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.
II. LEGAL STANDARD
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
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 Insurance Program
Before we reach the merits of plaintiffs' claims, background
information on the National Flood Insurance Program ("NFIP")
would be helpful. "Congress created the program, among other
things, to limit the damage caused by flood disasters through
prevention and protective measures, spread the risk of flood
damage among many private insurers and the federal government,
and make flood insurance available on reasonable terms and
conditions to those in need of it." Van Holt v. Liberty Mut.
Ins. Co., 163 F.3d 161, 165 (3d Cir. 1998) (citing
42 U.S.C. § 4001(a)) (quotations and footnote omitted). Congress provided
flood insurance coverage for those in flood prone areas who would
otherwise be unable to obtain insurance, and the program is
currently operated by the Federal Emergency Management Agency
("FEMA"). Van Holt, 163 F.3d at 165 n. 2 (citations omitted).
In 1983, FEMA, pursuant to its regulatory authority,
42 U.S.C. § 4081(a), created
the Write Your Own ("WYO") program, which authorizes private
insurance companies like Selective to issue flood insurance
policies to qualified companies and individuals.
44 C.F.R. § 62.23; Van Holt, 163 F.3d at 165. "FEMA fixes the terms and
conditions of the flood insurance policies, which, barring the
express written consent of the Federal Insurance Administrator,
must be issued without alteration as a Standard Flood Insurance
Policy (`SFIP')." Van Holt, 163 F.3d at 165-66 (citations
omitted). The WYO company is required to disburse claims and to
defend against claims, although FEMA reimburses the WYO company
for both the costs of paying insured's claims and defending
against disputed claims. Id. at 165. While WYO companies are
fiscal agents of the United States, they are not general agents
of the federal government. Id. FEMA ultimately bears the risk
under the NFIP. Id. at 166.
B. Proof of Loss Requirement
Selective seeks summary judgment arguing that plaintiffs failed
to file a timely signed and sworn proof of loss. The SFIP
provides, in relevant part, that: "[s]hould a flood loss occur to
the insured property, the Insured must . . . (3) Within 60 days
after the loss, send the Insurer a proof of loss, which is the
Insured's statement as to the amount it is claiming under the
policy signed and sworn to by the Insured[.]" SFIP, Art. 8(0),
Ex. 13, Pls.' App. to Mot. for Summ.J.*fn1 The proof of loss
requirement has been strictly construed by the courts and
operates as a bar where the insured fails to timely file a proof
As the provisions of an insurance policy issued
pursuant to a federal program must be strictly
construed and enforced, we hold that an insured's
failure to provide a complete, sworn proof of loss
statement, as required by the flood insurance policy,
relieves the federal insurer's obligation to pay what
otherwise might be a valid claim.
Gowland v. Aetna, 143 F.3d 951, 954 (5th Cir. 1998) (footnote
omitted); see also Forman v. Federal Emergency Mgmt. Agency,
138 F.3d 543, 545 (5th Cir. 1998); Wagner v. Director, Fed.
Emergency Mgmt. Agency, 847 F.2d 515, 518, 520 (9th Cir. 1988);
Phelps v. Federal Emergency Mgmt. Agency, 785 F.2d 13, 19 (1st
Cir. 1986); but see Meister Bros. Inc. v. Macy, 674 F.2d 1174,
1177 (7th Cir. 1982) (FEMA administrator estopped from asserting
as defense plaintiff's failure to file timely proof of loss).
The rationale for strictly adhering to the proof of loss
requirement is that federal funds are the source of payment for
insureds' claims. Gowland, 143 F.3d at 954 (citing Federal
Crop Ins. Corp. v. Merrill, 332 U.S. 380, 68 S.Ct. 1, 92 L.Ed.
Indeed, as noted by the Court of Appeals for the Third Circuit,
"regardless of whether FEMA or a WYO company issues a flood
insurance policy, the United States treasury funds pay off the
insureds' claims." Van Holt, 163 F.3d at 165. Therefore, it was
incumbent upon Brookville and Miller to comply with the
requirements of the SFIP and federal law and regulations
governing the flood insurance program. Accord Heckler v.
Community Health Servs. 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 the law").
It is beyond dispute that plaintiffs failed to file proof of
loss forms within sixty days of the loss.*fn2 Plaintiffs'
failure to timely file a proof of loss bars the claims.
