WEISBECKER et al v. SZALKOWSKI et al

Filing 47

MEMORANDUM AND ORDER granting in part and denying in part 17 Motion for Summary Judgment ; granting in part and denying in part 18 Motion for Summary Judgment. Plaintiffs' requests for attorney's fees and interest are DENIED. Signed by Judge Peter G. Sheridan on 6/28/2016. (mmh)

NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY

PHILIP and RENEE WEISBECKER,

Civil Action No.: 14-cv-55 (PGS)(DEA)

Plaintiffs,
v.
JANET SZALKOWSKI, et. al.,

MEMORANDUM
AND
ORDER

Defendants.

SHERIDAN, District Judge.
Facts and Procedural History:

By way of cross motions for summary judgment, Plaintiffs and Defendants seek a
determination of whether flood coverage pursuant to the National Flood Insurance Program
(“NFIP”) is available in this Superstorm Sandy case. Plaintiffs Philip and Renee Weisbecker
(“Plaintiffs”) have owned property in Toms River, New Jersey since August 25, 2007. On
October 29, 2012, Superstorm Sandy caused tidal water storm surges to flow onto the Property.
During the flooding, water entered into an abandoned underground oil tank. Plaintiffs had been
unaware of the existence of this tank. As a result, residual fuel oil was forced from the tank and
seeped into the sandy soil crawlspace areas of the property. To remedy the damage,
environmental remediation measures were undertaken, including removing and cleaning
contaminated sand. (Plaintiffs’ Summary Judgment Brief (“Pls’ Brief’), at 3). Plaintiffs did not

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submit an official proof of loss for the supplemental damage claim prior to filing suit. (See
Defendants’ Statement of Uncontested Material Facts (“Defs’ SMF”) at ¶ 9).
Plaintiffs are holders of a Standard Flood Insurance Policy (“SFIP”) Dwelling Form
issued by Allstate Insurance Company (“Allstate”), a Write-Your-Own Program carrier
participating in the NFIP. (See Defs’ SMF at ¶ 1). The SFIP is at issue in this case (the “Policy”),
which sets forth terms that have been approved by the U.S. government pursuant to regulations.
See 44 C.F.R. Pt. 61, App. A(1).
Plaintiffs allege that Allstate has “refused to provide coverage for the oil spill” under the
Policy and has “refused to pay any of the costs of the clean-up necessary for rehabilitation of the
plaintiffs’ property.” (Pls.’ Brief, at 3). Plaintiffs submitted a claim for flood damage, and on or
about January 3, 2013, Allstate issued an initial payment for other claims in the amount of
$70,967.76. (Id., at 4). Immediately thereafter, Plaintiffs submitted a supplemental claim because
the adjuster did not account for the damage caused by the oil tank and requested payment for
removal of the tank and oil and other clean-up. (Id). On January 17, 2013, Allstate claimed that
the oil tank was not covered by the policy. (Id.). Plaintiffs seek a declaration that the oil-spill
related damage is covered by the SFIP. (Id.).
At oral argument held on March 7, 2016, the Court requested supplemental briefing for
Plaintiffs to clarify what they were seeking. In their supplemental brief, Plaintiffs seek payment
for the following items:
1. Testing of the interior soil, as required by local law, found within the
confines of the house, i.e.: the crawlspace and area contained within the
foundation that is filled with sand;
2. The removal of oil-contaminated sand and replacement with clean sand;
3. The installation of rat slab to prevent further intrusion of oil vapors from
the sand; and
4. The complete removal of the oil-soaked joists, as opposed to the original
approved method of merely cleaning the oil off the joists.
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Defendants responded in mid-April 2016. [ECF No. 44].
Legal Standard:

