Nola Ventures, LLC et al v. Upshaw Insurance Agency, Inc. et al
Filing
229
ORDER denying 71 Motion for Summary Judgment. Signed by Judge Nannette Jolivette Brown. (Reference: 12-1026)(jrc)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
NOLA VENTURES, LLC ET AL
CIVIL ACTION
VERSUS
CASE NO. 12-1026
UPSHAW INSURANCE AGENCY, INC. ET AL
SECTION: G(2)
ORDER
This litigation involves an insurance dispute arising out of a May 2011 tornado in Joplin,
Missouri that destroyed two Arby’s restaurants owned and/or operated by NOLA Ventures LLC,
NOLA Restaurant Group LLC, and Critical Mass Holdings LLC (collectively, “Plaintiffs”).
Plaintiffs allege that Defendants Upshaw Insurance Agency, Inc. (“Upshaw”) and Upshaw agent
Robert Bentley (“Bentley”) (collectively, “Defendants”) negligently misrepresented the coverage
under the insurance policy that Upshaw procured for them. Before the Court is Defendants’ “Motion
for Summary Judgment on Liability,”1 wherein Defendants seek dismissal of all claims brought
against them by Plaintiffs.
I. Background
A.
Factual Background2
NOLA Ventures, LLC (“NOLA Ventures”) is an “Arby’s Roast Beef” restaurant franchisee.
Critical Mass Holdings, LLC (“CMH”) is the owner of the buildings from which some NOLA
1
2
Rec. Doc. 71.
Based on the Parties’ briefs, and how Plaintiffs chose to address Defendants’ list of undisputed facts, the
Court is unable to discern which facts are disputed and which are not. The following is the Court’s best attempt to
identify the undisputed facts in this case.
Ventures restaurants operate. NOLA Restaurant Group, LLC (“NOLA Restaurant”) manages the
NOLA Ventures restaurants.3
In September 2006, Plaintiffs purchased fourteen Arby’s restaurants from Specialty Food
Systems, Inc. (“Specialty”), including the two Joplin properties at issue here.4 In March 2007,
Plaintiffs engaged Defendants as the retail insurance broker for the Joplin properties.5 Bentley served
as Plaintiffs’ insurance representative.6 Bentley had acquired property insurance for the Joplin
properties when they were owned by Specialty.7
On March 21, 2011, Bentley visited Plaintiffs’ Metairie, Louisiana office to discuss
Plaintiffs’ insurance policy options for the ensuing year.8 At the meeting, Bentley presented Scott
Bastion, Darrell Ashley, and P. Albert Bienvenu, IV with three options for insurance programs for
the 2011-2012 insurance year.9 Plaintiffs selected the Lexington policy as the primary layer of
insurance and the Axis policy as the excess layer of insurance.10 Bentley agreed to procure those
3
Rec. Doc. 1–1 at p. 1–2.
4
Rec. Doc. 98 at p. 2.
5
Rec. Doc. 1–1 at p. 2.
6
Id. at p. 2.
7
Rec. Doc. 71–3 at 2.
8
Rec. Doc. 1–1 at p. 2.
9
Id. at p. 2-3; see also Rec. Doc. 98-4, deposition transcript of Christopher Scott Bastion (herinafter “Bastion
deposition”); deposition transcript of Darrel K. Ashley (hereinafter “Ashley deposition”); deposition transcript of P.
Albert Bienvenu, IV (herinafter “Bienvenu deposition”).
10
Rec. Doc. 71–24.
2
policies immediately.11 On March 28, 2011, Defendants presented Plaintiffs with the insurance
application signature pages.12 Scott Bastion signed and returned the documents.13
On May 22, 2011, a severe thunderstorm and tornado destroyed the two Joplin properties.14
Plaintiffs believed the Lexington policy covered up to $10 million of damage.15 During the claims
process, Plaintiffs were told that the Lexington policy would only pay “actual cash value” unless and
until the restaurants were rebuilt.16 Plaintiffs were also informed that the Axis policy contains a
“Broad Windstorm and Hail Exclusion” that did not provide coverage for the windstorm losses
suffered by Plaintiffs.17 Plaintiffs recovered $1.9 million for the two Joplin properties under the
Lexington policy.18
On June 24, 2011, Bentley delivered copies of the Lexington policy to Plaintiffs’ Metairie,
Louisiana office.19
B.
Procedural Background
On April 23, 2012, Plaintiffs filed suit in 24th JDC, Jefferson Parish, for damages “which
resulted from the defendants’ negligence, misrepresentation, want of care, fault and breach of
11
Rec. Doc. 1–1 at p. 3.
12
Id. at p. 3.
13
Rec. Doc. 98 at p. 8.
14
Rec. Doc. 1–1 at p. 4.
15
Id. at p. 4.
16
Id. at p. 5.
17
Id. at p. 5.
18
Rec. Doc. 71–3 at p. 12.
19
Rec. Doc. 1–1 at p. 3.
3
fiduciary duty.”20 Defendants removed to this Court, alleging diversity jurisdiction.21 Defendants
filed the pending motion on September 9, 2013.22 On September 24, 2013, Plaintiffs filed a
memorandum in opposition.23 Defendants filed a reply memorandum in support of the motion on
September 25, 2013.24 On March 11, 2014, Upshaw filed a supplemental memorandum in support
of the motion,25 and Plaintiffs filed a sur-reply memorandum in opposition on March 21, 2014.26
II. Parties’ Arguments
A.
