Stevens et al v. Allstate Insurance Company
FINDINGS OF FACT AND CONCLUSIONS OF LAW. It is ORDERED that plaintiffs' claims be dismissed with prejudice. Signed by Judge Eldon E. Fallon on 6/24/14.(jtd)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
DIANE P STEVENS, ET AL.
ALLSTATE INSURANCE COMPANY
SECTION "L" (4)
FINDINGS OF FACT & CONCLUSIONS OF LAW
This action arises out of a flood insurance claim made by Plaintiffs Diane and Bobby
Stevens against their flood insurer, Defendant Allstate Insurance Company, for damage their
house sustained during Hurricane Isaac. On July 18, 2013, the Stevens brought a complaint
alleging that Allstate breached their insurance contract and failed to tender payment for losses
covered under that contract. (Rec. Doc. 1). Specifically, the Stevens sought reimbursement for
those losses, court costs, and any other fair and equitable relief. Id. In its answer, Allstate denies
the allegations and asserts various affirmative defenses. (Rec. Doc. 5). On March 20, 2014, by
joint stipulation, the parties dismissed all but the breach of insurance contract claim. (Rec. Doc.
This matter came on for trial before the Court without a jury on June 12, 2014. After
considering the testimony of the witnesses, the exhibits admitted into evidence, and the
memoranda submitted by the parties, the Court now makes the following findings of fact and
conclusions of law, pursuant to Federal Rule of Civil Procedure 52. To the extent that a finding
of fact constitutes a conclusion of law, the Court adopts it as such; to the extent that a conclusion
of law constitutes a finding of fact, the Court also adopts that as such.
FINDINGS OF FACT
This action arises out of a flood insurance claim made by the Stevens for damage their
house sustained as a result of Hurricane Isaac, which came ashore August 28, 2012. The
property, which is located in LaPlace, Louisiana, was inundated with 12 to 14 inches of water for
over a day. The Stevens' insurer, Allstate, is a write-your-own program ("WYO") carrier
participating in the National Flood Insurance Program ("NFIP"), and it issued a standard flood
insurance policy ("SFIP"). The SFIP covers a term lasting from November 22, 2011, to
November 22, 2012, and has coverage limits of $165,000.00 for structural damage and
$26,300.00 for contents damage, each of which is subject to a $1,000.00 deductible.
After the Stevens submitted a claim, Allstate initiated the adjustment process. In doing
so, it assigned an independent adjuster, Rich Christie, through Pilot Catastrophe Services, who
inspected the property on September 7, 2012. Specifically, the estimate included the cost to
repair and replace the damaged parts of the property, as well as associated services. Based on the
adjuster's estimate, Allstate paid the Stevens $84,132.76 for structural damage. (It also paid them
$21,300.00 for contents damage, which is the policy limit.) Subsequently, the Stevens and
Allstate both sought additional estimates. Kevin Manale, hired by the Stevens, provided an
estimate of $179,789.13. Among other things, Mr. Manale's estimate was significantly higher
because it included the cost of replacing rigid foam in the exterior walls by removing the brick
façade of the house. Based on Mr. Manale's estimate, the Stevens made a supplemental claim for
$79,867.36 (that is, the difference between the $84,132.76 they had been paid and the
$165,000.00 coverage limit and deductible).
Thereafter, John Crawford, hired by Allstate, provided an estimate of $96,422.60. Mr.
Crawford's estimate was largely identical to Mr. Christie's estimate, but included the cost of
replacing the Stevens' tile floors. His estimate did not include the cost of replacing the rigid foam
because he had determined that it had not been damaged. Further, he suggested that if there was
any damage such damage could have been remedied by removing the foam from the interior of
the house after the drywall and insulation had been removed, rather than incurring the ancillary
costs associated with removing the brick façade. In either event, the issue of the rigid foam is
irrelevant as the parties stipulated both prior to trial and at trial that it did not need to be replaced.
The Stevens used the payments from Allstate to substantially repair the house. The
evidence and testimony of Mr. Stevens indicates that he acted as the general contractor,
purchasing most of the materials and performing much of the work with Mrs. Stevens, and their
two daughters. Additionally, he hired a number of presumably unlicensed subcontractors to gut,
replace the floors, hang drywall, paint, and perform electrical and plumbing work. Many of these
subcontractors were paid by check or in cash. The Stevens have produced documentation of
$49,711.94 in repair and replacement costs, but state that they are unable to document the
remainder of what was spent. They allege that they spent the entire amount Allstate paid as well
as some of their personal funds, but they also concede that some of the repairs were upgrades.
