Adventure Harbor Estates, LLC et al v. LeBlanc et al
Filing
190
ORDER denying 161 Motion for Summary Judgment. Signed by Judge Jay C. Zainey. (Reference: 12-2848, 13-142, 13-4925)(jrc)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
ADVENTURE HARBOR ESTATES, LLC,
ET AL.
CIVIL ACTION
VERSUS
NO: 12-1848 C/W 13-142
& 13-4925
MICHAEL A. LEBLANC, ET AL.
SECTION: "A" (5)
ORDER AND REASONS
The following motion is before the Court: Motion for Summary Judgment (Rec.
Doc. 161) filed by Allstate Insurance Co. Plaintiffs Michael and Mary Kaye LeBlanc oppose
the motion. The motion, noticed for submission on February 26, 2014, is before the Court on
the briefs without oral argument. For the reasons that follow, the motion is DENIED.
I.
BACKGROUND
These consolidated actions arise out of the attempted purchase of certain property
owned by Forty Acre Corporation and/or Mary Kaye and Michael LeBlanc. The property at
issue ("the Property") comprises approximately 80 acres located in Terrebonne Parish,
Louisiana. The principals of defendant Forty Acre are defendants, Mary Kaye and Michael
LeBlanc. The plaintiffs in the lead action (12-1848) are Adventure Harbor Estates, LLC,
Steven Serafin, and William McCollough.
According to the complaint, in January 2008 Plaintiffs entered into a Land Purchase
Agreement ("the Agreement") with Defendants for the purchase of the Property for
$1,930,000.00. (Comp.¶ A(1) {12-1848}). The Agreement required the LeBlancs to give
Adventure Harbor reasonable access to the Property to conduct inspections, tests, and
studies. (Id. ¶ 6).
During the course of the negotiations, Plaintiffs advised Defendants that the financing
company which was to provide the money to purchase the Property required a current
wetlands delineation to complete the analysis of the loan application. (Id. 7). Plaintiffs allege
that the LeBlancs assured them that a wetlands delineation had already been performed, and
that they would provide the appropriate documentation for the lender. (Id. ¶ 8). Plaintiffs
claim that the LeBlancs repeatedly delayed producing the wetlands document and when they
did produce it, the document was not a wetlands delineation. (Id. ¶¶ 8, 9). According to
Plaintiffs, Defendants then resisted their requests for full access to the Property for the
purpose of performing a complete wetlands study, and the lender eventually refused to allow
the transaction to close. (Id. ¶ 9). Plaintiffs assert that they were unable to obtain financing
because of Defendants' breaches of the Agreement and were damaged in excess of
$2,000,000.00 when the deal fell through. (Id. ¶ 12). Based on the foregoing, Plaintiffs' first
cause of action is for breach of contract. Plaintiffs allege that the LeBlancs acted outside the
scope of their corporate authority and that the corporation was their "alter ego," rendering
them personally liable on the breach of contract claim. (Id. ¶¶ A(1)-(2)).
Serafin and McCollough each assert a second cause of action for defamation and
malicious prosecution. The basis of this claim is that the LeBlancs filed criminal complaints
against Serafin and McCollough accusing them of stealing nearly $1,000,000.00 from the
LeBlancs in conjunction with the failed land deal. (Comp.¶¶ B(2), V(2) {12-1848}).
Prior to the filing of Civil Action 12-1848 in this Court, defendant Forty Acre filed for
bankruptcy protection in this district (Bankr. Case No. 11-10074). Adventure Harbor, Serafin,
and McCollough filed an adversary complaint (Adv. Pro. No. 12-1043) against Forty Acre in
the bankruptcy proceedings. The allegations in the adversary complaint were nearly identical
to those being asserted in Civil Action 12-1848. The Court granted Plaintiffs' motion to
withdraw the reference to the bankruptcy court, and the adversarial complaint was allotted as
Civil Action 13-142, which this Court then consolidated with Civil Action 12-1848.
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Meanwhile the LeBlancs and Forty Acre/The Forty Acre Corporation Plan Trust1 filed
suit against Robert Morris Cook, Serafin, and McCollough in state court. Cook is alleged to
have absconded with $900,000.00 in loan proceeds that he obtained by mortgaging a portion
of the LeBlancs' property. The LeBlancs had transferred a portion of the Property to Cook and
his corporation, C&R, so that Cook could confect a financing deal to enable Serafin and
McCollough to purchase the entirety of the property. McCollough removed that suit to this
Court as Civil Action 13-4925, which this Court then consolidated with the lead case.