Defendants’ Arguments in Support
Defendants argue that they are entitled to judgment as a matter of law on liability because
Louisiana law does not impose on insurance agents a duty to advise insureds as to the proper amount
or type of coverage.27 Defendants argue that in Isodore Newman Sch. v. J. Everett Eaves, Inc.,
[t]he Louisiana Supreme Court noted that ‘the insured is responsible for
communicating his insurance needs’; [sic] and ‘an agent has no duty to
independently assess the needs of the insured and recommend coverage,’ and the
agent has no duty to advise a client it is underinsured. Further, the Supreme Court
discussed that it is ‘the client’s responsibility or duty, not the agent, to determine the
amount of coverage needed.’28
20
Id.
21
Rec. Doc. 1.
22
Rec. Doc. 71.
23
Rec. Doc. 98.
24
Rec. Doc. 115.
25
Rec. Doc. 221.
26
Rec. Doc. 228.
27
Rec. Doc. 71–3 at p. 13 (citing Parker v. Lexington Ins. Co., No. 06-4156, 2006 WL 3328041 (E.D. La. Nov.
15, 2006); Dobson v. Allstate Ins. Co., 2006 WL 2078423 (E.D. La. July 21, 2006)).
28
Id. (citing Isidore Newman Sch. v. J. Everett Eaves, Inc., 2009-2161 (La. 7/6/10), 42 So. 3d 352) (emphasis
omitted)).
4
According to Defendants, “Louisiana law does not place a duty on insurance agents to insure homes
for more than their clients represent they are worth based on the notion that the insurance agent
should have known that the owners undervalued their own property.”29 Defendants argue that no
duty is breached if the agent procures insurance for the full amount of a building value as approved
by the insured.30
Defendants next contend that this Court must apply the three-part test set forth in Parker v.
Lexington Insurance Company to determine whether Plaintiffs may recover for losses resulting from
the failure of an insurance agent to procure the desired coverage.31 Under the Parker test, as
characterized by Defendants, Plaintiff must prove each of the following elements: (1) an undertaking
or agreement by the insurance agent to procure insurance; (2) failure of the agent to use reasonable
diligence in attempting to place the insurance and failure to notify the client promptly if he has failed
to obtain the insurance; and (3) action by the agent warranting the client’s assumption that the client
was properly insured.32 Defendants argue that “[P]laintiffs cannot prove all three elements of the
Parker test.” Specifically,
[P]laintiffs do not even allege that Upshaw failed to use reasonable diligence in
attempting to place the insurance and failed to notify them promptly that it failed to
obtain the insurance, which is the second element. Here, it is undisputed that Upshaw
diligently procured insurance in the amount of the scheduled values of the buildings.
Indeed, the schedule contained in the Upshaw proposal is attached to the Lexington
policy.33
29
Id. at p. 15 (citing Rowland v. State Farm Fire & Cas. Co., 2007 WL 3231665 (W.D. La. Oct. 30, 2007)
(emphasis omitted)).
30
Id. at p. 16.
31
Id. at p. 12 (citing Parker v. Lexington Ins. Co., No. 06-4156, 2006 WL 3328041 (E.D. La. Nov. 15, 2006)).
32
Id.
33
Id. at p. 17.
5
Apparently addressing the third element of the Parker test, Defendants argue that Plaintiffs
were “put on express written notice that each location had a rebuilding value and a total insured
value”34 because “Upshaw sent a schedule of values to [Plaintiffs] on April 29, 2011, a month before
the tornado. This schedule not only showed the rebuilding limits per restaurant, and not only showed
the total insured value per location, but it also showed the amount of premium based on each
location’s total insured value.”35
Defendants additionally argue that Plaintiffs should have known the details of the policy at
issue and that “an insured like [plaintiff] who does not inquire about a particular coverage, who does
not ask for the coverage, who does not ask for clarification about the coverage, and never examined
the years of policies, has no right to assume that he is covered and then sue his agent because his [the
insured’s] assumption was incorrect.”36 According to Defendants, “[e]ven an alleged statement to
an insured that it is ‘fully covered’ fails to state a claim where a ‘simple review’ of the policy (or
here, the schedules) would have put the insured ‘on notice’ of the coverage they were receiving.”37
Defendants make several alternative arguments based on Louisiana statutory law and
contract law. First, Defendants argue that Plaintiffs have already received the full amount allowed
under “Louisiana Valued Policy Law,” which “mandates that in the case of a total loss the insurer
shall compensate the insured at the value used to determine the premium.”38 Accordingly,
34
Id. at p. 24 (emphasis omitted).
35
Id. (emphasis omitted).
36
Id. at p. 14 (citing Mandina, Inc. v. O'Brien, 2013-0085 (La. App. 4 Cir. 7/31/13) writ denied, 2013-2104
(La. 11/22/13), 126 So. 3d 485 (emphasis omitted)).
37
Id.
38
Id. at p. 17–19 (citing La. Rev. Stat. Ann. § 22:1318; Chauvin v. State Farm Fire & Cas. Co., 495 F.3d 232
(5th Cir. 2007)).
6
Defendants argue, “because there was a total loss, the Louisiana Valued Policy Law statute
mandates that the insured should receive the scheduled value as compensation under the policy.”39
Next, Defendants aver that Plaintiffs “grossly failed to comply with the valuation provision”
of the policy, which
expressly requires the insured to provide a statement of values which consist of the
current 100% property and time element values for all insured locations...The
property values shall be shown on a replacement cost bases...Receipt of said
statement of values by this company shall be considered as authorization by the
insured for premiums under this policy to be calculated.40
Defendants contend that Plaintiffs “submitted values that were worth only half of the actual value.
