Opinion
Case No. 4:18-cv-10273-KMM
03-04-2020
Henry YANIZ, Jr. & Esperanza Yaniz, Plaintiffs, v. WRIGHT NATIONAL FLOOD INSURANCE COMPANY, Defendant.
Dennis Nicholas Urbano, Miami, FL, for Plaintiffs. Jason Paul Stearns, Sarah Elizabeth Chibani, Taylor Robert Ryan, Freeborn & Peters LLP, Tampa, FL, for Defendant.
Dennis Nicholas Urbano, Miami, FL, for Plaintiffs.
Jason Paul Stearns, Sarah Elizabeth Chibani, Taylor Robert Ryan, Freeborn & Peters LLP, Tampa, FL, for Defendant.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
K. MICHAEL MOORE, UNITED STATES CHIEF DISTRICT JUDGE
THIS CAUSE came before the Court following a bench trial held on September 9, 2019. See (ECF No. 36); Transcript of Bench Trial ("Trial Tr.") (ECF No. 39). Plaintiffs Henry Yaniz and Esperanza Yaniz filed a breach of contract claim against insurer Defendant Wright National Flood Insurance Company ("Wright" or "Defendant") alleging that Defendant failed to fully compensate Plaintiffs under the terms of Plaintiffs' flood insurance policy. Complaint ("Compl.") (ECF No. 1). The Parties submitted post-trial proposed findings of fact and conclusions of law. See Plaintiffs' Proposed Findings of Fact and Conclusions of Law ("Pls.' Proposed Findings") (ECF No. 41); Wright's Proposed Findings of Fact and Conclusions of Law ("Def.'s Proposed Findings") (ECF No. 42). Having reviewed the pleadings, examined the evidence, observed the witnesses, and considered the arguments of counsel as well as the remainder of the record, the Court makes the following findings of fact and conclusions of law as required by Rule 52(a) of the Federal Rules of Civil Procedure. Fed. R. Civ. P. 52(a). I. FINDINGS OF FACT
To the extent that any finding of fact is more aptly characterized as a conclusion of law, or any conclusion of law is more aptly characterized as a finding of fact, the Court adopts it as such.
A. Background
Plaintiffs own a residential property located at 640 11th Street, Key Colony Beach, Florida 33051 (the "Property"). Joint Pretrial Stipulation ("Stipulation") (ECF No. 31) ¶ 5(b). Plaintiffs purchased Standard Flood Insurance Policy No. 1150277618 07 (the "Policy"), Def.'s Trial Ex. 4 (ECF No. 37–4), for the Property through Defendant, a Write-Your-Own ("WYO") Program carrier participating in the United States Government's National Flood Insurance Program ("NFIP"), pursuant to the National Flood Insurance Act of 1968 ("NFIA"), 42 U.S.C. § 4001, et seq. Stipulation ¶ 5(b). The Standard Flood Insurance Policy Dwelling Form is a federal regulation codified at 44 C.F.R. Part 61, Appendix A(1). See Standard Flood Insurance Policy Dwelling Form ("SFIP"), 44 C.F.R. Pt. 61, App. A(1), Def.'s Trial Ex. 1 (ECF No. 37–1). The Policy was effective from March 30, 2017 to March 30, 2018 and provided Coverage A (Building) limits of $250,000.00 and Coverage B (Contents) limits of $55,100.00, both subject to separate $2,000.00 deductibles. Def.'s Trial Ex. 4.
References to exhibits propounded by Defendant at trial shall be in the following format: "Def.'s Trial Ex. ––––." Although Plaintiffs referred to exhibits during the presentation of their case, Plaintiffs never moved the Court to admit those exhibits into evidence.
The Federal Emergency Management Agency ("FEMA") uses private insurance companies, known as WYO companies, to issue flood insurance policies in carrying out its statutory duty to administer the NFIP. Newton v. Capital Assurance Co. , 245 F.3d 1306, 1308 (11th Cir. 2001) (citing 42 U.S.C. § 4081(a) ; 44 C.F.R. § 62.23(a) –(d) ). WYO companies are considered "fiscal agents of the United States." Id. at 1311 (citing 42 U.S.C. § 4071(a)(1) (authorizing use of "insurance companies ... as fiscal agents of the United States"); 44 C.F.R. § 62.23(f) ("[T]he primary relationship between the WYO Company and the Federal Government will be one of a fiduciary nature.")). "WYO companies may not alter the terms of SFIPs" and "must adjust claims under NFIP guidelines." Id. (citing 44 C.F.R. § 62.23(c), (h)(6), (i)(1) ). FEMA pays flood insurance claims, reimburses costs for adjustment and payment of claims by WYO companies, and indemnifies and defends WYO companies from insurance and litigation expenses. Grissom v. Liberty Mut. Fire Ins. Co. , 678 F.3d 397, 402 (5th Cir. 2012).
On or around September 10, 2017, while the Policy was in effect, Hurricane Irma caused flooding at the Property. See Stipulation ¶¶ 5(c), (f). The floodwaters rose to the height of approximately twenty-six (26) inches at the exterior and twenty (20) inches at the interior of the Property. Trial Tr. 80:18–21.
Upon receipt of Plaintiffs' flood claim, Wright assigned the claim to Fountain Group Adjusters, LLC, ("Fountain Group") who sent Denning Dinnat ("Dinnat") to inspect the Property and prepare a repair estimate. See Def.'s Trial Ex. 6 (ECF No. 37–6); Def.'s Trial Ex. 7 (ECF No. 37–7); Def.'s Trial Ex. 8 (ECF No. 37–8); Def.'s Trial Ex. 9 (ECF No. 37–9). On October 4, 2017, Dinnat inspected the Property and prepared an estimate of the flood damage. See Def.'s Trial Exs. 6–9. Dinnat calculated the replacement cost value ("RCV") of the flood loss at $74,421.15 for damage to the building and $32,225.90 for damage to the Property's contents. Def.'s Trial Exs. 6, 9. However, because the Property is not Plaintiffs' principal residence, Trial Tr. 62:18–22, 63:16–17, Plaintiffs cannot recover depreciation and do not qualify for RCV. SFIP art. II(B)(2), art. VII(V). Therefore, Dinnat calculated an actual cash value ("ACV") of the building flood loss in the amount of $68,799.96, after accounting for $3,621.19 in depreciation and subtracting the $2,000.00 deductible. Def.'s Trial Ex. 6. Dinnat calculated an ACV of the flood loss as to the Property's contents in the amount of $25,948.64, after accounting for $6,277.26 in depreciation and subtracting the $2,000.00 deductible. Def.'s Trial Ex. 9. Based on these estimates, Wright made payments to Plaintiffs in the amount of $68,799.96 under Coverage A (Building) of the Policy and $25,948.64 under Coverage B (Contents) of the Policy totaling $94,748.60. Stipulation ¶ 5(f); Def.'s Trial Ex. 12 (ECF No. 37–12).
