Richard Pecarovich's home suffered major damage after an El Nino rainstorm struck Southern California in 1998. He brought suit to collect under his Standard Flood Insurance Policy with Allstate, a private insurer under the National Flood Insurance Program. The district court granted summary judgment for Allstate on the ground that the damage was not caused by a covered "flood." We reverse.

Pecarovich's home sits at the base of a canyon in Laguna Beach, California. After he saw Allstate television advertisements warning of anticipated El Nino storms, Pecarovich purchased a flood insurance policy from Allstate under the National Flood Insurance Program.

On February 24-25, 1998, a torrential rainstorm struck the Laguna Beach area. Rain ran down the hill behind Pecarovich's home, gushed out of a drainage collection system, flowed around his house and pooled in his backyard patio.

The concrete slab under his home developed major breaks and pulled away from a wall, rendering the home uninhabitable. Pecarovich reported the damage to Allstate and Allstate assigned an independent claims adjuster, Richard Rossi, to investigate. An official with the National Flood Insurance Program initially stated that the damage was not covered, but agreed to reconsider if Rossi provided certain engineering reports and cost estimates. Allstate retained several engineers to prepare the reports but failed to pay them; the engineers refused to complete the reports and without them Rossi could not and did not complete his adjuster's report.

Pecarovich filed a complaint in district court in February of 1999 seeking to recover under the policy. The district court granted summary judgment for the defendant on the ground that plaintiff's home was not damaged by a "flood" covered by the policy.1 Pecarovich appeals.

Viewing the evidence in the light most favorable to Pecarovich, a portion of his backyard was flooded when storm water ran down the hills behind his home and submerged a portion of his back yard. Allstate argues the damage falls within one of two exclusions under the policy: (1) the flood was confined to Pecarovich's premises, or (2) the damage was caused by "movement of land." We construe any ambiguity in these exclusions strictly against Allstate and in favor of coverage. See Linder & Assocs. v. Aetna Cas. & Sur. Co., 166 F.3d 547, 550 (3d Cir.1999); see also Simkins v. NevadaCare, Inc., 229 F.3d 729, 735-37 (9th Cir.2000).

Article 3(C)(2) of the policy creates an exclusion for "A loss from a flood which is confined to the premises on which your insured property is located unless the flood is displaced over two acres of property." In holding the exclusion applicable, the district court failed to give weight to the declaration of Peter Savage, whose property lies adjacent to and above Pecarovich's property. Savage declared that during the storm an "enormous" amount of water ran off the hills into Savage's backyard, flowed across his property and damaged a retaining wall.2 Savage, like Pecarovich, experienced flood conditions on his property.

Allstate argues that even if Savage's property was inundated, it was the result of a separate "flood" because there is no evidence that both properties were submerged under one continuous pool of water. While Article 3(C)(2) does exclude a flood that is confined to the insured's premises, it also incorporates the general definition of "flood" in Article 2: a "general and temporary condition of partial or complete inundation." (Emphasis added). The fact that storm water from the same source flowed down the canyon along two separate paths — one that inundated Pecarovich's property, and another that inundated Savage's property — does not preclude a reasonable finding that both Savage and Pecarovich suffered from the same "condition of inundation."

Allstate seeks to apply a second exclusion, barring recovery for damage caused by "movement of land." Pecarovich argues, however, that the damage was caused by "land subsidence" which is covered by the policy.3

FEMA amended Article 3(B)(3) in 1994 to extend limited coverage for land subsidence. See 58 F.R. 62420, 62421 (November 26, 1993) (noting that the amendment provides "that the policy does cover loss caused by land subsidence, sewer backup or seepage of water where the enumerated conditions are present") (emphasis added); see also Smoak v. Indep. Fire Ins. Co., 180 F.3d 172, 173-75 (4th Cir.1999). Allstate argues that even if the loss is covered as land subsidence under Article 3(B)(3), it falls within the exclusion for land movement under Article 3(B)(1). However, since any type of "land subsidence" would also be "land movement," this interpretation would render the expanded coverage for land subsidence meaningless. As FEMA plainly intended to expand coverage to include land subsidence when the enumerated conditions are met, the land movement exclusion cannot bar coverage if the loss also falls within the coverage for land subsidence.4

Alternatively, Allstate argues that summary judgment should be affirmed because Pecarovich did not comply with the policy's procedural requirements for submitting a claim. To collect under the Standard Flood Insurance Policy, a claimant ordinarily must submit a "proof of loss" within sixty days after the loss. The proof of loss must include numerous details, including specific estimates of the damage, that might be difficult to obtain within the sixty-day limit.5 To alleviate this burden on claimants, another section of the policy — Article 9(J)(7) — creates an alternative, streamlined procedure for submitting a claim:

We may, at our option, waive the requirement for the completion and filing of a proof of loss in certain cases, in which event you will be required to sign and, at our option, swear to an adjuster's report of the loss which includes information about your loss and the damages sustained, which is needed by us in order to adjust your claim.

