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Sutor v. Federal Emergency Management Agency

November 23, 2009

ROBERT M. SUTOR AND TERESA Y. SUTOR
v.
FEDERAL EMERGENCY MANAGEMENT AGENCY, LIBERTY MUTUAL FIRE INSURANCE COMPANY, AND M&N ADJUSTING, INC.
ROBERT M. SUTOR AND TERESA Y. SUTOR
v.
FEDERAL EMERGENCY MANAGEMENT AGENCY, LIBERTY MUTUAL FIRE INSURANCE COMPANY, AND PILOT CATASTROPHE SERVICES, INC.



The opinion of the court was delivered by: Surrick, J.

MEMORANDUM

Presently before the Court is Defendant Liberty Mutual Fire Insurance Company's Motion for Summary Judgment. (Doc. No. 33.)*fn1 For the following reasons, Liberty Mutual's Motion will be granted.

I. BACKGROUND

Plaintiffs Robert and Teresa Sutor own the property located at 126 South Bell Avenue, Yardley, Pennsylvania (the "Property"). Plaintiffs purchased two Standard Flood Insurance Policies ("SFIPs") from Liberty Mutual, one covering the Property in 2005 and one covering the Property in 2006. (See 2006 Compl., Ex. A. (hereinafter, the "2005 Policy"); 2007 Compl., Ex. A. (hereinafter, the "2006 Policy").) A flood damaged the Property in 2005, and a second flood damaged the Property in 2006. Plaintiffs have filed two actions against Liberty Mutual, one arising out of the 2005 flood and one arising out of the 2006 flood, alleging that Liberty Mutual breached the SFIPs by failing to adequately compensate Plaintiffs for the damage done to the Property by the floods.

Plaintiffs entered into the 2005 Policy in December of 2004. On April 3, 2005, the first flood damaged the Property. Liberty Mutual retained the services of an independent adjuster to evaluate the damage to the Property and to assist Plaintiffs in the preparation of a proof of loss. Plaintiffs submitted a proof of loss dated June 21, 2005, to Liberty Mutual requesting a net amount of $8105.89. (Doc. No. 34, Sutor Aff., Ex. A.) Since the proof of loss was filed after the 60 days allotted by the terms of the SFIP, Plaintiffs sought and obtained a waiver of the 60-day period from the Federal Insurance Administrator. (See Doc. No. 34, Sutor Aff., Ex. B.) The request for waiver states that the reasons for the delay was that "there have been foundation issues," that Plaintiffs had hired an engineer and were awaiting his report, and that Plaintiffs "finally agreed to sign [the proof of loss] pending... [the] report for possible supplemental damages." (Id.) Liberty Mutual tendered a total amount of $8959.01 to Plaintiffs for the losses sustained in the 2005 flood, and Plaintiffs accepted the amount. (See Doc. No. 33 at 3; see also id., Ex. A ¶ 6.) Plaintiffs contend, however, that when they submitted the proofs of loss to Liberty Mutual, they advised Liberty Mutual that they would be supplementing their claims. (See Doc. No. 34, Sutor Aff. ¶ 6.) At least some FEMA employees responsible for adjusting Plaintiffs' claim were apparently aware that Plaintiffs intended to supplement their claims. (See Doc. No. 34, Sutor Aff., Ex. B.)

Plaintiffs renewed their SFIP with Liberty Mutual in December 2005. On June 27, 2006, the second flood damaged the Property. Liberty Mutual again retained the services of an independent adjuster to evaluate the damage to the Property and to assist Plaintiffs in the preparation of a proof of loss. Plaintiffs submitted a proof of loss dated August 26, 2006, to Liberty Mutual, requesting a net amount of $5327.23. (Doc. No. 34, Sutor Aff., Ex. C.) Liberty Mutual tendered that amount to Plaintiffs, and Plaintiffs accepted it. (See Doc. No. 33 at 3; see also id., Ex. A ¶ 6.)

Plaintiffs filed no additional proofs of loss in connection with either flood. The supplemental claims for which Plaintiffs now seek compensation cover significant damage to the Property, from cracks in the basement's concrete floor to cracked drywall in the living room. (See Doc. No. 34, Sutor Aff., Ex. D.) It is not clear whether Plaintiffs informed Liberty Mutual of the nature or scope of the supplemental claims before filing the instant lawsuits. In fact, there is nothing in the record, other than the filing of the two lawsuits, that suggests that Plaintiffs ever requested compensation for the supplemental damages. The only request to Liberty Mutual that Plaintiffs have provided to the Court is a July 24, 2009, letter itemizing the supplemental claims and requesting $40,787.88 in additional compensation from Liberty Mutual.*fn2 (Id.)