Pursuant to the replacement cost loss settlement provision in the SFIP, the replacement cost of the part of a dwelling that is damaged is the cost for replacement "with materials of like kind and quality and for like use." SFIP art. V(2)(a)(2).
The SFIP defines "Actual Cash Value" as "[t]he cost to replace an insured item of property at the time of loss, less the value of its physical depreciation." SFIP art. II(B)(2).
On November 27, 2018, Plaintiffs filed the instant lawsuit alleging that Wright breached the Policy by not paying Plaintiffs the full amount owed for flood damage. See generally Compl. The Parties agree that Wright's payment under Coverage B (Contents) complies with the SFIP and accounts for all covered flood damage to contents. Stipulation ¶ 5(g). The Parties also agree that Wright's payment under Coverage A (Building) complies with the SFIP as to cosmetic damage and accounts for all covered cosmetic flood damage to the Property. Id. The sole dispute in this case is whether the Property suffered covered structural damage and, if so, the appropriate cost of necessary repairs. Id. ¶¶ 5(g), 6(b)–(c).
Following the filing of the lawsuit, Plaintiffs retained Chris Thompson ("Thompson") of DCH Engineering. On April 10, 2019, Thompson inspected the Property and concluded that the floor of the Property collapsed due to flooding during Hurricane Irma. Trial Tr. 15:7–8, 15:18–21, 17:14–18:1. Plaintiffs also retained Jonathon Diego ("Diego") of DDA Claims Management who prepared a cost estimate that includes an RCV of $47,002.19 for the replacement of the Property's concrete slab. Id. 45:21–23, 48:5–12.
Wright retained John Crawford ("Crawford") of Crawford Engineering. On April 23, 2019, Crawford inspected the Property. Def.'s Trial Ex. 15 (ECF No. 37–15). Crawford prepared a Flood Damage Assessment in which he found that the approximate four-inch elevation differential across the Property's concrete slab was due to long-term foundation settlement, which may have been minimally exacerbated by flood. See id. at 9. Crawford also prepared a cost estimate. See Def.'s Trial Ex. 16 (ECF No. 37–16). However, that estimate did not provide for replacement of the Property's concrete slab. See id.
B. The Bench Trial
i. Fact Testimony
During the bench trial, the Court heard testimony from Plaintiff Henry Yaniz ("Yaniz"). Yaniz testified that he only visits the Property a couple of times per year, as the Property has always been used as a vacation rental property. Trial Tr. 62:18–22, 64:3–5. A management company handles the day-to-day rental business as to the Property. Id. 63:23–64:2.
Yaniz testified that the Property was previously damaged during a prior hurricane, after which Plaintiffs renovated the Property. Id. 62:25–63:9. Since then, the foundation slab has had floor coverings installed. Id. 64:9–12. Additionally, drywall, molding, and baseboards have covered the stud walls. Id. 64:13–20. Yaniz testified that he informed Thompson that there was no structural damage to the Property prior to Hurricane Irma. Id. 64:21–65:5. However, Yaniz also testified that, to the best of his knowledge, a structural engineer did not inspect the condition of the Property's foundation prior to Hurricane Irma. Id. 65:21–24. Yaniz further testified that he does not have experience in construction and that he had not observed the interior of the Property's walls prior to Hurricane Irma. See id. 65:6–11, 67:8–12. Yaniz also testified that he had not received any complaints from tenants or from the management company prior to Hurricane Irma regarding the Property, including complaints regarding the flooring or cracks on the walls. Id. 67:25–68:8.
As to the repair work performed at the Property following Hurricane Irma, Yaniz testified that only demolition work has been performed thus far. Id. 66:6–8. Specifically, the floor coverings were removed from the slab, the drywall was removed from floor to ceiling, and the appliances, cabinets, fixtures, and contents were all removed from the Property. Id. 66:6–18, 70:11–13. Yaniz testified that he was present for most of the demolition work and that to his knowledge, no one who assisted with the demolition work adjusted the framing or made any repairs to the framing, and no structural or other substantive repairs were made to the walls or floors. Id. 66:19–67:7. Further, Yaniz testified that he did not add any pieces of wood above or below the framing and that no doors were installed following Hurricane Irma. Id. 67:13–17.
ii. Expert Testimony
The Court also heard testimony from Thompson and Diego, who provided expert testimony on behalf of Plaintiffs. Crawford provided expert testimony on behalf of Wright. Thompson and Crawford provided competing testimony as to the cause of the damage to the foundation of the Property. Diego testified as to the estimated cost to repair the structural damage. For the reasons explained below, the Court finds Crawford's testimony more reliable and persuasive than the testimony of Thompson as to causation. Additionally, the Court finds that the estimated repair cost of the structural damage prepared by Diego is inaccurate and unreliable.
a) Causation
To prove that the damage to the foundation was caused by flood, Plaintiffs presented the expert testimony of Thompson. The Court qualified Thompson under Federal Rule of Evidence 702 in the field of engineering. Id. 16:14–20. Thompson testified that he observed "a very deep crack" in the foundation during his inspection of the Property. Id. 17:14–22 (testifying that the floor was "actually sloping almost like three inches towards the center"). Thompson opined that the storm surge during Hurricane Irma caused this damage because it "had to have been [caused by] something recent, something sudden," like a flood, and the slope in the floor was "something ... somebody would have noticed" if it existed prior to Hurricane Irma. Id. 17:15–18:1.
