Joseph BATTLE, Plaintiff-Appellant, v. SEIBELS BRUCE INSURANCE COMPANY; South Carolina Insurance Company, Defendants-Appellees, and Glasgow Hicks Company; North Carolina Joint Underwriting Association, Defendants. Joseph Battle, Plaintiff-Appellee, v. Seibels Bruce Insurance Company; South Carolina Insurance Company, Defendants-Appellants, and Glasgow Hicks Company; North Carolina Joint Underwriting Association, Defendants.
No. 01-1214, No. 01-1256
United States Court of Appeals, Fourth Circuit
Argued December 5, 2001. Decided April 29, 2002.
288 F.3d 596
Before WIDENER and WILLIAMS, Circuit Judges, and HAMILTON, Senior Circuit Judge.
Affirmed in part, vacated in part, and remanded by published opinion. Senior Judge HAMILTON wrote the opinion, in which Judge WILLIAMS joined. Judge WIDENER wrote a concurring and dissenting opinion.
OPINION
HAMILTON, Senior Circuit Judge.
This appeal primarily presents a subject matter jurisdiction question with respect to certain claims emanating from a coverage dispute between a homeowner and the South Carolina Insurance Company (SCIC) which involves a flood insurance policy issued under the National Flood Insurance Program (NFIP), see
I.
On October 23, 1995, SCIC issued Joseph Battle (Battle) a flood insurance policy under the NFIP for his beach-front home (the Property) located at 911 Canal Drive, Carolina Beach, North Carolina. Before we continue setting forth the facts and procedural history relevant to the issues on appeal, we deem the immediately following explanation of the NFIP necessary to put such information in proper context.
A.
Congress established the NFIP under the National Flood Insurance Act of 1968,
When Congress created the NFIP it gave the program‘s administrator two ways to execute the program and discretion to choose between them. The first method, the “Industry Program,” allows a pool of private insurers to underwrite flood insurance with financial backing from the government. The “Government Program,” the second option, allows the government to run the NFIP itself — offering federally underwritten policies — with the potential for administrative assistance from private insurers. In 1977[,] the Secretary of Housing and Urban Development, who ran the NFIP at the time (it has since been taken over by the Federal Emergency Management Agency), decided that the Industry Program was unworkable and ended it. He then implemented the Government Program, which has continued to the present.
Downey v. State Farm Fire & Cas. Co., 266 F.3d 675, 678-79 (7th Cir. 2001) (internal citations omitted).
For more than twenty years, the Director of the Federal Emergency Management Agency (FEMA) has been charged as the sole administrator of the NFIP. Exec. Order No. 12127, 44 Fed. Reg. 19367 (Mar. 31, 1979), reprinted in
The Director of FEMA operates the Government Program of the NFIP “through the facilities of the Federal Government....”
In 1983, the Director of FEMA used this authorization to create the “Write-Your-Own Program” (WYO Program). The WYO Program is a program whereby private insurance companies are allowed to issue, under their own names as insurers, flood insurance policies under the Government Program.
Premiums collected by WYO Companies, after deducting fees and costs, must be deposited in the National Flood Insurance Fund in the United States Treasury.
B.
SCIC is a WYO Company. As a WYO Company, SCIC issued Battle a SFIP for the Property (Battle‘s SFIP or his SFIP) for a one-year period beginning October 23, 1995. Significantly, Article 9(R) of Battle‘s SFIP provides as follows:
Conditions for Filing a Lawsuit: You may not sue us to recover money under this policy unless you have complied with all of the requirements of the policy. If you do sue, you must start the suit within 12 months from the date we mailed you notice that we have denied your claim, or part of your claim, and you must file the suit in the United States District Court of the district in which the insured property was located at the time of the loss.
(J.A. 484).2
On July 18, 1996, a property loss notice was forwarded on behalf of Battle to SCIC indicating that portions of the Property had sustained flood damage on July 12, 1996 as a result of Hurricane Bertha (the Bertha Claim). Specifically, Battle claimed flood damage to two structures built over the water and their miscellaneous contents, an enclosure on ground level under an elevated building, an air conditioning unit on a support stand, and the ceiling under an elevated building.
