U.S. Court of Appeals for the Ninth Circuit

Case Name:
MCHUGH V USAA
Case Number: Date Filed:
97-35019 01/06/99


FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

FRANK J. MCHUGH, husband; MARY
S. MCHUGH, wife,
                                                     No. 97-35019
Plaintiffs-Appellants,
                                                     D.C. No.
v.
                                                     CV-95-05702
UNITED SERVICE AUTOMOBILE
                                                     OPINION
ASSOCIATION, a Texas corporation,
Defendant-Appellee.


Appeal from the United States District Court
for the Western District of Washington
J. Kelley Arnold, Magistrate Judge, Presiding


Argued and Submitted
June 4, 1998--Seattle, Washington


Filed January 6, 1999

Before: Donald P. Lay,* Harry Pregerson and
Susan P. Graber, Circuit Judges.


Opinion by Judge Lay; Dissent by Judge Graber

_________________________________________________________________

SUMMARY

The summary, which does not constitute a part of the opinion of the court,
is copyrighted C 1999 by West Group.
_________________________________________________________________


Insurance/Homeowners

The court of appeals reversed a judgment of the district
court. The court held that under the doctrine of reasonable
_________________________________________________________________
*Honorable Donald P. Lay, Senior Circuit Judge for the Eighth Circuit,
sitting by designation.


                               51


expectations, coverage in a standard flood insurance policy
(SFIP) for losses from "mudslide" may apply to property
damage caused when a saturated mixture of soil and other
earth components moves downslope after heavy rains and
impacts the insured's house.


The Federal Emergency Management Agency (FEMA) is
authorized to provide, through private insurers, federally sub-
sidized flood insurance to homeowners. The language of the
SFIP is prescribed by statute and FEMA regulations.


The SFIP defines "flood" to include mudslides, i.e., mud-
flows that are proximately caused by flooding and are "akin
to" a river of liquid and flowing mud on the surfaces of nor-
mally dry areas. Among losses that are not covered, the SFIP
includes those caused by "landslide" or other earth move-
ment, except mudslides or erosion covered under the flood
peril.


Following heavy rains in the area of their house, appellants
Frank and Mary McHugh submitted a claim under their SFIP
issued by appellee United Service Automobile Association
(USAA). They reported that their house, located at the base
of a steep-sloping hill, was knocked off its foundation and
partially destroyed when a saturated mixture of soil, gravel,
rock, and vegetation moved down the hill and impacted the
house.


USAA's geotechnical engineer wrote in his report that the
slide was caused by a combination of factors, including satu-
ration of surface soils by heavy rainfall, and a buildup of
groundwater in underlying sand and gravel. He concluded that
the soil instability was classified as a landslide, not a mud-
slide.


The McHughs hired their own geotechnical engineer, who
reached the conclusion that the damage to the house was


                               52


caused by a mudslide precipitated by soil saturation and sur-
face water runoff from a natural drainage channel.


USAA rejected the McHughs' claim. They sued on the
SFIP. On cross-motions for summary judgment, USAA and
the McHughs tendered the testimony of their geotechnical
experts, who both characterized the event as "a saturated mass
of soil and trees." The district court found that soil saturation
was the primary cause of the damage and ruled for USAA.
The McHughs appealed.


[1] Under the SFIP, a "landslide " as opposed to a mudflow
is excluded from coverage. Yet the term landslide is not oth-
erwise defined in the policy. Webster's dictionary defines a
landslide as "the rapid downward movement under the influ-
ence of gravity of a mass of rock, earth, or artificial fill on a
slope.


[2] However, the fundamental question in this case was not
so much the interpretation of the exclusionary clause, but
whether a mudflow was the proximate cause of the damage to
the house. The definition of "mudflow" as set forth in the pol-
icy and regulation is reinforced by the common usage of that
term. According to Webster's Ninth New Collegiate Dictio-
nary, "mudflow" is defined as "a moving mass of soil made
fluid by rain or melting snow." There was nothing in the pol-
icy or regulations that defined "mudflow" any differently
from the common usage of the term.


[3] Under the terms of the policy, "liquid and flowing mud"
surely meant nothing more than a saturated soil mass moving
by liquidity down a slope. The McHughs' house was hit by
a saturated mixture of soil, gravel, vegetation, and rock, and
was knocked off its foundation. The policy described a mud-
flow "as when earth is carried by a current of water and
deposited along the path of the current." This was no different
than the Webster's definition of mudflow.


                               53


[4] The Act mandates that coverage under the term "flood"
includes "inundation from mudslides which are proximately
caused by accumulations of water on or under the ground.
Even the district court's conclusion that soil saturation was
the predominant cause of the damage fit within the partial def-
inition of a mudslide proximately caused by accumulations of
water on or under the ground.