In support of his opinion, Thompson testified that the excessive load pressure on the top of the concrete slab combined with the movement of the soil underneath the slab caused the foundation failure. See id. 18:2–9, 19:3–20:14, 41:23–42:1. Specifically, Thompson testified that the downward pressure of the floodwater exceeded the tolerance of the floor slab, which caused the floor to collapse at the center. Id. 17:23–20:14, 31:23–32:7, 41:13–22. Moreover, Thompson testified that the flood caused the soils underneath the floor to unsettle, undermining the structural integrity of slab. Id. 19:3–12, 28:21–25. He opined that "there was a sudden erosion and there were voids underneath the slab" and that the movement of the soil contributed to the foundation failure. Id. 28:21–29:22, 41:16–42:1. In response, Defendant presented the expert testimony of Crawford. The Court qualified Crawford under Federal Rule of Evidence 702 in the field of forensic structural engineering and construction. Id. 76:11–14. Crawford testified that the flood during Hurricane Irma did not cause structural damage to the concrete slab, foundation footings, or perimeter walls. Id. 82:16–22. Rather, according to Crawford, the Property's slab failed prior to the passing of Hurricane Irma, and this failure was unrelated to the flood. Id. 83:22–84:1, 85:16–20, 91:16–92:16. Crawford testified that this foundation damage was caused by long-term settlement of the soil due to locally detrimental soil conditions and the consolidation of the supporting soils that resulted in a void underneath the slab, causing the slab to "fail[ ] under its own weight." Id. 83:22–85:15; Def.'s Trial Ex. 17 (ECF No. 37–17) at 108.
Crawford explained that "[l]ong-term settlement occurs when you build a slab or a foundation ... on non-engineered soils. Typically, non-engineered soils will consolidate over time, causing voids, or causing downward movements in the supporting soils, and the foundations basically fall with it and settle over time." Trial Tr. 91:19–92:1. During his testimony, Crawford referenced the United States Department of Agriculture Soil Survey, which confirmed that the Property was built on "sandy, loamy, mucky, gravelly soil that were urban land complex-type soils, so [they are] ... moderately or highly subjected to consolidation, particularly at the top of the soils," where a concrete slab would rest. Id. 92:2–16.
In support of his opinion, Crawford testified regarding several photographs that demonstrate that the slab failed prior to Hurricane Irma. First, as an initial matter, Crawford directed the Court to a photograph that shows a two-to-three-inch deflection of the foundation slab, as evidenced by the gap between the base plate of the stud wall and the slab below it. Trial Tr. 86:4–14; Def.'s Trial Ex. 17 at 111. According to Crawford, the "slab should be abutting [the] base plate, [and] they should be snug together." Trial Tr. 86:12–14. Because there is a gap, Crawford explained that the slab is "deflected." Id.
Second, having established that the slab is deflected, Crawford directed the Court to photographs showing renovation retrofits, which would have been used "to allow someone to renovate the home, so that [someone] wouldn't see or feel [the] depression [of the foundation slab] if [they] were in the home." Id. 85:21–86:3. For example, photograph 112 in Defendant's Trial Exhibit 17 shows "a two-by wood piece underneath the stud wall" as well as "shims, or wedges, that are stuck between the two-by wood piece, which is newer ... than the original framing." Id. 86:15–25. Crawford further explained that the shims would have been placed "underneath the stud plate to allow for that deflection, or that difference, between the bottom of the stud and the top of the slab" so that someone "can walk through it and an average person wouldn't notice the difference in the trim and the finishes." Id. 87:1–10. In other words, the retrofitting would have made the deflection of the slab—which Crawford opines existed prior to Hurricane Irma—unnoticeable to the untrained eye.
Third, to demonstrate that the deflection of the slab occurred prior to Hurricane Irma, Crawford directed the Court to photograph 114 in Defendant's Trial Exhibit 17. Id. 87:11–88:18. This photograph shows a retrofitted plate and shims that "are still abutting the bottom of the stud." Id. 87:21–88:5. According to Crawford, had the stud wall "moved during the passing of Hurricane Irma, ... [the] retrofitted base plate and [the] retrofitted shims, or wedges, that were stuck in there to snug the bottom of the stud wall would have moved." Id. ; see also id. 88:6–10.
Crawford also testified that this photograph shows a modified density fiberboard ("MDF") that has been "flood damaged and disintegrated" but is "still nailed to [the] retrofit." Id. 88:11–18. Crawford testified that flood-damaged MDF existed in other locations at the Property as well. See id. 88:23–89:9. According to Crawford, this is "direct evidence ... that absolutely and irrefutably" demonstrates that the retrofits, and thus the deflection in the slab, "existed prior to the storm." Id. 88:8–10, 89:6–9.
Crawford similarly pointed to photographs of other hinge plates at the Property to support his contention that the slab was deflected prior to Hurricane Irma. See, e.g. , id. 89:10–91:7 (testifying regarding photograph 127 in Defendant's Trial Exhibit 17, which shows retrofitting on a bifold hinge plate "to allow for the deflection of the slab prior to Hurricane Irma"), 90:20–23 (describing photograph 161 in Defendant's Trial Exhibit 17, which shows a metal hinge plate that "was in place during the flood" because "[t]he hinge plate has proof of flood damage," as it is "oxidized, [and] the screws are rusted").
Further, Crawford testified that had the slab failed during Hurricane Irma, there would have been "very large cracks on the walls, in the gypsum board, [and] on the stud walls," which he did not observe at the Property. Id. 91:7–15. Based on this evidence, Crawford testified that the slab was "irrefutably" deflected prior to Hurricane Irma. Id. 122:15–19.
Nevertheless, despite opining that the structural damage was not caused by flood—but rather pre-existed the flood and was caused by long-term foundation settlement—Crawford acknowledged that the flooding during Hurricane Irma may have minimally exacerbated the long-term foundation settlement and consolidation of the supporting soils. See id. 94:7–14. Specifically, Crawford testified that because "the soil underneath the house—had flooded and it had gotten wet," he "couldn't rule out" that the flooding "did not exacerbate some of this long-term foundation consolidation and settlement," but noted that any effect would have been "extremely minimal," as the evidence demonstrates that "the shim plates didn't move." Id.
