Shepherd v. Geovera Specialty Insurance Services, Inc.

Filing 83

ORDER AND REASONS denying GeoVera Specialty Insurance Company's 27 Motion for Summary Judgment; denying Derrick Shepherd's 30 Motion for Partial Summary Judgment. Signed by Judge Jane Triche Milazzo. (ecm)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
DERRICK SHEPHERD

CIVIL ACTION

VERSUS

NO. 14-862

GEOVERA SPECIALTY
INSURANCE SERVICES, INC.

SECTION "H"(2)

ORDER AND REASONS
Before the Court are a Motion for Summary Judgment filed by
Defendant GeoVera Specialty Insurance Company ("GeoVera") (Doc. 27) and
a Motion for Partial Summary Judgment filed by Plaintiff Derrick Shepherd
("Shepherd") (Doc. 30).

For the following reasons, both Motions are

DENIED.
BACKGROUND
When Hurricane Isaac made landfall in Southeast Louisiana on August
28, 2012, Shepherd had a homeowner's insurance policy with GeoVera
insuring his property in Gretna, Louisiana. Shepherd filed a proof of loss
claiming his home was substantially damaged as a result of the hurricane.

Shepherd filed suit in Orleans Parish Civil District Court seeking insurance
proceeds under his homeowner's policy. GeoVera removed the case to this
Court on April 15, 2014.
GeoVera filed a motion for summary judgment on July 18, 2014
asserting that Shepherd breached the insurance contract by failing to
cooperate in the claim investigation. The Court denied the Motion, citing
numerous disputes of material fact that precluded summary judgment at that
time. On November 18, 2014, GeoVera filed a motion for summary judgment
on lack of coverage or rescission of contract of insurance. That same day,
Shepherd filed a motion for partial summary judgment on the issue of bad
faith. These are the Motions presently before the Court.
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."1 A genuine issue
of fact exists only "if the evidence is such that a reasonable jury could return
a verdict for the nonmoving party."2
In determining whether the movant is entitled to summary judgment,
the Court views facts in the light most favorable to the non-movant and

1
2

Fed. R. Civ. P. 56(c) (2012).
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

2

draws all reasonable inferences in his favor.3 "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."4 Summary
judgment is appropriate if the non-movant "fails to make a showing sufficient
to establish the existence of an element essential to that party's case."5 "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 non-movant on
all issues as to which the non-movant would bear the burden of proof at
trial."6

"We do not . . . in the absence of any proof, assume that the

nonmoving party could or would prove the necessary facts."7

Additionally,

"[t]he mere argued existence of a factual dispute will not defeat an otherwise
properly supported motion."8

Coleman v. Houston Indep. Sch. Dist., 113 F.3d 528 (5th Cir. 1997).
Engstrom v. First Nat’l Bank of Eagle Lake, 47 F.3d 1459, 1462 (5th Cir. 1995).
5 Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986).
6 John v. Deep E. Tex. Reg. Narcotics Trafficking Task Force, 379 F.3d 293, 301 (5th
Cir. 2004) (internal citations omitted).
7 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)).
8 Boudreaux v. Banctec, Inc., 366 F. Supp. 2d 425, 430 (E.D. La. 2005).
3
4

3

LAW AND ANALYSIS
GeoVera's Motion for Summary Judgment
GeoVera moves the Court to rescind the insurance contract between
Shepherd and GeoVera and order GeoVera to refund any premiums paid for
coverage of the policy. GeoVera contends that the insurance policy is void
and unenforceable due to material misrepresentations made by Shepherd or
his agent when filling out the insurance application.

GeoVera further

contends that it would not have placed the policy had the application been
filled out truthfully.
Specifically, GeoVera argues that the policy precludes coverage for any
insured in the event of concealment or fraud in relation to placement of the
insurance policy or for any claims thereafter. Under "Conditions," the policy
states:
We provide coverage to no "insureds" under this
policy if, whether before or after a loss, an "insured"
has:
1. Intentionally concealed or misrepresented any
material fact or circumstance;
2. Engaged in fraudulent conduct; or
3. Made false statements;
relating to this insurance.9
GeoVera argues that Shepherd is not entitled to coverage for the alleged
losses based on the plain language of the insurance policy. In the alternative,
GeoVera asserts that the policy should be rescinded for Shepherd's material
misrepresentations on his insurance application.
9

R. Doc. 27-1 at p. 5 (emphasis in original).

4

GeoVera argues that Shepherd made four material misrepresentations
in his application:
"1) no prior claims for property damage had been
made on the Property; 2) Shepherd had not been
convicted of an insurance-related crime within the
ten years preceding the date the application was
lodged; 3) the Property's purpose was that of a
primary residence; and 4) at the time of lodging the
application, the Property did not have any
unrepaired or unmitigated damage."10
GeoVera argues that these misrepresentations are material because
Shepherd's

policy

misrepresentations

would
because

never
of

have

been

GeoVera's

issued

but

underwriting

for

the

guidelines.