Mrs. Stevens testified that she had additional receipts, but that those were accidentally lost. The
Stevens state that they do not know exactly how much they have spent on repairs, nor do they
know exactly how much they will need to be spent. They indicate that some of the payments
were made in cash but they do not know the amount of those payments. They have no notes or
other accounting of any cash payments. Nor have they produced any bank statements indicating
any cash withdrawals around the time the work was done.
The evidence and testimony of Mr. Stevens, Mr. Manale, and Mr. Crawford conclusively
establishes that all but several items have yet to be repaired or replaced: five windows, the front
door, a shower door, two refrigerators and a stove, an access door in the garage, and the garage
door itself. It is undisputed that each of these items is included in Mr. Christie's estimate, as well
as those of Mr. Manale's, and Mr. Crawford. Accordingly, Allstate has already paid for their
repair or replacement and may not be held liable for those costs now. Moreover, all of the
estimates include at least a 10% profit and 10% overhead for a general contractor. Such cost was
not incurred by the Stevens since they did not use a general contractor.
Although the Stevens testified that some of the repairs were substandard, the testimony of
Mr. Crawford and—to a lesser extent—that of Mr. Manale indicate that the repairs are well
within acceptable tolerances. Regardless, the Stevens' assertion does not appear to be
substantiated by evidence. In contrast, Mr. Crawford asserted that the Stevens' house was in
very, very good condition and the repairs were all but complete. Further, even if there were some
indication that the repairs were deficient, it is far from apparent that the cost to remedy those
deficiencies should be borne by Allstate rather than the Stevens, who supervised or performed
CONCLUSIONS OF LAW
This Court has subject matter jurisdiction over this matter pursuant to 42 U.S.C. § 4072
as well as 28 U.S.C. § 1331, § 1332, and § 1337. SFIPs are governed by statute and Federal
Emergency Management Agency ("FEMA") regulations. Worthen v. Fid. Nat'l Prop. & Cas. Ins.
Co., 463 F. App'x 422, 426 (5th Cir. 2012) (citing 42 U.S.C. § 4011(a)). Any interpretation of
those regulations by FEMA also governs, as long as that interpretation is not inconsistent with
the regulations or plainly erroneous. Id. (citing Stinson v. United States, 508 U.S. 36, 45 (1993)).
SFIPs must be "'strictly construed and enforced.'" Id. (quoting Gowland v. Aetna, 143 F.3d 951,
954 (5th Cir.1998)). "In addition, the insured is charged with constructive knowledge of the
policy provisions and of the NFIP . . . 'regardless of actual knowledge of what is in the
[r]egulations or of the hardship resulting from innocent ignorance.'" Id. (quoting Fed. Crop. Ins.
Corp. v. Merrill, 332 U.S. 380, 385 (1947) (alteration in original))). Although federal law
governs SFIPs, "general principles of state insurance law may be useful" in interpreting them. Id.
Although the SFIP issued to the Stevens by Allstate "provides three methods for settling
losses," only the "replacement cost" provision is applicable in this instance. See 44 C.F.R. pt. 61,
app. A(1), art. V(1). That provision is something of a misnomer in that it incorporates both a
"replacement cost" approach and an "actual cash value" approach in settling claims.1 It provides:
The following loss settlement conditions apply to a single-family
dwelling . . . :
[The insurer] will pay to repair or replace the damaged dwelling
after application of the deductible and without deduction for
depreciation, but not more than the least of the following amounts:
The building limit of liability . . . ;
Customarily, the actual cash value approach allowed immediate payment regardless of whether repairs
had been made or would be made, whereas the replacement cost approach allowed payment only after repairs had
actually been made. See Need for Replacement to Actually Be Made, 12 COUCH ON INS. § 176:59 (3d ed.). Stated
differently, the actual cash value approach is unlike the replacement cost approach because it "makes the insured
responsible for bearing the cash difference necessary to replace old property with new property." Introduction;
Types of Provisions, 12 COUCH ON INS. § 176:56 (3d ed.). Further, the replacement cost may well exceed the actual
cash value. Id.
The replacement cost of that part of the dwelling damaged,
with materials of like kind and quality and for like use; or
The necessary amount actually spent to repair or replace
the damaged part of the dwelling for like use.