On September 13, 1996, another property loss notice was forwarded on behalf of Battle to SCIC. This time SCIC was notified that the Property had sustained additional flood damage on September 5, 1996 as a result of Hurricane Fran (the Fran Claim). This second property loss notice reported the damage to the Property as follows: “[R]oof, railing off deck, glass window seal broke, water damage inside, side of out building gone, fence damaged, contents damaged.” (J.A. 388).
Following a physical inspection of the Property by an insurance claim adjuster from Insurance Network Services sent by SCIC, Battle was sent a letter dated September 24, 1996, stating that his SFIP provided no coverage for his Bertha Claim.3 Although the letter was on the letterhead of “The Seibels Bruce Insurance Companies,” the “RE:” section of the letter correctly referenced the policy number of Battle‘s SFIP and the date he claimed to have sustained flood damage to the Property as the result of Hurricane Bertha. The letter specifically advised Battle that his SFIP “does not provide coverage for outbuildings, walkways or contents located in the enclosure of an elevated building.” (J.A. 386). The letter further advised him that his SFIP “does provide coverage for appurtenant structures, but only detached garages and carports,” and quoted the coordinate portions of Battle‘s SFIP.
Since you did not sustain a loss that would be covered by your flood policy, I regret to inform you Catawba Insurance Company will be unable to assist you in this matter. If you have any information which you feel may cause us to reevaluate our position, please do not hesitate to contact us by return mail.
(J.A. 387).4 The letter was signed by Linda Taylor, Senior Claims Representative.
Following another physical inspection of the Property by an insurance claim adjuster from Insurance Network Services sent by SCIC, Battle was sent a second letter dated January 21, 1997, stating that his SFIP provided only partial coverage for his Fran Claim.5 Although the letter was on the letterhead of “The Seibels Bruce Group, Inc.,” the “RE:” section of the letter correctly referenced the policy number of Battle‘s SFIP and the date he claimed to have sustained flood damage to the Property as the result of Hurricane Fran. The entire body of the letter states as follows:
Reference is made to the flood damage your above referenced property sustained on 9/5/96. Enclosed is a check for the undisputed amount of loss for which your flood policy provides coverage.
Also enclosed is a Proof of Loss in the amount of $6,195.15 (check amount). Please sign the Proof of Loss and return it in the self-addressed stamped envelope provided.
If you have any additional information you feel might cause us to reevaluate our position, please let us know by return mail.
(J.A. 390). The letter is signed by Michael Shaw, Claim Representative.
For reasons unexplained in the record, the check referenced as enclosed with the letter was not so enclosed. Nevertheless, Battle received a check for the same amount referenced in the January 21, 1997 letter in either late April or early May 1999 following a letter of inquiry by his attorney.
Nearly three years after Battle received the letter denying his Bertha Claim and two and one-half years after he received the letter denying his Fran Claim, in July 1999, Battle filed suit in North Carolina state court against SCIC, Seibels Bruce, the North Carolina Insurance Underwriting Association (NCIUA),6 as well as the Glasgow Hicks Company (Glasgow Hicks), the independent insurance agency through which Battle purchased his SFIP. Glasgow Hicks is located in Wilmington, North Carolina.
Battle‘s complaint alleged multiple claims, but the only claims at issue in the present appeal are his claims against SCIC and Seibels Bruce: (1) breach of contract; (2) breach of the implied covenant of good faith and fair dealing; and (3) conversion.7
SCIC and Seibels Bruce removed Battle‘s suit to the United States District Court for the Eastern District of North Carolina. The removal was based upon federal question jurisdiction,
Notes
[T]he Director [of FEMA] shall be authorized to adjust and make payment of any claims for proved and approved losses covered by flood insurance, and upon the disallowance by the Director of any such claim, or upon the refusal of the claimant to accept the amount allowed upon any such claim, the claimant, within one year after the date of mailing of notice of disallowance or partial disallowance by the Director, may institute an action against the Director on such claim in the United States district court for the district in which the insured property or the major part thereof shall have been situated, and original exclusive jurisdiction is hereby conferred upon such court to hear and determine such action without regard to the amount in controversy.
