Moffett et al v. Computer Sciences Corporation, et al

Filing 675

REPORT AND RECOMMENDATIONS of Special Master re 622 Supplemental MOTION for Summary Judgment for the claim of Tina Malara filed by FEMA Objections to R&R due by 7/14/2011 Responses due by 7/14/2011. Signed by Special Master Dennis M. Sweeney on 6/28/11. (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 TINA R. MALARA
This constitutes the Report and Recommendation to the Court concerning the
waiver claim of Tina R. Malara 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 520 pages labeled FEMA-000001 to 000520.
I.

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

Number 14-16023733 from Harleysville Insurance Company (“Harleysville”) to

insure Plaintiff’s house located at 703 South Morris Street, Oxford, Maryland (the
“insured structure”). Plaintiff's structure was insured up to $110,000.00 with a
deductible of $500.00 and no contents coverage under the SFIP.
FEMA-000140.

See

Harleysville is a Write Your Own (“WYO”) Program

participating insurance company, authorized to issue the SFIPs as promulgated by
FEMA.
On or about September 18, 2003, Hurricane Isabel struck the MidAtlantic States, including Maryland, causing damage along the coast, including to
the insured structure owned by Plaintiff.

See FEMA-000216.

The insured

property had flood water of 30 and 38 inches for approximately 48 hours. Id.
Plaintiff's SFIP was in full force and effect at the time of the loss and provided
coverage for the flood-related damages. Id .
Plaintiff contacted her insurer on September 19, 2003, notifying them of
the loss, alleging her insured structure was damaged by the flooding caused by
Hurricane Isabel.

An independent adjuster, Kim Wilson from SIMSOL, was

assigned to investigate the loss. See FEMA-000234. Harleysville assigned the
independent adjuster to assist Plaintiff with her claim “as a courtesy only” in
accordance with SFIP Article VII(J)(5), (7) and (8).
The SFIP normally allows the insured a total of sixty (60) days to submit a
Proof of Loss with supporting documentation for a claim, but for the loss at issue,
FEMA extended the time in which to present the Proof of Loss to a total of 120
days, or until January 16, 2004.

See FEMA-000090 and FEMA-000091.

A

plaintiff also has two years (normally) to submit a claim for Increased Cost of
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Compliance (“ICC”) benefits pursuant to Article III, Coverage D of the SFIP. See
44 C.F.R. §61, App. A-1, Article III, Coverage D, §5(e).

The independent adjuster inspected the exterior of the structure, conducted
a room-by-room inspection of the interior, took photographs, and adjusted the
loss.

See FEMA-000247 through FEMA-000265 and FEMA-000510 through

FEMA-000520. The adjuster identified $51,581.14 as being the replacement cost
amount of covered flood damages to the building, of which $43,616.57 was the
actual cash value of the damages. The difference between the total damages and
the actual cash value damages represented the recoverable depreciation, which
represented the replacement cost of the building. Plaintiff signed a Proof of Loss
for this amount. See FEMA-000264.
Plaintiff also signed a replacement cost proof of loss for $6,397.60 and
submitted same to Harleysville. See FEMA-000037. Plaintiff was paid the full
amount for her loss by Harleysville. However, Plaintiff indicated in her letter
accompanying the Proof that she did not agree with the numbers on the Proof of
Loss and that she was signing the Proof of Loss as only a “partial payment” on
her claim. See FEMA-000018 and FEMA-000019. No other timely, signed and
sworn Proofs of Loss for any amounts over and above the amount determined to
be payable by Ms. Wilson were submitted by Plaintiff seeking damages under
Coverage A as required by Article VII(J) of the SFIP.
Harleysville issued a letter on January 23, 2004, advising the insured that
it was construing the Proof of Loss as being the amount claimed, because
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otherwise, based upon the “partial payment” language, Harleysville would not
have been able to pay anything to the insured.

See FEMA-000033 and

FEMA-000034. In this same January 23rd letter, Harleysville also denied any
claim for amounts over and above the amount listed in the Proof of Loss,
triggering the one-year period for the Plaintiff to file a lawsuit in accordance with
Article VII(R) of the SFIP and 42 U.S.C. §4072. Id.

Plaintiff did submit a claim for Increased Cost of Compliance (“ICC”)
benefits under SFIP Article III, Coverage D for the maximum amount of coverage
available - $30,000.00. See FEMA-0000286. Plaintiff was paid the full amount
of $30,000.00 in ICC benefits by Harleysville.

See FEMA-000045 through

FEMA-000048.
Plaintiff availed herself of the FEMA Task force review process twice.
The first review resulted in a finding in July 2004 that no additional amounts
could be paid beyond what the adjuster allowed. Plaintiff then requested a second
re-inspection by the FEMA Task Force, and in December of 2004, FEMA
determined that an additional payment of $5,522.95 could be paid.

