Moffett et al v. Computer Sciences Corporation, et al

Filing 658

REPORT AND RECOMMENDATIONS of Special Master re 551 Supplemental MOTION for Summary Judgment for the claim of Arley Horne filed by FEMA Objections to R&R due by 6/23/2011 Responses due by 6/23/2011. Signed by Special Master Dennis M. Sweeney on June 5, 2011. (Sweeney, Special Master)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
Southern Division

THOMAS L. MOFFETT, II, ET AL.
Plaintiffs,
v.
COMPUTER SCIENCES CORPORATION,
ET AL.
Defendants.

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Civil Action No.
8:05-CV-01547

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REPORT AND RECOMMENDATION CONCERNING
WAIVER CLAIM OF ARLEY HORNE
This constitutes the Report and Recommendation to the Court concerning the
waiver claim of Arley Horne pursuant to Part 1.f of the Memorandum Order of
the Court (Document 467). In preparing this report, the Special Master reviewed
the motions, memoranda, affidavits and exhibits provided in connection with the
process specified in the Memorandum Order. As necessary, the Special Master
also reviewed other documents that are part of the Court filings in this case. The
Special Master was also provided by the Federal Emergency Management Agency
(“FEMA”) the computer disc of the “appropriate documents of record” for this
claim, as specified in Part 1.a of the Memorandum Order.

In this case, the

documents consist of 435 pages labeled FEMA-000001 to 000435.
I.

Background
Plaintiff purchased a Standard Flood Insurance Policy (“SFIP” or

“Policy”), Policy Number 3000030417, directly from the NFIP to insure his

residence located at 11226 Bird River Grove Road, White Marsh, Maryland
(“insured structure”) for damage caused by flooding.

See FEMA-000005.

Plaintiff's structure was insured up to $81,000.00 with a deductible of $1,000.00.
See Declaration of Suzanne Woods (Document 183-13) and Supplemental
Declaration of Karen Christian (Document 551-3).
On September 19, 2003, Hurricane Isabel struck the Middle Atlantic
States, including Maryland, causing severe damage along the coast, including the
insured structure owned by Plaintiff. See FEMA-000274. Plaintiff's policy was
effective September 17, 2003 through April 21, 2004 and was therefore covered at
the time of the loss. Id.
On or about September 23, 2003, Plaintiff contacted his insurer, the NFIP,
and notified it of his loss. Id. On or about September 26, 2003, Plaintiff was
contacted by an independent adjuster from Bellmon Adjusters, Inc. who was
assigned by FEMA to investigate Plaintiff's loss. See FEMA-000332.
The adjuster inspected the exterior of the structure, conducted a room-byroom inspection of the interior, took photographs, and adjusted the loss.

See

FEMA-000236 through FEMA-000270. The adjuster noted that the excessive
rainfall resulted in a waterline of seven to 14 inches on the exterior and only one
to two inches inside the structure. See FEMA-000237.
The adjuster identified $23,171.33 in actual cash value of covered flood
damages after applying the $1,000.00 deductible. See FEMA-000253. If eligible,
the adjuster noted an additional $4,569.49 under the replacement cost provision of
the policy. Id.
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On December 22, 2003, Plaintiff submitted a signed and notarized Proof
of Loss for the $23,171.33 and a Building Replacement Cost Proof of Loss for the
$4,569.49 as noted by the adjuster. See FEMA-000241 and FEMA-000242.
On January 21, 2004, FEMA issued a check for the entire balance for the
Actual Cash Value of the loss noted on the Proof of Loss ($23,171.33).
FEMA-000212.

See

On or about April 8, 2004, Plaintiff submitted a

supplemental Proof of Loss seeking an additional $6,426.65. See FEMA-000220.
On April 14, 2004, Plaintiff was paid $6,426.65.

See FEMA-000208 and

FEMA-000288. Plaintiff's two payments up to this date totaled $29,597.98. See
FEMA-000108.
On or about June 3, 2004, Plaintiff contacted the Hurricane Isabel Task
Force ("Task Force"). Id. On June 3, 2004, Allied Adjuster Services on behalf of
Plaintiff sent a letter to the Task Force stating:
We hereby acknowledge having filed a supplemental claim and
Proof of Loss on behalf of the insured in the amount of $6,426.65
on or about 3-31-04. This letter shall serve as a release between
Allied Adjuster Services and Arley Frances Horne. Our file is
closed at this time.
See FEMA-000158.
On June 10, 2004, a check for $5,181.48 was issued to Plaintiff for the
recoverable deprecation portion of his claim ($4,569.49 noted above, plus an
additional $611.98 in recoverable deprecation for the supplemental claim). See
FEMA-000174 and FEMA-000288. The NFIP database indicates Plaintiff never
cashed this check. FEMA indicates that Plaintiff is still entitled to this amount.

