Tr. at 129. Reigner's impression from a conversation he had with
an Omaha adjuster was that Omaha would not pay any more on the
claim; Reigner suggested that Mahood speak to counsel. Tr. at
49. On April 17, 2000, Mahood filed this lawsuit. During its
pendency, a National Flood Insurance Program ("NFIP") General
Adjuster performed a reinspection of the loss.
50. Sometime between February 20, 2001 and March 6, 2001,
counsel for plaintiff delivered to Omaha*fn3 invoices from 18th
Century Restorations, McErlean Plumbing & Heating, H & S
Electric, Michael Byrne Painting, and Val Jermacans, to document
the cost for repairs actually made to the Mahood home. Counsel
for plaintiff also provided Omaha with an estimate from
Eldredge-Ferrero for cleaning silt from the property.
This court has subject matter jurisdiction to decide the issues
presented. See 42 U.S.C.A. § 4072 (West 1994 & Supp. 2001);
Van Holt v. Liberty Mutual Fire Ins. Co., 163 F.3d 161, 166-67
(3d Cir. 1998) (federal district court has subject matter
jurisdiction over SFIP-based lawsuit). Omaha is a "Write Your
Own" ("WYO") flood insurance carrier permitted to issue flood
insurance backed by the Federal Emergency Management Agency
("FEMA"). See 44 C.F.R. § 62.23 (1998). In this capacity, Omaha
is a fiscal agent of the United States and a proper defendant in
this action. See 42 U.S.C.A. § 4071(a)(1) (West 1994 & Supp.
2001); Van Holt, 163 F.3d at 165.
Mahood's flood insurance policy incorporates the flood
insurance regulations issued by the FEMA and the National Flood
Insurance Act of 1968, as amended, 42 U.S.C. § 4001, et seq.;
federal common law governs the policy's interpretation. See
44 C.F.R. Pt. 61 App. A(1) Art. 11 (1998); Linder & Assoc., Inc. v.
Aetna Casualty and Surety Co., 166 F.3d 547, 550 (3d Cir. 1999)
(denying SFIP coverage for damage to lower level of building
because it was a basement as defined in the policy and the policy
does not cover flood damage to basements). The policy must be
strictly construed because it is, in effect, a suit against the
government. See Kennedy v. CNA Ins. Co., 969 F. Supp. 931, 934
(D.N.J. 1997), aff'd w/o opn, 156 F.3d 1225 (3d Cir. 1998)
(plaintiffs' failure to submit proof of loss to insurer bars
claim for damages).
The state-law based claims having been dismissed, there are two
main issues: (1) whether Mahood is barred from recovering under
the policy because he did not document his repair claims prior to
commencement of this lawsuit; and if he is not barred, (2)
whether Mahood is entitled to additional money from Omaha under
The policy insures against "direct physical loss by or from
flood." 44 C.F.R. Pt. 61, App. A(1) (1998). A "direct physical
loss by or from flood" is defined as "any loss in the nature of
actual loss or physical damage, evidenced by physical changes, to
the insured property (building or personal property) which is
directly and proximately caused by a flood (as defined in this
policy)." 44 C.F.R. Pt. 61 App. A(1), Art. 2 (1998). The insured
is covered to the
lesser of the actual cash value (not including antique value) or
the amount it would cost to repair or replace the property with
"material of like kind and quality within a reasonable time after
the loss." 44 C.F.R. Pt. 61 App. A(1) (1998). "Actual cash value"
is "the replacement cost of an insured item of property at the
time of loss, less the value of physical depreciation as to the
item damaged." 44 C.F.R. Pt. 61 App. A(1), Art. 2 (1998).
However, when the total amount of insurance exceeds 80% of the
full replacement cost of the home or the policy provides the
maximum amount of coverage available, the policy is extended to
include "the full cost of repair or replacement (without
deduction for depreciation)." 44 C.F.R. Pt. 61 App. A(1), Art. 8A
(1998). "When the full cost of repair or replacement is more than
$1,000 or more than 5 percent of the whole amount of the
insurance applicable . . . [Omaha] will not be liable for any
loss under subparagraph A. . . . unless and until actual repair
or replacement is completed." 44 C.F.R. Pt. 61 App. A(1), Art. 8D
Under the policy, when an insured suffers a covered flood loss,
among other things, the insured must: (1) notify its insurer in
writing; (2) separate the damaged from the undamaged property so
that it may be examined by the insurer; (3) send the insurer a
proof of loss within 60 days of the loss; (4) cooperate with the
insurer's adjuster in the investigation of the claim; and (5)
document the loss with bills, receipts and related documents.
