Ekhlassi v. National Lloyds Insurance Co., 060419 FED5, 18-20228

Docket Nº18-20228
Party NameALI EKHLASSI, Plaintiff - Appellant v. NATIONAL LLOYDS INSURANCE COMPANY, Defendant-Appellee
Judge PanelBefore BARKSDALE, SOUTHWICK, and HAYNES, Circuit Judges. HAYNES, Circuit Judge, concurring:
Case DateJune 04, 2019
CourtUnited States Courts of Appeals, Court of Appeals for the Fifth Circuit

ALI EKHLASSI, Plaintiff - Appellant



No. 18-20228

United States Court of Appeals, Fifth Circuit

June 4, 2019

Appeal from the United States District Court for the Southern District of Texas

Before BARKSDALE, SOUTHWICK, and HAYNES, Circuit Judges.


Ali Ekhlassi challenges the summary judgment awarded National Lloyds Insurance Company pursuant to the National Flood Insurance Act (the Act), 42 U.S.C. §§ 4001 et seq. Primarily, at issue are: whether 42 U.S.C. § 4072 (providing for "original exclusive jurisdiction" in district court and one-year limitations period) is applicable to actions against Write-Your-Own (WYO) carriers ("private insurers [which] issue flood insurance policies [underwritten by the Government] in their own names" as part of the National Flood Insurance Program (created by the Act), Campo v. Allstate Ins. Co., 562 F.3d 751, 754 (5th Cir. 2009)); and, if § 4072 is applicable, whether its one-year limitations period bars relief. AFFIRMED.


This action concerns the Act's government program, 42 U.S.C. §§ 4071- 72, which allows private insurance companies (as WYO carriers) to issue and administer flood-insurance policies underwritten by the Government. See Campo, 562 F.3d at 754. The required language of the policy issued by WYO carriers is provided in the Code of Federal Regulations in 44 C.F.R. pt. 61, App. A(1). See Campo, 562 F.3d at 754 n.11. Lloyds participated in the program as a WYO carrier.

The above-referenced Standard Flood Insurance Policy, provided in the Code of Federal Regulations and utilized by WYO carriers participating in the National Flood Insurance Program, states the "Requirements in Case of Loss". 44 C.F.R. Pt. 61, App. A(1), Art. VII (J). Among those requirements, the policyholder "must . . . send [the insurer] a proof of loss, which is [the insured's] statement of the amount [the insured is] claiming under the policy [and is] signed and sworn to by [the insured]". Id.

Ekhlassi insured his house in Houston, Texas, with a National Flood Insurance Program policy from Lloyds and a homeowner's policy from Auto Club Indemnity Company (ACIC). ACIC is not a party on appeal. An extensive rain-storm that caused flooding damaged Ekhlassi's home on 25 May 2015, and he reported the loss to Lloyds the next day.

On 28 May 2015, the Federal Emergency Management Agency (FEMA) issued a notice with a waiver for National Flood Insurance Program policyholders, extending the time within which to file a proof of loss by 180 days for "all claims for the flood damage related to the Texas and Oklahoma flooding" that began on 16 May 2015 and included Ekhlassi's house. As stated in the notice, policyholders had "a total of 240 days after the date of loss" to file the proof of loss. The notice stated it did "not . . . waive any other provisions of the [Standard Flood Insurance Policy]".

One such non-waived provision in the policy is the one-year statute of limitations. 44 C.F.R. Pt. 61, App. A(1), Art. VII (R). That provision states: "If you do sue, you must start the suit within one year after the date of the written denial of all or part of the claim, and you must file the suit in the United States District Court of the district in which the covered property was located at the time of loss." Id. (emphasis added).

Ekhlassi had an adjuster inspect his house. After doing so, the adjuster obtained estimates from contractors for the cost of repair, which exceeded $200, 000. Lloyds also inspected the house, and concluded flooding from the 25 May storm did not cause much of the claimed damage.

As a result, Lloyds' subsequent 6 October 2015 letter to Ekhlassi stated it had reviewed his adjuster's report and would process a claim for $3, 768.25 upon receipt of a "signed, dated and sworn to proof of loss". The letter also stated it was "denying payment for any building and contents items not subject to direct physical loss by or from flood" and "denying payment for all non-covered items located below the lowest elevated floor of [Ekhlassi's house], pursuant to the Standard Flood Insurance Policy".

More to the point, the 6 October letter warned Ekhlassi about the above-quoted, one-year limitations period. As noted, this period is provided in the Act, 42 U.S.C. § 4072; its regulations, 44 C.F.R. § 62.22(a); and the Standard Flood Insurance Policy, id. Pt. 61, App. A(1), Art. VII (R). Notably, "strict compliance with the provisions of federal flood insurance policies is required because payments are drawn from the federal treasury". Shuford v. Fidelity Nat'l Prop. & Cas. Ins. Co., 508 F.3d 1337, 1343 (11th Cir. 2007) (citation omitted).

