Court Opinion

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Opinions of the United
2005 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit

4-15-2005

Suopys v. Omaha Prop & Cslty
Precedential or Non-Precedential: Precedential

Docket No. 04-1996

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                                              PRECEDENTIAL

           UNITED STATES COURT OF APPEALS
                FOR THE THIRD CIRCUIT

                         No. 04-1996

                    ALLEN B. SUOPYS,

                                Appellant

                                v.

            OMAHA PROPERTY & CASUALTY

        On Appeal from the United States District Court
                  for the District of New Jersey
                     (D.C. No. 02-cv-05743)
        District Judge: Honorable Garrett E. Brown, Jr.

                   Argued January 25, 2005
          Before: SCIRICA, Chief Judge, RENDELL,
                 and FISHER, Circuit Judges.

                    (Filed April 15, 2005)

Kenneth P. Westreich (Argued)
Swain & Westreich
3100 Highway 138, Building 2
Wall, NJ 07719
       Attorney for Appellant
Gerald J. Nielsen (Argued)
3838 North Causeway Boulevard, Suite 2850
Metairie, LA 70002
       Attorney for Appellee

                    OPINION OF THE COURT

FISHER, Circuit Judge.

        Allen B. Suopys (“Suopys”) appeals from an order of the
United States District Court for the District of New Jersey granting
summary judgment in favor of Omaha Property & Casualty
(“Omaha”). Suopys claims that he sustained property losses that are
covered by the Standard Flood Insurance Policy (“SFIP”) issued to
him by Omaha in its capacity as a “Write-Your-Own” Program
Company participant in the National Flood Insurance Program
(“NFIP”). This appeal presents the question of whether under the
SFIP, the 60-day period for filing proof of loss, including the filing
of an adjuster’s report in lieu of proof of loss, is waivable absent the
consent of the Federal Emergency Management Agency (“FEMA”).
The District Court determined that Suopys’s claim was barred for
failure to timely submit proof of loss or, alternatively, found no
coverage for the damage at issue. We will affirm on the former
ground and, in doing so, make explicit that the 60-day period for
filing proof of loss must be strictly construed.

                                   I.

       The National Flood Insurance Act of 1968, 42 U.S.C.
§§ 4001-4129, established the NFIP. The NFIP is underwritten by the

                                   2
United States Treasury in order to provide flood insurance below
actuarial rates. 42 U.S.C. § 4017 (2003); see also Van Holt v. Liberty
Mutual, 163 F.3d 161, 154 n.2 (3d Cir. 1998). The NFIP is
administered by FEMA and the Federal Insurance Mitigation
Administration (‘FIMA”). 42 U.S.C. § 4011 (2003); 44 C.F.R.
§§ 59.1-77.2 (2003).

        The SFIP is codified at 44 C.F.R. Pt. 61, App. A (2003) and
is incorporated into the Code of Federal Regulations by reference at
44 C.F.R. § 61.13(a) (2003). The SFIP and all disputes arising from
the handling of any claim under the policy are governed by the flood
insurance regulations promulgated by FEMA, the National Flood
Insurance Act of 1968, 42 U.S.C. §§ 4001-4129, and federal common
law. 44 C.F.R. Pt. 61, App. A(1), Art. 11 (2000) / Art. IX (2003).
FEMA provides for marketing and claims adjustment of the SFIP by
Write Your Own (“WYO”) Companies, who operate as fiscal agents
of the United States. 44 C.F.R. §§ 61.13(f), 62.23 (2003); 42 U.S.C.
§ 4071(a)(1) (2003) (authorizing FEMA director to utilize insurance
companies as fiscal agents of the United States).

        The WYO Companies are bound to adjust claims in
accordance with the terms of the SFIP. The SFIP requires that in
adjusting claims, the WYO Company apply its own company
standards guided by NFIP Claims manuals issued by FEMA. 44
C.F.R. § 62.23(i)(1) (2003). WYO carriers may not alter, amend, or
waive any provision or condition of the SFIP absent express written
consent from the Federal Insurance Administrator. 44 C.F.R. Pt. 61,
App. (A)(1), Art. 9(D) (2000) / Art. VII(D) (2003); 44 C.F.R.
§ 61.13(d) (2003).

