Mancini v. Redland Ins. Co., CROSS-APPELLANTS

• Decision Date: 14 February 2001
• Docket Number: 99-4283MN,CROSS-APPELLEE,CROSS-APPELLANTS,No. 99-4278M,99-4278M
• Citation: 248 F.3d 729
• Parties: (8th Cir. 2001) RONALD MANCINI AND CHERYL MANCINI, APPELLEES/, v. REDLAND INSURANCE COMPANY, APPELLANT/ Submitted:
• Court: U.S. Court of Appeals — Eighth Circuit

Page 729

248 F.3d 729 (8th Cir. 2001)

RONALD MANCINI AND CHERYL MANCINI, APPELLEES/CROSS-APPELLANTS, v. REDLAND INSURANCE COMPANY, APPELLANT/CROSS-APPELLEE.

No. 99-4278MN, 99-4283MN

UNITED STATES COURT OF APPEALS FOR THE EIGHTH CIRCUIT

Submitted: February 14, 2001

Filed: May 8, 2001

On Appeal from the United States District Court for the District of Minnesota. [Copyrighted Material Omitted] Before Richard S. Arnold, Lay, and Hansen, Circuit Judges.

Richard S. Arnold, Circuit Judge

Defendant Redland Insurance Company is a private insurer that administers federally subsidized flood insurance pursuant to the National Flood Insurance Act, 42 U.S.C. § 4001-4041, 4071-4129. The plaintiffs, Ronald and Cheryl Mancini, brought this suit when Redland denied their claim for flood damage to their mobile home. The District Court found for the plaintiffs, but awarded them only part of the damages requested. Redland appeals, and the Mancinis cross-appeal. We hold that the Mancinis' failure to submit a signed and sworn proof of loss entitles Redland to judgment as a matter of law.

I.

The District Court found the following facts. In February of 1997, Ron and Cheryl Mancini bought a 70-acre farm near Dry Lake in Minnesota. Because the winter's heavy snowfall had left large drifts on the property, the Mancinis went to a local agent on March 11, 1997, and purchased a Standard Flood Insurance Policy (SFIP) from Redland.¹ This was a federally subsidized policy issued pursuant to the National Flood Insurance Act. Its coverage was limited to $75,000 for the Mancinis' mobile home and $18,000 for their personal property inside the home. After a 30-day waiting period, of which the Mancinis were informed at the time of purchase, the policy became effective on April 10, 1997. During that same period, the snow began to melt, and the nearby lake began to flood. A county worker activated an overflow pump near the home on April 3, which caused water to flow toward the home. As of April 4, about six inches of water covered part of the county road that runs past the home. The County closed the road the same day. At that time, the water had not yet reached the home, and freezing temperatures prevented it from doing so until after the effective date of the policy.

On April 14, the Mancinis submitted a notice to Redland stating that the house was surrounded by water and that they were unable to assess the damage, if any, because freezing prevented their reaching the house by boat. Redland hired an adjusting company called RGA, Inc. The RGA adjuster who visited the property on April 23 reported to Redland that he predicted a total loss. He first estimated the damage at $30,000, but later revised that estimate to $60,000. RGA gave the Mancinis slightly different numbers: they were initially told that the value of their loss would be $31,000, but another RGA adjuster, Ray Graf, later raised that valuation to $56,000.

The Mancinis believed, however, that they were entitled to the full policy limit of $93,000 for the home and its contents. The SFIP provides that:

Where the insured building has been inundated by rising lake waters continuously for 90 days or more and it appears reasonably certain that a continuation of this flooding will result in damage, reimbursable under this policy, to the insured building equal to or greater than the building policy limits plus the deductible(s) or the maximum payable under the policy for any one building loss, we will pay you the lesser of these two amounts without waiting for the further damage to occur if you sign a release agreeing:

1. To make no further claim under this policy;

2. Not to seek renewal of this policy; and

3. Not to apply for any flood insurance under the Act for property at the property location of the insured building.

Trial Exhibit Appendix, Ex. 1 at 19. As of July 13, the insured building had been inundated with water for 90 days.