[5] The policy was not ambiguous in its terms. The occur-
rence was "akin to a river of liquid, flowing mud," and consti-
tuted "earth carried by a current of water and deposited along
the path of the current." These definitions simply mean that
coverage will be extended to the common usage of the term
"mudflow," as when damage is proximately caused "by a
moving mass of soil made fluid by rain." [6] Under the undis-
puted historical facts, the coverage of the SFIP clearly
extended to the flooding, i.e., mudflow, that proximately
caused the damage to the McHughs' home.


Judge Graber dissented, writing that the majority's opinion
was inconsistent with the record, conflicted with precedent on
important matters of federal law, modified a valid federal reg-
ulation, and reached an unjust result.


_________________________________________________________________

COUNSEL

Matthew T. Boyle, Mitchell, Lang & Smith, Seattle, Wash-
ington, for the plaintiffs-appellants.


D. Bradley Hudson, Hudson Youngblood, Seattle, Washing-
ton, for the defendant-appellee.


_________________________________________________________________

OPINION

LAY, Circuit Judge:

Frank and Mary McHugh filed a complaint for a declara-
tory judgment against the United Service Automobile Associ-


                               54


ation insurance company ("USAA") and the Director of the
Federal Emergency Management Agency ("FEMA") alleging
that (1) their beach house which was insured by USAA under
a Standard Flood Insurance Policy ("SFIP") was damaged by
a mudslide, (2) they made a claim to USAA under the SFIP,
and (3) USAA improperly denied their claim. The district
court granted summary judgment for USAA, holding that the
damage to the McHughs' home was caused by a landslide
which is not covered by the policy. We reverse the decision
of the district court.


BACKGROUND

Under the National Flood Insurance Act of 1968 ("Act"),
codified at 42 U.S.C. SS 4001 et seq. (1994), the FEMA is
authorized to provide federally subsidized flood insurance to
individual homeowners. The language of the SFIP is pre-
scribed by the Act and FEMA regulations, although the policy
itself is issued through a private insurer. Frank and Mary
McHugh purchased a SFIP from USAA to provide coverage
for their beach house located on the Hood Canal in Seabeck,
Washington.


The McHughs' Flood Policy defines "Direct Physical Loss
By or From Flood" as "any loss in the nature of actual loss
of or physical damage, evidenced by physical changes, to the
insured property . . . which is directly and proximately caused
by a `flood' (as defined in this policy)." ER at 31. The policy
also defines "Flood" as:


      A. A general and temporary condition of partial or
      complete inundation of normally dry land area
      from:


      1. The overflow of inland or tidal waters.

      2. The unusual and rapid accumulation or
      runoff of surface waters from any
      source.


                               55


      3. Mudslides (i.e., mudflows) which are
      proximately caused by flooding as
      defined in subparagraph A-2 above and
      are akin to a river of liquid and flowing
      mud on the surfaces of normally dry
      land areas, including your premises, as
      when earth is carried by a current of
      water and deposited along the path of
      the current.


      B. The collapse or subsidence of land along the
      shore of a lake or other body of water as a result
      of erosion or undermining caused by waves or
      currents of water exceeding the cyclical levels
      which result in flooding as defined in subpara-
      graph A-1 above.


ER at 31-32 (emphasis added).

The Flood Policy also contains the following exclusion:

      We only provide coverage for direct physical loss by
      or from flood which means we do not cover:


      . . .

      B. Losses from other casualties, including loss
      caused by:


      1. Theft, fire, windstorm, wind, explo-
      sion, earthquake, land sinkage,
      landslide, destabilization or movement
      of land resulting from the accumulation
      of water in subsurface land areas, grad-
      ual erosion, or any other earth move-
      ment except such mudslides (i.e.,
      mudflows) or erosion as is covered
      under the peril of flood.


                               56


ER at 32-33 (emphasis added).

The federal courts have stated that flood insurance polices
normally are subject to limitations on coverage imposed by
applicable federal regulations. See Carneiro Da Cunha v.
Standard Fire Ins. Co./Aetna Flood Ins. Program, 129 F.3d
581, 585 (11th Cir. 1997) (stating that "[t]here is no dispute
that the policies at issue are subject to limitations on coverage
imposed by federal statute and regulations"); Criger v.
Becton, 902 F.2d 1348, 1351 (8th Cir. 1990) (stating that
FEMA's interpretation of its own regulations regarding cover-
age is entitled to great deference). However, this makes little
difference in the instant case because the definitions of the
terms "flood" and "flooding" in the policy are the same in all
material respects as the definitions found in the regulations.
The regulations defining mudslide state:


      Mudslide (i.e., mudflow) describes a condition where
      there is a river, flow or inundation of liquid mud
      down a hillside usually as a result of a dual condition
      of loss of brush cover, and the subsequent accumula-
      tion of water on the ground preceded by a period of
      unusually heavy or sustained rain. A mudslide (i.e.,
      mudflow) may occur as a distinct phenomenon while
      a landslide is in progress, and will be recognized as
      such by the Administrator only if the mudflow, and
      not the landslide, is the proximate cause of damage
      that occurs.


