245 F.3d 1306 (11th Cir. 2001)
ALEX W. NEWTON, Plaintiff-Appellee,v.CAPITAL ASSURANCE COMPANY, INC., Defendant-Appellant.
Nos. 98-7015 & 99-10305D. C. Docket No. 96-1117-CV-1-CB-C
UNITED STATES COURT OF APPEALSELEVENTH CIRCUIT
March 29, 2001

Appeals from the United States District Court for the Southern District of Alabama
ON PETITION FOR REHEARING
Before ANDERSON, Chief Judge, HULL and COX, Circuit Judges.
COX, Circuit Judge:


1
Capital Assurance Company's Petition for Rehearing, which the United States has  supported as amicus curiae, is GRANTED. We agree with the United States that the  opinion published at 209 F.3d 1302 misinterpreted parts of the Federal Emergency  Management Agency's Financial Assistance/Subsidy Arrangement, 44 C.F.R. pt. 62,  app. A, and that we arrived at the wrong result. That opinion is accordingly  VACATED and the following opinion issued in its stead:


2
Capital Assurance Company, Inc. appeals the award of prejudgment interest in an  insurance contract action based on a federally subsidized Standard Flood  Insurance Policy it issued under Part B of the National Flood Insurance Act of  1968, 42 U.S.C.  4001-4041, 4071-4129 (1994 & Supp. II 1996) (NFIA). We  address, for the first time in this circuit, whether a district court violates  sovereign immunity principles by awarding prejudgment interest against a  so-called "Write-Your-Own" company empowered to issue flood insurance by the  Federal Emergency Management Agency. We hold that it does.

I.  Background

3
Alex W. Newton owns a vacation house on the Gulf of Mexico that is constructed  on an artificially built-up point extending into the water and protected only by  bulkheads. Capital Assurance Company, Inc. (Capital) sold Newton a federally  subsidized Standard Flood Insurance Policy (SFIP) covering the property. The  Federal Emergency Management Agency (FEMA) uses "Write-Your- Own" (WYO)  companies like Capital to aid it in its statutory duty to administer the  National Flood Insurance Program (NFIP). See 42 U.S.C.  4081(a) (permitting  FEMA's Director to enter into arrangements with private insurance companies in  order to make use of their "facilities and services"); 44 C.F.R.  62.23(a)-(d)  (establishing the WYO program to permit private insurers to sell and administer  SFIPs). In 1995 Newton's house and lot suffered predictable extensive flood  damage from Hurricane Opal, and Newton filed a claim.


4
After Capital denied a portion of Newton's claim, Newton sued in an Alabama  state court. The defendants removed the case, asserting original jurisdiction  under 28 U.S.C.  1331 and 42 U.S.C.  4053. Following a bench trial, the court  awarded Newton compensatory damages, prejudgment interest, and costs. Capital  appeals only the award of prejudgment interest.1

II.  Subject-Matter Jurisdiction

5
Although neither party has challenged the subject-matter jurisdiction of the  federal courts over this suit, we are compelled to address the question sua  sponte, see, e.g., Univ. of S. Ala. v. Am. Tobacco Co., 168 F.3d 405, 410 (11th  Cir. 1999), because both the record and answers we received to questions posed  at oral argument betray some confusion on the issue. In the district court,  Newton at first filed a motion to remand for lack of federal-question  jurisdiction. Capital opposed the motion, again asserting jurisdiction under 28  U.S.C.  1331 and 42 U.S.C.  4053. For reasons unclear from the record, Newton  later conceded federal-question jurisdiction. We now clarify that the district  court had federal-question jurisdiction under 28 U.S.C.  1331. There are three statutes that potentially affect federal- question jurisdiction  in this case: the general "arising under" jurisdiction provision of 28 U.S.C.   1331 and two provisions of the NFIA, 42 U.S.C.  4053 and 42 U.S.C.  4072. We  begin by dispensing with  4053; Capital's reliance on that section was  misplaced. Under 42 U.S.C.  4041, the Director of FEMA may implement the NFIP  using one of two different institutional structures, each of which specifies a  different role for private insurance companies. The first scheme, described in  42 U.S.C.  4051-4056, includes a provision for suing private insurers,  4053.  The NFIP is, however, not currently implemented under that scheme. It is instead  implemented under the alternative structure set forth in 42 U.S.C.  4071-4072.  See Van Holt v. Liberty Mut. Fire Ins. Co., 163 F.3d 161, 165 (3d Cir. 1998). It  is thus clear from the statute and the current implementation of the program  that  4053 does not apply to this suit. We next turn to 28 U.S.C.  1331. Under that section, federal courts have  federal-question jurisdiction over suits "in which a well-pleaded complaint  establishes either that federal law creates the cause of action or that the  plaintiff's right to relief necessarily depends on resolution of a substantial  question of federal law." Franchise Tax Bd. v. Constr. Laborers Vacation Trust,  463 U.S. 1, 27-28, 103 S. Ct. 2841, 2856 (1983). The federal cause of action or  question of federal law must be apparent from the face of the well-pleaded  complaint and not from a defense or anticipated defense. See id. at 9-11, 103 S.  Ct. at 2846-47. But the federal question need not be statutory; federal common  law will suffice. See Nat'l Farmers Union Ins. Co. v. Crow Tribe, 471 U.S. 845,  850, 105 S. Ct. 2447, 2451 (1985). Here, the complaint alleged, among other  things, breach of an SFIP contract. SFIP contracts are interpreted using  principles of federal common law rather than state contract law. See, e.g.,  Carneiro da Cunha v. Standard Fire Ins. Co./Aetna Flood Ins. Program, 129 F.3d  581, 584 (11th Cir. 1997) ("`As contracts, the standard policies issued under  the Program are governed by federal law, applying "standard insurance law  principles."'" (quoting Wright v. Dir., Fed. Emergency Mgmt. Agency, 913 F.2d  1566, 1570-71 (11th Cir. 1990))). Thus, a complaint alleging breach of an SFIP  satisfies  1331 by raising a substantial federal question on its face.


