805 F.3d 204
5th Cir.2015Background
- Jeffrey and Theresa Pye owned a two-unit building in Galveston insured by a SFIP (flood) with $205,400 building / $50,000 contents limits and a separate wind policy through the Texas Windstorm Insurance Association.
- Hurricane Ike (2008) caused major damage; Pyes settled with wind insurer for $66,765.84 and received initial SFIP payments of $76,968.23 (building) and $30,367.49 (contents); $2,500 in damaged car parts was excluded.
- The Pyes later submitted an increased proof of loss; Fidelity rejected the higher figure. Fidelity’s contractor later estimated ACV flood damage at $147,340.01; the Pyes’ estimator gave $175,180.
- After selling the unrepaired property for $58,000, the Pyes sued Fidelity (bench trial). The magistrate found Fidelity’s ACV estimate more credible, applied a rule barring double recovery, and awarded nothing for building damage but $2,500 for car parts.
- On appeal, the panel affirmed denial of additional building coverage under federal common law’s prohibition on double recovery, and reversed the $2,500 contents award (Pyes conceded car parts not covered by SFIP).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether federal common law permits offset to prevent double recovery across wind and flood policies | Pye: policies insure mutually exclusive perils; double-recovery bar inapplicable so they can collect from both insurers | Fidelity: federal common law (standard insurance principles) bars recovery that exceeds total loss, so prior payments offset SFIP liability | Held: Federal common-law indemnity principle bars double recovery across different insurance contracts; offset permitted |
| Whether state (Texas) "one-satisfaction" rule governed instead of federal law | Pye: trial court erred by applying Texas rule | Fidelity: federal common law controls SFIP interpretation; state law not controlling | Held: SFIP governed by federal common law; court correctly used federal insurance principles (not state law) |
| Proper metric for measuring total loss when applying double-recovery cap (market value vs. ACV replacement-cost-minus-depreciation) | Pye: cap should use ACV (policy-defined) not pre-Ike market value | Fidelity: market value is permissible evidence and only market-value evidence of total loss was presented | Held: Federal common law allows consideration of market value (broad evidence rule); because only pre-Ike market-value evidence was offered, court did not err in using it to find Pyes already fully compensated |
| Contents award for car parts under SFIP | Pye: awarded $2,500 for car parts damaged in flood | Fidelity: SFIP excludes self-propelled vehicles and their parts; award improper | Held: Reversed — Pyes concede car parts are excluded under SFIP |
Key Cases Cited
- One Beacon Ins. Co. v. Crowley Marine Servs., Inc., 648 F.3d 258 (5th Cir. 2011) (bench-trial standard of review: factual findings for clear error; legal issues de novo)
- Wright v. Allstate Ins. Co., 500 F.3d 390 (5th Cir. 2007) (federal common law governs SFIP and draws on standard insurance principles)
- Bradley v. Allstate Ins. Co., 620 F.3d 509 (5th Cir. 2010) (applied anti–double-recovery principle to wind/flood payments and discussed measures for loss)
- GE Capital Commercial, Inc. v. Worthington Nat’l Bank, 754 F.3d 297 (5th Cir. 2014) (discussed limits of Texas one-satisfaction rule; noted distinction when multiple insurance policies share contractual liability)
- Hanover Bldg. Materials, Inc. v. Guiffrida, 748 F.2d 1011 (5th Cir. 1984) (SFIP disputes resolved under federal law referencing standard insurance rules)
- J & H Auto Trim Co. v. Bellefonte Ins. Co., 677 F.2d 1365 (11th Cir. 1982) (broad evidence rule for determining actual cash value)
- Manning v. Hayes, 212 F.3d 866 (5th Cir. 2000) (federal common law may be informed by analogous state law if consistent with federal policy)