Pecarovich argues that Allstate released him from the proof of loss requirement and permitted him to submit an adjuster's report under Article 9(J)(7).

Allstate contends only FEMA had the authority to grant an exception from the proof of loss requirement, interpreting the phrase "we" in Article 9(J)(7) as meaning "FEMA," not "Allstate."

The preamble of Pecarovich's policy states that "we" refers to FEMA:

AGREEMENT OF INSURANCE between the Federal Emergency Management Agency (FEMA), as Insurer, (hereinafter known as "we," "our," and "us") and the Insured, (hereinafter known as "you" and "your").

The preamble, however, is factually incorrect. Under the federal Write Your Own ("WYO") program, insurance policies may be offered and administered by private insurers with the federal government acting as an underwriter. See Flick v. Liberty Mut. Fire Ins. Co., 205 F.3d 386, 389 (9th Cir.2000) ("The WYO program allows private insurers to write standard flood insurance policies under their own names.") Accordingly, Pecarovich's policy was titled an "Allstate Dwelling Policy" on its cover sheet and the policy was endorsed by two Allstate executives on behalf of Allstate. The policy appears to be a contract between Pecarovich and Allstate, not Pecarovich and FEMA.

Allstate made the policy ambiguous by failing to substitute its own name wherever "FEMA" appeared in its contract with Pecarovich. See 44 C.F.R. § 61.13(f) (2002) (In the case of any Standard Flood Insurance Policy, and its related forms, issued by a WYO Company, wherever the names "Federal Emergency Management Agency" and "Federal Insurance Administration" appear, the WYO Company is authorized to substitute its own name therefor.")6 In this context, the phrase "we" in the policy identifies Allstate, not FEMA.7 See Battle v. Seibels Bruce Ins. Co., 288 F.3d 596, 600 n. 2 (4th Cir.2002) (interpreting the phrase "we" in Article 9(R) as referring to the private insurer). So read, Article 9(J)(7) in the contract between Allstate and Pecarovich provides:

We [Allstate] may, at our [Allstate's] option, waive the requirement for the completion and filing of a proof of loss in certain cases, in which event you will be required to sign and, at our option, swear to an adjuster's report of the loss which includes information about your loss and the damages sustained, which is needed by us in order to adjust your claim.

See Gowland v. Aetna, 143 F.3d 951, 954 (5th Cir.1998) (the Standard Flood Insurance policy provides "that the insurer, at its option, may waive the proof of loss requirement in certain cases") (emphasis added).8 This interpretation is consistent with the purpose of the "Write Your Own" program: to give private insurers the authority to adjust flood claims efficiently, in keeping with general business standards. See 44 C.F.R. § 62.23(d), (i) (2002).

Allstate argues that this interpretation conflicts with our decision in Flick. The plaintiff in Flick argued that despite her failure—by several months—to submit a timely proof of loss, she was entitled to recover under a Standard Flood Insurance Policy because she had substantially complied with the policy. We rejected the "substantial compliance" standard:

Because flood losses, whether insured by FEMA or by a participating WYO insurer, are paid out of the National Flood Insurance Fund, a claimant under a standard flood insurance policy must comply strictly with the terms and conditions that Congress has established for payment. That is the simple, but powerful command of the Appropriations Clause. Congress, through a valid act of delegation to FEMA, has authorized payment of flood insurance funds to only those claimants that submit a timely sworn proof of loss. We therefore have no more power to award a money remedy to a flood insurance claimant who submits a sworn proof of loss after the 60 day time limit than we have to award a money remedy to a disability benefits claimant whose income exceeds a statutory earnings limit.

205 F.3d at 394-95 (citations and footnotes omitted). Because the policy did not allow this extension, we declined to create an exception.

