Bridgefield Casualty Insurance Company v. River Oaks Management, Inc.
Filing
51
ORDER AND REASONS granting Plaintiff's 21 Motion for Summary Judgment; denying Defendant's 23 Motion for Summary Judgment. Signed by Judge Jane Triche Milazzo on 10/7/2013. (ecm, )
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
BRIDGEFIELD CASUALTY INSURANCE COMPANY
CIVIL ACTION
VERSUS
NO: 12‐2336
RIVER OAKS MANAGEMENT, INC
SECTION: “H”(3)
ORDER AND REASONS
Before the Court are Cross‐Motions for Summary Judgment (Docs. 21 & 23). For the
following reasons, Plaintiff's Motion is GRANTED and Defendant's Motion is DENIED.
BACKGROUND
Bridgefield Casualty Insurance Company filed this action for declaratory judgment seeking
a declaration that a Louisiana workers compensation insurance policy sold to River Oaks
Management, Inc. does not provide coverage for an accident which occurred in Mississippi. River
1
Oaks is an apartment management firm which, until 2011, operated exclusively in Louisiana.
Bridgefield first began writing workers compensation insurance policies for River Oaks in 2005.
Each policy was written for a term of one calendar year and contained a declaration page which
indicated that the policy provided workers compensation insurance for the state of Louisiana.
Beginning in 2006, the declarations pages noted the policies included “Other States” coverage for
nine additional states, including Mississippi. Part Three of the policy provides that if River Oaks
begins work during any policy year in a listed “Other State," that policy will provide workers
compensation coverage for work performed in the "Other State" during that same policy year. Part
Three also provides that, if River Oaks "has work" in a listed “Other State” on the first day of a
policy period, the policy will not provide workers compensation coverage for work performed in
that state during that policy year unless River Oaks notifies Bridgefield of the work within 30 days
of the effective date of the policy (January 31st). In other words, if River Oaks starts work in an
"Other State" anytime after January 1 of a policy year, that work will be covered by the policy. On
the other hand, if River Oaks has ongoing work in an "Other State" on January 1 of any policy year,
the notification provision applies.
On September 30, 2011, River Oaks contracted with an apartment complex in Mississippi
to provide apartment management services. River Oaks subsequently contracted with two other
Mississippi apartment complexes in the fall of 2011. On June 8, 2012, a River Oaks employee fell
down a ladder at one of River Oaks's Mississippi locations, sustaining severe injuries. River Oaks
2
filed a claim with Bridgefield and Bridgefield promptly issued a Reservation of Rights letter in which
they reserved their rights to deny coverage for the accident. On September 21, 2012, Bridgefield
filed this action seeking a declaration that the policy did not provide coverage for the accident.
Both parties have moved for Summary Judgment.
LEGAL STANDARD
Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories,
and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any
material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ.
P. 56(c) (2012). A genuine issue of fact exists only "if the evidence is such that a reasonable jury
could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986).
In determining whether the movant is entitled to summary judgment, the Court views facts
in the light most favorable to the non‐movant and draws all reasonable inferences in his favor.
Coleman v. Houston Indep. Sch. Dist., 113 F.3d 528 (5th Cir. 1997). "If the moving party meets the
initial burden of showing that there is no genuine issue of material fact, the burden shifts to the
non‐moving party to produce evidence or designate specific facts showing the existence of a
genuine issue for trial." Engstrom v. First Nat’l Bank of Eagle Lake, 47 F.3d 1459, 1462 (5th Cir.
1995). Summary judgment is appropriate if the non‐movant "fails to make a showing sufficient to
3
establish the existence of an element essential to that party’s case." Celotex Corp. v. Catrett, 477
U.S. 317, 324 (1986). "In response to a properly supported motion for summary judgment, the
nonmovant must identify specific evidence in the record and articulate the manner in which that
evidence supports that party’s claim, and such evidence must be sufficient to sustain a finding in
favor of the nonmovant on all issues as to which the nonmovant would bear the burden of proof
at trial." John v. Deep E. Tex. Reg. Narcotics Trafficking Task Force, 379 F.3d 293, 301 (5th Cir. 2004)
(internal citations omitted). "This burden is not satisfied with some metaphysical doubt as to the
material facts, by conclusory allegations, by unsubstantiated assertions, or by only a scintilla of
evidence. We resolve factual controversies in favor of the nonmoving party, but only when there
is an actual controversy, that is, when both parties have submitted evidence of contradictory
facts." Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (internal citations omitted). "We
do not . . . in the absence of any proof, assume that the nonmoving party could or would prove the
necessary facts." Badon v. R J R Nabisco, Inc., 224 F.3d 382, 394 (5th Cir. 2000) (quoting Little v.
Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994)). Additionally, "[t]he mere argued existence of
a factual dispute will not defeat an otherwise properly supported motion." Boudreaux v. Banctec,
Inc., 366 F. Supp. 2d 425, 430 (E.D. La. 2005).
LAW AND ANALYSIS
In this diversity case, Louisiana law controls. Seacor Holdings, Inc. v. Commonwealth Ins.
4
Co., 635 F.3d 675, 681 (5th Cir. 2011). Louisiana law governing the interpretation of insurance
contracts is well settled. "An insurance policy is a contract between the parties and should be
construed by using the general rules of interpretation of contracts set forth in the Louisiana Civil
Code." Mayo v. State Farm Mut. Auto. Ins. Co., 869 So. 2d 96, 99 (La. 2004). "When the words of
a contract are clear and explicit and lead to no absurd consequences, no further interpretation may
be made in search of the parties' intent." La. Civ. Code art. 2046. "An insurance policy should not
be interpreted in an unreasonable or a strained manner so as to enlarge or to restrict its provisions
beyond what is reasonably contemplated by its terms or so as to achieve an absurd conclusion."
Carrier v. Reliance Ins. Co., 759 So. 2d 37, 43 (La. 2000). "The rules of construction do not authorize
a perversion of the words or the exercise of inventive powers to create an ambiguity where none
exists or the making of a new contract when the terms express with sufficient clarity the parties'
intent." Mayo, 869 So. 2d at 99–100. "The determination of whether a contract is clear or
ambiguous is a question of law." Cadwallader, 848 So.2d at 580.
The workers compensation policy at issue provides two distinct coverages for workers
compensation injuries. The first, referred to in the policy as 3A coverage, is the primary coverage
under the policy. River Oaks' policy provides 3A coverage only for injuries which occur in Louisiana.
The parties agree that the 3A coverage does not provide coverage for the instant dispute. The
second coverage, referred to as 3C coverage or "Other States Insurance," provides coverage for
injuries which occur in certain designated states outside of Louisiana, including Mississippi. Part
5
Three of the policy governs the Other States coverage and provides:
PART THREE
OTHER STATES INSURANCE
A. How This Insurance Applies
1. This other states insurance only applies if one or more
states are shown in Item 3.C. of the Information page.
2. If you begin work in any one of those states after the
effective date of this policy and are not insured or are not
self‐insured for such work, all provisions of the policy will
apply as though that state were listed in item 3.A. of the
Information Page.
3. We will reimburse you for the benefits required by the
workers compensation law of that state if we are not
permitted to pay the benefits directly to persons entitled to
them.
4. If you have work on the effective date of this policy in any
state not listed in Item 3.A. of the Information Page,
coverage will not be afforded for that state unless we are
notified within thirty days.
B. Notice
Tell us at once if you begin work in any state listed in Item 3.C. of the
Information Page.
Bridgefield argues that section A.4. of Part Three operates to exclude coverage for this
injury. Bridgefield alleges that River Oaks "had work" in Mississippi on the effective date of the
policy (January 1, 2012) and that River Oaks failed to notify Bridgefield within 30 days (on or before
January 31). River Oaks admits that it had work in Mississippi on the effective date of the policy,
6
and that it failed to notify Bridgefield within 30 days. Therefore, Bridgefield has met its burden on
this Motion to show that there is no genuine dispute of material fact. The Court further finds that
the relevant policy language is clear and unambiguous and must be applied as written. Because
River Oaks failed to notify Bridgefield that it was working in Mississippi within 30 days of the
effective date of the policy, the policy expressly excludes coverage for the instant claim.
Having found that Bridgefield has met its burden on this Motion, the Court turns to River
Oaks' arguments in opposition to the motion. River Oaks claims that the policy is unenforceable
under Louisiana Law, and that Bridgefield is estopped from denying coverage. Each of these
arguments will be examined in turn.
River Oaks argues that the relevant policy provision is unenforceable based on La. Rev. Stat.