II. STATUTORY FRAMEWORK

Congress passed the National Flood Insurance Act ("NFIA"), 42 U.S.C. §§ 4001, et seq., in 1968 with the goal of "limit[ing] the damage caused by flood disasters through prevention and protective measures, spread[ing] the risk of flood damage among many private insurers and the federal government, and mak[ing] flood insurance 'available on reasonable terms and conditions' to those in need of it." Van Holt v. Liberty Mutual Fire Ins. Co., 163 F.3d 161, 165 (3d Cir. 1998) (on rehearing) (quoting 42 U.S.C. § 4001(a)); see also 42 U.S.C. § 4001(b) ("Many factors have made it uneconomic for the private insurance industry alone to make flood insurance available to those in need of such protection on reasonable terms and conditions."). The NFIA established the National Flood Insurance Program (the "Program"), designated the Federal Emergency Management Agency as the agency responsible for administering the Program, and provided for funding from the U.S. Treasury. Palmieri v. Allstate Ins. Co., 445 F.3d 179, 183 (2d Cir. 2006); see also 42 U.S.C. § 4017 (directing FEMA to establish a National Flood Insurance Fund in the U.S. Treasury). The NFIA authorizes FEMA "to prescribe regulations establishing the general method or methods by which proved and approved claims for losses may be adjusted and paid for any damage to or loss of property which is covered by flood insurance made available under the provisions of this title." 42 U.S.C. § 4019. The regulatory scheme promulgated by FEMA is set out in the Code of Federal Regulations at 44 C.F.R. §§ 61.1 to 78.14.

FEMA initially administered the Program under a provision of the NFIA known as Part A, 42 U.S.C. §§ 4251-56, which created a "pool of private insurance companies [that] issued policies and shared the underwriting risk[] with financial assistance from the federal Government." C.E.R. 1988, Inc. v. Aetna Cas. & Sur. Co., 386 F.3d 263, 266 (3d Cir. 2004). Since 1978, FEMA has administered the Program under Part B of the NFIA, 42 U.S.C. §§ 4071-72. C.E.R., 386 F.3d at 266; 42 U.S.C. § 4041(granting FEMA discretion to implement the Program under Part B). Part B of the NFIA provides for federal operation of the Program with the assistance of private insurers.

In 1983, FEMA created the Write-Your-Own ("WYO") program. See 44 C.F.R. §§ 62.23 to 62.24. The WYO program permits private insurers ("WYO companies") to write SFIPs in their own names. Although the WYO companies write the SFIPs, FEMA regulations set the terms and conditions of the policies, including the rate structures and premium costs. See 44 C.F.R. §§ 61.4(b), 62.23(a), (c), (d). Under the WYO program framework, "the federal government underwrites the policies and private WYO carriers perform significant administrative functions including 'arrang[ing] for the adjustment, settlement, payment and defense of all claims arising from the policies.'" Campo v. Allstate Ins. Co., 562 F.3d 751, 754 (5th Cir. 2009) (footnote omitted). "WYO companies remit premiums collected, after deducting a scheduled amount for administrative expenses, to FEMA for deposit in the National Flood Insurance Fund. Claims are thus paid from federal funds." Studio Frames Ltd. v. Standard Fire Ins. Co., 483 F.3d 239, 244 (4th Cir. 2007) (citation omitted); see also Gallup v. Omaha Prop. & Cas. Ins. Co., 434 F.3d 341, 342 (5th Cir. 2005) (observing that SFIP "[c]laims are ultimately paid of out of the U.S. Treasury"). WYO companies are fiscal agents of the United States. 42 U.S.C. § 4071(a)(1). They are not, however, general agents of the of the federal government. 44 C.F.R. § 62.23(g).

Interpretation and construction of SFIPs are governed by federal common law and informed by standard insurance law principles. See Linder & Assocs. v. Aetna Cas. & Sur. Co., 166 F.3d 547, 550 (3d Cir. 1999) (construing SFIP in accordance with standard insurance law principles); see also Suopys v. Omaha Prop. & Cas., 404 F.3d 805, 809 (3d Cir. 2005) (citing Linder, 166 F.3d at 550); Studio Frames, 369 F.3d at 382 ("[T]he development of the[] governing federal common law principles is informed by 'standard insurance law principles.'" (quoting Battle v. Seibels Bruce Ins. Co., 288 F.3d 596, 608 n.17 (4th Cir. 2002))).

III. LEGAL STANDARD

Federal Rule of Civil Procedure 56 provides that a movant is entitled to summary judgment when "the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986); Fed. Home Loan Mortgage Corp. v. Scottsdale Ins. Co., 316 F.3d 431, 443 (3d Cir. 2003). Where the non-moving party bears the burden of proof at trial, the moving party may identify an absence of a genuine issue of material fact by showing the court that there is no evidence in the record supporting the non-moving party's case. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 325 (1986); UPMC Health Sys. v. Metro. Life Ins. Co., 391 F.3d 497, 502 (3d Cir. 2004). If the moving party carries this initial burden, the non-moving party must set forth specific facts showing that there is a genuine issue for trial. See Fed. R. Civ. P. 56(e)(2) (stating that "an opposing party may not rely merely on allegations or denials in its own pleading; rather, its response must... set out specific facts showing a genuine issue for trial"); see also Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (noting that the nonmoving party "must do more than simply show that there is some metaphysical doubt as to the material facts"). The non-moving party may not avert summary judgment with reliance on speculation or by rehashing the allegations in the pleadings. Ridgewood Bd. of Educ. v. N.E. for M.E., 172 F.3d 238, 252 (3d Cir. 1999). "Where the record taken as a whole could not lead a reasonable trier of fact to find for the non-moving party, there is no ...


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