Al Cohen v. Allstate Insurance Company

Case: 18-20330 Document: 00514962478 Page: 1 Date Filed: 05/17/2019
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
No. 18-20330 FILED
May 17, 2019
Lyle W. Cayce
AL COHEN, Clerk
Plaintiff–Appellant,
versus
ALLSTATE INSURANCE COMPANY; RACHAEL G. RAY,
Defendants–Appellees.
Appeal from the United States District Court
for the Southern District of Texas
Before SMITH, GRAVES, and WILLETT, Circuit Judges.
JERRY E. SMITH, Circuit Judge:
Al Cohen sued Allstate Insurance Company (“Allstate”) and its agent,
Rachael Ray, for breach of contract after Allstate refused to pay a claim for
flood damage. Finding no error, we affirm a summary judgment.
I.
Congress enacted the National Flood Insurance Act of 1968 (“NFIA”) 1 “to
1 Housing and Urban Development Act of 1968, Pub. L. No. 90-448, tit. XIII, 82 Stat.
476, 572–89 (codified as amended at 42 U.S.C. §§ 4001–4131) (2012).
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make flood insurance available on reasonable terms and to reduce fiscal pres-
sure on federal flood relief efforts.” Campo v. Allstate Ins. Co., 562 F.3d 751,
754 (5th Cir. 2009). NFIA established the National Flood Insurance Program
(“NFIP”), 2 which permits private insurers, such as Allstate, to issue insurance
policies—known as Standard Flood Insurance Policies (“SFIPs”)—on behalf of
the federal government. Id. at 752, 754. Such insurers are referred to as
Write-Your-Own (“WYO”) carriers. Id. at 752; see also 44 C.F.R. § 62.23 (2018).
Under this arrangement, the government underwrites the policies, while
WYO carriers act as “fiscal agents of the United States,” Gowland v. AETNA,
143 F.3d 951, 953 (5th Cir. 1998), by performing administrative tasks, includ-
ing adjusting, settling, paying, and defending all claims, Campo, 562 F.3d
at 754. Private insurers are required to issue policies employing the precise
SFIP terms and conditions outlined in FEMA regulations, which also dictate
the way private insurers adjust and pay claims. Id. Despite the central role
played by WYO carriers, the claims are paid from the U.S. Treasury. Gallup
v. Omaha Prop. & Cas. Ins. Co., 434 F.3d 341, 342 (5th Cir. 2005).
All SFIP claims are subject to a statute of limitations. 42 U.S.C. § 4072.
An individual suing to recover money under an SFIP must initiate the lawsuit
“within one year after the date of the written denial of all or part of the claim.”
44 C.F.R. pt. 61, app. A(1), art. VII(R) (“article VII(R)”). The limitations provi-
sion applies to any claim brought under the policy and to any dispute arising
from the handling of such claim. Id.II.
In October 2015, Cohen sought to purchase an SFIP from Allstate to
cover his house and his detached garage apartment. Relying on assurances
2Campo, 562 F.3d at 754. The NFIP is administered by the Federal Emergency Man-
agement Agency (“FEMA”). Id.2
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from Ray that he did not need separate flood insurance policies for the house
and apartment, Cohen bought a single policy for both. The policy had coverage
limits of $150,000 for building damage and $60,000 for personal-property
damage (damage to contents). After a flood on April 18, 2016, which damaged
the house and apartment and their contents, Cohen discovered that his SFIP
did not cover the apartment or its contents. He notified Allstate of the damage
and initiated two claims: one for building damage and another for personal-
property damage. Based on an independent adjuster’s report, Allstate deter-
mined that the damage under the building policy was $55,506.28. On May 27,
it sent Cohen and John Kubala, Cohen’s public insurance adjuster, a proof-of-
loss form for that amount. 3
On June 3, Cohen responded by sending Allstate his own proof of loss,
claiming $93,871.67 in building damages. He did not provide supporting docu-
mentation. Allstate denied Cohen’s unsupported proof of loss. On July 19,
Cohen executed Allstate’s original proof-of-loss form for building damage, and
Allstate issued payment two days later.