Summary judgment is appropriate under FED. R. Civ. P. 56(c) when the moving party
demonstrates that there is no genuine issue of material fact and the evidence establishes the
moving party’s entitlement to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.s.
317, 3 22-23 (1986). A factual dispute is genuine if a reasonable jury could return a verdict for
the non-movant, and it is material if, under the substantive law, it would affect the outcome of
the suit. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In considering a motion for
summary judgment, a district court may not make credibility determinations or engage in any
weighing of the evidence; instead, the non-moving party’s evidence “is to be believed and all
justifiable inferences are to be drawn in his favor.” Marino v. Indus. Crating Co., 358 F.3d 241,
247 (3d Cir. 2004) (quoting Anderson, 477 U.S. at 255).
Once the moving party has satisfied its initial burden, the party opposing the motion must
establish that a genuine issue as to a material fact exists. Jersey Cent. Power & Light Co. v.
Lacey Twp., 772 F.2d 1103, 1109 (3d Cir. 1985). The party opposing the motion for summary
judgment cannot rest on mere allegations and instead must present actual evidence that creates a
genuine issue as to a material fact for trial. Anderson, 477 U S. at 248; Siegel Transfer, Inc. v.
Carrier Express, Inc., 54 F.3d 1125, 1130-31 (3d Cir. 1995). Moreover, only disputes over facts
that might affect the outcome of the lawsuit under governing law will preclude the entry of
summary judgment. Anderson, 477 U.S. at 247-48.
Courts interpret flood insurance policies by giving them their plain, unambiguous
meaning, with ambiguities decided in favor of the insured. Linder & Assoc., Inc. v. Aetna Cas. &
Sur. Co., 166 F.3d 547, 550 (3d Cir. 1999). “Because any claim paid by a WYO Company is a
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direct charge to the United States Treasury, strict adherence to the conditions precedent to
payment is required.” Suopys v. Omaha Property & Cas., 404 F.3d 805, 809 (3d Cir. 2005).
Analysis:

As a threshold matter, Defendants claim that Plaintiffs did not submit a formal proof of
loss for the supplemental oil spill claim. Article V1I(R) of the SFIP states that a claimant “may
not sue us to recover money under this policy unless you have complied with all the
requirements of the policy.” In a proof of loss, the insured informs the insurer of the amounts
they are claiming under the policy. See SFIP, VII(J)(4). The insured must sign and swear to the
statement and provide nine pieces of information to the insurer, including specifications of the
damage, repair estimates, and an inventory of damaged personal property. See SFIP,
VII(J)(4)(a)-(i). Policyholders are presumed to know and understand this requirement. See Sutor
v. Federal Emergency Management Agency, 2009 WL 4268457, at *4 (E.D. Pa. Nov. 23, 2009).
Furthermore, “there is substantial authority for the proposition that policyholders must file proofs
of loss in support of all claims, including supplemental or additional claims, and that failure to do
so warrants summary judgment against the policyholder.” Sutor, 2009 WL 4268457, at 5.
In their supplemental brief, Plaintiffs state that “a formal claim having been denied by
defendant ab

initio

is the real reason behind the missing proof of claim form.” (P1’s Supp. Brief,

at 2). Also, Plaintiffs argue that Defendants never questioned the missing proof of loss in the
discovery process. (Id.). Although Plaintiffs do not specifically argue waiver and estoppel,
waiver and estoppel has been rejected by courts. See Suopys, 404 F.3d at 809 (explaining that
waiver and estoppel does not apply to the proof of loss requirement).
The Policy does not state that the proof of loss must be submitted in any specific form; it
merely provides that the proof of loss must contain certain information. Here, Plaintiffs filed an

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initial claim, but the Court does not know the contents of that claim. Plaintiffs filed a
supplemental claim to Allstate dated January 4, 2013, the day after Allstate issued a payment of
$70,967.76 pursuant to the initial inspection, explaining that their oil tank was not accounted for
when the adjuster came to inspect the property, and that they needed money for the removal of
the tank and the oil. (Ex. A,

¶J

11-13 to Vytell Cert.; Ex. B to Vytell Cert.). On January 17,

2013, Allstate advised Plaintiffs that the oil tank was not covered under the flood policy. (Ex. A,

