South Louisiana Ethanol, L.L.C. v. Messer, et al

Filing 100

ORDER AND REASONS granting C&I and Chartis' 31 Motion for Summary Judgment; Further Ordered that Fireman's Fund's 64 Second Motion for Summary Judgment is Granted; Further Ordered the Fireman's Fund's 30 First Motion for Summary Judgment and 34 Motion to Strike are Dismissed as moot; Further Ordered that ENGlobal's 53 Motion for Summary Judgment is Granted. Signed by Judge Ivan L.R. Lemelle. (Reference: all cases)(ijg, )

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
SOUTH LOUISIANA ETHANOL, LLC

CIVIL ACTION

VERSUS

NO. 11-2715
c/w 12-379
PERTAINS TO ALL CASES

ERIC JACOB MESSER, ET AL.

SECTION “B”(4)

ORDER AND REASONS
Before the Court are: Defendant 1 Fireman’s Fund Insurance
Company’s (“Fireman’s Fund”) first Motion for Summary Judgment
against the claims of South Louisiana Ethanol, L.L.C. (“SLE”);
Defendants

Commerce

&

Industry

Insurance

Company

and

Chartis

Speciality Insurance Company’s (collectively, “C&I and Chartis”)
Motion for Summary Judgment against the claims of SLE; Third-party
Defendant ENGlobal U.S., Inc.’s (“ENGlobal”) Motion for Summary
Judgment against the claims of Fireman’s Fund; and Fireman’s Fund’s
subsequent second Motion for Summary Judgment against both SLE’s
and Intervenor Whitney Bank’s (“Whitney”) claims.
30, 31, 53, & 64).

(Rec. Docs. No.

Also before the Court are the Oppositions and

Replies filed against and in support of the aforementioned motions.
(Rec. Docs. No. 32, 33, 36, 69, 61, & 73).

Also before the Court

is Fireman’s Fund's Motion to Strike exhibits attached to the
opposition filed by SLE and Whitney regarding Fireman’s Fund’s
first Motion for Summary Judgment, and the subsequent opposition to
and reply in support of said motion.

(Rec. Docs. No. 34, 35, &

68).

Accordingly, and for the reasons articulated below,
IT IS ORDERED

that C&I and Chartis’ Motion for Summary

Judgment (Rec. Doc. No. 31) is GRANTED.
IT IS FURTHER ORDERED that Fireman's Fund's Second Motion for
Summary Judgment (Rec. Doc. No. 64) is GRANTED.

Accordingly,

IT IS FURTHER ORDERED that Fireman’s Fund’s First Motion for
Summary Judgment and Motion to Strike (Rec. Docs. No. 30 & 34) are
DISMISSED as moot in light of the foregoing Orders.
.
IT IS FURTHER ORDERED that ENGlobal's Motion for Summary
Judgment (Rec. Doc. No. 53) is GRANTED.
Procedural History and Facts of the Case:
The instant action arises out of alleged damage to property
belonging to SLE, while said property was in the care of its
subcontractor, Precision Combustion Technology, L.L.C. ("PCT").
(Rec. Docs. No. 33 & 64-1 at 2, referring to Rec. Doc. No. 30-2 at
2-4).

Because PCT filed for bankruptcy, SLE seeks recovery from

individual members of PCT and PCT's insurers, rather than from PCT
itself.

(Rec. Docs. No. 1-1 & 30-2 at 3).

SLE initiated the

action in state court, but the case was subsequently removed to
federal court under 28 U.S.C. §§ 1452(a) and 1334(b), as it was
related to the bankruptcy proceeding of SLE, already pending in
federal Court.1

(Rec. Doc. No. 1 at 2).

1

The instant action was originally removed to United States District
Court for the Middle District of Louisiana, and subsequently transferred to
this Court. (Rec. Doc. No. 22). Thereafter, SLE's suit was consolidated with

2

SLE entered into an engineering, procurement, and construction
contract with ENGlobal in January 2007, for the retrofitting of an
ethanol facility in Plaquemines Parish, within the Eastern District
Louisiana.

(Rec. Doc. No. 33 at 2).

ENGlobal hired PCT as a

subcontractor, and SLE sent several pieces of equipment to PCT's
yard in Gonzales, Louisiana for repair.
30-2 at 3).

Id. at 3; (Rec. Doc. No.