6
This leaves us only to question whether 42 U.S.C.  4072, the provision for  suits against FEMA under the NFIP as currently implemented, affects our  jurisdiction. On its face,  4072 provides only for suits against FEMA. It does  not discuss the WYO program, and we therefore do not read it as addressing suits  against WYO companies. It does not, therefore, abrogate  1331 jurisdiction. See  Carneiro da Cunha, 129 F.3d at 586-87 (implicitly recognizing federal  subject-matter jurisdiction over a suit against a WYO company after the  implementation of  4072). We need not consider the opposite question: whether  it provides an additional basis for jurisdiction against WYO companies, see Van  Holt, 163 F.3d at 165-66 (finding WYO companies subject to jurisdiction under   4072 (as well as  1331) because a suit against a WYO company is the "functional  equivalent" of a suit against FEMA), because our conclusion regarding  jurisdiction under  1331 is sufficient to answer the jurisdictional question we  raise.

III.  The No-Interest Rule

7
The issue Capital presents in this appeal is whether prejudgment interest awards  in suits against WYO companies selling federally sponsored SFIP contracts  violate the "no-interest rule," the sovereign immunity principle that "[i]n the  absence of express congressional consent to the award of interest separate from  a general waiver of immunity to suit, the United States is immune from an  interest award." Library of Congress v. Shaw, 478 U.S. 310, 314, 106 S. Ct.  2957, 2961 (1986). Although suits against WYO companies are not suits against  the federal government, Capital nevertheless contends that prejudgment interest  awards against WYO companies always violate the no-interest rule because such  awards constitute - as a legal conclusion derived from the NFIA and its  implementing regulations - "direct charge[s] on the public treasury." In re  Estate of Lee, 812 F.2d 253, 256 (5th Cir. 1987). Newton, on the other hand,  argues that the controlling laws give the government no more than a "financial  stake" in the payment of prejudgment interest by WYO companies, which is, as the  district court held, insufficient by itself to invoke the no-interest rule in a  given case. West v. Harris, 573 F.2d 873, 882 (5th Cir. 1978).2 We review the  question de novo, see Powers v. United States, 996 F.2d 1121, 1123 (11th Cir.  1993), and hold that the no-interest rule prohibits awards of prejudgment  interest against WYO companies.


8
We start our analysis by recognizing that those circuits considering the  question have, for important reasons, found the no-interest rule to bar awards  of interest in suits directly against FEMA. See Sandia Oil Co. v. Beckton, 889  F.2d 258, 263 (10th Cir. 1989) (holding, on reasoning equally applicable to  awards of prejudgment interest, that postjudgment interest may not be awarded in  suits directly against FEMA); Lee, 812 F.2d at 256. To begin with, the cases  note that nothing in the NFIA indicates a Congressional waiver of immunity from  interest awards. See Lee, 812 F.2d at 256; see also Sandia Oil, 889 F.2d at 262  (citing Lee). Nor, as one court has further concluded, does the NFIP produce a  profit for the federal government against which interest awards may sometimes be  appropriate because the government's role resembles that of a profit-making,  private entity. The NFIP is a subsidy program.3 The holdings of our sister  circuits are consistent with the Supreme Court's articulation of the no-interest  rule. See Shaw, 478 U.S. at 314-17, 106 S. Ct. at 2961-63. Moreover, Newton  concedes that both Lee and Sandia Oil were correctly decided. We use their  conclusions as a starting point and examine the relationship between FEMA and  WYO companies to determine whether the no- interest rule bars prejudgment  interest awards against WYO companies as well.