They paid premiums based on those values, but now they want to recover twice the scheduled
value.”41 According to Defendants, “the [P]laintiffs have claimed that the values of the two buildings
were under-reported in an amount of $992,208.68.”42
Defendants next claim that Plaintiffs signed the insurance contract, and are therefore bound
by the contents of the contract. Defendants acknowledge that it only sent the signature pages for the
insurance application to Plaintiffs, but argue that “the law is absolute that by signing the application
signature page[,] the insureds are bound by the contents of the insurance application.”43 Defendants
39
Id. at p. 19.
40
Id. (ellipses in original).
41
Id. at p. 20.
42
Id. at p. 19.
43
Id. at p. 20 (citing Arthur J. Gallagher & Company v. Babcock, 2011 U.S. Dist. LEXIS 2514 (E.D. La. Jan.
10, 2011); Mt. Cavalry Baptist Church v. Williams Construction Company of Port Allen, 2006-1674 (La. App. 1st Cir.
2007); Aguillard v. Auction Management Corp., 04-2804 (La. 6/29/05), 908 So.2d 1; Tweedel v. Brasseaux, 433 So.2d
133, 137 (La. 1993)).
7
additionally argue that the insurance proposal presented by Bentley to Plaintiffs at the March 2011
meeting is not controlling because “[P]laintiffs did not sign the insurance proposal, and...Louisiana
law provides that the signed application is controlling.”44 Moreover, according to Defendants, the
proposal contains a disclaimer that it is a summary only, and “is subject to all policy terms,
conditions and exclusions,” which would “necessarily include the terms and conditions that the most
it would ever pay for any occurrence was the scheduled limits and total insured values for each
location.”45
Finally, Defendants contend that
[i]t is contrary to Louisiana contract law for plaintiffs to submit rebuilding costs (and
here, undervalue rebuilding costs by approximately 50%), pay a premium they knew
was based on those values, and now contend they are entitled to insurance worth
double those values. Under Louisiana contract law, they paid the ‘price’ for the
‘thing’ (insurance with a premium based on rebuilding values they represented to the
insurer) and to allow them to recover any additional amounts under the policy would
be unreasonable and contrary to Louisiana contract law.46
B.
Plaintiffs’ Argument in Opposition
In opposition to Defendants’ motion, Plaintiffs assert that the Louisiana Supreme Court
expressly preserved the separate duty of an agent to use reasonable diligence in advising a client,
and that Defendants breached that duty by (1) misrepresenting the Lexington policy and (2) failing
to advise Plaintiffs with reasonable diligence as to the correct amount and type of coverage after
“having held itself out as an expert in such matters.”47
44
Id. at p. 22.
45
Id. at p. 22.
46
Id. at p. 25.
47
Rec. Doc. 98 at p. 13-14, 16 (citing Newman at 359).
8
With respect to the Lexington policy, Plaintiffs assert that “the standard of reasonable
diligence includes explaining the policy accurately and clearly communicating its terms, especially
its limitations and exclusions.”48 Plaintiffs point to cases which, they contend, apply either a negative
duty not to mislead a client regarding a policy value49 or an affirmative duty to clearly communicate
limitations or exclusions on coverage.50 Plaintiffs allege “that they were misled by Upshaw’s
material misrepresentations of the policies” and that “Plaintiffs were told here that they purchased
a different type of policy than in years past, which is evidenced by Bentley’s admitted explanation
of the policy and confirmed by his email assuring that the $10M primary is plenty to cover the Joplin
issue.”51
With respect to the duty owed by an insurance agent to an insured, Plaintiffs acknowledge
that “[t]ypically, an insurance agent has no duty to advise its clients as to the correct amount or type
of insurance to best fit their needs.”52 However, Plaintiffs contend that “[a]n insurance agent’s duty
can be greater than merely procuring the insurance requested, depending on what services the agent
holds himself out as performing and the nature of the specific relationship and agreements between
the agent and his client.”53 Plaintiffs argue that “a duty arose when Upshaw unilaterally undertook
48
Id. at p. 17.
49
Id. (citing Aurillo v. Gressaffa, 405 So.2d 664 (La. App. 4 Cir. 1981)).
50
Id. at p. 18 (citing Sims v. Insurance Unlimited of West Monroe, No. 28234, (La. App. 2 Cir. 2/28/96), 669
So.2d 709).
51
Id. at p. 14.
52
Id. at p. 18.
53
Id. at p. 18 (citing Belmont Commons, L.L.C. v. Axis Surplus Ins. Co., 569 F. Supp. 2d 637, 644 (E.D. La.
2008)).
9
to advise Plaintiffs with regard to the correct type and amount of insurance. This duty was breached
when Bentley recommended a policy to Plaintiffs that he clearly did not understand.”54
Plaintiffs concede that in order to prove that Defendants breached a duty to procure with
reasonable diligence the insurance requested, Plaintiffs must satisfy the three-pronged Parker test.55
With respect to the first element, Plaintiffs contend that Upshaw undertook to procure insurance for
Plaintiffs, as demonstrated by (1) a letter agreement between Upshaw and NOLA Ventures “in
which Upshaw memorializes its intent to act as an insurance agent for the plaintiffs and (2) the
Lexington policy that Defendants procured.56 Plaintiffs argue that the second Parker element is
satisfied because (1) Defendants misrepresented the terms of the policy presented at the March 2011
meeting; (2) Plaintiffs “specifically requested [Defendants] bind the Lexington policy;” (3)
Defendants “failed to procure the insurance coverage agreed upon by the parties;” and (4)
Defendants did not notify Plaintiffs “that it failed to obtain the insurance...until during the claims
process.”57 Moreover, Plaintiffs aver that Defendants “failed to give notice of the broad windstorm
exclusion in the Axis policy, which essentially made the policy worthless.”58
With respect to the third Parker factor, Plaintiffs contend that Bentley explained at the March
2011 meeting that “the full limit of the policy would be available in the event only a few stores were
damaged.”59 Plaintiffs also aver that they believed they had purchased blanket coverage because
54
Id. at p. 19.
