The opinion of the court was delivered by: BROTMAN
Presently before the court are cross motions for judgment filed by Plaintiffs, William and Phyllis Kennedy (hereinafter "the Kennedys" or "Plaintiffs"), and Defendant Aetna Insurance Company (hereinafter "Aetna"). This case was called for trial on May 19, 1997; on that date, counsel for Plaintiffs reported the matter settled as to defendants CNA Insurance Company, Thomas Heist Insurance Agency, Abrams Insurance Agency, National Associates, and Michael McLaughlin.
On the same date, Plaintiffs and the remaining defendant, Aetna, stipulated to all facts in the case, leaving in dispute only questions of law. Pursuant to the court's direction, the Kennedys and Aetna each submitted supplemental briefs in support of judgment, to which the court now turns.
I. STIPULATED FACTS AND BACKGROUND
On March 29, 1993, Aetna issued a flood insurance policy to the Kennedys covering their property at 111 47th Street in Sea Isle City, New Jersey. The policy is a Standard Flood Insurance Policy (hereinafter "SFIP") as set forth at 44 C.F.R. § 61 App. A(1) (1997), issued pursuant to the National Flood Insurance Act of 1968 (hereinafter "NFIA"), 42 U.S.C. §§ 4001 et seq. On March 2, 1994, a severe storm caused flooding which, in turn, caused a heater in the Kennedys' home to malfunction and ignite as it came into contact with the floor beams of the Sea Isle City property. The resulting fire completely destroyed the property. The Kennedys submitted a property loss notice to National Associates, which company forwarded same via facsimile to Aetna's Claims Department. (See Stip'd Facts Ex. D.)
On Aetna's behalf, Kevin Showalter of Michael Bellmon Associates investigated the Kennedys' loss and inspected their property on March 8, 1994. Showalter prepared a report summarizing his findings regarding, inter alia, the cause of the loss and the scope of the damage. Thereafter, Showalter contacted the Kennedys and forwarded to them a proof of loss form for their signatures. Because the Kennedys disputed Showalter's calculation of their loss, they did not sign or return to Aetna the proof of loss form. To date, the Kennedys have not submitted to Aetna a proof of loss form.
On April 19, 1994, Aetna mailed to the Kennedys a letter reminding them of their obligation to file a formal proof of loss within 60 days from the date of the loss. (Id. Ex. G.) The Kennedys did not file such a form; rather, on May 10, 1994, they notified Showalter and Bellmon Adjusters--Aetna's adjusting company--that they disagreed with the proposed proof of loss and required more time to assemble the receipts necessary to submit the sworn proof of loss to Aetna. (Id. Ex. H.) Two months later, on July 18, 1994, Aetna advised the Kennedys of its position regarding their claim: (1) the flooding had caused minimal demonstrable damage in the amount of $ 453.80 to the property in question; (2) all damage cause by fire are excluded by the flood policy; and (3) Aetna would reopen the Kennedys' file to consider a claim for $ 453.80 upon receipt of a signed proof of loss.
(Id. Ex. I.)
In the cross-motions before the court, the parties dispute whether the policy provides coverage for the damage to the Kennedys' property. Defendant Aetna contends that the policy expressly excludes losses caused by fire and therefore does not cover the Kennedys' fire-related losses. Aetna also argues that the Kennedys' failure to submit a sworn proof of loss within 60 days of their loss bars their claim for damages.
Plaintiffs, in turn, contend that the policy provides coverage for their claim and seek compensatory damages, costs, and interest as permitted by 42 U.S.C. § 4001, et seq. Plaintiffs argue that Aetna is estopped from raising as a defense their failure to file a timely proof of loss because Aetna denied coverage on another, substantive ground--namely, that the loss was not covered under the flood policy.