44 C.F.R. Pt. 61, App. A(1), Art. 9J 1-5 (1998). The proof of loss
must contain the following information: (1) the date and time of
the loss; (2) a brief explanation of how the loss occurred; (3)
the insured's interest in the damaged property and if applicable,
the interest of any others in the property; (4) the actual cash
value or replacement cost of each damaged insured item and the
amount of damage sustained; (5) names of mortgagees or any other
lien-holder;*fn4 and (6) the amount claimed under the policy,
including the policy limits and the lesser of the cost to repair
or replace the damaged property. 44 C.F.R. Pt. 61, App. A(1),
Art. 9J 3 (1998).
There is no contention that Mahood failed to notify Omaha of
the loss or to submit timely a signed Proof of Loss meeting the
policy's requirements. Omaha objects to the filing of the lawsuit
on the basis that Mahood failed to submit requested documentation
of the completed repairs. Article 9J5 requires an insured to
"[d]ocument the loss with all bills, receipts, and related
documents for the amount being claimed." 44 C.F.R. Pt. 61, App.
A(1), Art. 9J5 (1998).
Article 9K1 states that if Omaha
specifically request[s] it, in writing, [Mahood] may
be required to furnish [Omaha] with a complete
inventory of the destroyed, damaged and undamaged
property, including details as to quantities, costs,
actual cash values or replacement cost (whichever is
appropriate), amounts of loss claimed, and any
written plans and specifications for repair of the
damaged property which [Mahood] can reasonably make
available to [Omaha].
44 C.F.R. Pt. 61, App. A(1), Art. 9K1 (1998). Read together,
Omaha argues, these two provisions require the insurer to
document a flood loss, maintain those records, and supply them to
the SFIP-insurer if such documentation is specifically requested.
By letter dated March 14, 2000, after Omaha had already paid
Mahood $72,332.39 for his first proof of loss, Omaha requested
documentation from Mahood regarding the repair costs for painting
the ceilings and replacing the living room floor joists.*fn5 The
letter also expressed Omaha's willingness to discuss the claim or
to consider any additional documentation supporting Mahood's
demand. Because Mahood did not comply with this request, Omaha
argues that Mahood is precluded from initiating this litigation.
Under Article 9R, an insured may not sue the insurer "to recover
money under th[e] policy unless [the insured] has complied with
all the requirements of th[e] policy." 44 C.F.R. Pt. 61, App.
A(1), Art. 9R (1998).
There is no dispute that Mahood chose to commence a lawsuit
against Omaha instead of complying with Omaha's request for
additional documentation.*fn6 However, nowhere in the policy
does it state that an insured must supply invoices, cancelled
checks, or other documentation proving the repairs were actually
completed on the insured property or their cost. Article 9K1
requires, if specifically requested, "a complete inventory of the
destroyed, damaged and undamaged property," and "any written
plans and specifications for repair," not documentation of
repairs actually completed. Article 8D states that when the full
cost of repairs exceeds a certain amount (which the repairs here
do), the insurer is not liable until they are complete, but it
does not require the insured to submit any documentation proving
the repairs are complete or what they cost. Article J5 requires
documentation of "the loss," not the repairs performed, and does
not require submission of the documentation. See Burns v. FEMA,
84 F. Supp.2d 839, 846 (S.D.Tx. 2000) (SFIP-insured was not
required to supply "bills, receipts and related documents" absent
a written request to do so; Article 9J5 is not linked to the
60-day time limit for submission of claims).
Strict construction of the policy is required, but the
above-cited provisions cannot reasonably be construed in
accordance with Omaha's interpretation.*fn7 Mahood
had one year from the denial of his second proof of loss to
commence a lawsuit.*fn8 It would have been desirable to adjust
the loss claim with Omaha before commencing this lawsuit, but
Article 9R does not preclude its commencement. An inventory of
damaged and undamaged property and plans for repair had to be
submitted on request, but documents proving actual repairs were
not expressly requested by Omaha nor is their submission required
by the policy.
The SFIP employs a variety of entirely unambiguous
phrases when it imposes a duty on an insured to send
[its] insurer various materials, as opposed to a duty
to simply generate or maintain those materials. For
example, the insured must "notify" [its insurer] of
the loss [Art. 9J1]; must "send" [its insurer] a
Proof of Loss [Art. 9J3]; and must "furnish" [its
insurer] with various information [Art. 9J3 a-i].
Burns, 84 F. Supp.2d at 846. If Articles 9J5 or 8D were meant to
require an insured to send Omaha "bills, receipts, and related
documents" when "actual repair or replacement is completed," they
would have employed a word such as "notify," "furnish," or
"send." See id. Further, Article 9K1, requiring certain
documentation upon request of the insurer, would be redundant if,
as Omaha suggests, Article 9J5 were read to require "bills,
receipts, and related documents" to be sent to it. See id.