44 C.F.R. S 59.1 (1997).

On December 28, 1994, the McHughs reported to USAA
that their beach house had been damaged by a flood-related
mudslide that occurred after heavy rains and an overflow of
a drainage ditch situated at the top of the slope on which the
house was located. The house, located at the base of a steep
sloping hill, was knocked off its foundation and partially
destroyed after being hit by a saturated mixture of soil, gravel,


                               57


vegetation, and rock. After receiving the McHughs' claim
under the SFIP, USAA hired an independent adjustor, who
took several photographs,1 and then hired Martin Page from
the geo-technical engineering firm of Shannon & Wilson to
determine the exact cause of the damage to the McHughs'
house. In a written report, Page concluded that the slide was
caused by a combination of factors including saturation of the
surface soils by heavy rainfall and a build-up of groundwater
in the underlying sand and gravel. Page's report concludes,
however, that "it is our opinion that the soil instability that
occurred at the subject site is classified as a landslide, not a
mudslide." ER at 16.


The McHughs hired their own geo-technical engineer, Rob-
ert Pride, to assess the cause of the damage. Contrary to
Page's report, Pride found that the damage to the beach house
was caused by a mudslide, not a landslide, precipitated by soil
saturation and surface-water runoff from a natural drainage
channel above the slide area.


In December 1995, the McHughs filed a complaint against
USAA and the director of FEMA seeking coverage for dam-
age to the beach house.2 USAA moved for summary judgment
in November 1996 to dismiss all claims with prejudice. The
McHughs filed a cross-motion for summary judgment a
month later asking the district court to hold that their claim
was covered by the policy as a matter of law.


On December 6, 1996, the district court3  granted USAA's
motion for summary judgment, holding the damage to the
_________________________________________________________________
1 We have attached as an Appendix to the opinion four of those photo-
graphs which visibly demonstrate part of the debris and saturated soil
mass which pushed the home off its foundation.
2 The director of FEMA was dismissed as a party on March 11, 1996.
3 The parties consented for U.S. Magistrate Judge Kelley Arnold for the
Western District of Washington, to hear and decide the cross-motions for
summary judgment.


                               58


McHughs' home was caused by a landslide, not a mudslide,
and therefore was excluded from coverage under the SFIP.
See McHugh v. United Service Automobile Ass'n, No. C95-
5702JKA (W.D. Wash. Dec. 6, 1996) (Order Granting Defen-
dant's Motion for Summary Judgment). This appeal followed.


DISCUSSION

The law is clear that, as contracts, SFIPs issued under the
National Flood Insurance Program ("NFIP") are governed by
federal law applying standard insurance law principles. See,
e.g., Brazil v. Giuffrida, 763 F.2d 1072, 1075 (9th Cir. 1985);
Carneiro Da Cunha, 129 F.3d at 584. Federal common law
therefore controls the interpretation of these insurance poli-
cies. Sodowski v. Nat'l Flood Ins. Program of Federal Emer-
gency Management Agency, 834 F.2d 653, 655 (7th Cir.
1987). Furthermore, the interpretation of the insurance policy
is a question of law for the court and is reviewed de novo. See
Stanford Ranch, Inc. v. Maryland Cas. Co., 89 F.3d 618, 624
(9th Cir. 1996) (stating that "[t]he interpretation of an insur-
ance policy is a question of law"); Sodowski , 834 F.2d at 655
(analyzing the application of the SFIP as a matter of law on
de novo review); Brazil, 763 F.2d at 1075 (stating that a
reviewing court reviews de novo the district court's interpreta-
tion of an insurance policy).


There were two diverging expert testimonies in this case.
Although experts may disagree in their conclusions, their tes-
timony cannot be used to provide legal meaning or interpret
the policies as written. See Crow Tribe of Indians v. Racicot,
87 F.3d 1039, 1045 (9th Cir. 1996) (stating that expert testi-
mony is not proper for issues of law because the role of
experts is to interpret and analyze factual evidence and not to
testify about the law); Maffei v. Northern Ins. Co. of New
York, 12 F.3d 892, 898-99 (9th Cir. 1993) (holding that an
insurance expert's declaration that sulphur dioxide cloud con-
stituted a "hostile fire" as described in insured's policies was
improper expert testimony); Aguilar v. Int'l Longshoremen's


                               59


Union Local No. 10, 966 F.2d 443, 447 (9th Cir. 1992) (stat-
ing that matters of law are "inappropriate subjects for expert
testimony"). Therefore, we view the experts' testimony in this
case as only relevant for the historical facts that they observed
and not for their legal conclusions as to what conditions were
covered or excluded under the terms of the policy.


The historical facts of this case are not in dispute. Robert
Pride, the McHughs' expert, characterized the event as a
"saturated soil mass that flowed down towards the
[McHughs'] house." ER at 138. He stated that this signified
to him the fluid movement of saturated soils, whatever their
makeup. ER at 125-26. The insurance company's expert did
not differ from this observation. In fact, Martin Page, the
defendant's geo-technical engineer, also characterized the
event as "a saturated mass of soil and trees" that slid down the
slope. ER at 16-17. Page stated in his report:


      The slide debris generally consists of gravel and
      sand mixed with surface vegetation, several large
      tree stumps, and previously cut tree tops. In our
      opinion, the presence of cut trees and decayed tree
      stumps on the surface of the slope may also have
      contributed to the instability. . . . The soils that have
      accumulated against the side of the beach house
      appear to have slid down the slope as a saturated
      mass of soil and trees.


