Rogers v. Southern Fidelity Insurance Company et al

Filing 66

ORDER & REASONS that 42 Defendant Southern Fidelity Insurance Company's Motion for Summary Judgment as to Plaintiff's claims for statutory penalties is GRANTED. Signed by Judge Eldon E. Fallon on 7/11/14. (dno)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA

DONISE ROGERS
VERSUS
SOUTHERN FIDELITY INSURANCE CO., ET AL.

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CIVIL ACTION
NO. 13-5695
SECTION "L" (5)

ORDER & REASONS
Before the Court is a Motion for Summary Judgment, filed by Defendant Southern
Fidelity Insurance Company (“SFIC”). (Rec. Doc. 42). The Court has reviewed the briefs and
applicable law and now issues this Order and Reasons.
I.

BACKGROUND
This case arises out of damage that occurred to Plaintiff's property in La Place, Louisiana

as a result of Hurricane Isaac. (Rec. Doc. 1 at 2). According to the Plaintiff, Defendant SFIC
provided windstorm coverage for the property and Defendant Allstate Insurance Company
provided flood coverage through the National Flood Insurance Program. (Rec. Doc. 1 at 1-2).
With respect to the windstorm damage and insurance coverage, the following facts are not in
dispute:
Hurricane Isaac made landfall on August 28, 2012. (Rec. Doc. 42-2 at 1). On September
1, 2012, Plaintiff filed a notice of loss with SFIC regarding damage to her home caused by
Hurricane Isaac. (Rec. Doc. 42-2 at 1). On September 3, 2012, Jean Ludwin-Barger of United
Storm Adjusters, Inc. inspected Plaintiff’s claim for wind damage. (Rec. Doc. 42-2 at 2). Barger
inspected the property again on September 18, 2012. (Rec. Doc. 42-2 at 2). The purpose of the
second inspection was to allow Barger an opportunity to meet with Plaintiff’s contractor, inspect
the roof, verify debris removal, and agree on the scope of repairs. (Rec. Doc. 42-2 at 2). On
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September 24, 2012, Barger inspected the property a third time in order to verify the work that
was in progress and to finish assessing damages. (Rec. Doc. 42-2 at 2).
On September 19, 2012, following the USAI initial inspection, SFIC issued a check to
Plaintiff for $5,000.00, which was an advance on Plaintiff’s Coverage A (dwelling) claim. (Rec.
Doc. 42-2 at 2). On October 8, 2012, based on Barger’s estimate, SFIC issued payment to
Plaintiff in the amount of $58,856.34. (Rec. Doc. 42-2 at 2). This number represented a
payment for Coverage A (dwelling) and Coverage B (other structures) damages in the amount of
$71,699.80 less $5,000.98 in non-recoverable depreciation, the $5,000 advance, and the
hurricane deductible of $3,226.00. (Rec. Doc. 42-2 at 2). On November 28, 2012, SFIC issued a
check to Plaintiff in the amount of $14,400.00 under Coverage D (loss of use) for alternative
living expenses. (Rec. Doc. 42-2 at 2). On November 28, 2012, SFIC issued a check to Plaintiff
in the amount of $8,000.00 as an advance for her personal property damage under Coverage C.
(Rec. Doc. 42-2 at 2-3). On January 14, 2013, SFIC issued a check in the amount of
$45,000.000 to Plaintiff for Coverage C (contents) damages. (Rec. Doc. 42-2 at 3). To date, the
total received by the Plaintiff from SFIC for Coverage A, B, C, and D, less deductibles, is
$91,256.00.
Plaintiff, through counsel, hired Michaelson & Messinger Insurance Specialists LLC
(“M&M”) to conduct an inspection of the premises and report their assessment of the damages.
On December 3, 2012, M&M sent its building assignment and Public Adjusters License to SFIC.
On December 10, 2012, SFIC sent a letter to Plaintiff and M&M acknowledging that SFIC
received M&M’s letter of representation and requesting Plaintiff and/or M&M to provide a list
of information and proof of Plaintiff’s damages. (Rec. Doc. 42-21 at 2). On January 3, 2013,
M&M sent its estimate of damages to SFIC. (Rec. Doc. 42-2 at 3). M&M’s estimate for wind-

