Wright v. Allstate Ins. Co., 04-20493.

CourtUnited States Courts of Appeals. United States Court of Appeals (5th Circuit)
Citation415 F.3d 384
Docket NumberNo. 04-20493.,04-20493.
PartiesThomas WRIGHT, Dr., Plaintiff-Appellee-Cross-Appellant, v. ALLSTATE INSURANCE COMPANY, et al., Defendants, Allstate Insurance Company, Defendant-Appellant-Cross-Appellee.
Decision Date28 June 2005

Dax Faubus (argued), Faubus & Taft, Houston, TX, for Wright.

Gerald Joseph Nielsen (argued), William Truman Treas, Nielsen Law Firm, Metairie, LA, Doug Kevin Clemons, Eggleston & Briscoe, Houston, TX, for Allstate Ins. Co.

Appeals from the United States District Court for the Southern District of Texas.

Before GARWOOD, GARZA and BENAVIDES, Circuit Judges.

EMILIO M. GARZA, Circuit Judge:

This appeal stems from Allstate Insurance Company's ("Allstate") denial of Dr. Thomas Wright's claim against his flood insurance policy, issued under the auspices of the National Flood Insurance Act, 42 U.S.C. §§ 4001-4129 ("NFIA"). Allstate appeals the district court's application of equitable estoppel and award of costs and attorney's fees. Wright cross-appeals the court's dismissal of his state law claims against Allstate and an Allstate employee, Guy Chapman, as well as its denial of his motion to amend his complaint. Both parties appeal the damages award.


Wright purchased a Standard Flood Insurance Policy ("SFIP") to cover his Houston home. While Wright purchased his SFIP from Allstate, the insurance was provided through the National Flood Insurance Program ("NFIP"), which is administered by the Federal Emergency Management Agency ("FEMA") under the NFIA. The terms of SFIP policies are dictated by FEMA. 44 C.F.R. §§ 61.4(b), 61.13(d). Payments on SFIP claims come ultimately from the federal treasury. Gowland v. Aetna, 143 F.3d 951, 955 (5th Cir.1998). Allstate is a fiscal agent of the United States and, in the parlance of the NFIP, a Write Your Own insurer ("WYO"). 42 U.S.C. §§ 4071(a)(1), 4081(a).

After Tropical Storm Allison struck Houston in 2001, Wright filed a claim on his SFIP. Allstate dispatched claims adjuster Jack Gardner, of Pilot Catastrophe Services, to inspect Wright's home. Gardner estimated the covered damage at $12,580.04. Wright hired his own certified public insurance adjuster whose agent, Pat Wolford, prepared an estimate of $233,497.59. Because Wolford's estimate included damage unrelated to Wright's flood claim, Wolford later revised her estimate to $125,840.23. Wright did not provide Allstate with a copy of Wolford's revised estimate, although Allstate was apparently aware a second estimate had been prepared.

Negotiations between Wright's adjuster and Allstate's representatives over the correct loss amount were unfruitful. Wright refused to sign a Proof of Loss form ("POL"), required under FEMA regulations, containing Gardner's damage estimate. Instead, Wright eventually submitted his own POL to Allstate, listing "to be determined" in the spaces for cost of repairs, depreciation, cash value, and net amount claimed. Allstate responded with a letter, containing what purports to be employee Guy Chapman's signature,1 stating "we are accepting this proof in compliance with the policy conditions concerning the filing of a Proof of Loss." It continued, "we expressly reserve all of our rights and defenses in connection with the ascertainment as to the value and loss, if any, and we do not in any way in acknowledging receipt of this Proof of Loss waive any of the rights and defenses [we possess]." Wright's adjuster subsequently sent three letters to Allstate expressing an interest in negotiating a resolution. Allstate's response, received after the FEMA-established deadline for filing a POL had passed, rejected Wright's claim on the grounds that Wright failed (1) to cooperate as required by the terms of the policy and (2) to file an adequate POL within the FEMA-prescribed time frame.

Wright filed suit against Allstate and Chapman, alleging breach of contract, violations of the Texas Insurance Code and Deceptive Trade Practices Act, breach of the common law duty of good faith and fair dealing, fraud, and negligent misrepresentation. The district court dismissed all but the breach of contract claim against Allstate, holding that the state law claims were preempted by federal law. It also dismissed Wright's claims against Chapman. With regard to the breach of contract claim, the court held Allstate equitably estopped from asserting Wright's alleged failure to file an adequate POL as a basis for denial of his claim. Finding that Wright's evidence failed to show that all of the claimed damages were caused by flooding, the court awarded Wright $24,029, costs, and attorney's fees. Both parties appeal.