Pecarovich, however, is not seeking to avoid strict compliance with the policy. He argues that he received valid permission under the terms of Article 9(J)(7) of the policy to use this alternative procedure for submitting his claim. Pecarovich is not seeking to avoid the conditions Congress has established for payment; the only dispute here is one of contract interpretation — whether under the terms of Article 9(J)(7), he was required to obtain the necessary permission from FEMA or from Allstate.9 Correctly interpreted, Article 9(J)(7) gave Allstate the discretion to approve this procedure.

Allstate's ability to approve the alternative procedure in Article 9(J)(7) is not affected by Article 9(D), which provides that the policy "cannot be amended nor can any of its provisions be waived without the express written consent of the Federal Insurance Administrator." See also 44 C.F.R. § 61.13(d) (2002) (stating that "no provision of the [Standard Flood Insurance Policy] shall be altered, varied, or waived other than by the express written consent of the Administrator through the issuance of an appropriate amendatory endorsement"); Flick, 205 F.3d at 391(recognizing that the private insurer could not unilaterally extend the 60-day time limit for submitting a proof of loss because doing so would have constituted an unauthorized waiver of the policy's plain language). As we have said, Pecarovich was not seeking to amend or waive the terms of his policy, but only to follow an alternative procedure for submitting a claim in accordance with the policy.10

Finally, Allstate argues that even if it had the ability to approve the procedure in Article 9(J)(7), there is insufficient evidence that it gave Pecarovich permission to do so. According to Pecarovich, an Allstate supervisor met with him one month after the loss, told him that Allstate would "take care of everything", and that he was in good hands.

After Allstate appointed Rossi to adjust the claim, Rossi told Pecarovich that Pecarovich should follow his instructions about how to submit the claim. Rossi explained that after he obtained an estimate of the damage, he would meet with Pecarovich, specify the amount of the loss in an adjuster's report, and require Pecarovich to sign the report. Pecarovich asked if he needed to submit anything else, and Rossi said "no." However, Rossi never completed the report.11

This evidence is sufficient to create an inference that Rossi, with Allstate's authority, agreed to accept a signed adjuster's report in lieu of a proof of loss. See Hunt v. Cromartie, 526 U.S. 541, 552, 119 S. Ct. 1545, 143 L. Ed. 2d 731 (1999) ("[I]n ruling on a motion for summary judgment, the nonmoving party's evidence `is to be believed, and all justifiable inferences are to be drawn in[that party's] favor.'") (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986)). Allstate appointed an adjuster, but the adjuster did not provide a report to Pecarovich for him to sign. Pecarovich was not obligated to sign or swear to a report he did not receive. Moreover, Allstate continued to process Pecarovich's claim for nearly a year, despite his failure to submit a timely proof of loss, and did not request a proof of loss until March of 1998 — after it was far too late for Pecarovich to comply. Pecarovich has raised a genuine issue of fact as to whether he properly submitted his claim.

For the foregoing reasons, we REVERSE the district court's grant of summary judgment and REMAND.

Because I believe Pecarovich's claim is procedurally barred under well settled law, I respectfully dissent.

A claimant must strictly comply with the terms of the Standard Flood Insurance Policy ("SFIP").1 Flick v. Liberty Mutual, 205 F.3d 386, 387 (9th Cir.2000) (concluding "that the strict compliance rule is applicable to policies written by private insurance companies under the National Flood Insurance Program"); Wagner v. FEMA, 847 F.2d 515, 518 (9th Cir.1988) ("The SFIP's procedural requirements must be taken seriously: They constitute conditions precedent to a waiver by the federal government of its sovereign immunity."). See also Federal Crop Ins. Corp. v. Merrill, 332 U.S. 380, 385, 68 S. Ct. 1, 92 L. Ed. 10 (1947) (recognizing the "duty of all courts to observe the conditions defined by Congress for charging the public treasury"). Thus, when seeking to avoid the procedural hurdles imposed by the SFIP, the claimant faces a "heavy burden." Flick, 205 F.3d at 390.

