Slater v. Hartford Insurance Co. of the Midwest

Citations: 26 F. Supp. 3d 1239; 2014 U.S. Dist. LEXIS 80868; 2014 WL 2700835Docket: Case No. 3:13-cv-345-J-34JBT

Court: District Court, M.D. Florida; June 13, 2014; Federal District Court

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This case involves a breach of contract claim by Timothy and Deborah Slater against Hartford Insurance Company of the Midwest for non-payment under a flood insurance policy. The court is considering two motions: the Plaintiffs’ Motion for Partial Summary Judgment and the Defendant’s Motion for Summary Judgment, with responses and a reply filed by both parties. The dispute centers around a flood insurance policy issued under the National Flood Insurance Program (NFIP), which is managed by the Federal Emergency Management Agency (FEMA). The NFIP allows private insurers, like Hartford, to issue flood insurance policies under the Write-Your-Own Program (WYO Program). Although the policies are issued by private insurers, the federal government underwrites them, and claims are ultimately paid by the United States Treasury. Hartford acts as a WYO Program carrier and serves as a fiduciary agent for the federal government in this context.

On September 30, 2011, the Plaintiffs obtained a Standard Flood Insurance Policy (SFIP) from Hartford, covering their home in Neptune Beach, Florida, with a premium of $365. The policy provided $250,000 coverage for the structure and $100,000 for personal property, both subject to a $1,000 deductible. The SFIP is a Dwelling Form policy regulated under 44 C.F.R. Pt. 61, App. A(1). Key requirements under the policy include filing a Proof of Loss within 60 days after a flood loss, which must be signed and sworn by the insured and include specific details about the loss.

On June 26, 2012, while the policy was active, the Plaintiffs’ home was flooded due to Tropical Storm Debby, with water first discovered inside at 1:00 a.m. on June 27, 2012. The water remained for 24 hours, prompting the Plaintiffs to use fans and dehumidifiers to mitigate moisture. Hartford assigned the claim to an independent adjuster on June 27, 2012, who inspected the property on July 1, 2012. The adjuster’s Preliminary Report noted key details including the dates and times of the water entering and receding from the building, the height of the water, and the duration it remained inside. The policy stipulates that any amendments or waivers must be made with written consent from the Federal Insurance Administrator, and actions taken under the policy do not waive Hartford's rights.

The Flood Damage Closing Report prepared by the adjuster on August 23, 2012, documented significant water damage with a 5-7" water line outside and a 1" water line inside the property. Recommended actions included pressure washing the exterior, flood cleanup, mildewcide application, and removal and replacement of insulation, drywall, base molding, and damaged wood floors in multiple rooms, as well as removal of bathroom cabinets and countertops. The adjuster noted that the Slaters did not provide a list of damaged personal property, indicating no losses attributed to personal items, while other household items appeared undamaged. The adjuster advised Hartford to pay the insured for dwelling damages and stated that the claim file was closed, although the submitted Closing Report lacked supporting enclosures and estimates.

On August 27, 2012, the Slaters submitted their first Proof of Loss, claiming a net amount of $13,992.72, with additional handwritten claims totaling $125,848.51, which included various contractor costs. This form was officially signed and sworn by the Slaters. A second Proof of Loss was submitted on August 28, 2012, labeled as "Supplemental," with a claimed net amount of $125,293.38, also signed and sworn by the Slaters. On September 5, 2012, Hartford issued a payment of $15,567.63 for building damage under the Standard Flood Insurance Policy (SFIP).

On September 12, 2012, Hartford denied the Slaters' request for additional funds related to their flood claim, stating that the claim had been paid and closed based on the adjuster’s estimate. Hartford indicated that the receipts submitted exceeded the gross loss amount of $16,567.63 and required itemized paid receipts or a contractor's detailed cost estimate to consider any additional payments. Hartford rejected the Slaters' sworn Proof of Loss for $125,293.38, citing insufficient documentation per the Standard Flood Insurance Policy. The letter noted the Date of Loss as June 26, 2012, and informed the Slaters of their right to appeal Hartford's decision to FEMA.

