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Migliaro v. Fidelity National Indemnity Insurance Co.

United States Court of Appeals, Third Circuit

January 29, 2018

FIDELITY NATIONAL INDEMNITY INSURANCE COMPANY, a/k/a Wright National Flood Insurance Company

          Argued November 15, 2017

         On Appeal from the United States District Court for the District of New Jersey (District Court No.: 1-15-cv-05688) District Judge: Honorable Robert B. Kugler

          Steven C. Feinstein (Argued) Daniel W. Ballard Zenstein Ballard Counsel for Appellant

          Francis X. Manning (Argued) Stradley Ronon Stevens & Young Adam J. Petitt Brandon M. Riley Stradley Ronon Stevens & Young Counsel for Appellee

          Before: AMBRO, KRAUSE and RENDELL, Circuit Judges



         The issue in this case is whether the rejection of a policyholder's proof of loss constituted a "written denial of all or part of the claim, " thereby triggering the one-year statute of limitations that is set forth in every Standard Flood Insurance Policy ("SFIP"). After receiving a payment from Fidelity National Indemnity Insurance Company, based on an adjuster's assessment of the damage to his property caused by Hurricane Sandy, Anthony Migliaro submitted a sworn proof of loss seeking additional compensation. Fidelity sent Migliaro a letter rejecting his proof of loss, and he filed suit. The District Court found that the letter rejecting Migliaro's proof of loss was a "written denial of all or part of the claim." Since Migliaro filed his complaint almost two years after he received the letter, the District Court dismissed the suit as time-barred. We affirm the District Court's order. Although the rejection of a proof of loss is not per se a denial of the claim in whole or in part, it does constitute a denial of the claim if, as here, the policyholder treats it as such by filing suit against the carrier.

         I. Background[1]

         A. The National Flood Insurance Program

         Congress authorized the creation of the National Flood Insurance Program ("NFIP") to "enable interested persons to purchase insurance against loss resulting from physical damage to or loss of . . . property . . . arising from any flood occurring in the United States." 42 U.S.C. § 4011(a). The NFIP is administered by the Federal Emergency Management Agency ("FEMA"). Id. Under FEMA's Write Your Own program, individuals may purchase SFIPs from private insurance carriers ("WYO carriers"). 44 C.F.R. § 62.23.

         The national flood insurance system is an unusual hybrid of government and private insurance, but it is essentially a government program. WYO carriers are "fiscal agents" of the United States. 42 U.S.C. § 4071(a)(1). SFIP policyholders pay premiums to WYO carriers and WYO carriers service the policies. 44 C.F.R. § 62.23(d). However, the United States government ultimately pays all SFIP claims. Van Holt v. Liberty Mut. Fire Ins. Co., 163 F.3d 161, 166 (3d Cir. 1998) ("[A]n insured's flood insurance claims are ultimately paid by FEMA.").[2] In addition, although WYO carriers are also responsible for defending lawsuits arising under SFIPs, the United States government reimburses the cost of defending such claims. 44 C.F.R. §62.23(i)(6); Van Holt, 163 F.3d at 165 ("Although WYO companies have the responsibility of defending against claims, FEMA reimburses the WYO companies for their defense costs."). Because SFIP claims are ultimately paid by the United States government, all SFIPs must be identical to the form codified at 44 C.F.R. pt. 61, app. A(1).[3] Every SFIP contains the following statute-of-limitations provision:

You may not sue us to recover money under this policy unless you have complied with all the requirements of the policy. If you do sue, you must start the suit within one year after the date of the written denial of all or part of the claim[.] . . . 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.

44 C.F.R. pt. 61, app. A(1), art VII(R) (emphasis added).

         The SFIP and corresponding FEMA bulletins describe the SFIP claims process. After an SFIP policyholder suffers a loss, the WYO carrier sends an insurance adjuster to assess the damages. FEMA Bulletin W-12092a (Nov. 9, 2012). The adjuster then makes a recommendation as to the amount of money the policyholder is entitled to recover under the policy. Id. The WYO carrier typically adopts the adjuster's recommendation and pays the policyholder the recommended amount. Id. If the policyholder's coverage limits have not been exhausted and he believes he is entitled to recover more, he must send the carrier a proof of loss no later than a year and a half from the date of the loss. FEMA Bulletin W-13060a (Oct. 1, 2013).[4] A proof of loss is the policyholder's signed and sworn estimate of the additional covered damages. 44 C.F.R. pt. 61, app. A(1), art. VII(J)(4). The SFIP's Loss Payment provision sets forth the options available to the policyholder if the proof of loss is rejected. See 44 C.F.R. pt. 61, app. A(1), art. VII(M)(2).

         B. Factual Background

         Migliaro purchased an SFIP from WYO carrier Fidelity for his New Jersey property. The property sustained flood damage in October 2012 as a result of Hurricane Sandy. Fidelity sent an independent adjuster to assess the damage. The adjuster recommended a payment of $90, 499.11. Fidelity adopted the ...

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