Bolton v. Giuffrida

• Decision Date: 09 August 1983
• Docket Number: Civ. No. C-82-6270.
• Citation: 569 F. Supp. 30
• Parties: Vicki BOLTON and James Bolton, Plaintiffs, v. Louis O. GIUFFRIDA, Director of the Federal Emergency Management Agency, et al., Defendants.
• Court: U.S. District Court — Northern District of California

569 F. Supp. 30

Vicki BOLTON and James Bolton, Plaintiffs, v. Louis O. GIUFFRIDA, Director of the Federal Emergency Management Agency, et al., Defendants.

Civ. No. C-82-6270.

United States District Court, N.D. California.

August 9, 1983.

William E. Growney, Pacifica, Cal., for plaintiffs.

Barbara Parker, Asst. U.S. Atty., Clarke B. Holland, Otis McGee, Jr., Lee J. Novich, San Francisco, Cal., for defendants.

OPINION AND ORDER

AGUILAR, District Judge.

This action arises out of the Federal Emergency Management Agency's (hereinafter referred to as "FEMA") failure to provide benefits under a flood insurance policy to plaintiffs for alleged flood damage to their home. The action is now before the Court on defendant FEMA's motion to dismiss or for summary judgment. Defendant asserts that plaintiffs' lawsuit is barred by plaintiffs' failure to file a timely Proof of Loss, a timely Proof of Loss being a condition precedent to a suit for recovery under the policy.

On January 4, 1982, the San Francisco Bay Area experienced unusually heavy rainfall. Plaintiffs' home in Pacifica was damaged when San Pebro Creek overflowed and its waters surrounded and entered plaintiffs' home.

At the time of the damage, plaintiffs had in effect a Standard Flood Insurance Policy issued by the Federal Emergency Management Agency. After the flooding, plaintiffs notified FEMA of the damage to their home and of their intent to seek benefits under the insurance policy. Soon thereafter, two representatives of the National Flood Insurance Program visited plaintiffs' home and inspected the damage. Plaintiffs supplied the agents with estimates made by various contractors for repair of damage to the home. In March of 1982 the National Flood Insurance Program sent a geologist to inspect the home.

On April 6, 1982, FEMA's servicing agent, EDS Federal Corporation, assigned GAB Business Services, Inc. to investigate and adjust the flood loss claimed by plaintiffs. David Greenwald of GAB conducted an investigation. The investigation included an inspection of plaintiffs' home. On June 16, 1982 Greenwald sent a report to FEMA summarizing his investigation.

On July 1, 1982, FEMA advised Greenwald that plaintiffs were covered under the policy only for the interior floor damage that was sustained during the flooding. FEMA concluded that the policy would not cover the damage to the foundation and other portions of the structure. The grounds cited by FEMA for non-coverage were that the foundation and structural damage was caused by earth movement, and that paragraph D of the "Perils Excluded" portion of the insurance policy excludes loss by "any ... earth movement except such mudslide or erosion as is covered under the peril of flood."

On that same day, July 1, 1982, Greenwald sent a letter to plaintiffs advising them of FEMA's coverage decision. Greenwald enclosed in the letter a filled-in Proof of Loss for their signature. The Proof of Loss reflected the amount of loss FEMA had concluded was covered by the policy.

Plaintiffs refused to sign the Proof of Loss because they believed that their entire loss of $13,744.15 was caused by flooding, and therefore covered in full by the policy. (FEMA had proposed to pay only $1,674.15 in damages, representing the damage to the interior floor.)

Only July 2, 1982, over six months after the flooding, FEMA sent a letter to plaintiffs that informed plaintiffs that the provisions of their policy required that they file a formal Proof of Loss within sixty days of the date of loss. It also noted that the adjuster, Greenwald, had sent a Proof of Loss on July 1, 1982. The letter also required that plaintiffs return the executed Proof of Loss within fifteen days from the date of the letter or plaintiffs' file would be closed without payment.

On August 3, 1982, plaintiffs' attorney wrote to Greenwald demanding that the full amount of plaintiffs' loss be paid under the policy. Greenwald wrote to plaintiffs' counsel on August 5, 1982, that he had transmitted counsel's letter to FEMA.

On August 18, 1982, plaintiffs' counsel wrote to a representative of FEMA. Counsel stated that Greenwald had prepared an erroneous Proof of Loss form, and had refused to change the form to reflect the actual loss suffered by plaintiffs. Counsel requested that the representative send him a new Proof of Loss form so that he could submit an accurate Proof of Loss on plaintiffs' behalf.