        The SFIP requires that an insured claiming damages for flood
loss provide the WYO carrier with proof of loss within 60 days from

                                  3
the date of the alleged loss. 44 C.F.R. Pt. 61 App. A(1), Art. 9(J)
(2000) / VII(J) (2003).

                                  II.

        Suopys seeks flood insurance coverage for damage to his
Forked River, New Jersey summer home sustained on or about June
21, 2001, due to Tropical Storm Allison. Suopys timely notified
Omaha of the property damage. By early July 2001, Omaha’s claims
adjuster inspected the property and observed damage including
moisture in the house, water around the doors and carpet edges and
upheaval of the concrete slab on which the house was situated. The
adjuster indicated that the claim for $12,962.44 (the amount after
depreciation and deductibles) should be paid by Omaha within two
months of its receipt. Having not received payment by September
2001, Suopys inquired of the adjuster as to the status of his claim and
was informed by the adjuster that payment would be forthcoming.

         Omaha notified Suopys by letter dated September 27, 2001,
that his claim remained open beyond the 60-day period for submitting
a proof of loss and indicated that it could either close the claims file
without payment, or close it with a possible payment if a proof of loss
was received by October 5, 2001. Omaha requested that Suopys
contact the adjuster to determine his response given that Omaha did
not have authority under the SFIP to act on any request for an
extension of time to file a proof of loss. Omaha’s letter also
contained a reservation of all rights under the policy.

        On October 2, 2001, Suopys provided the adjuster with a
signed and notarized proof of loss and the National Flood Insurance
Program Final Report (“Adjuster’s Report”). Omaha received the
proof of loss and Adjuster’s Report on October 4, 2001. Shortly
thereafter, Omaha determined that there was no SFIP coverage for the

                                   4
claimed damage as it was not caused by Tropical Storm Allison or by
a flood. Rather, as the adjuster’s revised report reflected, although
there was a general and temporary condition of flooding as a result of
Tropical Storm Allison, the concrete slab upheaval resulted from
possible subterrain flooding or ground movement over time.1 By

       1
       The relevant provisions of the SFIP regarding exclusions
from coverage due to “earth movement”are as follows:

       We only provide coverage for direct physical loss by
       or from flood which means we do not cover:
              B.      Losses from other casualties,
                      including loss caused by:
              1.      Theft, fire, windstorm, wind,
                      explosion, earthquake, land sinkage,
                      landslide, destabilization or movement
                      of land resulting from the
                      accumulation of water in sub-surface
                      land areas, gradual erosion, or any
                      other earth movement except such
                      mudslides ... or erosion as is covered
                      under the peril of flood.
                      ***
              3.      Land subsidence ... unless, subject to
                      additional deductibles as provided for
                      at Article 7, (a) there is a general and
                      temporary condition of flooding in the
                      area, (b) the flooding is the proximate
                      cause of the land subsidence ... (c) the
                      land subsidence ... occurs no later than
                      72 hours after the flood has receded,
                      and (d) the insured building must be
                      insured, at the time of the loss, for at

                                  5
letter dated December 11, 2001, Omaha denied Suopys’s claim on the
ground that there was no general condition of flooding at the property
on the reported date of loss, which is required to trigger SFIP
coverage.2

         Suopys filed a Complaint in the District Court asserting that
Omaha breached its contract with Suopys in denying flood insurance
coverage and sought benefits under the SFIP.3 Omaha sought
summary judgment on the ground that Suopys’s claim was barred for
failure to submit a sworn proof of loss within 60 days of the date of

                       least 80 percent of its replacement cost
                       or the maximum amount of insurance
                       available under the [NFIP].