On February 19, 2013, FEMA responded to the Slaters’ appeal regarding the damage assessment and a supplemental claim totaling $126,293.38. FEMA acknowledged Hartford's adjusted loss payment of $15,567.63, which covered specific flood-related expenses and replacement of affected building components. FEMA found some expenses claimed by the Slaters either not covered or excessive but determined that the appeal warranted further review and investigation. FEMA referred the claim for re-evaluation back to Hartford and advised the Slaters of their right to file a lawsuit.

On March 15, 2013, Kelly Bauer sent an e-mail regarding the Slaters’ supplemental claim to FEMA, detailing a Request for Waiver. The claim listed a "Date of Loss" as June 26, 2012, and a "date loss assigned" of June 27, 2012, with the supplemental Proof of Loss (POL) signed on August 28, 2012. The flooding was characterized by exterior water at 7 inches and interior water at 1 inch for about one day. Original damages included clean-up, treatments, and repairs to various parts of the home, while supplemental damages involved additional costs for insulation, drywall, dumpster rental, and high-end cabinetry. The waiver request cited the delay in signing the supplemental POL due to the need for further documentation and an engineer's assessment, asserting that the flood damages were covered by the policy and that the delay did not jeopardize the program.

FEMA approved the waiver on March 18, 2013, contingent on the insured providing actual costs rather than estimates, explicitly stating that this waiver was limited to the outlined damages and did not affect other requirements of the Standard Flood Insurance Policy. On March 23, 2013, Hartford issued a second check to the Slaters for $29,717.26 for building damage, totaling $45,284.89 for building damage and $71.03 for contents damage. The Slaters filed a lawsuit on March 29, 2013, claiming that repair costs exceeded $125,000 and alleging Hartford breached its obligations under the SFIP. The case is currently under consideration for cross motions for summary judgment and partial summary judgment.

Under Rule 56 of the Federal Rules of Civil Procedure, summary judgment is granted when the movant demonstrates that there is no genuine dispute regarding any material fact and is entitled to judgment as a matter of law. The evidence for a motion can include various forms of documentation such as depositions and affidavits. An issue is deemed genuine if a reasonable jury could rule in favor of the nonmovant. A minimal amount of evidence from the non-moving party does not suffice to counter a summary judgment motion. The moving party has the initial responsibility to show that no genuine issues of material fact exist. If successful, the burden shifts to the non-moving party to produce specific facts, supported by affidavits or other evidence, indicating a genuine issue for trial. Materiality of facts is determined by substantive law, focusing on disputes that could influence the case's outcome. Courts must view all evidence favorably towards the opposing party and should not weigh evidence or determine its truth at this stage but rather assess if a genuine issue exists.

In Hartford's motion for summary judgment, it argues that the Slaters cannot recover additional amounts under their Standard Flood Insurance Policy (SFIP) due to their failure to submit a timely sworn Proof of Loss, thus entitling Hartford to judgment on the breach of contract claim. Hartford claims that the second Proof of Loss submitted on August 28, 2012, was late, as it was filed more than 60 days after the June 26, 2012, loss date. The Slaters contend that their submission was timely and therefore oppose the motion for summary judgment.

Plaintiffs assert that their 08/27/12 First Proof of Loss sufficiently presented their claim, and they argue that FEMA granted a written waiver of the deadline. They contend that Hartford's repudiation of its own deadlines excused them from strict compliance and that the doctrine of equitable tolling relieves them from the Proof of Loss deadline. A Proof of Loss must be signed, sworn, and contain specific information about the loss, including damage specifications and repair estimates, as per federal regulations. Strict adherence to these requirements is mandated since payments come from the federal treasury, and failure to file a timely Proof of Loss prohibits recovery. While a waiver of the Proof of Loss requirement is possible, it must be written and issued by the Federal Insurance Administrator. 