SLE alleges that while its equipment was in the

possession of PCT, PCT negligently caused certain SLE equipment to
be damaged by exposure to the elements, PCT negligently failed to
warn/advise SLE that its equipment was in danger of seizure

in

satisfaction of debts owed by PCT to a third party, and PCT
wrongfully sold equipment belonging to SLE to Southern Scrap
Materials, Co., L.L.C. ("Southern Scrap"). (Rec. Doc. No. 33 at 67).

SLE now seeks recovery against the principals of PCT (Steven

Zane Glaze, Cynthia Ann Glaze, and Eric Jacob Messer), Southern
Scrap, and PCT's insurers, Fireman's Fund and C&I and Chartis. Id.
at 8.

Whitney intervened in the matter asserting a first-ranking

security interest in SLE's property, having provided financing to
SLE for its engineering work on the plant PCT was contracted to
work on.

(Rec. Doc. No. 33 at 8, n. 19).

At issue in the instant motions is the extent of coverage, if
any, provided by Fireman's Fund and C&I and Chartis for the

the pending bankruptcy action, Civil Action No. 12-379 "B"(4), on August 24,
2012. (Rec. Doc. No. 25).

3

property of SLE while in the care of PCT.

(Rec. Docs. No. 30, 31,

& 64). Also in dispute is Fireman's Fund's right to bring ENGlobal
into the action as a third-party defendant.

(Rec. Doc. No. 53).

Law & Analysis
A. Summary Judgment Standard
Summary judgment is proper if the pleadings, depositions,
interrogatory

answers,

and

admissions,

together

with

any

affidavits, show that there is no genuine issue as to any material
fact and that the moving party is entitled to judgment as a matter
of law. Fed. R. Civ. P. 56(c); see also Celotex Corp. v. Catrett,
477 U.S. 317, 327 (1986). A genuine issue exists if the evidence
would

allow

a

reasonable

jury

to

return

a

verdict

for

the

nonmovant. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248,
(1986). Although the Court must consider the evidence with all
reasonable inferences in the light most favorable to the nonmoving
party, the nonmovant must produce specific facts to demonstrate
that a genuine issue exists for trial. Webb v. Cardiothoracic
Surgery Assocs. of N. Texas, 139 F.3d 532, 536 (5th Cir. 1998).
Because “only those disputes over facts that might affect the
outcome

of

the

lawsuit

under

governing

substantive

law

will

preclude summary judgment,” questions that are unnecessary to the
resolution of a particular issue “will not be counted.” Phillips
Oil Co. v. OKC Corp., 812 F.2d 265, 272 (5th Cir. 1987).
As to issues for which the non-moving party has the burden of

4

proof

at

trial,

the

moving

party

may

satisfy

its

burden

by

demonstrating the absence of evidence supporting the non-moving
party’s claim. Celotex v. Catrett, 477 U.S. 317, 323 (1986). Once
the movant makes this showing, the burden shifts to the nonmovant
to set forth specific facts showing that there is a genuine issue
for trial. Rivera v. Houston Indep. Sch. Dist., 349 F.3d 244, 247
(5th Cir. 2003).

The nonmovant must go beyond the pleadings and

use affidavits, depositions, interrogatory responses, admissions,
or other evidence to establish a genuine issue. Id. Accordingly,
conclusory rebuttals of the pleadings are insufficient to avoid
summary judgment. Travelers Ins. Co. v. Liljeberg Enter., Inc., 7
F.3d 1203, 1207 (5th Cir. 1993).
B. SLE and Whitney's Cause of Action against Fireman's Fund
1. Louisiana law on insurance contracts
The first issue in dispute is whether SLE and Whitney have a
cause of action against Fireman's Fund. SLE and Whitney claim that
the facts give rise to a cause of action against Fireman's Fund
either: (1) via statute, under Louisiana's Direct Action Statute
against insurers; or (2) via contract, as either a loss-payee or
third-party beneficiary to the policy Fireman's Fund issued to PCT.
(Rec.

Doc.

No.

73).

This

Court

recognizes

that

Louisiana

substantive law applies to interpret the inland marine insurance
contract issued by Fireman's Fund to PCT. See Dredging Supply Co.,
Inc. v. American First Ins. Co., Civ. A. No. 06-1744, 2008 WL

5

3851587, *3 (E.D. La. Aug. 13, 2008), citing Wilburn Boat Co. v.
Fireman's

Fund

Ins.

