitiesCongress did that ahead of time and determined the maximum amount that would be paid. See Thomas v. Standard Fire Ins. Co., 414 F.Supp.2d 567 (E.D.Va. 2006) (finding that increased cost of compliance under Coverage D should not be considered in determining what constitutes a direct physical loss under Coverage A). Our analysis is channeled by the requirement that a policy of insurance issued pursuant to a federal program must be strictly construed and enforced.... Gowland v. Aetna, 143 F.3d 951, 954 (5th Cir.1998). Because insurance companies act as fiscal agents of the government under the National Flood Insurance Program, all policy awards deplete federally allocated funds. In re Estate of Lee, 812 F.2d 253, 256 (5th Cir.1987). Therefore, `not even the temptations of a hard case' will provide a basis for ordering recovery contrary to the terms of a regulation, for to do so would disregard `the duty of all courts to observe the conditions defined by Congress for charging the public treasury.' Forman v. Fed. Emergency Mgmt. Agency, 138 F.3d 543, 545 (quoting Office of Pers. Mgmt. v. Richmond, 496 U.S. 414, 420, 110 S.Ct. 2465, 110 L.Ed.2d 387 (1990)). Because we are reversing the judgment in favor of the Monisteres, the issue arises of whether to enter judgment here or instead to remand for further proceedings. State Farm asks us to hold that the Monisteres are not entitled to anything more than what has already been paid under the policy. Conversely, the Monisteres have made an alternative argument on appeal that they should receive $38,925.34, which is the difference between what they were paid and the 2007 Whites & Whites estimate. The issue of awarding a lesser amount as an alternative was presented by the Monisteres in the district court, and thus is properly before us. We resolve this dispute by looking to the procedures and requirements for loss recovery under the regulations.