Opinion ID: 61821
Heading Depth: 3
Heading Rank: 3

Heading: Flood II Loss and Award

Text: We affirm the district court’s conclusion that the Gallups suffered a covered loss following Flood II. After Flood II, two of the pilings underneath Building B were completely undermined. Building B listed noticeably and was unsafe to use. Due to the unusual geographic and architectural features of the Gallups’ home, Building B was a total loss after Flood II.3 Although we hold that the Gallups were entitled to recover under their policy for the damage to Building B following Flood II, we reverse the district court’s award of the cost of relocating the Gallups’ home. The district court erred when it used its equitable powers to fashion this award. The Gallups’ recovery is limited to the terms of the SFIP. Gowland v. Aetna, 143 F.3d 951, 954 (5th Cir. 1998). We render judgment in the amount necessary to compensate the Gallups for the loss of Building B under the terms of their insurance policy. In addition to being an equitable remedy, the district court’s award of relocation costs is also specifically prohibited by the terms of the SFIP. “[T]he provisions of an insurance policy issued pursuant to a federal program must be strictly construed and enforced . . . .” Id. The Loss Settlement section of the SFIP excludes recovery for building relocation.4 SFIP, 44 C.F.R. Pt. 61, App. A(1), Art. VII(V)(2)(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 3 We note that our determination that the Flood II damage was limited to Building B is well supported by the record. Building A was a separate structure connected to Building B by only a deck. There is no evidence in the record of actual physical loss to Building A following Flood II, which is what is required for recovery under the SFIP. The district court also found that there was no physical damage to Building A after Flood II. 4 The SFIP provides up to $30,000 for building relocation under the “Increased Cost of Compliance” section, which “pays [the insured] to comply with a State or local floodplain management law or ordinance affecting repair or reconstruction of a structure suffering flood damage.” SFIP, 44 C.F.R. Pt. 61, App. A(1), Art. III(D)(1). As neither party has pointed us to a state or local law requiring relocation of the Gallups’ home, this section is not applicable. 8 No. 06-31156 dwelling had been rebuilt at its former location.”). The district court’s award of the cost of relocation is improper in light of this provision of the SFIP. The Gallups’ loss is determined under the “Actual Cash Value Loss Settlement” section of the SFIP because, according to the Gallups’ August 28, 2003 amended Proof of Loss, the amount of insurance on their home ($210,000), was less than eighty percent of the home’s full replacement value and less than the maximum available coverage ($250,000). 42 U.S.C. § 4013(b)(2) (statutory maximum coverage); SFIP, 44 C.F.R. Pt. 61, App. A(1), Art. VII(V)(4)(a). We hold that the proper amount of recovery under the SFIP insurance contract is the amount to which the Gallups are entitled to under the proportional loss settlement provision of the “Actual Cash Value Loss Settlement” section. SFIP, 44 C.F.R. Pt. 61, App. A(1), Art. VII(V)(4)(a)(2). Ordinarily, we would remand this case to permit the district court to determine the cost to replace Building B and to calculate the award under the SFIP. Here, however, remand would serve little if any practical purpose. The home and the considerable acreage on which it stood were sold in 2006 for less than 50% of the property’s pre-flood value. The riverbank erosion which undermined Building B has undoubtedly continued. There is little useful information that could be obtained on remand. We will therefore calculate the Gallups’ recovery based on the information they and Omaha submitted to the NFIP in 2003. We realize that our method is imprecise, but the passage of time, the changed circumstances, and the state of the record combine to prevent us from calculating the exact dollar amount of the actual “cost to repair or replace the damaged part of the dwelling,” as specified by the SFIP. These same factors plus the additional cost to the Gallups argue against remand for further fact finding. Given this limitation, and the fact that this case involves a unique set of circumstances which defy a perfect solution, we are satisfied that our result is fair and principled. 9 No. 06-31156 The November 18, 2003 National Flood Insurance Final Report submitted by independent adjuster Joel Schaefer showed that the combined area of Buildings A and B was 2176 square feet. Schaefer erroneously omitted the deck between Buildings A and B from his estimate of the total square footage of the home. See SFIP, 44 C.F.R. Pt. 61, App. A(1), Art. III(2) (“We insure against direct physical loss . . . to . . . additions and extensions attached to and in contact with the dwelling by means of a rigid exterior wall . . . .”).5 Correcting for this omission, the total square footage of the Gallups’ home was 2376 square feet. Building B, which contained two bedrooms, one full bathroom, one half bathroom, a laundry room, a den, and the deck, was 1064 square feet, or 44.78% of the total area of the home. The Gallups, in their Flood II amended Proof of Loss, estimated that the “full cost to repair or replace” their home was $314,000, and we find that the cost to replace the damaged part of the home was $140,612.79, or 44.78% of the full replacement cost.6 The Gallups are entitled to the proportion of this cost equal to the amount of insurance they actually carried ($210,000) divided by the maximum insurance available ($250,000), or 84%. After subtracting the $1,000 deductible, we render an award to the Gallups in the amount of $117,114.74 under the proportional loss settlement provision of the “Actual Cash Value Loss Settlement” section of the SFIP. SFIP, 44 C.F.R. 5 The omitted deck was a rectangular area running along the inside wall of Building B and connecting to the end of Building A. The scale drawings of the Gallups’ home in engineer John Garner’s August 25, 2003 report show that this deck area was approximately ten feet by twenty feet. Because one whole side of the omitted deck was connected to the inside wall of Building B and thus subject to the same structural damage suffered by the rest of Building B, we include the deck in Building B’s total area. 6 The district court stated that after Flood II, the Gallups were seeking $209,000, which it incorrectly characterized as “the total replacement value of the home less the deductible.” 434 F.3d at 343. The Gallups’ August 26, 2003 Proof of Loss claimed $209,585 and listed the cost to repair or replace the home plus the contents as $210,585. The Gallups amended their Proof of Loss on August 28, 2003 to include a replacement cost estimate of $314,000 provided by Albert Waterson, the home’s original architect. 10 No. 06-31156 Pt. 61, App. A(1), Art. VII(V)(4)(a)(2). The basis for the award is the SFIP contract, not this Court’s equitable powers.