SUMMARY: Defendant moved for summary judgment alleging that plaintiffs' failure to file a timely proof of loss statement for flood damages precluded plaintiffs from receiving insurance coverage. HELD: Defendant's motion granted. Plaintiffs' standard flood insurance policy was purchased pursuant to the national flood insurance program which regulates the manner in which flood insurance claims must be filed. Plaintiffs filed outside of the time limit allowed by the regulations.

Case Name: Raphael Slominski, et al. v. American Family Mutual Ins. Co.
Case Number: A2-98-114
Docket Number: 22
Date Filed: 4/11/00
Nature of Suit: 110

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NORTH DAKOTA
NORTHEASTERN DIVISION

MEMORANDUM AND ORDER

Plaintiffs commenced this action on October 22, 1998, seeking to receive payment for flood-related property losses. On December 29, 1998, plaintiffs voluntarily dismissed their claim against the National Flood Insurance Program. The remaining defendant, American Family Mutual Insurance Company, has now moved for summary judgment. (Doc. #18.) After considering the parties' briefs and supporting evidence, the court grants defendant's motion for summary judgment.

I. Background

On April 17, 1997, plaintiffs' home, located in Grand Forks, ND, was inundated with water during the flooding of the Red River. On that date plaintiffs were holders of a Standard Flood Insurance Policy (SFIP) purchased pursuant to the National Flood Insurance Program, and issued by American Family Mutual Insurance Company (American Family). American Family is a private insurer that has been authorized by the federal government to operate as a "Write-Your-Own" (WYO) insurance company. However, American Family is deemed a fiscal agent of the United States and acts pursuant to a financial assistance/subsidy arrangement with the Federal Emergency Management Agency (FEMA) and the Federal Insurance Administration. Thus, though American Family or other WYO insurance companies may administer the flood insurance policy, the federal government is ultimately responsible for the payment of claims and requires all SFIP's to conform to federal regulations. Plaintiffs' flood insurance policy required them to submit a proof of loss statement to American Family within 60 days after the loss. On May 28, 1997, the Executive Administrator for the Federal Insurance Administration announced a 90 day extension for the filing of proofs of loss under the National Flood Insurance Program for those affected by Red River flooding. This extension allowed plaintiffs to file their proof of loss by September 18, 1997. Plaintiffs filed their proof of loss on October 17, 1997, and now claim their proof of loss was timely filed because they received two individual extensions from American Family.

II. Summary Judgment Standard

Summary judgment is appropriate if there is not a genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. Pro. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). Rule 56 of the Federal Rules of Civil Procedure "mandates the entry of summary judgment . . . against a party failing to make a showing sufficient to establish the existence of an element essential to that party's case." Celotex, 477 U.S. at 322. If the moving party has supported its motion for summary judgment, the nonmoving party has an affirmative burden placed on it to go beyond the pleadings and show a genuine triable issue of fact. Commercial Union Ins. Co. v. Schmidt, 967 F.2d 270, 271 (8th Cir. 1992). However, the court considering a motion for summary judgment must view the evidence in the light most favorable to the nonmoving party who enjoys "the benefit of all reasonable inferences to be drawn from the facts." Vacca v. Viacom Broadcasting of Missouri, Inc. Et al., 875 F.2d 1337, 1339 (8th Cir. 1989)(citation omitted).

Summary judgment is improper if the court finds a genuine issue of material fact; however, "the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment . . ." Commercial Union Insurance Co. v. Schmidt, 967 F.2d 270, 271-72 (8th Cir. 1992)(citation omitted). The issue is whether "the evidence is sufficient to allow a reasonable jury to return a verdict for the nonmoving party." Landon v. Northwest Airlines, Inc., 72 F.3d 620, 624 (8th Cir. 1995).

III. Discussion

Defendant argues that plaintiffs did not file their proof of loss in a timely manner and as a result forfeited their rights to their claim. Alternatively, plaintiffs argue that they received two additional individual extensions which delayed the filing deadline for their proof of loss until October 21, 1997; therefore, they timely filed their proof of loss.

