Beverly v. Macy
| Citation | 702 F.2d 931 |
| Decision Date | 11 April 1983 |
| Docket Number | No. 81-7908,81-7908 |
| Parties | Elizabeth BEVERLY, etc., Plaintiff-Appellant, v. John W. MACY, Jr., et al., Defendants-Appellees. Elizabeth BEVERLY, etc., Plaintiff-Appellant, v. NATIONAL FLOOD INSURERS ASSOCIATION, et al., Defendants-Appellees. |
| Court | United States Courts of Appeals. United States Court of Appeals (11th Circuit) |
Joseph J. Boswell, Mobile, Ala., for plaintiff-appellant.
Edward J. Vulevich, Jr., Asst. U.S. Atty., Mobile, Ala., Federal Emerg. Mgmt. Agcy., Robert S. Brock, Washington, D.C., for defendants-appellees.
Appeals from the United States District Court for the Southern District of Alabama.
Before VANCE and ANDERSON, Circuit Judges, and ALLGOOD *, District Judge.
Appellant, Elizabeth Beverly, seeks relief from the denial of a claim for flood insurance pursuant to a lapsed policy issued by the National Flood Insurers Association ("NFIA"). Plaintiff contends that as a third-party beneficiary under a contract between the NFIA and Hartford Insurance Group, she is entitled to compensation for the loss of her house due to flooding. 1 The trial court held that Mrs. Beverly did not enjoy third-party beneficiary status, and granted a summary judgment in favor of the defendants. We reverse and remand.
In 1968, the United States Congress enacted the National Flood Insurance Act. See Pub.L. 90-448, 82 Stat. 572 (1968) (). The purpose of this legislation was to:
authorize a flood insurance program by means of which flood insurance, over a period of time, can be made available on a nationwide basis through the cooperative efforts of the federal government and the private insurance industry, and (2) provide flexibility in the program so that such flood insurance may be based on workable methods of pooling risks, minimizing costs, and distributing burdens equitably among those who will be protected by flood insurance and the general public.
42 U.S.C.A. Sec. 4001. Section 4011 of the Act authorized the Secretary of Housing and Urban Development ("HUD") to establish and carry out this program, and particularly to encourage "appropriate financial participation and risk sharing in the program by insurance companies and other insurers." 42 U.S.C.A. Sec. 4011(b). Further, Secs. 4051 and 4052 authorized the Secretary to encourage the creation of "pools" of insurance companies and to enter into agreements with such pools, all with a view towards providing the flood insurance mandated by the Act.
The NFIA was an unincorporated association of individual member insurance companies associated for the purposes of participating in the National Flood Insurance Program ("NFIP"). On June 6, 1969, and pursuant to Sec. 4052 of the Act, the Secretary of HUD entered into a contract with the NFIA whereby the NFIA agreed to provide flood insurance policies available to the general public. This contract obligated the Association to "exercise its best efforts to provide a continuous program of flood insurance pursuant to the Act and the terms of this agreement." Supp. Record on Appeal, p. 152 (Contract between NFIA and HUD). The NFIA further agreed to issue and service individual flood insurance policies, and to investigate, adjust, and settle all claims under such policies. Under the terms of both the contract and the Flood Insurance Act, HUD was required to subsidize policy premiums, thereby reducing the risk assumed by the insurers and making the insurance available to consumers at reasonable rates. 2 By written agreement between the Department of HUD and the NFIA dated November 19, 1974, the NFIA was permitted to subcontract out to Bradford Computer & Systems, Inc. for "a system of computerized flood insurance policy writing, billing and processing, and other statistical and computer services." Supp. Record on Appeal, p. 169 (agreement between HUD and NFIA). This contract with Bradford was terminated on November 1, 1976, and thereafter the NFIA itself performed the processing of bills. See Record on Appeal, p. 120 (affidavit of William R. Cunning, General Counsel for Litigation, Federal Emergency Management Agency).
The Hartford Insurance Group ("Hartford") was a member of the NFIA. In 1976, Hartford entered into a contract with the NFIA whereby Hartford would service all of the NFIA flood insurance policies issued in the state of Alabama. This is the contract with respect to which Mrs. Beverly claims the status of third party beneficiary. This contract was retroactive to July 1, 1976, and provided in part:
1. Servicing Company [Hartford] shall use its best efforts to arrange for the issuance of flood insurance policies and renewals thereof in the designated jurisdiction to any person or organization qualifying for such coverage on such terms and conditions and in consideration of such premiums as directed by NFIA. All policies and renewals shall be issued in compliance with the Act, any act amendatory thereof, and the regulations issued pursuant thereto as they may be amended from time to time.
