Bleecker v. Standard Fire Ins. Co.

• Decision Date: 23 October 2000
• Docket Number: No. 5:99-CV-603-H 3.,5:99-CV-603-H 3.
• Court: U.S. District Court — Eastern District of North Carolina
• Parties: Jennie S. BLEECKER, Plaintiff, v. STANDARD FIRE INSURANCE COMPANY, Defendant.

130 F.Supp.2d 726

Jennie S. BLEECKER, Plaintiff, v. STANDARD FIRE INSURANCE COMPANY, Defendant.

No. 5:99-CV-603-H 3.

United States District Court, E.D. North Carolina, Western Division.

October 23, 2000.

COPYRIGHT MATERIAL OMITTED

Odes L. Stroupe, Jr., Bode, Call & Stroupe, L.L.P., Raleigh, NC, Christie M. Foppiano, Bode, Call & Stroupe, Raleigh, NC, for Jennie S. Bleecker, plaintiff.

John R. Jolly, Jr., Poyner & Spruill, Raleigh, NC, Eric P. Stevens, Poyner & Spruill, Raleigh, NC, for The Standard Fire Insurance Company, defendant.

ORDER

MALCOLM J. HOWARD, District Judge.

This matter is before the court on defendant's motion to dismiss plaintiff's state law claims for failure to state a claim, defendant's motion for summary judgment, and defendant's motion to quash plaintiff's request for a jury trial. Plaintiff motions the court to compel defendant to completely respond to discovery and award sanctions. Finally, defendant requests the court hear oral arguments on all pending motions. The parties have responded and these matters are ripe for adjudication.

Statement of the Case

Plaintiff owns land and a sixty-year-old residential building located at 825 South Lumina Avenue, Wrightsville Beach, North Carolina ("Property"). On September 5, 1996, Hurricane Fran caused flood damage to the Property and the building's contents. On September 13, 1996, the Town of Wrightsville condemned the Property as "unsafe and dangerous."

The property was insured under a standard flood policy issued by the defendant, Standard Fire Insurance Company ("Standard Fire"), pursuant to the National Flood Insurance Act ("NFIA") of 1968. Plaintiff notified defendant of the flood damage. Defendant retained Colonial Catastrophe Claims Corporation ("Colonial") to adjust the claim.

Colonial assigned Jessie B. Parker ("Parker") to adjust the claim. Approximately one week after Hurricane Fran, Parker sent his stepson, David L. Babcock ("Babcock"), who was not an employee of Colonial or Standard Fire, to examine the flood damage. Despite seeing damage to the foundation, Babcock failed to ask plaintiff about the foundation damage or include the damage in the proof of loss form. (Babcock Dep. at 60-61).

Plaintiff prepared a list of damaged contents and submitted the replacement cost list to the defendant. Based on information obtained from Babcock and plaintiff's content replacement report, Parker estimated the cost of repair or replacement of the damaged property at $93,689.42. (Bleecker Dep., Ex. B). After Babcock adjusted the estimate for depreciation by $18,669.16 and a deductible of $1,500, Colonial presented plaintiff with a proof of loss for $71,712.49. (Id.). On October 30, 1996, plaintiff signed and returned to the defendant the proof of loss for $71,712.49. (Braham Dep., Ex. I).

Doug Braham ("Braham"), President of Colonial, reviewed the claim file and determined that the first proof of loss estimate was too high. (Braham Dep. at 19, ll. 7-16; Id. at 15, ll. 13-16; Id. at 55, ll. 13-23.) Defendant informed plaintiff that additional documentation was need to issue the $71,712.49 payment. (Bleecker Dep., Ex. C). Braham then reduced the first proof of loss statement by $31,733, and submitted to plaintiff a second proof of loss statement for the reduced amount. On November 18, 1996, defendant sent plaintiff a check for $41.787. Plaintiff, however, refused to cash the check or sign the second proof of loss statement. (Id. Ex. K)

Around the same time, plaintiff asserted to Colonial that she had discovered foundation damages to the residential building and asked for reimbursement for losses associated with these damages. Plaintiff asserts that defendant never inspected or investigated the foundation damages, but that she submitted photos of the damages to the defendant. It is uncontested that plaintiff did not submit a proof of loss claim containing the foundation damages.

Around October 1996, government authorities offered to provide, for a limited period, free debris removal services to Wrightsville Beach residents. Plaintiff decided to raze the existing structure and build a new one. Plaintiff asserts that she told Braham of her intent to tear down the existing structure, and asked Braham to inform her if defendant did not want her to demolish the structure. (Pl. Reply to Summ.J., Aff. of Robert Bleecker, ¶ 14; Aff. of Anthony E. Rand, ¶ 5). When she did not hear from defendant, plaintiff allowed government authorities to demolish the building in October 1996.