Separate from Cohen’s execution of the proof-of-loss form for building
damage, Allstate mailed Cohen another letter (the “July 19 letter”). It pur-
ported, inter alia, to (1) “close the personal property portion of [Cohen’s] claim
without payment until such time as [Allstate] receive[d] further supporting
documentation,” (2) “deny coverage for various items that [Cohen] claim[ed]
pending documentation of replacement from [his] prior flood loss,” and
(3) “deny coverage for the damage to [Cohen’s] second residence,” a detached
garage apartment. 4
3 A proof-of-loss form is a claimant’s inventoried damage estimate. See 44 C.F.R.
pt. 61, app. A(1), art. VII(J).
4 The July 19 letter also provided that “[i]f [Cohen did] not agree with [Allstate’s]
decision to deny [his] claim, in whole or in part, [f]ederal law allow[ed] [him] to appeal that
3
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Allstate continued to investigate and process Cohen’s personal-property
claim, even after it sent the July 19 letter. It dispatched an independent
adjuster to evaluate the flood damage; the adjuster made a damage estimate
of $3,852.13. Allstate sent Cohen a proof-of-loss form for that amount on his
personal-property claim, and Cohen executed the form on November 22. All-
state paid on December 2.
III.
Cohen sued on August 14, 2017, 5 asserting (1) breach of contract; (2) mis-
representation of an insurance policy in violation of TEX. INS. CODE ANN.
§ 541.061; (3) fraud, fraudulent misrepresentation, and negligent misrepresen-
tation; and (4) false, misleading, or deceptive acts or practices in violation of
TEX. BUS. & COM. CODE ANN. §§ 17.46(b), 17.50(a)(4). Allstate and Ray moved
for summary judgment. The district court granted summary judgment and
dismissed with prejudice.
The district court found that Cohen’s breach-of-contract claim was
barred by the one-year statute of limitations because the July 19 letter consti-
tuted a written denial of all or part of his claim. The court also determined
that Cohen’s other claims were foreclosed as a matter of law by established
precedent, including Federal Crop Insurance Corp. v. Merrill, 332 U.S. 380(1947), Heckler v. Community Health Services of Crawford County, Inc.,
467 U.S. 51 (1984), and Spong v. Fidelity National Property & Casualty Insur-
ance Co., 787 F.3d 296 (5th Cir. 2015). Cohen filed a Federal Rule of Civil
Procedure 59(e) motion to alter or amend the judgment, citing Westmoreland
v. Fidelity National Indemnity Insurance Co., No. 13-564-JWD-RLB, 2015 WL
decision within 60 days of the date of [the] denial letter.”
5Cohen filed suit about eight months after Allstate paid his personal-property claim
and thirteen months after it sent the July 19 letter.
4
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3456634 (M.D. La. May 29, 2015). The district court denied the motion. 6
IV.
Cohen raises two issues on appeal. First, he asserts the district court
erred in granting summary judgment to Allstate on his breach-of-contract
claim after it found that the claim was time-barred. Second, Cohen contends
the court abused its discretion in denying his Rule 59(e) motion.
A.
We review a summary judgment de novo. Campo, 562 F.3d at 753. “We
generally review a decision on a motion to alter or amend judgment for abuse
of discretion, although to the extent that it involves a reconsideration of a
question of law, the standard of review is de novo.” In re Deepwater Horizon,
824 F.3d 571, 577 (5th Cir. 2016) (per curiam).
B.
Our analysis is governed by the NFIA, FEMA’s flood insurance regula-
tions, and federal common law. 44 C.F.R. pt. 61, app. A(1), art. IX. Construc-
tion of the flood insurance contract is a question of federal law for this court to
decide. See West v. Harris, 573 F.2d 873, 881 (5th Cir. 1978).
