Hidenfelter v. DIRECTOR, FED. EMERGENCY MGT. AGCY.

• Decision Date: 06 March 1985
• Docket Number: No. K81-396 CA.,K81-396 CA.
• Citation: 603 F. Supp. 434
• Parties: James HIDENFELTER and Mable Hidenfelter, Plaintiffs, v. DIRECTOR, FEDERAL EMERGENCY MANAGEMENT AGENCY, Defendant.
• Court: U.S. District Court — Western District of Michigan

603 F. Supp. 434

James HIDENFELTER and Mable Hidenfelter, Plaintiffs, v. DIRECTOR, FEDERAL EMERGENCY MANAGEMENT AGENCY, Defendant.

No. K81-396 CA.

United States District Court, W.D. Michigan, S.D.

March 6, 1985.

Joseph W. Hayes, Stevens & Hayes, Coldwater, Mich., for plaintiffs.

Thomas J. Gezon, Chief Asst. U.S. Atty., Grand Rapids, Mich., for defendant.

OPINION

BENJAMIN F. GIBSON, District Judge.

This case was tried without a jury before the Court in May of 1984. Plaintiffs brought this civil action to obtain benefits under a policy of flood insurance covering their house located on property along the shore of Lake Michigan. The flood insurance was obtained under provisions of the National Flood Insurance Act, 42 U.S.C. § 4001 et seq. Plaintiffs claim that high lake levels and wave action caused flooding of their property by the waters of Lake Michigan eroding the land that supported the foundation of their house to the point that the house is now uninhabitable. They seek insurance benefits in the amount of the face value of the policy claiming that the present condition of the house has resulted in compensable losses exceeding the policy limits.

The defendant in this action is the director of the Federal Emergency Management Agency (FEMA), the agency responsible for administering the National Flood Insurance Program. FEMA challenged plaintiffs' right to recover under the insurance policy on two grounds: first, that plaintiffs' have failed to satisfy a contractual prerequisite to bringing this suit by failing to submit a formal "proof of loss" within sixty days of the claimed loss; and, second, that the damage to plaintiffs' house was not the result of erosion caused by flooding as defined in the policy of insurance. In addition, FEMA argued that plaintiffs' had failed to mitigate their damages and that plaintiffs' suffered damages in an amount less than the face value of the insurance policy. As required by Fed. R.Civ.P. 52(a), the Court's findings of fact and conclusions of law are stated below.

FINDINGS OF FACT

In 1966, plaintiffs purchased the property located at 38 Evergreen Bluff in South Haven Township, Michigan. At the time they purchased the property, their lot measured over 200 feet deep by 77 feet wide and sat on a bluff approximately 75 feet above Lake Michigan. The bluff itself was covered by vegetation and there was 30-40 feet of beach at the base of the bluff. Plaintiffs' house sat approximately 120 feet from the edge of the bluff and there was a three-story observation tower located between the house and the bluff.

When the National Flood Insurance Act was amended to provide coverage under the National Flood Insurance Program for losses caused by erosion due to flooding, plaintiffs obtained coverage for the observation tower and their house. As of the date of the trial in this matter, plaintiffs were still participating in this federal flood insurance program.

Plaintiffs have made three claims under the National Flood Insurance Program. Their first claim was filed in 1975 when recession of the bluff as a result of erosion undermined the observation tower to the point that it was in imminent danger of falling over the bluff. At that time, plaintiffs contacted their insurance agent to file a claim. A notice of loss was submitted and an adjuster investigated the claim on behalf of the insurer. In January, 1976, shortly after plaintiffs signed a proof of loss that had been prepared and submitted to them by agents of the insurer, that claim was settled for $4000, the face amount of the policy on the observation tower.

