Burnett et al v. State Farm Fire And Casualty Company

Filing 62

RULING denying 55 Motion for Partial Summary Judgment and denying as moot 61 Motion for Oral Argument. Signed by Judge James J. Brady on 05/14/2012. (NLT) Modified on 5/14/2012 (NLT).

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA
PHILLIP BURNETT AND
ALLISON BURNETT
CIVIL ACTION
VERSUS
NO. 09-166-JJB
STATE FARM FIRE AND CASUALTY
COMPANY
RULING ON STATE FARM’S MOTION FOR PARTIAL SUMMARY JUDGMENT
Defendant State Farm Fire and Casualty Company moves for summary judgment (Doc.
55) on a tort claim for negligent inspection brought by plaintiffs Phillip and Allison Burnett. The
Burnetts filed an opposition (Doc. 58), and State Farm filed a reply (Doc. 60). The Burnetts also
sought oral argument (Doc. 61), which the Court finds unnecessary. Jurisdiction exists under 28
U.S.C. § 1332.
I.
The following facts are undisputed or must be taken as true for purposes of this motion.
The Burnetts own a hundred-year-old home in Holden, Louisiana. (Affidavit of Phillip Burnett,
Doc. 19-4, at 31). They replaced their roof in approximately 2000 and their entire floor in
approximately 2004. (Id. at 106). In late 2007, high winds caused a tree limb to fall on their
home, damaging their roof. (Id. at 97). Phillip removed the limb and inspected the roof and
attic, but found no significant damage at that time. (Id. at 117-19). Upon returning home from
Thanksgiving vacation, plaintiffs discovered a small hole and water stains in their home’s ceiling
and puddles of water directly beneath the hole. (Id. at 97-98, 125-26). Phillip then went into the
home’s attic and discovered large amounts of water and, later, broken pieces of plywood. (Id. at
98). Phillip placed buckets and visqueen under the hole to prevent further leaking. (Id. at 128).
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Since that time, plaintiffs have observed water dripping from lights in the home’s ceiling. (Id. at
129-30). Moreover, the home’s walls are so saturated with moisture that curtains, mirrors and
pictures have fallen from the sheetrock. (Id. at 133).
The Burnetts then contacted State Farm, their homeowners’ insurer on February 21,
2008, and on March 4, 2008, Rodrick Philson, a field adjuster with State Farm, inspected their
property. (Statement of Undisputed Facts, Doc. 58-1, at ¶5). Philson issued the Burnetts a draft
for the repairs State Farm thought covered under the policy. (Id.). The Burnetts dispute whether
Philson conducted an adequate investigation of their attic and whether he tendered a check
adequate to pay for the necessary repairs. (Aff. of Phillip Burnett, Doc. 19-4, at 101-03). The
draft purported to pay for the damage to the roof caused by the fallen tree limb, but declined
coverage as to the water intrusion. The policy excludes coverage for losses “which consist of …
mold, fungus or wet or dry rot” or that were caused by “water below the surface of the ground,
including water which exerts pressure on, or seeps or leaks through a building, sidewalk,
driveway, foundation, swimming pool or other structure.” (Policy, Doc. 19-3, at 18, § 1.i and 19,
§ 2.c(3)).
Unhappy with Philson’s draft, Phillip Burnett e-mailed Philson pictures of the areas of
the attic he felt Philson missed. (See E-mail Correspondence between Burnett and Philson, Doc.
58-2, at 7-12). Philson disregarded the pictures in the e-mails apparently because the file sizes
jammed up his e-mail system. (Id. at 7-8). He never responded to Burnett’s concern that the
pictures would not show up well via fax submission. (Id.).
State Farm eventually sent out a civil engineer named Jim Danner to conduct another
investigation, who reported to State Farm that the cause of water damage was absorption from
excess moisture in the crawl space below the Burnetts’ home. (Statement of Undisputed Facts,
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Doc. 58-1, at ¶ 7). On April 2, 2008, State Farm denied further payment to the Burnetts based on
its determination that the moisture intrusion was caused by surface water, which in turn was
caused by inadequate design of the property and crawl space. (Affidavit of Terry Downs, Doc.
35-3, ¶ 7; Coverage Denial Letter, Doc. 35-3, at 4-5).
II.
Summary judgment is appropriate when “the movant shows that there is no genuine
dispute as to any material fact.” Fed. Rule Civ. P. 56(a). The party seeking summary judgment
carries the burden of demonstrating that there is an absence of evidence to support the nonmoving party’s case. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). When the burden at
trial rests on the non-moving party, the moving party need only demonstrate that the record lacks
sufficient evidentiary support for the non-moving party’s case. Id. The moving party may do
this by showing that the evidence is insufficient to prove the existence of one or more essential
elements of the non-moving party’s case. Id. A party must support its summary judgment
position by “citing to particular parts of materials in the record” or “showing that the materials
cited do not establish the absence or presence of a genuine dispute.” Fed. Rule Civ. P. 56(c)(1).
Although the Court considers evidence in a light most favorable to the non-moving party,
the non-moving party must show that there is a genuine issue for trial. Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248-49 (1986). Conclusory allegations and unsubstantiated assertions
will not satisfy the non-moving party’s burden. Grimes v. Tex. Dep’t of Mental Health, 102 F.3d
137, 139-40 (5th Cir. 1996). Similarly, “[u]nsworn pleadings, memoranda or the like are not, of
course, competent summary judgment evidence.” Larry v. White, 929 F.2d 206, 211 n.12 (5th
Cir. 1991), cert. denied, 507 U.S. 1051. If, once the non-moving party has been given the