“Men must turn square corners when they deal with the [g]overnment.”
Merrill, 332 U.S. at 385 (citation omitted). This is especially true when a pri-
vate party seeks money from the public fisc. Cmty. Health, 467 U.S. at 63.
“[T]he Appropriations Clause prohibits the judiciary from awarding claims
6 In denying the Rule 59(e) motion, the district court rejected Cohen’s citation of West-
moreland “for the proposition that a denial based only on a request for evidence that prior
property damage was repaired is not a denial of all or part of a claim.” The court concluded
that the Westmoreland court “did not consider whether an insurer’s denial of payment, fol-
lowed by an opportunity . . . to submit additional documents supporting the existence and
extent of covered losses, denied all or part of a claim, and whether, as a result, the statute of
limitations barred the policyholder’s suit.”
5
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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); see also Office of Pers.
Mgmt. v. Richmond, 496 U.S. 414, 424–26 (1990).
Those seeking public funds are held to a demanding standard and are
expected to comply with statutory requirements. 7 “Where federal funds are
implicated, the person seeking those funds is obligated to familiarize himself
with the legal requirements for receipt of such funds.” Wright v. Allstate Ins.
Co., 415 F.3d 384, 388 (5th Cir. 2005). Claimants dealing with the government
are presumed to have full knowledge of the law and cannot rely on the conduct
of government officials to the contrary. Cmty. Health, 467 U.S. at 63.
An SFIP claimant “must comply strictly with the terms and conditions
that Congress has established for payment.” Flick, 205 F.3d at 394. That
includes the relevant limitations period. “Strictly construed, 42 U.S.C. § 4072provides a limited right to sue upon the disallowance of all or part of a claim,
i.e. the complete or partial denial of a claim.” Migliaro v. Fid. Nat’l Indem. Ins.
Co., 880 F.3d 660, 666 (3d Cir. 2018). Under the statute (and related regu-
lation), a claimant must sue within one year of the denial of all or part of his
claim. 42 U.S.C. § 4072; article VII(R). “For the same reasons that we must
narrowly construe the type of suit a policyholder may bring against a WYO
carrier, we must also narrowly construe when a policyholder may bring suit.”
Migliaro, 880 F.3d at 667.
C.
Cohen contends that the district erred in granting summary judgment
because the purported claim denial in the July 19 letter did not identify any
7Cmty. Health, 467 U.S. at 63; see also Gowland, 143 F.3d at 954 (emphasizing that
“the provisions of an insurance policy issued pursuant to a federal program must be strictly
construed and enforced”).
6
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specific item denied. He notes that although no federal court has definitively
outlined what constitutes an effective written denial, FEMA requires the
insurer to identify the items denied. Consequently, because the July 19 letter
merely denied “coverage for various items,” it did not qualify as a written
denial of all or part of the claim sufficient to trigger limitations. 8
In support of this, Cohen refers to FEMA Bulletin W-17013a, 9 which
provides that WYO carriers must include certain information in all denial-of-
coverage letters. While acknowledging that the Bulletin’s requirements only
apply prospectively to denial letters sent after its publication, Cohen maintains
that the basic rationale remains: “[T]o be effective a written denial must
identify the item denied.”
Cohen also invokes Westmoreland for the proposition that 44 C.F.R.
pt. 61, app. A(1), art. VII(K)(2)(e)—which Allstate cited in the July 19 letter in
support of its denial—is not itself a basis for denying coverage. Instead, Cohen
maintains that the provision merely permits an insurer to request additional
information. See Westmoreland, 2015 WL 3456634, at *4.
Despite Cohen’s contention that the July 19 letter was not a claim denial
because it failed to identify specific items of personal property, he fails to cite
a single authority—other than FEMA Bulletin W-17013a—in support of that
position. He readily concedes, however, that the Bulletin’s requirements do
not apply to denials issued before October 16, 2017.
