Insurance Dispute Lawyer Blog

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Regular posting will resume in 2012! Have a happy, and SAFE, holiday season!

Uninsured/Underinsured Motorist (UM) coverage is designed to protect a policyholder against injury or loss inflicted by another driver who has inadequate insurance or no insurance coverage at all. Louisiana statute provides that "an insurer owes to his insured a duty of good faith and fair dealing," which includes fairly and promptly settling claims with the insured. La. R.S. 22:1220. An insurer who breaches this duty is liable for damages that result from the breach. In order to establish a cause of action for penalties and or attorney fees, a plaintiff must show that (1) the insurer received sufficient proof the of loss; (2) the insurer failed to tender payment within 30 days; and (3) the insurer's failure to pay is "arbitrary, capricious, or without probable cause." La. R.S. 22:658. Louisiana courts have held that “arbitrary, capricious, or without probable cause" is "synonymous with 'vexatious,'” and that a “vexatious refusal to pay” means it is “unjustified, without reasonable or probable cause or excuse.” The courts impose penalties on an insurer when the facts of the situation “negate probable cause for nonpayment," but tend to avoid them when an insurer can point to "a reasonable basis to defend the claim and acts in good-faith reliance on that defense.” Pointedly, it is well settled that "bad faith should not be inferred from an insurer's failure to pay within the statutory time limits when ... reasonable doubt exists." Instead, penalties are appropriate when the insurer refuses to tender a reasonable payment in an amount over which "reasonable minds could not differ."

Louisiana's Third Circuit Court of Appeal recently applied this jurisprudence in the case of Mitte v. Progressive Security Insurance Co.. On April 20, 2004, Dyna Mitte was severely injured when her vehicle was hit by an underinsured driver in Lafayette Parish. Mitte had UM coverage through Progressive and filed a claim after receiving only $32,000 from the other driver's insurance company. Progressive made pre-trial tenders to Mitte that amounted to $393,624. Mitte then filed suit seeking penalties and attorney fees on the basis of those tenders that she alleged were "inadequate and untimely." A jury found that the tenders made by Progressive were not adequate and awarded Mitte $1.6 million. However, the jury declined to award her penalties and attorney fees. Mitte appealed, arguing that the jury erred in failing to find that Progressive was arbitrary or capricious.

Mitte's assignment of error was based in part on her argument that because the jury awarded a large sum compared to the tenders made by Progressive, Progressive was necessarily arbitrary or capricious. The court rejected this argument, stating that Progressive was not required to "meet some percentage of the total claim awarded [Mitte] to avoid penalties and attorney fees." Rather, Progressive "needed to tender only a figure over which reasonable minds could not differ." Further, the record included several factual disputes described by Progressive's adjuster at trial. For instance, there was uncertainty over whether Mitte made a claim for lost earning capacity and also as to whether a gastric bypass surgery was related to the auto accident. Thus, although the jury ultimately concluded that Progressive undervalued Mitte's general damages "by a fairly large extent," there was a reasonable factual basis for the jury's finding that Progressive was neither arbitrary nor capricious. Because the court could not find that the jury's determination was manifestly erroneous, it affirmed the trial court's judgment.

Continue reading "Exploring the Standard for Recovering Penalties From an "Arbitrary and Capricious" Insurer" »

Governments traditionally were immune from lawsuit. That has changed. In certain circumstances, governments may be held liable for the damage they cause. A coulee flooded homes in Lake Charles after Hurricane Rita, although the area is protected by a drainage district that operates pumps and pipes to ensure drainage. The Louisiana Court of Appeal affirmed a jury award against the drainage district in Bordelon v. Gravity Drainage District No. 4 of Ward 3 of Calcasieu Parish, No. 10-1318 (La. Ct. App. 3 Cir. 10/5/11).

Drainage district employees typically stayed in pump houses during hurricanes, but in July 2005, Louisiana state officials determined that no evacuation site in Calcasieu Parish could withstand a category 4 or 5 hurricane. The drainage district has automated pumps run by electricity, but if the power went out, the diesel-fueled backup pumps required human operation. Hurricane Rita was expected to hit land as a category 4 or 5 hurricane. The district decided to allow its employees to evacuate with their families to Opelousas, Ville Platte, and Lafayette. The whole area south of Interstate 10 in Lake Charles was a part of the evacuation.

Rita unexpectedly weakened to category 3 when it made landfall on Friday, September 24, 2005. Electrical power was wiped out across a wide area. The drainage district's electric pumps at Pithon Coulee stopped at 9 p.m. No one was in the pump house to start the diesel pumps. When residents returned the next morning, their homes were fine, but the coulee waters were rising. Drainage district employees had yet to be recalled. The houses began flooding from the rising coulee waters after 3 p.m. Saturday. Early on Sunday, the district workers returned. They turned on the pumps at 8:30 a.m. By noon, the coulee was below flood stage.

Twenty-four homeowners sought damages from the district because it failed to plan a way to automate the diesel pumps and because its decisions during Hurricane Rita resulted in flooding. The district argued it was protected by governmental immunity under Louisiana Revised Statutes. A jury awarded the homeowners $1,570,219.60, although it recognized that the liability of the district's insurer, American Alternative Insurance Corporation, was limited to $1 million. The drainage district and its insurer appealed.

Courts strictly interpret immunity statutes to limit their reach. Two statutes may protect the district. The Louisiana Homeland Security and Emergency Assistance and Disaster Act provides immunity when a government is "engaged in any homeland security and emergency preparedness activities" as a part of complying with the Act. An unpublished court of appeal decision persuasively limits immunity to actions taken during an emergency, but not before. Based on that decision, the jury decided against the drainage district because it failed to have a plan in place before the hurricane's forecasted arrival. The court of appeal agreed. "A failure to plan for an emergency is not an emergency preparedness activity under the statutes conferring immunity for such activities." The district was not immune for not having a plan to keep pumps running when the pump houses were not staffed and power was out.

Louisiana state and local governments also are not liable "based upon the exercise or performance or the failure to exercise or perform their policymaking or discretionary acts when such acts are within the course and scope of their lawful powers and duties." Immunity exists for policymaking or acts for which a choice is acceptable within the government's delegated powers. If the act is "not reasonably related to the legitimate governmental objective for which the policymaking or discretionary power exists," or was done criminally or in some way intentionally, immunity does not apply.

The Louisiana statute is patterned after the Federal Tort Claims Act. A two-part test determines if immunity applies. Did the government employee have discretion, a choice, or did law require the employee to follow a certain course of conduct? If a specific action is mandatory, no immunity applies. If the employee has a choice, was that discretion "grounded in social, economic or political policy"? If not, the government may be liable. Louisiana has adopted the federal test for the state governmental immunity statute.

The court of appeal recognized that planning is an act of discretion, and ensuring employee safety above concerns to protect property "is clearly within the discretion of the district." But, automating the diesel pumps had never been considered, although it would cost only $40,000 and the money was available. By statute, "the drainage district shall make adequate provision for the drainage of all lands and property affected thereby." The district was required to provide adequate drainage of all property. The failure to consider a feasible alternative to ensure compliance with a statutory mandate prevented immunity for the effects of not automating the pumps. The court of appeal affirmed the district court jury verdict.

If you believe you have been harmed by a government, it is hard to know what to do. Government duties come from statutes and regulations, and governments may be protected from lawsuits. But not always. A lawyer will be able to review your claim and determine the government's authority and potential liability.

Continue reading "Calcasieu Parish May Be Liable For Damages Resulting from Failure to Ensure Drainage After Hurricane" »

When one is successful on a claim against an insurance company the payment of the claim is expected to be prompt. Any delay in payment could result in the court imposing a penalty against the insurance company. In most, if not all, cases this penalty takes the form of court costs and attorney's fees. But if an insurance company challenges a policy claim in court, and then loses, does that time when payment was refused constitute delay? The answer to this question is 'it depends.'