55
Id. (citing Parker v. Lexington Ins. Co., No. 06-4156, 2006 WL 3328041 (E.D. La. Nov. 15, 2006)).
56
Id. at p. 20 (citing Ex. 9).
57
Id. at p. 20–21.
58
Id. at p. 21.
59
Id.
10
Bentley sent “the partial application to Plaintiffs with a list of their properties having no reference
to limits, the summary of the Lexington policy without any reference to limits, and the failure to
deliver the policy until after the loss.”60 Additionally, Plaintiffs allege that Bentley’s assurances
following the storm“bolstered” their beliefs that they had purchased blanket insurance.61 Finally,
according to Plaintiffs, the email sent by Upshaw to Plaintiffs on April 29, 2011 failed to serve as
notice that each location had a rebuilding limit “because a blanket policy would contain a similar
spreadsheet of values for the purpose of calculating the premium.”62
In response to Defendants’ argument that the valued policy statute precludes Plaintiffs from
further recovery, Plaintiffs contend that the valued policy statute only applies to a scheduled policy
with limits per location”63 According to Plaintiffs, “the policy was not supposed to be a scheduled
policy. Accepting this argument would require this Court to completely disregard the
misrepresentations [Defendants] made with regard to the nature of the policy as a blanket-form
policy.”64
With respect to Defendants’ contention that Plaintiffs have no claim under the policy because
they failed to provide accurate values, Plaintiffs aver that Bentley made “misrepresentation[s] to
Plaintiffs about his own expertise as an expert in estimating rebuilding costs.”65 Moreover, Plaintiffs
state that “the $10 million dollar limit that they were led to believe would apply on a per occurrence
60
Id.
61
Id.
62
Id. at 22.
63
Id. (citing La. Rev. Stat. Ann. § 22:1318(D)).
64
Id.
65
Id. at p. 23.
11
basis was more than enough coverage, so increasing the values was not a pressing matter.”66 Finally,
Plaintiffs contend that “Louisiana courts have never charged an insured with knowledge of a policy
where previous policies would provide no notice of the current policy.”67
Plaintiffs next contend that they “cannot be charged with any part of the insurance
application that was not sent to them.” Specifically, they aver that the pages sent by Upshaw
contained a list of the insured properties without values anywhere on the page, so “nothing in the
pages sent could serve to put Plaintiffs on notice that the coverage they applied for was not blanket
insurance.”68 Additionally, “Plaintiffs cannot read documents they do not possess and cannot
therefore be charged with knowledge of documents never sent to them.”69 With regard to Upshaw’s
contention that “parties must be aware of the content of the documents they sign, including items
referenced but not attached to those documents,” Plaintiffs “gladly accept this charge, since the only
documents they signed included a list of properties without any limits per location.”70 Additionally,
Plaintiffs argue that “the outstanding pages would not have provided notice that they were
requesting a scheduled policy.”71 Moreover, Plaintiffs argue that Defendants “failed to sufficiently
communicate the limitations and exclusions” on coverage,72 and that the Upshaw Options booklet
66
Id.
67
Id. (citing Aurillo v. Gressaffa, 405 So.2d 664 (La. App. 4 Cir. 1981); Sims v. Insurance Unlimited of West
Monroe, No. 28234, (La. App. 2 Cir. 2/28/96), 669 So.2d 709)).
68
Id.
69
Id.
70
Id. at p. 24.
71
Id.
72
Id.
12
contained on the last page “I accept the coverage, terms and conditions as outlined in the proposal
presented by Upshaw Insurance Agency.”73
Finally, Plaintiffs aver that
[Defendants’] reliance on La. C.C. art. 2623 to argue that Plaintiffs did not buy a
policy based on the rebuilding costs they seek is misplaced. That article relates to a
contract of sale but a service contract is at issue here. Aside from that
disqualification, Plaintiffs and [Defendants] agree on both a thing and price.
However, [Defendants] failed to deliver the thing on which the parties agree.74
C.
Defendant’s Reply in Further Support
In response to Plaintiffs’ opposition brief, Defendants contend that there is no evidence of
a “special relationship between [Plaintiffs] and Defendants whereby Plaintiffs relied on Defendants
expertise and Defendants owed some sort of additional duty to properly value their property.”75
Defendants reiterate their reading of Newman and argue that “no Louisiana court has ever imposed
a duty of an agent [sic] to value an insured’s property, even if the agent recommends certain
coverages or limits, or even if the agent is perceived as an ‘expert.’”76
With regard to the valued policy law, Defendants contend that “[r]egardless of whether a
policy is blanket or scheduled, the VPL applies to every policy where the premium is based on the
values submitted by the insured and a total loss occurs from a covered peril.”77 According to
Defendants, the Fifth Circuit has ruled that the VPL must be applied in such situations.78 Finally,
73
Id. at p. 24–25.
74
Id. at p. 25.
75
Rec. Doc. 115 at p. 3 (internal quotation marks omitted).
76
Id. at p. 6 (emphasis omitted).
77
Id. at p. 6.
78
Id. at p. 6 (citing Chauvin v. State Farm Fire & Casualty, 495 F.3d 232 (5th Cir. 2007)).
