Discon et al v. McNeil et al
Filing
88
ORDER AND REASONS granting 81 Second Motion for Partial Summary Judgment. Signed by Judge Susie Morgan on 11/28/2016. (cg)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
NANCY M. DISCON, ET AL.,
Plaintiffs
CIVIL ACTION
VERSUS
NO. 14-392
JAMES LOUIS MCNEIL, III, ET AL.,
Defendants
SECTION: “E” (2)
ORDER AND REASONS
Before the Court is Defendant Encompass Insurance Company of America’s second
motion for partial summary judgment pursuant to Federal Rule of Civil Procedure 56. 1
The motion is opposed.2
BACKGROUND
Plaintiffs filed this action for damages they allegedly sustained as a result of an
auto accident on February 22, 2013.3 Plaintiffs Nancy Discon, John Discon, Lynne
Davisson, and Scott Discon filed suit against Erie Insurance Company and James
McNeil.4 Scott Discon was driving with passengers Nancy Discon, John Discon, and
Lynne Davisson when their vehicle was allegedly rear-ended by James McNeil, insured
by Erie Insurance Company.5
Plaintiffs filed an amended complaint on June 20, 2014, naming Encompass
Insurance Company (“Encompass”) as a defendant.6 Encompass provided an
uninsured/underinsured insurance policy in favor of Plaintiffs on the date of the accident
R. Doc. 81.
R. Doc. 82.
3 R. Doc. 1.
4 R. Doc. 1.
5 R. Doc. 1.
6 R. Doc. 10.
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in question.7 Plaintiffs Nancy Discon and John Discon have settled their claims,8 so there
are only two Plaintiffs remaining in this action: Lynne Davisson and Scott Discon.
On March 11, 2015, the Court granted Encompass’s motion to dismiss the
Plaintiffs’ claims that it acted in an arbitrary and capricious manner in handing the
Plaintiffs’ uninsured motorist claims.9 The Plaintiffs filed a second amended complaint
on January 22, 2016, again alleging Encompass engaged in arbitrary and capricious
behavior in handling Plaintiff Scott Discon’s claim.10 Scott Discon (“Discon”) alleges
Encompass is subject to penalties for engaging in arbitrary and capricious behavior in its
refusal to make unconditional tender payments to Discon for his hip replacement
surgery.11
Encompass filed its motion for partial summary judgment, arguing it did not act
in an arbitrary and capricious manner when handling Discon’s claim because there are
disputes with respect to the causation of Discon’s lower back and hip injuries.12
SUMMARY JUDGMENT STANDARD
Summary judgment is appropriate only “if the movant shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a matter
of law.”13 “An issue is material if its resolution could affect the outcome of the action.”14
When assessing whether a material factual dispute exists, the Court considers “all of the
evidence in the record but refrains from making credibility determinations or weighing
Id.
R. Doc. 13.
9 R. Doc. 54.
10 R. Doc. 63.
11 R. Doc. 63.
12 R. Doc. 81.
13 FED. R. CIV. P. 56; see also Celotex Corp. v. Catrett, 477 U.S. 317, 322–23 (1986).
14 DIRECTV Inc. v. Robson, 420 F.3d 532, 536 (5th Cir. 2005).
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the evidence.”15 All reasonable inferences are drawn in favor of the nonmoving party.16
There is no genuine issue of material fact if, even viewing the evidence in the light most
favorable to the nonmoving party, no reasonable trier of fact could find for the nonmoving
party, thus entitling the moving party to judgment as a matter of law.17
If the dispositive issue is one on which the moving party will bear the burden of
persuasion at trial, the moving party “must come forward with evidence which would
‘entitle it to a directed verdict if the evidence went uncontroverted at trial.’” 18 If the
moving party fails to carry this burden, the motion must be denied. If the moving party
successfully carries this burden, the burden of production then shifts to the nonmoving
party to direct the Court’s attention to something in the pleadings or other evidence in the
record setting forth specific facts sufficient to establish that a genuine issue of material
fact does indeed exist.19
If the dispositive issue is one on which the nonmoving party will bear the burden
of persuasion at trial, the moving party may satisfy its burden of production by either (1)
submitting affirmative evidence that negates an essential element of the nonmovant’s
claim, or (2) demonstrating there is no evidence in the record to establish an essential
element of the nonmovant’s claim.20 When proceeding under the first option, if the
Delta & Pine Land Co. v. Nationwide Agribusiness Ins. Co., 530 F.3d 395, 398 (5th Cir. 2008); see also
Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150–51 (2000).