ER at 16-17 (emphasis added).4
_________________________________________________________________
4 The experts, however, disagreed about whether mud flowed around the
house. During Pride's deposition, he was asked whether the debris flowed
around the sides of the house. In response, Mr. Pride stated that "at the
time that I was there, no, the material had been removed away from the
north side. Frank McHugh had indicated there was some materials that had
been taken away to gain access, but how much of it, I didn't see." ER at
124.


This contradicted Page's statement, "There was no evidence of soils
having flowed around the sides of or into the house, as would have
occurred if there had been significant flowing of wet or saturated soils."
ER at 17.


                               60


Pride also observed that the "slide was not a`landslide' "
because the "slide did not involve a deep-seated earth move-
ment or other geo-technical conditions associated with
landslides." ER at 116.5 Furthermore, in his report, Pride
stated "[l]andslides are typically in excess of five to fifteen
feet deep, usually involve large quantities of earth or rock,
and may move downslope with much of the slide mass rela-
tively intact." ER at 22.


[1] It is a fundamental principle that unless the contract
terms are specifically different than the common usage of the
terms, that the common usage of the terms will be adopted.
For example, under the SFIP, a "landslide" as opposed to a
mudflow is excluded from coverage. Yet the term landslide is
not otherwise defined in the policy. Webster's dictionary
defines a landslide as "the rapid downward movement under
_________________________________________________________________
5 In his initial report, Pride, stated that the saturated soil mass was a
"sand-gravel flow," not a landslide:


      Once saturated, the outer weathered zone gained weight and lost
      strength, resulting in the soil, rock and debris flow. If the satu-
      rated soils on the slope consisted of silts and clays, or even sands
      and silts, the failure most certainly would have been labeled a
      "mudflow." Saturated fine-grained soils would behave more like
      a slurry because of its particle size, strength and viscosity charac-
      teristics. In contrast, these soils on your slope are basically
      coarse-grained granular materials with higher strength and
      greater resistance to failure--thereby resulting in steeper natural
      slopes. The causes of failure are the same (i.e.: rainfall, surface
      runoff and groundwater seepage), but the appearance is different.
      Saturated sands and gravels are not carried as far by water flow,
      nor do they create mud or slurry-like consistencies. Although
      excess surface water runoff is more readily absorbed by the
      native granular soils, the net effect of saturated soils on your

      steep slope is a "sand-gravel flow" instead of a "mudflow."

ER at 21.

In his deposition, Pride explained that a "sand-gravel flow" would be
included within "the generic sense of mudflow. " ER at 32. As we discuss,
however, neither expert was qualified to give an opinion as to whether the
occurrence was covered or excluded under the terms of the policy.


                               61


the influence of gravity of a mass of rock, earth, or artificial
fill on a slope." Webster's Third New International Dictionary
1269 (1981).


[2] However, the fundamental question involved here is not
so much the interpretation of the exclusionary clause but
whether a mudflow occurred and was the proximate cause of
the damage to the house. The definition of "mudflow" as set
forth in the policy and regulation is reinforced by the common
usage of that term. According to Webster's Ninth New Colle-
giate Dictionary 778 (1984), "mudflow" is defined as "a mov-
ing mass of soil made fluid by rain or melting snow. " We find
nothing in the policy itself or in the regulations which defines
"mudflow" any differently than the common usage of the
term. Under the common usage, the "saturated soil mass" that
destroyed the McHughs' house was a mudslide.


[3] The dissent faults our interpretation of the record on the
basis that there is no evidence offered by the McHughs to
show that there was a "liquid river of mud." 6 However, we
think that common sense and common meaning must prevail.
Under the terms of the policy, "liquid and flowing mud"
surely means nothing more than a saturated soil mass moving
by liquidity down a slope. The torrential rain and the overflow
of the natural drainage channel formed a liquidity which
flowed down the slope and brought with it a saturated soil
mass composed of soil, sand, gravel, and underbrush. As a
result, the McHughs' house was hit by this saturated mixture
of soil, gravel, vegetation and rock, and was knocked off its
foundation. The policy itself describes a mudflow "as when
earth is carried by a current of water and deposited along the
path of the current." This statement is no different than the
definition of the mudflow quoted from Webster's that it is "a
moving mass of soil made fluid by rain or melting snow."
_________________________________________________________________

