Dixie Warehouse v. Federal Emergency Mgmt. Agency

• Decision Date: 20 August 1982
• Docket Number: No. C-81-153-WS.,C-81-153-WS.
• Court: U.S. District Court — Middle District of North Carolina
• Parties: DIXIE WAREHOUSE, Plaintiff, v. FEDERAL EMERGENCY MANAGEMENT AGENCY, Defendant.

547 F. Supp. 81

DIXIE WAREHOUSE, Plaintiff, v. FEDERAL EMERGENCY MANAGEMENT AGENCY, Defendant.

No. C-81-153-WS.

United States District Court, M. D. North Carolina, Winston-Salem Division.

August 20, 1982.

W. Thomas White of Bell & White, Mount Airy, N. C., for plaintiff.

Kenneth W. McAllister, U. S. Atty., Greensboro, N. C. and Susan Kantor Bank, Federal Emergency Management Agency, Washington, D. C., for defendant.

MEMORANDUM OPINION AND ORDER

WARD, Chief Judge.

This matter is before the Court on the defendant's Motion for Summary Judgment (April 20, 1982). Plaintiff seeks recovery on an insurance contract for damage to property insured by the defendant. Defendant seeks dismissal of the action on the ground that plaintiff failed to give a proof of loss, which allegedly was a condition precedent to defendant's liability under the insurance policy. The Court cannot conclude as a matter of law that defendant is entitled to judgment in its favor and therefore will deny the motion.

The plaintiff, Dixie Warehouse, is a partnership owning and operating a tobacco warehouse at 1230 Worth Street, Mount Airy, North Carolina. (Hereafter plaintiff and plaintiff's agents and officers will be referred to as Dixie). Pursuant to a program presently administered by the defendant, Federal Emergency Management Agency (FEMA), Dixie purchased flood insurance for the warehouse on June 11, 1975. Dixie renewed the policy every year thereafter, and the policy was in effect on April 8, 1980, when a flood allegedly damaged the warehouse. Complaint (April 9, 1981); Defendant's Memorandum (April 20, 1982); Stipulation of Parties (May 14, 1982).

The next day Dixie notified Allied Insurance Agency, the company which issued the policy, of the loss. Affidavit of Nancy Godfrey attached to Plaintiff's Memorandum (May 24, 1982). Allied forwarded a written notice of loss to Gay and Taylor, a private sector adjuster employed by the government to adjust the claims arising out of the April 8th flood. Gay and Taylor received the notice on April 10th. The notice included information revealing the occurrence of the flood, the date, a description of the property, a description and estimate of damages, and the identity of the property's mortgagee. Stipulation of the Parties and attached Notice of Loss.

Shortly thereafter Dixie contacted the original building contractor, H. S. Williams Co., and procured a written survey of damage and itemized estimate of repairs dated April 23, 1980. Affidavit of Harold Y. Hodges, Sr. attached to Plaintiff's Memorandum. In April, 1980, the same month as the flood, Dixie hand delivered the estimate to an employee of Gay and Taylor, the defendant's adjuster, who remarked that the estimate was "too high." Affidavit of Harold Y. Hodges, Jr. and Estimate of Repairs attached to Plaintiff's Memorandum.

At no time during the 60 day period after the flood did defendant provide Dixie a blank proof of loss form. In December, about eight months after the flood, the defendant did supply a blank form which Dixie completed and returned. Affidavit of Harold Y. Hodges, Sr.; Stipulation of the Parties; Defendant's Memorandum.

The insurance policy at issue here required the insured to notify the insurer as soon as practicable that a loss had occurred. Paragraph O of the General Property Policy attached to Defendant's Amended Memorandum (May 14, 1982) (hereinafter ¶ ____). Within 60 days after the loss, an insured is required to render to the insurer proof of loss, signed and sworn to by the insured stating the insured's knowledge and belief as to:

time and origin of loss, the interest of the Insured and of all others in the property, the actual cash value of each item thereof and the amount of loss thereto, all encumbrances thereon, all other contracts of insurance, whether valid or not, covering any of said property, any changes in the title, use, occupation, location, possession or exposures of said property since the issuing of this policy, by whom and for what purpose any building herein described and the several parts thereof were occupied at the time of loss.

¶ O. Submission of proof of loss cannot be waived except through the issuance of an amendatory endorsement approved by the director of FEMA. ¶ D; 44 C.F.R. § 61.13(d) (1980). Performance of each term of the policy is a condition precedent to bringing suit on the policy. ¶ T.

Paragraph J of the policy provides that where a statute of the state wherein the property is located conflicts with a term of the policy the statute shall control unless the statute in turn conflicts with federal law or regulation. The state of North Carolina, wherein Dixie Warehouse was located, has a statute governing proof of loss requirements. North Carolina General Statute § 58-31.1 provides that where proof of loss is required after notice of loss, the insurer must supply the insured with a proof of loss form within 15 days after receipt of notice. If the form is not supplied, the insured is deemed to have complied with the proof of loss requirement if the insured provides the insurer with written proof of the occurrence, character, and extent of loss within the specified policy period.

North Carolina General Statute 58-31.1 applies to measure the sufficiency of the proof of loss in this case. To determine if state statutory law where the property is located should apply to federal flood insurance issues, three factors must be considered: (1) the terms of the policy; (2) applicable state statutory law; and (3) applicable federal statutory or decisional law. Where no term in the policy addresses an issue in dispute, federal law is applied. West v. Harris, 573 F.2d 873 (5th Cir. 1978), cert. denied, 440 U.S. 946, 99 S.Ct. 1424, 59 L.Ed.2d 635 (1979).¹ If no decisional or statutory federal law exists the federal courts may apply the traditional common law technique of decision by drawing upon standard insurance law principles. West v. Harris, 573 F.2d 873; Drewett v. Aetna Casualty & Surety Co., 539 F.2d 496 (5th Cir. 1976); Gulf Coast Investment Corp. v. Secretary of HUD, 509 F.Supp. 1321 (E.D. La.1980). The policy itself provides at paragraph J that a statute of the state wherein the property is located which conflicts with the policy provision and does not conflict with federal law controls the terms of the policy. Thus, the courts may apply state...