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Surfsand Resort, LLC v. Nationwide Mutual Fire Insurance Co.

United States District Court, D. Oregon

June 28, 2018

SURFSAND RESORT, LLC, an Oregon limited liability company, Plaintiff,
v.
NATIONWIDE MUTUAL FIRE INSURANCE COMPANY, an Ohio company, and HARLEYSVILLE INSURANCE COMPANY, a Pennsylvania company, Defendants.

          JAMES LEE GUSE Barker Martin Attorneys for Plaintiff.

          DIANE L. POLSCER BRIAN C. HICKMAN Gordon & Polscer, LLC KAYLEIGH T. KEILTY PATRICIA M. LAMBERT Pessin Katz Law, P.A. Attorneys for Defendants.

          OPINION AND ORDER

          ANNA J. BROWN UNITED STATES SENIOR DISTRICT JUDGE.

         This matter comes before the Court on Plaintiff's Motion (#32) for Summary Judgment and Defendants' Cross-Motion (#36) for Summary Judgment. The Court concludes the record is sufficiently developed such that oral argument would not be helpful to resolve these Motions. For the reasons that follow, the Court DENIES Plaintiff's Motion, GRANTS Defendants' Motion, and DISMISSES this matter.

         BACKGROUND

         The following facts are taken from Plaintiffs' Complaint and the parties' filings related to their Motions for Summary Judgment.

         On September 14, 2015, Defendants Nationwide Mutual Fire Insurance Company and Harleysville Insurance Company issued to Plaintiff Surfsand Resort, LLC, a Standard Flood Insurance Policy (SFIP) pursuant to the National Flood Insurance Act (NFIA), 42 U.S.C. § 4001(a). The policy period was from September 14, 2015, through September 14, 2016. The policy “insure[d] [Plaintiff] against direct physical loss by or from flood.” Joint Statement of Agreed Facts at ¶ 5. The policy, however, imposed “restricted coverage on building items located in a ‘basement,' which it define[d] as ‘[a]ny area of the building, including any sunken room or sunken portion of a room, having its floor below ground level (subgrade) on all sides.'” Joint Statement of Agreed Facts at ¶ 6 (quoting Ex. 1, Art. II(B)(5)).

         The policy also provided “‘[w]ithin 60 days after the loss, send us a proof of loss, which is your statement of the amount you are claiming under the policy signed and sworn to by you.'” Joint Statement of Agreed Facts at ¶ 8 (quoting Ex. 1, Art. VII(J)(4)) (emphasis in original). Finally, the policy provided:

“If we reject your proof of loss in whole or in part you may: (a) Accept such denial of your claim; (b) Exercise your rights under this policy; or (c) File an amended proof of loss as long as it is filed within 60 days of the date of the loss.”

         Joint Statement of Agreed Facts at ¶ 9 (quoting Ex. 1, Art. VII(M)(2)).

         On December 11, 2015, the tidal waters of the Pacific Ocean overflowed and damaged the bottom level of hotel rooms at the Surfsand Resort in Cannon Beach, Oregon, which Plaintiff owned.

         On December 22, 2015, Nationwide received its first notice of loss from Plaintiff.

         “The claim was assigned to Colonial Claims Corporation who assigned Jacob Valencia to serve as the independent adjuster.” Joint Statement of Agreed Facts at ¶ 13. Valencia advised Plaintiff:

I am the eyes and ears of the insurance company. I cannot bind them. I cannot tell you what amount of money you will be paid. My job is to make assessment for the insurance company of the damage under the policy coverage based on my knowledge and experience. My assessment will be subject to the insurance company's approval.
Your insurance policy is a written contract with stated terms and conditions. Please comply with them and specifically we want to note you should file a Proof of Loss within sixty days from the date of your event. Please see VII. General Conditions, p12 of 19 for details on the proof of loss.

         Joint Statement of Agreed Facts at ¶¶ 13-14.

         On May 4, 2016, Plaintiff executed a signed and sworn Proof of Loss in the amount of $98, 765.08. Joint Statement of Agreed Facts at ¶ 17.

         At some point before June 2, 2016, Plaintiff requested the Federal Emergency Management Agency (FEMA) to grant Plaintiff a waiver of the 60-day Proof of Loss deadline contained in the SFIP with respect to Plaintiff's Proof of Loss in the amount of $98, 765.08.

         On June 2, 2016, FEMA granted Plaintiff a limited waiver of the 60-day Proof of Loss deadline as follows:

Based on the information you submitted, your request for a waiver of the 60 day Proof of Loss policy provision is approved. This limited waiver is for only the amount of the loss and scope of the damages outlined in this request and otherwise does not waive the proof of loss or any other requirement of the [SFIP] and makes no other comment because of lack of information.

Decl. of Brian C. Hickman, Ex. 4 at 2 (emphasis added).

         On June 3, 2016, Nationwide sent Plaintiff a coverage-determination letter enclosing a check for $98, 765.08 and advising Plaintiff that it was denying coverage for

damages to the insured contents and all non-covered items located in the basement pursuant to the SFIP and quoted the relevant policy language. The letter also explained the appeal process and provisions related to filing suit against Nationwide.

         Joint Statement of Agreed Facts at ¶ 19.[1]

         On July 14, 2016, Plaintiff appealed Nationwide's denial of coverage for damage to the “non-covered items located in the basement” to FEMA. Specifically, Plaintiff disputed Nationwide's determination that Plaintiff's property had a basement within the meaning of the SFIP.

         On October 19, 2016, FEMA advised Plaintiff that an inspection by John Garner, an Oregon licensed engineer, was “necessary because the elevations of the lowest floor and adjacent grades of ...


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