Construction Funding L.L.C. v. Fidelity National Indemnity Insurance Company et al

Filing 20

ORDER & REASONS: granting 17 Motion for Summary Judgment; FURTHER ORDERED that all of Plaintiff's claims against Fidelity are hereby DISMISSED WITH PREJUDICE. Signed by Judge Carl Barbier on 11/17/14. (sek)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
CONSTRUCTION FUNDING, LLC

CIVIL ACTION

VERSUS

NO: 13-5630

FIDELITY NATIONAL INDEMNITY
INSURANCE CO, ET AL

SECTION: J(3)

ORDER AND REASONS
Before the Court is a Motion for Summary Judgment (Rec. Doc.
17) filed by Defendant, Fidelity National Indemnity Insurance
Company ("Fidelity"), as well as an Opposition (Rec. Doc. 18) by
Plaintiff,

Construction

Funding,

LLC

("Plaintiff").

Having

considered the motion, the parties’ submissions, the record, and
the applicable law, the Court finds, for the reasons expressed
below, that the motions should be GRANTED.
PROCEDURAL AND FACTUAL BACKGROUND
Fidelity serves as a Write-Your-Own ("WYO") Program carrier
participating in the U.S. Government's National Flood Insurance
Program ("NFIP"). The NFIP was established by the National Flood
Insurance Act of 1968, 42 U.S.C. § 4001, and is administered by the
Federal Emergency Management Agency ("FEMA"). Under the NFIP,
Fidelity acts as a WYO Program Carrier pursuant to an Arrangement
with FEMA ("the Arrangement"), in which Fidelity issues Standard
Flood Insurance Policies ("SFIP's") to claimants insured under the

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NFIP.

Fidelity

garners

the

responsibility

of

investigating,

settling, and defending all claims and losses arising from SFIP's
under the Arrangement. All payments made by Fidelity pursuant to
the

Arrangement

are

derived

entirely

from

federal

funds.

As

compensation for participating in this program, FEMA pays all WYO
Program Carriers, including Fidelity, 1.5% of the amount paid to
the insured. As such, the greater the claims Fidelity pays to its
claimants, the greater the profit Fidelity earns.
Plaintiff, which is insured by Fidelity pursuant to the NFIP,
alleges that on or about August 28, 2012, as a result of Hurricane
Isaac, it sustained serious damage to property covered by the
insurance policy. Plaintiff subsequently filed an insurance claim
with Fidelity, seeking coverage for the damage sustained. The terms
of Plaintiff's SFIP require that in order to recover a claim for
flood damage, an insured must submit within sixty (60) days after
the loss is incurred, a proof of loss supported by "specifications
of damaged buildings and detailed repair estimates" (among other
documentation requirements). Fidelity granted a blanket extension
of this requirement for all claimants who sustained flood damage
during Hurricane Isaac, allowing them to file documented proofs of
loss within 240 days of the August 28, 2012 date on which Hurricane
Isaac made landfall.
In an attempt to assist Plaintiff in compiling a documented
proof of loss, Fidelity assigned Scott O'Berry as the independent

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adjuster to inspect Plaintiff's property and reach an estimate for
the amount of damage sustained. Mr. O'Berry met with Plaintiff on
September 2, 2012 to inspect the property, and upon inspection
provided

Plaintiff

with

a

Proof

of

Loss

form

including

his

estimation of the total value of damage in the amount of $266.81
(reflecting a recommended payment of $5,266.81 less the $5,000
deducible provided for by the SFIP). This amount was calculated in
light of Mr. O'Berry's conclusion that Plaintiff had failed to make
repairs to the property for damages sustained from Hurricane
Katrina in 2005, for which Plaintiff had previously been reimbursed
by Fidelity after filing a valid insurance claim. As such, Mr.
O'Berry's

estimate

reflected

only

those

damages

sustained

by

Hurricane Isaac, to the exclusion of those damages he concluded
were previously sustained during Hurricane Katrina.
On or about January 17, 2013, Plaintiff submitted to Fidelity
its own proof of loss form in the amount of $76,218.01. This form
was supported by no documentation other than an estimate compiled
by Plaintiff and a sworn affidavit by Plaintiff, stating that
damages to the property were repaired after Hurricane Katrina and
prior to Hurricane Isaac. In reliance on Plaintiff's alleged
failure to submit sufficient documentation, Fidelity refused to
verify the amount included in the proof of loss and consequently
denied Plaintiff's claim to recover flood damages for all items on
the property that had not been repaired after the 2005 damage.

