State Farm Fire and Casualty Company v. LeBlanc et al
Filing
59
ORDER granting 45 Motion for Summary Judgment. Ordered by Judge Hugh Lawson on 3/1/2012. (nbp)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF GEORGIA
VALDOSTA DIVISION
STATE FARM FIRE AND CASUALTY
COMPANY,
Civil Action 7:09-CV-76 (HL)
Plaintiff,
v.
LLOYD J. LEBLANC JR., THE B&F
SYSTEM, INC., EDNA G. LEBLANC,
PRODUCTOS MEXICANOS DON JOSE,
INC., LEBLANC’S LLC, MAXAM
WHOLESALE OF GA, INC., DIRECT
SOURCE IMPORTS, INC., JEFF
LEBLANC, and LLOYD LEBLANC III,
Defendants.
ORDER
This case is before the Court on State Farm’s Motion for Summary Judgment
(Doc. 45). For the reasons set out below, the Motion is granted.1
State Farm seeks a declaratory judgment to clarify its obligations under a
business policy issued to Lloyd LeBlanc Jr. d/b/a Maxam Wholesale of GA, a
business policy issued to Direct Source Imports, Inc., and a personal liability
umbrella policy issued to Lloyd LeBlanc Jr. This insurance dispute is related to the
case of The B & F System, Inc. v. Lloyd J. LeBlanc Jr., Edna G. LeBlanc, Productos
Mexicanos Don Jose, Inc., LeBlanc’s, LLC, Maxam Wholesale of Atlanta, Inc., Direct
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Defendants Lloyd LeBlanc Jr., Edna G. LeBlanc, Maxam Wholesale of Atlanta, Inc. (misnamed in the caption as Maxam Wholesale of GA, Inc.), Lloyd (“Jody”) LeBlanc III, Jeff
LeBlanc, Direct Source Imports, Inc., Productos Mexicanos Don Jose, Inc., and LeBlanc’s,
LLC are collectively referred to as the “LeBlanc Defendants.”
Source Imports, Inc., Lloyd J. LeBlanc III, and Arthur Jeffrey LeBlanc, Civil Action
No. 7:07-CV-192 (M.D. Ga.) (the “Liability Action”).2 The LeBlanc Defendants
contend the insurance policies provide coverage for the Liability Action. State Farm
has now moved for summary judgment, and argues that it does not owe a duty of
defense or indemnity to any of the LeBlanc Defendants.
I.
SUMMARY JUDGMENT STANDARD
Federal Rule of Civil Procedure 56 requires that summary judgment be
granted “if the movant shows that there is no genuine dispute as to any material fact
and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). “The
moving party bears ‘the initial responsibility of informing the ... court of the basis for
its motion, and identifying those portions of the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if any, which it
believes demonstrate the absence of a genuine issue of material fact.’” Hickson
Corp. v. N. Crossarm Co., 357 F.3d 1256, 1259 (11th Cir. 2004) (quoting Celotex
Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2549 (1986) (internal quotations
omitted)). Where the moving party makes such a showing, the burden shifts to the
non-movant, who must go beyond the pleadings and present affirmative evidence to
show that a genuine issue of material fact does exist. Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 257, 106 S.Ct. 2505 (1986).
2
The B & F System, Inc. is named as a defendant in this case because of its status as the
plaintiff in the Liability Action. B & F has taken no position on State Farm’s summary
judgment motion.
2
The applicable substantive law identifies which facts are material. Id. at 248. A
fact is not material if a dispute over that fact will not affect the outcome of the suit
under the governing law. Id. An issue is genuine when the evidence is such that a
reasonable jury could return a verdict for the non-moving party. Id. at 249–50.
In resolving a motion for summary judgment, the court must view all evidence
and draw all reasonable inferences in the light most favorable to the non-moving
party. Patton v. Triad Guar. Ins. Corp., 277 F.3d 1294, 1296 (11th Cir. 2002). The
court is bound only to draw those inferences which are reasonable. “Where the
record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no genuine issue for trial.” Matsushita Elec. Indus. Co. v.
Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348 (1986). “If the evidence is
merely colorable, or is not significantly probative, summary judgment may be
granted.” Anderson, 477 U.S. at 249-50 (internal citations omitted).
II.
ANALYSIS
As noted above, there are three insurance policies at issue. The Court will
address each separately.
A.
The LeBlanc Business Policy
The first policy is a business policy issued to Lloyd LeBlanc d/b/a Maxam
Wholesale of GA, Policy Number 91-NM-7119-2, which was in effect from May 14,
2007 to May 14, 2008 (the “LeBlanc Business Policy”). State Farm argues, among
other things, that no coverage is provided under the LeBlanc Business Policy
because State Farm was not promptly notified about the Liability Action.
3
Under Georgia law3,
a notice provision expressly made a condition precedent
to coverage is valid and must be complied with, absent a
showing of justification. Where an insured has not
demonstrated justification for failure to give notice
according to the terms of the policy, . . . then the insurer is
not obligated to provide either a defense or coverage.
Kay-Lex Co. v. Essex Ins. Co., 286 Ga. App. 484, 488, 649 S.E.2d 602 (2007)
(quoting Federated Mut. Ins. Co. v. Ownbey Enters., 278 Ga. App. 1, 3, 627 S.E.2d
917 (2006) (citations and footnote omitted)). Conditions precedent to an insurance
contract “must be complied with, absent a showing of justification.” Richmond v. Ga.
Farm Bureau Ins. Co., 140 Ga. App. 215, 221, 231 S.E.2d 248 (1976).
The General Conditions subpart of Section II of the LeBlanc Business Policy
contains the following language:
3.
Duties in the Event of Occurrence, Claim or Suit.
a.
You must see to it that we are notified promptly of
an occurrence that may result in a claim. Notice
should include:
(1)
(2)
b.
how, when and where the occurrence took
place; and
the names and addresses of any injured
persons and witnesses.
If a claim is a made or suit is brought against any
insured, you must see to it that we receive prompt
written notice of the claim or suit.
3
This case is a diversity action, which means the Court must apply the substantive law of
the forum state in which it sits. Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817
(1938). The Court will apply Georgia law to resolve this dispute.
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c.
You and any other involved insured must:
(1)
immediately send us copies of any demands,
notices, summonses or legal papers received
in connection with the claim or suit.
(Doc. 45-8, p. 6) (emphasis in original).
Similar notice language has been found by other courts to be a condition
precedent to coverage. See Ill. Union Ins. Co. v. Sierra Contracting Corp., 744
F.Supp.2d 1349 (N.D. Ga. 2010); Am. Ins. Co. v. Evercare Co., 699 F.Supp.2d 1361
(N.D. Ga. 2010). In any event, the LeBlanc Defendants do not contend that the
notice provision was not a condition precedent to coverage, and the Court finds that
the language is in fact a condition precedent. The purpose of such notice language
is to enable the insurer to begin immediately an
investigation of the facts and circumstances for
determining whether liability might be present and whether
a settlement of the claim should be attempted; to get the
facts while they [are] fresh and available in the minds of
the parties and such witnesses as might be available; to
obtain pictures, diagrams, etc. which might assist in
showing how the occurrence happened and the extent of
any physical damage done.
Bituminous Cas. Corp. v. J.B. Forrest & Sons, Inc., 132 Ga. App. 714, 717, 209
S.E.2d 6 (1974).
Generally, whether an insured gave an insurer timely notice under a policy is a
question for the factfinder. State Farm Fire & Cas. Co. v. Walnut Ave. Partners, LLC,
296 Ga. App. 648, 651, 675 S.E.2d 534 (2009). However, Georgia courts and courts
interpreting Georgia law have found in certain circumstances that the justification
offered by an insured for failure to notify the insurer was unreasonable as a matter of
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law. See, e.g., Allstate Ins. Co. v. Walker, 254 Ga. App. 315, 316(1), 562 S.E.2d 267
(2002); S. Guar. Ins. Co. v. Miller, 183 Ga. App. 261, 262-63, 358 S.E.2d 611
(1987).
