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Ayers Realty Co. LLC v. Selective Insurance Co. of Southeast

United States District Court, M.D. Pennsylvania

February 28, 2014



RICHARD P. CONABOY, Sr., District Judge.

The Court confronts here cross-motions for summary judgment by Plaintiff Ayers Realty Company ("Plaintiff")and Defendant Selective Insurance Company of Southeast ("Selective"). The parties agree that the sole issue for this Court's determination is whether Plaintiff's property is an "elevated" or "non-elevated" building in the context of the regulations promulgated by the Federal Emergency Management Agency (FEMA). These motions have been fully briefed (Docs. 13, 16, 18 and 21) and this case is now ripe for disposition.

I. Factual Background.

This case arises from flood damage at Plaintiff's premises in the Borough of Plains, Luzerne County, Pennsylvania on September 8, 2011. (Doc. 1, p. 9). Plaintiff submitted a Proof of Loss related to that flood in the amount of $53, 068.37 and Selective, the issuer of a General Property Standard Flood Insurance Policy (hereinafter "SFIP") pursuant to the National Flood Insurance Act of 1968 (hereinafter "NFIA") (42 U.S.C. § 4001, et. seq.), paid Plaintiff's claim in full. Selective paid the claim due to its understanding that the premises was a "non-elevated" building. (Doc. 14, ¶ 9; Doc. 19, ¶ 9). Selective had set the premium for coverage on the premises based upon Plaintiff's representation that the premises was "a slab on grade non-elevated building." (Id.) (Doc. 14-1, pp. 4 & 21-22). After paying the claim, Selective inspected the property in question and determined that, due to its manner of construction, Plaintiff's property had been improperly rated as a "non-elevated building" pursuant to the Federal Emergency Management Agency ("FEMA") regulations.[1] After making this determination, Selective re-rated the property as an "elevated building". (Doc. 14, ¶ 25; Doc. 19, ¶ 25). This revised designation limited the amount of insurance Plaintiff could prospectively obtain on any property damaged in the lowest floor of the premises.

After Selective re-rated the property, Plaintiff brought a Declaratory Judgment action in the Luzerne County Court of Common Pleas seeking a judicial declaration that the building was "non-elevated", a declaration that would require Selective to once again rate the property under the classification in force at the time the flood damage occurred. Selective then removed the case to this Court on diversity grounds pursuant to 28 U.S.C. § 1441.

II. Summary Judgment Standard.

Summary judgment is appropriate when the movant demonstrates there is no "genuine issue as to any material fact." Fed.R.Civ.P. 56(a). "[T]his standard provides that the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 247-48 (1986).

An issue is genuine only if there is a sufficient evidentiary basis on which a reasonable fact finder could find for the non-moving party, and a factual dispute is material only if it might affect the outcome of the suit under governing law. Kaucher v. County of Bucks, 455 F.3d 418, 423 (3d Cir. 2006) (citing Anderson , 477 U.S. at 248). In determining whether a genuine issue of fact exists, a court must resolve all factual doubts and draw all reasonable inferences in favor of the nonmoving party. Conoshenti v. Public Serv. Elec. & Gas Co., 364 F.3d 135, 140 (3d Cir. 2004).

The initial burden is on the moving party to show an absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 330 (1986) (citations omitted). The moving party may meet this burden by "pointing out to the district court [] that there is an absence of evidence to support the nonmoving party's case when the nonmoving party bears the ultimate burden of proof." Id . at 325. The non-moving party may not rest on the bare allegations contained in his or her pleadings, but is required by Federal Rule of Civil Procedure 56 to go beyond the pleadings by way of affidavits, depositions, answers to interrogatories or the like in order to demonstrate specific material facts which give rise to a genuine issue. Id . at 324.

"In considering a motion for summary judgment, a district court may not make credibility determinations or engage in any weighing of evidence." Anderson , 477 U.S. at 255. Therefore, when evidentiary facts are in dispute, when the credibility of witnesses may be in issue, or when conflicting evidence must be weighed, a full trial is usually necessary.

III. Applicable Law.

Plaintiff's Motion for Summary Judgment is largely predicated on the mistaken notion that the substantive law of Pennsylvania should apply to this matter. Plaintiff urges this Court to find that certain alleged ambiguities in FEMA's regulations concerning what constitutes an "elevated building" and "non-elevated building" should result in a decision by this Court that, as the drafter of an insurance contract, Selective should be required to rate Plaintiff's property as Plaintiff prefers under principles of Pennsylvania contract case law.

Plaintiff's reasoning is flawed in two ways. First, it is well-settled that the interpretation of a SFIP is made with resort to federal common law. Linder & Associates, Inc. v. Aetna , 166 F.3d 547, 550 (3d. Cir. 1999). Second, while Selective, in its capacity as a "Write Your Own Program Company" (WYO Company) participant in the NFIP, drafted the contract in question, it did so in accord with the express requirements FEMA has promulgated for SFIP's pursuant to its rule making authority. Suopys v. Omaha Property & Casualty Co. , 404 F.3d 805, 807 (3d. Cir. 2005). These rules are codified at 44 C.F.R. Pt. 61, App. A(2). FEMA's rules regarding the content of SFIP's are to be strictly construed. As the Third Circuit Court of Appeals has explained:

Because any claim paid by a WYO Company is a direct charge to the United States Treasury, strict adherence to the conditions precedent to payment is required. Federal Crop. Ins. Corp., v. Merrill 332 U.S. 380 , 384-85; 68 S.Ct. 1; 92 L.Ed. 10 (1947) (holding that insured must strictly comply with all terms and conditions of federal insurance policy and recognizing duty of courts to observe conditions defined by Congress for charging the public treasury); Van Holt, 163 F.3d at 165; Flick v. Liberty Mutual Ins., Co. , 205 F.3d 386 (9th Cir.), cert. denied, 531 U.S. 927 , 121 S.Ct. 305, 148 L.Ed.2d. 245 ...

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