Co.,

Partnership v. Highlands

348

U.S.

310

(1955);

Thanh

Long

Ins. Co., 32 F.3d 189 (5th Cir. 1994).

"Inland marine insurance" is a type of marine insurance. Tidelands
Ltd. I. v. Louisiana Ins. Guar. Ass'n., No. 94-0128, 645 So.2d
1240, 1242 (La. App. 1 Cir. 11/10/94), citing La Rev. Stat. Ann. §
22:6(13), predecessor to current Kinds of Insurance statute, La
Rev.

Stat.

Ann.

§

22:47

(West

2013).

"[S]tate

law

governs

construction of marine insurance contracts except where it is
displaced by admiralty law.”

Bordelon Marine, Inc. v. F/V KENNY

BOY, 780 F.Supp.2d 497, 501 (E.D. La. 2011), citing Employers Ins.
of Wausau v. Trotter Towing Corp., 834 F.2d 1206, 1210 (5th Cir.
1988).

Indeed, there is a presumption that state law applies to

marine insurance contracts.

Albany Ins. Co. v. Anh Thi Kieu, 927

F.2d 882, 886 (5th Cir. 1991) (“In Wilburn Boat Co. v. Fireman's
Fund Insurance Co., 348 U.S. 310(1955), the United States Supreme
Court concluded that the regulation of marine insurance is, in most
instances, properly left with the states. Id. at 321.”).

Further,

all parties in the instant case rely on Louisiana law and raise no
conflicts

between

Louisiana

law

and

federal

interpreting the insurance contract at issue.
30,

33,

64

&

73).

Therefore,

the

Court

maritime

law

in

(See Rec. Docs. No.
applies

Louisiana

substantive law to the insurance dispute at issue.
"Construction of a marine insurance policy 'usually involves
6

a question of law which can be resolved properly in the framework
of a motion for summary judgment.'"

Dredging, 2008 WL 3851587 at

*3, citing Bonin v. Westport Ins. Corp., 930 So.2d 906, 910 (La.
2006).

An insurance policy should be construed using the general

rules of contract interpretation, as provided by the Louisiana
Civil Code.

Dredging, 2008 WL 3851587 at *3, citing Cadwaller v.

Allstate Ins. Co., 848 So.2d 577, 580 (La. 2003). The Court's role
"is

to

ascertain

the

[insurance] contract."

common

intent

of

the

Id., (emphasis added).

parties

to

the

An insurance

contract should be enforced as written, and the Court should not
use rules of contractual interpretation to alter unambiguous terms
and policy provisions.
2.

Id.

Louisiana's Direct Action Statute

"The Louisiana Direct Action Statute generally allows an
injured party to proceed directly against an insurance company
which has issued a policy or contract of insurance against the
liability of the insured tortfeasor." Grubbs v. Gulf Int'l Marine,
Inc., 625 So.2d 495, 497 (La. 1993), citing La. Rev. Stat. Ann. §
22:655, (predecessor to current Direct Action Statute, La. Rev.
Stat. Ann. § 22:1269 (West 2013)).

"By its literal terms, the

Direct Action Statute applies to all liability policies."

Grubbs,

625 So.2d at 498, citing La. Rev. Stat. Ann. § 22:655, (predecessor
to current Direct Action Statute, La. Rev. Stat. Ann. § 22:1269
(West 2013))(emphasis added).

Therefore, whether SLE and Whitney

7

have a cause of action against Fireman's Fund under the Direct
Action Statute hinges on whether the underlying policy issued to
PCT was a "liability policy."
In support of their argument that the inland marine insurance
contract issued to PCT is a liability policy, SLE and Whitney cite
Davis v. Poleman, 319 So.2d 351 (La. 1975).

SLE and Whitney urge

Davis is similar to the instant facts because the insured was a
compensated depositary.

However,

this case is inapposite to the

present action, because the fact that the insured had a liability
policy was not in dispute.

Davis, 319 So.2d at 353 (noting that

the issue was that the claimants were denied coverage from the
depositary's liability insurers because they could not establish
the date of loss).
To the contrary, the inland marine insurance policy at issue
in the instant matter is a property insurance contract, rather than
a liability insurance contract.