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Plaintiff then filed the present lawsuit against Fidelity on August
28, 2013, claiming that Fidelity breached the SFIP, acted in bad
faith, and negligently misrepresented itself in the terms of the
SFIP by refusing to pay Plaintiff's claim.
On November 4, 2014, Fidelity filed the instant motion,
seeking summary judgment and the dismissal of all Plaintiff's
claims. Fidelity argues that because Plaintiff failed to satisfy
the strict requirements mandated by its SFIP, namely by failing to
provide a sufficiently documented proof of loss, under the terms of
the policy, Plaintiff is barred from filing a lawsuit against
Fidelity seeking payment of its claim.
LEGAL STANDARD
Summary judgment is appropriate when “the pleadings, the
discovery and disclosure materials on file, and any affidavits show
that there is no material issue as to any material fact and that
the movant is entitled to judgment as a matter of law.”

Celotex

Corp. v. Catrett, 477 U.S. 317, 322 (1986) (citing FED. R. CIV. P.
56(c)); See also Little v. Liquid Air Corp., 37 F.3d 1069, 1075
(5th Cir. 1994). When assessing whether a dispute as to any
material fact exists, the Court considers “all of the evidence in
the record but refrains from making credibility determinations or
weighing the evidence.”

Delta & Pine Land Co. v. Nationwide

Agribusiness Ins. Co., 530 F.3d 395, 398 (5th Cir. 2008).

All

reasonable inferences are drawn in favor of the nonmoving party,
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but

a

party

cannot

defeat

summary

judgment

allegations or unsubstantiated assertions.

with

conclusory

Little, 37 F.3d at

1075. A court ultimately must be satisfied that “a reasonable jury
could not return a verdict for the nonmoving party.”

Delta, 530

F.3d at 399.
If the dispositive issue is one on which the moving party will
bear the burden of proof at trial, the moving party “must come
forward with evidence which would ‘entitle it to a directed verdict
if the evidence went uncontroverted at trial.’” Int’l Shortstop,
Inc. v. Rally’s, Inc., 939 F.2d 1257, 1263-64 (5th Cir. 1991)
(citation omitted). The nonmoving party can then defeat the motion
by either countering with sufficient evidence of its own, or
“showing that the moving party’s evidence is so sheer that it may
not persuade the reasonable fact-finder to return a verdict in
favor of the moving party.” Id. at 1265.
If the dispositive issue is one on which the nonmoving party
will bear the burden of proof at trial, the moving party may
satisfy its burden by merely pointing out that the evidence in the
record is insufficient with respect to an essential element of the
nonmoving party’s claim. See Celotex, 477 U.S. at 325.

The burden

then shifts to the nonmoving party, who must, by submitting or
referring to evidence, set out specific facts showing that a
material issue exists. See id. at 324.

The nonmovant may not rest

upon the pleadings, but must identify specific facts that establish

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a material issue for trial.

See, e.g., id. at 325; Little, 37 F.3d

at 1075.
DISCUSSION
Fidelity contends that it is entitled to summary judgment on
Plaintiff's claims because Plaintiff has failed to comply with the
stringent requirements of its insurance policy.

Article VII(R) of

the General Conditions governing the SFIP (the "Conditions"), as
noted by Fidelity, provides:
You may not sue [Fidelity] to recover money under this
policy unless you have complied with all the
requirements of the policy. . . . This requirement
applies to any claim that you may have under this
policy and to any dispute that you may have arising
out of the handling of any claim under the policy.
(Rec. Doc. 17-3, p. 16).

