DeCosta v. Allstate Insurance Co. ( 2013 )

United States Court of Appeals
For the First Circuit
No. 13-1176
WAYNE DECOSTA,
Plaintiff-Appellee,
v.
ALLSTATE INSURANCE COMPANY,
Defendant-Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
[Hon. John J. McConnell, U.S. District Judge]
Before
Lynch, Chief Judge,
Torruella, Circuit Judge,
and Stearns,* District Judge.
Gerald J. Nielsen, with whom Joseph J. Aguda, Jr., Nielsen,
Carter & Treas, LLC, David W. Zizik, and Zizik, Powers, O'Connell,
Spaulding, & Lamontagne, PC were on brief, for appellant.
Patrick F. Dowling, Jr., with whom D'Amico Burchfield, LLP was
on brief, for appellee.
September 20, 2013
*
Of the District of Massachusetts, sitting by designation.
LYNCH, Chief Judge. This appeal concerns the special
requirements that policyholders, by federal law, must follow to
recover their covered losses under flood insurance policies issued
as part of the government's National Flood Insurance Program
(NFIP). See McGair v. Am. Bankers Ins. Co. of Fl., 693 F.3d 94,
100-01 (1st Cir. 2012).
Plaintiff Wayne DeCosta's property in Warwick, Rhode
Island is insured by a Standard Flood Insurance Policy (SFIP)
issued by Allstate Insurance Company (Allstate), a private insurer
participating in the NFIP. Allstate issued DeCosta's SFIP on
behalf of the Federal Emergency Management Agency (FEMA), the
agency that administers the NFIP. DeCosta's insured property was
damaged by a flood, Allstate promptly paid him for some claims, and
he successfully sued Allstate for what he said were the remaining
unpaid covered losses. Allstate appeals from the final judgment in
favor of DeCosta.
On appeal, Allstate argues that the court erred because
DeCosta's failure to comply with the SFIP's requirement that he
timely file a proof of loss as to all of the damages sought bars
recovery under his policy for those damages and requires dismissal.
Allstate argues, in addition, that the court erred when it invoked
the SFIP's appraisal clause to resolve disputes not suited for
appraisal.
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We agree that DeCosta cannot recover under the SFIP
because of his failure to comply with its proof-of-loss
requirements as to the sums sued on. We reverse and direct the
district court to enter summary judgment in Allstate's favor.
I.
A. Background
The parties agree on the following facts. A flood
damaged DeCosta's property on or about March 31, 2010, with sixteen
to eighteen inches of water accumulated on the main floor of his
house. His policy covers flood damage to the building, as well as
damaged personal property.
DeCosta notified Allstate of the flood damage, and
Allstate hired an independent adjuster, Kim Stevens, to assess
DeCosta's damages and process his claim. DeCosta also hired an
adjuster to represent him in filing his claim for loss. Stevens
visited DeCosta's property twice in April to assess the flood
damages. After completing a report about DeCosta's loss, Stevens
forwarded two proof-of-loss forms to DeCosta on or about May 8,
2010, which listed the costs that Stevens found to be covered.
A "proof of loss" is an insured's "official claim of
damages," which states, inter alia, the amount of money that an
insured is claiming under his flood insurance policy, accompanied
by detailed information about the property and damages. Nat'l
Flood Ins. Program, Flood Insurance Claims Handbook 6 (Feb. 2009),
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available at http://www.fema.gov/media-
library-data/20130726-1540-20490-5312/f687_claimshandbook_feb09.pdf
[hereinafter NFIP Handbook]; see 44 C.F.R. pt. 61, app. A(1), art.
VII(J)(4). A copy of a model form is available online.
Importantly, the SFIP requires the proof of loss to be signed and
sworn by policyholders and filed within sixty days of the flood
loss. 44 C.F.R. pt. 61, app. A(1), art. VII(J)(4).
As a matter of federal law, it is the policyholder's
responsibility to submit timely proofs of loss regardless of
whether his insurer's adjuster provides him with a form. Id.While it is common for insurance adjusters to send policyholders
proof-of-loss forms, as Stevens did, the policy explicitly warns
policyholders that such adjusters furnish those forms as "a matter
of courtesy only." Id. art. VII(J)(7); NFIP Handbook at 6.
The first proof-of-loss form that Stevens sent DeCosta,
and which DeCosta executed and filed, was for building damages of
$95,119.05. The second was for recoverable depreciation of
$7,539.98. On or about May 29, 2010, Allstate received those two
executed proofs of loss with the term "Undisputed" handwritten on
each by DeCosta.
