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The state of Louisiana, like many other states, has very specific requirements that the judicial branch uses to help interpret contracts when the parties are in dispute. Generally, the court likes to stay out of contracts because the right to contract without interference from the government is something that the American society greatly cherishes. The ability to contract is a basic fundamental right that is guaranteed by the Fourteenth Amendment. The court will usually only interfere if there is a dispute or if the contract was in some way illegal. Therefore, it is very important to have a contract that is well written and that all parties understand completely.

If the court has to step in to work with a contract, then it will follow a few select guidelines. The ultimate goal of the court is to determine the common intent of the parties and enforce the contract in that way. In order to determine the intent, the court will look to the contract itself. In contracts that include terms of art or very technical requirements, the court will look to the common use of the word within that trade. For example, some trades include quantity information that is always larger than actually stated; think of a “baker’s dozen.” Even though twelve is technically considered a dozen, a contract between bakers may actually mean thirteen. This notion disregards the fact that in any other contract that is not between bakers, a dozen would equal twelve.

The court will also consider the contract in its entirety, not just a few sections or a single disputed term. It will determine what outcome is practical for both parties and technical terms will be given their technical meaning. In addition, if a word has more than one meaning, then the court will defer to the meaning that will carry out the goal of the contract. Consider a simple example. If a grocery store contracts to receive bananas and they receive plastic bananas instead of real bananas, the court will likely conclude that the other party providing the plastic bananas was at fault because the definition of a banana is commonly a consumable food, especially if it is going to be sold at a grocery store. The contract did not say that the grocery store wanted edible bananas, but the court will assume this information because the outcome becomes ridiculous without this assumption.

The court will generally try to stay within the language of the contract when attempting to resolve disputes. When the contract is clear and doesn’t lead to ridiculous consequences, then external evidence provided by the parties to show an alternative intent cannot be considered. The contract’s wording is therefore very important. However, if the contract is not clear or is ridiculous, then the court can consider some outside evidence in order to determine the common intent of the parties. In our banana example, if the grocery store has always ordered real bananas from this seller and has never requested plastic bananas from this seller, then that information could be considered in the court’s analysis.

The court has a means to determine whether the meaning of the contract is clear or not. Obviously if a term or issue is missing from the contract entirely, then the court will most likely deem the issue to be unclear or ambiguous. In addition, the court will also reason that an issue is ambiguous when “the language used in the contract is uncertain or is fairly susceptible to more than one interpretation.” If this is the case, then the outside evidence can be used to determine what the intent of both parties actually is.

A well written contract will convey the intention of both parties and will define all of its questionable terms so that there is no contention in the future. Sometimes, one party does not think a term in unclear when it actually is, so a conflict will arise. Competent attorneys are needed to create a well written contract and deal with conflict.

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A summary judgment is rendered when a trial court decides that there are no genuine issues of material fact that need to be determined. “Manifestly erroneous” is the high standard under which summary judgments are reversed on appeal. Summary judgments are cheaper and less time consuming than full blown trials; they are a means toward the end of judicial expediency, a goal that becomes increasingly important to our judicial system over time. Despite the importance of this procedural device, many cases do not call for summary judgment. Sometimes trial courts grant full or partial summary judgments in error and are reversed. That is what occurred in the case of Jagneux v. Frohn, which you can read here.

The defendants in this case convinced the trial court that no issues of fact existed that required litigating. Their legal journey was not over though due to the plaintiff’s appeal. The court of appeals applied the standard promulgated by the Louisiana Supreme Court. This Louisiana Supreme Court’s standard initially places the burden of proof on the party that is moving for a summary judgment. The moving party must prove that one or more elements of the adverse party’s claim or defense lacks any factual support on the record so far. The opposing party is then granted an opportunity to prove that there have been facts alleged that support that party’s position. At the time of summary judgment the record is sparse so a granting of summary judgment represents a finding by the court that no facts supporting a particular party’s, in this case the plaintiff’s, position.

The appellate court reversed the trial court’s decision in this case because it found that the issue of whether Mrs. Kling, a defendant in this case, was the driver of the white SUV at the time that it, at least partially, caused the accident at issue in this case. Because there was conflicting evidence about where Mrs. Kling was and whether or not she was actually in control of the car at the time of the accident, summary judgment was not the right choice in this case. The trial court is not to weigh the merits of the case when addressing summary judgment. Summary judgment is only appropriate in cases where no potentially meritorious case is presented by one of the parties.

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The Class Action Fairness Act of 2005 was passed in an effort to prevent class action lawsuit abuse. CAFA changed the practice of class action litigation in state and federal courts. This change was accomplished by CAFA’s jurisdictional alterations in both the diversity and removal components of the traditional framework of class action practice, i.e. Rule 23 of the Federal Rules of Civil Procedure.

In Williams v Homeland Insurance, the Fifth Circuit applied the “local controversy” exception of CAFA to the facts of the case, determining that a class arbitration is not, nor does it preclude a class action. Williams provides a lesson in the application of the elements of CAFA and an understanding of CAFA’s features. The decision also demonstrates yet another unique feature of Louisiana law that distinguishes it from the law of all of the other jurisdictions in the United States: the Louisiana Direct Action Statute.