Following discovery, all defendants filed motions for summary judgment. Among other grounds, Seibels Bruce sought the grant of summary judgment with respect to all claims against it on the ground that it lacked privity of contract with Battle. Battle responded that liability on his SFIP should extend to Seibels Bruce because Seibels Bruce‘s logo appeared on the letterhead of the claim denial letters and on the declarations page of his SFIP. Agreeing fully with Seibels Bruce‘s lack of privity of contract argument, the district court granted Seibels Bruce‘s motion for summary judgment in toto.
Battle noted a timely appeal. On appeal, Battle does not appeal the district court‘s remand of any of his claims against NCIUA or Glasgow Hicks. Neither do either of these companies cross-appeal on any ground. Rather, Battle only appeals: (1) the district court‘s grant of summary judgment in favor of Seibels Bruce with respect to all of his claims against Seibels Bruce; and (2) the district court‘s grant of summary judgment in favor of SCIC with respect to his breach of contract claim against SCIC.
Seibels Bruce and SCIC noted timely cross-appeals. SCIC cross-appeals the district court‘s remand of Battle‘s claims against it alleging breach of the implied covenant of good faith and fair dealing and conversion. Seibels Bruce joins in SCIC‘s cross-appeal in the event we reject its lack of privity of contract argument. We will address Battle‘s appeal first and SCIC‘s cross-appeal second.
II.
Battle first contends the district court erred by granting summary judgment in favor of Seibels Bruce for lack of privity of contract. According to Battle, he has privity of contract with Seibels Bruce based upon the equitable theories of apparent agency (also known as apparent authority) and agency by estoppel. Battle theorizes that Seibels Bruce is a proper party because its logo appeared on the claim denial letters and on the declarations page of his SFIP.
Summary judgment is appropriate when “the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.”
Battle‘s challenge to the district court‘s grant of Seibels Bruce‘s motion for summary judgment is without merit. Every formulation of the equitable theories relied upon by Battle requires as an element reliance by the plaintiff upon the apparent agency relationship with the principal involved in order to establish liability. E.g., Crinkley v. Holiday Inns, Inc., 844 F.2d 156, 166 (4th Cir. 1988) (under both equitable theories of apparent agency or agency by estoppel, though no actual agency exists, a party may be held to be the agent of another on the basis that he has been held out by the other to be so in a way that reasonably induces reliance on the appearances) (applying North Carolina law); Johns Hopkins Univ. v. Ritter, 114 Md. App. 77, 689 A.2d 91, 100 (1996) (“Like apparent authority, an agency by estoppel can arise only where the principal, through words or conduct, represents that the agent has authority to act and the third party reasonably relies on those representations.“).
The record in this case is bereft of evidence suggesting that Battle relied upon any apparent agency relationship between Seibels Bruce and SCIC in connection with his decision to purchase flood insurance from SCIC or in his actions following such purchase. Accordingly, we affirm the district court‘s grant of summary judgment in favor of Seibels Bruce with respect to all of Battle‘s claims against it based upon the lack of privity of contract between Battle and Seibels Bruce.
Battle next challenges the district court‘s grant of summary judgment in favor of SCIC with respect to his breach of contract claim against SCIC, which claim the district court determined was time-barred pursuant to Article 9(R) of Battle‘s SFIP and
Article 9(R) of Battle‘s SFIP provides:
Conditions for Filing a Lawsuit: 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 12 months from the date we mailed you notice that we have denied your claim, or part of your claim, and you must file the suit in the United States District Court of the district in which the insured property was located at the time of loss.
(J.A. 484) (italics added).
We hold the mailing of the September 24, 1996 letter denying the Bertha Claim triggered the beginning of this twelve-month limitation period with respect to the Bertha Claim. In his appellate brief, Battle candidly acknowledges that he received the September 24, 1996 letter, which plainly states that it was sent “in reference to the claim which was presented under the above referenced policy number.”10 (J.A. 386). The “RE:” portion of the letter correctly states the policy number of Battle‘s SFIP and the date Battle claimed Hurricane Bertha damaged the Property, July 12, 1996. The letter specifically references the claim inspection performed by Mr. Gattiker of Insurance Network Services and the fact that Mr. Gattiker “advised that you sustained flood damage to two outbuildings, contents which were located in the enclosure, and a walkway.” (J.A. 386). The letter goes on to specifically state and explain why none of the claimed damage is covered by the referenced policy. Finally, the letter closes with the name and telephone number of a senior claims representative and a “cc:” to Glasgow Hicks. (J.A. 387).