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related damages totaled $324,179.45. (Rec. Doc. 42-2 at 3).1 On January 14, 2013, SFIC sent a
letter to M&M stating that SFIC had received M&M’s estimate and was unable to accept the
estimate of damages at that time. (Rec. Doc. 42-23 at 1). SFIC asked for an extensive list of
additional information, which it claimed was necessary in order to properly evaluate Plaintiff’s
estimate. (Rec. Doc. 42-23 at 1). SFIC’s redacted claim notes indicate that on March 22, 2013,
M&M called SFIC to inquire about the status of Plaintiff’s claim. (Rec. Doc. 42-24 at 2). SFIC
advised M&M that they still had not received the requested information. (Rec. Doc. 42-24 at 2).
On April 5, 2013, SFIC addressed a letter to Plaintiff and cc’d M&M. (Rec. Doc. 42-26 at 1).
This letter stated that SFIC still had not received the information that they requested from
Plaintiff. (Rec. Doc. 42-26 at 1). Plaintiff testified that she does not recall receiving letters from
SFIC requesting additional information. Plaintiff explains that she was not living at the property
at the time that SFIC claims to have sent these letters. (Rec. Docs. 52 at 56; 42-30 at 3-4).
On August 29, 2013, Plaintiff filed the present lawsuit. Plaintiff claims that SFIC
improperly adjusted her claims. (Rec. Doc. 1 at 9). She is seeking declaratory relief as well as
damages arising from SFIC's alleged breach of contract, as well as penalties arising from SFIC’s
breach of its duty of good faith and fair dealing.
SFIC filed an answer in which it denies all allegations and asserts various affirmative
defenses. Among other things, SFIC claims that it has not been provided satisfactory proof of
loss by the Plaintiff. SFIC also claims application of certain policy exclusions.

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In Defendant’s Statement of Uncontested Material Facts (Rec. Doc. 42-2) Defendant states that M&M sent its
estimate on January 3, 2014. Plaintiff responds that she “does not dispute that M&M sent an estimate to SFIC on or
about January 3, 2014 . . . .” (Rec. Doc. 52 at 55). The Court finds that both of these were typographical errors
because the M&M letter is actually dated January 3, 2013. (Rec. Doc. 42-22).

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II.

PRESENT MOTION
SFIC asks the Court to grant summary judgment as to Plaintiff’s claims for statutory

penalties, pursuant to Louisiana Revised Statute §§ 22: 1892 and 22:1973. SFIC argues that the
record clearly shows that SFIC acted in good faith during the adjustment of Plaintiff’s claim.
(Rec. Doc. 42-1 at 1). SFIC emphasizes that three inspections of the property took place by
Barger within thirty days of Hurricane Isaac’s landfall. (Rec. Doc. 42-1 at 2-3). SFIC claims
that it sent Plaintiff checks for the undisputed amounts of her claims and sent her advance
payments for portions of her claims. (Rec. Doc. 42-1 at 10). SFIC claims that it asked Plaintiff
and M&M to send additional information to support Plaintiff’s claims for damages and that SFIC
never received such information. (Rec. Doc. 42-1 at 6). SFIC argues that there was a reasonable
and legitimate question as to the extent of Plaintiff’s damages and that such a dispute precludes a
finding that SFIC was “arbitrary, capricious, or without probable cause.” (Rec. Doc. 42-1 at 912).
SFIC further argues that Plaintiff’s bad faith claims must be dismissed because she
materially breached her post-loss duties as set out in the insurance policy. (Rec. Doc. 42-1 at
13). SFIC claims that courts have previously dismissed bad faith claims where an insured fails
to provide documentation that is requested by the insurer. (Rec. Doc. 42-1 at 14). SFIC claims
that the insurance policy required Plaintiff to provide records and documents to SFIC at the
request of SFIC. (Rec. Doc. 42-1 at 15). SFIC claims that Plaintiff failed to provide requested
information and that this failure prejudiced SFIC in its investigation. (Rec. Doc. 42-1 at 15).
For this reason, SFIC argues that Plaintiff’s bad faith claims should be dismissed.
In opposition, Plaintiff argues that SFIC misinterprets Louisiana’s bad faith law.
According to Plaintiff, Louisiana law imposes a broad duty on insurers to “adjust claims fairly