Upon consideration of the evidence, the Court finds Crawford's expert opinion more credible and persuasive than that of Thompson with respect to the cause of the flood damage. As an initial matter, Crawford provided specific, compelling testimony critiquing Thompson's expert opinion as to the cause of the foundation damage. Specifically, Crawford testified that he reviewed Thompson's expert report and found that "[h]e has poor methodology [and] poor analysis." Id. 105:10–18. In Crawford's opinion, Thompson "completely disregards forensic evidence that shows that the slab had failed and settled and deflected prior to the passing of Hurricane Irma—that was very obvious during [Crawford's] inspection—and [Thompson's] theories aren't supported by evidence." Id. 105:18–22, 102:4–5.
As to Thompson's opinion that the damage could not have preexisted Hurricane Irma because "someone would have noticed [it]," id. 37:7–16, Crawford explained how a restoration contractor would retrofit a slab deflection and make it unnoticeable:
[Thompson] talked about [how] someone had to have known that this deflection was there prior to the storm, [but that] is completely unsupported, because people retrofit changes in the elevations in their slabs all the time. If I retrofit—if I'm a good restoration contractor, I can retrofit that differential. So, in other words, I stabilize that wall; now I come and I build up the old terrazzo, which
you see now, and I put wooden flooring, which is similar to what was in the house, [because] I can build up under that wood flooring. And so I build up around that with materials, then I put my finishes in, and I can taper those finishes to make it look like it's level; and you walk the house, and if you didn't have a trained eye, you would never know. So I can retrofit that house to make it look like there was no problem, and that was what was done the last time [the Property] was renovated.
Id. 121:3–19.
As to Thompson's testimony that the pressure from the flood water caused the foundation to fail, Crawford testified as follows:
The loading process [described by Thompson] is just not what happens [during a flood]. When the slab—when the water comes up—and I talked about the water tables and storm surge and tides. Storm surge is a tide, a tide that's created by a storm that comes in over time, especially Irma, it was very large. That tide comes in and [a]ffects the water table. The water table rises up underneath the house, around the house as it floods, and then the storm surge floods over the land. The storm surge doesn't come in and flood over the land and load the house up with water, that just doesn't happen. So, as this water rises, the opposite effect of what the plaintiffs' attorney is explaining happens. You have buoyancy force.
Id. 102:6–18, 103:16–19 ("As the water rises above [the superstructure], the buoyancy forces that come from outside and underneath equalize the pressures that are coming from above, and at the same time, water makes the structure more buoyant at relieving the weight."). According to Crawford, to create the situation Thompson described, "you would have to seal the foundation and walls off, pour water into the top of [the home], let the water rise, then it would put [downward pressure]—it just doesn't happen that way." Id. at 104:10–13. Indeed, Crawford testified that, having performed thousands of structural investigations, he has never encountered a foundation slab that failed because of the downward pressure of loaded water. Id. 104:5–13. Moreover, on cross-examination, Thompson acknowledged that water from under the slab would have created a buoyancy force that would have offset the downward force of the water to a certain extent. Id. 40:21–41:9.
As to Thompson's theory that the flood created voids underneath the slab leading to its collapse, Crawford testified that he agrees with Thompson that "water got underneath the slab and that water moved this soil from side-to-side," but disagrees that there was any "erosion." Id. 125:9–126:13. Crawford testified that "[t]aking soil out from underneath the slab, physically removing it out from underneath the slab, by force, such as flood waters, as it's moving, is erosion." Id. 125:25–126:3. Here, according to Crawford, there was no "erosion" because there is no "entry point coming underneath the slab, grabbing [the] soil and coming back out from underneath the slab." Id. 126:4–6. Rather, Crawford testified that what Thompson described was "water displacing, and moving, and consolidating, and changing the profile of the soil because it was wet." Id. 126:7–9. Further, Crawford testified that he would have been able to stick his hand under the footer of the foundation if erosion had undermined the foundation. Id. 126:10–13.
By contrast, Thompson did not provide a compelling critique of Crawford's conclusions. When asked whether it was "possible that the slab deflections ... existed prior to Hurricane Irma," Thompson testified that he did not believe so because "someone would have noticed this kind of failure." Id. 43:4–21, 37:7–16, 39:13–40:15 (further opining that "[i]t is [his] opinion that the slab was not damaged to this extent before Hurricane Irma"). However, Thompson testified that "[i]f somebody were to show [him] pictures" that showed that the slab "was damaged before, then ... [he] would have to accept that." Id. 44:6–10.
Additionally, the Court finds that Crawford's opinion and analysis are the product of a more reliable methodology than that of Thompson. For example, Crawford took measurements and performed a floor elevation survey to support his opinion. See id. 96:24–98:19; Def.'s Trial Ex. 16 at 15; see also Trial Tr. 77:6–79:3, 95:23–96:2. By contrast, Thompson did not perform a floor elevation survey and did not rely on his own measurements in forming his opinion. Trial Tr. 32:24–34:13. Instead, he used the measurements collected by and photographs taken by CEC Consulting Services in preparing his report and forming his opinion. Id. 20:15–21:3, 33:10–34:13. Thompson explained that he took his own measurements of the deflections in the slab and took his own photographs of those measurements but that he "didn't use [his photographs] because [he] already had really reliable photos." Id. 34:3–35:12, 21:1–3 (Question ("Q"): "And why did you use these pictures?" Answer ("A"): "Because they were accurate, and it hasn't changed since then."). When asked whether the measurements that he took yielded the same results as those he used, Thompson explained that his measurements were "[v]ery similar." Id. 35:7–9.
Finally, the Court notes that Crawford's experience as a licensed professional engineer, general contractor and licensed home improvement contractor, extensive experience inspecting flood-damaged properties, and knowledge and experience of the NFIP lends support to his testimony. See, e.g., id. 72:12–76:10. Thompson, by contrast, is not a civil-structural engineer or general contractor, has limited relevant construction experience, and has less relevant professional experience than Crawford. See, e.g., id. 23:11–12, 25:7–26:7, 31:16–22. Moreover, Thompson acknowledged that his report recommends that "the condition of the foundation be inspected by a structural engineering before the new flooring is set." Id. 23:5–12.
In sum, upon weighing the testimony and other evidence presented, the Court finds the testimony of Crawford to be credible, persuasive, and supported by the record evidence. Therefore, the Court finds that the foundation failed prior to Hurricane Irma due to long-term settlement.
b) Repair Estimate
Plaintiffs also presented the expert testimony of Diego regarding a cost estimate for the replacement of the Property's concrete slab. The Court recognized Diego under Federal Rule of Evidence 702 as a general contractor. Id. 48:1–3.
