Seahorse Oceanside Apartments Condo. Ass'n, Inc. v. Homesite Ins. Co.
| Decision Date | 12 March 2020 |
| Docket Number | CASE NO. 18-61755-CIV-ALTMAN/Hunt |
| Parties | SEAHORSE OCEANSIDE APARTMENTS CONDOMINIUM ASSOCIATION, INC., Plaintiff, v. HOMESITE INSURANCE COMPANY, Defendant. |
| Court | U.S. District Court — Southern District of Florida |
Elizabeth Brady Hitt, Ader & Hitt, P.A., Robert Alan Ader, Bank of America Tower, Miami, FL, for Plaintiff.
John Michael Pennekamp, Fowler White Burnett P.A., Miami, FL, William T. Treas, Pro Hac Vice, Nielsen & Treas, LLC, Metairie, LA, for Defendant.
AMENDED ORDER GRANTING THE DEFENDANT'S MOTION FOR SUMMARY JUDGMENT 1
THE DEFENDANT filed a Motion for Summary Judgment (the "Motion") [ECF No. 33], the Plaintiff responded (the "Response") [ECF No. 39], and the Defendant submitted its reply (the "Reply") [ECF No. 41]. The parties presented their oral arguments at a hearing on February 19, 2020. The Court has carefully considered the parties' briefs, the record, and the governing law and, for the following reasons, now GRANTS the Defendant's Motion.
In 1968, hoping to create a "unified national program for flood" insurance, Congress passed the National Flood Insurance Act ("the Act"), 42 U.S.C. § 4001, which placed the Federal Emergency Management Agency ("FEMA") in charge of the National Flood Insurance Program (the "NFIP"). See 42 U.S.C. § 4081. As relevant here, the Act authorizes FEMA to use private corporations—called Write-Your-Own insurance carriers ("WYO carriers")—to issue flood insurance policies. See 42 U.S.C. § 4081(a) (); 44 C.F.R. § 62.23(a) – (d) (). These policies—called Standard Flood Insurance Policies ("SFIP")—are themselves written by Congress, see 44 C.F.R. Part 61, App. A(1), and are underwritten by the United States Treasury, see 42 U.S.C. § 4017(a). In this way, the WYO carrier is a "fiscal agent" of the United States, see 42 U.S.C. § 4071(a)(1), and must remit all insurance premiums to FEMA, see 44 C.F.R. Part 62, App. A, Art. VIII(B). Because of this relationship between the WYO carrier and the government, the carrier may not amend or alter the terms of an SFIP without FEMA's express written consent. See 44 C.F.R. Part. 61, App. A(1), Art. 9(D).
Nevertheless, SFIPs are still contracts, and their construction is "governed by federal law, applying ‘standard insurance law principles.’ " Wright v. Dir., Fed. Emergency Mgmt. Agency , 913 F.2d 1566, 1571 (11th Cir. 1990) (cleaned up). "FEMA's administration of the insurance program does nothing to alter the status of [SFIPs] as insurance contracts." Id. at 1570. And, because SFIPs are issued all over the country, "SFIP contracts [must be] interpreted using principles of federal common law rather than state contract law." Newton v. Capital Assur. Co. , 245 F.3d 1306, 1309 (11th Cir. 2001).
But, because SFIP claims are paid directly from the U.S. Treasury, the interpretation of SFIP contracts differs from standard contract interpretation in one salient way: federal courts must "strictly construe" their terms and conditions. Office of Pers. Mgmt. v. Richmond , 496 U.S. 414, 432, 110 S.Ct. 2465, 110 L.Ed.2d 387 (1990). This principle finds its roots in the Appropriations Clause of the U.S. Constitution, which provides that "[n]o Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law." U.S. Const. art. I, § 9, cl. 7. The Clause was meant "to assure that public funds will be spent according to the letter of the difficult judgments reached by Congress as to the common good and not according to the individual favor of Government agents or the individual pleas of litigants." Richmond , 496 U.S. at 428, 110 S.Ct. 2465. It is for this reason "the duty of all courts to observe the conditions defined by Congress for charging the public treasury." Fed. Crop Ins. Corp. v. Merrill , 332 U.S. 380, 385, 68 S.Ct. 1, 92 L.Ed. 10 (1947). Thus, before a court may authorize the payment of an SFIP claim, "Strict Compliance with Policy Conditions" is required. Sanz v. U.S. Sec. Ins. Co. , 328 F.3d 1314, 1317 (11th Cir. 2003). "[N]ot even the ‘temptations of a hard case’ should cause courts to read the requirements of a federal insurance contract with ‘charitable laxity.’ " Id. at 1318 (quoting Merrill , 332 U.S. at 386, 68 S.Ct. 1 ).