* * *
4. Servicing Company shall follow procedures, adhere to the time standards and utilize the forms set forth in the Servicing Company Manual and the Flood Insurance Manual provided by NFIA as they may be amended from time to time. Said manuals are incorporated herein, made a part hereof, and are attached as attachments I and II.
5. Servicing Company agrees to assist NFIA in its responsibilities for the promotion of the National Flood Insurance Program.
* * *
7. NFIA and Servicing Company agree to comply with the Standards and Guidelines of Minimum and Maximum Performance (the Guidelines), as they shall be amended from time to time, for the services to be performed in this Agreement. Said Guidelines are attached hereto as Attachment III and incorporated herein by reference.
Supp. Record on Appeal, pp. 179-80 (service agreement) (emphasis added). The Flood Insurance Manual and the Guidelines and Standards Book referred to above were drafted by the NFIA for the specific purpose of facilitating the administration of its responsibilities under the Flood Insurance Program. The Flood Insurance Manual, which as noted above was incorporated into the contract at issue here, states in pertinent part Flood insurance, as provided through the National Flood Insurers Association ... under the provisions of the National Flood Insurance Act of 1968 or any acts amendatory thereof ... shall be written only with the Standard Flood Insurance Policy approved by the Federal Insurance Administrator together with the appropriate Application and Declarations Form specified herein, and only in accordance with these rules and rates, which have been adopted by or for the Association and shall govern in all instances.
* * *
In order to avoid a lapse of the policy because the premium for the succeeding policy term was not paid prior to expiration of the then current term, an expiration or premium notice will be issued to the payor at least 45 days prior to each annual expiration date. It is the responsibility of the agent to see that the policy is renewed.
* * *
The sequence of events for the renewal of a given policy is determined by the amount of information in NFIA files and by the proximity of that policy's expiration date. If the NFIA can determine rates and calculate renewal premiums for a given policy, the payor and agent are notified ... of the approaching expiration date, and instructed to remit the appropriate premium for the renewal. The renewal premium can be remitted by either the payor or the agent, but not by both. If the payor fails to respond to the first notice, a second notice ... is sent to the agent and the mortgagee. If the policy is not renewed, the insured and the agent will be notified of the expiration approximately 45 days after the expiration date.
Supp. Record on Appeal, pp. 195, 210, 254 (emphasis in original). The Guidelines and Standards Book states:
The vast majority of flood insurance policies are renewed by means of NFIA's computerized direct billing system. Occasionally, however, a policy may have to be manually renewed by means of an application submitted by the agent to the servicing company. For those few instances when a manual renewal may occur, a processing chart and time table is presented below.
Supp. Record on Appeal, p. 340.
On December 30, 1977, the Department of HUD and NFIA executed an agreement in which the Department assumed responsibility for the continuation of coverage under previously-issued flood insurance policies. HUD also assumed responsibility for the defense of litigation pending on January 1, 1978, or instituted thereafter against the NFIA or any of its member companies. On April 1, 1979, executive order 12127 (44 Fed.Reg. 19,367) transferred to the Federal Emergency Management Agency ("FEMA"), pursuant to Reorganization Plan No. 3 of 1978 (43 Fed.Reg. 41943) the operation of the Flood Insurance Program. Thus, the FEMA is the successor in interest of the NFIA.
In 1971, Elizabeth and Willie G. Beverly were joint owners of real property in Gulf Shores, Alabama, under warranty deed as tenants in common with rights of survivorship. In 1971, Mr. Beverly purchased a flood insurance policy from the NFIA insuring the property. Under the NFIA's agreement with Hartford, Hartford was the company responsible for servicing Mr. Beverly's policy from and after July 1, 1976. This policy was to be effective for a period of one year, "and thereafter for successive policy terms of one year, provided the then current premium payable by the insured for each successive policy term is paid prior to the expiration of the then current policy term, and if not so paid, this policy shall then terminate." Record on Appeal, p. 34 (insurance policy).
For the next four years, Mr. Beverly received premium due notices annually from both the NFIA and the...
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