44 C.F.R. Pt. 61 App. A(1), Art. 3(B) (2000) (emphasis in original).
See also 44 C.F.R. Pt. 61, App. A(1), Art. V(C) (2003).
       2
         Suopys subsequently requested that Omaha re-evaluate its
denial of coverage. Both Omaha and Suopys retained experts to
determine whether the cause of the structural damage to the property
was a result of “earth movement” excludable from coverage or
whether it met the narrow land subsidence exception to the earth
movement exclusion. See 44 C.F.R. Pt. 61 App. A(1) Art. 3 (2000).
In light of our holding that Suopys did not timely file proof of loss in
order to trigger flood insurance coverage, we do not address the
substance of the coverage dispute regarding “earth movement.”
       3
         The District Court had jurisdiction pursuant to 42 U.S.C.
§ 4072 given that Suopys sought as damages payment of United
States Treasury funds from Omaha in its capacity as a fiscal agent of
FEMA pursuant to 42 U.S.C. § 4071 (2003). See Linder & Assoc.,
Inc. v. Aetna, 166 F.3d 547, 550 n.3 (3d Cir. 1999).

                                   6
the alleged flood loss. Suopys countered that he complied with the
terms of the SFIP regarding proof of loss in light of the
representations made by Omaha in its September 27, 2001
correspondence indicating that it would accept the proof of loss if
filed by October 5, 2001 (despite the fact that more than 60 days had
passed). He argued that Omaha’s representation constituted a waiver
of his obligation to submit proof of loss within 60 days of the date of
the claimed flood loss or, alternatively, that Omaha waived the proof
of loss requirement by accepting the adjuster’s report in lieu of the
proof of loss.

         The District Court concluded that Suopys’s claim was barred
for failure to submit a proof of loss within 60 days of the date of the
loss and that there was no waiver of that 60-day filing requirement.
Although the failure to timely file the proof of loss standing alone
warranted entry of summary judgment in favor of Omaha, the District
Court further held that Omaha would be entitled to summary
judgment because the claimed property damage was not covered
under the flood insurance policy as it was caused by earth movement
rather than by land subsidence.

                                 III.

        Our jurisdiction over this appeal is premised on 28 U.S.C.
§ 1291. We apply plenary review to the grant of summary judgment
in favor of Omaha. Van Holt, 163 F.3d at 167 (3d Cir. 1998).

                                 IV.

        Federal common law governs the interpretation of the SFIP.
Linder, 166 F.3d at 550. The SFIP is construed in accordance with
its plain, unambiguous meaning, in order to fashion uniform
interpretation throughout the country and avoid state to state coverage

                                  7
variances. Id. While we apply standard insurance principles to
construe the SFIP, general doctrines of waiver and estoppel do not
apply when the insurer is an agent of the United States. Id.; Gowland
v. Aetna, 143 F.3d 951, 955 (5th Cir. 1998) (quoting Office of
Personnel Management v. Richmond, 496 U.S. 414, 425 (1990)
(“Any exercise of a power granted by the Constitution to one of the
other branches of Government is limited by a valid reservation of
congressional control over funds in the Treasury.”).

         Because any claim paid by a WYO Company is a direct
charge to the United States Treasury, strict adherence to the
conditions precedent to payment is required. Federal Crop Ins. Corp.
v. Merrill, 332 U.S 380, 384-85 (1947) (holding that insured must
strictly comply with all terms and conditions of federal insurance
policy and recognizing duty of courts to observe conditions defined
by Congress for charging the public treasury); Van Holt, 163 F.3d at
165; Flick v. Liberty Mutual, 205 F.3d 386 (9th Cir.), cert. denied,
531 U.S. 927 (2000) (strict compliance applied to policies written by
WYO Companies under the NFIP because flood loss claims are paid
from United States Treasury).

         Mindful of these principles, we address the merits of Suopys’s
two-fold waiver argument: (1) Omaha waived the 60-day period for
providing proof of loss when in its September 27, 2001
correspondence to Suopys, it represented it would accept a proof of
loss if submitted by October 5, 2001, and (2) Omaha waived the proof
of loss requirements in accepting a signed and notarized adjuster’s
report on October 4, 2001.

                                  A.

