Wagner v. Director, Fed. Emer. Management Agency

• Decision Date: 01 June 1987
• Docket Number: No. CV 85-4395-AAH(Tx),CV 85-4910-AAH(Tx),CV 85-6269-AAH(Tx) and CV 85-8230-AAH(Tx).,CV 85-4395-AAH(Tx)
• Citation: 658 F. Supp. 1530
• Parties: Christian WAGNER and Rosemarie Wagner, Plaintiffs, v. DIRECTOR, FEDERAL EMERGENCY MANAGEMENT AGENCY, Defendant. Ms. Dolphia BLOCKER, Mr. and Mrs. James Digby, Dr. and Mrs. William Frumovitz, Mr. and Mrs. Edward Gomoll, Mr. and Mrs. Brian Grazer, Ms. Eleanor Mirsky, Mr. Pernell Roberts and Ms. Kara Knack, Plaintiffs, v. DIRECTOR, FEDERAL EMERGENCY MANAGEMENT AGENCY, Defendant. Gerald BRESLAUER, Trustee of The Pacific Coast Highway Security Trust, and Robert Ferguson, Plaintiffs, v. DIRECTOR, FEDERAL EMERGENCY MANAGEMENT AGENCY, Defendant. Samuel and Carolyn BLACK, Stephen and Brigette Bosustow, Sumi Tatsui, and Anthony and Hedy Stute, Plaintiffs, v. DIRECTOR, FEDERAL EMERGENCY MANAGEMENT AGENCY, Defendant.
• Court: U.S. District Court — Central District of California

658 F. Supp. 1530

Christian WAGNER and Rosemarie Wagner, Plaintiffs, v. DIRECTOR, FEDERAL EMERGENCY MANAGEMENT AGENCY, Defendant.

Ms. Dolphia BLOCKER, Mr. and Mrs. James Digby, Dr. and Mrs. William Frumovitz, Mr. and Mrs. Edward Gomoll, Mr. and Mrs. Brian Grazer, Ms. Eleanor Mirsky, Mr. Pernell Roberts and Ms. Kara Knack, Plaintiffs, v. DIRECTOR, FEDERAL EMERGENCY MANAGEMENT AGENCY, Defendant.

Gerald BRESLAUER, Trustee of The Pacific Coast Highway Security Trust, and Robert Ferguson, Plaintiffs, v. DIRECTOR, FEDERAL EMERGENCY MANAGEMENT AGENCY, Defendant.

Samuel and Carolyn BLACK, Stephen and Brigette Bosustow, Sumi Tatsui, and Anthony and Hedy Stute, Plaintiffs, v. DIRECTOR, FEDERAL EMERGENCY MANAGEMENT AGENCY, Defendant.

Nos. CV 85-4395-AAH(Tx), CV 85-4910-AAH(Tx), CV 85-6269-AAH(Tx) and CV 85-8230-AAH(Tx).

United States District Court, C.D. California.

May 1, 1987.

As Amended June 1, 1987 Nunc Pro Tunc.

Lillick, McHose & Charles, Los Angeles, Cal. by Kenneth R. Chiate, Deborah J. Goldman, and John R. Caderette, Jr., for plaintiffs.

Robert C. Bonner, U.S. Atty., Frederick M. Brosio, Asst. U.S. Atty., Chief, Civ. Div., and Evelyn M. Matteucci, Asst. U.S. Atty., for defendant.

DECISION

STATEMENT OF MATERIAL FACTS WITHOUT SUBSTANTIAL CONTROVERSY AND CONCLUSIONS OF LAW

HAUK, Senior District Judge.

I. INTRODUCTION

This is an action for breach of an insurance contract arising out of the denial of plaintiffs' claims for damage to their homes covered by a flood insurance policy administered by the Federal Emergency Management Agency ("FEMA"), an agency of the Federal Government.¹ Plaintiffs here are homeowners in the Big Rock Mesa area of Malibu, Los Angeles County, California. Plaintiffs allege that they have suffered substantial damage to their homes and underlying properties due to a landslide which was reactivated and particularly aggravated by severe storms and flooding — a virtual deluge — during the winter of 1982-1983. Plaintiffs were insured against all "direct physical loss by flood" to their dwellings and personal property under the Standard Flood Insurance Policy ("SFIP") issued to each of them pursuant to the National Flood Insurance Program ("NFIP").²

Plaintiffs assert that the damage to their properties from the Big Rock Mesa landslide are losses covered by the SFIP and that FEMA is thereby liable to them for the maximum limits of their respective policies. Although separate actions to recover under the SFIP were initially filed by four groups of plaintiffs in Federal District Court, the above-captioned suits have now been consolidated here for resolution.³

Plaintiffs and defendant, Director of FEMA,⁴ have filed cross-motions for summary judgment to determine an issue of law; namely, whether the damage to plaintiffs' homes is a covered risk within the SFIP's definition of "flood", or, as defendant asserts, the damage is the result of a peril expressly and unambiguously excluded by the terms of the SFIP so that no liability under the policy exists.

II. SUMMARY OF THE PARTIES' ARGUMENTS

In making their claims, plaintiffs first posit that one of the SFIP's alternative definitions of "flood" requiring that there be "a partial or complete inundation of normally dry land areas" was satisfied when extraordinary rainfall during the winter of 1982-1983, combined with effluent from local septic systems, infiltrated and thus inundated the normally dry subsurface beneath plaintiffs' homes.