13
Defendants argue that even if it had issued a blanket policy, as a matter of law it discharged its legal
duty by procuring insurance in the exact amount at which Plaintiffs valued the property.79
Defendants also urge the court to “disallow all affidavits submitted by Mr. Bienvenu,”
because “contrary to his sworn affidavit, he did not sign the insurance application and necessarily,
he also could not have verified the information which undisputedly was not attached to the
application he did not sign.”80 Finally, Defendants urge that the court “should find that any ‘belief’
or ‘understanding’ the plaintiffs had that they were receiving a blanket policy of insurance instead
of a scheduled policy of insurance is unreasonable as a matter of law.”81
D.
Upshaw’s Supplemental Memorandum in Support
Upshaw reavers the arguments for summary judgment raised by Defendants in their Motion
for Summary Judgment and argues that “the very claim the [P]laintiffs raise in their opposition
memorandum has been rejected as a matter of law by the Louisiana Supreme Court, as confirmed
by four opinions recently issued from the Eastern District of Louisiana.”82 Upshaw argues that these
cases hold that the duty of reasonable diligence has been discharged when the insurance agent has
procured the correct amount or type of insurance coverage.83 “Once Upshaw procured property
insurance (type) in the exact amount that plaintiffs’ [sic] valued their property (amount), then as a
79
Id. at p. 3, n. 2.
80
Id. at p. 8–9.
81
Id. at p. 9.
82
Rec. Doc. 221 at p. 5, 8 (citing Tufaro v. Fidelity National Property & Casualty Insurance Company, 2013
U.S. Dist. LEXIS 178157 (E.D. La. Dec. 18, 2013); Rodriguez v. Fidelity National Property & Casualty Insurance Co.
(E.D. LA Dec 11, 2013); Morin v. American Bankers Insurance Company, 2013 U.S. Dist. LEXIS 161162 (E.D. La.
Nov. 11, 2013); Picou v. Fid. Natl. Prop. Ins. Co., 2013 U.S. Dist. LEXIS 179636 (Dec. 20, 2013).
83
Id. at p. 6.
14
matter of law, Upshaw has discharged its duty of reasonable diligence.”84 Upshaw additionally
argues that Plaintiffs’ expert, Mr. Manes, “created his own ‘spectrum’ of duties owed by an
insurance agent that has never been recognized by any court,” and that he admitted he “disagreed”
with the standard for insurance agents as set forth by the Louisiana Supreme Court in Newman.85
E.
Plaintiffs’ Sur-Reply Memorandum in further Opposition
In their sur-reply, Plaintiffs explain that they do not claim that Defendants were negligent
in failing to advise them as to the correct amount and type of insurance they should purchase.86
Instead, Plaintiffs reaver that Defendants misrepresented whether the Lexington policy was a blanket
or scheduled policy. Plaintiffs contend that “none of the [D]efendant’s [sic] newly cited cases
involve an insurance agent who actually undertook to consult and advise his clients based on the
agent’s superior knowledge of the insurance programs he was selling.”87 Moreover, “[u]nlike
Newman, the instant case is replete with allegations that plaintiffs were misled into believing that
they would receive coverage which was not delivered.”88 Plaintiffs argue that the Defendants
“subjected themselves to a heightened duty that arises when an agent holds himself out to provide
services greater than the mere order-taking insurance agent.”89 According to Plaintiffs, “[t]his
84
Id.
85
Id.
86
Id. at p. 3.
87
Id. at p. 1.
88
Id. at p. 4.
89
Id. at p. 3.
15
contention is based on a well-established legal principle that ‘when a duty to protect others against
a particular harm has been assumed ... liability may be created by a negligent breach of duty.’”90
III. Standard on a Motion for Summary Judgment
Summary judgment is appropriate when the pleadings, the discovery, and any affidavits show
that “there is no genuine dispute as to any material fact and the movant is entitled to judgment as
a matter of law.”91 When assessing whether a dispute as to any material fact exists, the court
considers “all of the evidence in the record but refrains from making credibility determinations or
weighing the evidence.”92 All reasonable inferences are drawn in favor of the nonmoving party, but
“unsupported allegations or affidavits setting forth ‘ultimate or conclusory facts and conclusions of
law’ are insufficient to either support or defeat a motion for summary judgment.”93 The nonmoving
party may not rest upon the pleadings, but must identify specific facts in the record and articulate
the precise manner in which that evidence establishes a genuine issue for trial.94 If the record, as a
whole, could not lead a rational trier of fact to find for the non-moving party, then no genuine issue
of fact exists and the moving party is entitled to judgment as a matter of law.95
90
Id. at p. 6 (citation omitted).
91
Fed. R. Civ. P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322–23 (1986); Little v. Liquid Air
Corp., 37 F.3d 1069, 1075 (5th Cir. 1994).
92
Delta & Pine Land Co. v. Nationwide Agribusiness Ins. Co., 530 F.3d 395, 398–99 (5th Cir. 2008).
93
Galindo v. Precision Am. Corp., 754 F.2d 1212, 1216 (5th Cir. 1985); Little, 37 F.3d at 1075.
94
See, e.g., Celotex, 477 U.S. at 325; Ragas v. Tenn. Gas Pipeline Co., 136 F.3d 455, 458 (5th Cir. 1998).
95
Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 586 (1986).
16
IV. Law and Analysis
A.
Applicable Law
This Court’s subject matter jurisdiction was invoked pursuant to 28 U.S.C. § 1332, which
provides original jurisdiction over civil actions between citizens of different states where the matter
in controversy exceeds $75,000. As a federal court exercising diversity jurisdiction, it is “axiomatic”
that this Court must apply Louisiana law to resolve matters of substantive law presented in the
pending motion and “attempt to discern how Louisiana’s highest court would resolve the issues at
hand.”96 Although that doctrine is equally applicable when a federal court is “[a]ddressing an
unsettled area of Louisiana law,” federal courts should “avoid creating new rights and remedies in
Louisiana state law where [the court] lack[s] express statutory authority or clear directive from the
Louisiana Supreme Court.”97
B.