¶

14 to Vytell Cert.). Although Defendants cite to the May 16, 2013 FEMA bulletin to support

the assertion that a proof of loss is necessary for the supplemental claim, that bulletin also states
that, “[cjommunication with the policyholder is the key: acknowledging, following up, and
informing of unforeseen delays as soon as they are anticipated.” (Ex. E to Vytell Cert.). Here,
there was clearly communication with Plaintiffs following the supplemental claim, and there is
no indication that Allstate ever alerted Plaintiffs of the need for a more formal proof of loss prior
to or following their response stating that the oil tank was not covered. The Court will not grant
summary judgment in favor of Defendants for this reason.
***

The Policy covers: “direct physical loss by or from flood to your insured property.”
(Policy, Art. I). The policy defines “direct physical loss by or from flood” as “loss or damage to
insured property, directly caused by a flood,” and “there must be evidence of physical changes to
the property.” Art II(B)(12). There is no claim here for removal of the underground oil tank. The
claim is for the oil forced into the crawlspace within the building’s enclosure. Section III,
Property Covered, A. Coverage A- Building Property, of the Policy states:
We insure against direct physical loss by or from flood to...
8. Items of property in a building enclosure below the lowest elevated
floor.. or in a basement, regardless of the zone. Coverage is limited to the
following...
.

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b. Clean-up
There is an exclusion related to “pollutants” that states: “We do not pay for the testing for or
monitoring of pollutants unless required by law or ordinance.” Art. III(D)(5). Pollutants are
described as, “Substances that include, but are not limited to, any solid, liquid, gaseous, or
thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals,
and waste.” Also, “waste” includes, but is not limited to, materials to be recycled, reconditioned,
or reclaimed.” Art. II(B)(22).
Article IV provides for Property Not Covered:
(8) Underground structures and equipment, including walls, septic tanks
and septic systems;
(10) Containers, including related equipment, such as, but not limited to,
tanks containing gases or liquids.
Defendants asserts that the oil tank was “underground” and hidden underneath a
“concrete pad” and “pool filtered system” on the property, which constituted a “container”
containing liquid. Plaintiffs explain that none of these paragraphs mention oil in a crawl space or
clean-up or removal of oil. However, the “Not Covered” section is irrelevant here. Plaintiffs are
not seeking the cost to replace the oil container; the Plaintiffs are requesting damages caused to
their Property because of a spill that happened to emanate from a container.
Defendants also argues that consequential damages are not covered. The SFIP only
covers damages caused directly by or from flood. In West v. Harris, the Fifth Circuit explained
that damages in a breach of contract action arising under an NFIA issued policy are “pecuniary
in nature, not personal.” Only “direct physical loss by or from flood” is covered. Ne user v.
Hocker, 140 F. Supp. 2d 787, 791 (W.D. Mich 1999). The policy also excludes consequential
and non-pecuniary losses in Article V(A):

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We oniy pay for direct physical loss by or from flood, which means that we do
not pay you for:
7. Any other economic loss you suffer.
Policy, Article V(A). See also, Ryan v. Selective Ins. Co. ofAmerica, 2014 WL 2872089 (D.N.J.
June 23, 2014) (“consequential or incidental damages are, however, excluded” under SFIP).
According to Defendants, the oil tank concealed underground is not covered under Articles IV
(8) and (10), and damages from non-covered items are excluded as consequential.
The Court finds that some of the damage suffered by Plaintiffs is covered by the terms of
the insurance policy. It appears that the damages do relate to “direct physical loss by or from
flood,” and some of the injury is to the Property, not to the surrounding land. Insurance policies,
when ambiguous, should be interpreted in favor of the insured, and exclusions are to be
interpreted narrowly. See Elizabethtown Water Co. v. Hartford Cas., Ins. Co., 998 F. Supp. 447,
456 (D.N.J. 1998). Also, it does not appear that these damages are consequential. The damages
are directly related to damage to the Property from the flood.
However, there is an exclusion to coverage for “cost associated with enforcement of any
ordinance or law that requires any insured or others to test for, monitor, clean up, remove,
contain, treat, detoxify or neutralize, or in any way respond to, or assess the effects of
pollutants.” Policy, Art. III(D)(5)(b). “Pollutants” is defined as:
Substances that include, but are not limited to, any solid, liquid, gaseous, or
thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids,
alkalis, chemicals, and waste. “Waste” includes, but is not limited to,
materials to be recycled, reconditioned, or reclaimed.
Policy, Art. 11(22). It appears as though the section of Plaintiffs’ damages seeking recovery for
testing of the interior soil to comply with local law would be excluded.

