Court Opinion

ID: 9492843
Source: CourtListenerOpinion
Date Created: 2023-08-05 14:51:46.992725+00
Date Added: 2024-06-11T17:55:31.265914
License: Public Domain

SCHROEDER, Circuit Judge,
Dissenting:
This flood insurance claimant gave the insurance company timely notice of the existence of her claim and informed it of the full amount of the claim as soon as it was known. In holding she must nevertheless be denied insurance benefits because of a failure to comply to the letter with the policy provision requiring a sworn proof of loss within 60 days, the majority announces an unduly harsh and unworkable rule. The holding conflicts with our prior recognition that standard insurance law principles should apply to the administration of the National Flood Insurance Program and with generally recognized state-law principles that literal compliance with a proof of loss provision is not required where compliance was not possible, or where substantial compliance provided the insurer with adequate notice of the claim.
In this case, Irene Flick made a claim on February 6, 1996, under a flood insurance policy underwritten by Liberty Mutual. This was 56 days after the flood loss occurred. Liberty Mutual dispatched a claims adjuster who inspected the home, completed a national flood insurance report, and noted the resettlement under the home, but concluded that the damage was not a result of the December 11th flooding. Flick attempted repeatedly to provide further information. On March 28, 1996, Flick’s attorney offered to provide any information available in a proof of loss and requested a blank form for that purpose. However, the adjuster handling the claim insisted that Flick sign the report prepared by the adjuster which, according to Flick, contained numerous errors. Flick’s claim was formally denied on April 8,1996. On May 24, 1996, Flick’s attorney again requested a form to be used for submitting proof of loss; on June 14, 1996, the adjusters again insisted that Flick sign the allegedly erroneous report.
After concluding the geophysical, structural, and financial analyses needed to evaluate the damage to her home, Flick’s attorney submitted a sworn proof of loss on his own form on September 17, 1996. In a letter dated October 9, 1996, an adjuster rejected Flick’s proof of loss form and stated that “the insured was given the form by the adjuster and I sent one to [Flick’s attorney’s] office with my 6/14/96 correspondence,” apparently referring to the flawed report prepared by the original claims adjuster. This suit followed.
Flick contends, and the government does not dispute for purposes of this appeal, that she could not have provided a complete proof of loss statement within 60 days of the date of the flooding. In fact where, as here, the damage is caused by flood-induced ground subsidence under a foundation, it is probable that the full amount of loss can almost never be known within 60 days. Flick offers reports by experts in geotechnical engineering, structural engineering, construction and real estate appraisal in support of that position.
This court has held that “[i]n creating the [National Flood Insurance] Program, Congress did not intend to abrogate standard insurance law principles.” Brazil v. Giuffrida, 763 F.2d 1072, 1074-75 (9th Cir.*3981985) (citing Hanover Building Materials v. Guiffrida, 748 F.2d 1011, 1013 (5th Cir.1984)); Drewett v. Aetna Casualty & Surety Co., 539 F.2d 496, 497-98 (5th Cir.1976). Accordingly, although we are dealing with a federal insurance program, we are to “draw[ ] upon standard insurance law principles” when interpreting policies issued under this program. Id. (citing West v. Harris, 573 F.2d 873, 881 (5th Cir.1978)).
Under ordinary principles of insurance law applicable in a majority of states, including California, Flick’s claim would be considered adequately presented and the 60-day proof of loss requirement excused on grounds of substantial compliance. See Windt, Insurance Claims and Disputes § 3.03 n. 23 (3d ed.1995) (citing cases); Croskey, Kaufman et al., California Practice Guide: Insurance Litigation § 3:166— 67 (Rutter 1995). The claim Flick made on February 6, 1996, was sufficient to put the insurer on notice that further inquiry was required. In fact, after receiving Flick’s notice of claim the insurance company did make further inquiry.
Also, in a growing majority of states an insurer can deny coverage for failure to submit a timely notification of loss only if the insurer proves prejudice as a result of the delay. See Ostrager & Newman, Handbook on Insurance Coverage Disputes § 4.02(c)(2)-(4) (9th ed.1998) (citing cases); Insurance Litigation at § 3.168-69; see also Insurance Claims and Disputes at § 3.03 n. 27 (noting that, in a majority of jurisdictions, a failure to submit a timely proof of loss will not result in denial of coverage unless prejudice is shown). It is difficult to see how the insurer was prejudiced by the failure to submit a sworn claim on a designated form until after February 10,1996.
In rejecting the claimant’s strong legal arguments, the majority confuses this case with cases against the United States involving sovereign immunity and claims of estoppel on the basis of inaccurate statements by government agents. See Wagner v. Director, FEMA 847 F.2d 515, 518-20 (9th Cir.1988) (60-day proof of loss requirement for federal flood insurance claims had to be strictly construed in action against FEMA because it constituted a “condition[ ] precedent to a waiver by the federal government of its sovereign immunity”); Federal Crop. Ins. Corp. v. Merrill, 332 U.S. 380, 68 S.Ct. 1, 92 L.Ed. 10 (1947) (estoppel not available against the government despite reliance on erroneous statement by official); Office of Personnel Management v. Richmond, 496 U.S. 414, 110 S.Ct. 2465, 110 L.Ed.2d 387 (1990) (estoppel not available against the government for monetary claim because Congress had not appropriated funds for such claims). This is not an estoppel case, nor is it a suit involving sovereign immunity. It is an insurance policy interpretation case that happens to involve insurance issued under a governmental subsidy program.
Moreover, there is nothing on the face of the policy to suggest the insured has a contractual relationship with anyone other than a private insurer, or that a claim made under the policy would be a direct charge on the public treasury. This case is therefore unlike Seattle Fur Exchange v. FCIA in which this court required strict compliance with the terms of an insurance policy because it “specifically identifie[d a government agency] as the reinsurer” and therefore “provide[d] a-direct contractual link” between the insured and the government agency. 7 F.3d 158, 163 (9th Cir.1993). In fact, the matter before us more closely resembles Lovell Mfg. v. Export-Import Bank, 777 F.2d 894 (3d Cir.1985), a case distinguished by the Seattle Fur Exchange panel. In that case, the Third Circuit held that because no provision in a privately issued insurance policy outlined the reinsurance agreement between the private insurer and a government agency, the insured’s claim was only against the private insurer and did not involve a charge on the Treasury. See Lovell Mfg., 777 F.2d at 901.
*399There is no indication anywhere in the legislative history of the National Flood Insurance Act, and certainly not in the case law of our circuit, that harsher rules should apply in the flood insurance context than apply in the ordinary insurance context. Indeed, the majority’s result thwarts one of Congress’ primary goals in enacting the National Flood Insurance Act of 1968-ensuring that flood insurance coverage is “available on reasonable terms and conditions to persons who have need for such protection.” 42 U.S.C. § 4001(a).
I therefore respectfully dissent.