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and promptly and to make a reasonable effort to settle claims with the insured.” (Rec. Doc. 52 at
2). Plaintiff claims that when Barger conducted three initial inspections she made many errors
and omissions. (Rec. Doc. 52 at 3). Plaintiff claims that Barger repeatedly assured her that the
damage to her home was going to result in a “total loss.” (Rec. Doc. 52 at 52). However,
Barger’s estimate reflected damages much lower than a total loss. (Rec. Doc. 52 at 3). Plaintiff
claims that she attempted to contact Barger and SFIC on multiple occasions to discuss the status
of her claim but experienced no success. (Rec. Doc. 52 at 3). According to Plaintiff, at this
point she hired M&M, which provided an estimate and repair details to SFIC. Plaintiff
emphasizes the fact that SFIC did not re-inspect her home after it received, and rejected, M&M’s
estimate. (Rec. Doc. 52 at 4). Plaintiff also points out that the amount she received from SFIC
was less that 20% of the estimate that she submitted to them. (Rec. Doc. 52 at 4). Plaintiff
claims that she has provided enough evidence to support all three factors required by La. R.S. §
22:1973 and § 22:1892. Specifically, Plaintiff claims that 1) SFIC failed to compensate her for
her losses, 2) SFIC’s failure was a result of its arbitrary and capricious adjustment of her losses,
and 3) Plaintiff provided satisfactory proof of loss to SFIC. (Rec. Doc. 52 at 5).
Plaintiff also argues that she fulfilled her duties under the insurance policy by providing
SFIC with M&M’s estimate, which provided a detailed description of the damage to Plaintiff’s
home as well as written documentation and photographs. (Rec. Doc. 52 at 11). Further, Plaintiff
argues that her duty to provide the insurer “proof of loss” does not require her to provide each
and every document that SFIC requested. (Rec. Doc. 52 at 11). Plaintiff claims that Barger’s
inspection and report as well as M&M’s estimate provided SFIC with satisfactory proof of loss.
(Rec. Doc. 52 at 12).

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III.

LAW & ANALYSIS
A.

Standard

Summary judgment is proper "if the pleadings, depositions, answers to interrogatories,
and admissions on file, together with the 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."
Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986) (citing Fed. R. Civ. P. 56(c)). "Rule 56(c)
mandates the entry of summary judgment, after adequate time for discovery and upon motion,
against a party who fails to make a showing sufficient to establish the existence of an element
essential to that party's case, and on which the party will bear the burden of proof at trial." Id.
When considering a motion for summary judgment, the district court "will review the facts
drawing all inferences most favorable to the party opposing the motion." Reid v. State Farm
Mut. Auto. Ins. Co., 784 F.2d 577, 578 (5th Cir. 1986).
B.

Louisiana Revised Statute Title 22 Sections 1892 and 1973

Louisiana Revised Statute Title 22 Section 1892 is entitled "Payment and adjustment of
claims, policies other than life and health and accident; personal vehicle damage claims;
extension of time to respond to claims during emergency or disaster; penalties; arson-related
claim suspension." La. Rev. Stat. § 22:1892 provides, in relevant part:
All insurers issuing any type of contract . . . 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 .
...
. . . 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 settle any property damage claim,
including a third-party claim, within thirty days after receipt of
satisfactory proofs of loss of that claim . . . when such failure is
found to be arbitrary, capricious, or without probable cause, shall
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subject the insurer to a penalty, in addition to the amount of the
loss . . . .
La. Rev. Stat. § 22:1892 (emphasis added). Louisiana Revised Statute Title 22 Section 1973 is
entitled "Good faith duty; claims settlement practices; causes of action; penalties." It provides,
in relevant part:
. . . An 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.
. . . 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: . . .
(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.
La. Rev. Stat. § 22:1973 (emphasis added). The Fifth Circuit has explained that “[t]he conduct
prohibited by the two sections is ‘virtually identical:’ ‘the failure to timely pay a claim after
receiving satisfactory proof of loss when that failure to pay is arbitrary, capricious, or without
probable cause.’” Korbel v. Lexington Ins. Co., 308 F. App’x 800, 803 (5th Cir. 2009) (quoting
Reed v. State Farm Mut. Auto. Ins. Co., 2003-0107 (La. 10/21/03); 857 So. 2d 1012, 1020).
In order to successfully claim penalties and attorney fees under these statutes, “[a]
plaintiff has the burden of proving that his insurer (1) received satisfactory proof of loss, (2)
failed to pay within the required time, and (3) acted in an arbitrary and capricious manner.”
Dickerson v. Lexington Ins. Co., 556 F.3d 290, 297 (5th Cir. 2009). "The sanctions of penalties
and attorney fees are not assessed unless a plaintiff's proof is clear that the insurer was in fact