       As to whether Omaha waived the 60-day period for providing
proof of loss when in its September 27, 2001 correspondence to

                                  8
Suopys, it represented it would accept a proof of loss if submitted by
October 5, 2001, the SFIP provides:

       J.      Requirements in Case of Loss

               4.      Within 60 days after the loss, send 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. . . .

                                ***

               6.      The insurance adjuster whom we hire
                       to investigate your claim may furnish
                       you with a proof of loss form, and she
                       or he may help you complete it.
                       However, this is a matter of courtesy
                       only, and you must still send us a
                       proof of loss within 60 days after the
                       loss even if the adjuster does not
                       furnish the form or help you complete
                       it . . . .

44 C.F.R. Part 61, App. (A)(1), Art. 9(J) (2000) / Art. VII(J) (2003)
(italics added).4

       4
       The parties dispute which version of the SFIP applies to
Suopys’s claim.     Suopys’s SFIP had an effective date of
December 26, 2000, and was in the form codified at 44 C.F.R. Pt. 61,
App. A(1) (2000), subject to the liberalization clause of that policy
found at Article 10 (which gives the policyholder the benefit of

                                  9
         Strictly construed, the SFIP clearly and unambiguously
requires that proof of loss be submitted by the insured within 60 days
of the claimed flood loss. The SFIP places the onus on the insured to
file the proof of loss within 60 days regardless of the representations
and assistance, or lack thereof, provided by the insurer or its adjuster.
Dawkins v. Witt, 318 F.3d 606 (4th Cir. 2003) (60-day proof of loss
filing period strictly enforced even where Hurricane Fran made it
extremely difficult for insured parties to comply with the time limit);
Phelps v. FEMA, 785 F.2d 13 (1st Cir. 1986) (government insurance
agency not barred from asserting defense of insured’s failure to file
written proof of loss even where misrepresentations of the agency
induced the failure). This, coupled with the directive that a WYO
Company may not alter, amend, or waive any provision or condition
of the SFIP absent express written consent from the Federal Insurance
Administrator,5 defeats Suopys’s claim that Omaha’s September 27,

subsequent policy amendments).           That liberalization clause
effectively incorporated the December 31, 2000 revisions to the SFIP
to the extent that they extend or broaden the coverage afforded to
Suopys without additional premium.             Federal Emergency
Management Agency, National Flood Insurance Program (NFIP);
Insurance Coverage and Rates, 65 Fed. Reg. 60, 758 (Oct. 12, 2000)
(to be codified at 44 C.F.R. Parts 59 and 61). The primary purpose
of the December 31, 2000 amendments to the SFIP was to render the
SFIP in plain language and restructure its format to resemble the
homeowner’s policy. Id. at 60,759. We agree with Omaha’s
contention that regardless of which SFIP language applies, Suopys
failed to comply with the proof of loss requirements.
        5
        44 C.F.R. Pt. 61, App. (A)(1), Art. 9(D) (2000) / Art. VII(D)
(2003); 44 C.F.R. § 61.13(d) (2003).

                                   10
2001 representations constituted a waiver of the 60-day requirement.6
Thus, we join a number of other Courts of Appeals in holding that
strict adherence to SFIP proof of loss provisions, including the 60-day
period for providing proof of loss, is a prerequisite to recovery under
the SFIP. See Phelps, 785 F.2d 13 (1st Cir. 1986); Dawkins, 318 F.3d
606 (4th Cir. 2003); Gowland, 143 F.3d 951 (5th Cir. 1998); Neuser
v. Hocker, 246 F.3d 508 (6th Cir. 2001) (failure to comply with 60-
day filing requirement for proof of loss was bar to recovery); Mancini
v. Redland Ins. Co., 248 F.3d 729 (8th Cir. 2001) (failure to submit
a signed and sworn proof of loss entitled insurer to judgment as a
matter of law); Flick, 205 F.3d 986 (9th Cir. 2000), and Sanz v. U.S.
Security Ins. Co., 328 F.3d 1314 (11th Cir. 2003) (failure to file a
proof of loss within 60 days without obtaining a written waiver of that
requirement from FEMA precluded recovery).

                                  B.