Plaintiffs argue that their 08/27/12 submission, which reflected the same amounts as the subsequent 08/28/12 Second Proof of Loss, adequately informed Hartford of their damages, creating a genuine issue of material fact regarding the necessity of the second submission. They also contend that Hartford incorrectly began counting the 60-day deadline from June 26, 2012, instead of June 28, 2012, the day after the floodwaters receded, which would mean the deadline expired on August 26, 2012. Plaintiffs support their position with evidence suggesting standing water remained in their home on June 28, 2012, potentially pushing the start date to June 29, 2012.

Timothy Slater’s deposition indicated that moisture remained in the home for months after a flood, with standing water cleared within 24 hours. The 60-day deadline for submitting a Proof of Loss under the Standard Flood Insurance Policy (SFIP) is calculated from the date of loss, which the Slaters contend occurred on June 26, 2012. This would set the deadline for submitting a Proof of Loss on August 25, 2012. If the loss occurred on June 27, the deadline extends to August 26, and if on June 28, it would be August 27. The Slaters executed their First Proof of Loss on August 27, which aligns with the deadline under each scenario. The SFIP mandates that a Proof of Loss be submitted within 60 days of the loss, but no specific legal authority was cited for computing this timeframe, though precedents from cases such as *Smith v. Nat’l Flood Ins. Program of FEMA* suggest applying the Federal Rules of Civil Procedure Rule 6(a) methodology. This rule dictates that the period excludes the first day and includes the last day unless it falls on a weekend or holiday. The Court concludes that the Rule 6(a) analysis applies to the SFIP’s 60-day deadline, confirming that the First Proof of Loss is timely. However, the Second Proof of Loss may be untimely if evaluated independently.

The 08/28/12 Second Proof of Loss is considered in conjunction with the 08/27/12 First Proof of Loss to determine if they satisfy the Proof of Loss requirement under the Standard Flood Insurance Policy (SFIP). Although the SFIP mandates a Proof of Loss to be filed within 60 days, it does not explicitly address supplemental claims. Courts have generally ruled that supplemental proofs of loss must also be submitted within this timeframe; failure to do so limits the insured's ability to claim additional damages not included in the original submission. Several cases highlight that plaintiffs cannot amend their original claims post-deadline and are restricted to benefits claimed in timely proofs. However, there is a distinction where a late supplemental proof may be considered if it claims the same amount as the original proof. The excerpt references cases where supplemental claims were rejected for various reasons, including acceptance of full payment or failure to submit a signed proof of loss. In contrast, the Stogner case suggests that if the same amount is claimed in both timely and supplemental submissions, additional proofs may not be necessary when only the decision is contested.

The Stogner court denied the insurer's motion for summary judgment, finding ambiguity regarding whether the lawsuit sought the same amount claimed in a prior proof of loss from 2008 or a higher amount requiring a new proof of loss. In Young v. Imperial Fire & Cas. Ins. Co., the insured presented three signed proof of loss statements for building damages, along with a public adjuster’s estimate of $260,635.83, after the 60-day submission period. The initial claim was for $175,000, reflecting the policy limit minus the deductible, but the actual cash value and full replacement costs were initially undetermined. The insurer denied payment, claiming the insured did not submit a timely and compliant proof of loss and argued that the discrepancy between the claimed amount and the estimate made it impossible to ascertain the actual claim amount. The court ruled that the combined documents constituted a complete proof of loss compliant with the Standard Flood Insurance Policy (SFIP), allowing the insurer to evaluate the claim based on the detailed estimate. The court noted that the insureds’ submissions were sufficient, contrasting them with a previous case where the claimant failed to provide documentation. The Slaters’ proofs of loss indicated damages exceeding $125,000, and the insurer did not contest the timeliness or sufficiency of the earlier proof of loss. Thus, the court denied the motion for summary judgment.

Failure to file a proof of loss bars recovery unless there is an express written waiver from the Administrator, as established in Shuford (508 F.3d at 1343). The Standard Flood Insurance Policy (SFIP) does not permit constructive waivers (Suopys v. Omaha Prop. Cas., 404 F.3d 805, 811). A valid waiver must be explicitly stated in writing, as detailed in 44 C.F.R. Pt. 61, App. A(1), art. VII.D, and must be evident on the document's face (Howell, 540 F. Supp. 2d at 628). FEMA’s notices regarding claims do not constitute a waiver of the proof of loss requirement, and processing a claim does not imply a waiver either (Greer v. Owners Ins. Co., 434 F. Supp. 2d 1267, 1277-78). 