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On June 11, 2004, the Task Force completed its review of Plaintiff's claim
and increased some of the costs for materials and labor resulted in a
recommended payment of $1,437.86, which Plaintiff was paid.

See

FEMA-000145 and FEMA-000005.
In July, Plaintiff again contacted the Task Force requesting policy limits.
Plaintiff's Public Adjuster was contacted and refused to get involved. See
FEMA-000109.
On September 23, 2003, Plaintiff was notified that the Task Force concluded he
was not entitled to any additional compensation. See FEMA-000113.
Plaintiff was entitled to payments totaling $36,217.31. 1 As noted above FEMA
issued a check for $5,181.47 that Plaintiff never cashed. This accounts for the
difference of $5,181.47 between Plaintiff's claimed payment amount of
$31,035.84 and the system payment issued of $36,217.31.
II.

Waiver Claim and Denial
On December 3, 2007, this Court permitted Plaintiffs to submit

applications for waivers to FEMA. See Doc. No. 196 and Doc. No. 197, Order of
December 4, 2007. On or about February 25, 2008, Plaintiff submitted to FEMA
a document entitled “PLAINTIFF ARLEY HORNE'S INDIVIDUAL
APPLICATION FOR WAIVER OF PROOF OF LOSS REQUIREMENTS.” See
FEMA-000001 through FEMA-000104.

FEMA denied the request in an undated

letter; see FEMA-000105 to 000106.

1

Plaintiff notes he was paid a total of $31,035.84 based upon payments of $23,171.33, $6,426.65,
$4,569.49 and $1,437.86 with all payment dates unknown. See FEMA-000005.

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III.

Reasons for Waiver Denial
The reasons for the denial of the Waiver Claim are found at ¶¶21-31 in the

Supplemental Declaration of Karen Christian with Respect to the claim of Arley
Horne (Document 551-3). It states:
Plaintiff claimed a shortfall of $48,964.16.
See
FEMA-000005. Plaintiff claims he had to remove and replace the
old home and build new. See FEMA-000020. Plaintiff took a
formulaic approach to calculate his loss based on the square
footage of the original structure (757 sq. ft.) multiplied by the cost
per square foot ($158,983.09 divided by 1,160 sq. ft. = $111.19 per
sq. ft.) of the new upgraded dwelling minus the $30,000.00
Increased Cost of Compliance compensation resulting in a
replacement valuation of $84,170.83. Id. Plaintiff reduced the
claim to his policy limits of $81,000 deducted the $31,035.84
payments from FEMA and the $1,000.00 deductible to arrive at his
claimed shortfall of $48,964.16. Id.
Plaintiff's formulaic "Shortfall Itemization" was based
completely on the cost of his new upgraded home.
See
FEMA-000020 and FEMA-000021. Plaintiff's "itemization" did
not actually include any itemization of physical loss caused by or
from the one to two inches of flood water that entered his home.
Id.
Plaintiff's method of calculating his damages by taking the
square footage of his original structure and multiplying it by the
cost per square foot of the new upgraded structure does not take
into account any of the SFIP's coverage limits or exclusions.
Plaintiff presented no evidence challenging the repair
estimates provided by FEMA and the Task Force.
Plaintiff's waiver application actually contradicts his claim.
Plaintiff provides a letter where he states ". . .the NFIP has only
provided enough money to rebuild damaged interior structure and
refinish where needed. . ." See FEMA-000010. Apparently,
Plaintiff concedes he was compensated per the terms of his SFIP.