Mahood is entitled to reimbursement for actual repairs covered by
the policy to the extent he had proven their cost exceeds the
amount Omaha has already paid him.
Amount Due Under The Policy
Mahood is entitled to recover the $9,721.15 Omaha deducted for
depreciation. The policy coverage exceeds eighty percent of the
full replacement cost of the Mahood home,*fn9 and provides the
maximum amount of coverage allowed, so no depreciation should
have been deducted. See 44 C.F.R. Pt. 61, App. A(1), Art. 8A
(1998). Omaha's withholding this amount and its refusal to comply
with Mahood's request for recovery of the depreciation deduction
unless he supplied "paid invoices and cancelled checks for the
repairs" is contrary to the express terms of the policy; Omaha
should not have made the deduction.
Mahood might have been entitled to more than the $83,053.54
(minus the $1,000 deductible) at which Simsol valued his flood
loss but there has been a failure of proof in this regard.
Neither party submitted the Simsol adjustment,*fn10 nor was a
witness called to explain how Mahood's claim was adjusted by
Simsol or what the $83,053.54 covered. The court cannot determine
whether Simsol's adjustment was unreasonable.
David Ozeroff's estimate of Mahood's flood loss included items
not covered by the policy and was clearly excessive; it cannot be
relied on for an accurate evaluation of the covered loss.
includes a $80,000.00 painting estimate from David Ryder; the
painting was done by another company for $53,676.00 less than
that. The Ozeroff estimate of the flood damages should at least
have been reduced from $241,569.00 to $187,893.00 (subtracting
$53,676.00, the difference between David Ryder's $80,376.00
painting estimate, included in Ozeroff's estimate, and the
$26,700.00 actually paid by Mahood for painting). The only way
the court could determine what portion (if any) of the Ozeroff
estimate should have been paid would have been to compare it with
the Simsol adjustment on which the Omaha payment was based.
Without such a comparison, there is no evidence Mahood was not
claiming duplicative damages because there is no evidence of the
items covered by the Simsol adjustment.
Alternatively, the court could rely, in part, on Sessa's
invoices for 18th Century to determine whether Mahood is entitled
to recover more than the amount received; however, at least a
portion of the $137,817.00 Mahood paid Sessa was for repairs
unrelated to the flood. For example, all of the living room floor
joists were replaced, but not all had been flood damaged; some
had just deteriorated with age.*fn11 In addition, "replac[ing]
the joist system" in the powder room, was designated as an
"upgrade" rather than a simple flood repair in Sessa's
estimate.*fn12 Sessa billed Mahood $7,368.00 for "living room
plaster (new walls)," but it is unclear whether the $7,368.00
covered plastering up to the 39-inch water line or whether the
walls were replastered from floor to ceiling. The same is true
for an additional $3,035.00 in "plastering and patching" in other
unspecified areas of the house.
It is the plaintiff's burden to prove the amount he can
recover. The court may not guess the reasonable price for repairs
covered under the policy. Again, without plaintiff's proof that
there were completed repairs covered by the policy but not
covered by the Omaha payment, any award for completed repairs may
be duplicative. The same is also true for the invoices submitted
for work done by McErlean Plumbing & Heating, H & S Electric, Val
Jermacans, Charles Goebel & Sons, Inc., and Eldredge-Ferrero.
Plaintiff did not meet his burden of proof as to the additional
amount due him under the insurance policy; accordingly, he cannot
recover more than the amount already paid plus the amount that
had been deducted for depreciation.
III. CONCLUSIONS OF LAW
1. The court has jurisdiction over the subject matter and the
2. Venue lies in this district.
3. Mahood timely submitted his proof of loss statements to
4. Upon the denial of Mahood's second proof of loss statement
and request for recovery of the depreciation, Mahood could have
submitted supporting documentation, as requested, or invoking
Article 9N, submitted
the claim to a disinterested appraiser.
5. Mahood and Omaha have waived their rights to invoke Article
6. No policy provision expressly requires an insured to produce
documentation of actual repairs in order to recover the amount
expended on repairs.
7. Mahood's failure to submit supporting documentation or
invoke Article 9N does not preclude him from filing suit to
recover under the policy.
8. Omaha should not have deducted any depreciation from its
estimate of Mahood's claim.
9. Mahood is entitled to recovery of the $9,721.15 deducted as
10. Mahood failed to meet his burden of proof on the amount of
his covered flood loss in excess of the Simsol estimate (minus
the $1,000.00 deductible) which has already been paid except for
11. Judgment will be entered for Mahood in the amount of