Plaintiffs next argue that although due to the contributory effect of septic system effluent the rain deluge was not the sole cause of the flood, it is enough for recovery if the rainfall was at the very least a concurrent proximate cause of the damage. Also, under the same principles of concurrent proximate causation, the flood rather than the landslide was the proximate and therefore, immediate cause of damage. The flood "set in motion" the catastrophic events, including the landslide and its effects which, having been proximately caused by the flood, are within the SFIP's coverage.

Defendant FEMA, on the other hand, contends that the definition of "flood" set forth in the SFIP requires that plaintiffs' homes, and not merely the subsurfaces beneath them, must be completely or partially inundated by water or mudflow.

Moreover, FEMA argues that the SFIP provides that the claimed loss must be the "direct" result of flood. In other words, common law principles of proximate cause, no matter how broadly construed, are not applicable to the SFIP which is governed only by federal statute and administrative regulations as interpreted by Federal Courts. FEMA further asserts that in the instant circumstances of the Big Rock Mesa disaster the direct cause of the damage was a landslide, not a flood. Because, adds FEMA, under a strict interpretation of the SFIP coverage is excluded for all losses caused by earth movement, including landslides, plaintiffs' losses do not fall within the SFIP's ambit.

FEMA goes on to argue that even if the damage to plaintiffs' homes is determined to be within the SFIP's scope of coverage, plaintiffs' claims are barred because they failed to comply with the express (albeit oppressive) terms of the policy which require that a sworn proof of loss be submitted to FEMA within 60 days of the loss. Finally, because 42 U.S.C. Section 4072 requires that a claimant alleging breach of the SFIP bring suit in Federal District Court within one year from the date that denial of the claim was mailed by FEMA, FEMA asserts that the suits by four of the plaintiffs are time-barred.⁵

In response, plaintiffs argue that FEMA is equitably estopped from now raising plaintiffs' failure to submit proofs of loss within 60 days; and that the one-year limitation posed as a so-called "time bar" against four of the plaintiffs' claims was tolled by subsequent letters of denial mailed by FEMA.

III. STATEMENT OF MATERIAL FACTS WITHOUT SUBSTANTIAL CONTROVERSY

1. The individual plaintiff homeowners here are Christian and Rosemarie Wagner, Dolphia Blocker, James and Mary Digby, William and Adrian Frumovitz, Edward Gomoll, Brian and Debra Grazer, Eleanor Mirsky, Pernell Roberts, Kara Knack, Gerald Breslauer, as Trustee of the Pacific Coast Highway Security Trust, Robert Ferguson, Samuel and Carolyn Black, Stephen and Brigette Bosustow, Sumi Tatsui, and Anthony and Hedy Stute.

2. All of the plaintiffs obtained written contracts for flood insurance issued pursuant to the NFIP and administered by defendant, Director of FEMA.

3. These written insurance contracts are the SFIP's which cover plaintiffs' designated real and personal property against all "direct loss by flood" to the extent of the coverage limits of each individual plaintiff's policy.⁶

4. In September of 1983 the existence of the Big Rock Mesa flood-induced landslide was announced to the public, including plaintiffs, by officials of Los Angeles County.

5. Although the landslide is ancient in its origins, the reactivation of the landslide in the winter of 1982-1983 was proximately caused by an unusual flood, resulting in a higher than normal level of ground water within the perimeter of the slide surface area.

6. According to the uncontradicted deposition testimony of expert geologists, both the unusually heavy and inundating rainfall during the winter of 1982-1983, and the septic system effluent from defective septic equipment, proximately caused and contributed to the catastrophic buildup of ground water in the area resulting in the subsequent destabilization of the ground under plaintiffs' homes and the damage it caused to them.

7. Plaintiffs' homes were significantly and proximately damaged each in an amount greatly in excess of the limits of their respective policies (see n. 6, supra) by the reactivated landslide induced by the unusual, inundating flood, even though no floodwater or mudflow actually entered the surfaces of plaintiffs' homes, residences or dwelling places.

IV. CONCLUSIONS OF LAW AND ANALYSIS

1. Jurisdiction

This Court has subject matter jurisdiction over actions for breach of a National Flood Insurance contract, such as the SFIP here, issued pursuant to the National Flood Insurance Act of 1968. 42 U.S.C. § 4072. FEMA is an agency of the Federal Government and the Government's waiver of immunity under 42 U.S.C. § 4072 is limited to actions based on the flood insurance policy itself.

2. Summary Judgment

Disposition of an action by summary judgment is appropriate when there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law in the context of the undisputed material facts. Fed.R.Civ.P. 56(c); Aronsen v. Crown Zellerbach, 662 F.2d 584, 591 (9th Cir.1981). The facts must be viewed and inferences drawn in the manner most favorable to the non-moving party. Retail Clerks Union Local 648, AFL-CIO v. Hub Pharmacy, Inc., 707 F.2d 1030, 1033 (9th Cir.1983).

Because in this case the material facts upon which the parties respectively claim and deny liability under the insurance policy are not in dispute, and because the existence of FEMA's liability depends solely upon a construction of the policy, the question of liability is one of law, and not fact, for the Court to decide. Atlas Pallet, Inc. v. Gallagher, 725 F.2d 131, 134 (1st Cir.1984); Edison v. Reliable Life Insurance Co., 664 F.2d 1130, 1131 (9th Cir. 1981).

3. Federal Law Governs The Construction of the SFIP

Plaintiffs and defendant disagree on what the legal effect is of the wording in the SFIP which provides that FEMA will "Insure you and your legal representatives against all `Direct Physical Loss By Flood' to the insured property as defined in the `Definitions Section' of this Agreement ..." SFIP preamble, 44 C.F.R. § 61 App. A(1). The crux of this dispute hinges on what legal theory of causation should apply to determine whether or not the operative occurence of a flood, which in turn causes higher than normal groundwater...