Diego testified that his repair estimate indicates that it would cost $47,002.19 to replace the concrete slab. Id. 48:12. Diego testified that to prepare his estimate he used an "estimating software ‘Xactimate,’ which basically will take a particular zip code and will source information both in material costs and labor costs, and come up with a mean for those costs." Id. 47:3–8, 48:14–16. He clarified that his estimate does not take into "consideration ... any structural walls outside of what would be the components related to the slab itself" and does not "account for any electrical [or] any plumbing" but reflects "the costs of just the slab." Id. 48:17–21. He noted that he would consider his estimate to be "conservative." Id. 48:22–24. On cross-examination, Diego testified that he is not familiar with the coverage provisions in the SFIP and that his estimate does not take the coverage afforded by the SFIP into account. Id. 50:17–23. Diego also testified that he is not familiar with the accepted methods of repair allowed under the NFIP and did not account for depreciation in his estimate. Id. 51:2–8, 58:5–10.
Notably, Diego's repair estimate was never received into evidence. See generally Trial Tr.
Further, Diego admitted that his estimate is not an accurate reflection of what it would cost to replace the Property's concrete slab. Specifically, Diego testified that his estimate is inaccurate because it "does not account for any walls, any electrical components [or any] plumbing components." Id. 54:25–55:12 (Q: "So you would agree that this is not an accurate estimate of what it's going to cost Mr. Yaniz to replace the slab; right?" A: "Correct. That's why I said it's extremely conservative."). Instead, his estimate reflects the cost to replace a slab "if it was just the slab-on-grade, without any structural walls" and is thus not "applicable" here. Id. 57:23–24.
Additionally, Diego testified that his estimate includes a line item to "remove and replace footings" even though he did not inspect the footings. Id. 55:13–19. In fact, he testified that "redo[ing] the slab in its entirety" would require replacing the footings, regardless of whether the footings were damaged by flood. Id. 55:21–56:19. Further, Diego estimated the cost to replace a six-inch thick slab even though Plaintiffs' slab was only measured to be four inches thick. Id. 56:23–57:15.
Diego testified that he wrote his estimate for replacement of a six-inch slab based on Thompson's report, but that if the slab was measured to be of a different thickness, his estimate would change. Trial Tr. 57:1–15. Thompson testified that Plaintiffs' slab is six inches thick consistent with "the actual construction practices in that area." Id. 42:2–8. However, he later testified that when he measured the slab at the cutout, it was thinner than six inches, but that "it should have been thicker" because a cutout is "not a reliable section to measure." Id. 42:9–13. By contrast, Crawford testified that he measured the slab to be four inches thick. Id. 82:19–83:10 (testifying that measuring the cutout was a proper way to measure the slab contrary to Thompson's testimony, as concrete foundation slabs are poured at uniform depth).
Crawford did not provide a competing cost estimate for replacement of the Property's concrete slab. Id. 79:6–8, 105:4–11. However, Crawford provided an assessment and critique of the repair estimate prepared by Diego. Specifically, Crawford testified that Diego's overall cost is "within reason," but that "it looks like it's done haphazardly in its scope, so it's kind of, in [Crawford's] opinion, a shot in the dark" because "some of the things [Diego] allows for don't need to happen." Id. 108:7–15.
For example, contrary to Diego's testimony, Crawford testified that a concrete slab can be replaced without replacing the concrete perimeter footings, and that the footings do not need to be replaced here. Id. 98:20–23, 108:16–109:5. Additionally, Crawford noted that the estimate accounted for replacement of a six-inch slab, while Crawford measured the slab to be four inches. Id. 109:6–20. Further, Crawford testified that a backhoe would not need to be used to replace Plaintiffs' specific slab, as provided for in Diego's estimate. Id. 98:25–99:16, 109:21–110:1.
Finally, Crawford testified that a contractor would not be able to use Diego's estimate to determine the scope of necessary repairs to the Property. Id. 110:8–12 (Q: "So, looking at Mr. Diego's estimate—the DDA Claims estimate—is it possible for a contractor to use this to determine the appropriate scope and to repair the plaintiffs' property, specifically?" A: "No.").
Upon consideration of the evidence and testimony presented, the Court finds that Diego's testimony reveals that his estimate for the cost to replace the Property's concrete slab is an inaccurate representation of the scope and cost of necessary repairs.
II. CONCLUSIONS OF LAW
This Court has subject matter jurisdiction over this matter pursuant to 42 U.S.C. § 4072 and 44 C.F.R. Part 61, Appendix A(1), Article VII(R). Jurisdiction is also proper under 28 U.S.C. § 1331 because the legal questions at issue with respect to the coverage provisions of the SFIP that Plaintiffs held with Wright involve federal law.
A. Applicable Law
"SFIPs are governed by statute, FEMA regulations, and federal common law." Tuircuit v. Wright Nat'l Flood Ins. Co. , No. 13-6268, 2014 WL 5685222, at *4 (E.D. La. Nov. 4, 2014) (citing Wright v. Allstate Ins. Co. , 415 F.3d 384, 390 (5th Cir. 2005) ). Courts also look to FEMA's interpretation of the FEMA regulations, "as long as that interpretation is not inconsistent with the regulations or plainly erroneous." Id. (citing Worthen v. Fid. Nat. Prop. & Cas. Ins. Co. , 463 F. App'x 422, 426 (5th Cir. 2012) ("FEMA's interpretation of its own regulations is given controlling weight unless it is plainly erroneous or inconsistent with the regulation.") (citation and internal quotation marks omitted)). "[S]trict compliance with the provisions of federal flood insurance policies is required because payments are drawn from the federal treasury." Shuford v. Fid. Nat'l Prop. & Cas. Ins. Co. , 508 F.3d 1337, 1343 (11th Cir. 2007) (citation omitted); Talerico Family Ltd. P'ship v. First Cmty. Ins. Co. , No. 12-62232-CIV-ROSENBAUM/SELTZER, 2014 WL 11600913, at *5 (S.D. Fla. Mar. 20, 2014) (citations omitted). Individuals who choose to participate in federal programs have a legal duty to "familiarize" themselves with the requirements of those programs. Allstate , 415 F.3d at 388 (citing Heckler v. Cmty. Health Svcs. of Crawford Cty., Inc. , 467 U.S. 51, 63, 104 S.Ct. 2218, 81 L.Ed.2d 42 (1984) ). Further, "general principles of state insurance law may be useful in determining federal law." Worthen , 463 F. App'x at 425 ; see also Furrow v. Wright Nat'l Flood Ins. Co. , No. 14-10497-PBS, 2016 WL 6818345, at *3 (D. Mass. Nov. 17, 2016) ("[I]n enacting the NFIP, Congress did not intend to abrogate standard insurance law principles. Courts are free to apply the traditional common-law technique of decision by drawing upon standard insurance principles.") (citations and internal quotation marks omitted).