Analysis
Defendants argue that summary judgment is appropriate because Louisiana law does not
impose a duty on insurance agents to independently or spontaneously advise clients as to the correct
amount or type of insurance to best fit their needs. Plaintiffs do not seem to disagree with this
interpretation of the law.98 Instead, Plaintiffs contend that Defendants stood in a “special
relationship” with Plaintiffs and thereby owed them a heightened duty to advise, and that this
heightened duty was breached when Defendants allegedly misrepresented the terms of the Lexington
policy.99 The Court finds, accordingly, that Defendants’ independent or spontaneous duty to advise
96
In re Whitaker Const. Co. Inc., 411 F.3d 209, 209 n.4 (5th Cir. 2005) (citing Erie R. Co. v. Tompkins, 304
U.S. 64 (1938)).
97
Id.
98
Rec. Doc. 98 at p. 18.
99
Rec. Doc. 228 at p. 6-7.
17
is not at issue in this motion. However, what is at issue and disputed is whether Bentley owed
Plaintiffs a heightened duty of reasonable diligence.
1.
Whether Bentley owed Plaintiffs a heightened duty of reasonable diligence
Louisiana law does not recognize a duty owed by an insurance agent to spontaneously advise
or procure any specific type or amount of insurance coverage for a client.100 Rather, the
responsibility rests with the insured to read his policy and request the required coverage.101 In
Offshore Production Contractors, Inc. v. Republic Underwriters Insurance Company, a case upon
which Plaintiffs rely, the Fifth Circuit noted that:
Where an agent is familiar with the insured’s business, has reason to know the risks
against which an insured wants protection, and has experience with the types of
coverage available in a particular market, we must construe an undertaking to
procure insurance as an agreement by the agent to provide coverage for the client's
specific concerns.102
In Offshore, Peter Barbara, an insurance agent who specialized in servicing oil companies,
had worked with Offshore Production Contractors (OPC) for many years and had at least 30 years
of experience in the insurance industry. He met with OPC’s CEO and made recommendations for
the acquisition of a blanket builder’s risk policy which OPC later accepted on the condition that the
policy include a stand-by clause that would cover the company in case of downtime due to bad
weather. Barbara helped draft the policy which, after several revisions, ultimately did not include
the desired coverage. Suit was filed when OPC’s insurance claim was denied following losses
incurred due to inclement weather in the Gulf of Mexico which had effectively prevented OPC’s
100
Isidore Newman School v. J. Everett Eaves Inc. 2009-2161 (La. 7/6/10), 42 So. 3d 352.
101
Id.
102
Offshore Production Contractors, Inc. v. Republic Underwriters Insurance Company, 910 F.2d 224, 230,
(5th Cir.1990) (citations omitted).
18
operations there for nearly one month. The record indicated that Barbara did not provide OPC with
a copy of its policy until well after the occurrence of the incident on which its insurance claim was
based.103 Noting that OPC would not have acquired stand-by coverage if it did not include coverage
for potential weather delays, the court pointed out that during meetings with Barbara, OPC had
expressed concerns over coverage for bad weather and that Barbara had acknowledged those
expressions. Based on his actions and knowledge of OPC’s desires, the court found that Barbara’s
duties included “advising his client with regard to recommended coverage” and informing him when
the policy he procured did not cover “a specific risk about which the client expressed concern.”104
In this case, Plaintiffs allege that Plaintiffs and Defendants had acquired a special
relationship similar to that contemplated in Offshore. Plaintiffs argue that “[o]ver the years,
[Bentley] personally inspected [its] stores, undertook to determine the appropriate amounts and types
of coverage necessary for their protection, and knew of the risks against which Plaintiffs needed
protection.”105
The record indicates that Defendants had procured insurance for the Joplin properties under
their previous owners, Specialty.106 The record moreover indicates that Bentley considered himself
a “consultant”107 with “superior knowledge about the insurance.”108 Finally, Plaintiffs present
103
Offshore, 910 F.2d at 226–29.
104
Id. at 230–31.
105
Rec. Doc. 98 at p. 19.
106
Rec. Doc. 71–3 at p. 2.
107
Bentley deposition at p. 34
Q: So you are essentially, because of your experience and training, a consultant to your clients for
insurance purposes?
A: Yes.
108
Id. at p. 265-266
Q: –you acted as a consultant; correct?
A: Correct.
19
evidence that Bentley essentially selected certain provisions of Plaintiffs’ 2011-2012 insurance
package for them.109 However, Plaintiffs fail to point to evidence in the record that indicates that
they specifically asked Bentley to procure blanket coverage. In fact, the Court can find only
ambiguous references to what was, or was not, requested during the March 2011 meeting.110
Based on the totality of evidence presented, and taking the evidence in the light most
favorable to Plaintiffs, the Court finds that there is a genuine issue of material fact as to whether
Bentley voluntarily assumed a duty beyond acting with reasonable diligence to explain each policy
provision.
C.
Whether Plaintiffs may prevail against Defendants on a Negligent Misrepresentation
claim
Under Louisiana law, insurance agents have a duty to supply their customers with correct
information, and they may be liable for negligent misrepresentation when they provide incorrect
information and an insured is thereby damaged.111 At the same time, however, the client is
responsible for reading the policy received and for assessing the amount and type of coverage
needed.112 To establish negligent misrepresentation under Louisiana law, a plaintiff must prove
Q: You were giving them advice?
A: Correct.