Cohen’s contention that he was subject to “inequitable process” is simi-
8 More generally, Cohen claims that by denying coverage in this fashion, Allstate
subjected him to an inequitable process.
9 FED. EMERGENCY MGMT. AGENCY, W-17013A, DENIAL LETTER REQUIREMENTS
(SUPERSEDES WYO BULLETIN W-17013) (Oct. 16, 2017) [hereinafter FEMA Bulletin
W-17013a]. The Bulletin was issued about fifteen months after Allstate sent the July 19
letter.
7
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larly unsupported by any legal authority. His pleadings and briefing indicate
that he did, in fact, have notice that Allstate’s July 19 letter was an express
denial of his personal-property claim. As Allstate correctly highlights, Cohen
did “not mention anywhere in his complaint or allege that Allstate failed to
sufficiently deny the claim or . . . properly put him on notice that the claim was
denied. To the contrary, . . . in paragraph 16 of [the] complaint[,] [Cohen
states] that he sued Allstate for “wrongfully denying his [personal-property]
claim.” Moreover, as a participant in the federal flood insurance program,
Cohen is presumed to have constructive knowledge of all rules and regulations
associated with it. See Cmty. Health, 467 U.S. at 63.
Cohen’s other theory—that 44 C.F.R. pt. 61, app. A(1), art. VII(K)(2)(e)
“is not a basis for denial or exclusion from coverage”—does not explain why the
July 19 letter (which states “we must respectfully deny coverage for various
items that you are claiming pending documentation of replacement from your
client’s prior flood loss”) is not a written denial of coverage. We agree with the
district court that the Westmoreland decision is inapposite. In Westmoreland,
a Louisiana district court merely interpreted the scope of 44 C.F.R. pt. 61,
app. A(1), art. VII(K)(2)(e). See 2015 WL 3456634, at *3–4. It did not address
the sister provision, article VII(R), at issue here. Id. Moreover, that Cohen
disputes the adequacy of Allstate’s grounds for denial does not speak to
whether the July 19 letter was itself sufficient to trigger the limitations period.
Strictly construed, it was. Cf. Migliaro, 880 F.3d at 667.
The letter states that Allstate was “writing to [Cohen] in regard to the
Personal Property Coverage claim submitted under [his] National Flood Insur-
ance Policy #4806043711.” It denies coverage for all or part of his personal
property claim, while expressing a willingness to reconsider that disposition
upon receipt of additional documentation. That Allstate continued to process
8
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Cohen’s claim does not change this conclusion. 10 Consequently, the July 19
letter was a written denial. Because Cohen failed to sue within one year of
that denial, the claim is barred by the relevant statute of limitations. See
art. VII(R); see also 42 U.S.C. § 4072.
In Forman v. FEMA, 138 F.3d 543 (5th Cir. 1998), we “recognized that
not even the temptations of a hard case will provide a basis for ordering
recovery contrary to the terms of [a] regulation, for to do so would disregard
the duty of all courts to observe the conditions defined by Congress for charging
the public treasury.” Id. at 545 (alteration in original) (internal quotation
marks and citation omitted). Because the district court did not err in granting
summary judgment to Allstate or abuse its discretion in denying Cohen’s Rule
59(e) motion, the judgment is AFFIRMED.
10 See Wagner v. Dir., FEMA, 847 F.2d 515, 521 (9th Cir. 1988). Allstate stresses
that—to the extent Cohen raises a waiver or estoppel defense because Allstate continued to
investigate his claim even after it sent the July 19 letter—“the federal regulations applicable
in this case provide that no provision of the policy may be altered, varied, or waived without
[the] express written consent of the Federal Insurance Administrator.” Because the Admin-
istrator provided no such consent, Cohen was obligated to comply strictly with the require-
ments of his SFIP. See 44 C.F.R. pt. 61, app. A(1), art. VII(D).
9