Gowland, 143 F.3d at 954.
Brookville and Miller argue that Selective waived the proof of
loss requirement by failing to mention it as the basis for
denying the claim. The SFIP provides, in relevant part, that:
"[t]his [SFIP] cannot be amended nor can any of its provisions be
waived without the express written consent of the Federal
Insurance Administrator. No action the Insurer takes under the
terms of this policy can constitute a waiver of any of its
rights." SFIP, Art. 8(D), Ex. 13, Pls.' App. to Mot. for Summ.J.
(emphasis in original). Federal regulations also provide that:
"no provision of the [NFIP] shall be altered, varied, or waived
other than by the express written consent of the Administrator
through the issuance of an appropriate amendatory endorsement,
approved by the Administrator as to form and substance for
uniform use." 44 C.F.R. § 61.13(d). However, the SFIP also
[t]he Insurer may, at its option, waive the
requirement of the completion and filing of a proof
of loss in certain cases, in which event the Insured
will be required to sign and, at the Insurer's
option, swear to an adjuster's report of the loss
which includes information about the loss and the
damages needed by the Insurer in order to adjust the
SFIP, Art. 8(O)(7), Ex. 13, Pls.' App. to Mot. for Summ.J. In
this case, it is clear that the Federal Insurance Administrator
did not waive the proof of loss requirement. Without the express
written consent of the Federal Insurance Administrator, there can
be no waiver. See Gowland, 143 F.3d at 954; SFIP, Art. 8(D),
Ex. 13, Pls.' App. to Mot. for Summ.J.; 44 C.F.R. § 61.13(d).
Even assuming that a waiver occurred, the insureds were
required to sign and swear to an adjuster's report of the loss.
There is no evidence that either Brookville or Miller ever signed
an adjuster's report of loss. We will grant judgment in favor of
Selective on plaintiffs' waiver claim. See Gowland, 143 F.3d at
Plaintiffs claim that Selective is estopped from denying
coverage under the policy due to its failure to raise the proof
of loss defense when it denied the claim. The burden of proving
estoppel is on the party invoking the doctrine. United States v.
Asmar, 827 F.2d 907, 912 (3d Cir. 1987). To establish estoppel,
a litigant must show: (1) a misrepresentation by another party;
(2) which it reasonably relied upon; (3) to its detriment.
Heckler, 467 U.S. at 59, 104 S.Ct. 2218; see also Asmar, 827
F.2d at 912. Reasonable reliance means that "the party claiming
estoppel did not know nor should it have known that its
adversary's conduct was misleading." Heckler, 467 U.S. at 59,
104 S.Ct. 2218. The Court of Appeals imposes an additional burden
on government claimants "to establish some affirmative misconduct
on the part of the government officials." Fredericks v.
Commissioner of Internal Revenue, 126 F.3d 433, 438 (3d Cir.
1997) (citations omitted).
Plaintiffs cannot satisfy the element of reasonable reliance in
that they were presumed to know of the proof of loss requirement.
First, as noted above, the proof of loss requirement is plainly
set forth in the policy. Second, the SFIP is published in the
Code of Federal Regulations. See 44 C.F.R. § 61, App. A(2). As
noted by the Supreme Court, "those who deal with the Government
are expected to know the law and may not rely on the conduct of
Government agents contrary to law." Heckler, 467 U.S. at 63,
104 S.Ct. 2218 (footnote omitted). This principle is also
applicable when a claimant deals with a fiscal intermediary of
the government. Id. at 64, 104 S.Ct. 2218.
Third and finally, federal regulations also provide that
representations which are inconsistent with federal law are void:
The [SFIP] is authorized only under the terms and
conditions established by
Federal statute, the program's regulations, the
Administrator's interpretations and the express terms
of the policy itself. Accordingly, representations
regarding the extent and scope of coverage which are
not consistent with the National Flood Insurance Act
of 1968, as amended, or the Program's regulations,
are void, and the duly licensed property or casualty
agent acts for the insured and does not act as agent
for the Federal Government, the Federal Emergency
Management Agency, or the servicing agent.
44 C.F.R. § 61.5(e). Therefore, even if Selective failed to
inform Brookville and Miller of the proof of loss requirement,
this fact does not give rise to estoppel. Id. We shall grant
judgment for Selective on plaintiffs' estoppel claim.