Q: And the reason you could give them advice is because you had superior knowledge about the
insurance that you were handling for them?
A: Had knowledge about the program I was handling for them. That’s correct.
Q: Superior to them?
A: Absolutely
109
Id. at p. 76-77.
110
See Bastion deposition at p. 102 (Q: At this meeting do you recall if you or Mr. Bienvenu or Mr. Ashley
told Mr. Bentley that the Chubb policy had sub limits and you did not want that? A: I don’t recall. Q: Okay. You did not?
A: No.).
111
See, e.g., Venture Assocs. Inc. of La. v. Trans. Underwriters of La., 634 So.2d 4, 6–7 (La. Ct. App. 1994),
Plauche v. Auto Club Family Ins. Co., 2007 WL 519260 (E.D. La. Feb. 14, 2007).
112
Isidore, 42 So. 3d at 359.
20
three elements: (1) the defendant owed a duty to supply correct information, (2) the defendant
breached that duty, and (3) the plaintiff suffered damages resulting from justifiable reliance on the
misrepresentation.113
It is clear that Defendants, as an insurance agency, owed Plaintiff a duty to provide correct
information. It is less clear whether Defendants breached that duty. The Parties dispute whether
Bentley misrepresented the terms of the Policy to Plaintiffs. In denying that they warranted that the
policy would provide blanket coverage, Defendants contend that the written proposal does not use
the terms “blanket” or $10 million “per occurrence.”114 Defendants additionally point to the
deposition testimony of both Bastion and Ashley to support the contention that Bentley did not
warrant to Plaintiffs that the total insured values and the building limits were not applicable.115
However, both Bastion and Ashley testified that the values in the TIV column were not discussed
at all.116
Plaintiffs claim that Bentley did not use the term “blanket coverage” in the March 2011
meeting, but that Bentley represented that in the event of a covered event, the policy would provide
a “pool” of $10 million.117 Plaintiffs further point to deposition testimony by Bienvenu, Bastion and
113
Id. (citing Abbott v. Equity Grp., Inc., 2 F.3d 613, 624 n. 38 (5th Cir.1993)).
114
Rec. Doc. 115 at p. 3.
115
Rec. Doc. 71–3 at p. 8.
116
Bastion deposition at 99; Ashley deposition at 162. See also Bienvenue deposition at 143.
117
See Ashley deposition, pp. 142-43 (testifying that “what Bob Bentley said was in this discussion that he
felt like the $10 million, he said even if the Florida coast stores, if all those were destroyed, if your Mississippi coast
stores were totally destroyed, your Louisiana coastal stores were all destroyed, in Texas, if it was one storm that went
through that particular group and would wipe out all the stores, you would have enough coverage with the $10 million.”);
See also Bastion depoisition at p. 99, 4-9:
Q. Okay. What did you understand?
A. That I had a $10 million limit with an umbrella policy.
Q: Why did you presume that there was a $10 million limit?
A: Because that was what was discussed.).
21
Ashley alleging that Bentley did not explain or mention any “per location” limit on the insurance
or on recovery except the $10 million Limit of Liability.118 Finally, Plaintiffs refer to Bentley’s own
testimony that he did not read, and did not know, the details of the Lexington policy prior to the
meeting.119 Accordingly, the Court finds that the record indicates a genuine issue of material fact
regarding whether Bentley represented that the Lexington contract would provide blanket coverage.
The third element of negligent misrepresentation requires Plaintiffs to prove that they
suffered damages resulting from justifiable reliance on Defendants’ alleged misrepresentation.
Under Louisiana law, “[i]t is well settled that it is the insured’s obligation to read the policy when
received, since the insured is deemed to know the policy contents.”120 Accordingly, Louisiana courts
have held that an insured's reliance on an insurer's alleged misrepresentation is not justifiable when
the terms of the policy clearly reveal that the alleged misrepresentation was inaccurate.121 Here, there
is a genuine issue of material fact as to whether Plaintiffs’ reliance on Bentley’s representations was
justifiable.
The Fifth Circuit’s holding in Campo v. Allstate Ins. Co. is instructive.122 In that case,
Campo’s flood insurance policy expired and Allstate sent him a notice of the expiration, along with
the option of retroactive renewal. During the grace period, Campo’s property was destroyed by
118
Bienvenu Affidavit; Bienvenu deposition at p. 373; Bastion deposition at p. 282, 292; Ashley deposition
at p. 142-43.
119
Bentley deposition at p. 266.
120
Isidore Newman School v. J. Everett Eaves, Inc., 2009-2161 (La. 7/6/10), 42 So. 3d 352, 359.
121
See, e.g.,Campo v. Allstate Ins. Co., 440 F. App’x 298, 301 (5th Cir. 2011); City Blueprint & Supply Co.,
2008-1093 (La. App. 4 Cir. 12/17/08), 3 So. 3d 62, 67 (“City Blueprint's reliance on the [insurer's alleged] statement
to mean that it had flood insurance was unreasonable in light of the fact that the policy in this case specifically
contains a straightforward, uncomplicated, exclusion against damage caused by flood.”).
122
Campo v. Allstate Ins. Co., 440 F. App’x 298, 301 (5th Cir. 2011).