In addition to submitting the two executed proofs of loss
that were prepared by Allstate, DeCosta also included a separate
sixteen-page document from one of his adjusters, Richard Juchnik.
That document estimated that DeCosta's building damages were
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$212,071.32, which is about double the amount of damages included
in the executed proofs of loss. That document was not from
DeCosta, nor was it sworn or signed by him.
Within days, by May 31, 2010, Allstate had paid DeCosta
$102,659.03. That amount is the total amount claimed in the two
original executed proof-of-loss forms for building damages.
DeCosta accepted and cashed that check.
DeCosta's adjuster sent Allstate another estimate of
building damages on June 14, 2010, that pointed out building
damages that were not included in Allstate's proof-of-loss forms
and also disputed the valuation of some damages in those forms. As
a result, a different Allstate adjuster, Yarri Soteros, met with
DeCosta and his adjuster on June 28, 2010, on Allstate's third
visit to DeCosta's flood-damaged property.
Soteros's notes from the site visit indicate that she
disagreed with Juchnik, DeCosta's adjuster, as to the scope of
damages that the SFIP covered;1 she concluded that DeCosta's policy
did not cover many of the items for which he sought compensation.
At the site visit, Juchnik informed Soteros that he would appeal to
1
In "claim activity" notes documenting Allstate's adjusters'
handling of DeCosta's claim, Soteros indicated that the inspection
of DeCosta's property would only determine the scope of damages
that the SFIP covers; resolution of any pricing disputes would
require further documents, such as the receipts from repairs to the
property.
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FEMA if Allstate denied coverage of various building repairs he
listed.2
The day after the site visit, Soteros called an Allstate
agent to "discuss the . . . claim issues and partial denials for
[DeCosta's claim for additional damages]." Soteros's notes
indicate that DeCosta's claim remained "pending" while she awaited
additional "documentation" from Juchnik. Between July and November
of 2010, Soteros left at least 14 messages for Juchnik requesting
that he submit additional documents that she needed to process
DeCosta's claim for supplemental damages.
While Soteros received a couple of emails from Juchnik in
late September, she eventually transferred DeCosta's claim to
another adjuster on November 15, 2010, because she had not received
all of the documents required to finish processing it. In mid-
November, Juchnik sent Allstate a list covering the amount of loss
for personal property.
Allstate's adjuster finished reviewing DeCosta's claim
for personal property loss, as well as his claim for additional
building damages, and sent DeCosta two more proof-of-loss forms in
late November. The first was largely for damaged contents -- or
2
FEMA offers three mechanisms that policyholders can use to
dispute the handling of their flood insurance claims: 1) appeal to
FEMA; 2) seek an appraisal if the dispute concerns "actual cash
value" or "replacement cost" of damaged property; and 3) file suit
in a United States District Court. See 44 C.F.R. § 62.20 (appeal
to FEMA); 44 C.F.R. pt. 61, app. A(1), art. VII(P), (R) (appraisal
and lawsuit, respectively).
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personal property -- totaling $41,221.52; however, $126.78 of that
amount covered additional building damages. The second was for
recoverable depreciation of $7,539.98.
Allstate received back from DeCosta those two executed
proofs of loss on or about December 15, 2010, more than sixty days
after the flood damaged DeCosta's property at the end of March
2010. Those proofs of loss were untimely. See 44 C.F.R. pt. 61,
app. A(1), art. VII(J)(4) (requiring policyholder to submit proof
of loss within sixty days after flood).
Allstate requested a waiver of the sixty-day time limit
for these two proofs of loss from FEMA on December 22, 2010. FEMA
approved the proof-of-loss waiver that same day, and Allstate also
paid the $48,761.50 claimed in the second set of proofs of loss on
December 22, 2010. This appeal concerns only claims for additional
building damages; DeCosta does not seek any further compensation
for damaged personal property.
As a matter of law, a flood insurance claim is not
payable until both: 1) the policyholder and insurer agree on the
amount of damages; and 2) the insurer receives the policyholder's
"complete, accurate, and signed Proof of Loss." NFIP Handbook at
6.3
3
Other cases involving federal flood insurance policies
indicate that claims filed without a proof of loss can be "closed
without payment consistent with the terms of the policy." Jacobson
v. Metro. Prop. & Cas. Ins. Co., 672 F.3d 171, 173 (2d Cir. 2012)
(internal quotation mark omitted).