The Liability Action was filed against Lloyd LeBlanc Jr., Maxam Wholesale of
Atlanta, Inc., Direct Source Imports, Inc., Jeff LeBlanc, and Jody LeBlanc on
December 6, 2007. All five defendants were served on December 7, 2007. They
hired private counsel in December of 2007. Counsel filed an answer and
counterclaim on behalf of those defendants in February of 2008. Lloyd LeBlanc, the
named insured under the LeBlanc Business Policy, never contacted State Farm to
notify it about the lawsuit. After being served with the lawsuit he “became very
nervous,” and “[b]eing a layperson, I never knew what to do. So I didn’t do anything
for quite a while.” (Deposition of Lloyd LeBlanc Jr., p 40). Instead, Jody LeBlanc
called Fred Horne, the LeBlancs’ local State Farm agent, on or about May 10, 2008.
(Affidavit of Jody LeBlanc, ¶ 2). Jody did not actually speak with anyone until May
13, 2008, when he told Kay Dunn, who works in Mr. Horne’s office, about the
lawsuit. (Jody LeBlanc Aff., ¶ 3). On some unknown date thereafter, Jody LeBlanc
spoke with Daryl Scarbrough, a State Farm Claims Specialist, about the lawsuit.
(Jody LeBlanc Aff., ¶ 5). Jody LeBlanc’s only reason for not notifying State Farm
earlier was that he “didn’t have any idea we had coverage.” (Deposition of Jody
LeBlanc, pp. 32, 34).4
4
While an amended complaint was later filed in the Liability Action, and notice of the
amended complaint was given to State Farm, providing notice of the amended complaint
6
Courts applying Georgia law have held notification delays of three, four, five,
six, eight, and nine months to be unreasonable as a matter of law. See Hathaway
Dev. Co. v. Ill. Union Ins. Co., 274 Fed. Appx. 787 (11th Cir. 2008) (delays of four,
five, and eight months unreasonable as a matter of law); DS Waters of Am., Inc. v.
Twin City Fire Ins. Co., 2011 WL 1743716, No. 1:09-CV-1819-TWT (N.D. Ga. May 5,
2011) (delay of eight months); Ill. Union, 744 F.Supp.2d at 1352 (delay of nine
months); Cotton States Mut. Ins. Co. v. Int’l Surplus Lines Ins. Co., 652 F.Supp. 851,
856 (N.D. Ga. 1986) (“The Georgia courts have repeatedly held that where no valid
excuse exists, failure to give written notice for periods in the range of four to eight
months is unreasonable as a matter of law); Caldwell v. State Farm Fire & Cas. Ins.
Co., 192 Ga. App. 419, 385 S.E.2d 97 (1989) (delay of six months after being served
with summons); Diggs v. S. Ins. Co., 172 Ga. App. 37, 321 S.E.2d 792 (1984)
(insured failed to comply with condition precedent to coverage by waiting for three
months to give notification of lawsuit to insurer).
Even though the LeBlanc Business Policy required the insured to immediately
send copies of any lawsuit to State Farm, over five months passed between the time
the LeBlanc Defendants were served with the Liability Action and when State Farm
was notified about the lawsuit. “Policy provisions requiring that insureds send their
insurers any legal papers received in connection with a claim or suit ‘[i]mmediately’
[have] been construed in many cases to mean with reasonable diligence and within
did not relieve the LeBlanc Defendants from their responsibility to notify State Farm about
the lawsuit when it was initially filed.
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a reasonable length of time in view of attending circumstances of each particular
case.” Advocate Networks, LLC v. Hartford Life Ins. Co., 296 Ga. App. 338, 340, 674
S.E.2d 617 (2009) (quoting Bituminous Cas. Corp., 132 Ga. App. at 719(2)). In
determining whether the insured is in compliance with such a policy provision, the
Court must look to the reasons given by the insured for the delay in notifying the
insurer about the lawsuit. Id. The LeBlanc Defendants’ only explanation for not
forwarding the lawsuit papers to State Farm immediately was confusion about
whether there would be any coverage. That is not a sufficient excuse. See Hill v.
Safeco Ins. Co. of Am., 93 F.Supp.2d 1375, 1381 (M.D. Ga. 1999).