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Further, Plaintiff's Public Adjuster agreed the amount of
compensation Plaintiff received was sufficient.
See
FEMA-000109 and FEMA-000158.
When reviewing Plaintiff's waiver application, the
Administrator evaluated the facts and circumstances relating to the
request. See FEMA-000105 and FEMA-000106. Specific to this
case, the Administrator considered the following whether:
1. Policy holder demonstrated additional damages
exist that are covered by the SFIP;
2. Policy holder submitted appropriate documenttation supporting the additional compensation being
requested;
and
3. Policy holder provided a reasonable explanation
for the delay in submitting the POL.
Id.
The SFIP only covers direct physical loss caused by or
from flooding. Plaintiff's formulaic shortfall calculation to replace
his structure constructed in 1949 (See FEMA-000157) was based
on the square footage cost of a new upgraded dwelling, which
included code and material upgrades. The SFIP excludes coverage
for upgrades and requires the use of material that is of like kind
and quality. See Exhibit A at ¶ ¶ 16 and 17. Further, the SFIP has
a policy limit of $30,000.00 for Increased Cost of Compliance
expenses and Plaintiff's formula makes it impossible to separate
out these expenses.
In the letter providing FEMA's determination on Plaintiff's
waiver application, the Administrator stated:
... [Y]ou claim your actual damages
exceeded the amount allowed by the
National Flood Insurance Program Servicing
Agent (NFIPSA). Your claim was originally
reviewed by an independent adjuster and
subsequently reviewed by the Hurricane
Isabel Task Force. A supplemental payment
in the amount of $1,437.86 was
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recommended by the Task Force.
The
NFIPSA has paid you $36,217.31 for the
building damages and the maximum amount
of coverage for your Increased Cost of
Compliance claim, $30,000.
The
supplemental funds you are seeking relate to
the increased square footage of your
dwelling from 704 square feet to 1,160
square feet, upgrades to the dwelling that are
not covered by the SFIP and additional costs
associated with your ICC claim for which
you received the maximum amount of
payment.
Further, your waiver resulted in a
comprehensive review of your claim by a
FEMA Insurance Examiner. After further
review, the Insurance Examiner found no
basis to set aside the original findings.
Id.

Plaintiff failed to demonstrate he met any of the
criteria used to determine whether to grant a waiver.
First, he failed to demonstrate any additional damages he sought
were actually covered by his SFIP. Second, he did not submit
detailed line-item documentation of uncompensated damages caused
directly by the one to two inches of flooding to the interior of his
original structure, but instead took a formulaic approach based on the
cost per square foot of a substantially improved home to calculate his
loss. Third, he failed to establish that he proceeded in good faith and
with reasonable explanation for the delay.
Accordingly, after another comprehensive review of the
claim, FEMA determined no further compensation was warranted.
Id. Plaintiff's waiver application was denied for a multitude of
reasons, but primarily because he failed to document any physical
loss by or from flood covered under his SFIP for which he did not
receive full compensation for.

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IV.

Plaintiffs’ Assertions

Plaintiff asserts that the adjuster selected by FEMA put a replacement cost
value to Mr. Horne’s home at $57,120.00 with an actual cash value at
$43,982.00. Plaintiff notes that prior to Tropical Storm Isabel as part of a
refinancing of a mortgage an appraiser had assessed the value of the home
at $82,172.81 and had found the square footage of the house’s living area
to be 704 square feet while the bank’s appraiser’s found there to be 757
square feet of living area.

Plaintiff asserts that the appraisal and

calculations of the appraiser should have been accepted over that of the
adjustor selected by FEMA.
Plaintiff also asserts that a check issued by FEMA in the amount of
$5,181.4 concerning the recoverable depreciation was never presented or
cashed and notes that Ms. Christian states that $5,181.48 is still available.
Plaintiff also contends that there monies determined to be due from the
Hurricane Isabel Task Force in the amount of $1, 432.86 were never paid
and that FEMA has taken contradictory positions on whether these funds
were or were not paid. Plaintiff also asserts that it was very reasonable for
him to replace his home which he had demolished and to put a “bare bones
prefabricated structure” in its place.
Because of what Plaintiff contends are differences in the values for the
home given by the adjuster and the appraiser, Plaintiff believes that the

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appraiser’s conclusion should have been accepted with a shortfall of either
$50,397.02 or $27, 517.02 even accepting the adjuster’s figures.
Plaintiff also asserts that failure to mention in the original denial letter the
amounts now conceded to be due to Plaintiff by FEMA (the $5,181.48
amount and the $1, 437.86 amount) demonstrates that “no true review” of
the claim ever took place which demonstrates that FEMA’s actions are
arbitrary and capricious.

V.

Special Master’s Analysis 2

FEMA argues that the claims now being presented based on the
differences between the adjuster’s calculations and the appraiser’s
calculations are new arguments that were not presented in the waiver
application filed by the Plaintiff which was solely based on the square foot
formula for new construction that has now been rejected by the court. The
Special Master agrees with FEMA that a fair reading of the waiver
application does not indicate that the argument about the appraisal

2Group

Three Plaintiffs in their Oppositions (Document No. 630) at pages 3 to 9 have raised what
they term to be twenty four “common issues” that the Court has previously considered or resolved
in consideration of prior groups. To the extent that these issues are not further cited in the
individual Plaintiffs’ discussion of their particular cases, the Special Master will not specifically
address in this report and recommendation these issues but will incorporate and rely on the court’s
prior rulings on these issues (see Documents 594,596 and 597) and the previously filed
Memorandum on Role of the Special Master and Report and Recommendation of the Special
Master on General Issues Raised by Plaintiffs and Defendants (Document 563).