In Louisiana Bag Co. v. Audubon Indemnity Co., the court held that if an insurer errs in interpreting its own insurance contract, then the insurance company will be held liable for the delay in payment resulting from the trial. This delay justifies the incurrence of penalties for attorney's fees. If, however, the policy dispute revolves around facts rather than contract interpretation, then the "timely payment" provision is stayed during the trial. This was the situation of Maxley v. Universal Casualty Co. where Maxley's car insurance policy through Casualty covered loss from both theft and fire. When Maxley's car was stolen and set on fire, he filed for his claim. However, Maxley had left his car unlocked with the key in it. The policy through Casualty had an exception that nullified any claim if there was no evidence of forcible entry. The issue went to court with Casualty claiming it owed nothing under the policy because the theft was not through a forcible entry, and Maxley contesting payment was due under the fire provision of the policy rather than the theft. Maxley, in essence, argued that the exclusion provision for no evidence of forced entry was irrelevant because his car would have been recovered if it had not been for the fire.

The court found for Maxley, who then sought attorney's fees for Casualty's failure to make timely payment. The Third Court of Appeal upheld the denial of Maxley's claim, stating that Maxley's reliance on Louisiana Bag was misplaced. While Louisiana Bag relied on policy interpretation, Maxley's case relied on a true disputation of the facts. It would be senseless to require the insurance company to pay the claim only to the have the claim payment rescinded if the facts were found in favor of the insurance company. This finding upholds efficiency in the industry as it is easier to withhold payment until truly due than it is to always make payment, then try to recoup it if made erroneously.

When going to court over a contested policy claim, it is important read through your policy contract. If, according to the policy, it is unambiguous that you are entitled to payment, then attorney's fees may also be charged against the insurance company for failing to pay in a timely manner. However, most insurance claims that wind up in court do so because there are questions of material fact relating to the policy. So ask yourself: is the insurance company contesting what happened to the item covered, or how the policy covers it?

The above question is simply a starting point in determining whether or not payment has been erroneously withheld. Insurance claims are complicated and require the expertise of a licensed, practicing attorney. If you have any questions regarding your insurance claim, contact the Berniard Law Firm.

It is well settled under Louisiana law that insurers owe a duty of "good faith and fair dealing" to their customers. Each insurance company is required to adjust claims in a fair and prompt manner and to make reasonable efforts to settle claims when possible. La. R.S. 22:1973 establishes that damages may be awarded against an insurance company that fails to meet this duty. One category of wrongdoing includes:

"Failing to pay the amount of any claim due any person insured by the contract within sixty days after receipt of satisfactory proof of loss from the claimant when such failure is arbitrary, capricious, or without probable cause."

The statute also permits a wronged insured to collect penalties from the insurer "in an amount not to exceed two times the damages sustained or five thousand dollars, whichever is greater." The purpose of this law is to discourage insurers from failing to live up to the promises they make to their customers in their insurance policies and for which the customers pay premiums.

On October 27, 2004, Carl Guidry and his granddaughter were driving in Guidry's pickup truck. They were rear-ended by Amber Guidry (no relation) and Guidry's truck was knocked forward. Guidry suffered from neck and back pain following the accident. Two weeks later, on November 11, 2004, Guidry and his granddaughter were again rear-ended while driving in Guidry's truck, this time by an SUV driven by Evelyn Smith. Guidry experienced further neck and back pain, as well as shoulder pain, after the second collision. Guidry sued both Amber Guidry and Evelyn Smith, and also sued his own uninsured/underinsured motorist (UM) carrier, Progressive. Guidry settled with Amber Guidry's insurance carrier in the first accident for the policy limits of $10,000. At trial, the jury found that Guidry did not suffer damages in the first accident, but found that he did suffer damages in the second accident; they jury awarded Guidry medical expenses in the amount of $19,860 and general damages of $10,000. The jury also found that Progressive had been "arbitrary and capricious" in handling Guidry's claims for general damages and medical expenses from both accidents; specifically, Progressive never tendered any money to Guidry for either claim. Accordingly, it awarded Guidry $50,000 for Progressive's breach of duty and $10,000 in attorney fees. Then the trial judge awarded Guidry $100,000 in statutory penalties against Progressive.

Progressive appealed the penalty award to the Third Circuit. The court upheld the award after a review of Progressive's handling of Guidry's claims. Progressive admitted receiving proper notice of Guidry's accidents in September, 2006 but disputed that Guidry could establish the amount of his damages. The general rule for UM carriers is that if the insured can show that "he was not at fault, that the other driver was uninsured or underinsured, and that he was in fact damaged," the UM insurer cannot avoid liability just because the insured is unable to prove the exact extent of his general damages. Instead, the insurer "must tender the reasonable amount due as a sign of its good faith and its willingness to comply with the duties imposed upon it under the insurance policy." See McDill v. Utica Mut. Ins. Co. The tendered amount would not be to settle the case, but to show good faith. Once the good-faith tender is made, the insurer must take "substantive and affirmative steps" evaluate the claim. In this case, Progressive opened its claim file in September, 2006 but did not depose Guidry's treating physician and orthopedist until June, 2008--nearly two years later. It failed to pay Guidy any money towards the $3,500 in costs to repair his truck. Also, Progressive failed to tender any of the medical payment coverage ($5,000 per accident) included in Guidry's policy, even though it ample evidence that injuries had resulted from the second accident. Guidry finally had shoulder surgery some four years after the second accident to relieve his debilitating pain, which was paid for by Medicare. Thus, the court concluded that "the jury was not unreasonable in finding that Progressive breached its duty to Mr. Guidry by failing to pay the amount of any claim within sixty days and by failing in its duty to timely investigate the accidents."

What should have been a simple resolution for Mr. Guidry turned into a four-year-long nightmare of shoulder pain because his insurance carrier mishandled and delayed the payment he was entitled to receive under his policy. This case shows the value of an experienced accident attorney who can advocate on behalf of an injured victim.

Continue reading "Insurance Company Taken to Task for Poor Handling Claims " »

Those living in low-lying areas and near rivers often seek, and often obtain, flood insurance. Many of the policies granted come from insurance providers that have opted into the National Flood Insurance Program (NFIP). Under this program, property owners are issued flood insurance through the Federal Emergency Management Agency (FEMA). The federal government, in an effort to expand the NFIP, created the Write Your Own program. These policies provide identical coverage as regular NFIP insurance, except they are administered through local insurance companies. These insurance companies increase community awareness of the NFIP in return for expenses related to claims written and processed. FEMA retains all responsibility for claim losses.

These policies, like any other insurance policy, are only active for the policy period. However, once the policy period has expired, FEMA and Write Your Own insurers typically extend a grace period of thirty days. This means that if the policy holder pays a renewal premium within thirty days of the policy's expiration, the renewal will be retroactive, essentially covering the gap between the policy expiration and the payment of the premium. If the policy holder fails to pay the renewal premium before the grace period ends, then the policy terminates at its original expiration date and no grace period claims can be processed under it.

This retroactive policy renewal was the issue in Campo v. Allstate Insurance Company. Here, Campo's flood insurance expired and Allstate sent him notice of the expiration along with the option of retroactive renewal. During this grace period Campo's property was damaged by Hurricane Katrina. Due to the excessive number of claims arising from Katrina, FEMA increased NFIP grace periods from thirty days to ninety. Campo contacted Allstate and procured an insurance check to cover his living expenses. No further discussion of policy renewal took place. Campo's ninety day grace period expired without any renewal premium payment. Therefore, when Campo filed his insurance claim it was denied as the policy was not retroactively renewed to cover the damage caused during the grace period. Campo sued Allstate claiming that Allstate had negligently misrepresented the status of his policy.