See

FEMA-000011, FEMA-000013, FEMA-000017, FEMA-00090 through
FEMA-000094, and FEMA-000116.
On August 18, 2004, Plaintiff signed a Proof of Loss for $5,522.95, and
Harleysville issued payment to the Plaintiff for this amount. See FEMA-000038.
As a result of the review of the loss by the independent adjuster from
SIMSOL, by Harleysville’s Claims Department, and two separate reviews by
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FEMA’s Task Force, Plaintiff was issued three checks by Harleysville for the
flood-related damage to the building – a check for $43,616.57 for the actual cash
value of the building damages, a check for $6,397.60 for the recoverable
depreciation on the building damages (which resulted in the claim being paid on a
replacement cost coverage basis), and a third check for $5,522.95 based upon the
second FEMA Task-Force review of her property.

See FEMA-000032,

FEMA-000035, FEMA-000036, FEMA-000040, and FEMA-000041.
On July 7,2004,Plaintiff submitted an untimely Proof of Loss for
$67,466.40. See FEMA- 000044. Harleysville reviewed the untimely $67,466.40
Proof of Loss, and determined that no additional amounts were due and owing to
the insured over and above the amounts previously paid. See FEMA-000012.
On June 8, 2005, the instant lawsuit was filed by the Plaintiff. See First
Complaint, Doc. No. 1.
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 TINA MALARA’S INDIVIDUAL
APPLICATION FOR WAIVER OF PROOF OF LOSS REQUIREMENTS.” See
Doc. No. 243 and the subparts thereto. FEMA denied the request in a letter dated
July 31, 2008. See FEMA-000090 to 000091.

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III.

Reasons for Waiver Denial
The reasons for the denial of the Waiver Claim are found at ¶¶24-37 of the

Supplemental Declaration of Karen Christian for the Claim of Tina R. Malara
(622-2). It states:
In the waiver request, Plaintiff made the wholly
conclusory and unsupported statement that she “had to remove
and replace her old home and build new.” See Doc. No. 243 at
¶ 17 and FEMA-000005.
Plaintiff claimed a total shortfall of $53,462.88 as
part of her waiver application. Id. This amount constitutes the
remaining available coverage under the Plaintiff’s Coverage A
(Building Coverage) of her SFIP. See FEMA-000049 through
FEMA-000051.
Plaintiff's “Shortfall Itemization" did not actually
include any itemization of phyiscal(sic) loss caused by or from
flood. Id.
Plaintiff did submit a two-page, non-itemized
estimate in support of a request for greater benefits from
Schuman’s Quality Builders, Inc. (“Schuman”) Id.
Schuman listed a “block” estimate of
$30,000.00 for materials necessary to complete the
job without any detailed itemization. Id.

The total costs (without overhead and
profit) listed by Schuman was $100,870.00, and the
contractor’s overhead and profit was $48,630.00
which equates to a total overhead and profit rate of
more than 48% (and industry standards is 10%
overhead and 10% profit).
See FEMA- 000050,
FEMA-000051, and FEMA-000174.
Plaintiff's "Shortfall Itemization" was based
completely on the cost of rebuilding her damaged home anew
as opposed to the actual scope and cost of flood related
damages to the insured structure. See FEMA-000049 through
FEMA-000051.
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The “Shortfall Itemization” also claims an amount
of to bring the electrical wiring up to current building code
standards. See FEMA-000049 through FEMA-000051. This
work is excluded by SFIP Article V (“Exclusions”), Section A,
subparts 6 and 7, as well as Article III, Coverage D, Section 5,
subsection (f).
Nothing in the Schuman estimate indicates where in
the house the work was to be performed.
See FEMA
FEMA-000049 through FEMA-000051.
The Plaintiff’s
property only had 38 inches of water in it. FEMA will not pay
for incidental or consequential damages, but only for “direct
physical loss by or from flood” under the SFIP.
Plaintiff presented no evidence requiring her to
demolish her home and did not provide any evidence
supporting a greater claims payment than what was allowed by
the estimates provided by Harleysville and the Task Force
review. The Plaintiff's shortfall calculation to replace her old
building was based on the square footage cost of a new,
upgraded dwelling, which included code and material
upgrades. See FEMA-000049 through FEMA-000051. The
SFIP excludes coverage for upgrades and requires the use of
material that is of like kind and quality. See 44 C.F.R. §61,
app. A-1, Article V(A) and Article VII, Section V, subpart 2(a)
(2).
As there is nothing submitted that would allow
FEMA to evaluate the basis for these claims, no amounts can be
paid.
When reviewing Plaintiffs' waiver application, the
Administrator evaluated the facts and circumstances relating to
the request.
See FEMA-000090 through FEMA-000091.
Specific to this case, in his July 31, 2008 letter the
Administrator considered whether:
1. Policy holder demonstrated additional damages
exist that are covered by the SFIP;
2. Policy holder submitted appropriate
documentation supporting the additional
compensation being requested; and
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3. Policy holder provided a reasonable
explanation for the delay in submitting the POL.
Id.
In the July 31, 2008 letter providing FEMA's
determination on Plaintiff’s waiver application, the Federal
Insurance Administrator (David Maurstad) stated:
Based upon our review of your waiver
request, I have determined that there are no
additional items eligible for payment under your
policy and that no further payment is due to you.
It has been over four years since the deadline to
submit a POL expired and you have not provided
a reasonable explanation for the delay in
submitting a timely POL. In addition you have
not demonstrated additional covered damage
exists for which you have not been paid.
Specifically, you claim your damages
necessitated the demolition of your dwelling as a
result of the flooding. To support the amount
claimed, you provided an estimate for the
replacement of your home.
Your claim was
originally reviewed by an independent adjuster, a
General Adjuster with the National Flood
Insurance Program, and subsequently reviewed by
the Hurricane Isabel Task Force which resulted in
a $5,522.95 supplemental payment. The General
Adjuster’s inspection of the property did not find
damages that would require demolition of the
structure. You did receive the maximum payment
under the Increased Cost of Compliance Coverage
f r o m y o u r Wr i t e Yo u r O w n C o m p a n y,
Harleysville Insurance Company. A review of the
contractor’s estimate by the Hurricane Isabel Task
Force found that the costs presented were
unexplained and lacked an itemization of the
repairs needed.
The contractor’s charges for
overhead and profit were more than double the
insurance industry standard.
No further
documentation has been submitted to support your
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claim and a supplemental payment is not
warranted.
Further, your waiver request 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.
Accordingly, your request for a waiver of
the time period within which to file a POL is
denied.
See FEMA-000090 through FEMA-000091.
Plaintiff failed to demonstrate she met any of the criteria
used to determine whether to grant a waiver. First, she failed to
demonstrate any additional damages she sought were actually
covered by the SFIP. Second, she did not submit detailed line-item
documentation of uncompensated damages caused directly by
flooding which exceeded the amount previously paid by
Harleysville to Plaintiff for her loss. Third, she failed to establish
that she proceeded in good faith and with reasonable explanation
for the delay.
Accordingly, after a 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 she failed to demonstrate that any of the
criteria for the granting of a waiver were met, and she failed to
document any physical loss by or from flood covered under the
SFIP for which she did not previously receive full compensation
from Harleysville.