See La. Rev. Stat. Ann. § 22:47

(West 2013)(defining "Kinds of Insurance" and listing "inland
marine insurance" as distinct from liability insurance, and in the
same section as marine builder's risk insurance and personal
property floater risks); See also Michael R. Newby, The Nature of
Inland Marine Insurance and its Association with Maritime Law, 13
U.S.F. Mar. L.J. 267, 269-273 (2001)(describing inland marine
insurance as typically covering property of high value, comparing
inland marine insurance with a particular type of property risk

8

insurance);

Russ

and

Segalla,

Couch

on

Insurance,

§

154:3,

Specialized Insurance Coverages; "Inland Marine" Concept, n.3 (3d
ed. 2011), citing Ohio Cas. Ins. Co. v. Carman Cartage Co., Inc.,
636 N.W.2d 862 (Neb. 2001)("'Inland marine insurance' functions
basically as a form of property insurance.").

Further, the

insurance contract itself is defined in terms of property insured
and excluded.

(Rec. Doc. No. 64-6 at 10).

Therefore, where the

written terms of the contract are clear and unambiguous that the
inland marine insurance contract in dispute is a property insurance
policy, and not a liability insurance policy, SLE and Whitney are
without

a

cause

of

action

against

Louisiana Direct Action Statute.

Fireman's

Fund

under

the

Therefore, SLE and Whitney must

allege facts giving rise to a contractual right against Fireman's
Fund in order to sustain a cause of action against Fireman's Fund.
3.

SLE and Whitney's contractual rights against Fireman's

Fund
"It is a well-established principle of law that a policy of
insurance is a personal contract between the insurer and the
insured. A person who is neither a party to the insurance contract
nor one for whose benefit it was written is not entitled to a share
of the insurance proceeds by the mere fact that he has an insurable
interest in the property."

Haddad v. Elkhateeb, 2012-0214, p. 11

(La. App. 4 Cir. 8/11/10), 46 So.3d 244, 253, citing Hartford Ins.
Co. of Southeast v. Stablier, 476 So.2d 464, 466 (La. App. 1st Cir.

9

1985); Franks v. Harper, 141 So.2d 690, 694-95 (La. App. 3d Cir.
1962)(emphasis

added).

"Property

insurance,

as

first-party

coverage, generally does not respond to third-party claims."

TCC

Contractors, Inc., v. Hospital Service Dist. No. 3 of the Parish of
Lafourche, 2012-0685, p.11 (La. App. 1 Cir. 12/8/10), 52 So.3d
1103, 1110.

A party who is not a named beneficiary to a property

insurance policy and who has no contractual relationship with the
insurer has "no judicially enforceable right of action" against the
insurer under the terms of the policy.

Stall v. State Farm Fire

and Cas. Co., 2008-0649, p.6 (La. App. 4 Cir. 10/29/08), 995 So.2d
670, 674 .

To establish status as a third-party beneficiary of a

property insurance policy, "there must be a clear expression of
intent to benefit the third party."

Id., citing Smith v. State

Farm Ins. Co., 2003-1580, p. 5 (La. App. 4 Cir. 3/3/04), 869 So.2d
909, 913.

"If the most natural and obvious construction of the

policy is that the party named as the insured only sought to
protect his own interest, the contract cannot be extended so as to
cover the interest of a third person."

Haddad, 46 So.3d at 252,

citing Duncan v. Sun Mut. Ins. Co., 12 La. Ann. 486 (1857).
In both TCC Contractors and Haddad, the Louisiana appellate
courts

rejected

the

claims

of

parties

who

were

not

named

beneficiaries or loss payees to the property insurance contracts at
issue.

TCC Contractors, 52 So.3d at 1110; Haddad 46 So.3d at 253.

In TCC Contractors, the Court found that although the insured may
10

have breached a contractual obligation to name the plaintiff as a
loss payee to the insurance contract in dispute, "[the insured's]
contractual failure" could not be imputed to the insurer. 52 So.3d
at 1110.

In Haddad, there was no dispute that property belonging

to the claimants was covered by the property insurance policy in
dispute.

46 So.3d at 247-48.

However, the Court found that the

mere fact that the claimants had a property interest in the insured
property

was

insufficient

to

grant

them

an

interest

in

the

insurance proceeds, where they were not parties to the insurance
contract.

Id. at 252-53.

The facts of TCC Contractors and Haddad are similar to the
case at bar.

As in TCC Contractors, SLE and Whitney urge that PCT

was "contractually obligated to list SLE as a loss payee" and was
"an intended third-party beneficiary."
10).

