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November 12, 1997

M.Z. DISCOUNT CLOTHING CORP., Plaintiff, against DR. RITA MEYNINGER, Director of Federal Emergency Management Agency, an agency of the United States Government, and THOSE CERTAIN UNDERWRITERS AT LLOYDS' ISSUING POLICY NUMBER L947020, Defendants.

The opinion of the court was delivered by: DEARIE

 DEARIE, District Judge.

 This is an action to recover proceeds of two insurance policies. Plaintiff M.Z. Discount Clothing Corp. ("M.Z.") was insured under a $ 15,000 Commercial Crime Insurance Policy (the "FEMA Policy") issued by the Federal Emergency Management Agency ("FEMA"). *fn1" M.Z. was also covered by an $ 85,000 excess policy issued by certain underwriters at Lloyds' ("Lloyds"). Less than one month after coverage under the Lloyds policy commenced, M.Z. claimed that certain of its inventory was stolen in a robbery. M.Z. claimed a loss in excess of $ 100,000, thus implicating both of these policies. FEMA and the Underwriters have moved to dismiss or, in the alternative, for summary judgment.


 Because the Court has relied on materials beyond the pleadings, it will treat the instant motions as motions for summary judgment. Summary judgment should be granted where there is "no genuine issue as to any material fact." FED. R. CIV. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 323, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986). To survive a motion for summary judgment, the adverse party must "set forth specific facts showing that there is a genuine issue for trial." FED. R. Civ P. 56(e).

 1. FEMA Motion

 The FEMA Policy was issued by the Federal Crime Insurance Program (the "FCIP"), which Congress created to provide crime insurance coverage to individuals and small businesses in areas where such coverage is difficult or impossible to obtain. See 12 U.S.C. §§ 1749bbb-10a et seq. ; 44 C.F.R. § 80.2(a). FEMA is charged with administration of the FCIP, 12 U.S.C. §§ 1749bbb-2(a)(17), 1749bbb-10b, which is subject to the regulations set forth at 44 C.F.R. Part 80 et seq.

 The FEMA Policy, the regulations enabling the government's issuance of such policies and applicable law required plaintiff to commence an action to recover proceeds within two years of its discovery of the loss and within one year of its receipt of notice of the disallowance of its claim. 12 U.S.C. § 1749bbb-11(b)(2); 44 C.F.R. § 83.26, at Condition 9 (setting forth required content for Commercial Crime Insurance Policies). The alleged burglary occurred on January 20, 1995. Submission of a sworn proof of loss within sixty days of the incident was a condition of coverage under the FEMA Policy. On March 17, 1995, plaintiff submitted a sworn proof of loss, by certified mail, to the FCIP's independent adjuster, M.J. Palais & Co., Inc. ("Palais"). Nevertheless, on April 1, 1995, the FCIP mistakenly notified plaintiff that the sixty-day period for submitting a valid proof of loss had expired, and that the claim would therefore be denied.

 Plaintiff reacted immediately. On April 7, 1995, M.Z.'s accountant faxed a copy of its sworn proof of loss to the FCIP, explaining that plaintiff had submitted the sworn proof of loss to Palais within the sixty-day period. FEMA does not now contest that the original proof of loss was timely submitted, or that it denied M.Z.'s claim in error. In fact, the FCIP's April 1, 1995 letter stated that plaintiff's claim might be reconsidered if appropriate documentation was received within thirty days. Plaintiff understood that the April 7, 1995 letter from its accountant constituted such documentation.

 By letter dated June 22, 1995, FEMA's adjuster requested certain additional documentation from M.Z. by August 14, 1995. Palais admonished plaintiff that: "should you fail to provide information requested by the established [sic] deadline, your clients [sic] claim may be closed without payment." In a report dated October 16, 1996, Palais informed the FCIP that Lloyds had denied M.Z.'s claim on August 1, 1996, "citing policy violations including late notice and false testimony" regarding the amount of the loss. Palais also informed the FCIP it had closed its file on the claim.

 M.Z. commenced this action on October 2, 1996, within two years of the claimed loss and within one year after Palais' August 1, 1996 letter informing the FCIP it had closed its file. FEMA argues that the one-year limitations period began to run as of the FCIP's April 1, 1995 denial letter, and that the action is therefore time-barred. Plaintiff, citing Farmacia San Jose v. Federal Emergency Management Agency, 1984 U.S. Dist. LEXIS 17239, No. CV-83-2054 (D.P.R. Apr. 26, 1984), argues that the April 1, 1995 letter was not a clear and unequivocal denial of its claim, and therefore did not trigger the one-year limitations period. Furthermore, plaintiff argues that the FCIP's April 1, 1995 letter left open the possibility of reconsideration upon submission of appropriate documentation, that such documentation was promptly submitted, and that Palais' June 22, 1995 letter indicated the claim was still under consideration.


 In Farmacia San-Jose, the FCIP had denied an insured's claim, but invited the insured to request additional information or further clarification. The insured submitted several requests for reconsideration, each of which was denied. The district court ruled that the limitations period ran from the initial denial, and was not tolled by the requests for reconsideration. Contrary to plaintiff's contention, Farmacia San-Jose does not indicate that a denial letter must be "unequivocally clear and definite" to be effective. Rather, the court merely stated that even if it were to accept such a requirement, the requirement was satisfied by the denial letter at issue there.

 However, although the limitations period for acting on FCIP policies has strictly been construed, see Robinson v. Federal Ins. Admin., 1984 U.S. Dist. LEXIS 16303, 1984 WL 425, at *2 (S.D.N.Y. 1984) (Haight, J.) (interim period of negotiation, after initial denial, does not toll limitations period), none of the cases cited by FEMA indicates that a concededly erroneous denial triggers the one-year limitations period, particularly when the FCIP resumes consideration of the claim after being notified of its error. In fact, some courts that have denied similar claims on statute of limitations grounds have considered the possibility that the FCIP's reconsideration or reopening of a claim, after an initial denial, might toll the limitations period or preclude the initial denial from triggering the period. See Massey v. Bragg, 1985-86 Fire & Casualty Cas. (CCH) 792, 793 (E.D.N.Y. June 18, 1985) (Wexler, J.) (even though initial denial might not trigger limitations period, and action was commenced within one year of second denial, it was not commenced within two years of loss); Rogers v. Federal Crime Ins. Co., 1985 U.S. Dist. LEXIS 12782, 1985 WL 4892 (N.D. Ill. Dec. 13, 1985) (even if first letter did not trigger limitations period, action was untimely because not filed ...

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