The Third Circuit has not yet ruled on whether a claimant's failure to file a proof of loss bars completely a subsequent claim against a private insurance company that issued a federally sponsored insurance policy. An extensive survey of opinions from courts in this circuit and others indicates widespread disagreement on this issue. Compare Schumitzki v. FEMA, 656 F. Supp. 430, 432 (D.N.J. 1987) (Gerry, J.) (citations omitted) ("Numerous courts [in this circuit] have held . . . failure to comply with the proof of loss requirement of a federal insurance policy bars a subsequent action . . . .") with Conrad v. Omaha Property & Cas. Ins. Co., 1995 U.S. Dist. LEXIS 7907, *3, No. CIV. A. 94-4087, 1995 WL 350418, *4 (E.D. Pa. June 7, 1995) (concluding that failure to comply strictly with proof of loss requirement does not bar claim). Most recently, this court considered this issue in Gagliardi v. Omaha Property & Ins. Co., 952 F. Supp. 212 (D.N.J. 1997), concluding inter alia that the lack of a formal proof of loss statement barred the plaintiffs' action in light of repeated notifications regarding same by the defendant-insurer.
Indeed, Aetna argues that this court's rationale in Gagliardi applies with equal force to the case at bar. While the court agrees that the legal principles in Gagliardi also guide the court's decision in this matter, the court acknowledges factual differences between the two cases. For instance, in Gagliardi, the record included evidence of numerous letters from both the defendant-insurer and its adjuster to the plaintiffs--even after the 60-day period had lapsed--advising them of the need to file a sworn proof of loss statement. Moreover, the defendant-insurer in Gagliardi closed the plaintiffs' file and denied their claim for insurance coverage for the sole reason that they had not complied with the provisions in the policy requiring them to submit proof of loss documentation. In this case, Aetna reminded the Kennedys of the obligation to file a formal proof of loss before the 60-day period had expired.
(Stip'd Facts Ex. G.) Later, Aetna advised the Kennedys that their claim had been denied because the policy did not provide coverage for damages caused by fire, but that it would nonetheless still consider a claim for flood-related damages upon receipt of a signed proof of loss form.
The Kennedys contend that Aetna excused them from fulfilling the policy requirement to file a proof of loss by classifying the loss as non-covered and denying coverage on that basis. They argue that, under N.L. Indus., Inc. v. Commercial Union Ins. Co., 926 F. Supp. 446, 455 (D.N.J. 1996) ("N.L. Industries "), Aetna waived the notice requirement of the insurance contract and is now estopped from raising as a defense the failure to file a proof of loss. However, reliance on N.L. Industries and that decision's guidance regarding a private, comprehensive general liability insurance policy is inapposite, since the insurance policy at bar derives from the NFIAand is governed by a discrete line of cases to which N.L. Industries does not belong.
To that end and as a preliminary note, insurance policies issued under federal programs must be strictly construed. See Federal Crop Ins. Corp. v. Merrill, 332 U.S. 380, 92 L. Ed. 10, 68 S. Ct. 1 (1947); Cross Queen, Inc. v. FEMA, 516 F. Supp. 806, 809 (D.V.I. 1980) (noting that non-compliance with requirement of policy issued under federal program almost always bars recovery). Further, general doctrines of waiver and estoppel do not apply when the insurer is an agency of the United States. Continental Imports, Inc. v. Macy, 510 F. Supp. 64, 66 (E.D. Pa. 1981); Schumitzki, 656 F. Supp. at 434 (citations omitted). While the court recognizes that the defendant is not such an agency, cf. 44 C.F.R. § 62.23(g) (1997), it cannot ignore that the flood insurance policy Aetna issued to the Kennedys provides federally sponsored coverage pursuant to federal law. Cf. Stip'd Facts Ex. B at 8 (noting that federal law governs insurance policy at issue). Thus, where that policy and the federal law from which it derives delimit waiver, the court must conclude that doctrines of waiver and estoppel usually applicable in insurance cases are inapposite here.
Here, the Kennedys' policy states clearly "This Standard Flood Insurance Policy cannot be amended nor can any of its provisions be waived without the express written consent of the Federal Insurance Administrator." (Id. Ex. B at 5.) The policy also advises the insured that actions of the insurer will not constitute a waiver of the insurer's rights. (Id.) Moreover, it permits a waiver of the proof of loss requirement only if the insured signs and swears to a detailed adjuster's report of the loss and damages. (Id. at 7.)
This the Kennedys never did. In addition, the letter from Aetna on which the Kennedys rely to assert their waiver-estoppel argument invites the Kennedys to submit a signed proof of loss if they "wish to reopen the file for [their] flood ...