Criger v. Becton

• Decision Date: 11 May 1990
• Docket Number: No. 89-1097,89-1097
• Parties: Forrest D. CRIGER, Appellee, v. General Julius W. BECTON, Director of Federal Emergency Management Agency, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1348

902 F.2d 1348

Forrest D. CRIGER, Appellee, v. General Julius W. BECTON, Director of Federal Emergency Management Agency, Appellant.

No. 89-1097.

United States Court of Appeals Eighth Circuit.

Submitted Feb. 15, 1990.

Decided May 11, 1990.

Edward Himmelfarb, Washington, D.C., for appellant.

Allen H. Surinsky, St. Louis, Mo., for appellee.

Before ARNOLD, Circuit Judge, HEANEY, Senior Circuit Judge, and BOWMAN, Circuit Judge.

BOWMAN, Circuit Judge.

General Julius W. Becton, Jr., director of the Federal Emergency Management Agency (FEMA), appeals the District Court's ruling that a regulation promulgated by FEMA under the National Flood Insurance Act of 1968 (NFIA), as amended, 42 U.S.C. Secs. 4001-4127, should have retrospective effect. We reverse.

NFIA authorizes a federally assisted flood insurance program to provide coverage for those in need of such protection. The director of FEMA promulgates the "terms and conditions of insurability," 42 U.S.C. Sec. 4013(a) (1982), which appear in the Code of Federal Regulations as administrative regulations and are subject to procedural requirements such as notice and comment.

Forrest Criger was insured under the National Flood Insurance Program (NFIP) and was issued a Standard Flood Insurance Policy (SFIP) on his St. Charles, Missouri, home, located on the Mississippi River. The policy term was from October 22, 1985, to October 22, 1986. His property was flooded on or about October 7, 1986, and he made a timely claim against his SFIP for the flood damage. An independent adjuster first inspected the property in late October 1986. In February 1987, a reinspection report concluded that the Criger home was an elevated structure. That designation excluded from coverage the property damage to the structure's lower level enclosure and its contents, as required by the regulations and the SFIP terms then in effect. 44 C.F.R. Sec. 61.5(f)(10) (1985); 44 C.F.R. Pt. 61, App. A(1), Art. V(F) (1985). ¹ A public adjuster reinspected the property, at Criger's request, and agreed with the earlier determination that the residence was an elevated structure. Recovery for the flood loss was denied. Criger then brought this action seeking judicial review of FEMA's denial of flood insurance coverage. FEMA counterclaimed for recovery of $3,344.46 it paid Criger in 1985 on a claim for flood damage to the lower level enclosure.

The case came before the District Court on three issues: (1) whether the exclusion in question was vague, discriminatory, and unenforceable; (2) whether FEMA was estopped from enforcing the exclusion as to Criger's 1986 loss because it had treated his residence as nonelevated when it paid a claim for flood damage sustained in February 1985; and (3) whether the exclusion was inapplicable because Criger's home is an initial construction under FEMA's interpretation No. 1-87. The District Court did not reach these issues because it determined, after both parties briefed the issue, that a new FEMA regulation, effective October 1, 1988, which would render the exclusion inapplicable to Criger's property, applied retroactively to allow Criger to recover for the 1986 flood loss. Criger v. Becton, 702 F.Supp. 761 (E.D.Mo.1988). The District Court denied FEMA's counterclaim because it was "based upon the elevated structure exclusion." Id. at 765. Presumably the court believed the 1988 amendment applied to the 1985 loss as well as the 1986 loss.

Criger purchased the insured property in 1975. In the 1960's, the original structure had been moved closer to the river and the lower level had been enclosed. The exclusion in effect at the time of Criger's 1986 flood loss applied to such enclosures of all elevated buildings. The October 1, 1988, regulation narrowed the exclusion to include only enclosures of elevated buildings "for which the start of construction or substantial improvement occurred after December 31, 1974, or on or after the effective date of the initial Flood Insurance Rate Map (FIRM) for the community in which the building is located, whichever is later." 44 C.F.R. Pt. 61, App. A(1), Art. II (1989). The effective date of the FIRM for St. Charles county was September 15, 1978, making Criger's property a pre-FIRM building. Because it found that the 1988 regulation applied retroactively to Criger's 1986 flood loss, the District Court held that coverage for the 1986 flood damage was improperly denied and ordered FEMA to pay Criger $11,436.00. FEMA appeals.