6 The regulation reads "a river, flow or inundation of liquid mud . . ."
44 C.F.R. S 59.1 (1997).


                               62


The district court found that "soil saturation was the pre-
dominant cause" of the event which occurred. In denying cov-
erage, however, the district court relied upon Wagner v.
Director, Federal Emergency Management Agency, 847 F.2d
515, 521 (9th Cir. 1988). The Wagner case is clearly distin-
guishable from the facts adduced in this case. First and fore-
most, as the Wagner court points out, in that case the
plaintiffs admitted that floodwaters did not damage their prop-
erty directly and all of their losses were caused by the shifting
of the saturated earth beneath their home. Unlike the facts in
Wagner, the McHughs' home was hit by the liquid flow of
soil mass which in turn knocked the home off its foundation.
There is no evidence that the saturation of the land underneath
the McHughs' home gave way or was caused to move by rea-
son of that saturation. The pictures submitted to the court by
exhibit clearly demonstrate to the contrary. Neither expert tes-
tified that saturation of the land underneath the house caused

the movement of the house.

In the Wagner case, the court stated that "the courts have
all but universally held, federal flood insurance policies do
not cover losses stemming from water-caused earth
movements." Wagner, 847 F.2d at 522. It is clear from the
facts involved and the cases cited to support this statement,
that the court did not mean to exclude water-caused mud-
flows. In other words, Wagner's statement was not intended
to change the policy terms which define mudflow "as when
earth is carried by a current of water. . . ." ER at 32.


The Wagner court finds support for its statement in the cir-
cuit court opinions of Sodowski v. National Flood Ins. Pro-
gram of Federal Emergency Management Agency, 834 F.2d
653, 657-59 (7th Cir. 1987),7 and West v. Harris, 573 F.2d
873 (5th Cir. 1978). However, the facts in Sodowski and West
demonstrate that these cases are completely distinguishable
_________________________________________________________________
7 The SFIP policy issued to the plaintiff in these cases was worded dif-
ferently than the McHughs' current policy.


                               63


from the present case. Neither Sodowski or West involved a
soil mass flowing down a hill caused by heavy rains and over-
flow of a drainage ditch. As the court pointed out in
Sodowski:


      In West, the court was faced with two similar factual
      situations, both involving houses built on concrete
      slabs. There, as in this case, flooding occurred in the
      area surrounding the two dwellings, and in one
      instance water also inundated the house. The soil
      under the insureds' structures became saturated with
      water and eventually the soil settled causing struc-
      tural damage to the dwelling. The court stated that
      "[r]egardless of whether this settlement had been in
      process over a long period of time or whether it
      occurred immediately after the flood and draining of
      the canals, it was still the result of earth movement."
      West v. Harris, 573 F.2d at 877. The court, giving
      full effect to the earth movement exclusion and dis-
      allowing the plaintiffs' claims, held that "[t]he policy
      does not cover loss caused by earth movement in the
      form of soil settlement." Id. [footnote omitted].


Sodowski, 834 F.2d at 656-57.

The court in Wagner also compared the case to Atlas Pal-
let, Inc. v. Gallagher, 725 F.2d 131, 137 (1st Cir. 1984),
which held that a SFIP does not cover damage caused by a
flood induced mill dam collapse. A reading of the Gallagher
case, however, clearly shows that the issue in that case was
whether the mill dam was a structure covered by the policy.
There is no question of similar issues of coverage in the pres-
ent case.


Under the reading of the policy urged by USSA, a policy-
holder whose home was inundated with flood waters mixed
with fine, granular soil would receive coverage, while a
homeowner unfortunate enough to be located below a slope


                               64


with sand and gravel where flood waters are mixed with fine,
granular soil would be denied coverage. While FEMA should
be free to draw a mudslide/landslide distinction when allocat-
ing its flood coverage, as a matter of fairness such a distinc-
tion should not lead to such a seemingly arbitrary result.


[4] The Act mandates that coverage under the term "flood"
includes "inundation from mudslides which are proximately
caused by accumulations of water on or under the ground.
. . ." 42 U.S.C. S 4121(b) (1994) (emphasis added). See also
42 U.S.C. S 4001(f) (1994) (providing "It is therefore the fur-
ther purpose of this chapter to make available . . . protection
against damage and loss resulting from mudslides that are
caused by accumulations of water on or under the ground.")
(emphasis added). Even the district court's conclusion that
soil saturation was the predominant cause of the damage at
the McHughs' property fits within the partial definition of a
mudslide proximately caused by accumulations of water on or
under the ground.


CONCLUSION

As we earlier observed, whether coverage exists under an
insurance policy is a question of law. The historical facts in
the present case are not materially disputed by the experts'
reports and depositions. What is disputed is their legal conclu-
sions as to whether the facts fall within the terms of
"mudflow" or the exclusion of a "landslide " within the policy.
This is a question of law for the court to be decided from the
definitions within the policy as reinforced by the common
usage of the terms. The following facts are undisputed:


(1) At the time of the damage to McHughs' home, there
was a heavy rainfall and overflow of waters from a drainage
ditch located above the house and slope.


(2) The waters came down the slope, inundated the slope,
and carried a mass of saturated soil, gravel, vegetation and
rock.