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opportunity to raise a genuine fact issue, no reasonable juror could find for the non-moving
party, summary judgment will be granted for the moving party. Celotex, 477 U.S. at 322.
III.
Louisiana follows the duty-risk analysis for assessing negligence claims. The Louisiana
Supreme Court has set forth five elements:
(1) Proof that the defendant had a duty to conform his conduct to a specific standard (the
duty element);
(2) Proof that the defendant’s conduct failed to conform to the appropriate standard (the
breach element);
(3) Proof that the defendant’s substandard conduct was a cause-in-fact of the plaintiff’s
injuries (the cause-in-fact element);
(4) Proof that the defendant’s substandard conduct was a legal cause of the plaintiff’s
injuries (the scope of liability or scope of protection element); and
(5) Proof of actual damages (the damages element).
Fowler v. Roberts, 556 So.2d 1, 4 (La. 1989). The question of whether a duty exists in a
particular set of circumstances is a question of law. Harris v. Pizza Hut of La., Inc., 455 So.2d
1364, 1371 (La. 1984). “An insurer … owes to his insured a duty of good faith and fair dealing.”
La. R.S. 22:1973(A). This statutory language imposing the duty of good faith and fair dealing
“recognizes the jurisprudentially established duty of good faith and fair dealing owed to the
insured, which is an outgrowth of the contractual and fiduciary relationship between the insured
and insurer.” Theriot v. Midland Risk Ins. Co., 694 So.2d 184, 187 (La. 1997). 1
Although “[t]he doctrine of negligence per se has been rejected in Louisiana[,] …
statutory violations provide guidelines for civil liability.”

Galloway v. State Dep’t of

Transportation and Development, 654 So.2d 1345, 1347 (La. 1995).

In determining the

existence of a delictual civil duty owed to a specific person, courts may examine statutory duties

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In this regard, the statute confirms an independent, pre-existing duty, and it provides special penalties under
subsection C for insurers who breach that duty through one of the acts in subsection B. Contrary to State Farm’s
suggestion, the statute does not circumscribe the pre-existing duty the Burnetts sue under here.

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and decide (1) whether the person falls within the class of persons the statute was intended to
protect, and (2) whether the harm complained of was of the kind which the statute was intended,
in general, to prevent. Clomon v. Monroe City Sch. Bd., 572 So.2d 571, 577 (La. 1990).
Louisiana statute forbids an insurer from “[r]efusing to pay claims without conducting a
reasonable investigation based upon all available information.”

La. R.S. 22:1964(14)(d).

Statutory claims under La. R.S. 22:1964 can only be enforced by the Commissioner of Insurance
and cannot be enforced indirectly through La. R.S. 22:1973. Theriot, 694 So.2d at 188; see also
La. R.S. 22:1967 and Klein v. Am. Life & Cas. Co., 858 So.2d 527, 533 (La. App. 1st Cir.), writ
denied, 857 So.2d 499 (La. 2003). Thus, third-party claimants against the defendant-insurer (i.e.,
non-insureds) cannot avail themselves of private enforcement actions for “the entire list of unfair
settlement practices” contained in La. R.S. 22:1964(14) (formerly La. R.S. 22:1214) but rather
only the “smaller number of acts deemed appropriate for private [third-party] enforcement”
embodied in La. R.S. 22:1973 (formerly La. R.S. 22:1220).