9
Capital urges us to accept a dictum from the Fifth Circuit that any award of  prejudgment interest against a flood insurer is "a direct charge on the public  treasury" indistinguishable from identical awards in suits against FEMA itself  and is thus precluded by the no-interest rule. Lee, 812 F.2d at 256 (making the  statement in the context of a suit directly against FEMA). Cf. Gowland v. Aetna,  143 F.3d 951, 954-55 (5th Cir. 1998) (referring to Lee's "direct charge"  language and prohibiting application of the doctrine of equitable estoppel  against a WYO company because the doctrine could not be applied against the  federal government). To even entertain this idea, we must accept the proposition  that the no-interest rule can ever apply to shield private entities from  interest awards. We can do so because we recognize that Congress should be able  to implement federal programs using private entities rather than government  agencies without necessarily waiving protection of program funds under the  no-interest rule. We also recognize, however, that the rule as applied to  private entities should be a narrow one applicable only when the interest charge  really is, for all relevant purposes, directly against the federal government. To conclude otherwise would allow private entities to use the no- interest rule  to protect their purely private concerns rather than public programs. This is  why, as West holds, "a financial stake in . . . [the flood insurance] program is  not sufficient to cloak . . . [a] defendant [insurance company] with the robe of  sovereign immunity from awards of any interest." West, 573 F.2d at 882.


10
Even under this narrow view, however, Capital contends that the no-interest rule  protects it from the award in this case because the regulations detailing the  financial relationship between FEMA and WYO companies establish that interest  charges against WYO companies are direct charges against FEMA. We agree. Capital  begins by noting that although WYO companies initially collect premiums from  which they must pay claims (including those ordered paid only as a result of  litigation), and refunds, see 44 C.F.R. pt. 62, app. A, arts. II(E),  III(D)(1)-(2), III(E), the amount of the collected premiums actually controlled  by and immediately available to the WYO companies is severely curtailed by the  regulations. Premiums received must be kept in separate accounts, id. app. A,  art. II(E), and all funds not required to meet current expenditures must be  remitted to FEMA, id. app. A, art. VII(B). When the scant funds retained by the  WYO company are not enough to satisfy outstanding claims and refunds, the WYO  companies must draw upon letters of credit from FEMA. Id. app. A, art. IV(A).  Because premiums collected on the policies do not belong to the WYO insurers,  see id. app. A, art. VII(B), claim payments come out of FEMA's pocket regardless  of how they are paid.


11
Capital also points out the functionary status of the WYO companies in relation  to FEMA. Under the statute, WYO companies act as the "fiscal agents of the  United States," 42 U.S.C.  4071(a)(1); see also 44 C.F.R.  62.23(f)  (characterizing the relationship between the federal government and WYO  companies as "one of a fiduciary nature" and intended to "assure that any  taxpayer funds are accounted for and appropriately expended"). WYO companies may  not alter the terms of SFIPs, or insert flood coverage into other policies. 44  C.F.R.  62.23(c), (h)(6). Finally, they must adjust claims under NFIP  guidelines. Id.  62.23(i)(1).


12
Capital persuades us with these points - FEMA's inevitable liability for claims  and its substantial administrative oversight - to join our fellow circuits in  concluding that the line between a WYO company and FEMA is too thin to matter  for the purposes of federal immunities such as the no-interest rule. See Flick  v. Liberty Mut. Fire Ins. Co., 205 F.3d 386, 393-94 (9th Cir.) (relying on  unlikelihood that claims will be paid out of premiums, rather than federal fund,  to conclude that WYO policies are federal insurance policies financed by  congressional authorization, and that the Appropriations Clause therefore  prohibits any "substantial compliance" softening of proof-of-loss requirements),  cert. denied, 121 S. Ct. 305 (2000); Van Holt v. Liberty Mut. Fire Ins. Co, 163  F.3d 161, 166-67 (3d Cir. 1998) (concluding that a suit against a WYO insurer  is, for jurisdictional purposes, "in reality" a suit against FEMA because FEMA  pays the judgment and litigation costs); Gowland v. Aetna, 143 F.3d 951, 954-55  (5th Cir. 1998) (because losses WYO policies are paid from federal funds, a WYO  insurer cannot waive a right to a proof-of-loss statement, or be equitably  estopped from demanding one).