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valuation was presented or put FEMA on notice that it was being made.
The Special Master concludes that FEMA was only obligated to review
those arguments that were fairly presented in the FEMA application but
did not have to search to find other potential errors or arguments not
presented and not raised until a response to the Motion for Summary
Judgment was filed. The administrative record indicates that a careful
review was done of this claim at all stages by FEMA.

The letter to

Senator Mikulski in 2004 explaining in detail the reasons why the claim
was adjusted the way it was is representative of the approach taken in
evaluating the Plaintiff’s claim. FEMA-000108 to 000109.
There is however one issue that remains unresolved and which indicates
confusion about what payments were made. This concerns two payments
that Plaintiff is said to be entitled to receive. It appeared from the
Supplemental Declaration of Karen Christian at paragraph 15 that the
$5,181.48 will be paid upon request. It appeared that there remains a
dispute about whether the $1,437.86 was ever paid to Plaintiff.
To clarify the status of these payments, the Special Master asked counsel
to clarify their positions on these payments and to respond to the Special
Master by e-mail prior to the preparation of this report and
recommendation.
It appears that FEMA’s position is now that both the $5,181.48 and the
$1,437.86 amounts were paid in a check issued on November 15, 2005 in
the amount of $6,619.33. FEMA’s position is stated in the e-mail sent to
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the Special Master from Ramoncito J. deBorja, Deputy Associate Chief
Counsel. The e-mail states:
Pursuant to your 5/31/11 email regarding Group 3 plaintiff Arley
Horne and whether FEMA will reissue a check for amounts due,
FEMA conducted further investigation and located check
#0000299813 issued to Mr. Horne on 11/17/2005 in the amount of
$6,619.33.  See attached.  This amount includes $5,181.47 referenced
by you as well as $1,437.86 recommended by the Hurricane Isabel
Task Force. FEMA's records show that the check cleared and the
back of the check shows Mr. Horne's endorsement.  
"
I contacted plaintiffs' counsel today and provided a copy of the
cleared check for $6,619.33.  I asked whether they would dispute Mr.
Horne's receipt of the check.
"
As evidenced in plaintiffs' letter to you today, plaintiffs dispute
that FEMA paid this amount to Mr. Horne because it did not provide
or refer to this check in its supporting documents, declaration, or
Motion for Summary Judgment.  Plaintiffs' counsel also states that
Mr. Horne does not recall receiving or negotiating this check.         
"
Despite plaintiffs' assertions, the check is clear evidence that
FEMA did in fact pay the amounts that FEMA previously indicated
were still owed...and more importantly, that Mr. Horne endorsed the
check.  Accordingly, it is FEMA's position that additional monies are
not due to Mr. Horne.
A scanned copy of the check, front and back was included with the e-mail.
Counsel for Plaintiff Horne sent to the Special Master a copy of the letter
sent to FEMAʼs counsel by e-mail. Plaintiffʼs counselʼs response is as
follows:
We have received from you a copy of the cancelled check referenced
in and attached to your email of today, as to which Mr. Horne's name
appears on what you have represented is the back of the copy of the
check. Upon receipt of it, we contacted Mr. Horne. He does not recall
receiving or negotiating the check.
We have re-reviewed the supporting documents submitted with
FEMA's Motion for Summary Judgment on January 12, 2011,
supposedly all of the documents used by FEMA to review Mr. Horne's
claim. We found no copy of the check in question. In fact, FEMA has
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given sworn testimony that the $5,181.47 and the $1,437.86 were not
paid and remain due, as detailed in Document 630, pages 31 & 32:
On February 7, 2004, Mr. Horne contracted with Jeff Wolf of Allied
Adjuster Services to assist him with filing supplemental
claims."
On March 31, 2004, with Mr. Wolfʼs assistance, Mr. Horne
filed a Supplemental POL for additional $6,426.65 (see FEMA
000126-000134). According to the email correspondence between
Karen Christian and Tere Martin, Department of Homeland Security,
Emergency Preparedness & Response, Division of Mitigation, there
was a Proof Waiver and Losses Reported over 60-days. Based on the
response by Ms. Martin, both documents were approved (see FEMA
000214). A check in the amount of $5,181.48, which represents the
original recoverable depreciation and the recoverable depreciation
reflected in the March 12, 2004 POL. FEMAʼs records indicate, a
check was issued to Mr. Horne, however, this check was never
presented or cashed. Ms. Christian states $5,181.48 is still available