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arbitrary, capricious, or without probable cause in refusing to pay." Reed, 857 So. 2d at 1021
(citing Block v. St. Paul Fire & Marine Ins. Co., 32, 306 (La. App. 2 Cir. 9/22/99); 742 So. 2d
746, 751). The Louisiana Supreme Court has explained that "arbitrary, capricious or without
probable cause" means vexatious and unjustified. See La. Bag Co., Inc. v. Audubon Indem. Co.,
2008-0453 (La. 12/2/08); 999 So. 2d 1104, 1114. The plaintiff must show that the insurer
willfully refused to pay and this refusal was not based on a good-faith defense. Id. (citing Reed,
857 So. 2d at 1021). If there is a reasonable and legitimate dispute regarding the extent of the
insurance claim, the court should not infer bad faith from an insurer's failure to pay within the
time limits provided by statute. See Reed, 857 So. 2d at 1021; see also Block, 742 So. 2d at 752
("the statutory penalties are inappropriate when the insurer has a reasonable basis to defend the
claim and was acting in good-faith reliance on that defense . . . where there is a reasonable and
legitimate question as to the extent and causation of a claim; bad faith should not be inferred
from an insurer's failure to pay within the statutory time limits . . ."). The statutory penalties
should only be imposed "in those instances in which the facts negate probable cause for nonpayment." McDill v. Utica Mut. Ins. Co., 475 So. 2d 1085, 1092 (La. 1985).
Whether the insurer acted arbitrarily, capriciously, or without probable cause depends on
the facts and circumstances of the case and what the insurer knew at the time of its actions. This
is generally a factual issue. See id.; see also Louisiana Bag Co., Inc. v. Audubon Indem. Co.,
2008-0453 (La. 12/2/08); 999 So. 2d 1104, 1120 (“whether an insurer’s action was arbitrary,
capricious or without probable cause is essentially a fact issue . . . ”). However, where, as here,
the nonmoving party will bear the burden of proof at trial, it is incumbent upon that party to set
out specific facts showing that a genuine issue exists in order to defeat a summary judgment
motion. See Gates v. Auto Club Family Ins. Co., No. 06-4394; 2007 WL 1464259, at *4 (E.D.

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La. May 17, 2007) (citing Celotex, 477 U.S. at 324-25). Here, Plaintiff has not provided any
facts indicating that SFIC acted arbitrarily, capriciously, or without probable cause. Therefore,
Plaintiff will be unable to prove that she is entitled to penalties under La. Rev. Stat. §§ 22:1892
or 22:1973.
Assuming that the estimate, which M&M sent to SFIC on January 3, 2013, constitutes
satisfactory proof of loss, the Plaintiff has failed to put forth any facts indicating that SFIC’s
failure to pay additional money after receipt of this estimate was arbitrary, capricious, or without
probable cause. SFIC conducted 3 inspections of the property, paid an advance to the Plaintiff,
and paid the undisputed amounts as determined by the inspection. When SFIC received the
estimate from M&M, it took issue with it. SFIC submitted a letter, which it sent to M&M on
January 14, 2013 – 11 days after receiving the wind-storm estimate from M&M. The letter states
that SFIC is “unable to accept your estimated amount of damages at this time.” (Rec. Doc. 42-23
at 1). The letter goes on to request additional information that SFIC claims is necessary to
properly evaluate the supplemental estimate. (Rec. Doc. 42-23 at 1). SFIC’s requests are
extremely detailed. For instance, SFIC asks for “[a]n explanation as to why you included
replacement of 35.80 squares of roofing felt, after this was already included in your shingle
replacement,” “[c]olor photos showing damage[] which would warrant the tear out and
replacement of the subfloor and spraying of the floor joists in bedroom 1, Hallway, and bedroom
3,” and “[a]n explanation as to why overhead was calculated at 15%.” (Rec. Doc. 42-23 at 1-2).
The list goes on to provide 25 similarly detailed requests. Whether or not the Plaintiff had a duty
to respond to these requests, the substance of the requests themselves conclusively demonstrates
that there existed a legitimate dispute over the extent of Plaintiff’s wind-storm damages. SFIC
did not just send Plaintiff a blanket rejection. Instead, it went through the estimate in detail and