An insurance policy for flood losses, whether insured by the FEMA or by a participating private insurer known as a WYO insurer, are paid out of the National Flood Insurance Fund; therefore, a claimant filing under a SFIP must strictly comply with the terms and conditions that Congress has established for payment. Flick v. Liberty Mutual Fire Insurance Company, 2000 WL 155899 at *7 (9th Cir. 2000). One of those conditions is that claimants may not avoid the 60 day requirement for filing proof of loss except upon a valid written waiver by the Federal Insurance Administrator. Id. at *6; See 44 C.F.R. § 61.13(d); 44 C.F.R. Pt. 61, App. A(1), art. 9(J)(7)(setting out the conditions of a waiver). In this instance the Federal Insurance Administrator did issue a valid waiver, but only until September 18, 1997.

It is true that plaintiffs received two individual extensions; however, those extensions were not issued by the Federal Insurance Administrator as required by law. Plaintiffs did not file a proof of loss by the September 18, 1997, deadline. Instead, American Family's Flood Insurance Processing Center sent a letter to plaintiff dated September 30, 1997, twelve days after the Federal Insurance Administrator's deadline, informing plaintiffs that the deadline had passed and affording them ten days from the receipt of the letter in which to file their proof of loss. Upon receipt of the letter plaintiffs contacted a representative of the Processing Center, who verbally granted a 15 day extension from October 7, 1997, which postponed the deadline for filing the proof of loss until October 21, 1997. The Processing Center followed the verbal postponement with a letter dated October 7, 1997, outlining the details of the agreement. Plaintiffs filed their proof of loss on October 17, 1997. Plaintiffs now claim that because they received extensions, their proof of loss was timely. The court rejects this claim.

The law clearly establishes that when anyone enters into an agreement with the Government, that individual takes on the risk that the agent representing the Government will stay within the bounds defined by Congress. Federal Crops Ins. Corporation v. Merrill et al., 332 U.S. 380, 384 (1947). The regulations governing flood policies purchased pursuant to the National Flood Insurance Program bind policy holders regardless of whether the policy holders had actual knowledge of the regulations. See Id. at 385 (stating everyone is charged with the knowledge of the rules and regulations in the Federal Register). Case law suggests that governmental regulations will prevail even when the insured relies detrimentally on inaccurate information provided by the agent of the government. See Phelps v. Federal Emergency Management Agency, 785 F.2d 13, 17 (1st Cir. 1986)(stating that the doctrine of equitable estoppel may not be used against the government no matter how compelling the circumstances).

In this case the plaintiffs' position rests solely on the extensions granted to them by defendant American Family; unfortunately, American Family did not have the authority to grant the extensions. American Family's granting of extensions can not be construed as a waiver of the deadline in light of the federal regulation requiring the written authorization of the Federal Insurance Administrator. See Gowland v. Aetna, 143 F.3d 951, 954 (1st Cir. 1998)(noting that defendant's act of re-opening plaintiff's file repeatedly can not be construed as waiver of the proof of loss requirement). Plaintiffs could argue that American Family is a private agency and therefore the doctrine of equitable estoppel should apply; however, it would not be an appropriate argument because reliance on faulty information provided by American Family did not cause plaintiffs to miss the deadline. Plaintiffs had already missed the deadline imposed by the Federal Insurance Administrator before American Family wrote a letter informing plaintiffs they had missed the deadline and granting them an extension. In a similar case in which the result seemed inequitable the Supreme Court stated that "not even the temptations of a hard case can elude the clear meaning of the regulation." Federal Crops Ins. Corporation, 332 U.S. at 386. The court must "observe the conditions defined by Congress for charging the public treasury." Id. at 385. The Constitution grants Congress the power to appropriate public funds, and a judicial award of monies from the public treasury without authorization from Congress would usurp Congress's exclusive power. Flick, 2000 WL 155899 at *6. In accordance with principle that Congress is the only branch of government authorized to appropriate funds from the public treasury, the court grants defendant American Family's motion for summary judgment.

IV. Conclusion

In sum, the court finds that defendant American Family Mutual Insurance Company has established that no genuine issues of material fact exist in the case which must be resolved by the jury and that it is entitled to judgment as a matter of law. Thus, the court grants defendant American Family Mutual Insurance Company's motion summary judgment.

IT IS ORDERED that defendant's motion for summary judgment (doc. #18) is granted. Plaintiffs' complaint and cause of action are dismissed with prejudice.

Dated: April _____, 2000.