The Defendant, Homesite Insurance Company ("Homesite"), is a WYO carrier authorized to administer SFIPs under the NFIP. See Homesite Insurance Company's Statement of Material Facts in Support of Summary Judgment (the "Homesite SOF") [ECF No. 34] ¶ 4.2 The Plaintiff, Seahorse Oceanside Apartments Condominium Association ("Seahorse"), is the "owner of a 19-unit beachfront condominium building" in Hollywood Beach, Florida. See Plaintiff's Statement of Material Facts (the "Seahorse SOF") [ECF No. 38 at 3–5] ¶ 1. On April 30, 2017, Seahorse either purchased or renewed a "Residential Condominium Building Association" SFIP from Homesite. See Resp. Ex. A (the "Contract") [ECF No. 39-1] at 1. By that Contract, Homesite promised to provide Seahorse with flood insurance through April 30, 2018. See id.3
On September 30, 2017, Hurricane Irma made landfall on the east coast of Florida. See Seahorse SOF ¶ 1. The storm caused catastrophic damage along Florida's entire shoreline, including in Hollywood Beach, where the Seahorse condominiums are located. See id. After the storm, Seahorse's property manager and its board members went out to view the property and made a preliminary assessment of the damages. See id. Seahorse then filed a claim with Homesite for benefits under the SFIP. See Homesite SOF ¶ 6. Homesite assigned an independent claim adjuster—James Dwyer of Colonial Claims—to handle the claim. See id. ¶ 7. After an inspection of the property, Dwyer prepared an estimate of the damages. See id. ¶ 8. Based on that estimate, Homesite paid Seahorse $13,419.61. See id. ¶ 9.
Unsatisfied with that payment, Seahorse hired Paul Orr of Nutek Engineering to conduct a formal assessment of the damages and to issue a report. See Homesite SOF ¶¶ 13–15; Seahorse SOF ¶¶ 1–2; see also Seahorse SOF Ex. 1 ("Orr Summary") [ECF No. 38-1]; Homesite SOF Ex. 4 ("Orr Expert Report") [ECF No. 33-4]. Orr determined "that the damage to the building's structural foundation and outside walls and concrete canopies was caused by Hurricane Irma's storm surge and flood waters." Seahorse SOF ¶ 2. He also opined that Irma "deposit[ed] 2 to 3 ft of sand on the Boardwalk in front of the Seahorse Building" and "raised the level of groundwater to the point where it weakened the soil['s] ability to hold weight[ ] and shifted the piling slightly to allow the building weight to crack the foundation." Orr Summary at 1.
Armed with the Orr Summary, the President of the Seahorse Condominium Association—Sharon Usinger—sent Homesite a claim for additional benefits under the SFIP. See Homesite SOF ¶ 15; Seahorse SOF ¶ 3. Homesite then hired Steven Pace, an engineer with Donan Engineering, to conduct an independent inspection of the property. See Seahorse SOF ¶ 4; Homesite SOF ¶ 12. Pace concluded that "the cracks to the foundation claimed by the Plaintiff were from spalled or missing concrete and corroded reinforcing steel, and the damages claimed to the front entrance awning were historical." Homesite SOF ¶ 12. Because of its engineer's conclusion that the damages were not caused by Irma, Homesite denied the claim on January 13, 2018. See Homesite SOF ¶ 15.
Hoping to salvage Seahorse's claim, Usinger then sent Pace and Homesite a 2016 report on the property, in which Orr had assessed the building's structural integrity. See Seahorse SOF ¶ 6. On March 30, 2018, after having reviewed the 2016 report, Homesite issued its second denial of coverage. See Homesite SOF ¶ 16; Seahorse SOF ¶ 8.
After this second denial, Seahorse hired a public adjuster—Brad Johnson of Brodsky and Associates—who estimated that the total cost to Seahorse of the Irma-related flood damage was $167,302.00. See Seahorse SOF ¶ 7; see also Seahorse SOF Ex. 6 (the "Johnson Report") [ECF No. 38-6]. Two days later, on April 27, 2018, Homesite denied coverage for a third (and final) time. See Homesite SOF ¶ 16; Seahorse SOF ¶ 8.
On July 23, 2018, Seahorse sent Homesite—via certified mail with return service requested—its sworn proof-of-loss statement. See Seahorse SOF ¶ 9. Seven days after that, on July 30, 2018, Seahorse filed this Complaint. See Complaint [ECF No. 1] at 1.
On August 20, 2018, Seahorse's proof of loss was returned as undeliverable because Seahorse had addressed it to the wrong zip code. See Seahorse SOF ¶ 11; see also Seahorse SOF Ex. 8 (the "First Proof of Loss") [ECF No. 38-8]; Seahorse SOF Ex. 9 [ECF No. 38-9] (). Later that same day, Seahorse re-mailed the proof of loss (this time with the correct zip code) to Homesite. See Seahorse SOF ¶ 12. That Second Proof of Loss was delivered to Homesite on August 25, 2018. See id.
Summary judgment is appropriate when there is "no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Celotex Corp. v. Catrett , 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ; FED. R. CIV. P. 56(a). In determining whether to grant summary judgment, the Court must consider "particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations (including those made for purposes of the motion only), admissions, interrogatory answers, or other materials." FED. R. CIV. P. 56(c). "By its very terms, this standard provides that the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported ...
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