Great American Insurance Company v. Tom's Marine and Salvage, LLC et al

Filing 19

ORDER AND REASONS granting 13 Motion for Summary Judgment as set forth in document. Signed by Judge Jay C. Zainey on 6/13/2018. (ajn)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
GREAT AMERICAN INSURANCE
CO.

CIVIL ACTION

VERSUS

NO: 17-12090

TOM’S MARINE & SALVAGE, LLC,
ET AL.

SECTION: "A" (4)

ORDER AND REASONS
The following motion is before the Court: Motion for Summary Judgment
(Rec. Doc. 13) filed by Plaintiff, Great American Insurance Co. Defendant Tom’s
Marine & Salvage, LLC opposes the motion. The motion, submitted on May 30, 2018, is
before the Court on the briefs without oral argument.
Great American Insurance filed this declaratory judgment action seeking a
judgment declaring that it has no duty under its policy to defendant Tom’s Marine in
connection with a lawsuit styled Bismark Mairena-Rivera v. Tom’s Marine & Salvage,
LLC, Civil Action 17-5823, formerly pending before Judge Engelhardt and now pending
before Judge Vance (hereinafter “the Underlying Lawsuit”). The Underlying Lawsuit
involves a Fair Labor Standards Act (“FLSA”) collective action for unpaid overtime
wages.
Great American issued a commercial liability policy (hereinafter “the Policy”) to
Tom’s Marine. The policy includes Coverage A – Bodily Injury and Property Damage
Liability; Coverage B – Personal and Advertising Injury Liability; Coverage C – Medical
Payments. (Rec. Doc. 13-3 Exh. B-1 at 20). The issue before the Court is whether the
Page 1 of 5

Coverage A for property damage liability applies such that Great American would have a
duty to defend and cover the FLSA claims asserted in the Underlying Lawsuit. Great
American argues that the claims in the Underlying Lawsuit are for economic loss only,
do not pertain to tangible property, and are not covered by the Policy.
Under Louisiana law, a liability insurer’s duty to defend and the scope of its
coverage are separate and distinct issues. Mossy Motors, Inc. v. Cameras Am., 898 So.
2d 602, 606 (La. App. 4th Cir. 2005) (citing Dennis v. Finish Line, Inc., 636 So. 2d 944,
946 (La. App. 1st Cir. 1994)). The obligation of a liability insurer to defend suits against
its insured is generally broader than its obligation to provide coverage for damages
claims. Id. (citing Steptore v. Masco Constr. Co., 643 So. 2d 1213, 1218 (La. 1994)). The
issue of whether a liability insurer has the duty to defend a civil action against its
insured is determined by application of the “eight-corners rule,” under which an insurer
must look to the “four corners” of the plaintiff's petition and the “four corners” of its
policy to determine whether it owes that duty. Id. (citing Vaughn v. Franklin, 785 So. 2d
79, 84 (La. App. 1st Cir. 2001)). Under this analysis, the factual allegations of the
plaintiff's petition must be liberally interpreted to determine whether they set forth
grounds which raise even the possibility of liability under the policy. Id. In other words,
the test is not whether the allegations unambiguously assert coverage, but rather
whether they do not unambiguously exclude coverage. Id. Similarly, even though a
plaintiff's petition may allege numerous claims for which coverage is excluded under an
insurer's policy, a duty to defend may nonetheless exist if there is at least a single
allegation in the petition under which coverage is not unambiguously excluded. Id.
(citing Emp. Ins. Rep., Inc. v. Emp. Reinsur. Corp., 653 So. 2d 27, 29 (La. App. 1st Cir.
Page 2 of 5

1995)).
Thus, assuming all the allegations of the petition to be true, if there would be
both coverage under the policy and liability to the plaintiff, the insurer must defend the
lawsuit regardless of its outcome. Mossy Motors, 898 So. 2d at 607 (citing Yount v.
Maisano, 627 So. 2d 148 (La. 1993); Matheny v. Ludwig, 742 So. 2d 1029 (La. App. 2nd
Cir. 1999)). The duty to defend arises whenever the pleadings against the insured
disclose even a possibility of liability under the policy. Id.
The crux of the Underlying Lawsuit is that Tom’s Marine required Bismark
Mairena-Rivera, and others similarly situated, to work more than forty hours a week
without receiving overtime pay, all in violation of federal law. (Rec. Doc. 13-2 Exh. A).
The Policy defines property damage as:
A.

