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

Heading: Loss recovery under the regulations

Text: The National Flood Insurance Act and the regulations created standard requirements for submitting proof of a flood loss. However, following the widespread devastation that resulted from Hurricane Katrina, the Acting Federal Insurance Administrator altered the usual rules in an August 31, 2005 memorandum. Contemplating a shortage of qualified adjusters, the memorandum cited an urgent need to expedite claims payments to policyholders. To accomplish this goal, the Administrator waived the proof of loss requirement in cases where policy holders agreed with the insurance carrier's adjustment. When there was not acceptance, the policy memo placed the homeowner back into the usual process, with a few exceptions: I am waiving the requirement in VII. J.4 of the SFIP ... for the policyholder to file a proof of loss prior to receiving insurance proceeds. Instead, payment of the loss will be based on the evaluation of damage in the adjuster's report.... In the event a policyholder disagrees with the insurer's adjustment, settlement, or payment of the claim, a policyholder may submit to the insurer a proof of loss within one year from the date of the loss. The proof of loss must meet the requirements of VII.J.4 of the SFIP .... The insurer will then process the policyholder's proof of loss in its normal fashion. If the insurer rejects the proof of loss in whole or in part, the policyholder may file a lawsuit against the insurer within one year of the date of the written denial of all or part of the claim as provided in VII.R of the SFIP .... See Marseilles Homeowners Condo. Ass'n v. Fid. Nat'l Ins. Co., 542 F.3d 1053, 1055 (5th Cir.2008). It is undisputed that the Monisteres disagreed with State Farm's offer. The November 2005 estimate was given to State Farm. A proof of loss was later filed on August 28, 2006, just within the one-year deadline. The 2006 document claimed about $94,000 more in compensation. Since State Farm's initial assessment of damage was not accepted by the Monisteres, the Acting Federal Insurance Administrator's memorandum provided that their claim would thereafter be processed basically in the usual way. That usual way is for a policy holder to supply the insurance carrier with the following information: [S]end 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: ... f. Specifications of damaged buildings and detailed repair estimates.... 44 C.F.R. pt. 61, app. A(2)(J)(4). After receiving the proof of loss, the insurance carrier, at its option, also may request additional information: 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. Id. at (K)(2). State Farm never requested additional information. The first question is whether the Monisteres' proof of loss was initially supported by detailed repair estimates. Three estimates appear in the record: (1) a November 8, 2005 estimate from Whites & Whites Redevelopment Corporation in the amount of $154,843; (2) a June 20, 2006 estimate from Highland Homes in the amount of $477,692; and (3) a January 25, 2007 estimate from Whites & Whites in the amount of $171,638. Each of those included an estimate of all the damages. The money already received from State Farm ($132,712) would be deducted from any further payment, and the amount paid would be capped by the policy limit. Both Whites & Whites estimates set forth the same areas to be repaired or replaced. The Monisteres explain that the January 2007 estimate includes some items that were overlooked in the November 2005 estimate, and it also incorporates market increases in the cost of construction. We note that the Highland Homes estimate could not have satisfied the documentation requirement, as it is not an estimate for repairs. It was issued in order to determine the demolition cost of the old home and the proposed price of building a new one. The later of the two Whites & Whites estimates, which is dated January 25, 2007, was furnished more than one year after the date of loss. As we discussed, the usual 60-day deadline for presenting a proof of loss was extended to one year from the date of the loss. The 2007 estimate was well after that, though it is argued that the policyholder was merely submitting a revised estimate reflecting inflation-caused increases in repair costs. The earliest estimate is dated November 8, 2005. It listed twenty-three areas that required repair or replacement and, for each, stated a cost estimate made by Whites & Whites to the Monisteres. To give a sense of the document, we show the caption and list the first three items: Work Description ProjectGut storm-damaged portions of 604 Atherton Dr. and renovate. 1. Gut 1st floor entirely and 2nd floor as required (wiring and HVAC, at a minimum). $ 9,000.00 2. Steam clean upstairs carpets $ 300.00 3. Mold Remediation $ 4,000.00 A clear line has not been drawn in this Circuit between what is and what is not sufficient detail for the repair estimate. We do not draw one today. The estimate here does provide more detail than those we have previously held inadequate. See Wright v. Allstate Ins. Co., 415 F.3d 384, 386-89 (5th Cir.2005); Forman, 138 F.3d at 545. State Farm eschews reversal based on an argument that the document was not a detailed repair estimate. We were informed by letter after briefing was closed that State Farm desires to make clear that it is not making any argument in this case as to the sufficiency of the documentation that had been submitted by the Plaintiffs in this matter. Instead of arguing that the Monisteres failed to meet the threshold requirements of submitting a proper estimate, State Farm argues that the Monisteres never, not even at trial, provided the evidence that would allow more to be paid. In State Farm's view, whether the estimate was sufficiently detailed is irrelevant. In reviewing the issue, we note again that the Monisteres could receive