Pursuant to the SFIP, if an insured complies with all terms and conditions of the SFIP, the insurer will pay the insured "for direct physical loss by or from flood to [the] insured property." SFIP art. I. The SFIP defines "direct physical loss by or from flood" as "[l]oss or damage to insured property, directly caused by a flood." Id. art. II(B)(12). "There must be evidence of physical changes to the property." Id. The SFIP defines "flood" as:
[a] general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or of two or more properties (one of which is your property) from: (a) Overflow of inland or tidal waters; (b) Unusual and rapid accumulation or runoff of surface waters from any source; (c) Mudflow.
Id. art. II(A)(1). The SFIP further defines "flood" to include: "[c]ollapse or subsidence of land along the shore of a lake or similar body of water as a result of erosion or undermining caused by waves or currents of water exceeding anticipated cyclical levels that result in a flood as defined in A.1.a. above." Id. art. II(A)(2). The FEMA regulations, which govern the SFIP pursuant to Article IX, define "flood" or "flooding" as follows:
The collapse or subsidence of land along the shore of a lake or other body of water as a result of erosion or undermining caused by waves or currents of water exceeding anticipated cyclical levels or suddenly caused by an unusually high water level in a natural body of water, accompanied by a severe storm, or by an unanticipated force of nature, such as flash flood or an abnormal tidal surge, or by some similarly unusual and unforeseeable event which results in flooding as defined in paragraph (a)(1) of this definition.
44 C.F.R. § 59.1. Further, the NFIP Claims Manual provides that "[t]he SFIP only pays for damage caused by direct physical loss by or from flood, as defined by the SFIP." NFIP Claims Manual (Aug. 2018) ("Claims Manual"), Def.'s Trial Ex. 3 (ECF No. 37–3) at 29. The Claims Manual similarly provides that "[d]irect physical loss means flood must physically contact the insured property and there must be evidence of physical change by or from flooding to the insured building or to insured personal property." Claims Manual at 29.
The SFIP also includes certain exclusions and limitations, including an exclusion for damage caused by earth movement, even if that earth movement is caused by flood. See SFIP arts. IV, V. The earth movement exclusion states as follows:
We do not insure for loss to property caused directly by earth movement even if the earth movement is caused by flood. Some examples of earth movement that we do not cover are:
1. Earthquake;
2. Landslide;
3. Land subsidence;
4. Sinkholes;
5. Destabilization or movement of land that results from accumulation of water in subsurface land area; or
6. Gradual erosion.
Id. art. V(C). However, this exclusion has an exception (which thus affords coverage), for "losses from ... land subsidence as a result of erosion that [is] specifically covered under [the SFIP's] definition of flood." Id. This exception cites Article II(A)(2), which defines flood as: "[c]ollapse or subsidence of land along the shore of a lake or similar body of water as a result of erosion or undermining caused by waves or currents of water exceeding anticipated cyclical levels that result in a flood." Id. art. II(A)(2). Further, the Claims Manual provides:
The SFIP is a single-peril policy that only pays for covered damage due to direct physical loss by or from flood, defined in the policy at Section II. The SFIP does not cover damage resulting from an intervening cause of loss, even if the resulting cause is due to flood. The SFIP does not cover damage that results when saturated soils cause the soil below ground level to sink, expand, compact, destabilize, or otherwise lose its load bearing capacity such as from voids or rotten organic matter when the soil dries. The SFIP does not cover earth movement; each form of earth movement is an intervening cause of loss and a separate peril.
Claims Manual at 60.
The insured has the burden to prove that (1) the damages are covered under the SFIP (i.e. , that the damages constitute direct physical loss by or from flood) and (2) the amount of those damages. See Slater v. Hartford Ins. Co. of the Midwest , No. 3:13-CV-345-J-34JBT, 2015 WL 1310984, at *7 (M.D. Fla. Mar. 24, 2015) ; Mahood v. Omaha Prop. & Cas. , 174 F. Supp. 2d 284, 293 (E.D. Pa. 2001) ; see also Monistere v. State Farm Fire & Cas. Co. , 559 F.3d 390, 398 (5th Cir. 2009). Although the insured has the initial burden to prove that the loss is covered under the SFIP, the insurer bears the burden to prove that an exclusion to the SFIP applies. See Furrow , 2016 WL 6818345, at *3. However, the burden then shifts back to the insured to the extent the insured relies on any exception to an exclusion. Id.
As to the amount of damages, failure to prove the specific, additional amount owed under the SFIP precludes any further award. Mahood , 174 F. Supp. 2d at 293. The Court is not permitted to, and will not, speculate as to damages. See id. ("The court may not guess the reasonable price for repairs covered under the policy.").
B. Discussion
Here, the Parties dispute whether the Property suffered structural damage from flood and, if so, the appropriate cost of repair. Stipulation ¶¶ 5(g), 6(b)–(c).
As set forth in the above Findings of Fact, Plaintiffs presented the testimony of Thompson to demonstrate that the flood caused the Property's slab to fail. See supra Part I.B.ii.a. Thompson opined that the excessive load pressure on the top of the concrete slab combined with the movement of the soil underneath the slab caused the foundation to fail. See Trial Tr. 17:14–18:9, 19:3–20:14. In response, Defendant presented the expert testimony of Crawford, who opined that the slab failed prior to Hurricane Irma as a result of long-term settlement and consolidation of the supporting soils underneath the Property. Id. 83:22–84:1, 85:16–20.