16 Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994).
17 Smith v. Amedisys, Inc., 298 F.3d 434, 440 (5th Cir. 2002).
18 Int’l Shortstop, Inc. v. Rally’s, Inc., 939 F.2d 1257, 1263–64 (5th Cir. 1991) (quoting Golden Rule Ins. Co.
v. Lease, 755 F. Supp. 948, 951 (D. Colo. 1991)).
19 Celotex, 477 U.S. at 322–24.
20 Id. at 331–32 (Brennan, J., dissenting); see also St. Amant v. Benoit, 806 F.2d 1294, 1297 (5th Cir. 1987)
(citing Justice Brennan’s statement of the summary judgment standard in Celotex Corp. v. Catrett, 477 U.S.
317, 322–24 (1986), and requiring the movants to submit affirmative evidence to negate an essential
element of the nonmovant’s claim or, alternatively, demonstrate the nonmovant’s evidence is insufficient
to establish an essential element); Fano v. O’Neill, 806 F.2d 1262, 1266 (citing Justice Brennan’s dissent in
Celotex, and requiring the movant to make an affirmative presentation to negate the nonmovant’s claims
on summary judgment); 10A CHARLES ALAN WRIGHT, ARTHUR R. MILLER & MARY KAY KANE, FEDERAL
PRACTICE AND PROCEDURE §2727.1 (2016) (“Although the Court issued a five-to-four decision, the majority
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nonmoving party cannot muster sufficient evidence to dispute the movant’s contention
that there are no disputed facts, a trial would be useless, and the moving party is entitled
to summary judgment as a matter of law.21 When, however, the movant is proceeding
under the second option and is seeking summary judgment on the ground that the
nonmovant has no evidence to establish an essential element of the claim, the nonmoving
party may defeat a motion for summary judgment by “calling the Court’s attention to
supporting evidence already in the record that was overlooked or ignored by the moving
party.”22 Under either scenario, the burden then shifts back to the movant to demonstrate
the inadequacy of the evidence relied upon by the nonmovant.23 If the movant meets this
burden, “the burden of production shifts [back again] to the nonmoving party, who must
either (1) rehabilitate the evidence attacked in the moving party’s papers, (2) produce
additional evidence showing the existence of a genuine issue for trial as provided in Rule
56(e), or (3) submit an affidavit explaining why further discovery is necessary as provided
in Rule 56(f).”24 “Summary judgment should be granted if the nonmoving party fails to
respond in one or more of these ways, or if, after the nonmoving party responds, the court
determines that the moving party has met its ultimate burden of persuading the court that
there is no genuine issue of material fact for trial.”25
“[U]nsubstantiated assertions are not competent summary judgment evidence.
The party opposing summary judgment is required to identify specific evidence in the
and dissent both agreed as to how the summary-judgment burden of proof operates; they disagreed as to
how the standard was applied to the facts of the case.” (internal citations omitted)).
21 First National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 288–89 (1980);
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249–50 (1986).
22 Celotex, 477 U.S. at 332–33.
23 Id.
24 Celotex, 477 U.S. at 332–33, 333 n.3.
25 Id.; see also First National Bank of Arizona, 391 U.S at 289.
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record and to articulate the precise manner in which that evidence supports the claim.