                               65


(3) The saturated soil mass flowed down the slope, hit the
McHughs' home, and knocked it off its foundation. (See
Appendix A).


(4) The damage to the foundation did not occur because of
settlement of saturated soil underneath the house. Cf. Wagner
and Sodowski, supra.


[5] We conclude that the policy is not ambiguous in its
terms. We also conclude that the occurrence was "akin to a
river of liquid, flowing mud" and constituted "earth carried by
a current of water and deposited along the path of the
current." These definitions simply mean that coverage will be
extended to the common usage of the term "mudflow " as
when damage is proximately caused "by a moving mass of
soil made fluid by rain."


[6] We, therefore, conclude that under the undisputed his-
torical facts the coverage of the SFIP policy clearly extends
to the flooding (i.e., mudflow) that proximately caused the
damage to the McHughs' home. We vacate the judgment of
the district court and remand the case for entry of judgment
in favor of the plaintiffs.


_________________________________________________________________

GRABER, Circuit Judge, dissenting:

I respectfully dissent. The majority's opinion is inconsistent
with the record, conflicts with precedent on important matters
of federal law, modifies a valid federal regulation, and
reaches an unjust result.


THE INSURANCE POLICY AND THE
GOVERNING REGULATIONS


This appeal involves the interpretation of a Standard Flood
Insurance Policy (SFIP), the wording of which is prescribed


                               66


by the National Flood Insurance Act of 1968 (Act) and by
Federal Emergency Management Agency (FEMA) regula-
tions, found at 44 C.F.R. Pt. 61, App. A(1). The Act grants to
the Director of FEMA the authority to promulgate regulations
pertaining to SFIPs. 42 U.S.C. S 4121(a)(1). The SFIP is a
single-risk insurance policy that "only provide[s] coverage for
direct physical loss by or from flood." 44 C.F.R. Pt. 61, App.
A(1) (emphasis in original).1 The emphasized phrase is
defined as "any loss in the nature of actual loss of or physical
damage, evidenced by physical changes, to the insured prop-
erty (building or personal property) which is directly and
proximately caused by a flood." Id. (emphasis added; empha-
sis omitted).


FEMA regulations define the terms "flood" and "flooding"
to include:


       (a) A general and temporary condition of partial
      or complete inundation of normally dry land areas
      from:


       . . . .

       (3) Mudslides (i.e., mudflows) which are proxi-
      mately caused by flooding as defined in paragraph
      (a)(2) of this definition and are akin to a river of liq-
      uid and flowing mud on the surfaces of normally dry
      land areas, as when earth is carried by a current of
      water and deposited along the path of the current.


44 C.F.R. S 59.1 (emphasis added). "Inundation" is not
defined in the regulations, but commonly means, as pertinent,
"a rising and spreading of water over land not usu[ally]
submerged." Webster's Third New Int'l Dictionary 1188
(unabridged ed. 1993).
_________________________________________________________________
1 Except as noted, the terms of plaintiffs' SFIP are identical to FEMA's
regulations.


                               67


The regulations further define "mudslide (i.e., mudflow)"2
as


      a condition where there is a river, flow or inundation
      of liquid mud down a hillside usually as a result of
      a dual condition of loss of brush cover, and the sub-
      sequent accumulation of water on the ground pre-
      ceded by a period of unusually heavy or sustained
      rain. A mudslide (i.e., mudflow) may occur as a dis-
      tinct phenomenon while a landslide is in progress,
      and will be recognized as such by the Administrator
      only if the mudflow, and not the landslide, is the
      proximate cause of damage that occurs.


44 C.F.R. S 59.1 (emphasis added). That regulatory definition
of "mudslide (i.e., mudflow)" as "a river, flow or inundation
of liquid mud" is very similar to the SFIP's definition of that
term as "akin to a river of liquid and flowing mud." Under
either definition, a "mudslide (i.e., mudflow) " must consist of
liquid mud.


THE ISSUE FOR DECISION AND THE FACTS IN THE
RECORD


We must decide whether, based on the evidence in this
record, a "mudslide" directly caused the damage to plaintiffs'
property. If so, defendant must provide insurance coverage. If
not, defendant need not provide coverage.


The majority correctly notes (Slip op. at 59-60) that the
legal conclusions of the experts involved in this case are enti-
tled to no consideration because, as this court has held, expert
testimony is inappropriate in matters of law that are reserved
for the court's determination. G.F. Co. v. Pan Ocean Shipping
Co., 23 F.3d 1498, 1507 n.6 (9th Cir. 1994). The majority also
correctly recognizes that the material historical facts of this
_________________________________________________________________
2 Plaintiffs' SFIP does not contain this additional definition.


                               68


case are undisputed. Slip op. at 60. Those facts show, how-
ever -- without contradiction -- that the direct damage to
plaintiffs' property did not involve an inundation of liquid
mud. That being so, the majority's conclusion that plaintiffs'
injury was caused by a mudslide or mudflow is erroneous as
a matter of law.