Ekhlassi submitted a proof of loss in late December 2015 for $274, 940.05. In response, Lloyds' 11 January 2016 letter to Ekhlassi acknowledged receipt of the proof of loss, and rejected all but $3, 768.25 (the amount offered by the 6 October letter). The 11 January letter also instructed Ekhlassi to "refer to the denial letter dated October 6, 2015[, ] for what Federal law allows under the Standard Flood Insurance Policy and for reasons of denial for damages that have been claimed".

In mid-January, Ekhlassi signed, inter alia, a different proof of loss for $3, 768.25, but he disagreed with the amount and stated his intent not to "conclude this claim in any manner whatsoever".

One year from the 11 January 2016 denial, Ekhlassi filed this action in Texas state court on 11 January 2017. He claimed, inter alia, breach of contract against Lloyds. This action was removed to federal court on 24 April 2017.

ACIC, the issuer of the homeowner's policy, filed a summary-judgment motion, which was granted in November 2017. (As noted, ACIC is not a party on appeal.)

Lloyds also filed a summary-judgment motion, which was granted in January 2018. Ekhlassi v. Nat'l Lloyds Ins. Co., 295 F.Supp.3d 750 (S.D. Tex. 2018). The court ruled Ekhlassi's action was time-barred, based on its concluding the 6 October, not the 11 January, letter triggered the one-year limitations period. Id. at 755.

In early February 2018, pursuant to Federal Rule of Civil Procedure 59(e), Ekhlassi moved to reconsider the summary judgment awarded Lloyds. The March 2018 order denying the motion reiterated the court's prior holding: the 6 October letter served as the denial triggering the limitations period.


As governed by the Act, this action concerns a WYO carrier. Our court has previously, and comprehensively, explained how the WYO program operates: By enacting the National Flood Insurance Act of 1968, 42 U.S.C. § 4001 et seq., Congress established the [National Flood Insurance Program] to make flood insurance available on reasonable terms and to reduce fiscal pressure on federal flood relief efforts. FEMA administers the [p]rogram. Within [that] [p]rogram, the WYO program allows private insurers to issue flood insurance policies in their own names. Under this framework, the federal government underwrites the policies and private WYO carriers perform significant administrative functions including "arrang[ing] for the adjustment, settlement, payment and defense of all claims arising from the policies." WYO carriers must issue policies containing the exact terms and conditions of the [Standard Flood Insurance Policy] set forth in FEMA regulations. Additionally, FEMA regulations govern the methods by which WYO carriers adjust and pay claims. Although WYO carriers play a large role, the government ultimately pays a WYO carrier's claims. When claimants sue their WYO carriers for payment of a claim, carriers bear the defense costs, which are considered "part of the ... claim expense allowance"; FEMA reimburses these costs. Yet, if "litigation is grounded in actions by the [WYO] Company that are significantly outside the scope of this Arrangement, and/or involves issues of agent negligence," then such costs will not be reimbursable to the WYO carrier.

Campo, 562 F.3d at 754 (footnotes omitted).

WYO carriers are fiscal, not general, agents of the United States. Van Holt v. Liberty Mut. Fire Ins. Co., 163 F.3d 161, 165 (3d Cir. 1998). As such, they administer the National Flood Insurance Program by "strictly enforc[ing] the provisions set out by FEMA and" can not "vary the terms of [the Standard Flood Insurance Policy]" without "express written consent" from the Government. See C.E.R. 1988, Inc. v. Aetna Cas. & Sur. Co., 386 F.3d 263, 267 (3d Cir. 2004). At least historically, if not today as well, WYO carriers write far more policies than does FEMA. See id. Pursuant to federal regulation, WYO carriers are "sued in place of the FEMA [Administrator]" in actions involving WYO policies. See id. at 267 n.4.

The summary judgment awarded Lloyds is reviewed de novo.

E.g., Borden v. Allstate Ins. Co., 589 F.3d 168, 170 (5th Cir. 2009). "Summary judgment is appropriate when the record demonstrates that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Id. at 170-71 (internal quotation marks and citation omitted); see also Fed. R. Civ. P. 56(a).

In his original opening brief on appeal, Ekhlassi challenged: the district court's using Lloyds' first claim-denial letter (6 October 2015) to trigger the limitations period; and, its denying his Rule 59(e) motion. But, pending oral argument, we, sua sponte, ordered supplemental briefing by the parties regarding "the effect of the federal court's original exclusive jurisdiction on whether the action is barred by the limitations period".

Accordingly, primarily at issue are: whether 42 U.S.C. § 4072 applies to a WYO action like the one at hand; and, if it does, whether the statute's requirement of...

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