Plaintiffs filed their second and third claims, which are the subject of this lawsuit, in October of 1976 and January of 1978 claiming that erosion had rendered the house uninhabitable. At the time of the October 26, 1976 claim, only a portion of the rear porch attached to the house had been undermined. However, by the time plaintiffs filed their claim in 1978, the foundation of the house itself had been undermined by erosion. Although plaintiffs submitted a notice of claim with respect to this loss, they never submitted a proof of loss.

In spite of never having received a proof of loss, defendant investigated plaintiffs' 1976 and 1978 claims. As stated in Defendant's Exhibit I, plaintiffs were advised that they would not receive payment for any loss associated with their claim in 1976 because there had been no physical damage to the dwelling. After plaintiffs' 1978 claim had been investigated, defendant offered a little over $200 in settlement of the claim concluding that the loss was limited to damages to the rear porch which had been severely undermined as a result of erosion. Sometime after July 7, 1978, almost seven months after plaintiffs filed their claim, a proof of loss for $200.79 was sent to plaintiffs for damage to the porch. Plaintiffs did not accept the offer of $200.79 and did not sign and return the proof of loss. Defendants finally rejected plaintiffs' claim by a letter dated April 1, 1981.

The plaintiffs testified to the changes that occurred in the bluff from 1968 through 1978. During this period, the rate of erosion was substantially higher than that encountered by plaintiffs in prior years. Initially, the vegetation on the bluff was lost and attempts to replace the vegetation to slow the rate of soil loss proved futile. As the process continued, the bluff became undermined causing large portions to fall into the lake. It was as a result of this process that the observation deck was eventually undermined and fell into the lake and in 1978, a portion of the house became undermined. Experts for both parties related the high rate of erosion at the Hidenfelter property to high water levels on Lake Michigan during this period.

Water levels on Lake Michigan are affected by several factors. Storm activity, exclusive of wave action, can cause them to rise several feet in a matter of hours and wave action can cause even higher water levels to be achieved. While storms and wave action may rapidly and temporarily increase water levels on Lake Michigan, because of its immense size, lake water levels respond more slowly to increases in water volume attributable to precipitation, and stormwater runoff, or losses attributable to evaporation and water outflow.

Lake Michigan water levels also exhibit a seasonal cycle with low water levels occurring in late winter because precipitation is stored on land in the form of snow while high water levels occur in summer after the snow has melted and entered the lake as runoff. Lake levels also fluctuate over longer periods of time. Although some observers have postulated various multi-year cycles to explain long-term variations in lake levels, at this point no multi-year cycles of higher or lower than average water levels have been conclusively identified.

During the period from 1966 to 1974 average monthly water levels on Lake Michigan were generally rising with the highest water level ever recorded on Lake Michigan occurring in 1973. The evidence submitted during the trial demonstrated that from April, 1969 to December, 1976, the average monthly water levels on Lake Michigan were continuously above Lake Michigan's mean water level calculated for the period 1900 through 1983. See Defendant's Exhibits D and O. Beginning in late 1974 and running through 1978, average monthly water levels on Lake Michigan were generally declining. See Defendant's Exhibit D.

CONCLUSIONS OF LAW

The National Flood Insurance Program was instituted pursuant to the National Flood Insurance Act, 42 U.S.C. § 4001 et seq., to provide low cost flood insurance to homeowners and small businesses that may suffer losses through damage to real and personal property from flooding. Plaintiffs brought this lawsuit to recover benefits under a policy of flood insurance issued under the National Flood Insurance Program after their claim was rejected by FEMA. Jurisdiction over this civil action is provided by 42 U.S.C. § 4072.

The Standard Flood Insurance Policy issued to plaintiffs describes the requirements for filing a claim in Paragraph N which provides in part:

Requirements in Case of Loss — The insured shall give written notice, as soon as practicable, to this Company of any loss.... Within 60 days after the loss, unless such time is extended in writing by this Company, the insured shall render to this Company a proof of loss, signed and sworn to by the insured, stating the knowledge and belief of the insured as to the following: the time and origin of the 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.

Paragraph S of the Standard Flood Insurance...