The only way to succeed on a claim of negligent misrepresentation by an insurance company is to show that the insurance company had a legal duty to supply correct information, that that duty was breached, and that damages resulted from justifiable reliance on that misrepresentation. In most cases, as in Campo's, the third prong of this test is the most difficult to satisfy. The reasoning behind this is simple: policy holders have access to correct information through the policy contract that they possess. Thus, courts may find damages flowed from an unjustified reliance on the misstatement because the policy itself is clear.

Yet, under this test, Campo succeeded on his damages claim in district court. The U.S. Court of Appeals for the 5th Circuit, on the other hand, reversed in favor of Allstate. The reasoning behind this decision is that Campo was fully aware that he was required to pay a premium in order to obtain the retroactive renewal of his policy. In conversations with Allstate, Campo failed to discuss the renewal, and, in addition, the check provided by Allstate during the grace period was not a promise that it would pay Campo's claim. In short, the court viewed Campo as being responsible for knowing the terms of the insurance policy he held. Insurance policy holders have access to the terms of their policy and are therefore in a position to familiarize themselves with relevant provisions.

Since much of Louisiana is prone to flooding, it is important to protect yourself by obtaining flood insurance. However, once a policy is issued, be sure to read through the terms and know the conditions of renewal. When a policy expires, it is the policy holder's responsibility to take action for renewal.

Insurance disputes such as these are complex and best left to an experienced practicing attorney.

Continue reading "U.S. 5th Circuit Court of Appeals Clarifies Retroactive Renewal of Flood Insurance" »

U.S. Court of Appeals affirms that maritime insurance policy covering collision on the Mississippi River included defense costs in coverage limits. In a case of insurance contract interpretation, the U.S. Court of Appeals for the Fifth Circuit determined that defense costs were included in the policy limits set by a maritime insurance policy. The court admitted that this interpretation erodes policy limits.

Gabarick v. Laurin Maritime (America) Inc., Nos. 09-30549, 09-30809 (5th Cir. 8/10/11) arose out of a collision on the Mississippi River. Laurin Maritime and related parties owned the ocean-going tanker M/V Tintomara. In the early hours of July 23, 2008, the ship collided with a barge carrying heavy fuel oil. The impact split the barge in half, and heavy oil spilled into the river. American Commercial Lines, LLC (barge owner) owned the tug, barge, and cargo, but D.R.D. Towing Co., LLC (towing company) provided the crew that ran the tug pushing the barge. It's the towing company's insurance policy that raised issues of policy interpretation.

A protection and indemnity (or P&I) policy issued by Indemnity Insurance Company of North America (insurer) covered the towing company. The policy is a standard maritime policy, except for modifications the parties made to the SP-23 Form. The policy provided a single occurrence limit of liability of $1 million, with a $15,000 deductible. The towing company and the barge owner demanded that the insurer indemnify and defend them. Not knowing which of the numerous parties rightfully should receive the insurance proceeds, the insurer deposited $985,000 into the registry of the U.S. District Court for the Eastern District of Louisiana for the court to make the decision. That court held that the insurer's deposit for the interpleader action was proper and that the funds would reimburse defense costs. The barge owner and Laurin Maritime appealed.

The appellate court explained that Louisiana law forms the basis for the court's independent review of the District Court's interpretation of the insurance policy. Even before it entered into this analysis, the court cautioned that marine insurance commentators agree that defense costs are typically included within such insurance policy limits. The P&I insurer usually has no duty to defend: indemnification is the basis for coverage. Louisiana law agrees. Legal expenses incurred in defending a liability covered by an insurance policy are treated as part of the overall claim. Payment of legal expenses falls within the policy limits. Because the barge owner is a sophisticated commercial entity, it bore the burden that this policy should be interpreted differently.

The collision triggered coverage under the policy's collision and towers liability and protection and indemnity coverage. Although the policy was mostly standard, a "manuscript provision" (modification) added a collision and towers liability clause. The standard language for the relevant coverage stated, "Liability hereunder in respect to any one accident or occurrence is limited to the amount hereby insured." The court found no ambiguity.

The barge owner argued that the policy was ambiguous. It pointed to the modification language that the insurer "will also pay the costs which the Insured shall thereby incur or be compelled to pay." The barge owner argued that Exxon Corporation v. St. Paul Fire & Marine Insurance Co., 129 F.3d 781 (5th Cir. 1997) had interpreted the clause to exclude defense costs from the policy cap. This argument did not work for three reasons. The cited case involved personal injury, not collision, placing the "also pay" language in the P&I policy, unlike the towing company's policy. Second, the claims mentioned by the barge owner are excluded from the collision coverage. "[A]ny recovery must come under the standard P&I section of the policy," the court explained. Finally, any ambiguity from the clause, were it applicable, would not extend to the relevant coverage sections of the standard policy language because the modification was a separate contract entered into by sophisticated parties.

The court summarized that "the policy is clear that defense costs were intended to be included within the policy limits. This P&I policy is unambiguously written against the backdrop of traditional principles of maritime law that defense costs erode P&I limits of liability."

The barge owner also appealed the District Court's denial of insurance proceeds. The appellate court explained, "The district court did not permanently deny funds to the barge owner but rather stated, 'payment to [the barge owner] at this time would not be equitable.'" (Alterations in original.) Therefore, the District Court's decision was not a final judgment and could not be appealed.

Coverage limits and defense from an insurer are crucial issues in evaluating a claim when you have been harmed. Insurance policies differ between consumer and business and by industry. This case demonstrates the specificity of insurance coverage. A lawyer independent of your insurance company can help you understand your policy, its coverage limits, and the extent of an insurer's duty to defend.

Continue reading "Insurance Coverage and its Limits - How Protected Are You?" »

Previously on the Insurance Dispute blog, we have reviewed cases where the court analyzied various policy provisions that are intended to limit the scope of the insurer's coverage. One recent example was a clause in a hazard insurance policy that limited the insurer's responsibility for certain economic damages that resulted from a covered loss. Coverage limitations are common features in other types of policies, as well. For instance, a workers compensation insurance policy will typically include provisions that define the type of injuries that fall under the policy and specify the timeframe in which claims must be made. The recent case of Continental Holdings, Inc. v. Liberty Mutual Insurance Co. offers an example of a court's analysis of such a provision. Continental Holdings purchased a Workers Compensation/Employers’ Liability Policy from Liberty Mutual on October 1, 1964. The policy's term ended on July 1, 1973. It covered two kinds of work-related injuries: bodily injury "by accident," and bodily injury "by disease." The policy specifically excluded coverage for claims of "bodily injury by disease unless prior to thirty-six months after the end of the policy period written claim is made or suit is brought against the insured for damages because of such injury or death resulting therefrom." In 2009, a group of former employees, certified as a class, sued Continental for hearing loss caused by their long-term exposure to industrial noise while working for the company. In their complaint, the employees alleged that the hearing loss "was painless, and occurred gradually over a long period of time as a result of their continuous long term exposure to hazardous industrial noise at [Continental's] facility.” Continental filed suit against Liberty Mutual seeking indemnity for the employees' claims in the hearing loss suit, arguing that the policy purchased in 1964 covered the workers' hearing loss. Liberty Mutual filed a motion for summary judgment asserting that it was not required to indemnify Continental because noise-induced hearing-loss was not an “accident” and therefore was subject to the 36-month exclusion under the policy. The district court granted Liberty Mutual's motion, and Continental appealed.