The LeBlanc Defendants point primarily to State Farm Mutual Automobile Ins.
Co. v. Sloan, 150 Ga. App. 464, 258 S.E.2d 146 (1979), in support of their argument
that their lack of knowledge of whether the LeBlanc Business Policy would provide
coverage creates a jury question on the notice issue. The Court finds Sloan
distinguishable, as that case involved a question of whether a policy would afford
coverage for an automobile collision involving the insured’s son and a third party.
Here, Lloyd LeBlanc, the named insured, contends he allegedly did not know he was
covered by his own policy. The Court finds the Georgia Court of Appeals’ decision in
Allstate Insurance Co. v. Walker, 254 Ga. App. at 316, instructive. In Walker, the
insureds testified that they did not notify their insurance company for almost a year
after the occurrence because they did not know their policy might afford coverage.
The Court of Appeals found that the trial court erred in denying the insurer’s motion
for summary judgment on the ground that the insureds did not give the insurer notice
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of loss as soon as possible following the incident, holding: “There is no evidence,
indeed, not even an assertion, that [the insured’s] ignorance of the terms of the
subject insurance policy was due to any fraud or overreaching on the part of [the
insurer] or its agents. The law requires more than just ignorance, or even misplaced
confidence, to avoid the terms of a valid contract.” Id. at 316 (quotation omitted).
Because the LeBlanc Defendants provide no other reasonable explanation for
the five-month delay, the Court finds as a matter of law that the LeBlanc Defendants
violated the notice provision of the LeBlanc Business Policy. See also HolbrookMyers Co., Inc. v. Transp. Ins. Co., 354 F.Supp.2d 1349, 1355 (N.D. Ga. 2005)
(delay of four months in forwarding a copy of the complaint to the insurer was
unreasonable as a matter of law); Advocate Networks, 296 Ga. App. at 340 (delay of
four months in sending complaint to insurer violated provision requiring insured to
immediately provide legal documents). Thus, State Farm has no duty under the
LeBlanc Business Policy to defend or indemnify the LeBlanc Defendants against the
Liability Action.
The Court rejects the LeBlanc Defendants’ contention that State Farm has
waived its right to contest its duty to defend. The LeBlanc Defendants cite to the
case of Richmond v. Georgia Farm Bureau Ins. Co., 140 Ga. App. at 215, and argue
that by waiting for one year to file this declaratory judgment action, State Farm
should be estopped from terminating its representation of the LeBlanc Defendants.
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In Richmond, the Georgia Court of Appeals stated that:
Upon learning of facts reasonably putting it on notice that
there may be grounds for noncoverage and where the
insured refuses to consent to a defense under a
reservation of right, the insurer must thereupon (a) give
the insured proper unilateral notice of its reservation of
rights, (b) take necessary steps to prevent the main case
from going into default or to prevent the insured from
being otherwise prejudiced, and (c) seek immediate
declaratory relief including a stay of the main case
pending final resolution of the declaratory judgment action.
Id. at 219.
The LeBlanc Defendants acknowledge that the first two Richmond prongs
were met by State Farm, but contend State Farm waived its coverage defenses by
failing to seek immediate declaratory relief. However, because there was never any
objection to the reservation of rights, State Farm “was not required to file a
declaratory judgment action within any particular time period, or at all, to avoid
estoppel.” Boatright v. Old Dominion Ins. Co., 304 Ga. App. 119, 124, 695 S.E.2d
408 (2010); Kay-Lex Co., 286 Ga. App. at 491 (rejecting insured’s argument that
insurer failed to timely file a declaratory judgment action because the insured did not
object to the reservation of rights); Jacore Sys., Inc. v. Cent. Mut. Ins. Co., 194 Ga.
App. 512, 514, 390 S.E.2d 876 (1990) (holding that the insurer was not required to
file a declaratory judgment action to avoid waiver and estoppel when the insured did
not object to the reservation of rights made by the insurer).