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DeCosta acknowledges that his adjuster, Juchnik, and
Allstate never agreed on the amount of building damages he was owed
under the policy. What is clear is that Allstate only sent DeCosta
proof-of-loss forms for the amount of damages to which it agreed
DeCosta was entitled. These were the only documents that DeCosta
submitted which met the requirements of a proof of loss.
Because DeCosta believed he could recover around
$200,000.00 in building damages under the policy, but Allstate paid
him only about half that amount -- or $102,785.81 -- DeCosta sued
Allstate in March 2011 for the difference.4
B. District Court Proceedings
DeCosta filed suit against Allstate in Rhode Island
Superior Court on March 18, 2011, alleging among other things that
Allstate's actions constituted a breach of contract. Allstate
removed the case to the Rhode Island U.S. District Court. DeCosta
then sought an appraisal.
In opposing DeCosta's motion to compel appraisal and in
its own summary judgment motions, Allstate made two arguments.
First, DeCosta's claim for additional recovery under the policy for
building damages is barred because he failed to comply with the
4
DeCosta never pursued an appeal of Allstate's final claim
determination to FEMA. Any such appeal must be filed within sixty
days of the date of the decision being appealed, 44 C.F.R.
§ 62.20(e)(1), whereas a lawsuit can be filed as late as one year
from the date of decision, see 44 C.F.R. pt. 61, app. A(1), art.
VII(R). DeCosta sued Allstate on March 18, 2011, which is just
over sixty days after Allstate issued its final payment to DeCosta.
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SFIP's proof-of-loss requirement as to those damages. Second,
DeCosta could not invoke the SFIP's appraisal clause because the
parties disagreed about the scope of damages covered under the
SFIP, not just the value of those damages. Indeed, these themes
were consistently sounded by Allstate throughout the litigation,
and DeCosta does not contend otherwise.
The district court rejected Allstate's arguments and
granted DeCosta's motion to compel appraisal, saying that it
thought the parties' dispute concerned the "value of loss" rather
than what the policy covers. In so concluding, the district court
ignored substantial evidence, including claim processing notes from
Allstate's adjusters, which reveals the parties' disagreement as to
the scope of coverage under DeCosta's policy. However, the
district court retained jurisdiction to give Allstate an
opportunity to seek judicial determination of any "overall coverage
issue prior to the appraisal process." Thereafter, the district
court also denied Allstate's summary judgment motion and rejected
its proof-of-loss argument in one sentence, stating only that it
"finds that [DeCosta] timely filed the proof of loss [as] required
by the policy."
The district court directed the parties to proceed to
appraisal, ordering them to "instruct the appraisal panel to
separate in any award any damages [alleged] by [Allstate] to be
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beyond the[] policy coverage . . . so as to preserve such for later
Court review if necessary."
The three appraisers on the panel concluded that
DeCosta's building damages totaled $205,000.00. After deducting
the $102,785.81 that Allstate had already paid DeCosta for building
repairs, as well as other related costs, the final award came out
to $99,805.67. Allstate filed a second summary judgment motion and
moved to strike the appraisal award. DeCosta moved to confirm that
award.
The district court confirmed the appraisal award.
Although the appraisers' signed memorandum stated that they would
"solely [determine] the actual cash value/replacement cost" of
DeCosta's property, thereby disclaiming any decision over policy
coverage determinations, the district court found significant that
the "appraisers did not specifically separate any . . . out-of-
scope damages." The court rejected Allstate's argument that the
appraisers implicitly made decisions about the scope of damages
covered under the policy -- in violation of the SFIP -- because the
damages they included in their loss calculations were much broader
than the type of damages included in Allstate's pre-appraisal
estimate.
The district court also denied Allstate's second summary
judgment motion and stated in a footnote that Allstate had waived
its argument that DeCosta had not preserved his claim for
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additional damages by failing to comply with the SFIP's proof-of-
loss requirement "[b]ecause Allstate did pay on the allegedly
improperly filed claim." Notably, neither party argued that
Allstate had waived this requirement, nor does DeCosta so contend
on appeal. In a final judgment, the district court ordered
Allstate to pay DeCosta the appraisal award of $99,805.67.
Allstate timely appealed.
II.
This court reviews a denial of summary judgment de
novo, viewing the evidence in the light most favorable to the
nonmoving party. Colon v. Tracey, 717 F.3d 43, 49 (1st Cir.