The U.S. Court of Appeals for the Fifth Circuit relied on Louisiana law to guide its analysis. At the time the policy was taken out, the Louisiana Worker’s Compensation Act (“LWCA”) was in effect and was incorporated by reference in the policy. The LWCA included the following definition of "accident": "an unexpected or unforeseen event happening suddenly or violently with or without human fault and producing at the time objective symptoms of an injury." Continental asserted that the industrial noise the workers were exposed to created an "objective injury" and therefore fell under Louisiana’s then-existing statutory definition of “accident.” It backed up its position with the affidavit of Dr. Robert Dobie, which explained that noise-induced hearing loss can be measured at the moment a noise is heard through an audiogram test. The court noted, however, that "the vast majority of Louisiana cases," including one that held "gradual hearing loss resulting from occupational noise exposure ... cannot meet the definition of an ‘accident’ under any version of the LWCA,” reach[es] a contrary conclusion." The court observed that the Continental workers did not claim that a single event caused their hearing loss. Nor did they experience any symptoms during the period of time that the Liberty Mutual policy was in effect. These facts were contrary to the court's own prior holding that Louisiana's definition of "accident" requires “at least ... some identifiable event or incident within the policy term where the employee can demonstrate a palpable injury.” By way of example, the court recalled a case that involved "a sudden, acute, and identifiable injury during the period of employment." The employee-plaintiff complained of ear pain immediately after exposure to noise, requested and was denied a transfer, and then over the course of a few months experienced nearly total deafness. The court concluded, therefore, that the gradual, noise-induced hearing loss that the Continental workers suffered was "not an 'accident' under the LWCA." Therefore, the court affirmed the district court's finding that the workers' injuries must be classified as "bodily injury by disease," thus triggering the 36-month exclusion.

It is important to note that the Fifth Circuit's decision did not necessarily create a negative outcome for the workers themselves. Indeed, their suit (filed in state court) was merely put on hold until the conclusion of this action, which only served to determine that Liberty Mutual would not be responsible for any damages due the workers if they ultimately prevailed against Continental.

Continue reading "Fifth Circuit Court of Appeals Looks to Louisiana State Law to Guide Resoltion of Insurance Coverage Dispute in Workplace Injury Case" »

When an insurance company provides coverage to a business, the contract typically includes a duty to defend the inured business against any coverage claims. If an insurer refuses to provide the insured with claim defense, then the insured business may sue the insurance company for indemnification of defense fees. However, a question often arises as to how much an insurance company is required to pay for indemnification. This issue was brought to light in a recent Supreme Court of Louisiana case when insurance company Continental was sued for indemnification by a manufacturing company, T&L.

When an insurance company is sued for indemnification, several options exist for a defense. One defense, which was used in the Continental case, is policy exclusion. Under this defense, the insurance company claims that the individuals seeking damages from the insured business fall outside the policy coverage and thus outside the realm requiring the insurer to defend the insured business. In the Continental case, for example, Continental refused to defend T&L against claims brought by T&L employees because certain time frames of T&L's policy did not cover injuries sustained by employees.

One way to defeat a policy exclusion defense is to prove that the insurance company waived its right to the defense. Typically, a waiver occurs when an individual, or in this case a company, has an existing right, knowledge of its existence, and an intention to relinquish that right. However, even if there is no intention to give the right up, conduct that creates a reasonable belief that the right has been relinquished will constitute a waiver of that right. Therefore, if an insurance company undertakes a defense on behalf of its insured against claims that the insurance company knows do not fall under the insurance policy, and does not reserve its rights to withdraw defense, then it is likely that the insurance company has waived its right to a policy exclusion defense. This means that if the insurance company was to back out of the defense it would be held liable for indemnification to the insured because the insured relied on the insurer's actions to defend them.

However, it is important to make a distinction between waiver and breach of duty to defend in the insurance context. While a waiver involves an insurer relinquishing its rights to deny coverage under a policy, a breach of a duty to defend expressly denies coverage under a policy. In essence, the two are complete opposites. If an insurance company waives its right to deny coverage, then the insurance company, if they withdraw from defense, is likely to be forced to indemnify the insured for all defense costs for all claims. On the other hand, as was the holding in the Continental case, a breach of a duty to defend falls under contract law, and would find the insurance company liable for reasonable defense costs. In addition, if the breach was made in bad faith, statutory penalties will be imposed upon the insurer. Liability for such claims is also allocated on a pro rata basis between all insurance policies. This lowers the costs incurred upon insurers, which, for Continental, decreased from over four million dollars to just shy of two-hundred thousand dollars.

If your business is at odds with an insurance company over policy claim defense, be sure to consider whether or not the insurance company has waived its right to a policy exclusion defense. If the insurer has, then it is likely that the insured will be able to recoup costs paid to all claimants. If, on the other hand, the insurer has simply breached a duty to defend, you may only be able to recoup reasonable defense costs.

Even if you find this article helpful, insurance law is a complicated matter that should not be approached without consultation from a practicing insurance attorney.

Continue reading "Limits of Insurer Indemnity Clarified in Parish of St. Bernard Case " »

In a prior post, we examined the case of Berk-Cohen Associates, L.L.C. v. Landmark American Insurance Company, which concerned a dispute over an insurer's coverage of lost revenue suffered by the Forest Isle Apartments complex in New Orleans in the aftermath of Hurricane Katrina. The district court found that the lost revenue experienced by the apartment's owner, Berk-Cohen, was covered under the policy issued by Landmark. Based on this finding, it assessed Landmark penalties and attorney's fees for its misinterpretation of its policy and refusal to pay Berk-Cohen for the lost revenue that it deemed covered under the policy. Landmark appealed the assessment (along with the district court's finding on the coverage issue); although the Court of Appeals for the Fifth Circuit affirmed the district court's holding as to insurance coverage, it reversed on the issue of the penalty.

Under Louisiana law, an insurance company generally has 30 days after receiving a demand letter and written proof of loss to pay a claim. A court can assess a penalty against an insurer that fails to pay within 30 days “when such failure is found to be arbitrary, capricious, or without probable cause.” La. Rev. Stat. Ann. § 22:1892(B)(1). The penalty is calculated as 50 percent of difference between the amount actually paid and the amount due. Attorney's fees and costs can also be part of the assessment. No penalty is available “when there is a reasonable and legitimate question as to the extent and causation of a claim.” In the case of Louisiana Bag Co. v. Audubon Indemnity Co., the Louisiana Supreme Court assessed penalties against an insurer that failed to pay the uncontested portion of a claim and refused coverage for a loss that was clearly included in the policy. The court found that "no reasonable uncertainty existed as to the insurer’s obligation to pay," and so its position was "arbitrary and without probable cause."

The Fifth Circuit concluded, however, that the Forest Isle Apartments case was unlike the situation in Louisiana Bag. "The scope of the flood exclusion," reasoned the court, "with its reference to all damage 'caused directly or indirectly' by flooding, is susceptible to different interpretations." Landmark, therefore, was "neither arbitrary nor capricious" in refusing to pay Berk-Cohen for lost revenue based on the favorable business conditions brought on by hurricane flooding. The court also found it important that Landmark had already paid out more than $20 million on undisputed portions of Berk-Cohen's claims. In light of this, Landmark's dispute over the lost revenue claim could reasonably be considered a "good-faith error" in interpreting the policy. In addition, the court noted that under Louisiana jurisprudence, an unfavorable judgment does not necessarily call for the statutory penalty. Thus, the court reversed the district court's assessment of penalties against Landmark.

Continue reading "Court Declines Statutory Penalties in New Orleans Insurance Case" »

In insurance, an assignment is the transfer of legal rights under an insurance policy to another party. The legality of assignments became a major issue in the aftermath of hurricanes Katrina and Rita. During this period, the federal government, in an effort to aid rebuilding efforts, issued money through the Road Home program to homeowners who held underinsured properties. In exchange, these homeowners were required to assign their rights to insurance claims under their policies to the the state of Louisiana. The purpose of this assignment was to prevent homeowners from fraudulently receiving duplicate payments. However, the program incentivized insurance companies to estimate damages too low, which in turn forced homeowners to take the higher amount offered through the Road Home program.

The shortfall created within the Road Home program forced the state of Louisiana to bring suit against insurance companies through the policy rights assigned to the state by homeowners. In essence, the state sought to recoup actual insurance claim damages that the homeowners were rightfully owed had they not opted into the Road Home program. Though most, if not all, of the homeowner insurance policy contracts contained an anti-assignment clause, the state maintained that it had the right to post-loss assignment. Therefore, it is critical to distinguish between a pre-loss assignment and a post-loss assignment.