During the course of the litigation the LeBlancs filed third party demands against
Certain Underwriters at Lloyd's of London (Rec. Doc. 52) and Allstate Insurance Co. (Rec.
Doc. 94). Allstate issued a homeowner's policy to the LeBlancs, naming as insureds Michael
A. LeBlanc and Mary Kaye LeBlanc (Id. ¶ III). Allstate initially agreed to provide a defense
under a reservation of rights. (Id. ¶ IV).
Via the instant motion Allstate now moves for summary judgment on the questions of
coverage and its duty to defend. The crux of Allstate's argument is that the causes of action
being asserted against the LeBlancs arise from business pursuits and/or intentional acts,
which foreclose coverage under the policy. According to Allstate, the pleadings clearly and
unambiguously preclude coverage so that Allstate has no duty to defend the LeBlancs.
Accordingly, Allstate seeks to be dismissed from this case as a matter of law.
In opposition, the LeBlancs point out that Plaintiffs have sued them individually for
conduct that allegedly kept the sale of the Property from coming to fruition. The LeBlancs
argue that the policy's business pursuits exclusion should not apply when they are sued
As noted above, Forty Acre filed for Chapter 11 bankruptcy protection prior to the
commencement of litigation in district court. The Confirmation Order directed Forty Acre to
transfer certain assets, including the Terrebonne Parish land and Forty Acre's causes of action,
to The Forty Acre Corporation Plan Trust. (Rec. Doc. 1-2 {13-4925}).
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individually. As for the intentional acts exclusion vis à vis the defamation claim, the LeBlancs
argue that Allstate should not be able to use this exclusion to evade coverage in a situation
where the LeBlancs themselves might have been guilty of a felony had they not contacted law
enforcement about Plaintiffs' possible involvement with the fraudulent scheme to abscond
with the loan proceeds.
II.
DISCUSSION
Summary judgment is appropriate only if "the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if any," when viewed in
the light most favorable to the non-movant, "show that there is no genuine issue as to any
material fact." TIG Ins. Co. v. Sedgwick James, 276 F.3d 754, 759 (5th Cir. 2002) (citing
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50 (1986)). A dispute about a material
fact is "genuine" if the evidence is such that a reasonable jury could return a verdict for the
non-moving party. Id. (citing Anderson, 477 U.S. at 248). The court must draw all justifiable
inferences in favor of the non-moving party. Id. (citing Anderson, 477 U.S. at 255). Once the
moving party has initially shown "that there is an absence of evidence to support the nonmoving party's cause," Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986), the non-movant
must come forward with "specific facts" showing a genuine factual issue for trial. Id. (citing
Fed. R. Civ. P. 56(e); Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 587 (1986)).
Conclusional allegations and denials, speculation, improbable inferences, unsubstantiated
assertions, and legalistic argumentation do not adequately substitute for specific facts
showing a genuine issue for trial. Id. (citing SEC v. Recile, 10 F.3d 1093, 1097 (5th Cir. 1993)).
It is a fundamental tenet of Louisiana law that an insurer's duty to defend its insured
against suits is broader than its obligation to provide coverage (indemnification for damage
claims). See, e.g., Henly v. Phillips Abita Lumber Co., 971 So. 2d 1104, 1109 (La. App. 1st Cir.
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2007) (citing Yount v. Maisano, 627 So. 2d 148, 153 (La. 1993)); Alombro v. Salman, 536 So.
2d 764, 766 (La. App. 5th Cir. 1988) (citing Meloy v. Conoco, Inc., 504 So. 2d 833 (La. 1987)).
The duty to defend, unlike the ultimate issue of coverage for liability, is determined solely by
the factual allegations of the injured plaintiff's petition. Alombro, 536 So. 2d at 766. Pursuant
to the "eight-corners rule," the insurer must look solely to the four corners of the plaintiff's
petition and to the four corners of its policy to determine whether it owes a duty to defend.