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Defendants also contend that there can be no recovery for any damage regarding the sand
in the crawlspace because the SFIP does not pay for land. See Art. IV. That section also states:
that the SFIP does not cover, “[t]hose portions of walks, walkways, decks, driveways, patios and
other surfaces.. .located outside the perimeter, exterior walls of the insured building.” Art. IV(9).
The Third Circuit has held, “In sum, we conclude that. land is not insured under the SFIP, and
. .

that the SFIP thus does not cover costs the [plaintiffs] incurred in removing debris not owned by
them from their land outside their home.” Torre v. Liberty Mitt. Fire Ins. Co., 781 F.3d 651, 655
(3d Cir. 2015). However, the Court is not convinced that the crawlspace constitutes “land” that is
“outside the home.” In the Court’s view, a crawlspace would be located within the perimeter of a
building, and is therefore covered under the policy.
Defendants also note that there is no evidence that the rat slab was damaged by the flood.
According to Defendants, Plaintiffs cannot establish that the rat slab was present at the time of
the loss. Such an upgrade is not payable, according to Defendants. Plaintiffs have not disputed
this claim. Since there is no evidence that the rat slab was damaged, this claim is denied.
Similarly, Defendants claim that there is no evidence that the floor joists were damaged
by the flood. Defendants agree that floor joists could be covered under the Policy, but they assert
that they already cleaned the floor joists and applied a microbial agent. (See Ex. A, Jeremy
Mates Affidavit). In their briefs, Plaintiffs do not explain why the cleaning of the joists is
insufficient or why replacement would be required under the Policy. Therefore, replacement of
the floor joists is denied.
Finally, Defendants claim that attorney’s fees and interest are barred because Case
Management Order No. 1 dismissed all state law claims, including claims for attorney’s fees. See
Docket No. 10, Section 3(a)(ii); see also Linbiad v. Nationwide Mitt. Ins. Co., 2014 WL

8

6895775, at *6 (D.N.J. Dec. 4, 2014). The Court agrees that attorney’s fees are barred. Also,
neither pre-judgment interest nor post-judgment interest is permitted for SFIP claims, according
to Defendants. See Ravasio v. Fid. Nat’! Prop. & Cas, Ins. Co., 81 F. Supp. 3d. 274, 280
(E.D.N.Y. 2015); Newton v. Capital Assur. Co., Inc. 245 F.3d 1306 (11th Cir. 2001); see also
Studio Frames Ltd. v. The Standard Fire Ins. Co., 483 F.3d 239, 252-53 (4th Cir. 2007). The
authority appears to support Defendants’ position, and Plaintiffs may not recover interest, either.

ORDER

Upon consideration of Plaintiffs’ Motion for Summary Judgment, and Defendants’
Motion for Summary Judgment, opposition thereto, any reply, and supplemental briefs; for the
reasons stated herein, and for good cause shown;
IT IS, on this

day of June, 2016, hereby

ORDERED that Defendants’ Motion for Summary Judgment [ECF No. 18] is
GRANTED IN PART and DENIED IN PART; and it is further
ORDERED that Plaintiffs’ Motion for Summary Judgment [ECF No. 17] is GRANTED
IN PART and DENIED IN PART; it is further
ORDERED that Plaintiffs’ request for the removal and replacement of sand under the
crawispace is GRANTED; it is further
ORDERED that Plaintiffs’ requests for payment for testing of the interior soil,

installation of the rat-slab and replacement of the oil-soaked joists are DENIED; it is further
ORDERED that Plaintiffs’ requests for attorney’s fees and interest are DENIED.

PETER G. SHERIDAN, U.S.D.J.
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