The LeBlanc Defendants further argue that State Farm is not entitled to deny
coverage because it suffered no prejudice by the timing of their notice. While some
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courts have considered prejudice to the insurer, the overwhelming majority of
Georgia courts have found that “prejudice is irrelevant because the failure to give
timely notice is the failure of a condition precedent to coverage under the policy, and
that failure alone voids coverage.” Cotton States, 652 F.Supp. at 856 (listing cases);
Caldwell, 192 Ga. App. at 420. In fact, courts generally have found that prejudice is
inherent in the delay in giving notice to the insurer. See Cotton States, 652 F.Supp.
at 856-57; Richmond, 140 Ga. App. at 221. The Court finds that any lack of prejudice
to State Farm is irrelevant as the LeBlanc Defendants violated a condition precedent
of the LeBlanc Business Policy.
State Farm does not owe the LeBlanc Defendants a defense or indemnity in
the Liability Action under the LeBlanc Business Policy.
B.
The DSI Policy
The second policy is a business mercantile policy issued to Direct Source
Imports, Inc., Policy Number 91-BB-K904-5 (the “DSI Policy”). The DSI Policy was in
effect from February 14, 2008 until February 14, 2009. State Farm argues, among
other things, that there is no coverage available under the DSI Policy because the
policy was not taken out until after the Liability Action was filed.
“It is settled insurance law that an insured is not entitled to coverage under a
policy obtained after the insured is aware of an occurrence prior to the policy period.”
S. C. Ins. Co. v. Coody, 813 F.Supp. 1570, 1577 (M.D. Ga. 1993) (citing Chemical
Leaman Tank Lines, Inc. v. Aetna Cas. & Surety Co., 788 F.Supp. 846, 853 (D.N.J.
1992)). The DSI Policy is an “occurrence” policy, which means coverage is “triggered
11
either by an injury caused by what the policy defines to be an occurrence, or such an
occurrence, taking place during the policy period.” Simpson & Creasy, P.C. v. Cont’l
Cas. Co., 770 F.Supp.2d 1351, 1354 (S.D. Ga. 2011) (quotation omitted). The DSI
Policy specifically states that the insurance applies only to injuries caused by an
occurrence which happened during the policy period. Here, any occurrence would
have necessarily occurred prior to the filing of the Liability Action in December of
2007. As the policy period for the DSI Policy did not begin until February of 2008,
and the occurrence for which the LeBlanc Defendants seek coverage occurred prior
to the policy period, the DSI Policy cannot provide coverage for the Liability Action.
State Farm does not owe the LeBlanc Defendants a defense or indemnity in
the Liability Action under the DSI Policy.
C.
The PLUP Policy
The final insurance policy at issue is a personal liability umbrella policy, Policy
Number 81-NQ-9486-0, issued by State Farm to Lloyd LeBlanc Jr., which was in
effect from July 10, 2006 to July 10, 2007 (the “PLUP Policy”). Like the LeBlanc
Business Policy, the PLUP Policy contained a notice provision requiring the insured
to notify State Farm immediately of a claim or suit. “If a claim or suit is filed against
you, notify your underlying insurer and us right away. You must send us every
demand, notice, summons or other process you receive.” (Doc. 45-12, p. 11). For
the same reasons discussed in Part II(A) above in connection with the LeBlanc
Business Policy and the LeBlanc Defendants’ failure to timely notify State Farm
12
about the Liability Action, State Farm does not owe the LeBlanc Defendants a
defense or indemnity under the PLUP Policy.
D.
Counterclaim
Jeff LeBlanc, Jody LeBlanc, and DSI filed a counterclaim against State Farm
for failing to defend them following the initial filing of the Liability Action and the filing
of the amended complaint in the Liability Action. This counterclaim is dismissed as
the Court has found that State Farm has no duty to defend any of the LeBlanc
Defendants under the policies.
III.
CONCLUSION
State Farm’s Motion for Summary Judgment (Doc. 45) is granted. State Farm
has no duty to defend or indemnify the LeBlanc Defendants in the Liability Action.
Further, the counterclaim filed by Jeff LeBlanc, Jody LeBlanc, and Direct Source
Imports, Inc. is dismissed.
SO ORDERED, this 1st day of March, 2012.
s/ Hugh Lawson
HUGH LAWSON, SENIOR JUDGE
mbh
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