They promptly reported their loss and followed procedures for filing a claim.
Defendant's reliance on Wagner v. Director, Federal Emergency Management Agency, 847 F.2d 515 (9th Cir. 1988), is entirely misplaced. In Wagner, the Ninth Circuit indeed found that the policy exclusion for damage caused by earth movement barred recovery by plaintiff. The ruling, though, was not based on a tandem reading of direct cause and the earth-movement exclusion. Plaintiff's circumstances were squarely within the exclusion. Id. at 521-22. Wagner's relevance to this case is limited to the proposition that circumstances must square with those noted in the clause in order for an exclusion to bar a claim. Plaintiffs' circumstances do not fall squarely within the proffered exclusion clause.
In sum, the damages are a direct physical loss by or from flood NOT specifically excluded from the coverage of the policy. Plywood Property Associates v. National Flood Ins., 928 F. Supp. 500, 504-05 (D.N.J. 1996) (loss that would not have occurred but for the flood is not recoverable only if it comes within one of the specific exclusion clauses). They are, therefore, a covered loss under the policy.
Defendant's final argument that the letter from the FEMA claims director constitutes authority supporting denial of plaintiffs' claim is without support. The Court readily accepts the proposition that a regulatory interpretation from a proper authority receives special deference in appropriate cases in the district court. See National Railroad Passenger Corp. v. Boston and Maine Corp., 503 U.S. 407, 421-22, 118 L. Ed. 2d 52, 112 S. Ct. 1394 (1992). The claims director's letter, however, is neither a regulatory interpretation nor the opinion of an authority deserving deference in this Court.
The case law cited by defendant is not to the contrary. In Lollar v. Alabama By-Products Corp., 893 F.2d 1258 (11th Cir. 1990), the court considered the deference to be given an administrative law judge's findings in a black lung case. "Courts must defer to an agency's consistent interpretation of its own regulation unless it is plainly erroneous or inconsistent with its own regulation." Id. at 1262 (internal quotations omitted). "We owe this deference," the court continued, "only to [the Director of the Agency] as the relevant policymaker." Decisions by other members of the agency receive no special deference.
The claims director does not purport to be a policymaker entitled to deference under the NFIP. Indeed, the director's letter comments on specific contract provisions and their applicability under given circumstances. It does not pretend to be an official interpretation of a federal regulatory guideline like that discussed in Lollar. Federal common law, not the read of a claim administrator, controls. See Smoak v. Independent Fire Ins. Co., supra, 874 F. Supp. at 111.
Because the Court finds that the 1995 Napa River flood was a direct and proximate loss not excluded by the SFIP, plaintiffs' motion for summary judgment on liability is granted.
B. Breach of Contract Damages
Plaintiffs ask for summary judgment on damages as well as liability. They offer several theories resulting in awards ranging from $ 24,000 to over $ 1 million. Defendant argues that if it is liable for the wallpaper loss, plaintiffs' damages are grossly overstated.
The Court finds that there is inadequate evidence on damages to rule on this aspect of plaintiffs' motion. The only support submitted by plaintiffs is an unexplained, handwritten list describing several inventory and placing a value on each item. It is unclear just what inventory is described and whether all the inventory described was lost. It is likewise unclear whether the dollar amounts listed are cost or retail value. This issue must, therefore, be resolved on a later day.
C. Bad Faith Claim
While the Court is unimpressed with defendant's arguments against liability, there is insufficient evidence of bad faith on this record. Plaintiffs focused their attention in this motion on interpretation of the contract and presented little evidence relevant to bad faith. An inference of bad faith may be gleaned from the record as it stands. A finding of bad faith, though, is best left as a question of fact for the jury. Therefore, plaintiffs' motion for summary judgment on this claim is denied.
For the reasons stated above and GOOD CAUSE APPEARING, the Court ORDERS that:
1. Plaintiffs' motion for summary judgment on the liability issue of the breach of contract claim is GRANTED;
2. Plaintiffs' motion for summary judgment on the damages prong of the breach claim is DENIED;
3. Plaintiffs' motion for summary judgment on their tortious breach of contract is DENIED.
IT IS SO ORDERED.
DATED: July 8, 1997.
EUGENE F. LYNCH
United States District Judge