‘Rule 56 does not impose upon the district court a duty to sift through the record in search
of evidence to support a party’s opposition to summary judgment.’”26
LAW AND ANALYSIS
As the moving party, it is Encompass’s burden to establish the absence of genuine
issues of material fact and that it is entitled to judgment as a matter of law. Because
Discon, as the nonmoving party, bears the burden of persuasion at trial on the issue of
whether Encompass breached its statutory duty to timely pay his claims,27 Encompass
must either put forth affirmative evidence that negates an essential element of Discon’s
claim or demonstrate that there is no evidence in the record to establish an essential
element of Discon’s claim. The question before this Court is whether there is a genuine
dispute of material fact with respect to whether Encompass’s refusal to pay was based on
a good-faith defense that there was a reasonable dispute concerning the extent of Discon’s
injuries resulting from the February 2013 accident.
It is undisputed that in his second amended complaint, Discon states he received
$170,000 in payments from Encompass following the February 12, 2013 accident. 28
Discon now seeks additional payment for “extensive testing and treatment, including but
not limited to, his hip, lumbar spine, cervical spine, physical therapy and eventual
anterior hip replacement surgery.”29 The parties do not dispute that, following the
Ragas v. Tenn. Gas Pipeline Co., 136 F.3d 455, 458 (5th Cir. 1998) (citing Celotex, 477 U.S. at 324;
Forsyth v. Barr, 19 F.3d 1527, 1537 (5th Cir. 1994) and quoting Skotak v. Tenneco Resins, Inc., 953 F.2d
909, 915–16 & n.7 (5th Cir. 1992)).
27 Reed v. State Farm Mut. Ins. Co., 857 So. 2d 1012, 1020 (La. 2003) (“One who claims entitlement
penalties and attorney fees has the burden of proving the insurer received satisfactory proof of loss as a
predicate to a showing that the insurer was arbitrary, capricious, or without probable cause.”).
28 R. Doc. 81-2 at 2; R. Doc. R. Doc. 82-7 at 1.
29 R. Doc. 63 at 2.
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accident, Discon did not undergo neck or back surgery.30 In its statement of uncontested
material facts, Encompass points to the report of Dr. James Butler, an independent
medical examiner.31 In his opposition to the motion for partial summary judgment,
Discon argues the Court must not consider Dr. Butler’s report because it is unsworn.32 In
its reply to Discon’s memorandum in opposition, Encompass attached the sworn affidavit
of Dr. James Butler, swearing he performed “an examination and review [of] medical
records regarding Scott Discon that resulted in [Dr. Butler’s] report of November 14,
2014.”33 The Court therefore may consider Dr. Butler’s report when ruling on this motion
for partial summary judgment.
Other than objecting to Dr. Butler’s report being inadmissible evidence for the
purpose of Rule 56, Discon did not dispute the factual statements made by Encompass
with respect to Dr. Butler’s findings.34 The only statement of fact disputed by Discon is
Encompass’s representation that Dr. Chad Millet is not Discon’s treating physician and
Discon saw him only for a second opinion concerning Discon’s hip replacement surgery.35
The Court finds this factual dispute immaterial.
At trial, Discon will bear the burden of proving that Encompass acted arbitrarily
and capriciously by refusing to make unconditional tender payments.36 Encompass, as
movant on summary judgment, must submit affirmative evidence to negate an essential
R. Doc. 81-2 at 2; R. Doc. R. Doc. 82-7 at 1.
See R. Doc. 81-2.
32 R. Doc. 82-7. “Unsworn expert reports . . . do not qualify as affidavits or otherwise admissible evidence
for [the] purpose of Rule 56, and may be disregarded by the court when ruling on a motion for summary
judgment. Provident Life & Acc. Ins. Co. v. Goel, 274 F.3d 984, 1000 (5th Cir. 2001).