Despite all of this information, Battle argues that the September 24, 1996 letter was ineffective to put him on notice that SCIC had denied the Bertha Claim because the letter appeared on the letterhead of “THE SEIBELS BRUCE INSURANCE COMPANIES,” rather than on the letterhead of SCIC. Battle contends that his argument is even stronger if we ultimately hold, as we did in Part II. of this opinion, that Battle lacks privity of contract with Seibels Bruce.
Battle‘s argument is without merit. Under federal law, a cause of action accrues when the plaintiff possesses sufficient facts about the harm done to him that reasonable inquiry will reveal his cause of action. See United States v. Kubrick, 444 U.S. 111, 122-24 (1979). All of the information in the September 24, 1996 letter and the fact that the cover page of Battle‘s SFIP listed SCIC as a subsidiary company of “THE SEIBELS BRUCE INSURANCE COMPANIES,” at a minimum, gave Battle sufficient facts about the alleged harm done to him (i.e., denial of the Bertha Claim) that reasonable inquiry would have revealed his cause of action. In short, Battle was on inquiry notice that SCIC had denied his Bertha Claim at the time he received the September 24, 1996 letter. Thus, his breach of contract claim, filed almost three years after his receipt of the September 24, 1996 letter, is untimely under the twelve-month limitation period set forth in Article 9(R) of Battle‘s SFIP.
Similarly, we hold the mailing of the January 21, 1997 letter denying the Fran Claim triggered the beginning of the twelve-month limitation period set forth in Article 9(R) of Battle‘s SFIP with respect to that claim. Again, Battle candidly admits that he received the January 21, 1997 letter.11 The letter correctly references the policy number of his SFIP, correctly states the date of his claimed loss due to Hurricane Fran, and plainly indicates that only a portion of the Fran Claim is covered while the remainder of the claim is denied.
In response to these facts, Battle reiterates his argument about the incorrect letterhead. We reject his argument for the same reason we rejected it with respect to the September 24, 1996 letter. Battle‘s receipt of the January 21, 1997 letter and the fact that the cover page of Battle‘s SFIP listed SCIC as a subsidiary company of “THE SEIBELS BRUCE INSURANCE COMPANIES,” at a minimum, gave Battle sufficient facts about the alleged harm done to him (i.e., partial denial of the Fran Claim) that reasonable inquiry would have revealed his cause of action. See Kubrick, 444 U.S. at 122-24. Thus, Battle‘s breach of contract claim against SCIC in connection with the partial denial of the Fran Claim, filed almost two and one-half years after his receipt of the January 21, 1997 letter, is untimely under the twelve-month limitation period set forth in Article 9(R) of Battle‘s SFIP.
IV.
We now turn to address SCIC‘s cross-appeal. The district court believed that Battle‘s claims alleging breach of the implied covenant of good faith and fair dealing and temporary conversion of money that SCIC acknowledged in its January 21, 1997 letter that it owed Battle with respect to the Fran Claim (collectively “the Remaining Claims“) did not “arise[] under the Constitution, laws, or treaties of the United States,” as provided in
Except as provided in subsections (b) and (c) or as expressly provided otherwise by Federal statute, in any civil action of which the district courts have original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution.