Pecarovich did not meet the SFIP procedural requirements. He did not file a proof of loss within 60 days of the alleged flood as required by the SFIP; in fact, he never filed a proof of loss. Consequently, his only avenue of recovery was under Article 9(J)(7) of the policy,2 which provides for a waiver of "a proof of loss in certain cases, in which event[the insured] will be required to sign and, at [Allstate's] option, swear to an adjuster's report ...." Strict compliance with Article 9(J)(7) required that, at a minimum, (1) Allstate expressly waive the requirement that Pecarovich file a proof of loss, and (2) Pecarovich sign the adjuster's report. Gowland v. Aetna, 143 F.3d 951, 954 (5th Cir.1998). Neither of these conditions precedent to a proper SFIP claim were satisfied by Pecarovich.

In an understandable desire to help Mr. Pecarovich get some compensation for his loss, the Court's opinion is premised upon the incorrect assumption that Allstate waived the requirement that he file a proof of loss, though Pecarovich himself admits that Allstate never expressly waived that requirement.3 Nonetheless, the Court holds that Allstate's assurances to Pecarovich (that Allstate would satisfy the claim) somehow waived the proof of loss requirement.

When the uncontested evidence is fairly viewed, however, Allstate's alleged statements neither create an express waiver to the proof of loss requirement nor give rise to an inference of waiver. Pecarovich's own declaration, upon which the majority relies, provides, in relevant part:

I believe around mid-March and within a month of the loss, Mr. Rossi returned with a supervisor from Allstate. She told me that the reason she came out was to assure me that Allstate "would take care of everything" and that I was in good hands.

Either at that same time, or a few days later, in March Rossi told me he was having a problem with someone he had spoken to about the claim. He said, we "can't proceed with adjustment of the claim unless I (Mr. Rossi) can establish certain information about the loss." He then said he would therefore put together a report for me. He said that he would tell me what I had to do to be paid on the claim, and told me on no uncertain terms that he was calling the shots and I was just to take his direction. I asked him if there was anything else I needed to do, and he said no. . . .

Rossi repeatedly said that "he was in charge" and I could do nothing without his approval. I don't recall his exact words, but by what he told me I understood that after he had the cost of repair he would meet with me, agree on the amount of loss, on the loss to be included in his report, and I would have to sign off on it.

Viewing this statement in the light most favorable to Pecarovich, Allstate never expressly waived the proof of loss requirement. The Allstate supervisor's statement to Pecarovich that Allstate "would take care of everything" is not a waiver of the SFIP procedural requirements; it is mere puffery. Similarly, Adjuster Rossi's assurances to Pecarovich never indicated that Allstate intended to waive the SFIP hurdles.

At most, Pecarovich can argue that (1) Allstate constructively waived the proof of loss requirement or (2) Allstate should be equitably estopped from denying a waiver. But, the case law has generally rejected such equitable theories of liability in the context of the SFIP since public monies are at stake. See, e.g., Flick, 205 F.3d at 394-95 (rejecting a substantial compliance standard in determining compliance with the SFIP procedural requirements); Gowland, 143 F.3d at 954-55 (dismissing theories of constructive waiver and equitable estoppel); Wagner, 847 F.2d at 519 (holding that equitable estoppel is narrowly defined in the context of the SFIP to include only "affirmative misconduct going beyond mere negligence").4

Assuming arguendo that Allstate somehow acted to waive the proof of loss requirement, Pecarovich still needed to sign an adjuster's report in order to strictly comply with Article 9(J)(7). Gowland, 143 F.3d at 954 (noting that the insured is required to sign an adjuster's report in order to effect a waiver of the proof of loss requirement); Jamal v. Travelers Lloyds of Tex. Ins. Co., 131 F. Supp. 2d 910, 918 (S.D.Tex.2001) (explaining that a signed adjuster's report is a condition for waiving the proof of loss requirement). See also Mancini v. Redland Ins. Co., 248 F.3d 729, 734 (8th Cir.2001) (holding that claimants had not "signed" the proof of loss form by placing their names on a fax transmittal sheet). Viewing the evidence in the light most favorable to Pecarovich, this case is at best an example of substantial compliance with the SFIP provisions. But substantial compliance with the SFIP procedural requirement does not cure Pecarovich's failure to sign an adjuster's report. His claim is still precluded. Flick, 205 F.3d at 394-95 (holding that substantial compliance with the SFIP terms is insufficient; a claimant "must comply strictly with the terms and conditions that Congress has established for payment").

Pecarovich needed to file a proof of loss within 60 days of his loss in order to perfect his claim. He did not. There was no waiver of this requirement. Summary judgment in favor of Allstate was appropriate. Therefore, I respectfully dissent.