Glenn K. GUNTER; Lisa G. Gunter, Plaintiffs-Appellants
FARMERS INSURANCE COMPANY, INC.; American Security Insurance Company, Defendants-Appellees.
Submitted: Sept. 24, 2013.
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David A. Hodges, Sr., argued, Little Rock, AR, for appellants.
Gerald J. Nielsen, argued (Kristie Luke Mouney and Deani Beard Milano, on the brief), Metairie, LA, for Appellee Farmers Insurance Company.
Joseph R. Falasco, on the brief, Little Rock, AR, for Appellee American Security Insurance Company.
Before MURPHY, MELLOY, and SHEPHERD, Circuit Judges.
MURPHY, Circuit Judge.
After a flood caused damage to their home, Glenn and Lisa Gunter filed claims under their Standard Flood Insurance Policy (SFIP) with Farmers Insurance Company Inc. and their supplemental policy with American Security Insurance Company. Farmers promptly paid the amount claimed in the Gunters' timely filed proof of loss. When their home was later condemned as uninhabitable, the Gunters sued Farmers and American for breach of contract and various state law violations, seeking recovery for additional loss. The district court  dismissed the state law claims as preempted and concluded that the breach of contract claim could not survive summary judgment because the Gunters failed to comply with the requirements of the SFIP. The court also granted summary judgment to American, reasoning that the Gunters could not collect on their supplemental policy until they had exhausted their primary policy. The Gunters appeal, and we affirm.
Congress established the National Flood Insurance Program (NFIP) in 1968 in order to reduce the burden on the public fisc after flood disasters. 42 U.S.C. § 4001. The program is administered by the Federal Emergency Management Agency (FEMA). Id. § 4011. FEMA promulgated the Standard Flood Insurance Policy (SFIP) and directed that these policies may be issued through private insurers known as " Write Your Own" (WYO) companies. Id.; 44 C.F.R. § 62.23; 44 C.F.R. pt. 62 app. B. As " fiscal agent[s] of the Federal Government," WYO insurers deposit SFIP premiums in the United States Treasury and pay SFIP claims and litigation costs with federal money. 42 U.S.C. §§ 4017(a), (d); 44 C.F.R. §§ 62.23(g), (i)(6), (i)(9). WYO insurers cannot vary the terms of the SFIP without express written consent from the federal insurance administrator. 44 C.F.R. §§ 61.4(b), 61.13(d)-(e).
The Gunters' home was flooded on December 24, 2009. Their mortgagee held a SFIP through Farmers, a WYO carrier, in the amount of $87,900, and a supplemental flood insurance policy through American in the amount of $16,100. The Gunters initiated claims under these policies, stating that the flood had produced cracks along the interior and exterior walls of their home.
Farmers sent an independent insurance adjuster, Tommy Tipton, and an engineer from U.S. Forensic, LLC to inspect the property. The engineer's subsequent report concluded that most of the damage to the home was unrelated to the December 24 flood. Pursuant to the SFIP the Gunters then submitted to Farmers a proof of loss claiming $12,488.04 and a building replacement proof of loss claiming $249.73. Farmers reviewed the proof of loss in light
of the U.S. Forensic report and paid $12,237.77 of the Gunters' stated loss. Although American denied liability for any damage to the residence, it paid $1,610 for damage to a storage shed not covered by the SFIP.
In early March the Gunters' home was condemned as uninhabitable. In April the Gunters asked Farmers' adjuster Tipton to inspect the property again. He issued a new report and attached the findings from U.S. Forensic stating that the structural damage was not caused by the flood. The Gunters then hired Hall Engineering Ltd. to conduct an independent inspection of the residence, and it issued a report stating that approximately 30% of the building was damaged by ...