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Jones v. Cornerstone National Insurance Co.

United States District Court, E.D. Missouri, Southeastern Division

February 25, 2015

McIVAN JONES, Plaintiff,


AUDREY G. FLEISSIG, District Judge.

This matter is before the Court following a bench trial held on June 11, 2014. Defendant Cornerstone National Insurance Company, a Write-Your-Own ("WYO") program carrier participating in the federal government's National Flood Insurance Program ("NFIP") pursuant to the National Flood Insurance Act of 1968, as amended, appears in its fiduciary capacity as the fiscal agent of the United States. Plaintiff McIvan Jones seeks recovery under several Standard Flood Insurance Policies ("SFIP") issued by Defendant under the NFIP. Defendant maintains that recovery is precluded by the "flood-in-progress" exclusion in the policies, and pursuant to the common law doctrine of loss-in-progress. The following findings of fact and conclusions of law are entered based on the entire record, including the trial testimony and exhibits, and the parties' post-trial briefs. As set forth below, judgment shall be entered on behalf of Plaintiff and against Defendant.


Jones, through his company Jones Family Farm Registered, LLP, is the owner of farm property located on a ridge in East Prairie, Mississippi County, Missouri. Mississippi County, consisting of approximately 262, 000 acres, is located in the southeastern part of Missouri, with its eastern, northern, and southern borders along the Mississippi River. East Prairie is approximately 15 miles west of the river and the Birds Point-New Madrid Floodway (the "Floodway") on the bank of the river. The purpose of the Floodway is to divert water from the Mississippi River during major flood events and lower flood risks upstream, notably at Cairo, Illinois, located across from the southern tip of Mississippi County, on the Illinois side of the river. The Floodway is operated by detonating one of its levees. Prior to 2011, this had been contemplated numerous times, but had not actually been done since 1937.

By April 22, 2011, mid-Spring storms produced historically high water levels in the Mississippi River, causing flooding in numerous states and counties, including Mississippi County. On April 22 or 23, 2011, to help finance his wheat planting for the season, Plaintiff applied for a loan in the amount of $51, 523, to be secured by buildings on his property. He was informed that he would first need to acquire flood insurance. On April 25, 2011, the United States Army Corps of Engineers ("the Corps") issued a news release which stated that it would be initiating a "readiness plan" to operate the Floodway by detonating one of its levees, noting that "[n]o decision can be made at this time whether or not to artificially open the floodway." On the same day, the local sheriff told Plaintiff to evacuate his property due to impending flooding. Plaintiff began moving household furnishings and farm equipment in case the Corps did breach the levee, and continued his moving efforts for four days.

On April 27, 2011, Plaintiff completed flood insurance applications with Defendant for several of his buildings. By that time, the National Weather Service projected the water level of the Mississippi River at Cairo would peak at 60.5 feet by May 1, 2011; thus a decision on whether or not to detonate the levee would probably have to be made by April 29, 2011.

When Plaintiff applied for the flood insurance and paid his premium on April 27, his land was dry. "Backwaters" from the river were one quarter to one half of a mile away from his property. Plaintiff's property had previously experienced backwater flooding on several occasions, but in the past, flooding had never done any damage to his property or buildings, other than leaving some debris behind. On April 28, 2011, Defendant issued several SFIPs to Plaintiff, each pertaining to a separate building on his property. Pursuant to the parties' joint stipulation of facts, the policies were effective May 2, 2011, through May 2, 2012. (Doc. No. 41 at 10.) The coverage of these policies was, in the aggregate, approximately $388, 000. The policies stated that Defendant would pay for "direct physical loss by or from flood to [the] insured property" as long as the premiums were paid, Plaintiff complied with all terms and conditions, and accurate information and statements were furnished.

Article V(B) in each of the SFIPs, commonly referred to as the "flood in progress" provision, stated: "We do not insure a loss directly or indirectly caused by a flood that is already in progress at the date and time: (1) The policy term begins...." Article II (A)(1) defined the term "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 (at least one of which is your property) from (a) overflow of inland or tidal waters; (b) unusual and rapid accumulation or run off of surface waters from any source; (c) mud flow." Regarding all definitions, the policies stated: "Some definitions are complex because they are provided as they appear in the law or regulations or result from court cases. The precise definitions are intended to protect you."

On April 29, 2011, a decision was issued in Missouri ex rel. Koster v. United States Army Corps of Engineers, No. 1:11CV00067 SNLJ, 2011 WL 1630339 (E.D. Mo. Apr. 29, 2011), denying the State of Missouri and the Missouri Department of Natural Resources' motion to enjoin the Corps from operating the Floodway. On May 2, 2011, Plaintiff closed on the loan he had applied for on April 23, 2011. Neither at the time Plaintiff applied for and paid for the insurance, nor at the time Plaintiff closed on the loan did Plaintiff know with any certainty whether the levee would be breached. Although Defendant emphasizes the notice from the Sheriff to vacate and that Plaintiff moved belongings, those actions would have been prudent, if not necessary, regardless of whether the levee was going to be blown.

Later that day, at 10:00 p.m., the Corps artificially breached a levee of the Floodway. Plaintiff's property was flooded two days later, on May 4, 2011. The levee breach resulted in massive flooding of Plaintiff's farm and damage to the buildings, a level of destruction very different from the debris being left behind that occurred with previous flooding. Plaintiff subsequently submitted a claim to Defendant for damage his property sustained.

On May 17, 2011, FEMA sent a Memorandum (Bulletin W-11030) to WYO Principal Coordinators and the NFIP Servicing Agent. The Memorandum stated, "[t]his Bulletin provides guidance" regarding what triggers the "flood in progress" exclusion in SFIPs. The Memorandum stated that FEMA considers the "flood in progress" exclusion to be triggered by the earlier of the following situations:

A. The community where the insured building is located first experiences a flood as defined in the SFIP, or
B. The date and time of an event initiating a flood that causes damage, ...

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