33 R. Doc. 83-1.
34 See R. Doc. 82-7.
35 R. Doc. 82-7 at 2.
36 See Reed, 857 So. 2d at 1020–21.
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element of Discon’s claim or demonstrate there is no evidence in the record to establish
an essential element of Discon’s claim.
Louisiana Revised Statutes section 22:189237 mandates insurers “shall pay the
amount of any claim due to any insured within 30 days after receipt of satisfactory proofs
of loss from the insured or any party in interest.38 “Failure to make such payment within
thirty days after receipt of such satisfactory written proofs and demand . . . when such
failure is 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.”39 Section 22:1973 of the Louisiana Revised Statutes states “[f]ailing 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” may subject the insurer to penalties.40 The conduct prohibited
in these two statutes is “virtually identical” and the “primary difference is the time periods
allowed for payment.”41
To prove Encompass breached its duty to timely pay his claim, at trial Discon must
show “(1) the insurer has received satisfactory proof of loss, (2) the insurer fails to tender
payment within thirty days of receipt thereof, and (3) the insurer’s failure to pay is
arbitrary, capricious, or without probable cause.”42 The issue in this case is whether
Encompass’s failure to pay is arbitrary and capricious.
Previously Louisiana Revised Statutes section 22:658.
LA. REV. STAT. § 22:1892(A)(1).
39 Id. at § 1892(B)(1).
40 Id. § 22:1973.
41 Reed, 857 So. 2d at 1020.
42 Versai Mgmt. Corp. v. Clarendon Am. Ins. Co., 597 F.3d 729, 739 (5th Cir. 2010) (quoting La. Bag Co. v.
Audubon Indem. Co., 999 So. 2d 1104, 1112–13 (La. 2008)).
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An insurer’s behavior is “arbitrary, capricious, or without probable cause” when it
is “vexatious,” and a vexatious refusal to pay means the refusal to pay is “unjustified,
without reasonable or probable cause or excuse.”43 An insurer’s actions are vexatious
when its refusal to pay is not based on a good-faith defense.44 “An insurer does not act
arbitrarily or capriciously when its refusal to pay a claim is based on a genuine dispute
over coverage or the amount of loss.”45 “[W]hen 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 when such reasonable doubts
exist.”46 When there are reasonable and legitimate issues as to the extent of an insurer’s
liability or an insured’s loss, failure to pay within the time limit required by the statute is
not arbitrary or capricious.47
In Guillory v. Lee, the Louisiana Supreme Court reversed an award of penalties
and attorneys fees to Progressive—the insurer—because it “possessed a good faith defense
that there was a reasonable dispute concerning the extent of plaintiff’s injuries resulting
from the accident.”48 Like the insurer in this case, Progressive made one unconditional
tender to its insured for his injuries, but refused to make a second unconditional tender
because of “Progressive’s belief that there existed liability and causation issues.” 49 When
the Progressive claims representative was asked why the plaintiff was refused an
additional unconditional tender, the representative testified “it was difficult to tell if
Reed, 857 So. 2d at 1021.
Id.
45 In re Chinese Manufactured Drywall prods. Liabl. Litig., 759 F. sup. 2d 822, 853 (E.D. La. 2010) (citing
Reed, 857 So. 2d at 1021).
46 Lemoine v. Mike Munna, LLC, 148 So. 3d 205, 215 (La. Ct. App. 1 Cir. 6/6/14) (citing Reed, 857 So. 2d at
1021).