On September 7, 1982 plaintiffs' counsel made another demand for a Proof of Loss form. On September 21, 1982, a Claims Examiner for FEMA wrote plaintiffs' counsel and stated:

Our denial of August 17, 1982 remains in effect. No Proof of Loss will be forthcoming.¹

Accordingly, plaintiffs brought suit in this Court to recover under their flood insurance policy to the full extent of their loss. It should be noted here that plaintiffs originally sued Greenwald, GAB and EDS in addition to FEMA. Plaintiffs have now dismissed all defendants but FEMA.

FEMA moves to dismiss or for summary judgment contending that timely filing of a Proof of Loss is a condition precedent to filing suit against FEMA. FEMA claims that plaintiffs have never filed a Proof of Loss with FEMA. Therefore plaintiffs are barred from pursuing this action.²

Paragraph N of the General Conditions and Provisions portion of the flood insurance policy held by plaintiffs provided:

Requirements in Case of Loss: The Insured shall give written notice, as soon as practicable, to the Insurer of any loss .... Within 60 days after the loss, unless such time is extended in writing by the Insurer, the Insured shall render to the Insurer a Proof of Loss, signed and sworn to by the Insured, stating the knowledge and belief of the Insured as to ... various items having to do with the loss.

This provision of the policy is also reflected in the regulations governing the National Flood Insurance Program at 44 C.F.R. § 61, Appendix A(1).

Paragraph D of the policy provided:

No permission affecting this insurance shall exist, or waiver of any provision be valid, unless granted herein or expressed in writing added hereto. No provision, stipulation or forfeiture shall be held to be waived by any requirement or proceeding on the part of the Insurer relating to the appraisal to any examination provided for herein.

44 C.F.R. § 61.13(d) also provides that no provision of a standard flood insurance policy shall be waived or varied except through the issuance of an appropriate amendatory endorsement approved by the Administrator of the Flood Insurance Program.

Finally, paragraph S of the policy provided:

No suit or action on this policy for the recovery of any claim shall be sustained in any court of law or equity unless all of the requirements of this policy shall have been complied with ....

Thus, the standard flood insurance policy held by plaintiffs contained a specific requirement that in the event of a loss, a Proof of Loss had to be submitted to FEMA (insured) within sixty days after the loss. The policy also provided that all requirements of the policy had to be complied with to be able to bring an action on the policy, absent to express waiver which neither party contends was present in this case. Therefore, under the terms of plaintiffs' flood insurance policy, and under the applicable regulations, plaintiffs are barred from bringing this action on the policy as they did not comply with the requirement of the policy that a Proof of Loss be filed within sixty days following the loss.

Plaintiffs do not dispute the fact that they did not file a timely Proof of Loss. However, plaintiffs assert that FEMA should be estopped from raising as a defense their failure to file a timely Proof of Loss because this failure was caused by affirmative misconduct on the part of FEMA. Specifically, plaintiffs assert that they did not file a Proof of Loss because of the following actions of FEMA: When plaintiffs notified the Agency of the damage to their home FEMA quickly sent out investigators; the investigators told plaintiffs that submission of the estimates was all that was required to process plaintiffs' claimed loss; adjustment proceedings took place; at no time during this period were plaintiffs told that they had to submit a sworn Proof of Loss; plaintiffs were informed in July, well after the sixty day time limit had passed, that they had to file a Proof of Loss; and, plaintiffs' counsel requested a new Proof of Loss form that he could accurately fill out, but the Agency refused him one.

Estoppel ordinarily does not lie against agencies of the federal government. California Pacific Bank v. SBA, 557 F.2d 218, 224 (9th Cir.1977). Thus, many courts have interpreted the terms of governmentally sponsored insurance policies strictly, and have held that no suit can be brought for failure to provide benefits under a governmentally sponsored insurance policy where a requisite Proof of Loss has been untimely, or has never been, filed. See e.g., Havemeyer Textile v. Federal Insurance Administrator, 559 F.Supp. 956, 959 (E.D.N. Y.1983); Cross Queen, Inc. v. Director, Federal Emergency Management Agency, 516 F.Supp. 806, 809 (D.Virgin Islands 1980); Continental Imports, Inc. v. Macy, 510 F.Supp. 64, 66 (E.D.Penn.1981). The Ninth Circuit has not yet indicated whether it will adopt this strict interpretation and refuse to apply the estoppel doctrine to Proof of Loss requirements for bringing suit on such policies.

However, the Ninth Circuit has held that the estoppel doctrine can be asserted against the United States "where justice and fair play require it". United States v. Lazy FC Ranch, 481 F.2d 985, 988 (9th Cir.1973). Estoppel can be interposed against the federal government where the conduct of the government is relied upon to the detriment of the party seeking to interpose an estoppel, where the government's conduct threatens to work a serious injustice, and where the public's interest would not be unduly damaged by the...