A pre-loss assignment occurs when one transfers a legal right under an insurance policy to another before the injury or loss occurs. An example of a type of pre-loss assignment is found in cases when life insurance is assigned to a bank as collateral for a loan. Here, the assignment has occurred before the loss, in this case the death of the original policy holder, and any benefits that accrue at the time of death are used to repay the bank first. These types of assignments typically require consent from the insurer, but are usually barred by anti-assignment clauses.

A post-loss assignment, on the other hand, is the transfer of a legal right under an insurance policy to another party after the injury or loss occurs. Post-loss assignments frequently give the third party transferee the ability to file a claim against the insurance company for any loss accrued by the original policy holder. Many insurance companies try to block such assignments through broad anti-assignment clauses found in policy contracts. Such clauses were found in most Katrina and Rita policies, and insurance companies pointed to these sections in an attempt to avoid paying actual damage costs homeowners thought they rightfully assigned to the state.

While national jurisprudence holds that pre-loss anti-assignment clauses are valid in favor of contract law and public policy, anti-assignment clauses related to post-loss assignments are held to be invalid. The reasoning behind this difference primarily lies with public policy considerations. A pre-loss assignment, for example, may increase the risk beyond the point that the insurance company had originally contracted for and with a party the insurance company had not originally contracted with. A post-loss assignment, on the other hand, simply assigns an accrued right to payment after a loss has already occurred. There is no change in risk as the loss has already occurred, and since payment is to be made it matters none to whom the payment is made.
The Supreme Court of Louisiana holds that such public policy concerns are better suited for the legislature. However, the Court does state that clauses prohibiting post-loss assignment must be written in clear and unambiguous language. If the language in the policy contract is unclear, then, in accordance with laws regarding contracts of adhesion, the language will be construed against the insurance company and in favor of the insured. If you have entered into a contract with an insurance company and are looking to assign your rights under the policy to a third party, turn to the language in the contract itself. Though there is not specific set of words or test used to determine "clear and unambiguous," your own judgment is a good starting point in determining whether or not you have the right to assignment.

Though your own judgment is an excellent place to start, insurance law is very complicated and is best suited for a practicing attorney.

Continue reading "Supreme Court of Louisiana Rules on Hurricane Katrina Insurance Policies' Anti-Assignment Clauses" »

Insurance policies routinely include provisions that are intended to limit the scope of the insurer's coverage in the event of a claim by the policyholder. For instance, most homeowner's insurance policies exclude coverage for fire damage that results from the policyholder's deliberate arson. Commercial premises insurance policies, which commonly also include coverage for loss of business income, can carry similar limitations. The recent case of Berk-Cohen Associates, L.L.C. v. Landmark American Insurance Company in the U.S. Court of Appeals for the Fifth Circuit provides an instructive example of how insurance policies are "construed using the general rules of interpretation of contracts" by the courts.

Berk-Cohen Associates, L.L.C., as the owner of the Forest Isle Apartments in New Orleans, maintained an insurance policy to cover the complex with the Landmark American Insurance Company. The policy covered property damage but specifically did not cover losses at Forest Isle "caused directly or indirectly by Flood.” In the case of a covered cause of loss, such as wind damage or fire, the policy insured Berk-Cohen against both the property damage and the resulting lost business income. However, the scope of the income protection excluded any income that would have been earned directly as a consequence of any "favorable business conditions caused by the impact of the Covered Cause of Loss on customers or on other businesses." In other words, Berk-Cohen could not profit by a widespread calamity that was also the source of a property damage claims. Forest Isle suffered a series of misfortunes, including a tornado, a vehicle strike, and--most significant--damage from Hurricane Katrina. Following the hurricane, Landmark compensated Berk-Cohen for damages caused by wind but not flood. Concerning Berk-Cohen's claim for lost business income, Landmark argued that it was not responsible for the increased rents that resulted from the extensive flooding around the city because flood damage was excluded from the policy. Accordingly, Landmark "declined to increase its calculation of lost business income to the extent that any foregone income arose from flooding." Berk-Cohen initiated litigation and, following a bench trial, the district court held that, notwithstanding the flood damage exclusion in the policy, Landmark should have considered the business conditions attributable to flooding in other buildings when computing the business income that Berk-Cohen lost as a result of the wind damage to Forest Isle. On appeal, the Fifth Circuit upheld the district court's opinion. It noted that the “Covered Cause of Loss” that gave rise to Berk-Choen's property damage claim was wind. Consequently, the policy language prohibited Berk-Cohen from recovering for lost business income as a result of wind damage suffered by customers or other competing businesses. But, "any increase in customers’ demand or reduction in competitors’ supply due to flooding at other properties is a permissible factor in calculating lost business income." (Emphasis supplied.) The court refused to permit Landmark to exclude coverage for flood damage by the policy language while at the same time invoking the same source of damage to reduce Berk-Cohen's business income recovery. To do so would "extend[] the flood exclusion beyond its function," since the policy specifically permits the income calculation to consider "favorable business conditions." Accordingly, the court "decline[d] to use a limitation on coverage"--that is, flooding--"to alter the calculation of damages for a covered loss"--the lost income. The Fifth Circuit concluded that the "policy ... excludes coverage for flood damages at the Forest Isle property. The flood exclusion does not, however, prevent Berk-Cohen from recovering lost business income due to the favorable business conditions arising from flood damage to other buildings."

This case demonstrates that applying the "normal cannons of contract interpretation" can work to the benefit of the insured. As with any contract, the insurance company is bound by the plain meaning of the policy language, even if it means that excluding coverage for one claim will open the door to liability for another. The lesson here is that a knowledgeable and experienced attorney is invaluable to anyone who is involved in a dispute over insurance coverage.

Continue reading "Hurricane Damage at New Orleans Apartment Leads to Dispute Over Insurance Coverage Calculation" »

In a prior post, we reviewed the Johnson v. Louisiana Farm Bureau Casualty Insurance Co. case. The case concerned the undelivered notice from Farm Bureau to Janice Johnson that the company would not renew her homeowner's insurance policy. The case centered around the state law that requires notice of the intent not to renew:

"An insurer that has issued a policy of homeowner's insurance shall not fail to renew the policy unless it has mailed or delivered to the named insured, at the address shown in the policy, written notice of its intention not to renew. The notice of nonrenewal shall be mailed or delivered at least thirty days before the expiration date of the policy." La. R.S. 22:1335, formerly La.R.S. 22:636.6.

In the Johnson case, the Third Circuit interpreted the "mailing or delivery" requirement to mean that the notice must actually be received by the homeowner. During the trial, the jury found that Farm Bureau had properly mailed the notice. But Johnson's testimony that she always opened every piece of mail she received (except for bank statements) convinced the jury that she had not, in fact, received Farm Bureau's letter. Since the Third Circuit regarded the conclusion about delivery to be a matter of "the credibility of the witnesses," and could not find "manifest error in the jury’s credibility determination nor in their determination that the notice of non-renewal was not delivered," it affirmed the trial court's award of damages to Johnson.

Farm Bureau appealed this decision, which so happened to contrast directly with a recent decision from the Fourth Circuit. The Fourth Circuit case, which featured very similar facts, reached the following conclusion:

"[t]he mailing of a notice of nonrenewal to the insured’s address, as listed on the policy, at least thirty days before the expiration of the policy satisfies the burden placed upon the insurer." Collins v. State Farm (La.App. 4 Cir. 1/26/11).