Negotiations between the parties continued sporadically until the middle of 1999. Colonial's involvement in the case ended, and employees of the Travelers Group began working on plaintiff's claim. On May 25, 1999, defendant informed plaintiff that it could not adjust plaintiff's claim for flood damage because she had demolished the building. (Pl.Complaint, ¶ 19). On June 15, 1999, plaintiff attempted to use the mandatory appraisal provision of the insurance policy, but defendant refused.

Plaintiff filed this action for breach of contract and unfair and deceptive trade practices on September 3, 1999. Plaintiff's claim for breach of contract which arises from a policy issued under the NFIA raises a substantial federal question, and thus jurisdiction over the contract claim is proper under 28 U.S.C. § 1331. See Newton v. Capital Assurance Co., Inc., 209 F.3d 1302 (11th Cir.2000) (holding that contract claim under national flood insurance policy raises substantial federal question). Jurisdiction over plaintiff's state law claims is proper under supplemental jurisdiction. 28 U.S.C. § 1367.¹

Court's Discussion

I. National Flood Insurance Act

To provide a proper context for the court's discussion, the court begins with a discussion of the history of national flood insurance. After determining that many factors made it "uneconomic for the private insurance industry alone to make flood insurance available ... on reasonable terms and conditions" to homeowners and businesses located on the coast and in flood plains, Congress in 1968 created the National Flood Insurance Act, 42 U.S.C. § 4001-4128, to provide subsidized flood insurance. Id. § 4001(b). In exchange, federal law requires local officials to adopt and enforce various flood plain management measures. Id. §§ 4002(b)(4), 4012(a), 4022; 44 C.F.R. §§ 60.2-60.7.

NFIA is administered by the Federal Emergency Management Agency (FEMA). Flood insurance may be issued directly through the FEMA or through Write-Your Own ("WYO") programs created by private insurers who sell and service federal flood insurance under their own name with the federal government acting as a guarantor and reinsurer. Gowland v. Aetna, 143 F.3d 951, 953 (5th Cir.1998).² Regardless of whether FEMA or private insurers issue the policy, the federal treasury pays for insurance claims arising from flood insurance policies which exceed revenues from insurance premiums collected by WYO insurers. See Van Holt v. Liberty Mut. Fire Ins. Co., 163 F.3d 161, 165 (3rd Cir.1998).

II. Breach of Contract Claim for Foundation Damages

A. Standard of Review

Summary judgment is appropriate pursuant to Fed.R.Civ.P. 56 when no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The party seeking summary judgment bears the initial burden of demonstrating the absence of a genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Once the moving party has met its burden, the non-moving party may not rest on the allegations or denials in its pleading, see Anderson, 477 U.S. at 248, 106 S.Ct. 2505, but "must come forward with `specific facts showing that there is a genuine issue for trial.'" Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (quoting Fed.R.Civ.P. 56(e)). Summary judgment is not a vehicle for the court to resolve disputed factual issues. See Faircloth v. United States, 837 F.Supp. 123, 125 (1993). Instead, a trial court reviewing a claim at the summary judgment stage should determine whether a genuine issue exists for trial. See Anderson, 477 U.S. at 249, 106 S.Ct. 2505. In making this determination, the court must view the inferences drawn from the underlying facts in the light most favorable to the non-moving party. See United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962) (per curiam). Only disputes between the parties over facts that might affect the outcome of the case properly preclude the entry of summary judgment. See Anderson, 477 U.S. at 247-48, 106 S.Ct. 2505.

B. Substantial Compliance and Estoppel

Federal common law governs federal flood insurance policies. Leland v. Federal Ins. Adm'r, 934 F.2d 524, 529 (4th Cir.1991). Courts generally require claimants to strictly comply with policy terms to recover under federal flood insurance policies. The standard flood insurance policy issued to the plaintiff provides that as soon as a flood loss occurs to insured property, the claimant must "[w]ithin 60 days after the loss, send us a proof of loss, which is your statement as to the amount you are claiming under the policy." See 44 C.F.R. pt 61 app. A(1), art. 9(J).

Claimants are not allowed to recover under a flood insurance policy unless they submit sworn proof of loss statements within sixty days after a flood-related claim arises. Id. Most courts strictly enforce the time deadline. See, e.g., Gowland v. Aetna, 143 F.3d 951, 954 (5th Cir. 1998); Phelps v. Federal Emergency Management Agency, 785 F.2d 13, 18-19 (1st Cir.1986). But see West Augusta Development Corp. v. Giuffrida, 717 F.2d 139, 141 (4th Cir.1983) (leaving open question of whether estoppel could be asserted against government when plaintiff did not meet time deadline). The issue presented in this...