13
Newton does point to countervailing considerations that might suggest that  payment of claims is not a direct charge on federal funds. First, the  regulations amply demonstrate that the role accorded WYO companies is in minor  respects more than that of mere functionary. WYO companies may issue policies in  their own names (as Capital issued Newton's) rather than in that of FEMA or the  United States, see 44 C.F.R.  61.13(f), and they may use their own, individual  "customary business practices", id.  62.23(a); see also id.  62.23(e). For  example, a WYO company may accept an application previously rejected by another  WYO company. See id.  62.23(h)(5). Similarly, WYO companies adjust claims in  accordance with their own "general [c]ompany standards," although they must seek  guidance from "NFIP [c]laims manuals." Id.  62.23(i)(1). Finally, the  regulations expressly deny that WYO companies are general agents of the  government; the companies are thus "responsible for their obligations to their  insureds under any flood insurance policies issued." Id.  62.23(g). WYO  companies, rather than FEMA, are thus initially responsible for the "adjustment,  settlement, payment and defense" of claims on the policies they sell. Id.   62.23(d) (emphasis added). A WYO company choosing to defend against a claim must  therefore seek reimbursement for its costs rather than merely handing the case  over to FEMA. See id.  62.23(i)(6) ("[D]efense costs will be part of the . . .  claim expense allowance . . . ."). Reimbursement may be limited, moreover, if a  WYO company fails to meet certain documentation requirements. See id. pt. 62,  app. A, art. III(D)(2).


14
But the reality lying behind these observations robs them of their strength. A  WYO company may write a policy in its name, but FEMA dictates the terms. And  preliminary responsibility is a mirage when the federal government, through  FEMA, will always foot the full bill in the end. Giving these factors  controlling weight would elevate the form of the insurance system over its  substance. We thus conclude that prejudgment interest awards against WYO  companies are direct charges on the public treasury forbidden by the no-interest  rule and reverse the part of the judgment awarding such interest. The remainder  of the judgment is unchallenged, and it is accordingly affirmed.


15
AFFIRMED IN PART; REVERSED IN PART.



NOTES:


1
  Capital noticed appeal of the award of costs as well, but at oral argument the  parties stipulated to settlement of the costs issue.


2
  West v. Harris, 573 F.2d 873 (5th Cir. 1978), affirmed a prejudgment interest  award against a private company selling federal flood insurance. Our holding in  this case does not conflict with it, however; West was decided at a time when  the structure of the NFIP involved a more attenuated relationship between  private insurance companies selling flood insurance and the federal agency  running the NFIP. The "Industry Program With Federal Financial Assistance" at  issue in West, 42 U.S.C. subch. II, pt. A, involved a pool of private insurers  selling flood insurance under an agreement between the pool as an entity (rather  than individual insurers) and the government (then represented by the Department  of Housing and Urban Development (HUD)). See 42 U.S.C.  4051-4052. HUD  provided only reinsurance coverage when necessary and payments to the pool to  make up for the issuance of insurance at less-than-actuarial rates. See   4054-4055. The insurance companies were, under explicit statutory provisions,  exclusively responsible for adjusting claims, paying claims, and defending suits  arising from disallowed claims, see  4053. See also Van Holt, 163 F.3d at 165;  Berger v. Pierce, 933 F.2d 393, 394-95 (6th Cir. 1991) (both recounting the  history of the NFIP). By contrast, as Capital notes, today's NFIP is a  "Government Program With Industry Assistance." 42 U.S.C. subch. II, pt. B. As we  explain in the text, in this scheme the money to pay claims comes from a  federally administered fund rather than a subactuarial insurance pool.


3
  On this point, the Tenth Circuit has found an exception to the no-interest rule  for engagement in profitable "`commercial enterprise'" inapplicable. Sandia Oil,  889 F.2d at 261 (quoting Shaw, 478 U.S. at 317 & n.5, 106 S. Ct. at 2963 & n.5).  The court compared the holdings in the controlling cases, United States v.  Worley, 281 U.S. 339, 50 S. Ct. 291 (1930) and Standard Oil Co. v. United  States, 267 U.S. 76, 45 S. Ct. 211 (1925), both of which dealt with coverage  disputes over insurance sponsored and sold by the United States government. It  noted that Worley, in which prejudgment interest was barred, distinguished  Standard Oil, in which prejudgment interest was allowed, because the government  insurance program addressed in Standard Oil was profitable while the program  considered in Worley was not. See id. at 262-63 (citing Worley, 281 U.S. at 343,  50 S. Ct. at 293). Because the federal government subsidizes rather than profits  from the NFIP, the Tenth Circuit reasoned that the commercial enterprise  exception cannot apply to the NFIP. See id. at 263-64.