compensation for the lowest of the coverage limit, the replacement cost of that part of the dwelling damaged, or the amount actually spent to repair. As plaintiffs who sought additional benefits at trial, the Monisteres shouldered the burden of proving that the $132,712 received from State Farm did not sufficiently cover their provable damage. State Farm submits that the November 2005 and January 2007 estimates are the only evidence of record available to support an award of federal funds, and that the these documents are insufficient to establish that more is owed under the policy. We examine some of the evidence. Two representatives of the parish government testified for the Monisteres. They spoke to the fact that the house could not be rebuilt as it was and had to be elevated. Brandon Monistere testified about the conditions inside the house, including the muck and destroyed possessions and the dreadful general conditions. Photographs of the damage that he had taken were introduced into evidence and discussed. Describing the mold above the level that the flood waters reached was part of his testimony. He also testified about some of the adjusting procedures and visits. Tara Monistere testified about the damage, the claims process involving State Farm, and her contacts with the parish government. Both homeowners testified as to the waterline in the house, which usually was described as being at three and a half to four feet above the floor. On cross-examination, State Farm's attorney made the point in the form of questions that, though the water only reached that level, the estimate included repairs above that level. Also called as a witness was State Farm adjuster Michael Boudreaux. He testified that the amount paid to the Monisteres was based on the entire bottom floor being in need of repair up to the flood water level. The adjuster further explained that the policy would pay for gutting the entire house to that level, but not above. There was some ambiguity in the adjuster's records about just what the flood level was, which he explained. David Andras, a second State Farm adjuster, was another witness. When questioned by State Farm's attorney, Andras testified as to the defects from the company's perspective in the repair estimate on which the Monisteres relied at trial. That estimate remains the primary evidence on appeal. Andras discussed the impossibility of determining from the estimate what amounts were for repairs below the floodwater level and which for damage above. Removing all drywall from the first floor, all molding, and all wiring would go above the flood policy's limits. Other claims also were not well developed. The first item was an estimate of $9,000 for gutting the first floor and the second floor as required. No evidence was introduced at trial as to the second-floor requirements. Item three provides another example. It was $4,000 for mold remediation. No effort was made to demonstrate the type of remediation that was to occur or the specific areas that needed to be addressed. Item seven lists rewiring the entire home at a cost of $19,500. The Monisteres offered no evidence to elaborate on why the policy would cover rewiring the entire home when the flood waters did not reach the second floor. Another questioned entry on the estimate because it was higher than the water level was this: Repair sag in 1st floor entry overhang and replace corroded ironwork$6,000. To award additional benefits based on such claims requires that we find that there is enough in the evidence to support them. State Farm's witnesses indicated that the physical limit of the flood coverage was at the level of the flood waters. Various policy provisions are relevant here. In an earlier section of the opinion, we noted that only direct physical loss was covered. That was defined in the policy as [l]oss or damage to insured property, directly caused by a flood. Not included in that term were damages, including mold damage, resulting from water remaining in the home after flood waters receded. All witnesses questioned on the matter agreed that no mitigation of damages had occurred, such as removing drywall, carpet, or other saturated material. The effect on such policy exclusions of the fact that repairs or other mitigation in the turmoil after Katrina would likely have been impractical is not discussed by either party. It is important, though, that this is a congressionally created program, with rather severe limits in some respects. The problem with the argument on appeal that more should be paid is that the Monisteres presented only their own testimony and submitted the estimates provided by Whites & Whites. Among the factual issues unaddressed by that evidence are how this damage avoided the policy requirement of direct physical loss, and of not paying for damage such as from mold that occurs after the flood waters recede. No evidence was offered to justify paying for damage on the second floor resulting from the flood waters on the first floor. We do not know if the Monisteres could have factually supported the type of causation that was consistent with the policy terms. We are finding only that they never did. We close with one piece of obviously self-serving but instructive testimony by State Farm. One of the adjusters testified that if the repairs for which no coverage or at least some question existed were removed, State Farm had already paid more than the Monisteres' estimate would justify. Whether that is true or not, it identifies why we cannot go through the estimate in a search for some clearly appropriate claims. No one questions that the Monisteres were entitled to substantial coverage under the flood policy. This whole suit has been about whether they were entitled to more than they had already received. We find no basis in this record on which the district court could have awarded a specific additional sum or even have determined that more was owed.