The Louisiana Supreme Court sided with the Fourth Circuit, finding that "the key is that the statute requires only mailing, not proof of receipt." Because "the plain language of the statute requires only that such notice be mailed," in the court's view "any evidence of non-delivery is relevant only as far as it is evidence of non-mailing or improper mailing." The court determined that the jury's fact-finding duty extended no farther than determining that Farm Bureau had properly mailed the notice, which was "all that [Farm Bureau] was required to do under [the statute] in order to give notice of nonrenewal of [Johnson's] insurance policy." Accordingly, the Supreme Court reversed the Third Circuit and declared that "Farm Bureau did not provide homeowner’s coverage to [Johnson] at the time of the loss." As a result, Johnson was denied the $296,500 payment she expected from Farm Bureau.

The purpose of the nonrenewal notice is to provide an insured homeowner sufficient time to obtain new insurance with another company before the existing policy expires. While the law placed a specific burden on insurance companies to send such a notice, customers in Louisiana are now clearly warned that the failed delivery of a properly mailed notice will not obligate an insurer to extend coverage, even if the consequences are catastrophic to the homeowner.

Continue reading "Louisiana Supreme Court Settles Circuit Dispute Over Insurance Policy Renewal Issue " »

Nearly six years after Hurricane Katrina struck, Louisiana residents are still dealing with the traumatic and costly effects of the storm. The American Red Cross estimates that approximately 275,000 Louisiana homes were destroyed by the storm and thousands more were damaged. Even those homeowners with insurance can find the recovery of damages to be a difficult and definitely expensive process. This financial burden, regardless of the supposed

Many homeowners filing claims for damages were in for a nasty surprise: the “Named Storm Deductible.” Under Louisiana law, insurance companies can implement deductibles of as much as 5% of the value of the insured property for damage caused by “named storms,” including tropical storms and hurricanes such as Hurricane Gustav or Hurricane Katrina. Frequently these provisions have not appeared on the original policies, but were added during a policy renewal, meaning homeowners are unaware of its existence or don’t understand its implications.

Under a Named Storm Deductible of 5%, for example, damage caused to a home with an insured value of $100,000 would cost the homeowners a deductible of $5,000, rather than the standard $500 or $1,000 deductible ordinarily applied to such losses. Litigation arguing against and interpreting these deductibles can be complicated and frustrating.

Homeowners Mary Williams, Michael Manint, and Susan Manint ran into this problem firsthand when recovering from damage caused to their homes by Hurricane Katrina. While their policy from Republic Fire and Casualty Insurance Company includes a Named Storm Deductible of five percent (5%), it does not specifically designate what the 5% is to be taken from: the damage amount or the dwelling coverage limit. One year, when renewing their homeowners insurance, Republic sent them an Important Policyholder Notice explaining the application of the Named Storm Deductible. The Notice included an example of the Named Storm Deductible which showed that the deductible would be 5% of the dwelling coverage limit. This distinction, however, did not actually appear within the provisions of their policies.

After Hurricane Katrina struck Louisiana, Republic determined that Ms. Williams and the Manints would have to pay deductibles of $7,320 and $4,445, respectively, which were 5% of their dwelling coverage limits. Both homeowners, however, had expected to have to pay only 5% of the covered loss, which would have amounted to costs under $1,000.

Both homeowners filed suit against Republic, asserting that the company had miscalculated the Named Storm Deductible. They argued this on the theory that the Important Policyholder Notice, which showed that the 5% was to be taken from the dwelling coverage limit, could not be considered when interpreting the Named Storm Deductible. The district court however, disagreed and ruled in favor of Republic, confirming that the deductible had been calculated correctly.

On appeal, the court affirmed the district court’s ruling. Under Louisiana law, because the Important Policyholder Notice was physically attached to the renewal policies, it was made a part of them as well. This meant that the Notice’s interpretation showing that the 5% was to be taken from the dwelling coverage limit was part of the policy and thus enforceable against the homeowners.

If you find yourself in a similar predicament, consulting with a legal expert may be your best chance in receiving the justice you deserve.

Continue reading "Insurance Policies and How They Affect Recovery After a Hurricane or Disaster" »

If a homeowner insures his home and then suffers damage to the structure, the process of making a claim and being paid for the loss can be long and frustrating. Frequently, the insurance company will arrive at its value of the loss and attempt to persuade the homeowner to accept that value, even if it doesn't reflect the homeowner's actual costs of repair. In such a case, the homeowner should check his policy for an "appraisal clause." This provision provides for an alternative method for setting the value of the property damage. An appraisal procedure requires the homeowner to obtain an independent appraiser to survey the damage and assign a value to the loss. Similarly, the insurance company must hire an independent appraiser to perform the same analysis. The two appraisers must petition the court for the appointment of an umpire who will then oversee the negotiation of the settlement based on the two appraisals. Once any two of the parties--the appraisers and/or the umpire--agree as to the value of the loss, the matter is settled.

In Louisiana, like other states, flood insurance policies are underwritten through the National Flood Insurance Program (NFIP) and administered by the Federal Emergency Management Agency (FEMA). The NFIP authorizes private insurance companies to issue policies and handle the claim settlement process. Claims are actually paid by the federal government. FEMA requires that all NFIP flood insurance policies include an appraisal clause.

After their was heavily damaged by flood in Hurricane Katrina, William and Cynthia Dwyer filed a claim with their flood insurer, Fidelity National Property and Casualty Insurance Company. The Fidelity policy was issued through the NFIP. The Dwyers disagreed with Fidelity's offer of settlement and took the dispute to the District Court for the Eastern District of Louisiana. The court entered judgment for the Dwyers, and on appeal by Fidelity, the Fifth Circuit Court of Appeals vacated the judgment and ordered the parties to submit to the appraisal process as outlined in the policy. The Dwyers and Fidelity sought appointment of an umpire, who then submitted to the district court an appraisal that included the amount of actual damage to the Dwyer home as well as a "mark-up for overhead and profit" intended to cover the cost of a general contractor to make the repairs. Fidelity accepted the umpire's figure on damages but objected to the addition of the mark-up because the Dwyers had already sold the house and would not have any role in the repair itself. The Fifth Circuit agreed with Fidelity that "the award of overhead and profit was erroneous" and noted that "Fidelity told the district court that absent the improper award of overhead and profit, it agreed with the umpire’s appraisal." Thus, determining that Fidelity and the umpire were in agreement on the amount of the loss, the court entered judgment ordering Fidelity to pay the Dwyers $1,552.51. This amount represented the umpire’s appraisal amount less the erroneous overhead and profit, the policy deductible, and the amount Fidelity had already paid out to the Dwyers.

The appraisal process seeks to take the potentially emotional settlement of an insurance claim out of the hands of the homeowner and the insurance company and leave the decision to disinterested, expert third parties who have no connection to the outcome. Although the process is generally more cost-effective and expedient than litigation, a homeowner should consult with an experienced attorney to ensure the procedure is properly followed and his rights are protected.

Continue reading "Dispute Over Hurricane Katrina Home Repair Shows Role of Appraisal Process in Insurance Settlements." »

Homeowners across the Louisiana coast were affected by Hurricane Katrina. Many of those affected are still dealing with the stressful experience of rebuilding their homes, communities, and lives. Homeowners insurance is a boon to many when natural disaster strikes. Unfortunately, insurance companies do not always make recovery of benefits easy on the afflicted homeowner. The insurance recovery process can be overwhelming, and may be complicated by the often necessary instigation of litigation. Insurance negotiations can be complicated by differing interpretations of policy provisions. Many different provisions governing recovery are involved in insurance contracts. The interpretation of the language of the contract by the court plays a pivotal role in deciding the amount of damages an insured is entitled to recover.

The recent Fifth Circuit Court of Appeals case French v. Allstate Indemnity Co., illustrates that the recovery of damage benefits from an insurance company is not always a straight forward process. In French , homeowners in Slidell, Louisiana sued their homeowners insurance provider, Allstate Indemnity Co., to recover additional damages resulting from wind damage to their residence caused by Hurricane Katrina. The plaintiffs initially won a judgment in their favor in the United States District Court for the Eastern District of Louisiana , but they appealed, arguing that they were entitled to additional damages beyond the original award. The insurance company paid less than the full amount of the liability limit under the homeowners insurance policy. The District Court held that, since their repair costs would exceed their policy limit, they were entitled to at least the full limit and awarded them judgment accordingly.