The only issue before us is whether the 1988 regulation should be given retroactive effect to cover flood losses that occurred under a policy that terminated nearly two years before the effective date of the new regulation. We hold that it should not and reverse and remand the case for further proceedings with respect to the issues raised by Criger but not yet addressed by the District Court, ² and with respect to FEMA's counterclaim.

FEMA, the agency charged with administering NFIA, insists on this appeal that it did not intend for the regulation at issue to apply retroactively, despite the District Court's contrary conclusion. FEMA's interpretation of its own regulation is entitled to great deference by a reviewing court.

[W]hen it is the Secretary's [of Health and Human Services] regulation that we are construing, and when there is no claim in this Court that the regulation violates any constitutional or statutory mandate, we are properly hesitant to substitute an alternative reading for the Secretary's unless that alternative reading is compelled by the regulation's plain language or by other indications of the Secretary's intent at the time of the regulation's promulgation.

Gardebring v. Jenkins, 485 U.S. 415, 430, 108 S.Ct. 1306, 1314, 99 L.Ed.2d 515 (1988); accord Udall v. Tallman, 380 U.S. 1, 16, 85 S.Ct. 792, 801, 13 L.Ed.2d 616 (1965) (great deference accorded managing agency's interpretation of statute, but "deference is even more clearly in order" when agency is construing administrative regulation); Moore v. Custis, 736 F.2d 1260, 1262 (8th Cir.1984) ("[I]t is equally well established that great deference should be accorded an administrative agency's interpretation of its own regulations."); Dymond v. United States Postal Serv., 670 F.2d 93, 96 (8th Cir.1982) ("The prevailing standard is that an administrative interpretation is to be afforded controlling weight unless it is plainly erroneous or inconsistent with the regulations at issue.").

The regulation at issue says nothing to suggest it was intended to have retroactive effect, and the "other indications" of FEMA's intent either support FEMA's interpretation of the regulation or are so ambiguous that they do not compel an alternative reading of the regulation.

The new regulation was published in final form on July 26, 1988, with a declared effective date of October 1, 1988. 53 Fed.Reg. 27,989 (1988). Under the Administrative Procedure Act (APA), publication of a new regulation thirty days before the effective date normally is required. 5 U.S.C. Sec. 553(d) (1988). The regulation may be made effective immediately, however, when it "grants or recognizes an exemption or relieves a restriction." Id. Sec. 553(d)(1). Notwithstanding that permissive statute, which clearly would apply to this regulation, the revised SFIP exclusion had an effective date more than two months after its final publication. It is difficult to fathom why FEMA would delay the effective date if it intended retroactive coverage. While we do not hold that a delayed effective date on a regulation is conclusive of prospective intent, it certainly is evidence that cuts against retroactive application. And this is not the only evidence of FEMA's intent that the new regulation would have prospective effect only.

The record shows that FEMA intends to increase the premium rate for elevated, enclosed pre-FIRM buildings in an effort to cover at least a portion of the additional cost of the expanded coverage. ³

Since Pre-FIRM buildings with enclosures would no longer be subject to the limitation coverage under the SFIP, FEMA intends to increase the premium rates for such buildings as part of future premium rate changes after this rule becomes final. Thus, the existing premium rate differential between the rates for Pre-FIRM elevated buildings without enclosures and the higher rates for Pre-FIRM elevated buildings with enclosures would be increased.

53 Fed.Reg. 10,548 (1988) (proposed April 1, 1988). That NFIP is a federally subsidized program does not compel the conclusion that the premiums insureds pay are not expected to defray the cost of covering the risk. In fact, NFIA authorizes estimation of premium rates according to standard insurance risk and actuarial studies. 42 U.S.C. Sec. 4014 (1982); see Drewett v. Aetna Casualty & Sur. Co., 539 F.2d 496, 498 (5th Cir.1976) ("Because [NFIP's] exposure to claims and its premiums are required to be estimated in accordance with standard insurance practices, and because private insurers carry part of the risk, it is clear that Congress did not intend to abrogate standard insurance law principles which affect such estimates and risks."); see also 48 Fed.Reg. 39,066 (1983) (final rule publication of the exclusionary regulation in effect at time of Criger's loss) ("The purpose of the amendment is to revise the Program regulations to reflect changes in the Flood Insurance Manual used by private sector property insurance agents and brokers in producing flood insurance business and coverage changes in the contract of flood insurance....").

With a private insurer, one generally pays higher premiums to get increased coverage. We do not accept the proposition that, merely because NFIP is federally assisted, it is divorced from the actuarial principles that govern the actions of private insurers. FEMA's plan to charge higher premiums for the broader coverage afforded by the 1988 amendment is plainly inconsistent with an intent to...