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IV.

Plaintiff’s Assertions

Plaintiff in her Opposition (Document 646) at pages 35 to 41 complains
that Ms. Christian in her declaration did not acknowledge the severity of
the damage done to the home by the flood waters and gave short shrift to
the Town of Oxford “substantial damage” determination. Id at 35 to 36.
Plaintiff argues: “ With flood water lapping over the countertops in her
home for 2 full days, her home was severely and significantly damaged to
the point where the replacement of her home was the only viable choice.”
Id at 36.
Plaintiff also expresses disagreement with FEMA’s characterizations of the
July 7, 2004 Proof of Loss as “untimely” since Plaintiff believes it was
timely submitted under the circumstances of this case. Id at 38.
Plaintiff further states that contrary to Ms. Christian’s statements the house
was substantially damaged with water contamination for two full days and
this resulted in damages that are due to direct physical loss by flood
pursuant to the SFIP. Id at 38. Plaintiff also contends that her detailing of
the itemization of the damages was sufficient and should not have been
rejected by FEMA. Id at 39. Plaintiff seeks $53,462.88 in her motion for
summary judgment. Document 464 at page 40.

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V.

Special Master’s Analysis 1

FEMA’s reasons for waiver denial as set about above in Part III are
lengthy and unusually detailed and, in the Special Master’s view, show
careful consideration of the claim under the standards of the SFIP. None of
Plaintiff’s arguments are persuasive and some are not relevant to the
Special Master’s review of the denial of the waiver claim. In Plaintiff’s
waiver application the claim was based on the cost of new construction,
see FEMA 000049 and 000005 to 000006. The reasons given in Part III
above are more than sufficient to explain why FEMA did not agree with
Plaintiff’s position. The Special Master does not believe that further
discussion is necessary.
Plaintiff spends much of her argument explaining why the July 7, 2004
POL was timely filed. This issue is significant for purposes of whether
Plaintiff timely filed her action in this court, but as the Special Master
understands the court’s directions to the Special Master it is not for the
Special Master to make determinations about whether the underlying
complaint in the U.S. District Court was filed in a timely fashion under the
statutory standards.

The Special Master will thus make no

1

In their Oppositions at Document No. 646 at Pages 3 to 9, Group Four Plaintiffs 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 these issues in this Report and Recommendation, 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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recommendation as to whether the July 7, 2004 POL was timely made or
the complaint in this court was timely filed.
As to the denial of the waiver claim, the Special Master finds that FEMA
denials for the reasons stated are neither arbitrary, capricious or an abuse
of discretion.

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; and it is further
recommended that Plaintiff’s Motion for Summary Judgment be denied.

June 26, 2011
Date

/S/
Dennis M. Sweeney
Special Master

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