"Federal law governs interpretation of

NFIP polices." Kidd v. State Farm Fire & Cas. Co., 392 F. App'x
241, 243 (5th Cir. 2010). Because payments on SFIPs ultimately come
from

the

federal

treasury,

the

Fifth

Circuit

has

repeatedly

recognized that conditions of SFIPs, such as the aforementioned
condition, must be "strictly construed and enforced." Forman v.
FEMA, 138 F.3d 543, 545 (5th Cir. 1998); Richardson v. Am. Bankers
Ins. Co. of Fla., 279 F. App'x. 295, 298 (5th Cir. 2008) (citing
Gowland v. Aetna, 143 F.3d 951, 954 (5th Cir. 1998)). Courts should
not, even in "hard cases," allow plaintiffs to circumvent these
regulations, as providing for such "would disregard 'the duty of
all courts to observe the conditions defined by Congress for

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charging the public treasury.'" Forman, 138 F.3d at 545 (quoting
Office of Pers. Mgmt. v. Richmond, 110 S.Ct. 2465, 2469 (1990)). As
such, a rule allowing for claimants to recover against Fidelity and
other WYO

Program Carriers despite only "substantial compliance"

with the terms of their SFIP would be "contrary to [Fifth Circuit]
caselaw." Marseilles Homeowners Condo. Ass'n Inc. v. Fidelity Nat.
Ins. Co., 542 F.3d 1053, 1056 (5th Cir. 2008) (citing Richardson,
143 F.3d at 299).
Fidelity specifically argues that Plaintiff is not entitled to
file a lawsuit seeking payment on its claim because it has failed
to satisfy the "Proof of Loss" requirement. The Conditions of
Plaintiff's SFIP require all claimants to submit a sworn and
verified "proof of loss" setting forth the nature, cause, and
extent of the loss. These terms further require claimants to
supplement this proof of loss with "specifications of damaged
buildings and detailed repair estimates." (Rec. Doc. 17-3, p. 15).
Moreover, Article VII(J)(3) of the Conditions further instructs
that all claimants must provide Fidelity with "prompt written
notice" of any loss suffered, accompanied by a prepared "inventory
of damaged property showing the quantity, description, actual cash
value, and amount of loss" to be supported by "all bills, receipts,
and related documents." (Rec. Doc. 17-3, p. 14). Fidelity contends
that Plaintiff has failed to fulfill its obligation to provide
Fidelity with adequate proof of loss. It notes that despite

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Plaintiff's submission of a proof of loss form, it failed to
provide any documentation to support or substantiate its insurance
claim. The crux of Plaintiff's argument is that it satisfied all
requirements regarding the proof of loss under the SFIP by both
timely allowing Fidelity's independent adjuster, Mr. O'Berry, to
inspect the damaged property, of which Fidelity was aware, and by
submitting with the proof of loss an attached affidavit attesting
to the "completion of the repairs from the Hurricane Katrina
claim." (Rec. Doc. 18, p. 4). As such, Plaintiff submits that a
genuine issue of material fact remains regarding whether the proof
of loss it submitted is sufficient so as to justify payment of its
claim under the SFIP.
Despite Plaintiff's contentions, the Court finds that no
genuine issue exists regarding the fact that Plaintiff failed to
comply with the strict proof of loss requirements imposed by its
SFIP. The Fifth Circuit has repeatedly held that "an insured's
failure to provide a complete, sworn proof of loss statement, as
required by the flood insurance policy, relieves the federal
insurer's obligation to pay what otherwise might be a valid claim."
Marseilles, 542 F.3d at 1056 (citing Richardson, 143 F.3d at 299;
Gowland, 143 F.3d at 954). Here, while the proof of loss submitted
by Plaintiff was sworn and timely, it failed to include any
documentation to support its calculation of loss, as mandated by
the terms of its SFIP.

