Sodowski v. National Flood Ins. Program Federal Emergency Management Agency

• Decision Date: 25 November 1987
• Docket Number: No. 86-2227,86-2227
• Citation: 834 F.2d 653
• Parties: Joseph SODOWSKI, Plaintiff-Appellant, v. NATIONAL FLOOD INSURANCE PROGRAM OF the FEDERAL EMERGENCY MANAGEMENT AGENCY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 653

834 F.2d 653

Joseph SODOWSKI, Plaintiff-Appellant, v. NATIONAL FLOOD INSURANCE PROGRAM OF the FEDERAL EMERGENCY MANAGEMENT AGENCY, Defendant-Appellee.

No. 86-2227.

United States Court of Appeals Seventh Circuit.

Argued Jan. 13, 1987.

Decided Nov. 25, 1987.

Bruce Thiemann, Peoria, Ill., for plaintiff-appellant.

L. Lee Smith, Asst. U.S. Atty., Peoria, Ill., Gerald D. Fines, U.S. Atty., Springfield, Ill., for defendant-appellee.

Before POSNER and COFFEY, Circuit Judges, and GRANT, Senior District Judge. ^*

COFFEY, Circuit Judge.

Joseph Sodowski, plaintiff-appellant, appeals from the district court's order denying recovery for the structural damages his dwelling sustained during a flood in December of 1982. Sodowski based his claim for recovery on the Standard Flood Insurance Policy (SFI Policy) issued pursuant to the National Flood Insurance Program (NFIP) administered by the Federal Emergency Management Agency (FEMA). The district court denied coverage finding that the dwelling's structural damage was caused by soil settlement and thus excluded under the SFI Policy's earth movement exclusion. We affirm.

I

The facts material to this case are undisputed. Sodowski owns a home on the west bank of the Illinois River, in Peoria County, Illinois. He purchased the dwelling in the early 1950's. During the late 1960's, Sodowski built an addition to his house (away from the river). The older portion of the house contained a master bedroom, bathroom, living room, kitchen, a basement, and a crawlspace.

In December, 1982, when the Illinois River overflowed its banks, the water inundated Sodowski's basement, crawlspace, and reached the first floor living area. ¹ The house sustained substantial structural damage and current and/or wave activity collapsed a wooden wall surrounding the crawlspace and basement. At the time of the December 1982 flood, Sodowski was insured under a SFI Policy issued by the NFIP pursuant to the National Flood Insurance Act of 1968, 42 U.S.C. Sec. 4001 et seq., and administered by the FEMA.

Sodowski's SFI Policy insured his property against all "Direct Loss By 'Flood.' " The policy defines "flood:"

"Wherever in this policy the term 'flood' occurs, it shall be held to mean:

A. A general and temporary condition of partial or complete inundation of normally dry land areas from:

1. The overflow of inland or tidal waters.

2. The unusual and rapid accumulation or runoff of surface waters from any source.

3. Mudslide (i.e., mudflow), a river or flow of liquid mud proximately caused by flooding as defined in subparagraph A-2 above or by the accumulation of water under the ground.

B. The collapse or subsidence of land along the shore of a lake or other body of water as a result of erosion or undermining caused by waves or currents of water exceeding the anticipated cyclical levels."

The policy also provides that: "The Insurer shall not be liable for loss: by ... earthquake, landslide or any other earth movement except such mudslide or erosion as is covered under the peril of flood."

After the flood, Sodowski filed two proof of loss claims with the NFIP claiming: (1) structural damage to the dwelling in the amount of $50,000; and (2) damage to the contents of his home in the amount of $2,066.15. FEMA paid Sodowski's claim for the damaged contents, but denied coverage for the structural damage asserting that these damages were excluded under the earth movement exclusion of the policy. Sodowski filed suit against FEMA and after a trial to the court the trial judge entered judgment in favor of Sodowski in the amount of $3,000 for the value of the wooden wall, but found that the structural damage to Sodowski's dwelling was caused by "settlement of the ground beneath the house" and was thus excluded under the terms of the SFI Policy.

Appellant raises two issues on appeal: (1) whether the SFI Policy provides coverage for structural damage to a dwelling caused by soil settlement which was itself caused by flooding, and (2) whether he is entitled to prejudgment interest on his damages.

II

The relevant facts are undisputed; thus, the issue before us is whether the trial court properly interpreted the SFI Policy to exclude coverage for structural damages directly caused by soil settlement, itself a result of the flood. This question is one of first impression in this circuit, and we join the Fifth Circuit's holding in 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), that the SFI Policy does not provide coverage for damages caused by any earth movements other than those expressed exceptions set forth in the earth movement exclusion.