(Rec. Doc. No. 73 at 1,

However, SLE and Whitney do not argue that SLE was named as

a party to the Fireman's Fund, either as a named beneficiary or as
a loss payee.

Further, under Louisiana law that there must be

"clear expression of intent to benefit the third party" in an
insurance contract, therefore PCT's mere intention to cover SLE is
insufficent to make SLE a third-party beneficiary to the insurance
contract issued by Fireman's Fund.

Finally, as in Haddad, even if

this Court accepts that the property owned by SLE and in the
possession of PCT was covered by the policy issued by Fireman's
Fund, SLE's interest in the property alone does not grant a
11

contractual right to insurance proceeds.2

SLE and Whitney fail to

create a genuine issue of material fact as to their right to claim
proceeds as a non-party to the property insurance policy issued by
Fireman's Fund.
Therefore, where SLE and Whitney have not established a right
to a cause of action against Fireman's Fund, Fireman's Fund is
entitled to summary judgment in its favor against the claims of SLE
and Whitney.3
C.

ENGlobal's Motion for Summary Judgment against Fireman's Fund
Fireman's Fund admits that its third-party demand against

ENGlobal is "dependent upon the outcome of the main demand." (Rec.
Doc. No. 61 at 3), citing Fed. R. Civ. P. 14(a)(1)4; Sunrise
Development Inc. v. Carl E. Woodard, Inc., Civ. A. No. 03-2273,
2004 WL 574719 at *2 (E.D. La. 2004), quoting Southeast Mortgage
Co. v. Mullins, 514 F.2d 747, 749 (5th Cir. 1975).

"Here,

ENGlobal's liability to Fireman's Fund is strictly contingent on
whether Fireman's Fund is found liable on SLE's main demand."
2
Although the property insurance policy issued by Fireman's Fund
contains a provision that "property of others held by the Insured" is covered,
it contains a further provision that loss payees may express an interest for
covered property pursuant to a written agreement with the insured. (Rec. Doc.
No. 64-6 at 10, 3). SLE and Whitney admit that there is no written agreement
between SLE, the alleged loss payee, and the insured, PCT. (Rec. Docs. No.
64-1 at 6 & 73 at 4)(SLE and Whitney instead point to agreements between SLE
and ENGlobal or ENGlobal or PCT, but cite none between SLE and PCT).
3

Therefore, the Court need not address the additional grounds for
summary judgment urged by Fireman's Fund. (See Rec. Docs. No. 30 & 64).
4

"A defending party may, as third-party plaintiff, serve a summons and
complaint on a nonparty who is or may be liable to it for all or part of the
claim against it." Fed. R. Civ. P. 14(a)(1).

12

(Rec. Doc. No. 61 at 4).

Therefore, in light of the foregoing

Order granting summary judgment in favor of Fireman's Fund against
SLE, ENGlobal is entitled to judgment as a matter of law on
Fireman's Fund's third-party demand against it.
D.

C&I and Chartis' Motion for Summary Judgment against SLE and

Whitney
Unlike the inland marine insurance policy that Fireman's Fund
issued to PCT, which was a property insurance policy, C&I and
Chartis admit that they issued liability policies to PCT.5
Docs. No. 31-1 at 1, 31-4, & 31-5).

(Rec.

In Landry, the federal

Bankruptcy Court applied Louisiana substantive law to determine the
claimant's property interest in the liability insurance contract at
issue.

See Landry v. Exxon Pipeline Co., 260 B.R. 769, 800 (Bankr.

M.D. La. 2001)("Property interests are created and defined by state
law.

Unless some federal interest requires a different result,

there is no reason why such interest should be analyzed differently
simply because an interested party is involved in a bankruptcy
proceeding.").

Further, both C&I and Chartis, and SLE and Whitney

apply Louisiana substantive law to the insurance dispute at issue.
(Rec. Docs. No. 31 & 36).

Therefore, this Court applies Louisiana

5
C&I and Chartis also do not contest that SLE and Whitney can allege a
cause of action for PCT's wrongful acts. See also Landry v. Exxon Pipeline
Co., 260 B.R. 769,786 (Bankr. M.D. La. 2001), citing Matter of Edgeworth, 993
F.2d 51, 56 (5th Cir. 1993)(noting that in the liability insurance context,
the proceeds are paid to the victim of the insured's wrongful act, as SLE and
Whitney purport to be here).