47 Id. (citing Louisiana Bag Co. v. Audubon Indem. Co., 999 So. 2d 1104, 1114 (La. 2008)).
48 Guillory v. Lee, 16 So. 3d 1104, 1130 (La. 2009).
49 Id. at 1129.
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plaintiff sustained any injury as a result of this accident, based upon his recorded
statement that he had prior neck and back injuries, as well as the differing opinions of the
physicians . . . .”50 Recognizing that a penalizing statute is to be strictly construed, 51 the
court found Progressive’s refusal to pay was not arbitrary and capricious because
“reasonable minds could have differed as to the value of plaintiff’s claim, based upon the
circumstances surrounding the cause of plaintiff’s alleged injuries and related medical
expenses . . . .”52
Likewise, in Reed v. State Farm Mutual Insurance Company, the Louisiana
Supreme Court held State Farm—the insurer—presented a reasonable defense for its
refusal to pay a second unconditional tender to the plaintiff, and its actions were therefore
not arbitrary or capricious.53 The court found causation questions as to the source of the
plaintiff’s complaints existed because the medical records showed the accident aggravated
a preexisting condition.54 In arriving at its decision, the court considered the facts that
State Farm had made an initial tender payment to the plaintiff, deposed the plaintiff’s
treating physician, and obtained an independent medical examination.55 These three facts
also exist in the instant case.
Encompass argues Discon fails to establish it acted in an arbitrary and capricious
manner in its refusal to make additional unconditional tender payments. 56 Encompass
contends “legitimate causation issues exist with regards to Mr. Discon’s injuries and
Id.
International Harvester Credit Corp. v. Scale, 518 So. 2d 1039, 1041 (La. 1988).
52 Guillory, 16 So. 3d at 1130.
53 Reed, 857 So. 2d at 1022.
54 Id.
55 Id.
56 R. Doc. 81-1.
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continuing complaints.”57 In support of its position, Encompass submits the report of Dr.
Butler, the independent medical examiner. In his report, upon review of Discon’s medical
records, Dr. Butler states Discon has sustained neck and lower back injuries from an
automobile accident in March 2010, well before the accident that is the subject of this
matter.58 With respect to Discon’s neck injury, Dr. Butler noted Discon had symptoms
“both prior to and following the accident of February 2013” and Discon “show[ed]
evidence of degenerative disc disease . . . predating the [February 2013] accident.”59 With
respect to Discon’s complaints of low back pain, Dr. Butler disagreed with the radiologist
who reviewed Discon’s MRI of the lumbar spine, opining Discon suffers from “very early
mild degenerative disease of the lumbar spine.”60 Regarding Discon’s complaints of right
shoulder pain, Dr. Butler again disagreed with the radiologist who reviewed the MRI of
the right shoulder.61 Instead, Dr. Butler found the MRI did not reveal a SLAP tear, and
any degeneration of Discon’s right shoulder was not traumatic in nature.62 With respect
to Discon’s hip pain, Dr. Butler opined he “failed to see any relationship of any right hip
complaints to the accident in question.”63 Dr. Butler did note Discon has “evidence of
significant osteoarthritis of the right hip and some degenerative changes of the hip . . . .
[but] [n]one of these findings . . . with regard to the right hip are related to trauma with
any reasonable probability.”64
R. Doc. 81-1 at 2.
R. Doc. 81-4 at 1.
59 R. Doc. 81-4 at 6–7.
60 R. Doc. 81-4 at 7.
61 R. Doc. 81-4 at 7.
62 R. Doc. 81-4 at 7.
63 R. Doc. 81-4 at 6.
64 R. Doc. 81-4 at 6.
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In further support of its contention that its refusal to tender additional payment to
Discon is not arbitrary and capricious because questions of causation exist, Encompass
submits the testimony of Dr. R. Bryan Griffith, who performed Discon’s hip replacement
surgery.65 Dr. Griffith testified Discon “had arthritic changes prior to [the] accident more
likely than not” and Discon “had arthritis before the accident.” 66 Dr. Griffith further
testified he does not know “how much [the] accident bothered [Discon] [or] how much it
accelerated him” and that Discon “was going to have his hip replaced whether he had this
accident or not.”67 In his deposition, Dr. Griffith was asked repeatedly whether the
accident caused or accelerated Discon’s hip injury. In response to these questions, Dr.