Weighing the testimony and evidence presented, the Court finds that Plaintiffs failed to meet their burden to demonstrate that the Property's foundation suffered "direct physical loss by or from flood," SFIP art. I, and is thus a covered loss under the SFIP. Rather, as set forth in the above Findings of Fact, the Court finds that the Property's slab failed prior to the passing of Hurricane Irma in light of the testimony and evidence presented showing (1) retrofitting at the Property to conceal the deflection in the concrete slab, (2) flood-damaged MDF and hinge plates, and (3) that the retrofitted base plates, shims, and wedges underneath the stud walls did not move during the passing of Hurricane Irma. See supra Part I.B.ii.a. Further, the evidence presented related to the preexisting retrofitting at the Property undermines Thompson's opinion that the foundation failure did not exist prior to the flood because "someone would have noticed." Trial Tr. 17:20–22. The Court also notes that although Thompson disputes that the foundation was damaged prior to the flood, Thompson was unable to rule out this possibility entirely. See id. 39:20–40:1 (Q: "Is your causation opinion based on the assumption that the slab was not damaged prior to Hurricane Irma?" A: "It is my opinion that the slab was not damaged to this extent before Hurricane Irma." Q: "And is that based on the assumption that the slab was not damaged before the storm?" A. "Yes, I don't believe it was damaged."), 44:6–10 (Q: "If you were to accept that the slab had deflections in it prior to Hurricane Irma, of up to three or four inches, would you still attribute that failure of the slab to Hurricane Irma?" A: "If somebody were to show me pictures, and yes, it was damaged before, then yeah, I would have to accept that.").
Further, even if the flood contributed to the foundation failure, the Court finds that the earth movement exclusion applies. As articulated above, the SFIP does not cover "loss to property caused directly by earth movement even if the earth movement is caused by flood." SFIP art. V(C). The earth movement exclusion lists examples of earth movement that are not covered, including "[l]and subsidence" and "[d]estabilization or movement of land that results from accumulation of water in subsurface land area." Id.
Defendant argues that the earth movement exclusion applies because the damage to the concrete slab was caused by long-term foundation settlement, which constitutes "earth movement" under the terms of the SFIP. Def.'s Proposed Findings at 29–30. Specifically, Defendant argues that the foundation failure was caused by land subsidence, or consolidation of soil, and the destabilization or movement of land, which may have been minimally exacerbated by flood. See id. ; see also Trial Tr. 126:15–131:25 (Crawford testifying that the conditions that he observed at the Property that may have been minimally exacerbated by flood would constitute "land subsidence, which is the consolidation of soil" and "destabilization or movement of land that results from accumulation of water in subsurface land area"), 94:15–18 (Q: "To the extent that flooding exacerbated this settlement, in your experience as an NFIP flood adjuster, is flood-induced settlement covered under the [SFIP]?" A: "It is not."), 133:4–134:1.
"Courts have long held that ‘federal flood insurance policies do not cover losses stemming from water-caused earth movements.’ " Dippel v. S.C. Farm Bureau Mut. Ins. Co. , No. 4:16-cv-1605-RBH-TER, 2019 WL 4022741, at *8 (D.S.C. July 26, 2019) (quoting Wagner v. Dir. Fed. Emergency Mgmt. Agency , 847 F.2d 515, 522 (9th Cir. 1988) ), report and recommendation adopted , No. 4:16-cv-01605-RBH-TER, 2019 WL 4010420 (D.S.C. Aug. 26, 2019). For example, "[c]ourts have applied the earth movement exclusion in situations where structural damage following a flood resulted from soil saturation or liquefaction." Id. ; see also Clifford v. Preferred Mut. Ins. Co. , No. 8:12-CV-1331 (FJS/RFT), 2015 WL 5512726, at *3 (N.D.N.Y. Sept. 15, 2015) (finding that "the damage to the concrete slab ... occurred due to earth movement that resulted from the floods" where the engineer report stated that the "damage to the floor was the result of ‘excessive settlement’ " and the plaintiff's "engineer admitted that the sand beneath her concrete slab shifted"). Similarly, courts have also found that "soil settlement qualifie[s] as subsidence." Elwell v. Selective Ins. Co. of Am. , No. 14-2590 (RBK/KMW), 2016 WL 5928682, at *3 (D.N.J. Oct. 11, 2016).
As set forth in the above Findings of Fact, see supra Part I.B.ii.a, the Court is persuaded by Crawford's testimony that the structural damage was caused by long-term settlement, which Crawford explains occurs when "non-engineered soils [ ] consolidate over time, causing voids, or causing downward movements in the supporting soils, and the foundations basically fall with it and settle over time." Trial Tr. 91:16–92:16, see also id. 83:22–84:1, 85:16–20, 94:7–14. The Court finds that this qualifies as "land subsidence" or the "[d]estabilization or movement of land that results from accumulation of water in subsurface land area" and thus falls within the earth movement exclusion. SFIP art. V(C); see also Claims Manual at 60 ("The SFIP does not cover damage that results when saturated soils cause the soil below ground level to sink, expand, compact, destabilize, or otherwise lose its load bearing capacity such as from voids or rotten organic matter when the soil dries."); Dippel , 2019 WL 4022741, at *8 ("Both experts observed structural problems as a result of soil saturation which impacted the soil properties. These conditions as described by [the] [p]laintiff's experts fall within the earth movement exclusion involving ‘[d]estabilization or movement of land that results from accumulation of water in subsurface land area.’ ") (citation omitted). Therefore, even if the floodwater caused or otherwise exacerbated the long-term settlement or soil consolidation, the resulting damage to the Property's concrete slab is excluded from coverage under the SFIP.
The SFIP does not define many of the terms within the earth movement exclusion. "When interpreting the language of an NFIP provision, the court is obliged to apply unambiguous language." Dippel , 2019 WL 4022741, at *7. "When statutory language has not been expressly defined, we are to give that language its common meaning." In re Fretz , 244 F.3d 1323, 1327 (11th Cir. 2001). Black's Law Dictionary defines "subsidence" as "[a]ny downward movement of the soil from its natural position; esp., a sinking of soil." Subsidence, Black's Law Dictionary (11th ed. 2019). Merriam-Webster defines "subside" as "to sink or fall to the bottom: settle" or "to tend downward: descend." Subside , Merriam-Webster Dictionary, https://www.merriam-webster.com/dictionary/subside (last visited Mar. 3, 2020). "Destabilize" means "to make unstable." Destabilize , Merriam-Webster Dictionary, https://www.merriam-webster.com/dictionary/destabilize (last visited Mar. 3, 2020). "Subsurface" means "of, relating to, or being something located beneath a surface and especially underground." Subsurface , Merriam-Webster Dictionary, https://www.merriam-webster.com/dictionary/subsurface (last visited Mar. 3, 2020).