Additionally, GeoVera argues that the circumstances surrounding the
misrepresentations and the nature of the statements "lead to the inevitable
conclusion that these statements were made to deceive GeoVera and to
induce GeoVera into placing a policy of insurance against its guidelines."11
GeoVera argues that the policy should be rescinded based on these material
misrepresentations.
That is not, however, the end of the inquiry.

Louisiana Revised

Statutes section 22:860 provides that an insurer can void a liability insurance
contract only under specific circumstances. Specifically, it provides that:
[N]o oral or written misrepresentations or warranty
made in the negotiation of an insurance contract, by
the insured or in his behalf, shall be deemed material
10
11

R. Doc. 27-1 at p. 2.
R. Doc. 27-1 at p. 8.

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or defeat or void the contract or prevent it attaching,
unless the misrepresentation or warranty is made
with the intent to deceive.12
Under this section, "only a finding of intent to deceive will defeat coverage."13
Thus, for the alleged misrepresentations to void coverage under this policy,
GeoVera bears the burden of proving that Shepherd misrepresented a
material fact with the intent to deceive.14
A misrepresentation is material "'if the truth would have resulted in
the insurer not issuing the policy of insurance or issuing the policy at a
higher rate.'"15 With respect to proving intent to deceive, the Louisiana
Supreme Court has stated:
[S]trict proof of fraud is not required to show the
applicant's intent to deceive, because of the inherent
difficulties in proving intent. Intent to deceive must
be determined from surrounding circumstances
indicating the insured's knowledge of the falsity of
the representations made in the application and his
recognition
of
the
materiality
of
his
misrepresentations, or from circumstances which
create a reasonable assumption that the insured
recognized the materiality.16
Shepherd does not dispute that his application contains errors. In fact,
La. Rev. Stat. § 22:860(A) (emphasis added).
Cousin v. Page, 372 So. 2d 1231, 1233 (La. 1979).
14 Darby v. Safeco Ins. Co. of Am., 545 So. 2d 1022, 1025–26 (La. 1989).
15 Grenoble House Hotel v. Hanover Insurance Co., 06-8840, 2010 WL 2985789, at p.
3 (E.D. La. 2010) (quoting Abshire v. Desmoreaux, 970 So.2d 1188, 1196 (La. App. 3 Cir.
2007)).
16 Cousin v. Page, 372 So. 2d 1231, 1233 (La. 1979); see also Darby v. Safeco Ins. Co.
of Am., 545 So. 2d 1022, 1026 (La. 1989).
12
13

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he pointed out several errors when reviewing the application during his
deposition, including the year the house was built, the year the roof was
replaced, how far the fire hydrant is from the house, and whether he rents or
owns other properties.17 He argues, however, that GeoVera cannot prove he
misrepresented material facts or made false statements with the intent to
deceive because Shepherd did not fill out the application—it was instead
filled out by Shepherd's agent, Swanson & Associates.18 He contends that
any errors are the fault of his insurance agent at Swanson & Associates and
thus are not imputable to him.19 Shepherd argues GeoVera's motion must
fail because he did not make the false statements himself and there is no
evidence that he had knowledge of any material false statements made by
Swanson & Associates on the application.
The Court finds that there is a material misrepresentation on
Shepherd's insurance application, which was made either by Shepherd or by
Swanson & Associates on his behalf. GeoVera's Underwriting Manual states
that an applicant is not eligible for coverage if, inter alia: (1) he has made two
claims in the preceding three years totaling more than $20,000; (2) he has
R. Doc. 53-1 at pp. 15–19.
Shepherd refers to Swanson & Associates as his "agent." The Court notes that in
the insurance context, the term "insurance agent" generally refers to one who represents
the insurer, whereas an "insurance broker" generally refers to one who represents the
insured or prospective insured. See, e.g., Ford v. Golemi, Albrecht Ins., 522 So. 2d 1283 (La.
App. 5 Cir. 1988); Sw. Veterinary Servs., Inc. v. Hartford Cas. Ins. Co., 12-2281, 2013 WL
2471671, at *6 (W.D. La. June 6, 2013). It is clear that Swanson & Associates acted as
Shepherd's broker. Thus, Swanson & Associates represented Shepherd in the transaction.
19 There is also a question of whether Shepherd signed the application or whether
the broker signed his name on Shepherd’s behalf. R. Doc. 53-1 at pp. 11, 19.
17
18