13

substantive law to interpret the liability insurance policies
issued by C&I and Chartis to PCT.

As noted supra, under Louisiana

law, an insurance contract should be enforced as written and the
Court should not use rules of contractual interpretation to alter
unambiguous terms and policy provisions.

"Interpretation of a

policy of insurance involves legal questions which can properly be
resolved through a motion for summary judgment."

Duchmann v.

Orleans Maritime Brokerage, Inc., 603 So.2d 818, 820 (La. App. 4th
Cir. 1992), citing Ledbetter v. Concord Gen. Corp., 564 So.2d 732
(La. App. 2d Cir. 1990); Pridgen v. Jones, 556 So.2d 945 (La. App.
3d Cir. 1990).
SLE,

Whitney,

C&I

and

Chartis

agree

that

the

liability

policies issued to PCT excluded property damage to "property in the
care, custody or control of the insured."
11 & 36).

(Rec. Docs. No. 31-1 at

The Louisiana jurisprudence interpreting the "care,

custody or control" exclusion recognizes that the exclusion will be
applied to defeat coverage when:
...the insured is either a contractor or subcontractor who has
been sued by the owner of the property upon which work was
being performed, or is a party with whom property had been
placed for use or repair.

The suits brought by the property

owners are normally for alleged negligence in the performance
of the work or in the use of the property which led to damage
to the property.
14

Reynolds v. Select Properties, Ltd., 634 So.2d 1180, 1184 (La.
1994), citing Borden, Inc. v. Howard Trucking Co., Inc., 454 So.2d
1081 (La. 1983); Thomas W. Hooley & Sons v. Zurich Gen. Acc. &
Liability Ins. Co., 103 So.2d 449 (La. 1958); Duchmann v. Orleans
Maritime Brokerage, Inc., 603 So.2d 818 (La. App. 4th Cir.), writ
denied, 607 So.2d 568 (La. 1992); State Farm Fire & Cas. Co. v.
Zurich American Ins., 459 So.2d 205 (La. App. 3rd Cir. 1984), writ
denied, 463 So.2d 603 (La. 1985); Petrol Indus. v. Gearhart-Owen
Indus., 424 So.2d 1059 (La. App. 2nd Cir. 1982); H.E. Wiese, Inc.
v. Western Stress, Inc., 407 So.2d 464 (La. App. 1st Cir. 1981);
Commercial Capital Sys., Inc. v. Paille, 333 So.2d 293 (La. App.
1st Cir. 1976); Hendrix Elec. Co., Inc. v. Cas. Reciprocal Exch.,
297 So.2d 470 (La. App. 2nd Cir. 1974); Industrial Supply Co. of
La. v. Transamerica Ins. Co., 220 So.2d 126 (La. App. 3rd Cir.),
writ denied, 254 La. 136, 222 So.2d 884 (La.1969), (emphasis
added).
In Duchmann, the Louisiana appellate court found that the
"care, custody and control" exclusion applied when the property at
issue was in the possession of the insured.

603 So.2d at 820.

In

Duchmann, the plaintiff was the owner of a vessel who left the
vessel in the control of its listing agent.

Id. at 819.

The

listing agent docked the vessel at a pier in New Orleans, and
returned to find the vessel at an angle, listing, and taking on
water.

Id.

The vessel owner filed suit for damage to the vessel
15

in Louisiana state court, against the listing agent as well as the
listing agent's liability insurer.

Id.

The liability insurer

filed a motion for summary judgment in the trial court alleging
that coverage was excluded under the "care, custody and control"
exclusion.

Id.

The trial court denied the motion.

The appellate

court reversed the trial court's finding and held that coverage was
barred by the "care, custody and control" exclusion.
In

its

ruling,

the

appellate

court

noted

Id. at 820.

"[b]oth

Louisiana

decisional and statutory authority support [the insurer's] claim
that, if an item is in the insured's possession or under its
control at the time of the property damage, the exclusionary
provision which relates to the property damaged in the care,
custody, and control of the insured, is given effect." Id., citing
La. Civ. Code Ann. art. 2045 et seq. (2013), Berquist v. Fernandez,
535 So.2d 827 (La. App. 2d Cir. 1988); Kold, Inc. v. U.S. Fidelity
& Guar. Co., 496 So.2d 1338 (La. App. 3d Cir. 1986), writ den., 498
So.2d 758 (La. 1986); Industrial Supply Co. of La. v. Transamerica
Ins. Co., 220 So.2d 126 (La. App. 3d Cir. 1969), writ den., 222
So.2d 884 (La. 1969).
In Navarro Pecan v. Penn American Ins., the United States
Fifth Circuit affirmed summary judgment in favor of an insurer,
applying Louisiana law to interpret a "care, custody and control"
exclusion.