The Court notes that Thompson's description of the cause of the foundation failure as sudden erosion or movement that caused an unsettling of the soils beneath the concrete slab suggests that the phenomenon he describes—despite characterizing it as "erosion"—similarly would qualify as "earth movement" under the terms of the SFIP. Indeed, Crawford does not appear to entirely disagree with Thompson's opinion, but rather disagrees that there was any "erosion." In discussing Thompson's opinion, Crawford stated that Thompson described how "water got underneath the slab and that water moved this soil from side-to-side" and that this is "kind of saying the same thing that [Crawford is] saying, water did rise ... underneath the foundation, but that's not erosion." Trial Tr. 125:18–24. In any event, the Court notes that "the SFIP ... does not state that flood-related erosion cannot also involve soil settlement or other earth movement." Elwell , 2016 WL 5928682, at *4. "Thus, flood-related erosion as contemplated by the SFIP may very well involve some movement of the earth; Congress simply made the decision to nonetheless include coverage of earth movement from flood-related erosion within the SFIP." Id.
Notably, however, Thompson characterizes the "movement" of the soil underneath the foundation as "erosion." To the extent Plaintiffs argue that the earth movement was caused by "flood-based erosion" and falls within the exception to the earth movement exclusion and is thus covered under the SFIP, Plaintiffs have not met their burden in this regard. The earth movement exclusion includes an exception for "losses from ... land subsidence as a result of erosion that [is] specifically covered under [the policy's] definition of flood." SFIP art. V(C). Therefore, the SFIP covers losses from the "[c]ollapse or subsidence of land along the shore of a lake or similar body of water as a result of erosion or undermining caused by waves or currents of water exceeding anticipated cyclical levels that result in a flood." Id. art. II(A)(2). To demonstrate that flood-related erosion occurred, Plaintiffs must demonstrate: "(1) collapse or subsidence of land, (2) the land is along the shore of a lake or similar body of water, (3) the collapse or subsidence resulted from erosion or undermining caused by waves or currents of water exceeding anticipated cyclical levels, and (4) the waves or currents resulted in a flood as defined in Article II(A)(1)(a)." Elwell , 2016 WL 5928682, at *3.
Here, other than Thompson's conclusory statements that the Property sustained "sudden erosion," Plaintiffs presented no argument, testimony, or other evidence demonstrating that flood-based erosion within the meaning of the SFIP occurred at the Property. Indeed, Crawford testified that the voids underneath the slab and the resulting foundation failure could not have been caused by erosion, as there was no pathway of entry or exit below the slab such that the soil may have been eroded. Trial Tr. 125:7–126:9. Notably, Plaintiffs did not provide any evidence or other testimony indicating that there were in fact points of entry or exit such that the voids observed below the concrete slab may have been caused by "erosion." Rather, Thompson testified that the sand "moved to the sides." Id. 29:12–16 (Q: "And where did the sand go when it eroded?" A: "It eventually moved to the sides. Wherever there is conduit runs, or drain runs, there's voids underneath the floor. That could have moved the gravel around and created a space where the foundation was unsettling."). Further, Crawford testified that although the Property was exposed to "relatively minor" dynamic water flow, there was no evidence that the dynamic water flow caused structural damage or resulted in any erosion. Id. 94:21–95:22, 115:15–117:17. Upon weighing the testimony and evidence presented, the Court finds that there is insufficient evidence to support a finding that the conditions observed at the Property were caused by "flood-based erosion" as defined in the SFIP. Accordingly, the Court finds that the damage to Plaintiffs' concrete slab is not a covered loss under the SFIP.
Crawford testified that the definition of "flood-based erosion" in the SFIP describes a situation where "a house that is built up on [the] side of a riverbank and that river starts to flow and get above its bank—or right at its bank and cuts and erodes underneath it—that dynamic water flow is the key here—it erodes underneath the house and that house falls into the river." Trial Tr. 131:2–8. Here, Crawford testified that there was no evidence of erosion as a result of dynamic water flow. See id. 94:21–95:22, 115:15–117:17.
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Finally, even if the Court found that the structural damage to the foundation was a covered loss under the SFIP, Plaintiffs have not met their burden to prove the corresponding damages amount. Plaintiffs seek $47,002.19 to replace the concrete slab based on the estimate prepared by Diego. Id. 48:12. However, as articulated in the above Findings of Fact, Plaintiffs never moved the Court to admit this estimate into evidence, and, in any event, the Court finds that Diego's testimony reveals that his estimate is an inaccurate representation of the scope of the work necessary to replace the Property's slab. See supra Part I.B.ii.b. Further, Plaintiffs presented no argument, testimony, or other evidence to demonstrate that the repair costs provided for in Diego's estimate would be covered under the SFIP. Therefore, the Court finds that Plaintiffs failed to meet their burden to prove the amount of damages owed for structural repair to the foundation.
Accordingly, having examined the evidence and made the above findings of fact and conclusions of law, the Court finds that Plaintiffs have not demonstrated that Wright owes Plaintiffs any additional payment for damage caused by flood. Thus, the Court finds that Plaintiffs are not entitled to any further payment under the SFIP.
III. CONCLUSION
UPON CONSIDERATION of the foregoing, the pertinent portions of the record, and being otherwise fully advised in the premises, it is hereby ORDERED AND ADJUDGED that the Clerk of the Court is instructed to enter judgment in favor of Defendant Wright National Flood Insurance Company and against Plaintiffs Henry Yaniz and Esperanza Yaniz. It is FURTHER ORDERED AND ADJUDGED that in light of the foregoing, the Complaint (ECF No. 1) is DISMISSED WITH PREJUDICE. The Clerk of the Court is instructed to CLOSE this case. All pending motions, if any, are denied as MOOT.
DONE AND ORDERED in Chambers at Miami, Florida, this 4th day of March, 2020.