Physical injury to tangible property, including all resulting loss of use of that
property. All such loss of use shall be deemed to occur at the time of the physical
injury that caused it; or

B.

Loss of use of tangible property that is not physically injured. All such loss of
use shall be deemed to occur at the time of the “occurrence” that caused it.

(Rec. Doc. 13-3 Exh. B-1 at 51).
“Occurrence” means “an accident, including continuous or repeated exposure to
substantially the same general harmful conditions.” Id. at 50.
Tom’s Marine does not indicate which aspect of the property damage portion of
the policy, Paragraphs A or B, might apply. Assuming for the sake of argument that
Mairena-Rivera’s unpaid wages constitute “tangible” property, Paragraph A requires
physical injury, and Paragraph B requires an “occurrence,” which is an accident or
harmful exposure. This case involves neither physical injury nor an accident of any kind.
Page 3 of 5

The legal argument devolves on decisions issued by certain Louisiana appellate
courts that have held that lost money is tangible property and therefore can be property
damage under Louisiana law. Tom’s Marine argues that this Court is bound by Erie
Railroad Co. v. Tompkins, 304 U.S. 64 (1938), to apply the substantive law of Louisiana
in this diversity case.1 On the other hand, Great American argues that certain decisions
issued by the federal Fifth Circuit are in conflict with those Louisiana appellate court
decisions, and that this Court is bound by Fifth Circuit precedent.2 Tom’s Marine’s
asserts that it would be unfair to have the coverage question decided one way in state
court and another way in federal court.
Under any plausible reading of the property damage section of the Policy,
coverage is unambiguously excluded given the allegations in the Underlying Lawsuit.
The Court acknowledges the state appellate court decisions that support Tom’s Marine’s
position. But Erie requires a federal court to look to the decisions of the state’s highest
court, in this case the Louisiana Supreme Court. Howe v. Scottsdale Ins. Co., 204 F.3d
624, 627 (5th Cir. 2000) (citing Labiche v. Legal Sec. Life Ins., 31 F.3d 350, 351 (5th Cir.

Tom’s Marine does not identify the Louisiana appellate court decisions at issue. Rather, they
are cited in footnote 16 of Great American’s memorandum in support. Those decisions are:
Dietrich v. Travelers Ins. Co., 551 So. 2d 64 (La. App. 1st Cir. 1989), Williamson v. Historic
Hurstville Ass’n, 556 So. 2d 103 (La. App. 4th Cir. 1990), Nelson v. Want Ads of Shreveport, 720
So. 2d 1280 (La. App. 2nd Cir. 1998), and Innovative Hosp. Sys., LLC v. Abraham, 61 So. 3d 740
(La. App. 3rd Cir. 2011).
The only decision that Tom’s Marine discusses is a federal district court opinion that
does not allude to the potentially contradictory decisions of the federal Fifth Circuit.
1

The two decisions that Great American identifies are Selective Insurance v. J.B. Mouton &
Sons, Inc., 954 F.2d 1075 (5th Cir. 1992), and Lamar Advertising Co. v. Continental Casualty
Co., 396 F.3d 654 (5th Cir. 2005). Great American identifies a third decision, DeLoach v. HGI
Catastrophe Services, LLC, 460 Fed. Appx. 314 (5th Cir. 2012), but that decision is unpublished
and therefore does not constitute precedent. Fifth Circuit Rule 47.5.4.
Page 4 of 5
2

1994)). The decisions of the lower state courts should be given some weight but they are
not controlling where the state’s highest court has not spoken on the subject. Labiche, 31
F.3d at 351 (citing Comm’r v. Estate of Bosch, 387 U.S. 456, 465 (1967)).
Every decision supportive of Tom’s Marine’s position ignores the insurance
policy’s express requirements for physical injury and/or an occurrence. The Court has
no reason to assume that the Louisiana Supreme Court would do the same. And given
that this Court is bound by the decisions of the federal Fifth Circuit, which has not been
willing to ignore the physical injury/occurrence requirement, see Selective Insurance,
954 F.3d at 1079, this Court is persuaded that Great American is entitled to judgment as
a matter of law. Great American owes no duty to defend or to indemnify Tom’s Marine
in connection with the Underlying Lawsuit.
Accordingly, and for the foregoing reasons;
IT IS ORDERED that the Motion for Summary Judgment (Rec. Doc. 13)
filed by Plaintiff, Great American Insurance Co. is GRANTED as explained above.
June 13, 2018

JAY C. ZAINEY
UNITED STATES DISTRICT JUDGE

Page 5 of 5