Defendant's geotechnical engineer unequivocally con-
cluded that plaintiffs' property damage was the result of a
landslide, not a mudslide. His report stated in part:


      The slide debris generally consists of gravel and
      sand mixed with surface vegetation, several large
      tree stumps, and previously cut tree tops. In our
      opinion, the presence of cut trees and decayed tree
      stumps on the surface of the slope may also have
      contributed to the instability.


      . . . .

      Based on our visual evaluation of the property, it is
      our opinion that the soil instability that occurred at
      the subject site is classified as a landslide, not a
      mudslide. The soils that have accumulated against
      the side of the beach house appear to have slid down
      the slope as a saturated mass of soil and trees . There
      was no evidence of soils having flowed around the
      sides of or into the house, as would have occurred if
      there had been significant flowing of wet or satu-
      rated soils.


(Emphasis added.)

Plaintiffs' expert, in his report, presented " arguments for
classifying this slope failure as a `mudslide' in accordance
with [defendant's] flood policy terminology. " (Emphasis
added.) Notwithstanding the availability of those
"arguments," however, plaintiffs' expert, too, ultimately con-


                               69


cluded that the directly damage-causing event was not a mud-
slide:


      If the saturated soils on the slope consisted of silts
      and clays, or even sands and silts, the failure most
      certainly would have been labeled a "mudflow. " Sat-
      urated fine-grained soils would behave more like a
      slurry because of its particle size, strength and vis-
      cosity characteristics. In contrast, these soils on your
      slope are basically coarse-grained granular
      materials with higher strength and greater resistance
      to failure -- thereby resulting in steeper natural
      slopes. The causes of failure are the same (i.e.: rain-
      fall, surface runoff and groundwater seepage), but
      the appearance is different. Saturated sands and
      gravels are not carried as far by water flow, nor do
      they create mud or slurry-like consistencies.
      Although excess surface water runoff is more readily
      absorbed by the native granular soils, the net effect
      of saturated soils on your steep slope is a "sand-
      gravel flow" instead of a "mudflow."


(Emphasis added.) Plaintiffs' expert did not refer to the mass
of material that directly damaged the house as "liquid mud"
or even "mud." Rather, the words that he used in his report
to describe the material include "sand," "gravel," "rock,"
"vegetation," "coarse-grained granular materials," and
"debris."


Nowhere in the record is there any indication that the
directly damage-causing material was liquid mud or that it
flowed or resembled a river at any time, as required by the
definition of "mudslide" in the SFIP and the FEMA regula-
tions. In colloquial terms, it rained a lot. The rain caused the
hill behind plaintiffs' house to fail, and the hill -- soil, rock,
gravel, sand, trees, plants, and debris -- fell on the house.
That kind of earth movement is not a "mudslide, " because it


                               70


lacks the essential characteristic of a "mudslide " as defined in
the SFIP and the regulations -- liquidity.


The majority writes that "[t]he torrential rain and the over-
flow of the natural drainage channel formed a liquidity which
flowed down the slope and brought with it a saturated soil
mass composed of soil, sand, gravel, and underbrush. " Slip
op. at 62 (emphasis added). This passage still means that rain
caused the ground to get wet and give way, and that the wet
ground then damaged plaintiffs' house. Using the word
"liquidity" in the sentence does not change the nature of the
directly damage-causing event from a slope failure to a mud-
flow.


FEDERAL JUDICIAL INTERPRETATION OF THE SFIP

"As the courts have all but universally held, federal flood
insurance policies do not cover losses stemming from water-
caused earth movements." Wagner v. Director, Fed. Emer-
gency Management Agency, 847 F.2d 515, 522 (9th Cir.
1988). That is so because of the SFIP's requirement that prop-
erty damage be caused "directly and proximately " by a flood.
See SFIP, Art. 2, at 1 (so providing); 44 C.F.R. Pt. 61, App.
A(1) (same). Because of that requirement, it is not enough for
heavy rainfall to cause an earth movement and for the earth
movement in turn to cause property damage. Rather, the flood
must be the immediate and actual cause of the damage. As
this court observed in Wagner, 847 F.2d at 522, other courts
that have considered the question have concluded that SFIPs
do not provide coverage for water-caused earth movements.
See, e.g., Sodowski v. National Flood Ins. Program, 834 F.2d
653, 657-59 (7th Cir. 1987) (holding that the SFIP does not
cover structural damage caused by soil settlement that, in
turn, resulted from a flood); Beck v. Director, Fed. Emer-

gency Management Agency, 534 F. Supp. 516 (N.D. Ohio
1982) (holding that the SFIP does not cover damage to the
plaintiffs' house caused by slippage of a hillside following
heavy rainfall).


                               71


Except for a belated legal opinion offered by plaintiffs'
expert (which, as noted, can be given no weight), the evidence
does not conflict. The reports from both parties' experts sup-
port only one ultimate conclusion: that the directly damage-
causing event was not a "mudslide (i.e., mudflow) " within the
meaning of the SFIP. That being so, defendant properly
denied coverage, and the district court properly granted sum-
mary judgment in defendant's favor. The majority's contrary
holding (1) effectively removes the SFIP's and the regula-
tion's requirement of direct flood damage, and (2) conflicts
with precedent.