On appeal, the plaintiffs argued that they were entitled to further damages under two provisions of their policy, an Extended Limits Endorsement provision and an Additional Living Expenses provision. They argued that the lower court erred in denying them recovery under these provisions. The court applied Louisiana case law which dictates that the language of the policy controls and “constitutes the law between the insured and insurer.” When an insurance contract is subject to interpretation "'[w]ords and phrases ... are to be construed using their plain, ordinary and generally prevailing meaning,’ unless the words have acquired a technical definition." The appellate court reviewed the original award to determine if the lower court erred in their interpretation of these provisions and in denying recovery to the plaintiffs.

The Extended Limits Endorsement allowed for a certain amount of additional damages above and beyond the actual cash value of the insured’s home. The court found that the language of the provision indicated that, in order to recover under this provision, the insured had to show they had repaired or replaced their damaged property. They must also have insured their home to 100% of its value. The plaintiffs did not meet either of these requirements, and the court found the denial of an additional award under this provision was appropriate.

The Additional Living Expenses provision allowed for recovery of damages for "the reasonable increase in living expenses necessary to maintain [a] normal standard of living when a direct physical loss we cover . . . makes your residence premises uninhabitable." The court determined that the plaintiffs had to show additional living expenses they had actually incurred. Since they had not yet begun repairs on their home, and continued to live in the residence, they were properly denied additional recovery under this provision.

Knowledge of the interpretation of insurance contract provisions is important when negotiating an insurance settlement or in litigation for recovery of damages. If you or a loved one has been affected by Hurricane Katrina you need an experienced law firm to help you navigate negotiations with your insurance company and to represent you in court should it be necessary. If you are looking for legal representation, the Berniard Law Firm has experience working with the victims of Hurricane Katrina and their families as well as a variety of storm and general insurance dispute issues.

Continue reading "Insurance Contract Interpretations and the Affect on Recovery of Damages " »

Lake Charles resident Ginger Hinch Durio sued her Insurer, Horace Mann, over the extent of payments she received for the damages she sustained during Hurricane Rita. Durio's house was severely damaged, including her garage where her family's belongings were being stored while they were in talks to sell the house. The ceiling inside the garage collapsed onto their stored belongings. Additionally, an engineering report obtained by Durio four months after the hurricane indicated the structural and mechanical integrity of the house was compromised, and the HVAC, electrical, and plumbing systems had failed.

Durio's policy with Horace Mann provided for several categories of damages for which the Insurer would pay her up to their respective policy limits: Structure ($173,300), Adjacent Structures ($17,330), Contents ($103,980), and Additional Living Expenses ($103,980). After Durio submitted a claim in September of 2005, Horace Mann made several payments to her that fell far below the category policy limits. Despite Durio's submission of re-evaluation materials, Horace Mann ultimately honored in full only her Contents claim (for all the belongings contained in the garage) of $47,061.44. This, however, was after the Insurer issued her a "sarcastic" check for $6.90 for a broken flowerpot.

The Third Circuit Court of Appeal affirmed the damages awarded by the Trial Court for a total in excess of $1.5 million. Durio received Contractual damages for the difference between what she was paid by Horace Mann and the policy limits for Structure and Adjacent Structure damages. In addition, the Court affirmed an award of $39,000 for thirty-eight months of living expenses based on Durio's own estimation for the period in which the Insurer worked on the claim.

Beyond Contractual damages, the Court affirmed the award of General and Special damages, including compensation for Durio's mental anguish and the egregious conduct of Horace Mann. The Insurer was found to have handled the claim in a "... dilatory and non-customer service fashion," including the facetious flowerpot check, the assignment of eight different adjustors to the claim, and their failure to actually inspect the premises (Horace Mann relied on photographs and the notes of an adjustor).

Durio was found to have sustained damages of $3,000 a month from mental anguish, but this amount was cut in half after the Court considered other factors in her life like family, job, and other financial pressures as equally responsible for her mental and stress-related symptoms. The award for 38 months was adjusted to $57,000. Additionally, Durio was awarded $110,333 to compensate her for lost wages and lost future retirement benefits for the period when she was unable to work due to her symptoms.

Moreover, the Court upheld the award of Attorney Fees and Penalties, which together amplify Durio's damages to the sum of $1.5 million. Durio was awarded one-third of the total amount in Attorney Fees based on a statutory amendment passed after her initial claim was made. Though Horace Mann objected, the Court upheld the award, reasoning that the Insurer has a "... continuing duty of good faith and fair dealing" during the entire litigation period. The Penalties award - calculated as two-times the damages for general, special, and contractual damages - was upheld because the Court found that Horace Mann received satisfactory proof of Durio's loss and arbitrarily, capriciously, or without cause, failed to make payment within 30 days.

Ultimately, Horace Mann's poor processing of their Insured's claim cost them over $928,000 in damages and penalties, in addition to over $379,000 in Durio's Attorney Fees. These figures each dwarf the Court's finding of only around $210,000 in Contractual damages. The standard below which an Insurer like Horace Mann falls can therefore impose a costly consequence for such deficient conduct.

In a recent Louisiana Court of Appeals case, an injured logger was not able to collect damages from his employer's insurance company because the subcontractor at fault for the accident was found to be not covered.

Travis Palmer was working for A.T. Martinez (ATM), LLC, as a logging truck driver and was injured when he was struck by a log while his employer's truck was being loaded with timber. Palmer sued his employer's insurer, Royal Indemnity Company (Royal), alleging that they provided general liability coverage even though a subcontractor, KLM Logging (KLM) was at fault. The trial court granted a motion for summary judgment in favor of the Palmer and found that the insurance policy in question covered KLM but the court of appeals disagreed on appeal.

Royal denied coverage here on the primary grounds that KLM did not meet the definition of "an insured" or an "additional insured" under the terms of the policy issued to ATM. In addition, there was no agreement between ATM and KLM that required ATM to name KLM as an insured for the timber cutting/loading operations or for any other subcontractor work. KLM and ATM did allege, however, that had an oral agreement that ATM's insurance would also cover KLM. The two owners of the respective corporations (who happen to be parent and child) claim that KLM paid insurance premiums to Royal for this coverage by virtue of ATM withholding part of the payments they owed to KLM. ATM believed that the policy covered their subcontractors, even though the owners admitted they never read it.

ATM's insurance agent, Mac Pace, also thought subcontractors were covered. Pace had been ATM's agent for over 25 years. According to Pace, he obtained the policy through George Pusey of O'Donovan and Associates, Royal's Managing General Agent and requested the same coverage for subcontractors as he had previously obtained for ATM from the Hartford insurance company. The trial court found that ATM had an agreement with KLM to provide KLM with coverage and that ATM and Pace had intended to get coverage, reforming the contract to provide coverage.

Interpreting an Insurance Policy: Plain Language or Latitude?

An insurance policy is a contract between the insured and the insurer. As such, the intent of the parties to the contract is deemed through the plain meaning of the language of the policy under La.C.C. art. 2047. If the language is clear, the policy must be enforced as written.

The crux of the case here is the meaning of the provision in the policy regarding "who is an insured" and whether the language of the policy requires a written contract to add an additional insured or whether an oral agreement, as existed here to name KLM as an additional insured, would suffice.

The policy contains the following provision:

12. ADDITIONAL INSUREDS-BY CONTRACT, AGREEMENT OR PERMIT ... 5. a. Any person or organization you are required by a written contract, agreement or permit to name as an insured is an insured but only with respect to liability arising out of: 1. "Your work" performed for that insured at the location designated in the contract, agreement or permit; or 2. Premises owned or used by you. b. This insurance does not apply unless the contract, agreement or permit is executed prior to the "bodily injury" or "property damage."

