On May 29, 2015, District Judge John W. DeGravelles of the United States District Court for the Middle District of Louisiana, issued his Ruling and Order prohibiting a Write Your Own flood insurance carrier from denying payment for unrepaired prior damages on subsequent flood loss.1
As with the majority of National Flood Insurance Program (“NFIP”) cases, Westmoreland v. Fidelity National Indemnity Insurance Company, deals with claim against a Write Your Own (“WYO”) carrier that issued and administered a Standard Flood Insurance Policy (“SFIP”) to a homeowner. The homeowner, Joyce Westmoreland (“Westmoreland”), made a claim for damages to her Springfield, Louisiana home after Hurricane Isaac flooded it on August 29, 2012. At the time of the loss, Westmoreland had a SFIP in effect and carried $200,000 dwelling limits. The property suffered approximately twenty-two inches of flooding on the interior and thirty-two inches on the exterior. The carrier, Fidelity National Indemnity Insurance Company (“Fidelity”), hired an independent adjuster, Bruce Huffman (“Huffman”) of Colonial Claims Corporation to inspect the property and adjust the loss.
Prior to Westmoreland purchasing the home in 2010 from Carl Lind, Mr. Lind, under his own SFIP, made a claim in 2008 for flood damage as a result of Hurricane Ike. The damage from Hurricane Ike, included three inches of water in the interior of the home and fifteen inches on the exterior. Mr. Lind was paid $21,151.81 by his WYO for the damage.
Huffman, after inspecting Westmoreland’s property determined that all damage was as a result of flooding, but noted that “some of the damage appeared to have been damage from a prior flood loss,” and requested Westmoreland provide him with evidence of the repairs made from Hurricane Ike’s flooding damage. When no evidence was produced, Huffman wrote his estimate and “included only those ‘items that were not paid in the prior claim or items [he] could tell by pictures and [his] inspection hat [sic] they had been repaired.” Huffman’s estimate totaled $54,892.90, the WYO issued payment for same and issued a partial denial to Westmoreland. Westmoreland appealed the denial to the Federal Emergency Management Agency (“FEMA”), who ultimately upheld the WYO’s decision. After FEMA’s denial, Westmoreland then filed the instant lawsuit.
In response to Westmoreland’s lawsuit, Fidelity filed a motion for summary judgment arguing, “Westmoreland is not entitled to ‘recover for items of damage that were previously damaged by a prior loss, however, not repaired/replaced after the prior loss,’” and that, “Article VII(K)(2)(e) of the SFIP requires Westmoreland to produce evidence to show that any items damaged in a prior flood loss for which payment under the SFIP was issued were actually repaired before the current loss occurred.” Westmoreland, in response argued that, “she [was] entitled to recover all damages from the 2012 flood loss regardless of whether or not the prior damages were repaired.”
Fidelity’s argument was summarized by the court: “[Fidelity’s] argument stands for the proposition that the SFIP specifically excludes from coverage prior flood damages for which payment was made but which were not repaired.” The court disagreed:
Article VII((K)(2)(e) gives the insurer the option to “request, in writing, that the insured furnish it with a complete inventory of the lost, damaged or destroyed property, including…evidence that prior flood damage [had] been repaired. Even applying the required strict construction standards, the language of this provision does not indicate a coverage exclusion for prior unrepaired damages; it merely provides the insurer with the option to request evidence of repair. Simply put, there is nothing in Article VII or the SFIP as a whole indicating that evidence of the repair of prior damages is a predicate to recovery.
In addition to the argument above, Fidelity argued, that FEMA’s Adjuster Claims Manual supports its claim that unrepaired prior damages are excluded from coverage under the SFIP. “Specifically, [Fidelity note[d] that the Adjuster Claims Manual requires the adjuster to exclude from adjustment any unrepaired prior damages’ and to ‘document that prior flood damage has been repaired in the event that the building sustained previous flood damage.’” Again, the court disagreed:
The language of these provisions is clear and unambiguous – the adjuster must exclude unrepaired prior damages from the adjustment. The Adjuster Claims Manual provisions cited by [Fidelity], speak only to the standards which the adjuster must follow, not the scope of coverage under the SFIP.
Moreover, reading the provisions from the Adjuster Claims manual in pari materia with Article VII(K)(2)(e) does not resolve the issue of whether or not the SFIP allows for coverage of prior unrepaired damages. As discussed above, Article VII(K)(2)(e) merely provides the insurer with the option to request evidence of repairs. If that evidence is available and provided, the adjuster can use it to fulfill his or her obligation to document the repairs.
The Court is further persuaded by the structure of the SFIP itself. Coverage exclusions are found in Articles IV and V of the SFIP. Under Article IV of the SFIP, certain types of property are specifically excluded from coverage including land, currency, and fences. Article V sets forth specific coverage exclusions such as lost revenue and profits. Notably, neither Article IV nor Article V excludes from coverage unrepaired prior flood damages.
At bottom, [Fidelity] has not pointed to any cases, statutes, regulations or FEMA interpretations which clarify whether or not the SFIP covers prior unrepaired damages. Thus, the Court conclude[d] that the SFIP is ambiguous as to its coverage of prior unrepaired damages; and, applying the standard principles of insurance policy interpretation, this ambiguity will be resolved in favor of the insured, Westmoreland. Accordingly, the Court finds that this issue is inappropriate for summary judgment’ therefore, [Fidelity’s] motion [was] denied.
This is a big win not only for Westmoreland, but for all flood litigation Plaintiffs. The court used the SFIP and FEMA’s own manuals against them and highlighted the arrogance of the WYO in their handling for flood claims. I’m hoping to see more cases like this in the future.
As always, I’ll leave you with a (mildly) related tune, here’s Paul Butterfield’s Better Days with Louisiana Flood: