Bartlett Construction, LLC v. Surface Specialties, LLC et al

Filing 33

ORDER denying 25 Motion to Dismiss for Failure to State a Claim. Signed by Judge Mary Ann Vial Lemmon on 12/18/13. (cbn)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
BARTLETT CONSTRUCTION, LLC

CIVIL ACTION

VERSUS

NO: 13-3738

SURFACE SPECIALTIES, LLC AND
EMPLOYERS MUTUAL CASUALTY
COMPANY D/B/A EMC INSURANCE
COMPANY

SECTION: "S" (2)

ORDER AND REASONS
IT IS HEREBY ORDERED that Employers Mutual Casualty Company's Rule 12(b)(6)
Motion to Dismiss for Failure to State a Claim (Doc. #25) is DENIED.
BACKGROUND
This matter is before the court on a motion to dismiss plaintiff's claim for breach of contract
and statutory penalties for failure to state a claim pursuant to Rule 12(b)(6) of the Federal Rules of
Civil Procedure filed by defendant, Employers Mutual Casualty Company. Employers Mutual
argues that plaintiff's claims against it should be dismissed because plaintiff, Bartlett Construction,
LLC, does not specifically allege that Employers Mutual provided coverage for Bartlett's claim
against its insured, co-defendant Surface Specialties, LLC, and statutory penalties are not available
to Bartlett.
In February 2012, Woodward Design + Build, L.L.C. hired Bartlett as a subcontractor to do
concrete work on an "auto court," a large parking area with elaborate colored concrete designs, for
a residence in Covington, Louisiana. Bartlett subcontracted the work to Surface Specialties. The
contract in which Surface Specialties agreed to construct and finish the auto court also provided that
Surface Specialties would provide proof of commercial general liability insurance. Surface
Specialties procured the required insurance from Employers Mutual.

Bartlett alleges that after Surface Specialties finished its work, around April 23, 2012,
patches of discolored concrete began appearing on the troweled area of the auto court. The patches
grew. Bartlett discovered that the concrete in these areas was not curing, and retained a tacky, puttylike "wet" consistency. Bartlett and the concrete supplier obtained samples of the affected areas to
determine if the materials were defective. The tests revealed that the samples failed to properly cure
because the concrete had come in contact with "a solution (possibly gasoline) that was introduced
to the surface of the concrete either during or shortly after finishing operations." The homeowner
refused to accept the defective work, forcing Bartlett to remove and rebuild the auto court.
Bartlett filed this suit alleging that Surface Specialties caused the damage.1 Bartlett alleges
that Surface Specialties had exclusive control over the affected areas at the relevant times, and that
it used a petroleum-powered auto trowel to finish the auto court. Bartlett alleges that Surface
Specialties refueled the trowel on or near the auto court which "was the only identifiable source of
the spillage that could have caused the concrete to retard."
Bartlett also brought claims against Employers Mutual, including claims for penalties under
Louisiana Revised Statutes §§ 22:1892 and 22:1973, alleging that it filed a claim with Employers
Mutual, and provided "information and documents sufficient to establish Bartlett Construction's
losses and Surface Specialties' responsibility for those losses." Bartlett claims that Employers
Mutual failed to properly investigate and adjust the claim, but "engaged in confrontational tactics

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In its original complaint and first amended complaint, Bartlett alleged tort claims against Surface
Specialties. After Surface Specialties filed a motion to dismiss based on prescription, Bartlett filed its second
amended complaint alleging claims of breach of contract and defective workmanship against Surface
Specialties.

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in an effort to intimidate Bartlett Construction," and "misrepresented certain facts pertaining to the
reason for the removal and reinstallation of the auto court."
Employers Mutual filed the instant motion to dismiss arguing that Bartlett has not stated a
claim against it because Bartlett did not allege that Surface Specialties' insurance policy with
Employers Mutual covered the allegedly defective work. Employers Mutual also argues that
Bartlett, as a third-party claimant, cannot maintain a claim against it for penalties under La. Rev.
Stat. § 22:1892, and has failed to file a satisfactory proof of loss as required by the statute. Further,
Employers Mutual contends that Bartlett cannot maintain a claim for penalties under La. Rev. Stat.
§ 22:1973 because it has not alleged that Employers Mutual breached a specific duty listed in
subsection B of that statute.
ANALYSIS
A.

Legal Standard
Rule 12(b)(6) of the Federal Rules of Civil Procedure permits a motion to dismiss a

complaint for failure to state a claim upon which relief can be granted. To survive a Rule 12(b)(6)
motion to dismiss, enough facts to state a claim for relief that is plausible on its face must be
pleaded. In re Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007) (quoting Bell Atl.
v. Twombly, 127 S.Ct. 1955, 1964-65 & 1973 n. 14 (2007)). A claim is plausible on its face when
the plaintiff pleads facts from which the court can “draw the reasonable inference that the defendant
is liable for the misconduct alleged.” Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). “Factual
allegations must be enough to raise a right to relief above the speculative level, on the assumption
that all the allegations in the complaint are true (even if doubtful in fact).” Bell Atl., 127 S.Ct. at
1965. The court “must accept all well-pleaded facts as true and view them in the light most

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favorable to the non-moving party.” In re S. Scrap Material Co., LLC, 541 F.3d 584, 587 (5th Cir.
2008). However, the court need not accept legal conclusions couched as factual allegations as true.
Iqbal, 129 S.Ct. at 1949-50. In considering a motion to dismiss for failure to state a claim, a district
court may consider only the contents of the pleading and the attachments thereto. Collins v. Morgan
Stanley Dean Witter, 224 F.3d 496, 498 (5th Cir. 2000) (citing FED. R. CIV. P. 12(b)(6)).
B.

Sufficiency of the Complaint
Employers Mutual argues that Bartlett's claims against it should be dismissed because

Bartlett did not allege that Surface Specialties' insurance policy with Employers Mutual covered
the allegedly defective work.
Rule 8(a)(2) of the Federal Rules of Civil Procedure states that pleadings must contain a
short and plain statement of the claim showing that the pleader is entitled to relief. To comply with
Rule 8(a)(2) a plaintiff does not need to plead specific facts, but only “‘give the defendant fair notice
of what the . . . claim is and the grounds upon which it rests.’” Bell Atl. Corp. v. Twombly, 127 S.Ct.
1955 (2007) (quoting Conley v. Gibson, 78 S.Ct. 99, 103 (1957)). Further, if a complaint alleges
facts upon which relief can be granted, the form is not important, even if it does not correctly
categorize the legal theory giving rise to the claim. Peavy v. WFAA-TV, Inc., 221 F.3d 158, 167
(5th Cir. 2000) (citing Dussouy v. Gulf Coast Inv. Corp., 660 F.2d 594, 604 (5th Cir. 1981)).
In its second amended complaint, Bartlett alleges Surface Specialties procured the
commercial general liability insurance required by their contract from Employers Mutual, and that
when Bartlett concluded that Surface Specialties caused the problem with the concrete, it made a
claim to Employers Mutual, providing "information and documents sufficient to establish Bartlett's
losses and Surface Specialties' responsibility for those losses." Bartlett's complaint meets the

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pleading requirements of Rule 8(a)(2) because these allegations give Employers Mutual fair notice
of Bartlett's claims against it regarding its coverage of Surface Specialties' work. Therefore,
Employers Mutual's motion to dismiss is DENIED as to Bartlett's breach of contract claim.
C.

Penalties Under La. Rev. Stat. § 22:1892
1. Bartlett's Ability to Make a Claim for Penalties Under § 22:1892 as a Matter of
Law
Employers Mutual, relying on ANF Partners #1 v. Lexington Ins. Co., 2007 WL 1191227

(E.D. La. 4/23/2007) (Feldman, J.), and Woodruff v. State Farm Ins. Co., 767 So.2d 785 (La. Ct.
App. 2000), argues that Bartlett, a third-party claimant, cannot recover penalties under La. Rev. Stat.
§ 22:1892, as a matter of law.
La. Rev. Stat. § 22:1892 provides, in pertinent part:
A. (1) All insurers issuing any type of contract, other than those specified in R.S.
22:1811, 1821, and Chapter 10 of Title 23 of the Louisiana Revised Statutes of 1950,
shall pay the amount of any claim due any insured within thirty days after receipt of
satisfactory proofs of loss from the insured or any party in interest. The insurer shall
notify the insurance producer of record of all such payments for property damage
claims made in accordance with this Paragraph.
(2) All insurers issuing any type of contract, other than those specified in R.S.
22:1811, R.S. 22:1821, and Chapter 10 of Title 23 of the Louisiana Revised Statutes
of 1950, shall pay the amount of any third party property damage claim and of any
reasonable medical expenses claim due any bona fide third party claimant within
thirty days after written agreement of settlement of the claim from any third party
claimant.
*