CAFA changed the rules for federal diversity jurisdiction and removal. The Act enables large class action law suits to be filed in and/or removed to federal court. CAFA changed the numerosity requirement of Rule 23 from by raising the requirement from 40 class members to more than 100 class members; the citizenship requirement of Rule 23 by relaxing the diversity criteria, i.e. any class member must be diverse from any defendant; and the amount-in-controversy (from one named plaintiff having a claim of more than $75,000) to the total of $5 million. In addition, CAFA incorporated looser removal rules: in diversity cases any defendant can remove the case (including in-state defendants); any defendant can remove without the unanimous consent of the other defendants; there is no 1 year limit on the timing for removal of the case to another court’s jurisdiction; and the decision to grant or deny a remand is subject to appellate review.

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On behalf of the Berniard Law Firm, we hope that all of our friends and followers have had a relaxing and restful holiday. Posting will resume on Tuesday

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The Berniard Law Firm would like to wish everyone a Happy Holiday.

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

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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.

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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.

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When litigation involves multiple parties, all of which are big national or international organizations, there is a higher likelihood that something is going to end up in the litigation process. The unfortunate nature of insurance coverage is that companies will try to find little nuances to try to argue their case, or will add little nuances to make any future case more difficult for opposing parties. One party to a contractual agreement may cite to these nuances to find a loophole to escape from any potential liability and, subsequently, leave someone who believed they had full coverage with nothing. Despite these loophole efforts, a court can still look at the realities of the circumstances and come to real life conclusions to the exclusion of the argument of either party. This is true in the case of Federal Insurance Company v. New Hampshire Insurance Company, when the court ultimately looked at the reality of a contractual agreement and decided that no matter what the terms of the contract were, the whole contract was in regard to a personal injury case.

Our previous blog post discussed this case but a brief summary is as follows:
The case began when Wayne Robinson was unfortunately hurt by an explosion at a chemical plant. The explosion occurred because there were certain chemicals used by the plant that reacted with each other to cause the explosion. One of the defendants in Mr. Robinson’s case was Thomas and Betts Corporation (hereinafter T&B). T&B allegedly manufactured a product that contributed to the explosion that caused Mr. Robinson’s injuries. T&B had liability insurance from both New Hampshire Insurance Co., which was the primary insurance provider, and Federal Insurance Co., which was the secondary, or excess insurance provider. Ultimately, Mr. Robinson settled with T&B.

The interest of discussing policy nuances hinges upon the terms of the agreement were between T&B and Mr. Robinson. In that agreement, T&B would give Mr. Robinson $5 million for bodily injuries and an additional $1.2 million for a potential breach of contract claim another plaintiff may have had against Mr. Robinson. In fact, by settling with T&B, Mr. Robinson was breaching his agreement with the plaintiff company. After Mr. Robinson reached his agreement with T&B the other plaintiff sued Mr. Robinson for breach of contract. This breach of contract was supposed to be covered by his settlement agreement with T&B. However, soon after the settlement, Mr. Robinson received a letter from New Hampshire Co., T&B’s primary insurer, that it was going to cover his $5 million settlement, but would not cover his $1.2 million settlement because it was for a breach of contract and therefore, outside the scope of its policy covering T&B.

As a separate issue, the court discussed whether the New Hampshire policy covered contractual agreements. However, it came to the conclusion that the use of the phrase “legally obligated to pay” rendered the policy to cover tortious actions. However, the court went on to explain that the entire settlement between T&B and Mr. Robinson did in fact relate to and cover the bodily injury claim. The settlement could only cover the bodily injury claim because the only action for which T&B was liable to Mr. Robinson was the bodily injury. Therefore, the settlement could not be for any breach of contract claim.

The $1.2 million settlement was a by-product of T&B inducing Mr. Robinson to settle his bodily injury claim against T&B. The court held that even though this separate amount is categorized as reimbursement for a breach of contract claim, it is still within the bodily injury claim because the settlement was made in consideration for the bodily injury claim. Therefore, because the bodily injury claim was covered by the New Hampshire policy, New Hampshire was liable for the entire settlement. Mr. Robinson received money from Federal, T&B’s secondary insurer, therefore Federal stepped into T&B’s shoes in its claim for reimbursement from New Hampshire. Therefore, New Hampshire owed Federal the money it paid to Mr. Robinson.

Even in cases where a contract defines things in a certain manner or when the law defines different terms, the realities of a contract are the ultimate facts that define a contract. Although, the New Hampshire policy only covered tortious actions and even though the settlement between Mr. Robinson and T&B defined two different amounts, one for bodily injury and the other for a breach of contract, the reality was that both amounts were in consideration for the bodily injury claim and therefore the reality was that New Hampshire owed the entire amount as per its policy with T&B.

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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.