to Mr. Horne (see Doc 551-3, page 5, para. 15).
Mr. Horne requested assistance and review from the Hurricane Isabel
Task Force. It was determined additional monies were owed him in
the amount of $1,432.86. Susan Woods indicates, in her Declaration
of April 1, 2008, that Mr. Horne did not sign the Proof of Loss
associated with this supplement and a check was not issued (see
Declaration of Susan Woods, Doc 298-3, page 4, para. 25 & 26).
Also, as detailed in Document 630, page 32:
FEMA states, in its undated denial letter, Mr. Horne was paid a total of
$36,217.31 (see FEMA 000106). This amount does not reflect either
the $5,181.48 or the $1,432.86 detailed above. This is yet further
proof that Mr. Horne did not receive a true review of his claim
between the date he filed his application for waiver and the day
FEMA denied it.
If such a pivotal document as proof of payment of part of Plaintiff's
claim was not part of the documentation submitted to Plaintiff's
counsel either in support of FEMA's review of said claim or in
support its subsequent motion, where was this document? Was it
relied upon or even seen by Ms. Susan Woods or Ms. Karen
Christian? If in the file, it should have been produced. If not, the
production of such at this late date results in an after-the-fact review.
This prompts the question; how many other documents are in Mr.
Horne's file, pertinent to the litigation and "allegedly" part of FEMA's
review, have not been made available to counsel for Plaintiff Horne?
This prompts an additional question. How many documents
pertaining to the claims of the other Plaintiff households have also
been "overlooked" and not made available to their counsel?
It is Mr. Horneʼs position that,
(1) because FEMAʼs denial letter claimed only that amounts were
paid which did not include the $5,181.48 or the $1,432.86,
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(2) becauses FEMAʼs representatives (Ms. Woods and Ms. Christian)
have given testimony under oath in support of FEMAʼs motion for
summary judgment that these amounts remain due, and
(3) because FEMA did not claim these amounts were paid even in
their reply memorandum,
FEMA is now foreclosed from making that claim after the fact.
In addition, and contrary to your email of today, Mr. Horne disagrees
that no further payment is due him as detailed above, in his waiver
application of February 28, 2005, and his Opposition to FEMA's
Motion for Summary Judgment filed April 25, 2011.
We have cc'd Honorable Judge Sweeney on this communication, so
that he will be fully apprised of Mr. Horneʼs response to the
questions he raised in his recent email.
If you have any questions, please contact us at your convenience.
It was the Special Masterʼs hope that the matter of this payment could be
resolved without the need for further proceedings. Unfortunately, it
appears that this is not the case. The representations in the Declaration
filed with the court from FEMA did not reflect what FEMA now states the
facts to be, i.e. that both the $5,181.483 and the $1,432.86 were paid in
the check that they have presented. Counsel for Mr. Horne disputes that
the check was received and cashed at least according to Mr. Horneʼs
current recollection.
This dispute creates a factual issue which the Special Master believes can
not be resolved by summary judgment proceedings.
As to this limited issue, the Special Master recommends that either: (1) the
matter of the receipt of the $5,181.48 and the $1,432.86 be remanded to
FEMA for a review and determination after receiving all evidence relating
to the issue including a sworn affadavit from Plaintiff as to non-receipt; or
(2) that the U.S. District Court empower the Special Master to conduct an
3

At various points the parties refer to the amount as $5,181.48 and other places as
$5,181.47. The penny difference is not material and is not argued to be so by the parties.

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evidentiary hearing on this limited issue and make proposed findings to be
submitted to the court. Except for this limited issue, the Special Master
concludes that Defendantʼs Motion for Partial Summary Judgment be
granted and that Plaintiffʼs Motion for Summary Judgment be denied.

VI.

Recommendation of the Special Master
After a review and a consideration of the matter and the arguments

presented by the parties, it is the recommendation of the Special Master that the
Defendants’ Motion for Partial Summary Judgment affirming FEMA’s
determination of Plaintiff’s waiver application be granted except that the issue of
the payments to Plaintiff of the two amounts in dispute be resolved in a manner
directed by the U. S. District Court; and it is further recommended that Plaintiff’s
Motion for Summary Judgment be denied.

June 5, 2011
Date

/S/
Dennis M. Sweeney
Special Master

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