*

*

(4) All insurers shall make a written offer to settle any property damage claim,
including a third-party claim, within thirty days after receipt of satisfactory proofs
of loss of that claim.
B. (1) Failure to make such payment within thirty days after receipt of such
satisfactory written proofs and demand therefor or failure to make a written offer to
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settle any property damage claim, including a third-party claim, within thirty days
after receipt of satisfactory proofs of loss of that claim, as provided in Paragraphs
(A)(1) and (4) of this Section, respectively, or failure to make such payment within
thirty days after written agreement or settlement as provided in Paragraph (A)(2) of
this Section when such failure is found to be arbitrary, capricious, or without
probable cause, shall subject the insurer to a penalty, in addition to the amount of the
loss, of fifty percent damages on the amount found to be due from the insurer to the
insured, or one thousand dollars, whichever is greater, payable to the insured, or to
any of said employees, or in the event a partial payment or tender has been made,
fifty percent of the difference between the amount paid or tendered and the amount
found to be due as well as reasonable attorney fees and costs. Such penalties, if
awarded, shall not be used by the insurer in computing either past or prospective loss
experience for the purpose of setting rates or making rate filings.
(emphasis added).
In ANF Partners #1, 2007 WL 1191227, at *3, the court relied on Woodruff, 767 So.2d 785,
to find that third-party claimants could not recover penalties under § 22:1892, because "the penalty
provisions of Revised Statue [22:1892] B are inapplicable to third party claimants such as plaintiff."
Woodruff applied an earlier version of § 22:1892, in which subsection B(1) had no mention of thirdparty claimants. It provided:
B.(1) Failure to make such payment within thirty days after receipt of such
satisfactory written proofs and demand therefor, as provided in R.S. 22:658 A(1),
or within thirty days after written agreement or settlement as provided in R.S.
22:658 A(2) when such failure is found to be arbitrary, capricious, or without
probable cause, shall subject the insurer to a penalty, in addition to the amount of
the loss, of ten percent damages on the amount found to be due from the insurer to
the insured, or one thousand dollars, whichever is greater, payable to the insured,
or to any of said employees, together with all reasonable attorney fees for the
prosecution and collection of such loss, or in the event a partial payment or tender
has been made, ten percent of the difference between the amount paid or tendered
and the amount found to be due and all reasonable attorney fees for the prosecution
and collection of such amount.
Three years after Woodruff was decided, the Louisiana Legislature passed 2003 La. Acts No.
790, § 1, which amended La. Rev. Stat. § 22:1892(A)(4) and (B)(1) to include the phrase "including
a third-party claim," as highlighted above in the current version of the statute. In State Farm Mut.
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Auto. Ins. Co. v. Norcold, Inc., 88 So.3d 1245, 1250-51 (La. Ct. App. 2012), the court examined the
current text of La. Rev. Stat. § 22:1892, the various amendments to the statute, the legislative intent
and applicable jurisprudence, and found that these sources support the conclusion that subsection
B(1) "does provide for an award of penalties and attorney fees in favor of third-party claimants
against an insurer who fails to make an offer of settlement after receiving satisfactory proof of loss,
if the insurer's failure to pay is "arbitrary, capricious, or without probable cause." The court noted
that the word "shall" was used in subsections A(4) and B(1) to address the insurer's duties regarding
third-party claimants, and that this "mandatory statutory duty" is not negated by the fact that the
phrase "third-party claimant" was not inserted in the penalty calculation provision where the statute
refers to amounts "due from the insurer to the insured." Id. at 1252-53.
Norcold provides a thorough analysis of § 22:1892 that supports the conclusion that the
statute's current version provides for penalties for third-party claimants under subsection B(1) when
an insurer's failure to make a written offer to settle a property damage claim within thirty days of
the receipt of a satisfactory proof of loss is arbitrary, capricious, or without probable cause.
Woodruff and ANF Partners #1 apply a pre-2003 version of 22:1892 that does not provide the same
protections to third-party claimants under subsections A(4) and B(1) that are found in the current
version of the statute, which was analyzed in Norcold. Therefore, this court finds § 22:1892(B)(1)
provides a cause of action for penalties to third-party claimants, such as Bartlett, and Employers
Mutual's motion to dismiss that claim is DENIED.
2. Satisfactory Proof of Loss
Employers Mutual also argues that Bartlett's claim for penalties under § 22:1892 should be
dismissed because Bartlett has not alleged that it provided a satisfactory proof of loss to Employers

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Mutual. Under Louisiana law, an insurer receives a satisfactory proof of loss when it has sufficient
information to act on the claim, and the manner in which the information is obtained is immaterial.
Richardson v. GEICO Indem. Co., 48 So.3d 307, 314 (La. Ct. App. 2010). "Whether and when a
satisfactory proof of loss was received is a question of fact." Id. In its second amended complaint,
Bartlett alleged that it provided "information and documents sufficient to establish Bartlett
Construction's losses and Surface Specialties' responsibility for those losses" to Employers Mutual.
Therefore, Bartlett has alleged that it provided a proof of loss, which is enough to survive a motion
to dismiss. Whether the proof of loss was satisfactory is a question of fact that cannot be determined
on a motion to dismiss. Employers Mutual's motion to dismiss Bartlett's claim for penalties under
§ 22:1892 for failure to allege that it provided a satisfactory proof of loss is DENIED.
D.

Penalties Under La. Rev. Stat. § 22:1973
Employers Mutual argues that Bartlett's claim for penalties under La. Rev. Stat. § 22:1973

must be dismissed because Bartlett does not allege that Employers Mutual violated one of the duties
listed in the statute.
La. Rev. Stat. § 22:1973 provides, in pertinent part:
A. An insurer, including but not limited to a foreign line and surplus line insurer,
owes to his insured a duty of good faith and fair dealing. The insurer has an
affirmative duty to adjust claims fairly and promptly and to make a reasonable effort
to settle claims with the insured or the claimant, or both. Any insurer who breaches
these duties shall be liable for any damages sustained as a result of the breach.
B. Any one of the following acts, if knowingly committed or performed by an
insurer, constitutes a breach of the insurer's duties imposed in Subsection A of this
Section:
(1) Misrepresenting pertinent facts or insurance policy provisions relating to any
coverages at issue.

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(2) Failing to pay a settlement within thirty days after an agreement is reduced to
writing.
(3) Denying coverage or attempting to settle a claim on the basis of an application
which the insurer knows was altered without notice to, or knowledge or consent of,
the insured.
(4) Misleading a claimant as to the applicable prescriptive period.
(5) Failing to pay the amount of any claim due any person insured by the contract
within sixty days after receipt of satisfactory proof of loss from the claimant when
such failure is arbitrary, capricious, or without probable cause.
(6) Failing to pay claims pursuant to R.S. 22:1893 when such failure is arbitrary,
capricious, or without probable cause.
In Theriot v. Midland Risk Ins. Co., 694 So.2d 184, 193 (La. 1997), the Supreme Court of Louisiana
held that both insureds and third-party claimants have a right of action under § 22:1973, but only
the insurer's commission of the specific acts listed in subsection B can support a private cause of
action for breach of the statute.
In this case, Bartlett alleges that Employers Mutual is liable for penalties under § 22:1973
because the claims adjustor misrepresented facts regarding the reason that the auto court was
removed and replaced.

Depending on the circumstance of the alleged misrepresentation, §

22:1973(B)(1) may include this allegation. Because further factual development is necessary to
properly analyze this claim, dismissal is inappropriate at this time, and Employers Mutual's motion
to dismiss Bartlett's claim for penalties under § 22:1973 is DENIED.
CONCLUSION
IT IS HEREBY ORDERED that Employers Mutual Casualty Company's Rule 12(b)(6)
Motion to Dismiss for Failure to State a Claim (Doc. #25) is DENIED

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18th
New Orleans, Louisiana, this _____ day of December, 2013.

____________________________________
MARY ANN VIAL LEMMON
UNITED STATES DISTRICT JUDGE

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