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On August 29, 2005, Hurricane Katrina devastate much of the Gulf Coast, prompting the Louisiana Legislature to enact Acts 2006, which extended the prescriptive period within which insured’s were allowed an additional year to file certain claims under their insurance policies for losses incurred by the storms. Despite many insurance contracts granting only one year for insured’s to file claims, this prescriptive period extension allowed many residents more time to file as a result of the difficult circumstances caused by the storm. The Louisiana Supreme Court recently were asked to determine whether the Plaintiffs’ lawsuit, seeking damages from the Louisiana Citizens Property Insurance Corporation (LCPIC), filed nearly three years after Hurricane Katrina had prescribed. In an earlier decision made by the Fourth Circuit Court of Appeal, the prescriptive period was held to be interrupted by a timely filing of a class action petition against the insurer, which included the Plaintiffs as putative class members. Time is of the essence when filing lawsuits, here, the Louisiana Supreme Court held that the plaintiffs were timely and permitted to continue their lawsuit against LCPIC.

The plaintiffs, like so many other Gulf Coast residents, suffered extensive property damage as a result of Hurricane Katrina. Maneuvering through the insurance filing process became tedious and very difficult, the plaintiff’s constantly received refusals by the insurance company to make any payments on their policy limits. Thus, the plaintiff’s turned to legal help in order to obtain help to rebuild their homes and their lives. On June 27, 2008, the Plaintiffs filed a petition against their insurer, LCPIC, seeking payment of their policy limits and damages, including damages for emotional distress and mental anguish. The allegations included: The plaintiff’s property was completely destroyed during the storm, the properties in question were covered by a policy of insurance issued by the defendant LCPIC, yet, the company refused to pay the policy limits. In response, LCPIC filed an Exception of Prescription, arguing that the suit was not filed within one year of loss and that the extended period of prescription provided by legislation had also expired. The trial court initially granted the defendant’s exception of prescription and dismissed the plaintiff’s claim with prejudice, finding that they had failed to file their claim timely. However, on appeal the trial court’s decision was reversed, the prescriptive period had been interrupted by the timely filing of a class action against the defendant insurer in which the Plaintiff’s were putative class members.

Prescription, as defined by Louisiana’s civilian tradition, is defined as a means of acquiring real rights or of losing certain rights as a result of the passage of time. In the case of Cichirillo v. Avondale Industries, Inc, the court reasoned that prescription is designed to “afford a defendant economic and psychological security if no claim is made timely and to protect the defendant from stale claims and from the loss or non-preservation of relevant proof.” Prescription itself is a safety measure that was created in order to prevent defendants from the constant fear of a lawsuit twenty or more years after the fact. Conversely, the other type of period that exists in Louisiana, is liberative prescription. This is a period of time fixed by law for the exercise of a right, yet, a contractual limitation period is not a period of time fixed by law, it is a fixed agreement between the parties. Time is of the essence, yet, there are exceptions to the rule, this is exemplified by the fact that Louisiana extended the initial one year prescriptive period for property damage claims against insurers, for one additional year, allowing victims fo Hurricane Katrina more time to organize the various aspects of their lives that were devastated by the storm.

The primary issue in this recent Louisiana Supreme Court decision, was whether or not the class action suit in which the plaintiff’s were putative class members, interrupted prescription, thus, allowing them continued access to their legal claim against the insurance company. Louisiana civil code article 1793 states, “Any act that interrupts prescription for one of the solidary obligees benefits all the others.” Thus, by becoming putative class members in the initial lawsuit against the insurance company, the plaintiff’s maintained their legal claims against the defendants, allowing them to pursue further legal action against the company despite the passage of time. The court of appeal held that the filing of the class action suits against LCPIC suspended or interrupted the running of prescription against the plaintiff’s property damage claims since they were found to be putative class members when the original class action petitions were filed.

The defendant insurer argued that the contract, which provided one year from the date of the property damage, was the governing time period, even over the statutory extension provided by the Louisiana Legislature. The defendants supported this assertion by declaring that the public interest is served by permitting the insurer to limit the time of its exposure, as Louisiana Civil Code 802 states, “any suit not instituted within the specified time and any claims relating thereto, shall be forever barred unless a contract or the parties thereto provide for a later time.” However, even though the plaintiff’s did not unilaterally file a claim against the insurer within the one year contractual time period, they did enter into the class action against the insurer within the aforesaid time period. Upon the filing of the class action, liberative prescription on the claims arising out of the transaction or occurrences described in the petition were suspended as to all members of the class. The insurance contract provided a contractual time period, not a prescriptive time period, as a result, the additional one year time period afforded to Gulf Coast residents affected by the storm governs. The insurance company attempted to assert the contractual nature of its agreement to circumvent the application of the general codal and statutory rules of prescription is adverse to Louisiana civil Code Article 3471, which clearly circumscribes the limits of any contractual agreement attempting to incorporate a limitation period different from that established by law. Specifically, Louisiana Civil Code Article 3471 states:

A juridical act purporting to exclude prescrption, to specify a longer period than that established by law, or to make the requirements of prescription onerous, is null.

Thus, parties cannot “opt out” of prescriptive periods created by general codal and statutory rules. The plaintiff’s entered into a class action within the prescriptive time period, this interrupted the passage of time that would have taken away their legal rights to sue the insurer. Thus, the subsequent suit against the defendants was timely, and despite the contractual language that attempted to circumvent the Louisiana Legislature, the plaintiff’s filing was timely.

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