Plaintiffs argue that a March 18, 2013 communication from FEMA waived the 60-day proof of loss requirement in response to Hartford’s March 15 waiver request, which they claim references their supplemental proof of loss and damages multiple times. They suggest that this creates a material factual question about the waiver's scope. Plaintiffs also assert ambiguity regarding a referenced amount of $29,717.26. Hartford counters that the waiver is limited to this amount and does not waive the proof of loss requirement. It is noted that Hartford sought a waiver for this specific amount from FEMA. 

The key legal issue is whether the March 18 waiver can be interpreted as waiving the proof of loss requirement for only the specified amount or for the full scope of damages noted in the prior proof of loss. Precedent from Shuford indicates that language in waivers must be interpreted carefully to avoid rendering parts of the waiver unnecessary.

The court examined the sufficiency of a FEMA bulletin concerning a claim review process and determined it did not constitute an express waiver of the proof of loss requirement under the Standard Flood Insurance Policy (SFIP). For a waiver to be valid, it must be clearly evident from the document's language. In previous cases, such as Goodman and Provenza, courts addressed ambiguities in FEMA's use of the term "may" regarding waivers post-Hurricane Katrina, noting that such ambiguities could confuse claimants and preclude summary judgment against them. Ultimately, the Fifth Circuit ruled that FEMA's use of "may" did not broadly waive the proof of loss requirement.

The Request for Waiver presented by the plaintiff, the Slaters, was deemed ambiguous. It referenced specific amounts and scope of damages but also mentioned a supplemental proof of loss that was delayed due to the insured's need for additional documentation and an engineer's inspection. Despite the potential interpretation of the loss amount, the waiver's language created ambiguity regarding its scope. 

Consequently, when viewing the facts in favor of the Slaters, the court found that summary judgment in favor of Hartford concerning the waiver of the 60-day proof of loss requirement was inappropriate. The Slaters also contended that Hartford repudiated the SFIP by failing to send an adjuster for a property inspection within the mandated timeframe, arguing that Hartford's failure to adhere to its own deadlines excused any errors related to the supplemental proof of loss deadline.

The doctrine of repudiation is classified as a legal doctrine rather than an equitable one. It occurs when one party fails to fulfill its contractual obligations, leading to the cessation of the unperformed rights and duties for the non-repudiating party. According to the Restatement (Second) of Contracts, such repudiation discharges the remaining performance duties of the non-repudiating party, allowing them to recover on the contract without fulfilling any conditions precedent. Repudiation is defined as a statement by the obligor indicating an intent to breach the contract, which gives the obligee a claim for damages. Although the Eleventh Circuit has not definitively addressed the applicability of repudiation to Standard Flood Insurance Policies (SFIPs), the Fourth Circuit has suggested it might apply. A relevant case involved a WYO insurer that informed a tenant they could not purchase SFIP coverage for a building they did not own, leading to the court's consideration of whether that constituted repudiation. Conversely, the Second Circuit has expressed skepticism about the applicability of repudiation in the context of NFIP policies, noting a split among circuits. If repudiation were applicable to SFIPs, the insurer would need to renounce the policy itself rather than merely deny a claim. A mere denial does not constitute repudiation, as established in various case law.

Disputes between insurers and insured parties that focus solely on the amount of loss, rather than coverage, do not constitute a repudiation of the insurance contract. In the case referenced, Hartford's failure to promptly send an adjustor is deemed a "material breach," yet Hartford continued to fulfill the contract, and the insured, the Slaters, opted to proceed with their claims and received benefits. Consequently, Hartford's delays in inspection and reporting do not excuse the Slaters from the 60-day Proof of Loss requirement of the Standard Flood Insurance Policy (SFIP). 