2013). Neither party suggests that there are disputed material
facts that would warrant remand.
A. Strict Compliance with the SFIP's Proof-of-Loss
Provision
Under the NFIP, the federal government provides
subsidized flood insurance to fill a gap in the private insurance
market. See 42 U.S.C. § 4001(b). In administering the NFIP, FEMA
creates regulations that govern the process of adjusting,
approving, and paying claims for flood loss. Id. § 4019. In 1983,
FEMA created the Write-Your-Own (WYO) program by which private
insurers, such as Allstate, can and do issue flood insurance
policies under the NFIP. McGair, 693 F.3d at 96. These private
insurers are often called "WYO companies." See id. Although FEMA
can issue policies directly, currently about ninety-five percent of
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the NFIP's flood insurance policies are issued by WYO companies.
See Mun. Ass'n of S.C. v. USAA Gen. Indem. Co., 709 F.3d 276, 280
(4th Cir. 2013).
FEMA has promulgated regulations under 44 C.F.R. pt. 61
that dictate the terms of the standard flood insurance policies, or
SFIPs, which private insurers can issue on its behalf. McGair, 693
F.3d at 96. By regulation, WYO companies must issue identical
SFIPs, and "no provision of [an SFIP] shall be altered, varied, or
waived other than by the express written consent of the Federal
Insurance Administrator." Id. (quoting 44 C.F.R. § 61.13(d))
(internal quotation mark omitted).
Under the SFIP, the first step that policyholders must
take to recover their loss from flood damages is give their insurer
"prompt written notice" of that flood loss. 44 C.F.R. pt. 61, app.
A(1), art. VII(J)(1). This initial notice provision is distinct
from the requirement that policyholders timely submit a signed and
sworn proof of loss. Gowland v. Aetna Flood Ins. Program, 143 F.3d
951, 954 (5th Cir. 1998); compare 44 C.F.R. pt. 61, app. A(1), art.
VII(J)(1), with id. art. VII(J)(4).
This dispute centers on whether DeCosta, as to the sums
he seeks, complied with the SFIP's proof-of-loss requirement, which
states:
In case of a flood loss to insured property,
you [insured] must: [. . .]
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4. Within 60 days after the loss, send us a
proof of loss, which is your statement of the
amount your are claiming under the policy
signed and sworn to by you, and which
furnishes us with the following information:
a. The date and time of loss;
b. A brief explanation of how the loss
happened;
c. Your interest (for example, "owner")
and the interest, if any, of others in the
damaged property;
d. Details of any other insurance that may
cover the loss;
e. Changes in title or occupancy of the
covered property during the terms of the
policy;
f. Specifications of damaged buildings and
detailed repair estimates;
g. Names of mortgages or anyone else
having a lien, charge, or claim against
the insured property;
h. Details about who occupied any insured
building at the time of loss and for what
purpose; and
i. The inventory of damaged personal
property described in J.3 above.
44 C.F.R. pt. 61, app. A(1), art. VII(J)(4) (emphasis added).
Notably, under the SFIP, insurance companies can reject
policyholders' proofs of loss in favor of their own adjusters'
estimate of damages. Id. art VII(J)(9). Where there is
disagreement about the amount of flood damages or coverage, the
SFIP allows policyholders to appeal to FEMA from any denial of
their claims or to contest it in federal court. See 44 C.F.R.
§ 62.20; id. pt. 61, app. A(1), art. VII(R). However, to invoke
either procedure for review of the denial of a flood insurance
claim, a policyholder must have first filed a timely and compliant
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proof of loss. See 44 C.F.R. § 62.20; id. pt. 61, app. A(1), art.
VII(R).
On appeal, the parties dispute whether DeCosta's
submissions to Allstate complied with the SFIP's proof-of-loss
requirement such that he is eligible to both bring suit and recover
under his policy.
Allstate argues that under the SFIP every "dollar sought
must be supported by a proof of loss." Allstate paid DeCosta the
amounts of money he claimed, signed, and swore to in four proof-of-
loss forms. In doing so it did not, and as a matter of law could
not, waive the requirement of a timely proof of loss for additional
sums sought. DeCosta's failure to submit a signed proof of loss
for the money he seeks to recover in this lawsuit bars his
recovery.
