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July 7, 1999


The opinion of the court was delivered by: Ziegler, Chief Judge.


Pending before the court are the parties' cross motions (doc. nos. 34 and 38) for summary judgment pursuant to Rule 56(c) of the Federal Rules of Civil Procedure. Plaintiffs, Brookville Mining Equipment Corporation ("Brookville") and Miller Welding & Machine Company ("Miller"), sued defendant, Selective Insurance Company of America ("Selective"), alleging breach of contract, waiver, estoppel, bad faith and for a declaratory judgment arising out of Selective's denial of insurance benefits under a flood insurance contract between the parties. Defendants deny plaintiffs' allegations and assert that: (1) plaintiffs' claims are barred because they failed to file a timely signed and sworn proof of loss; (2) plaintiffs' properties are not in a Standard Flood Hazard Area ("SFHA"); and (3) the policies are void because of material misrepresentations. For the reasons discussed below, we will grant judgment in favor of Selective Insurance Company.


On July 19, 1996, between 6:00 and 7:00 A.M., flood waters encroached on both Brookville and Miller's properties. Plaintiffs contacted Becky Matson, an insurance agent with Matson Insurance Agency, and inquired whether they could procure flood insurance, explaining that flood waters had already reached the properties. Matson informed Brookville and Miller that she would attempt to procure such insurance.

Matson phoned Selective and spoke with Lori Paliana. Matson informed Paliana that flood waters had reached plaintiffs' properties earlier that morning. Paliana informed Matson that flood insurance could be obtained if plaintiffs' lender made a request that flood insurance be obtained immediately. According to Paliana, a lender's request would operate as a waiver of the usual 30 day waiting period for flood insurance. Matson then phoned plaintiffs' lender and mortgagee, S & T Bank. The lender agreed to issue a request stating that it required flood insurance for plaintiffs' loans. Matson again phoned Selective and informed the insurer that plaintiffs' lender required flood insurance coverage. Selective informed Matson that it could bind coverage effective July 19, 1996 at 12:01 A.M.

On July 23, 1996, Selective issued Standard Flood Insurance Policies ("SFIP") insuring plaintiffs' properties against flood losses effective July 19, 1996 at 12:01 A.M. On July 22, 1996, Brookville and Miller filed a notice of claim with Selective arising out of flood damage to their properties. Selective sent an adjuster, Simsol, to adjust the loss. On August 1 and 19, 1996, Simsol filed preliminary reports with Selective of the damage to plaintiffs' properties.

On December 12, 1996, Selective denied coverage for the loss claiming that the policy was not in effect until the applicable policy forms were completed and the premiums paid. As the process was not completed until the losses had occurred, Selective deemed the loss to be a loss in progress. Plaintiffs filed suit against Selective claiming that defendant wrongfully denied coverage under the applicable policies.


A. Summary Judgment Standard

Summary judgment is appropriate when there are no genuine issues of material fact and the moving party 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). In considering a motion for summary judgment, we must examine the evidence in the light most favorable to the non-moving party and draw all reasonable inferences in favor of that party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). If the plaintiff fails to make a showing of the existence of an element essential to its case on which it bears the burden of proof at trial, summary judgment should be entered for the defendant. Cleveland v. Policy Mgmt. Sys. Corp., 526 U.S. 795, 119 S.Ct. 1597, 1603, 143 L.Ed.2d 966 (1999).

B. Law Governing the Standard Flood Insurance Policy

It is well established that federal common law governs the interpretation of the SFIP. Linder and Assocs., Inc. v. Aetna Cas. and Sur. Co., 166 F.3d 547, 550 (3d Cir. 1999) (citations omitted). "Accordingly, `neither the statutory nor decisional law of any particular state is applicable to the case at bar.'" Id. (quoting Sodowski v. National Flood Ins. Program, 834 F.2d 653, 655 (7th Cir. 1987)). Courts should interpret the SFIP utilizing standard insurance law principles, which instruct that the SFIP should be given its plain, unambiguous meaning. Id. Ambiguities should be construed in favor of the insured and against the insurer. Id. If the SFIP "is susceptible to two constructions, however, we will adopt the one more favorable to the insured." Id. (citing Aschenbrenner v. United States Fidelity & Guar. Co., 292 U.S. 80, 84-85, 54 S.Ct. 590, 78 L.Ed. 1137 (1934)).


A. The National Flood ...

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