Furthermore, Hartford is not prevented from denying coverage due to its own delays or the acceptance of a Supplemental Proof of Loss, as the Eleventh Circuit has ruled equitable estoppel does not apply in claims against government funds. Since a Write Your Own (WYO) insurer acts as a fiscal agent of the United States, claims under the National Flood Insurance Program are treated similarly to those against the government concerning the Appropriations Clause. The Eleventh Circuit has consistently upheld that such insurers can enforce deadlines, such as the 60-day proof of loss requirement, even when there are indications of acceptance beyond that period. 

Additionally, for equitable estoppel to be applicable, there must be evidence of affirmative and egregious misconduct by the insurer, which the Slaters have not demonstrated. Finally, the Slaters have filed a Motion for Partial Summary Judgment seeking a legal determination that their SFIP covers mold damage to their home.

Following a storm, portions of the Slaters' home were damaged by mold and mildew, with the extent of the damage being disputed. The Slaters argue that the mold exclusion of the Standard Flood Insurance Policy (SFIP), which excludes losses from mold or mildew resulting from conditions within the insured's control, does not apply, asserting they mitigated the damage by using fans and dehumidifiers within 48 hours post-flood. Hartford Insurance contends that the Slaters' mitigation efforts were inadequate and emphasizes that it paid $45,284.89 for property damage. Hartford also argues that it is up to a fact-finder to determine if the mold damage meets the exclusion criteria. The court found genuine disputes regarding the extent of the mold damage, the Slaters' control over it, and the adequacy of their maintenance after the flood, precluding partial summary judgment in favor of the Slaters. Consequently, Hartford's motion for summary judgment was granted in part—specifically regarding the Slaters' claims of policy repudiation and estoppel—while denying it in other respects. The Slaters' motion for partial summary judgment was denied. Additionally, the court noted that the National Flood Insurance Act allows FEMA to set regulations for claims adjustment, clarifying that Write-Your-Own (WYO) insurance carriers are not general agents of the federal government. An affidavit from a claims director at a third-party vendor was contested by the Slaters, who argued it constituted expert opinion despite the absence of prior disclosure as an expert witness.

Plaintiffs have not moved to exclude the Holmes Affidavit, but the Court references it only for facts within the affiant's personal knowledge, excluding legal conclusions. The Plaintiffs' Standard Flood Insurance Policy (SFIP) is governed by 44 C.F.R. Pt. 61, App. A(l), and a fact admitted by answer is no longer in dispute, as established in Hill v. Federal Trade Commission. The Flood Damage Closing Report includes various enclosures, such as invoices, proof of loss documents, and reports. The Plaintiffs submitted a Second Proof of Loss with attachments detailing repair costs, notably a report estimating repairs at $103,184.20. Disputes over flood damage or coverage can be appealed to FEMA or contested in federal court, provided a timely and compliant proof of loss is filed. The Court notes that a letter from the NFIP Claims Director to the Slaters’ adjuster is relevant, as is the identification of Kelly Bauer with Hartford's flood insurance services. The Plaintiffs alleged professional negligence against Hartford, but this claim was dismissed as preempted by federal regulations. Count I, alleging breach of contract, remains. Rule 56's standard for summary judgment has not changed despite amendments aimed at improving procedures. The Court will not extend the loss date to June 30, 2012, based on FEMA's memoranda regarding Tropical Storm Debby.

FEMA’s memorandum regarding Tropical Storm Debby notes that the storm caused severe flooding in Florida, with designated “dates of loss” from June 23, 2012, to June 30, 2012. The document clarifies that claimants are not automatically entitled to assert June 30, 2012, as their date of loss; the Slaters' claim falls within these dates. However, they cannot bypass the Proof of Loss requirement, as their second submission on August 28, 2012, was late by one day, which is regarded as a minor error but insufficient for compliance. Complete adherence to the Proof of Loss requirement is necessary, as substantial compliance alone is inadequate, according to precedent. Although the Slaters submitted their Second Proof of Loss and a detailed Water Damage Report, they did not specify which repair estimates relate to the mold and mildew exclusion under the Standard Flood Insurance Policy (SFIP), and the court cannot determine the relevant information from the provided record.