DeCosta argues that he complied with his SFIP when he
submitted Allstate's proof-of-loss forms as to the amounts paid,
writing "undisputed" on each form, and simultaneously submitted a
separate sixteen-page estimate from his adjuster, which listed
total building damages of $212,071.32, albeit not signing and
swearing to it. He claims that the submission of his adjuster's
estimate, along with the completed proofs of loss, "preserv[ed] a
claim for the value of loss in excess" of the $102,659.03 signed
and sworn to in an executed proof-of-loss form. This argument
fails as a matter of law.
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DeCosta's SFIP is not an ordinary insurance policy;
rather, his SFIP's provisions are also embodied in FEMA's codified
regulations, see McGair, 693 F.3d at 96, and interpretation of
DeCosta's SFIP is a matter of federal law, id. at 99. The SFIP
states, "You may not sue us to recover money under this policy
unless you have complied with all the requirements of the policy."
44 C.F.R. pt. 61, app. A(1), art. VII(R). We have already held
that federal law mandates strict compliance with the SFIP,
including its proof-of-loss requirement. McGair, 693 F.3d at 100-
01. So have other circuits. See Jacobson v. Metro. Prop. & Cas.
Ins. Co., 672 F.3d 171, 175 (2d Cir. 2012) (enforcing strict
compliance with SFIP in accordance with its sister circuits that
"have uniformly held that [SFIP's proof-of-loss requirement] must
be strictly construed and enforced").
A number of reasons compel strict compliance with the
SFIP terms even where a lesser form of compliance might suffice
under state law governing other insurance disputes. As we have
said,
The NFIP is administered by [FEMA] and backed
by the federal treasury, which is responsible
for paying claims that exceed the revenue
generated by premiums paid under policies
issued pursuant to the program. . . . Thus,
when private companies [in the WYO program
issue SFIPs], they "act as fiscal agents of
the United States, but they are not general
agents. . . . In essence, the insurance
companies serve as administrators for the
federal program. It is the [g]overnment, not
the companies, that pays the claims."
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McGair, 693 F.3d at 95-96 (second omission in original) (citations
omitted) (quoting Palmieri v. Allstate Ins. Co., 445 F.3d 179, 183-
84 (2d Cir. 2006)) (internal quotation marks omitted); see also 42
U.S.C. § 4017(a) (establishing the National Flood Insurance Fund,
located in the Treasury, to make payments required to carry out the
NFIP).
Because the federal government is liable for claims
brought under SFIPs issued by private insurers,5 the Constitution
mandates strict compliance with the SFIP. The Supreme Court has
"recognized that the Appropriations Clause prohibits the judiciary
from awarding claims against the United States that are not
authorized by statute." Flick v. Liberty Mut. Fire Ins. Co., 205
F.3d 386, 391 (9th Cir. 2000) (citing Office of Personnel Mgmt. v.
Richmond, 496 U.S. 414, 424, 434 (1990)); see U.S. Const. art. I,
§ 9, cl. 7 ("No Money shall be drawn from the Treasury, but in
Consequence of Appropriations made by Law").
5
It is not just a theoretical possibility that the
government might incur liability for flood losses that exceed
revenue from written premiums. See Felicity Barringer, Eric Lipton
& Mary Williams Walsh, Flood Insurance, Already Fragile, Faces New
Stress, N.Y. Times, Nov. 12, 2012,
h t t p : / / w w w . n y t i m e s . c o m / 2 0 1 2 / 1 1 / 1 3 /
nyregion/federal-flood-insurance-program-faces-new-stress.html?pa
gewanted=all&_r=0 (documenting the "giant debt" that the NFIP owes
the Treasury); Raymond Hernandez, Congress Passes a $9.7 Billion
Storm Relief Measure, N.Y. Times, Jan. 4, 2013,
http://www.nytimes.com/2013/01/05/nyregion
/house-passes-9-7-billion-in-relief-for-hurricane-sandy-victims.h
tml (reporting that Congress adopted a bill authorizing the NFIP to
borrow $9.7 billion needed to pay claims caused by Hurricane Sandy
and other disasters).
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Here, "Congress, through a valid act of delegation to
FEMA, has authorized payment of flood insurance funds to only those
claimants that submit a timely sworn proof of loss." Flick, 205
F.3d at 394. As a result, it would "usurp Congress's exclusive
power to appropriate money were [federal courts] to award an
unauthorized money claim based on a theory of substantial
compliance" with the SFIP's proof-of-loss requirement. Id. at 391.