Henly, 971 So. 2d at 1109 (citing Vaughn v. Franklin, 785 So. 2d 79 (La. App. 1st Cir. 2001)).
The duty to defend is triggered unless the allegations in the complaint unambiguously
exclude coverage under the policy. Alert Centre, Inc. v. Alarm Protection Servs., Inc., 967
F.2d 161, 163 (5th Cir. 1992) (citing Meloy, 504 So. 2d at 838). Thus, assuming the factual
allegations of the petition to be true, if there could be both 1) coverage under the policy, and
2) liability to the plaintiff, then the insurer must defend the insured regardless of the outcome
of the suit. Henly, 971 So. 2d at 1109 (citing Prestage v. Clark, 723 So. 2d 1086, 1092 (La.
App. 1st Cir. 1998)). Moreover, if the complaint alleges a single claim against the insured that
is covered by the policy, then the insurer must defend the entire lawsuit, even those claims
clearly excluded from coverage. Id. (citing Montgomery Elev. Co. v. Bldg. Eng’g Servs. Co.,
730 F.2d 377, 382 (5th Cir. 1984).
For purpose of evaluating the possibility of coverage under the policy, several
important principles of Louisiana law apply. First, an insurance policy is a contract between
the insured and the insurer and it has the effect of law between the parties. Hudson v. Jager
Bomb, LLC, 107 So. 3d 712, 715 (La. App. 2d Cir. 2012). Because an insurance policy is a
contract, the rules established for the construction of written instruments apply to contracts
of insurance. Id. The parties’ intent, as reflected by the words of an insurance policy,
determines the extent of coverage, and the intent is to be determined in accordance with the
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plain, ordinary, popular sense of the language used in the policy, unless the words have
acquired a technical meaning. Id. (citing Washington v. McCauley, 62 So. 3d 173 (La. App.
2d Cir. 2011)).
Second, the insurer has the sole burden of establishing that an exclusion to coverage
applies. Veuleman v. Mustang Homes, LLC, 110 So. 3d 572 (La. 2013) (citing Blackburn v.
Nat’l Union Fire Ins. Co., 784 So. 2d 637, 641 (La. 2001)). Moreover, when an exclusion has
an exception to it that would allow coverage, the insurer relying on the exclusion has the
burden of proving that the exception is not met. Id.
Next, when a policy of insurance contains a definition of any word or phrase, its
definition is controlling. Smith v. Reliance Ins. Co., 807 So. 2d 1010, 1020 (La. App. 5th Cir.
2002) (citing Zanca v. Breaux, 590 So. 2d 821, 824 (La. App. 4th Cir. 1991)). When the
definition is susceptible to more than one reasonable interpretation, it is ambiguous and must
be construed in favor of coverage. Id. (citing McCarthy v. Berman, 668 So. 2d 721, 726 (La.
1996)). Finally, a policy exclusion must be clearly stated and any ambiguity as to the
applicability of a policy exclusion must be interpreted in favor of coverage. Mistich v. Weeks,
107 So. 3d 1, 6 (La. App. 3d Cir. 2012) (quoting La. Maint. Servs., Inc. v. Certain
Underwriters at Lloyd’s, 616 So. 2d 1250, 1252 (La. 1993)).
With these principles in mind the Court turns its attention to the "four corners" of
Allstate's policy and the "four corners" of Plaintiffs' complaint against the LeBlancs. Allstate
has identified (Rec. Doc. 161-3 at 5) the pertinent insuring provision of its policy:
Losses We Cover
We will pay all sums arising from the same loss which an insured person
becomes legally obligated to pay as damages because of bodily injury or
property damage covered by this part of the policy.
(Allstate Exhibit 19, ALL 00613) (emphasis in original).
Allstate does not argue that the claims being asserted against the LeBlancs fall outside
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of this insuring agreement. Thus, the possibility of coverage vel non turns on the policy's
various exclusions. Allstate argues that two of the policy's exclusions are triggered and
preclude the possibility of coverage under the facts alleged. The first is the "intentional acts"
exclusion:
We do not cover any bodily injury or property damage which may reasonably
be expected to result from the intentional or criminal acts of an insured person
or which is in fact intended by an insured person.
(Allstate Exhibit 19, ALL 00613) (emphasis in original). The second exclusion is the "business
pursuits" exclusion:
We do not cover any bodily injury or property damage arising out of the
business pursuits of an insured person. We do cover:
a)
activities normally considered non-business . . . .