Theriot, 694 So.2d at 192.

Therefore, the robust statutory penalties provided for in La. R.S. 22:1973(C) only apply to the
six actions delineated in 22:1973(B).
Nonetheless, “[t]he Insurance Code defines the obligation of an insurer in terms of such
magnitude as to describe a legal duty … to policyholders beyond whatever action the
[Commissioner of Insurance] is empowered to take.” French Market Plaza Corp. v. Sequoia Ins.
Co., 480 F.Supp. 821, 826 (E.D. La. 1979); see also Southwest La. Convention & Visitors
Bureau v. Employers Mut. Cas. Co., No. 06-2006, 2009 WL 54295, at *1 (W.D. La. Jan. 7,
2009) (citing French Market). As Theriot explicitly noted, its “holding does not affects rights
and causes of action the insured may have directly against his own insurer for breach of the
implied covenant of good faith and fair dealing arising out of the contractual and fiduciary
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relationship between those parties.” 694 So.2d at 192, n. 15. Theriot shows the duty of good
faith and fair dealing does not arise via statute, only that the statute incentivizes compliance with
that pre-existing duty by adding penalty provisions. Therefore, despite the unavailability of the
statutory punitive damage provisions in this case, an insured may, consistently with Theriot and
French Market, sue its insurer based on a breach of the insurer’s fiduciary duty of good faith and
fair dealing.
As the Louisiana Supreme Court in Galloway and Clomon made clear, the statutory
prohibition against refusing to pay a claim without conducting a reasonable investigation
embodied in La. R.S. 22:1964(14)(d), even if only statutorily enforceable by the Insurance
Commissioner, may nonetheless provide guidelines for State Farm’s civil liability to the Burnetts
under the general duty of good faith and fair dealing. Because the Insurance Code’s prohibitions
operate to protect insurance consumers and the statute sought to prevent harm created by unfair
claims settlement practices which led to insurers unreasonably denying claims without adequate
information, the Court finds the Burnetts may sue State Farm for negligent inspection.
IV.
Because the Court finds the Burnetts have shown State Farm owes it a duty, the Court
must now examine the potential for State Farm to be found liable under the remaining elements.
Genuine disputes of material fact exist as to whether State Farm breached its duty. In fact, State
Farm has not brought forward any competent summary judgment evidence from which to show
support for the fact that it conducted a reasonable investigation. Philson, the adjuster who
originally looked at the Burnetts’ damaged home, has not been heard from in this case, either by
deposition or by affidavit. Danner, State Farm’s other investigator, submitted a report, but it is
unsworn. (See Doc. 19-13). “Unsworn expert reports do not qualify as affidavits or otherwise
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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 and Accident Ins. Co. v. Goel, 274 F.3d
984, 1000 (5th Cir. 2001) (citations, quotations, and punctuation marks omitted). The Burnetts,
on the other hand, have adequately supported their breach allegations with deposition testimony
and documentation showing they attempted to bring certain details Philson may have overlooked
to his attention, only to be met with bureaucratic intransigence. Moreover, they have introduced
competent evidence that Danner negligently inspected the house by also failing to go into the
attic or onto the roof. (Aff. of Phillip Burnett, Doc. 19-4, at 105-09). State Farm has simply not
introduced into the record competent summary judgment evidence from anyone with personal
knowledge of State Farm’s investigation at the Burnetts’ house.
The failure to conduct such a reasonable investigation and the willful refusal to at least
acknowledge information supporting the insured’s claim would be a breach of State Farm’s duty
of good faith and fair dealing causing continuing loss to the Burnetts in the form of withheld
payments, which in turn caused the Burnetts to pay for repairs out of pocket. These alleged
damages come squarely within the cause-in-fact and scope of protection elements of the dutyrisk analysis. The Burnetts have made out a cognizable claim and supported it with evidence
creating genuine disputes of material fact, rendering summary judgment for State Farm
inappropriate.

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V.
Accordingly, State Farm’s motion for summary judgment (Doc. 55) is DENIED. The
Burnetts’ motion for oral argument (Doc. 61) is DENIED as moot.
Signed in Baton Rouge, Louisiana, on May 14, 2012.





JAMES J. BRADY, DISTRICT JUDGE
MIDDLE DISTRICT OF LOUISIANA

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