Nederland Jewelers L L C v. Great American Insurance Co of New York
MEMORANDUM RULING re 20 Motion for Partial Summary Judgment filed by Great American Insurance Co of New York. Signed by Judge James D Cain, Jr on 1/11/2022. (crt,Benoit, T)
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UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF LOUISIANA
LAKE CHARLES DIVISION
NEDERLAND JEWELERS LLC
CASE NO. 2:21-CV-01431
JUDGE JAMES D. CAIN, JR.
GREAT AMERICAN INSURANCE CO OF MAGISTRATE JUDGE KAY
Before the court is a Motion for Partial Summary Judgment [doc. 20] filed by
defendant Great American Insurance Company of New York (“Great American”) and
seeking dismissal of plaintiff’s claims of insurance coverage for consequential loss.
Plaintiff Nederland Jewelers, LLC (“Nederland”) opposes the motion. Doc. 23.
This suit arises from plaintiff Nederland’s claims against a property and inland
marine insurance policy issued by defendant Great American, which was in effect at all
relevant times in this matter. Nederland owns and operates a jewelry store in Lake Charles,
Louisiana. An armed robbery occurred at the store on June 3, 2020, in which the four
suspects smashed display cases and took several Rolex watches, among other items. See
doc. 23, atts. 2 & 3 (police report and photographs). Law enforcement arrested the suspects
soon after the robbery, recovering all but two of the watches. Doc. 20, att. 2. Nederland
then filed a claim under its policy with Great American, seeking to recover for the missing
watches and for the loss of value to the Rolex watches that had been returned as well as
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those that had remained in the display case. Id. Great American made partial payment but
claimed insufficient information to determine coverage for some of the amounts. Id.
Nederland then filed suit in the Fourteenth Judicial District Court, Calcasieu Parish,
Louisiana, raising claims for breach of insurance contract and bad faith under Louisiana
law. Doc. 1, att. 1. Relevant to this motion, Nederland alleges that “[a]s a result of this
robbery, the damaged watches can no longer be sold as Rolex products and have lost their
original value due to damages sustained.” It seeks damage, inter alia, for “loss of use” and
“depreciation.” Id. at ¶¶ 3, 9. Great American removed the case to this court on the basis
of diversity jurisdiction, 28 U.S.C. § 1332. Doc. 1. It now moves for partial summary
judgment on Nederland’s entitlement to coverage for consequential damages, asserting that
such losses are not covered under the policy. Doc. 20. Nederland opposes the motion,
arguing that the damage to the watches was not a “consequential loss” and that it is entitled
to recover for the loss in value to the watches. Doc. 23.
SUMMARY JUDGMENT STANDARD
Under Rule 56(a), “[t]he court shall grant summary judgment 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.” The moving party is initially responsible for identifying
portions of pleadings and discovery that show the lack of a genuine issue of material fact.
Tubacex, Inc. v. M/V Risan, 45 F.3d 951, 954 (5th Cir. 1995). He may meet his burden by
pointing out “the absence of evidence supporting the nonmoving party’s case.” Malacara
v. Garber, 353 F.3d 393, 404 (5th Cir. 2003). The non-moving party is then required to go
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beyond the pleadings and show that there is a genuine issue of material fact for trial.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). To this end he must submit
“significant probative evidence” in support of his claim. State Farm Life Ins. Co. v.
Gutterman, 896 F.2d 116, 118 (5th Cir. 1990). “If the evidence is merely colorable, or is
not significantly probative, summary judgment may be granted.” Anderson, 477 U.S. at
249 (citations omitted).
A court may not make credibility determinations or weigh the evidence in ruling on
a motion for summary judgment. Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S.
133, 150 (2000). The court is also required to view all evidence in the light most favorable
to the non-moving party and draw all reasonable inferences in that party’s favor. Clift v.
Clift, 210 F.3d 268, 270 (5th Cir. 2000). Under this standard, a genuine issue of material
fact exists if a reasonable trier of fact could render a verdict for the nonmoving party.
Brumfield v. Hollins, 551 F.3d 322, 326 (5th Cir. 2008).
LAW & APPLICATION
Under Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1938), a federal court sitting in
diversity jurisdiction applies the substantive law of the forum state. Cates v. Sears, Roebuck
& Co., 928 F.2d 679, 687 (5th Cir. 1991). Louisiana law provides that an insurance policy
is a contract and that its provisions are construed using the general rules of contract
interpretation in the Louisiana Civil Code. Hanover Ins. Co. v. Superior Labor Svcs., Inc.,
179 F.Supp.3d 656, 675 (E.D. La. 2016). The words of the policy must be given their
generally prevailing meaning and “interpreted in light of the other provisions so that each
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is given the meaning suggested by the contract as a whole.” Coleman v. Sch. Bd. of
Richland Par., 418 F.3d 511, 516–17 (5th Cir. 2005) (citing La. Civ. Code arts. 2047,
While the insured must show that a claim falls within a policy’s terms, the insurer
bears the burden of showing that an exclusion applies. Doerr v. Mobil Oil Corp., 774 So.2d
119, 124 (La. 2000). Ambiguities in the policy, including within an exclusionary clause,
must be construed against the insurer and in favor of coverage. Coleman, 418 F.3d at 517.