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took issue with certain very specific elements of that estimate. As the courts have explicitly
repeated, “an insurer need not tender payments for amounts that are reasonably in dispute.” See
Harvey Canal Ltd. P’ship v. Lafayette Ins. Co., 09-605 (La. App. 5 Cir. 3/9/10); 39 So. 3d 619,
631. The penalty statutes are “not intended . . . to prevent insurers from disputing claims in good
faith . . . .” Dickerson, 556 F.3d 290, 299; see also La. Bag., 999 So. 2d at 1120 (“An insured
has a recognized right to withhold payment of disputed amounts in a claim for which there are
substantial, reasonable and legitimate questions as to the extent of its insurer’s liability or of the
insured’s loss.”) The Court finds that SFIC was not arbitrary and capricious when it disputed
specific portions of the estimate that M&M provided.
Furthermore, after disputing the estimate and asking for additional information, SFIC
received no information from the Plaintiff or from M&M. The Plaintiff points to nothing in the
record indicating that anyone ever responded to SFIC’s request, even if just to put SFIC on
notice that the Plaintiff refused to provide this information. Once again, the Court takes no
position on whether the Plaintiff had a duty to provide the additional information. However, the
Court finds that SFIC’s unanswered requests justified SFIC’s failure to pay the Plaintiff the
additional amount that she requested within 30 or 60 days. The evidence indicates that SFIC was
waiting to receive a response from the Plaintiff. Cf. Korbel, 308 Fed. Appx. At 804 (“viewed in
the light most favorable to [plaintiff], the summary judgment evidence does not support the
conclusion that Lexington was waiting on [plaintiff] to provide these estimates).
The Plaintiff contends that “Louisiana law broadly requires insurers ‘to adjust claims
fairly and promptly and to make a reasonable effort to settle claims with the insured.” (Rec.
Doc. 52 at 2) (citing La. Rev. Stat. § 22:1973(A)). The Court finds that this is exactly what SFIC
did. Within days of receiving Plaintiff’s notice of loss, SFIC sent an adjuster to inspect

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Plaintiff’s property for wind damage. The adjuster inspected the property on three separate
occasions, taking pictures and detailed notes of the damage that she observed. After the adjuster
submitted an estimate, SFIC promptly paid the Plaintiff the amount of that estimate. (Rec. Doc.
42-13 at 1). SFIC also paid the Plaintiff for her alternative living expenses and contents damages
promptly after receiving proof of these losses. (Rec. Docs. 42-25 at 6; 42-15 at 1; 42-18 at 1). In
fact, SFIC has paid Plaintiff the policy limits under Coverage C (contents). (Rec. Doc. 42-18 at
1). After all of the inspections and various payments by SFIC to the Plaintiff, SFIC received an
estimate from M&M, which claimed significantly higher damages than SFIC’s adjuster
estimated. SFIC responded by seeking additional information about various portions of this
estimate. The Court finds, and the Plaintiff points to no facts to the contrary, that SFIC acted in
good faith throughout the adjustment of the Plaintiffs claim. All of the evidence indicates that
there was a legitimate dispute regarding the amount of the Plaintiff’s damages. SFIC cannot,
therefore, be penalized under La. Rev. Stat. §§ 22:1892 and 22:1973.
IV.

CONCLUSION
For the foregoing reasons,
IT IS ORDERED that SFIC’s Motion for Summary Judgment as to Plaintiff’s claims

for statutory penalties (Rec. Doc. 42) is hereby GRANTED.

New Orleans, Louisiana, this 11th day of July, 2014.

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UNITED STATES DISTRICT COURT JUDGE

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