We note initially that the district court found that the structural damage to Sodowski's house was caused "by settlement of the ground beneath the house, caused by a change in the consistency of the soil when the flood waters surrounded the foundation during the December 1982 flood." The appellant concedes "that earth movement was the nearest or immediate cause" of his loss but asserts that because the flood waters caused the change in the soil's consistency, the flooding must be a proximate cause of the structural damage. Sodowski contends that the SFI Policy is ambiguous because under one construction of the policy language, damages resulting from soil settlement, itself caused by flooding, are not covered pursuant to the earth movement exclusion, but under another, more "reasonable construction" of the policy language, these same damages would be covered as a direct loss by flood. Sodowski argues that because the insurance policy is ambiguous, we should construe the language strictly against the insurer and liberally in the insured's interest; therefore, appellant asserts that the SFI Policy covers the structural damages to his dwelling caused by earth movement, itself caused by an inundation of flood water.

Federal common law controls the interpretation of insurance policies issued pursuant to the National Flood Insurance Program (NFIP). Hanover Building Materials v. Guiffrida, 748 F.2d 1011, 1013 (5th Cir.1984); Atlas Pallet, Inc. v. Gallagher, 725 F.2d 131, 135 (1st Cir.1984); West v. Harris, 573 F.2d 873, 881 (5th Cir.1978), cert. denied, 440 U.S. 946, 99 S.Ct. 1424, 59 L.Ed.2d 635 (1979); accord Meister Bros. Inc. v. Macy, 674 F.2d 1174, 1175 fn. 2 (7th Cir.1982). Courts applying federal common law to flood insurance policies have recognized that "Congress did not intend to abrogate standard insurance law principles" by enacting the NFIP. Atlas Pallet, Inc., 725 F.2d at 135; Drewett v. Aetna Casualty & Surety Co., 539 F.2d 496 (5th Cir.1976). Because "neither the statutory nor decisional law of any particular state is applicable to the case at bar, we are [thus] free to apply the 'traditional common law technique of decision by drawing upon standard insurance principals.' " Atlas Pallet Inc., 725 F.2d at 135 (quoting West v. Harris, 573 F.2d at 881); see also Brazil v. Guiffrida, 763 F.2d 1072, 1075 (9th Cir.1985). Because the interpretation given to an insurance policy is a question of law, our review is de novo. Atlas Pallet, Inc., 725 F.2d at 134.

Appellant directs our attention to Aschenbrenner v. United States Fidelity & Guaranty Co., 292 U.S. 80, 54 S.Ct. 590, 78 L.Ed. 1137 (1934), for the insurance principles controlling the present dispute. That Court stated:

"[W]e are interpreting a contract and are concerned only with the sense in which its words were used.... The phraseology of contracts of insurance is that chosen by the insurer and the contract in fixed form is tendered to the prospective policy holder who is often without technical training, and who rarely accepts it with a lawyer at his elbow. So if its language is reasonably open to two constructions that more favorable to the insured will be adopted, ... and unless it is obvious that the words are intended to be used in their technical connotation they will be given the meaning that common speech imports."

Aschenbrenner, 292 U.S. at 84-85, 54 S.Ct. at 592-93 (citations omitted). However, " 'if the language of a policy is clear and unambiguous, it should be accorded its natural meaning.' " Hanover Building Materials, Inc. v. Guiffrida, 748 F.2d at 1013 (quoting Landress Auto Wrecking Co. Inc. v. United States Fidelity & Guaranty Co., 696 F.2d 1290, 1292 (11th Cir.1983)). Applying these principles, we initially determine whether the language found in the flood insurance policy is "reasonably open to two constructions."

Sodowski's flood insurance policy provides that the defendant "shall not be liable for loss: by ... earthquake, landslide or any other earth movement except such mudslide or erosion as is covered under the peril of flood." (Emphasis added.) In unambiguous terms, the policy excludes from coverage losses caused by any earth movement except mudslides or erosion. ² The language in the SFI Policy does not expressly except losses caused by soil settlement resulting from flooding from the earth movement exclusion. The language is unambiguous in its recitation that only losses caused by mudslides or erosion are covered. Sodowski acknowledges that the structural damage to his dwelling was caused by ground settlement but nonetheless argues for coverage because the settlement of the soil was caused by the flood. We sympathize with the claimant, but Mr. Sodowski is in error, for a reading of the policy allows only one reasonable construction, namely, that the policy clearly excludes damages resulting from any earth movement other than those caused by a mudslide or erosion. We agree with the district court that "[t]he settlement [of the soil or ground] which caused the damage to the house is a type of earth movement which is excluded from the coverage of the insurance policy" because it is neither a mudslide nor erosion. ³ Therefore, we hold that Sodowski is not entitled to recover for the structural damage caused by...