22
Hurricane Katrina. Campo filed a claim with Allstate, which issued Campo an advance check on the
policy. Two weeks after the grace period expired, Allstate notified Campo that his claim was denied
because the policy had lapsed prior to the Hurricane. The district court found that Campo had proven
all three elements of negligent misrepresentation by a preponderance of the evidence. The Fifth
Circuit, however, found that Campo was not justified in relying on any representation made by
Allstate when he failed to pay his insurance premium because the terms of his policy clearly
provided that he would be without coverage once his policy expired, unless he retroactively
reinstated that coverage by timely paying his renewal premium within the grace period.123
Here, unlike in Campo, evidence in the record suggests that Plaintiffs were not provided with
a copy of the Lexington or Axis policies until June 24, 2011, one month after the loss of the
properties.124 Plaintiffs contend that they therefore could not have reviewed the policy prior to the
destruction of the Joplin properties, and that previous policies would not have provided notice as
to the current year’s limitations for each location.125 On the other hand, Plaintiffs present no
evidence that they made any inquiry into the status or amount of its insurance coverage prior to the
May 2011 tornado, nor do they allege that they requested a copy of the insurance application.
Plaintiffs themselves point to Bienvenue’s deposition testimony stating that Plaintiffs trusted
Bentley’s assessments to the extent that Plaintiffs did not independently assess the values listed on
the schedule.126
123
Id.
124
Rec. Doc. 98 at p. 10.
125
Id. at p. 16.
126
Bienvenue deposition at pp. 43-44:
Q: Under the column titled Building, did the three companies, or I guess at that time the two
companies, perform any analysis to verify that thte values listed for each location were sufficient to
23
Defendants argue that the written insurance application executed by both Plaintiffs and
Defendants “unambiguously requests scheduled coverage with a total insured value for each
restaurant location and a total limit of $1.19 million for the two Joplin restaurants. The application
does not request blanket coverage.”127 However, Plaintiffs dispute Defendants’ interpretation of what
that document represented. The Court accordingly finds that a genuine issue of material fact exists
as to whether Plaintiffs’ reliance on Bentley’s alleged representations was justifiable.
3.
Whether Plaintiffs Claims Should be Dismissed Based on Statutory or Contract
Law
Defendants argue that Plaintiffs have already received the full amount of recovery allowed
under “Louisiana Valued Policy Law,” which “mandates that in the case of a total loss the insurer
shall compensate the insured at the value used to determine the premium.”128 Tthe VPL reads in
relevant part:
rebuild each location in the event of a total loss?
A: When we went to hire Upshaw, we hired Bob Bentley. Upshaw came with the package, but we
talked to Bob Bentley and we brought him in as a member of our team. So, before we did anything,
we talked to our accountant, our lawyer, and Bob Bentley. Bob Bentley would make suggestions to
us and we trusted him, must like we trust Darrell, I trust Scott, he trusts me. So, when they sent over
a spreadsheet of values like this (indicating), we didn’t dig into the values. We’ve always been told
from the beginning that he has a program, he puts information and it tells him what to – what to insure
things for. He represents construction companies and building owners around the country in 40 states.
He has superior knowledge, and I think he said – maybe it wasn’t in those terms, that he knows this
– he told us and I think maybe even in his deposition he mentioned that he knows construction all
around the country. We trusted him and we trusted his values.
Q: So, the answer to my question is no; correct, sir? No one in the three companies made any
assessment to verify that the values on this list were sufficient to rebuild any given location; is that
–
A: Correct.
127
Rec Doc. 115 (citing Rec. Doc. 71-23).
128
Rec. Doc. 71–3 at p. 17-19 (citing La. Rev. Stat. § 22:1318; Chauvin v. State Farm Fire & Cas. Co., 495
F.3d 232 (5th Cir. 2007)).
24
A. Under any fire insurance policy insuring inanimate, immovable property in this
state, if the insurer places a valuation upon the covered property and uses such
valuation for purposes of determining the premium charge to be made under the
policy, in the case of total loss the insurer shall compute and indemnify or
compensate any covered loss of, or damage to, such property which occurs during
the term of the policy at such valuation without deduction or offset, unless a
different method is to be used in the computation of loss, in which latter case, the
policy, and any application therefor, shall set forth in type of equal size, the actual
method of such loss computation by the insurer [.]129
Because the issue here is what method was to be used in the computation of loss, the Court finds
Defendants’ arguments pursuant to the VPL do not warrant summary judgment.
Defendants’ claims under contract law are unpersuasive. Defendants argue that “the law is
absolute that by signing the application signature page[,] the insureds are bound by the contents of
the insurance application.”130 However, Defendants’ interpretation of the case law is misleading.
For instance, Defendants cite Tweedel v. Brasseaux for the proposition that “[t]he presumption is
that parties are aware of the contents of writings to which they have affixed their signatures,” but
Defendants omit the remainder of that paragraph, which states that “[t]he burden of proof is upon
[Plaintiffs] to establish with reasonable certainty that they have been deceived.”131 Because Plaintiffs
have established a genuine issue of material fact with regard to whether Bentley misrepresented the
terms of the policy, Defendants’ contract argument is unavailing.
129
La. Rev. Stat. § 22:695 (emphasis added).
130
Rec. Doc. 71-3 at p. 20.
131
Tweedel v. Brasseaux, 433 So. 2d 133, 137 (La. 1983).
25
V. Conclusion
Plaintiffs have demonstrated that the evidence in the record shows genuine disputes of
material fact regarding whether Bentley owed a heightened duty of reasonable diligence to
Plaintiffs, whether Bentley misrepresented the terms of the Lexington policy, and whether Plaintiffs’
reliance on those alleged misrepresentations was justifiable. Accordingly,
IT IS HEREBY ORDERED that Defendants’ Motion for Summary Judgment on the Issue
of Liability132 is DENIED.
NEW ORLEANS, LOUISIANA, this ____ day of September, 2014.
_________________________________
NANNETTE JOLIVETTE BROWN
UNITED STATES DISTRICT JUDGE
132
Rec. Doc. 71.
26
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