Enforcing strict compliance with the SFIP also arises
from the doctrine of sovereign immunity. Given that it is the
government's liability at stake in any suit against a WYO insurer,
compliance with the proof-of-loss provision serves as a
"condition[] precedent to a waiver by the federal government of its
sovereign immunity." Wagner v. Dir., Fed. Emergency Mgmt. Agency,
847 F.2d 515, 518 (9th Cir. 1988). As we have explained, "[i]t has
long been established that the [government] is not subject to suit
without a waiver of sovereign immunity, and that any such waiver is
to be strictly construed." Progressive Consumers Fed. Credit Union
v. United States, 79 F.3d 1228, 1230 (1st Cir. 1996). Where waiver
depends on compliance with the terms of a federal insurance policy,
it follows that the terms of that policy must also be strictly
construed and enforced. See Mancini v. Redland Ins. Co., 248 F.3d
729, 734-35 (8th Cir. 2001).
In Phelps v. Federal Emergency Management Agency, 785
F.2d 13 (1st Cir. 1986), we upheld strict compliance with the
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SFIP's written proof-of-loss requirement and refused to apply the
equitable estoppel doctrine against the government although
"elements of traditional estoppel [were] plainly present." Id. at
16-17, 19. "[C]onsiderations of sovereign immunity and
constitutional grounds -- [such as] the potential for interference
with the separation of governmental powers" - motivated our refusal
to apply equitable estoppel against the government, "no matter how
compelling the circumstances." Id. at 17.
The need for uniformity in federal law also supports
strict construction of the SFIP. Such uniformity provides clarity
to the numerous insurance companies issuing the bulk of insurance
policies under the NFIP, as well as the diverse jurisdictions
inundated with flood insurance disputes in the aftermath of
national disasters. Insurance companies and policyholders need
clear rules to ensure a fast response to policyholders' claims
after these disasters. Relatedly, we noted in Phelps that Congress
established the NFIP because many factors made it uneconomical for
private insurance companies to offer affordable flood insurance.
785 F.2d at 14; see also 42 U.S.C. § 4001(a), (b). "[A] rule of
strict compliance . . . avoid[s] disturbing the delicate balance,
which FEMA has sought to strike, between the need to pay claims and
the need to ensure the long term sustainability of the NFIP" in
this economically fraught area. Flick, 205 F.3d at 396.
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Strictly construing the SFIP's proof-of-loss provision,
see McGair, 693 F.3d at 100-01, it is clear that DeCosta did not
sign and swear to claiming $212,071.32 on a proof of loss, as
required. Merely attaching his adjuster's estimate of damages to
two executed proof-of-loss forms claiming a smaller amount does not
comply. See 44 C.F.R. pt. 61, app. A(1), art. VII(J)(4). The law
on this is clear, as we describe.
In Mancini, an insurance company sent the Mancinis a
proof-of-loss form documenting their flood damages under the SFIP.
248 F.3d at 732. The Mancinis did not sign or notarize the proof
of loss, but faxed it to their insurance company with a hand-
printed cover sheet that included a note with their names on the
bottom. Id. The insurance company conceded that the fax
submission "contained the relevant information" but disputed
whether it conformed to the SFIP's requirement of a statement of
the amount claimed under the policy that is "signed and sworn by
the insured." Id. at 734 (emphasis added). The Eighth Circuit
held that the Mancinis did not comply with the SFIP's proof-of-loss
provision, observing that their "signature does not appear on a
statement by the Mancinis as to the amount they claimed under the
policy." Id. Thus, they failed to sign and swear to the amount
they sought to recover.
In Evanoff v. Standard Fire Insurance Co., 534 F.3d 516,
520-21 (6th Cir. 2008), the Sixth Circuit adopted the Eighth
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Circuit's reasoning in Mancini. It held that a policyholder failed
to comply with the SFIP where he submitted all of the supporting
documentation required in the proof-of-loss provision, along with
a letter that contained his signature. Id. The Evanoff court
explained that the policyholder was "required to do more than
merely submit a set of figures together with a signed statement not
rejecting or nullifying those figures. [He] had to submit a signed
statement as to the amount claimed under the policy. [He] simply
did not do so." Id. at 520 (quoting Mancini, 248 F.3d at 734-35)
(internal quotation mark omitted).
Here, DeCosta's signature on Allstate's two proof-of-loss
forms for building damages claims only the amounts listed in those
forms. His policy made clear that these forms are provided only as
a courtesy, warning policyholders that they are responsible for
submitting a timely proof of loss if their insurer's adjuster does
not supply them with a form.6 44 C.F.R. pt. 61, app. A(1), art.
VII(J)(7).