In its cross-appeal, SCIC argues the district court lacked the discretion to remand the Remaining Claims to state court pursuant to § 1367(c)(3), because
Therefore, in order to determine whether the district court had subject matter jurisdiction pursuant to
Battle‘s complaint does not specify upon what law, state or federal, he premises either of these claims. Accordingly, we cannot conclude that Battle‘s complaint establishes that federal law creates either claim. However, we do conclude that Battle‘s complaint establishes that Battle‘s right to relief under either claim “`necessarily depends on resolution of a substantial question of federal law.‘” Interstate Petroleum Corp., 249 F.3d at 219 (quoting Franchise Tax Bd., 463 U.S. at 27). First, the law is well settled that federal common law alone governs the interpretation of insurance policies issued pursuant to the NFIP.17 Leland, 934 F.2d at 529. See also Newton, 245 F.3d at 1309; Flick v. Liberty Mut. Fire Ins. Co., 205 F.3d 386, 390 (9th Cir. 2000); Sodowski v. National Flood Ins. Program, 834 F.2d 653, 655 (7th Cir. 1987); Hanover Bldg. Materials, Inc., 748 F.2d at 1013; Atlas Pallet, Inc. v. Gallagher, 725 F.2d 131, 135 (1st Cir. 1984); West, 573 F.2d at 881-82. Second, by force of the regulatory authority granted the Director of FEMA by Congress, Battle‘s SFIP “is governed by the flood insurance regulations issued by FEMA, the National Flood Insurance Act of 1968, as amended (
We also hold that Battle‘s complaint establishes that his right to relief upon his so-called “CONVERSION” claim “`necessarily depends on resolution of a substantial question of federal law.‘” Interstate Petroleum Corp., 249 F.3d at 219 (quoting Franchise Tax Bd., 463 U.S. at 27). This is because Battle‘s so-called “CONVERSION” claim is essentially a breach of contract claim with respect to Battle‘s SFIP, which claim, as explained previously, is governed solely by federal law. The essence of the claim is that SCIC owed Battle money under the terms of his SFIP, which SCIC allegedly paid him in an untimely manner under the terms of his SFIP.
Like Battle‘s claim alleging breach of the implied covenant of good faith and fair dealing, Battle‘s so-called “CONVERSION” claim also constitutes a “su[it] to recover money under” his SFIP, as stated in Article 9(R) of his SFIP. (J.A. 484). Thus, such claim is also subject to the accompanying twelve-month limitation period for bringing suit. Accordingly, as with Battle‘s claim alleging breach of the implied covenant of good faith and fair dealing, the district court may be faced with resolving whether, under the undisputed material facts, Battle‘s so-called “CONVERSION” claim is barred by the twelve-month limitation period set forth in Article 9(R) of Battle‘s SFIP.
Finally, we recognize that because the Remaining Claims are “su[its] to recover money under” Battle‘s SFIP, as stated in Article 9(R) of Battle‘s SFIP, they are also subject to Article 9(R)‘s contractual obligation that Battle litigate these claims, if at all, in “the United States District Court of the district in which the insured property was located at the time of the loss.” (J.A. 484). Accordingly, rendered nugatory is any need to address SCIC‘s statutory construction argument that the exclusive federal court jurisdiction provision in
For the reasons we have just explained, we hold the district court possessed subject matter jurisdiction over the Remaining Claims pursuant to § 1331. Accordingly, the district court erred when it remanded the Remaining Claims to state court pursuant to
V.
In summary, we: (1) affirm the district court‘s grant of summary judgment in favor of Seibels Bruce with respect to all claims against it; (2) affirm the district court‘s grant of summary judgment in favor of SCIC with respect to the breach of contract claim against it; and (3) vacate the district court‘s order remanding to state court the Remaining Claims and remand this case to the district court for further proceedings consistent with this opinion.21
WIDENER, Circuit Judge, concurring and dissenting.
I concur in Parts I, II, and III of the majority opinion.
I concur in Parts V(1) and V(2) of the majority opinion.
The remaining parts of the opinion are Part IV and V(3); with respect to these, I respectfully dissent. They concern only the claims of an “implied covenant of good faith and fair dealing” and the “temporary conversion of money that SCIC acknowledged in its January 21, 1997 letter.”
In my opinion, there is no cause of action arising under federal common law for either of those two items.
Among other reasons, acknowledging their existence under federal common law is very nearly in the teeth of Erie Railroad v. Tompkins, 304 U.S. 64 (1938): “There is no federal general common law.” Id. at 78.
Second, an equally strong reason is that I would not leave open on remand any option for the district court to find that such causes of action exist in this case under federal common law, thus inviting an arguable opportunity for a plaintiff to recover from the Treasury of the United States on those causes of action, a result never intended under the National Flood Insurance Program. On remand, I would require the district court to dismiss those claims as n
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, and you must file the suit in the United States District Court of the district in which the covered property was located at the time of loss. 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.
65 Fed. Reg. 60758, 60776 (2000) (emphasis added).