CONTRACTUAL AND REGULATORY DEFINITION OF
TERMS


When an insurance policy defines a term, the court is
bound by that definition. Enterprise Tools, Inc. v. Export-
Import Bank, 799 F.2d 437, 439 (8th Cir. 1986). The SFIP
defines "flood" and "mudslide (i.e., mudflow)." As noted ear-
lier, the policy covers "[m]udslides (i.e., mudflows) which are
. . . akin to a river of liquid and flowing mud on the surfaces
of normally dry land areas, as when earth is carried by a cur-
rent of water and deposited along the path of the current."


Although the majority recognizes that a court must employ
the contractual definition of a term when that definition dif-
fers from common usage, the majority conducts its analysis
using the common meaning of "mudflow," after asserting that
the contractual and common definitions match. Slip op. at 62.
That reasoning is flawed, because the contractual definition
and the common meaning of "mudflow" differ materially.
The SFIP's narrow definition of "mudslide (i.e., mudflow)"
requires liquidity. The majority, instead, adopts a broader
meaning for "mudflow" as " `a moving mass of soil made
fluid by rain or melting snow.' " Slip op. at 62 (quoting
Webster's Ninth New Collegiate Dictionary 778 (1984)). The
majority thereby ignores the contractual requirement that a
mudslide "be akin to a river of liquid and flowing mud," and


                               72


contradicts the precedential requirement that a contractual
definition govern, when it says that "common sense and com-
mon meaning must prevail." Slip op. at 62.


There is a second flaw in the majority's analysis of terms:
By adopting the "common meaning" of terms for interpreting
SFIPs, the majority unjustifiably modifies a valid FEMA
regulation.3 The SFIP's definition of "mudflow" derives from
and is mandated by a FEMA regulation, 44 C.F.R.S 59.1.
Regulations issued by an agency pursuant to statutory author-
ity have the force and effect of law. Batterton v. Francis, 432
U.S. 416, 425 (1977). A court has no power to set aside valid
administrative regulations simply because it would interpret
differently the statute under which they were promulgated. Id.


Indeed, the majority recognizes that it is eschewing the reg-
ulatory definition when it rejects defendant's reliance on the
pertinent FEMA regulations: "While FEMA should be free to
draw a mudslide/landslide distinction when allocating its
flood coverage, as a matter of fairness such a distinction
should not lead to such a seemingly arbitrary result." Slip op.
at 65.


It is true that SFIPs are governed by federal common law,
and courts are charged with creating that common law. See
Sodowski, 834 F.2d at 655 (holding that federal common law
controls the interpretation of SFIPs). However, the power to
create federal common law is not absolute. We have said that
"[t]he authority of courts to develop a `federal common law'
. . . is not the authority to revise the text of the statute."
Peterson v. American Life & Health Ins. Co., 48 F.3d 404,
411 (9th Cir. 1995) (quoting Mertens v. Hewitt Assocs., 508
U.S. 248, 259 (1993)). By enlarging the unambiguous terms
of the SFIP, which FEMA mandates, the majority is altering
_________________________________________________________________
3 No party challenges the validity of the FEMA regulations that are
implicated here. For purposes of this case, therefore, the regulations must
be deemed to be valid and binding.


                               73


valid regulations simply because it would interpret the statu-
tory concept of "flood" differently. The majority is thus doing
to the Act what Peterson forbids.


UNFAIR RESULT

As noted, the majority uses the common, rather than the
contractual and regulatory, definition of the term "mudflow"
to avoid a "seemingly arbitrary result." Slip op. at 65.
Although what befell plaintiffs was unquestionably a disaster,
disallowing recovery under an insurance policy that plainly
does not cover their loss is entirely reasonable and just.


Simply put, it is not unjust to deny coverage when the
insured has not bought coverage for the particular kind of
disaster that occurred. The majority thinks it unfair that "a
policyholder whose home was inundated with flood waters
mixed with fine, granular soil would receive coverage, while
a homeowner unfortunate enough to be located below a slope
with sand and gravel where flood waters are mixed with fine,
granular soil would be denied coverage." Id.  Although that
result surely is unfortunate for the second homeowner, it is
not unfair. The first homeowner bought insurance that cov-
ered the damage, while the second did not.


Indeed, the opposite result is what would be unfair. Others
who have purchased flood insurance must pay for the claim
in the form of increased premiums. Purchasers of flood insur-
ance agree to share only the risk of flood, not any of the many
other risks for which other forms of insurance are designed.


CONCLUSION

For the foregoing reasons, I must dissent. The majority can
reach the conclusion that it does only by bending the facts
(which show unequivocally that liquid was the indirect, but
not the direct, cause of damage) or the law (which requires


                               74


that liquid be the direct cause of damage). The judgment of
the district court should be affirmed.


                               75


APPENDIX A

                               76




                               77