(Allstate Exhibit 19, ALL 00614) (emphasis in original). The policy defines "business" in
pertinent part as "any trade, profession or occupation . . . . Id. at ALL 00602.
Serafin's and McCollough's defamation claims against the LeBlancs are based on the
LeBlancs filing criminal complaints against Serafin and McCollough accusing them of
conspiring to steal $1,000,000.00. (Rec. Doc. 24 at ¶¶ B(2), V(2)). Both plaintiffs were
charged with a felony as a result of the LeBlancs' complaints and they claim numerous
elements of damages as a result of the criminal cases against them. Allstate's arguments of
privilege notwithstanding, the LeBlancs face potential liability on this claim.
As for the potential for coverage, the Court finds Allstate's arguments in support of
applying the two exclusions to the defamation claim to be wholly unpersuasive in the context
of its duty to defend. Allstate's argument for applying the intentional act exclusion is that the
LeBlancs intended to have Serafin and McCollough arrested, which would undoubtedly cause
them damages. Allstate's policy does not define "intentional" yet Allstate's position suggests
that "intentional" would mean the same thing as "voluntary". (Rec. Doc. 161-4, Allstate
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Memorandum in Support at 7). While common sense would dictate that one who files charges
with the district attorney would intend for an arrest to occur, it does not necessarily follow
that any type of intentional injury was intended—the type of intentional injury that an
insured should not be allowed to inflict with impunity knowing that his insurer will "pay the
piper" for the damages. See, e.g., Alombro, 536 So. 2d at 766 (explaining the concept of
"intentional" injury). Many voluntary acts, such as driving a car, can lead to unintentional
and unforeseen injuries but those acts do not automatically become "intentional" for
purposes of a policy exclusion. For purposes of ultimately determining coverage for liability,
Allstate may very well be able to meet its burden of proving the applicability of the intentional
act exclusion but on the basis of the pleadings alone the possibility of coverage cannot be
rejected outright.
Allstate's arguments for applying the business pursuits exclusion to the defamation
claim are likewise unpersuasive. The policy's definition of "business" controls, yet nothing in
Plaintiffs' complaint suggests that the LeBlancs' dealings with selling the land involved "any
trade, profession or occupation." Allstate's contention that Michael LeBlanc's sole
employment since 1994 had been with Forty Acres, (Rec. Doc. 161-3, Allstate's Undisputed
Facts ¶ 21), is based on facts learned via discovery, not on anything in the complaint, and of
course this contention says nothing regarding Mary Kaye's employment and whether the
business pursuits exclusion would apply to her.2 Moreover, the business pursuits exclusion
has an exception for activities normally considered non-business. Under Louisiana law
Allstate has the burden of proving that this exception to the business pursuits exclusion is not
Michael LeBlanc admits that his sole employment since 1994 has been with Forty Acre
as its president and manager. (Rec. Doc. 174-1, Responses to Allstate's Undisputed Facts). Thus,
it will be difficult for him to obtain escape the business pursuits exclusion when coverage is
ultimately determined.
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met. See Veuleman, 110 So. 3d at 641. Meeting with the local law enforcement authorities to
report a crime would arguably seem like an activity normally considered non-business in
nature.
In sum, because the policy and the complaint do not foreclose the possibility of
coverage, at least as to the defamation claim, and certainly not the possibility of liability,
Allstate's duty to defend is triggered. Therefore, Allstate owes the LeBlancs a defense for all
claims asserted in the action, including those for which coverage might ultimately be
unavailable. Allstate's motion for summary judgment is DENIED as to the duty to defend.
The motion is likewise DENIED as to coverage because the Court finds the coverage
issue to be premature and/or incapable of being determined as a matter of law. For instance,
the applicability of the intentional act exception may very well turn on findings by the trier of
fact regarding the LeBlancs' intent behind certain acts.
Accordingly, and for the foregoing reasons;
IT IS ORDERED that the Motion for Summary Judgment (Rec. Doc. 161)
filed by Allstate Insurance Co. is DENIED.
April 9, 2014
_______________________________
JAY C. ZAINEY
UNITED STATES DISTRICT JUDGE
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