While the SFIP does not require that a proof of loss
follow any particular format, it "define[s] a proof of loss as a
statement of the insured, not of some third party, and it does
6
The model proof-of-loss form that FEMA published online
leaves blank spaces for policyholders to indicate the "full cost of
repair or replacement (Building and Contents)", as well as the "net
amount claimed under the . . . policy." Fed. Emergency Mgmt.
Agency, Proof of Loss (Rev. Oct. 2010), available at
http://www.fema.gov/media-library-data/20130726-1601-20490-7838/0
86_0_9_previously_ff81_42.pdf [hereinafter Proof of Loss].
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require that the insured sign and swear to that statement."
Mancini, 248 F.3d at 734. That was not done here as to the sums
claimed in the litigation. See id. at 735 ("[I]t is the insured,
not the adjuster, who must swear to the proof of loss."); 44 C.F.R.
Pt. 61, App. a(1), Art. VII(J)(5) (requiring policyholders to "use
[their] own judgment concerning the amount of loss" when completing
the proof of loss).
At oral argument, DeCosta's counsel explained that he was
not arguing that equitable estoppel or waiver barred enforcement of
the proof-of-loss requirement. Nor was he arguing that DeCosta
substantially complied with the SFIP. Instead he asserted that the
estimate claiming $212,071.32 in damages from DeCosta's adjuster
satisfied the SFIP's proof-of-loss requirement under a stringent,
strict construction standard because it was contemporaneously
submitted with two proof-of-loss forms. He suggests this case is
different from other cases finding noncompliance with the SFIP's
proof-of-loss provisions because the adjuster's estimate of
disputed damages accompanied timely, executed proof-of-loss forms
as to undisputed amounts. Not so. It does not matter that the
estimate from DeCosta's adjuster was submitted at the same time and
along with compliant proof-of-loss forms claiming undisputed sums
because, under the plain terms of the SFIP, DeCosta still had to
sign and swear to the amount in that estimate, which he did not do.
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As counsel for Allstate argued, the attestation serves
the purpose of reducing fraud.7 This is a common-sense conclusion
drawn from the language of FEMA's model proof-of-loss form itself.8
Even if equitable considerations could play some role, we
reject DeCosta's plaint of lack of notice.9 The fact that Allstate
7
The NFIP's Adjuster Claims Manual notifies adjusters that
"[f]raud or misrepresentation is a continuing problem in the
[NFIP]." Nat'l Flood Ins. Program, Adjuster Claims Manual x-1
( R e v . J u n . 2 0 1 0 ) , a v a i l a b l e a t
https://www.nfipservices.com/uploads/AdjusterClaimsManual.pdf. The
Federal Bureau of Investigations has also examined flood insurance
fraud, commenting that of the $80 billion in government funding
that was appropriated to reconstruction after Hurricane Katrina,
"it is estimated that [i]nsurance [f]raud . . . accounted for as
much as $6 billion." Fed. Bureau of Investigations, Reports and
P u b l i c a t i o n s : I n s u r a n c e F r a u d ,
http://www.fbi.gov/stats-services/publications/insurance-fraud
(last visited Sep. 17, 2013).
8
FEMA's model proof-of-loss form warns policyholders in bold
lettering that willfully making false answers or factual
misrepresentations in a proof of loss is punishable by a fine or
imprisonment. It also includes an attestation whereby
policyholders "declare under penalty of perjury" that the
information in their proof of loss is "true and correct." Proof of
Loss.
9
The NFIP's Flood Insurance Claims Handbook was created by
FEMA to explain the process of filing a flood insurance claim to
policyholders. See NFIP Handbook. The handbook not only tells
policyholders that they are the ones responsible for submitting a
"signed" proof of loss, see NFIP Handbook at 6, but it also details
the process for seeking additional damages beyond those sought in
an initial claim, stating:
If you notice additional damage to your Building Property
or Personal Property after filing your claim, you may
file a Supplemental Claim. This means, essentially, that
you must repeat the documentation and filing process for
your original claim, including a Proof of Loss -- but
only for the newly discovered damage.
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provided DeCosta with two separate proof-of-loss forms for building
damages and the cost of related depreciation, if anything, should
have put DeCosta on additional notice that he needed to sign and
swear to every dollar he claimed under the SFIP.