The SFIP requires that an insured comply with certain claim-handling procedures in order to recover under the policy. Among the requirements in the Mancinis' policy is that, within 60 days after the loss, the insured must submit a "proof of loss," defined as "your statement as to the amount you are claiming under the policy signed and sworn to by you . . .." Trial Exhibit Appendix, Ex. 1 at 17. On August 15, Ray Graf sent the Mancinis a proof-of-loss form containing all the required information, together with an adjuster's report and supporting documents. The report was signed by the adjuster and had blank spaces for the Mancinis' signatures. Each of these spaces was marked with a handwritten X. The proof-of-loss form, which the adjuster did not sign, bore handwritten Xs on the two signature lines reading "Insured." A letter accompanying the forms stated as follows:

Enclosed are your spread sheets that reflect your covered damages to your dwelling and contents, with the Proof of loss and Final report forms.

These will require your signature and return them to our office in Minnesota either by mail or fax.

1. Proof of Loss - Must be notarized!!

2. Final Report - Must be Witnessed!!

Once we receive these forms, we will attach to your file and forward to the process center for final determination and payment consideration.

Trial Exhibit Appendix, Ex. 16 at 2. Instead of signing the forms and returning them to Mr. Graf, the Mancinis faxed them, neither signed nor notarized, to Redland Claims Representative Chad Huebner, with a hand-printed cover sheet reading:

Chad here is the information you are waiting on from Ray Graf. It was told to us that you would call us on 8/19/97 as to the status of this policy. We would appreciate a call back today from you, this deserves your immediate attention.

Ron & Cheryl Mancini

Id. at 1. The District Court found that the Mancinis believed that, by submitting the forms to Redland accompanied by a transmittal letter bearing their printed names, they had signed and sworn to the proof of loss. The policy, which they had read, states that to make a false statement in submitting a claim may be a violation of federal law.

On August 28, Redland asked a National Flood Insurance Program adjuster to inspect the Mancinis' property. The adjuster did so on September 3. By a letter to the Mancinis' attorney, dated November 11, 1997, Redland denied the Mancinis' claim on the ground that the loss was already in progress on the effective date of the policy. Redland contended that the date of loss was not April 13 but April 4, when the County closed the road near the home. The letter denying the claim specifically reserved all of Redland's rights and remedies under the policy or applicable law, and disclaimed any intent to waive any right or any provision or condition of the policy.

On February 17, 1998, the Mancinis' attorney wrote to Redland asking whether the claim had been denied. The letter specifically asked whether Redland contended that the Mancinis had failed to submit a proper proof of loss. Redland's reply, dated March 9, stated that Redland had denied the claim as a loss in progress. It made no mention whatsoever of the proof-of-loss issue.

The Mancinis then filed this lawsuit. The case was tried to the Court. Redland defended on two theories: that the claim fell within an express exclusion for losses already in progress on the effective date of the policy, and that the plaintiffs had failed to comply with the policy's requirement that they submit a signed and sworn proof of loss. The District Court found for the plaintiffs, holding that the loss-in-progress exclusion did not apply and that the Mancinis had "technically complied with the proof of loss provisions of the policy." It awarded the Mancinis the $56,257.33 included by the adjuster on the proof-of-loss form, but denied all other items of damages as not having been submitted to the company in accordance with the policy. This appeal and cross-appeal followed.

II.

Because Redland functions here not as a purely private insurance company, but as a fiscal agent of the United States, see 42 U.S.C. § 4071(a)(1), this case is governed to some extent by rules quite different from those that would apply in a normal insurance dispute. The policy the Mancinis bought is more than a contract: it is also a regulation of the Federal Emergency Management Agency, stating the conditions under which federal flood-insurance funds may be disbursed to eligible policy holders. See 44 C.F.R. § 61.13 (1997). The Supreme Court has held that courts must strictly construe the statutory or regulatory limits upon disbursements of funds through federal insurance programs. Federal Crop Ins. Corp. v. Merrill, 332 U.S. 380, 385-86 (1947). Like our sister circuits, we are unable to avoid the conclusion that the proof-of-loss provision in the SFIP states such a limit and must therefore be strictly construed. Accord, Flick v. Liberty Mut. Fire Ins. Co., 205 F.3d 386, 387 (9th Cir.), cert. denied, 121 S. Ct. 305 (2000); Gowland v. AETNA, 143 F.3d 951, 955 (5th Cir. 1998). Additionally, the SFIP states that an insured must comply with all policy requirements or lose the right to sue under the policy. Because a plaintiff's judgment in such a suit would be paid out of the federal treasury, those requirements function as "conditions precedent to a waiver by the federal government of its sovereign immunity." Wagner v....