When the full cost of repair or replacement is more than $1,000, or
more than 5% of the whole amount of insurance that applies to the
dwelling, [the insurer] will not be liable for any loss under
[subsection (a)] above . . . unless and until actual repair or
replacement is completed.
[The insured] may disregard the replacement cost conditions above
and make claim under this policy for loss to dwellings on an actual
cash value basis. [The insured] may then make claim for any
additional liability according to [subsections (a) and (c)] above,
provided [the insured] notif[ies the insurer] of [their] intent to do
so within 180 days after the date of loss.
Id. art. VII(V)(2)(a)-(d).
Previously, this Court indicated that Allstate's liability arose under subsection (d) because
subsection (a) only applied if the repair or replacement had been completed (and it had not been).
Regardless of whether the liability arises under subsection (a) or (d), the Stevens are unable to
demonstrate that they are entitled to more than they have already been paid by Allstate.
If subsection (a) is applicable, Allstate is required to pay the replacement cost. Here, that
is the necessary amount actually spent to repair or replace the damaged part of the dwelling for
like use. The Stevens have not demonstrated, through evidence or testimony, that they actually
spent more than $84,132.76 (the amount received from Allstate). The evidence—largely in the
form of receipts—establishes that they spent, at most, $54,610.91. The testimony does not
provide any basis for concluding they spent more than this. Accordingly, the Stevens are not
entitled to any additional payment under subsection (a).
If subsection (d) is applicable, Allstate is required to pay the actual cash value. Because
the actual cash value is determined soon after damage occurs, it ordinarily is established via an
estimate. It equals the estimated replacement cost, minus any depreciation. Although an estimate
provides a basis for the loss at the point the damage occurs, it is useful—if not necessary—to
consider the actual expenses incurred in determining the validity of that estimate. With the
exception of five windows, three doors, two refrigerators, a stove, and some painting, the
Stevens' have repaired or replaced everything included within the scope of Mr. Christie's
estimate. In addition, the Stevens repaired or replaced several items with items of greater value
(for instance, they upgraded their heating, ventilation, and air conditioning system). It is difficult
to test the estimate against what the Stevens have spent because the evidence is less than
comprehensive. Although there is a dispute as to which items should have been included in the
estimate, there is general agreement about what the price of each item was. Thus, Mr. Christie's
estimate can be said to have fairly reflected the actual cash value of the items that it included
within its scope. However, the testimony of Mr. Manale and Mr. Crawford make it clear that Mr.
Christie should have also included the cost of replacing the tile floor in his estimate. Mr.
Crawford's estimate indicates that removing and replacing the tile floor would cost
approximately $15,758.02. Mr. Christie's estimate indicates that cleaning the tile floor, replacing
the grout, sealing the grout, and applying an antimicrobial agent would have cost approximately
$2,601.55. Thus, the Stevens should have received about $13,156.47 more for the repair and
replacement of their tile floors. However, it is also necessary to consider the fact that there were
certain expenses the Stevens did not incur. Mr. Christie's estimate also included $13,324.94, for a
general contractor's overhead and profit (according to Mr. Manale and Mr. Crawford, this is the
accepted industry rate). Because the Stevens did not use a general contractor, they did not incur
these costs.2 Thus, this amount must be debited. Thus, the amount paid should have been
increased by $13,156.47 for the tile floors but decreased by $13,324.94 for unspent contractor
overhead and profit. This results in an aggregate decrease in the payment from of $168.47.
Accordingly, the Stevens are not entitled to any further payment under subsection (d).
Regardless of whether the Stevens were entitled to the replacement cost under subsection (a) or
the actual cash value under subsection (d), they have not demonstrated that they were entitled to
more than Allstate has already paid.
On the basis of the above findings of fact and conclusions of law, the Court finds that the
Stevens are not entitled to further payment under the SFIP. Accordingly, IT IS ORDERED that
their claims be DISMISSED WITH PREJUDICE.
New Orleans, Louisiana, this 24th day of June, 2014.
UNITED STATES DISTRICT JUDGE
FEMA has indicated that an insured may not recover for such costs:
Generally, allowances for Overhead and Profit may not be charged for the [insured's] supervision of
construction. However, if there is a full explanation, up to 10 percent Overhead may be charged. No Profit
may be charged in the case of a [insured's] supervising construction."
See FEMA BULLETIN W-13064.
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