The court resolves an ambiguity by asking “how a reasonable insurance policy purchaser
would construe the clause at the time the insurance contract was entered.” Id.
Under its “Jewelers Block Coverage Form,” Great American’s policy provides that
it will pay for “direct physical loss of or damage to Covered Property from Covered Causes
of Loss.” Doc. 20, att. 4, p. 24. The parties do not dispute that the Rolex watches stocked
by Nederland are covered property. “Covered Causes of Loss,” meanwhile, is defined as
“Direct Physical Loss or Damage to the Covered Property except those causes of loss listed
in the exclusions.” Id. at 25. Among the exclusions, Great American states that it will not
pay for “loss or damage caused by or resulting from . . . [d]elay, loss of use, loss of market
or any other consequential loss.” Id. at 27.
Great American relies on this exclusion for the position that, while it is liable for
repair costs for the watches that were damaged during the robbery, it is not liable for any
diminution in their value. Nederland maintains that the provision is ambiguous and that the
physical damage to the watches is inseparable from their resulting decrease in value.
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“Insurance companies in Louisiana are permitted to exclude coverage for
consequential damages as a result of damage to property.” Barry Concrete, Inc. v. Martin
Marietta Materials, Inc., 2008 WL 1885326, at *2 (M.D. La. Apr. 28, 2008). Reviewing
such a provision, the Fifth Circuit delineated between actual losses and consequential
damages as follows:
According to Black's [Law Dictionary], “actual loss” is “[a] loss resulting
from the real and substantial destruction of insured property.” Black's makes
reference to “actual loss” when it defines “actual damages” as “[a]n amount
awarded to a complainant to compensate for a proven injury or loss; damages
that repay actual losses.” In contrast, Black's separately defines
“consequential loss” as “[a] loss arising from the results of damage rather
than from the damage itself,” and notes that it is “[a]lso termed indirect loss;
consequential injury.” According to Black's, “consequential damages” entail
“[l]osses that do not flow directly and immediately from an injurious act but
that result indirectly from the act.” A plain reading of “actual loss or damage”
does not include “consequential loss” or “consequential damage.”
First Am. Bank v. First Am. Title Ins. Co., 585 F.3d 833, 839 (5th Cir. 2009).
The concept appears more frequently in the case law under loss of use cases. A few
courts have distinguished between repair/replacement costs and damages based on the
diminished value of the repaired item.1 See, e.g., Holder v. State Farm Fire & Cas. Co.,
2021 WL 4929493, at *5 (S.D. Miss. Oct. 21, 2021) (excluding damages for diminished
value of home where policy only provided for repair/replacement costs); Davis v. Farmers
Ins. Co. of Ariz., 142 P.3d 17, 20 (N.M. Ct. App. 2006) (“Plaintiff’s loss of market value
cannot be shoe-horned into the coverage for direct damage to his truck.”) In this case,
Great American also cites Admiral Ins. Co. v. Little Big Inch Pipeline Co., Inc., where the court held that diminution
in value to an adjacent property was “consequential economic damage” that was nevertheless covered by the property
damage terms of a policy. 523 F.Supp.3d 524, 539 (W.D. Tex. 2007). Because the “consequential damage” occurred
on a separate piece of property from the one insured under the policy, the court finds that case of little persuasive
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however, where the insured property is the merchant’s stock in trade, the court finds a much
closer question in whether a diminution in market value following covered direct physical
damage is properly excluded as a consequential loss.
Nederland purchased coverage as a jeweler, with the obvious intent of selling its
insured property rather than keeping it as an heirloom. Great American asserts that any
diminution in value—not merely those resulting from changes in market conditions or loss
of use—is a consequential damage excluded by the terms of the policy. But if the watches
cannot be resold for close to their original value after these repairs, then it calls into
question whether the repairs themselves offered the coverage contemplated by the policy.
Accordingly, the court finds that the exclusion cannot be read as barring all coverage for
the watches’ decrease in value following repair.
For the reasons stated above, the Motion for Partial Summary Judgment [doc. 20]
will be denied.
THUS DONE AND SIGNED in Chambers on this 11th day of January, 2022.
JAMES D. CAIN, JR.
UNITED STATES DISTRICT JUDGE
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