Royal contends that the word "written" in the policy at 5.a. modifies the words "contract, agreement, or permit", requiring something in writing to add an insured. Palmer and the other appellees, however, contend that the provision contemplates the possibility of an oral agreement because the word "written" should not be read to modify "agreement" or conversely, that the policy is ambiguous and must be construed in favor of coverage.

The Court of Appeals disagreed with the appellees and found that the policy requires a written document.

Although there is no hard fast rule stating that an adjective before a series of nouns modifies all nouns in the series, in this context, such would be the only reasonable construction of the phrase "written contract, agreement, or permit." According to the Court, to read the phrase otherwise would be "strained and implausible." The appellees make other efforts to argue that an agreement does not need to be written, such as stating that because the terms "contract" and "agreement" are separated by commas, the term "written contract" is separate from "agreement," which is not modified by "written." Despite a protracted effort, however, the Court does not deviate from the standard interpretation of the phrase.

The Court found that when reading the phrase in the context of the policy provision, the only reasonable way to interpret the construction would be that there must be a written document--whether it be a contract, agreement, or permit. One exception to this rule would be in the case where there is written evidence of an oral agreement. Either way, there must be something written.

Here, there was no written document that met the requirement of the policy, but what about deposition testimony indicating that ATM and KLM had a longstanding oral agreement that ATM would procure general liability insurance coverage that covered KLM? There was also testimony that KLM paid for coverage through their payroll, and the trial court relied on an insurance application as "written" evidence of ATM's intent to provide coverage. The Court of Appeals did not accept these arguments and disagreed with the trial court.

First, the "application" actually related to Owner's and Contractor's Protective Insurance, not CGL insurance which applies here. Second, this was not a situation when reformation of an insurance policy is permitted due to mutual mistake or error, which must be proven by clear and convincing evidence. The self-serving deposition testimony that evidenced ATM's intent to provide coverage and that ATM had an oral agreement with KLM did not meet the high clear and convincing standard.

The bottom line is that because the policy requiring a writing was clear and unambiguous and the undisputed facts were that this requirement was not met, coverage should not be provided and the decision had to be reversed. Complicated in of itself, the legal complexities illustrate why a qualified and experienced attorney is necessary.

By the terms of most mortgage agreements, homeowners are required to maintain adequate insurance on their houses. In New Orleans and other coastal areas, this requirement can include both a standard homeowner's policy as well as flood insurance. Mortgage lenders insist on insurance coverage to help protect their financial interest in the properties for which they issue mortgages. If a borrower fails to purchase or maintain adequate coverage, the lender is permitted to "force-place" a policy--that is, to purchase an insurance policy on the property for its own benefit. A force-placed policy allows the lender to protect its exposure on a home up to the then-owed amount of mortgage on the date of issuance.

When Hurricane Katrina hit New Orleans, the home of Latisha Williams sustained significant flood damage. Williams had purchased the house with a mortgage issued by Homecomings Financial, the terms of which required her to maintain a flood insurance policy on the property. In June of 2005, Williams let the flood policy lapse, at which point Homecomings Financial force-placed a new policy on the property that was issued by Lloyd's of London. Following the Katrina disaster, a Lloyd's adjuster inspected the property and issued a loss estimate that Williams believed was below the true amount of loss on the property. Williams sued Lloyd's seeking to recover for the full amount of flood damage to the house. At trial in the district court, Lloyd's filed a motion to dismiss Williams's claim, arguing that she lacked standing to bring the action. Standing is the right to initiate a lawsuit which arises from the plaintiff's direct connection with or involvement in a legal dispute. The district court granted Lloyd's motion, and Williams appealed.

The Fifth Circuit of the U.S. Court of Appeals examined the facts to determine whether Williams had standing to sue Lloyd's. The issue centered around the question of whether the insurance policy, which was an agreement between Lloyd's and Homecomings Financial, was intended to benefit Williams in any way. Without this intent to benefit Williams, she would have no standing to bring suit. Under Louisiana law, which the federal court applied, a contract for the benefit of a third party is called a "stipulation pour autrui." See Paul v. Louisiana State Employees' Group Benefit Program, 762 So.2d 136, 140 (La. App. 1st Cir. 2000). According to the court, "[t]he most basic requirement of a stipulation pour autrui is that the contract manifests a clear intention to benefit the third party; absent such a clear manifestation, a party claiming to be a third party beneficiary cannot meet his burden of proof." The court found ample evidence that Homecomings Financial and Lloyd's did not intend to benefit Williams in any way. The court noted that the policy specifically stated that Homecomings Financial was the "sole insured" under the policy, notwithstanding "the insurable interests of the owner," (Williams). Furthermore, the policy specified that Homecomings was Lloyd's "sole insured under this policy" and that benefits paid would be "made directly to [Homecomings]." Thus, the court affirmed the district court's dismissal of Williams's action.

The lesson from this case is that a homeowner should always maintain the appropriate level of insurance for his or her property. Because a mortgage issuer is able to force-place a policy only up to the value of the outstanding balance on the mortgage, any equity the homeowner may have in the property is left unprotected in the event of a catastrophe. It is no stretch to imagine that a mortgage issuer would be happy to accept a settlement offer that covers its exposure without regard to any equity loss the homeowner may personally sustain.

Continue reading "Katrina Victim Denied Benefits Under Lender-Only Flood Insurance Policy " »

The Gulf Coast has seen its share of hurricanes and tropical storms, unfortunately, and nearly everyone who lives in our region knows someone who has been adversely affected by the damage these acts of nature cause. Whether a home, car, business or other form of property, many suffered devastating losses that left the future unclear. While those with insurance may have felt more relieved than those without, the fact remains that a wide variety of uphill battles exist.

If you are a Louisiana resident who suffered any type of injury relating to a storm, whether it was to your person or property, the courts have held a mixture of results that both reinforced and hindered claimants. Just a few weeks ago, a lawsuit was filed in Louisiana against Allstate Insurance in conjunction with a whistle blower alleging improper actions by the company.

The case, which is still pending in the courts, claims that Allstate cheated the federal government by creating false data that steered the majority of costs toward the National Flood Insurance Program. The lawsuit accuses Allstate, a major participant in the government's Write Your Own Program, of fabricating damage documents. Allegedly, Allstate "substantially inflated" the flood portion of damages while "substantially deflating" the homeowners insurance claims. This means that the company may have also been shifting numbers away from the claims of homeowners, forcing them to either settle for the offer substantially less than they deserved or hire attorneys to get them proper compensation.

The suit states that "Allstate thus knowingly presented, or caused to be presented, ... fraudulent claims for substantially inflated flood insurance benefits" covered by the federal flood insurance program. This is outrageous and, if true, against the law given the fact insurance companies should not be allowed to benefit at your expense. Louisiana residents have rights, and the law on their side, in circumstances where they have been wronged by a company they have trusted. A knowledgeable attorney can help you try to recover money that you are owed but were cheated out of by Allstate or another insurance company.

This is not the last we will hear of this lawsuit. Allstate and other insurance companies will continue to be challenged in court if they have committed wrongs against citizens of Louisiana. The Berniard Law Firm defended thousands of insurance policy holders against companies that delayed payments. Additionally, if you have information about Allstate or any other insurance company that shows they may have tried to defraud the government or the people, you need to contact an attorney immediately. Often, as a whistle blower, you can recover monetary damages or a portion of the amount the government recovers because of your valuable information.

If you believe you have not received the financial compensation you deserve or that an insurance company is leading you astray with improper offers, contact our offices today. An unfortunate reality is that insurance companies will pull a variety of 'games' while dealing with claims that, in the end, do not represent the interests of the customers who submitted their monthly payments faithfully expecting only what they were due. If you are receiving the run-around, or for more information on insurance company delays, contact the Bernaird Law Firm today.