SFIP policies require that insureds asserting a claim file a POL within 60 days, subject to such extensions as FEMA may approve, listing "the actual cash value ... of each damaged item of insured property...[,] the amount of damage sustained" and "the amount ... claimed as due under the policy to cover the loss." 44 C.F.R. §§ 61.13(a), (d), (e) (1993); see also Forman v. Fed. Emergency Mgmt. Agency, 138 F.3d 543, 545 (5th Cir.1998). Courts have enforced this requirement strictly, holding that failure to timely file a POL complying with the regulatory requirements is a valid basis for denying an insured's claim. See, e.g., Neuser v. Hocker, 246 F.3d 508, 510 (6th Cir.2001) ("Our sister circuits have consistently held that FEMA's proof of loss requirement is to be strictly enforced."); Gowland, 143 F.3d 951. We have previously recognized that a POL lacking the requisite amounts claimed is insufficient to satisfy FEMA requirements. See Forman, 138 F.3d at 545.

The district court held, however, that Allstate was equitably estopped from claiming Wright's failure to file an adequate POL as a basis for denying his claim. Citing Allstate's letter "accepting this proof in compliance with the policy conditions concerning the filing of a Proof of Loss," the court found that Wright had proven the elements of equitable estoppel. On appeal, Allstate argues that (1) courts cannot apply equitable estoppel against a WYO on these facts and (2) Wright failed to establish the elements of equitable estoppel. We review the district court's application of equitable estoppel de novo. Ramirez v. City of San Antonio, 312 F.3d 178, 183 (5th Cir.2002).

We previously considered the application of equitable estoppel against a WYO in Gowland. 143 F.3d 951. There, the insureds, like Wright, argued that their WYO should be equitably estopped from asserting their failure to file a POL as a basis for denying their claim. Id. at 954. We declined to so hold, stating that:

Although the Gowland policy was written by Aetna, a private insurance company, payments made to that policy are a "direct charge on the public treasury." When federal funds are involved, the judiciary is powerless to uphold a claim of estoppel because such a holding would encroach upon the appropriation power granted exclusively to Congress by the Constitution.

Id. at 955 (quoting In re Estate of Lee, 812 F.2d 253, 256 (5th Cir.1987)). We went on to explain that "[w]hile this result may seem harsh.... [It] `does not reflect a callous outlook. It merely expresses the duty of all courts to observe the conditions defined by Congress for charging the public treasury.'" Id. (quoting Fed. Crop Ins. Corp. v. Merrill, 332 U.S. 380, 385, 68 S.Ct. 1, 92 L.Ed. 10 (1947)).

Here, as in Gowland, we find the doctrine of equitable estoppel inapplicable. The Supreme Court has made clear that "judicial use of the equitable doctrine of estoppel cannot grant respondent a money remedy that Congress has not authorized." Office of Pers. Mgmt. v. Richmond, 496 U.S. 414, 426, 110 S.Ct. 2465, 110 L.Ed.2d 387 (1990). Under the Appropriations Clause of the Constitution, "[m]oney may be paid out only through an appropriation made by law; in other words, the payment of money from the Treasury must be authorized by a statute." Id. at 424, 110 S.Ct. 2465. While Richmond dealt with a claim of estoppel based on the actions of a government employee, our holding in Gowland makes clear that the same principle applies to claims against WYOs, because SFIPs are ultimately supported by federal funds. Although the Supreme Court has not categorically held equitable estoppel unavailable in cases involving government funds, we find that such a claim is not viable in this case. Our holding is also consistent with the principle that

Whatever the form in which the Government functions, anyone entering into an arrangement with the Government takes the risk of having accurately ascertained that he who purports to act for the Government stays within the bounds of his authority. The scope of this authority may be explicitly defined by Congress or be limited by delegated legislation, properly exercised through the rule-making power. And this is so even though, as here, the agent himself may have been unaware of the limitations upon his authority.

Merrill, 332 U.S. at 384, 68 S.Ct. 1; see also Dawkins v. Witt, 318 F.3d 606, 611-12 (4th Cir.2003) (discussing the applicability of equitable estoppel in a claim against FEMA under the NFIA, and concluding that a FEMA adjuster's assurances that FEMA was not concerned with the sixty day POL deadline and FEMA's acceptance of an untimely POL were insufficient to invoke equitable estoppel under the standard established by the Supreme Court).2

Where federal funds are implicated, the person seeking those funds is obligated to familiarize himself with the legal requirements for receipt of such funds. See Heckler v. Cmty. Health Services of Crawford County, Inc., 467 U.S. 51, 63, 104 S.Ct. 2218, 81 L.Ed.2d 42 (1984) ("Protection of the public fisc requires that those who seek public funds act with scrupulous regard for the requirements of law.... [T]hose who deal with the Government are expected to know the law and may not rely on the conduct of Government agents contrary to law."). While Wright purchased his SFIP...

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