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Plaintiff relies on several prior decisions of this Court
regarding the issue of sufficiency of proofs of loss in support for
its contention that summary judgment is not appropriate on this
issue. However, Plaintiff has failed to acknowledge the substantial
distinctions between those rulings and the facts at hand. For
instance, this Court previously found summary judgment improper
when a plaintiff provided documentation to its insurance company,
a WYO Program Carrier, which included "a written statement by
Plaintiff setting forth the basis of the loss along with supporting
documentation, including contractor's estimates, that very well may
have been sufficient to establish both the nature of the loss and
the amount of the claim." Oechsner v. Hartford Life Ins. Co., 2008
WL 89514, at *3 (E.D. La. Jan. 7, 2008) (Barbier, J.). Here,
Plaintiff has provided no documentation to support the damage
alleged in its proof of loss other than one sworn affidavit,
claiming that the present damages were sustained after it had
performed

repairs

for

previous

damage

sustained

in

Hurricane

Katrina. However, this affidavit provides no facts to support the
nature, the extent, or the cost of the damages.
Additionally, unlike in Oechsner, noticeably missing from the
Plaintiff's proof of loss is any documentation setting forth
estimates by third party contractors, adjusters, or otherwise.
Plaintiff

relies

on

the

fact

that

Fidelity

was

granted

an

opportunity to fully inspect Plaintiff's property through its

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appointed adjuster, Mr. O'Berry, which it pursued. However, this
mere

opportunity

to

inspect

does

not

relieve

Plaintiff

from

providing any documentation to support its claims. Moreover, upon
inspection, Mr. O'Berry estimated the appropriate payment for
Plaintiff's damage at $266.81 (a recommended payment of $5,266.81
less the $5,000.00 deductible provided by the policy). (Rec. Doc.
17-1, p. 6). This estimate lends no support to Plaintiff's proof of
loss in the amount of a staggering $76,218.01. As such, the Court
finds

that

Plaintiff's

reliance

on

Fidelity's

opportunity

to

inspect and knowledge of Mr. O'Berry's inspection in support of its
argument that its proof of loss was proper entirely lacks merit.
Instead, by failing to provide documented support for its damage
calculations, Plaintiff has failed to provide any information
whereby FEMA could evaluate "the merits of their claim." See
Forman, 138 F.3d at 545. Considering the strict interpretation and
construction given to the regulations contained in SFIPs by both
the U.S. Supreme Court and the Fifth Circuit, this Court finds that
Plaintiff has failed to provide sufficient documentation as to
fulfill its obligation to submit a proper proof of loss.
Additionally, the mere fact that Plaintiff provided timely
notice to Fidelity with an opportunity for Fidelity's assigned
independent adjuster to inspect the damage does not substantiate
its claim that it has submitted a proper proof of loss. This Court
has previously recognized that giving notice of loss and providing

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a

sworn

proof

of

loss

statement

requirements of the policy."

are

"separate

and

distinct

Oechsner, 2008 WL 89514, at *3

(quoting Gowland, 143 F.3d at 954). Fidelity does not dispute that
Plaintiff satisfied the policy requirement mandating timely notice
of damage, and this issue is not currently before the Court.
Because Plaintiff has failed to prove that it submitted a properly
documented proof of loss to Fidelity as required by its SFIP, no
genuine issue remains regarding the fact that Plaintiff was not
entitled to full payment for its claim for damage sustained during
Hurricane Isaac under the terms of its policy. As such, summary
judgment shall be granted in favor of Fidelity on all Plaintiff's
claims.
CONCLUSION
Accordingly,
IT IS HEREBY ORDERED that the Motion for Summary Judgment
(Rec. Doc. 17) is GRANTED.
IT IS FURTHER ORDERED that all of Plaintiff's claims against
Fidelity are hereby DISMISSED WITH PREJUDICE.
New Orleans, Louisiana this 17th day of November, 2014.

________________________________
CARL J. BARBIER
UNITED STATES DISTRICT JUDGE

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