§ 22:860, which provides (as pertinent here) “no oral or written misrepresentation or warranty
made in the negotiation of an insurance contract, by the insured or in his behalf, shall be deemed
material or defeat or void the contract or prevent it attaching, unless the misrepresentation or
warranty is made with the intent to deceive.” This statute, referred to in the jurisprudence as an
“anti‐technical statute,” prevents an insurance company from voiding an entire insurance contract
based on alleged fraud on the part of the insured unless the insurer meets a heightened burden
of proof imposed by the statute. River Oaks’ assertion that the statute applies in this matter is
misplaced. Several courts, including the U.S. Fifth Circuit, have held that this statute only applies
where the insurer is attempting to nullify an entire insurance policy. It is not applicable where, as
7
here, the insurer is only relying on an exclusion contained within the policy. See Stream v. Aetna
Cas. & Sur. Co., 608 So. 2d 260, 262‐63 (La. App. 3 Cir. 1992) (citing Prof'l Managers, Inc. v. Fawer,
Brian, Hardy & Zatzkis, 799 F.2d 218, 224‐25 (5th Cir. 1986)).
This case does not fall into the category of cases to which §860 applies. Bridgefield is not
seeking to void the entire worker’s compensation policy. Instead, Bridgefield asks this Court to
hold that the policy, by its plain text, excludes coverage for one specific claim. As such Bridgefield
is not held to the heightened standard of §860.
River Oaks next argues that Bridgefield is estopped from denying coverage because it later
accepted premiums which were calculated, in part, based on Mississippi salaries. Since the
premiums for the workers compensation insurance policy at issue were based on the total payroll
of River Oaks in a given year, Bridgefield would conduct annual payroll audits. These audits, which
usually occurred in the spring, would review the final payroll numbers from the previous year.
Throughout a given policy year, River Oaks would pay premiums which were estimated based on
the prior year's payroll. After the audit, Bridgefield would calculate the final premium for the
previous year, and issue a refund or invoice accordingly.
River Oaks' argument focuses on a payroll audit which occurred in March of 2012. During
the audit, a contractor of Bridgefield inspected some of River Oaks' payroll records for the 2011
calendar year. River Oaks alleges that the payroll numbers which were provided to the auditor
included the wages of Mississippi employees. River Oaks argues that the estimated policy premium
8
payments for 2012 were based (in part) on Mississippi wages. Thus, it claims that Bridgefield is
estopped from denying coverage for Mississippi workers because Bridgefield accepted premiums
which were partially based on Mississippi payroll. To support its argument River Oaks cites to
Alliance Gen. Ins. Co. v. Louisiana Sheriff's Auto. Risk Program, 52 F. Supp. 2d 711 (E.D. La. 1999).
Alliance General applied the long‐standing jurisprudential rule that an insurer who accepts
premiums after receiving information that creates a privilege of forfeiture of coverage waives the
right to subsequently contest that coverage. Id. at 719.
In order for this argument to have merit, River Oaks would have to demonstrate that
Bridgefield received information which gave them the right to cancel the policy, and that
Bridgefield continued to accept premiums after receiving that information. Based on the evidence
submitted by both parties, there is a genuine dispute of fact as to whether Bridgefield received
information at the March audit from which it could conclude that River Oaks was operating in
Mississippi. However, this fact is not material, because the knowledge that River Oaks was doing
work in Mississippi would not have given Bridgefield the right to cancel the policy. The policy does
not contain a provision which allows cancellation of the policy if River Oaks performs work in other
states. Instead, it contains an exclusion of coverage for claims based on work performed in other
states under certain circumstances. Because Bridgefield never had the right to cancel the entire
policy, the rule of Alliance General is not applicable.
Finally, River Oaks argues that Bridgefield is estopped from denying coverage for this
9
accident because Bridgefield has already paid a portion of the claim. This defense has no merit.
On July 24, 2012, Bridgefield issued a Reservation of Rights letter to River Oaks. As such,
Bridgefield's payments were made pursuant to that letter. It is a well–settled principle of insurance
law that a timely reservation of rights does not operate to waive the insurer's coverage defenses.
See, e.g., Arceneaux v. Amstar Corp., 969 So. 2d 755, 768 (La. Ct. App. 4th Cir. 2007) ("A prompt
reservation of rights letter serves the purpose of negating the inference of a voluntary
relinquishment of a known right to contest coverage.").
As discussed above, there is no dispute that River Oaks was doing work in Mississippi on the
effective date of the workers compensation policy, and that River Oaks failed to notify Bridgefield
of that work within 30 days of the effective date of the policy. For that reason, under the clear and
unambiguous terms of the policy, there is no coverage for the claim as issue in this suit.
CONCLUSION
10
For the foregoing reasons, Plaintiff's Motion (Doc. 21) is GRANTED and Defendant's Motion
(Doc. 23) is DENIED.
New Orleans, Louisiana, this __ day of October, 2013.
7th
____________________________
JANE TRICHE MILAZZO
UNITED STATES DISTRICT JUDGE
11
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?