Griffith first answered “I think it’s certainly possible if not probable that [the accident]
accelerated [the hip injury].”68 When asked a second time, Dr. Griffith testified “it’s
certainly possible that this accident . . . could have aggravated [Discon’s] hip,” but that
Dr. Griffith did not “have enough information to say it’s more probable than not” that the
accident accelerated Discon’s hip injury.69 When asked whether the accident contributed
to Discon’s hip injury a third time, Dr. Griffith testified “it’s certainly more probable than
not that an accident like this . . . could contribute to some degree of acceleration of
[Discon’s] arthritic hip.”70
Dr. Butler’s opinion and Dr. Griffith’s testimony show coverage is disputed. The
Court finds Encompass’s decision not to pay an additional unconditional tender to Discon
is not behavior that is “unjustified [or] without reasonable or probable cause or excuse.”71
R. Doc. 81-5.
R. Doc. 81-5 at 7–8.
67 R. Doc. 81-5 at 10.
68 R. Doc. 81-5 at 10.
69 R. Doc. 81-5 at 21.
70 R. Doc. 81-5 at 27–28.
71 Reed, 857 So. 2d at 1021.
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Encompass has a good-faith defense that the accident may not have caused Discon’s
injuries.72 Encompass, therefore, has submitted sufficient evidence to negate an essential
element of Discon’s claim—that Encompass acted arbitrarily and capriciously in its
refusal to pay Discon’s claim.
Because Encompass, as movant on summary judgment, has submitted affirmative
evidence to negate an essential element of Discon’s claim, the burden shifts to Discon to
muster sufficient evidence to show Encompass is not entitled to summary judgment as a
matter of law.
In support of his position, Discon submits the testimony of Dr. Jason Rolling, an
orthopedic surgeon who treated Discon. Dr. Rolling opined the accident “played a role”
in the acceleration of Discon’s hip injury, albeit not a “gigantic” role. 73 Dr. Rolling also
testified Discon would likely have needed a hip replacement “no matter what.”74
Discon also submits Dr. Griffith’s testimony arguing that Dr. Griffith’s statement
that it was “possible, if not probable” the accident accelerated Discon’s injuries establishes
the accident and injuries were causally related.75 As discussed above, Dr. Griffith’s
conflicting testimony gives rise to a factual question of whether there was coverage based
on the extent to which the accident caused or accelerated Discon’s injuries.
Finally, Discon submits his own sworn affidavit, in which states he never had any
hip complaints or complaints related to his hip and never sought medical care relating to
his hip before the February 22, 2013 accident.76
Id. An insurer’s actions are vexatious when its refusal to pay is not based on a good-faith defense.
R. Doc. 82-1 at 1.
74 R. Doc. 82-1 at 1.
75 R. Doc. 82 at 6–7.
76 R. Doc. 82-3 at 1. Discon also attempts to submit the medical records of Dr. John Logan from The North
Institute. R. Doc. 82-4. These documents are uncertified medical records, which are not proper summary
judgment evidence. The Court will not consider these documents in its ruling.
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The Court finds Discon fails to submit sufficient evidence to overcome
Encompass’s evidence that its refusal to pay was based on a good-faith defense. Because
factual issues with respect to the causation of Discon’s injuries exist, “bad faith should not
be inferred from [Encompass’s] failure to pay within the statutory time limits when such
reasonable doubts [as to causation] exist.”77 Encompass has established its refusal to pay
a claim is based on a genuine dispute over coverage or the amount of loss and it therefore
did not act vexatiously.
Accordingly;
CONCLUSION
For the foregoing reasons, IT IS ORDERED the motion for partial summary
judgment78 filed by Encompass Insurance Company is GRANTED.
New Orleans, Louisiana, this 28th day of November, 2016.
________________________________
SUSIE MORGAN
UNITED STATES DISTRICT JUDGE
Lemoine v. Mike Munna, LLC, 148 So. 3d 205, 215 (La. Ct. App. 1 Cir. 6/6/14) (citing Reed, 857 So. 2d at
1021).
78 R. Doc. 81.
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