"[W]here federal funds are implicated, the person seeking
those funds is obligated to familiarize himself with the legal
requirements for receipt of such funds." McGair, 693 F.3d at 100
(emphasis added) (quoting Jacobson, 672 F.3d at 175) (internal
quotation marks omitted). Other circuits enforcing strict
compliance with the SFIP have noted the Supreme Court's mandate:
"Protection of the public fisc requires that those who seek public
funds act with scrupulous regard for the requirements of the law."
Jacobson, 672 F.3d at 175 (quoting Heckler v. Cmty. Health Servs.
of Crawford Cnty., Inc., 467 U.S. 51, 63 (1984)) (internal
quotation mark omitted).
Thus, the district court erred as a matter of law in
holding that DeCosta had filed a proof of loss that complied with
his SFIP for the additional payment he seeks to recover.
NFIP Handbook at 7 (emphasis added). This explains that the
insured must provide a signed proof of loss for every dollar
sought.
Allstate's adjusters' notes indicate that DeCosta was given
this handbook at the first site visit to his insured property, and
DeCosta does not say otherwise. The adjuster who visited DeCosta's
property in response to his request for more building damages also
discussed the handbook with him and confirmed that he had received
it at the initial site visit.
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B. Waiver under the SFIP
In ruling on Allstate's second summary judgment motion,
the district court noted in a footnote:
Allstate also argues . . . that Mr. DeCosta
failed to preserve his claim for further
damages above the amounts Allstate has already
paid by failing to submit a signed proof of
loss for such additional amounts as required
by SFIP Art VII(J)(4) so therefore his claim
is barred. Because Allstate did pay on the
allegedly improperly filed claim, the Court
finds that this argument has been waived.
This was also an error of law. To the extent that the district
court considered all documents filed to relate to a single claim,
and thereby reasoned that payment of the properly filed sums, as a
portion of DeCosta's total "claim," could serve to waive any
dispute as to the remainder, we reject this interpretation. Mere
payment of claims properly submitted in a proof of loss does not
waive objections to further sums not submitted as required by the
SFIP's proof-of-loss provision. Even DeCosta agrees that Allstate
did not waive the proof-of-loss requirement for the additional
amount he seeks to recover in this suit.
FEMA must provide express written consent for Allstate to
waive any of the requirements outlined in DeCosta's SFIP. The
SFIP's waiver provision states, "[t]his policy cannot be changed
nor can any of its provisions be waived without the express written
consent of the Federal Insurance Administrator. No action we take
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under the terms of this policy constitutes a waiver of any of our
rights." 44 C.F.R. pt. 61, App. a(1), Art. VII(D).
The SFIP's stringent waiver provision reflects the fact
that private insurers are "fiscal agents of the United States," 42
U.S.C. § 4071(a)(1), as opposed to general agents. See McGair, 693
F.3d at 96. Thus, consistent with their duty to strictly enforce
the SFIP, private insurance companies can "[vary] the terms of a
policy only with FEMA's express written consent." Jacobson, 672
F.3d at 175. This circuit has previously enforced the written
waiver requirement, noting that the SFIP "explicitly preclude[s]
oral waiver or waiver by conduct." Phelps, 785 F.2d at 19. The
district court's reasoning violates Phelps.
Where Allstate did pay claims for damaged personal
property that DeCosta submitted in untimely proof-of-loss forms,
Allstate solicited the required written waiver from FEMA before
paying on those noncompliant proofs of loss. No such express
written consent from FEMA waived the proof-of-loss requirement for
the unsigned and unsworn estimate from DeCosta's adjuster.
As a result, DeCosta cannot sue to recover the difference
between his adjuster's estimate and the amount of money that
Allstate has already paid him for flood damages to his building.
See Phelps, 785 F.2d at 19 ("[F]ailure to submit a written proof of
loss, coupled with the absence of a waiver of this requirement by
FEMA, constitutes a valid defense to recovery on the [flood]
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insurance policy."); 44 C.F.R. pt. 61, app. A(1), art. VII(R)
(requiring that policyholders fully comply with SFIP before they
file suit).
Because DeCosta's failure to comply with the SFIP bars
any recovery under his policy, it is clear that the district court
should not have ordered the parties to proceed to appraisal.
Given our resolution of this appeal, we need not address
whether the parties' dispute over coverage issues precluded DeCosta
from invoking the SFIP's appraisal clause. Nor need we decide
whether the district court abused its discretion in denying
Allstate discovery.
III.
Accordingly, we reverse with instructions that the
district court enter summary judgment in Allstate's favor and
vacate any orders that are inconsistent with this opinion. No
costs are awarded.
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