34 Fed. Appx. 963 (5th Cir. 2002).

In Navarro, the

plaintiff was the property owner of pecans, who deposited his
16

pecans in the insured's warehouse.

Id.

When a sprinkler pipe in

the warehouse ruptured and damaged the pecans, the plaintiff sued
the insured, as its depositary, and the depositary's insurer.

Id.

The insurer was awarded summary judgment at the trial court, on the
grounds that the policy excluded coverage for the pecans because
they were "in the care, custody and control of the insured."

Id.

When plaintiff appealed, the Fifth Circuit agreed with the district
court's

finding,

stating

that

"because

[the

insured]

is

a

depositary ... it is deemed to have 'care, custody or control" over
the personal property it accepts for deposit." Id., citing Hendrix
Elec. Co. Inc., v. Cas. Reciprocal Exch., 297 So.2d 470, 474 (La.
App. 2d Cir. 1974); La. Civ. Code Ann. art. 2926 (2013).
The facts in the instant case are similar to those in Duchmann
and Navarro.

As in Navarro, SLE and Whitney contend that the

insured, PCT, was a depositary for SLE's property.

(Rec. Doc. No.

36 at 5, "PCT was a depositary with respect to SLE's equipment.").
Therefore, under the Fifth Circuit's holding in Navarro, PCT is
deemed to have "care, custody or control" over SLE's property which
it accepted for deposit.

SLE and Whitney dispute applicability of

the "care, custody and control" exclusion by attempting to draw a
distinction between property damage which results "from exercising
control" versus "while exercising control."
19).

(Rec. Doc. No. 36 at

However, in doing so, SLE and Whitney rely on one Louisiana

case which predates the Louisiana Supreme Court's holding in
17

Reynolds,

and

another

Louisiana

appellate

case

that

was

subsequently reversed in part at the Louisiana Supreme Court, and
cited in Reynolds.

(See Rec. Doc. No. 36 at 19-20, citing Eymard

v. C&W Well Svc., Inc., 258 So.2d 406 (La. App. 4th Cir. 1972);
Borden, Inc. v. Howard Trucking Co., Inc., 372 So.2d 242 (La. App.
1st Cir. 1979)); See also Reynolds v. Select Properties, Ltd., 634
So.2d 1180, 1184 (La. 1994), citing Borden, Inc. v. Howard Trucking
Co., Inc., 454 So.2d 1081 (La. 1983).

Further, in the Eymard case

cited by SLE and Whitney, the policy exclusion at issue contained
the language "property in the care, custody or control of the
insured or property as to which the insured for any purpose is
exercising

physical

control."

Eymard,

258

So.

2d

at

407.

Therefore, the court in Eymard found the distinction between
"resulting from exercising control" and "while exercising control"
relevant, only because the policy contained express language making
such a distinction important.

The instant policies issued by C&I

and Chartis do not contain such express language, nor do SLE and
Whitney contend that it does.

(Rec. Docs. No. 31-1 at 11 & 36).

As illustrated in Duchmann, Louisiana courts have interpreted the
"care, custody and control" exclusion to apply when the property
was in the possession of the insured. Here, SLE and Whitney allege
damages resulting

from "the actions and/or inactions of PCT as a

depositary," and while SLE's equipment was "held by PCT in its yard
in

Gonzales,

Louisiana."

(Rec.
18

Docs.

No.

36

at

5

&

3).

Accordingly, no genuine issue remains as to the material fact of
whether PCT was in possession of SLE's equipment at the time of the
alleged damage.
Therefore, coverage for SLE's property is barred by the "care,
custody and control" exclusion, and C&I and Chartis are entitled to
judgment as a matter of law against the claims of SLE and Whitney.6
New Orleans, Louisiana, this 18th day of March, 2013.

____________________________
UNITED STATES DISTRICT JUDGE

6

Accordingly, the Court need not address the additional grounds for
summary judgment urged by C&I and Chartis. (Rec. Doc. No. 31).

19