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been convicted of a crime related to insurance coverage; (3) the property is
held for rental; or (4) the property has unrepaired prior damage.20 GeoVera
also points to an affidavit of GeoVera underwriter Carol Chervinko, which
supports GeoVera's position that "had [it] known any of the above-referenced
certifications by Shepherd made in his application were false, GeoVera would
have declined Shepherd's application for coverage."21
Looking just to the issue of previous claims made on the property,
Shepherd admits he filed claims with his previous insurer, about which he
informed Swanson & Associates.22 The claims file from his previous insurer
confirms that there were previous claims on the property that rendered
Shepherd ineligible for coverage based on GeoVera's underwriting guidelines.
The file indicates that there were more than two claims filed within the three
years preceding Shepherd's application and that the claims totaled more than
$20,000.23 There can be no question that Shepherd's application contained a
material misrepresentation. Thus, the dispositive question is whether the

R. Doc. 27-3 at p. 69.
R. Doc. 27-3 at pp. 1–3.
22 R. Doc. 53-1 at p. 18. Based on Shepherd’s opposition, it appears that he does not
contest that the application contains a material misstatement concerning his prior claims.
Instead, he contends that this error cannot void coverage because it was made by Swanson
& Associates. With respect to the other alleged misstatements, Shepherd contends his
agent either was not aware of his conviction of conspiracy to commit money laundering or
did not consider it to be an insurance-related crime; his tax returns indicate there was zero
rental income, which indicates the property was not rented and rather owner occupied; and
there was no prior damage to his property at the time the application was completed. R.
Doc. 53 at pp. 6–7. The Court finds there are factual disputes as to whether these
certifications were material misstatements.
23 R. Doc. 27-4.
20
21

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misrepresentation was made with the intent to deceive.
Viewing the evidence in the light most favorable to Shepherd, the Court
finds that there is a genuine dispute of material fact as to whether the
misrepresentations were made by Shepherd and whether he intended to
deceive GeoVera. Although there are some situations in which a Court may
infer intent to deceive, in this case there are factual disputes that must be
determined by the trier of fact.24

Because there are genuine disputes of

material fact, GeoVera's Motion must be denied.
Shepherd's Motion for Partial Summary Judgment
Shepherd filed a Motion seeking partial summary judgment on the
issue of GeoVera's bad faith arguing: "GeoVera has acted arbitrarily,
capriciously and without probable cause in adjusting its insured's claim for
damages, entitling [Shepherd] to statutory damages and penalties" under
Louisiana Revised Statutes sections 22:1892 and 22:1973.25 Shepherd would
bear the burden of proving his bad faith claim at trial. As discussed above,
there is a genuine dispute of material fact in this case as to whether GeoVera

For example, Shepherd’s affidavit avers that he did not complete or sign the
application, that he was not made aware that GeoVera’s underwriting guidelines prevented
it from placing a policy of insurance under the circumstances at issue, and that there was
no unrepaired damage to his residence. R. Doc. 53-2. To rule in GeoVera’s favor on
summary judgment would require a credibility determination, a determination better left to
the trier of fact.
25 R. Doc. 30-1 at p. 1. Both statutes prohibit insurers from refusing to pay a claim
after receiving a satisfactory proof of loss if the failure was arbitrary, capricious, or without
probable cause and provide for penalties if insurers do not comply. The primary difference
between the statutes is the time period allowed for payment. Compare, La. Rev. Stat. §
22:1892 (30 days) with, La. Rev. Stat. § 22:1973 (60 days).
24

9

has a valid defense to Shepherd's claim. There can be no dispute that, if
GeoVera prevails on its defense at trial, it was not in bad faith in refusing to
pay the amount demanded by Shepherd.

"Summary judgment is not

appropriate when a claim for bad faith penalties depends on factual
determinations concerning the reasonableness of the insurer's actions."26
Accordingly, Plaintiff's Motion must also be denied.
CONCLUSION
For the foregoing reasons, the Motions are DENIED.
New Orleans, Louisiana, this 5th day of March, 2015.

___________________________________
JANE TRICHE MILAZZO
UNITED STATES DISTRICT JUDGE

Johnson v. State Farm Mut. Auto. Ins. Co., 11-1991, 2012 WL 1745497, at *4 (E.D.
La. May 16, 2012) (Africk, J.). The Louisiana Supreme Court has stated that "[t]he
statutory penalties are inappropriate when the insurer has a reasonable basis to defend the
claim and acts in good-faith reliance on that defense." Reed v. State Farm Mut. Auto. Ins.
Co., 857 So. 2d 1012, 1021 (La. 2003).
26

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