        As to whether Omaha’s acceptance of the adjuster’s report
constituted a waiver, Suopys relies on the following provision of the
SFIP as amended effective 12/31/00:

       6
        Omaha has a policy of continuing to examine claims despite
an insured’s non-compliance with policy requirements given that
facts may surface that would support Omaha making a request for
waiver from FEMA. But the mere fact that an insurer continues its
investigation does not constitute a waiver of policy requirements. See
generally Wagner v. Director FEMA, 847 F.2d 515, 520 (9th Cir.
1988) (“Holding that FEMA may inadvertently extend the limitations
period by answering claimants’ inquiries or by considering new
information ‘would contravene a strong public policy to encourage an
insurance company to reconsider its original denial when confronted
with potentially new facts.’. . . .”) (citation omitted).

                                  11
       At our option, we may accept the adjuster’s report of
       the loss instead of your proof of loss. The adjuster’s
       report will include information about your loss and
       the damages you sustained. You must sign the
       adjuster’s report. At our option, we may require you
       to swear to the report.

44 C.F.R. Pt. 61, App. A.(1), VII(J)(9) (2003). See also 65 Fed. Reg.
at 60,775 (October 12, 2000). This provision only applies to claims
under $7500, which Suopys’s $12,962.44 claim exceeded. FEMA’s
regulations are controlling regarding the application of the SFIP by
WYO Companies. 44 C.F.R. Pt. 61, App. A(1), Art. 11 (2000) / Art.
IX (2003). The FEMA Claims Manual, which is incorporated by
reference into the FEMA regulations (44 C.F.R. § 62.23), limits SFIP
Article VII(J)(9) (2003) and Article 9(J)(7) (2000) to claims with a
maximum value of $7500.7

       7
        Both the version of the Claims Manual effective at the time
of Suopys’s loss and the current Claims Manual
(www.fema.gov/nfip/authreq.htm at ¶q) limit such claims to $7500.
The current version requires:

       q. Proof of Loss. A Proof of Loss form (page A-29)
       signed by the insured is required on every claim on
       which any payment is recommended. On claims up to
       $7,500, the NFIP Final Report form (page A-25) will
       suffice for this purpose. On claims over $7,500, a
       separate Proof of Loss form must be obtained. If the
       insured qualifies for replacement cost coverage, the
       adjuster must submit the Statement as to Full Cost of
       Repair or Replacement (shown on page A-31) for the
       additional amount recoverable under the replacement
       cost provisions. If the insured qualifies for Increased

                                 12
        Suopys suggests that the above-quoted SFIP which became
effective December 30, 2000 (65 Fed. Reg. at 60,758), eliminated the
$7500 limitation. Compare 44 C.F.R. Pt. 61, Art. 9(J)(7) (2000)8.
We disagree. Both versions of the SFIP make clear that acceptance
of the adjuster’s report is at the option of the insurer. Moreover, the
implementation of either version of this SFIP provision is subject to
the limitations imposed by FEMA. 42 U.S.C. § 4019 (FEMA
establishes the rules governing adjustment and payment of proved and
approved claims for losses). The $7500 limitation imposed by FEMA
is binding on Suopys. Suopys’s claim was for $12,962.44.
Consequently, in the absence of a written waiver from FEMA, Omaha
was barred from accepting the adjuster’s report in place of proof of
loss. 44 C.F.R. Pt. 61, App. (A)(1), Art. 9(D) (2000) / Art. VII(D)
(2003); 44 C.F.R. § 61.13(d) (2003).

       Cost of Compliance (ICC), the Increased Cost of
       Compliance Proof of Loss form (shown on page A-
       13) must be submitted. The insured has 60 days from
       the date of loss to proffer the proof.
       8
       The SFIP as issued to Suopys on December 26, 2000,
provided:

       We may, at our option, waive the requirement for the
       completion and filing of a proof of loss in certain
       cases, in which event you will be required to sign and,
       at our option, swear to an adjuster’s report of the loss
       which includes information about your loss and the
       damages sustained, which is needed by us in order to
       adjust your claim.

44 C.F.R. Pt. 61 Art. 9(J)(7) (2000) (italics added).

                                  13
                              IV.

         For the foregoing reasons, we will affirm the grant of
summary judgment in favor of Omaha based upon Suopys’s failure
to strictly comply with SFIP provisions regarding proof of loss.

                              14