Morris v. State Farm Fire and Casualty Co

Filing 62

RULING re 52 MOTION for Partial Summary Judgment filed by State Farm Fire & Casualty Insurance Co. Signed by Judge Robert G James on 2/25/13. (crt,DickersonSld, D)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF LOUISIANA
MONROE DIVISION
SHANNON MORRIS

CIVIL ACTION NO. 11-1770

VERSUS

JUDGE ROBERT G. JAMES

STATE FARM FIRE &
CASUALTY INSURANCE CO

MAG. JUDGE JAMES D. KIRK

RULING
This lawsuit arises out of a fire that occurred at Plaintiff Shannon Morris’ (“Morris”)
home on September 14, 2010. Morris filed suit against Defendant State Farm Fire & Casualty
Insurance Co. (“State Farm”), alleging that State Farm arbitrarily and capriciously denied his
insurance claim. He seeks to recover the proceeds of the policy, as well as attorney’s fees and
penalties under La. Rev. Stat. 22:1892 and 22:1973.
Pending before the Court is State Farm’s Motion for Partial Summary Judgment [Doc.
No. 52] and supporting memorandum [Doc. No. 53]. State Farm moves the Court to dismiss
Morris’ claims for attorney’s fees and penalties. Morris has opposed the motion. [Doc. Nos. 56
& 58]. State Farm has filed a Reply to Plaintiff’s Opposition to Motion for Partial Summary
Judgment (“Reply”) [Doc. No. 59].
For the following reasons, State Farm’s Motion for Partial Summary Judgment is
DENIED.
I.

Facts
Morris and his wife built a home at 2431 Century Loop Road, in Eros, Jackson Parish,

Louisiana, in 2005. Morris’ wife died in 2008.

Some time following his wife’s death in 2008 or 2009, Morris purchased property next to
the cemetery where his wife was interred. The property was located at 208 Waldroup Road,
approximately 1-2miles1 and only “minutes” away from his home on Century Loop Road.
Morris began residing in a mobile home on the property with boarders, Bill and Denise Bowser.
On September 14, 2010, two fires occurred at Morris’ home within hours of each other.
The first fire, which was discovered at 7:27 p.m., caused minimal damage and was completely
extinguished. The second fire later that night destroyed the home and its contents.
Following the fires, Morris filed a claim with State Farm, which insured the home, for
proceeds of policy number 18-A315-954.
On September 17 and 30, 2010, an investigator hired by State Farm, John Newcomer
(“Newcomer”), inspected the scene of the fires. On the second inspection, Newcomer was
accompanied by Chief Chad Caskey of the Ward 2 Volunteer Fire Department. As part of his
investigation, Newcomer interviewed Caskey and Louisiana State Fire Marshal’s Office
representative, Ric Abbott. Based on the evidence collected, Newcomer concluded that the fires
were intentionally set using gasoline as an accelerant.
State Farm received Newcomer’s report on October 5, 2010. Some time after receiving
that report, State Farm denied Morris’ claim, contending that there had been no “occurrence”
under the Policy and/or the Policy had been rendered void due to arson and misrepresentation.
On September 13, 2011, Morris filed suit against State Farm in the Second Judicial
District Court, Parish of Jackson, State of Louisiana, alleging that he was entitled to the proceeds

1

The property is described alternatively as being 2.5 miles or 1 mile away from Morris’

home.
2

of the policy, plus attorney’s fees and penalties.
On October 3, 2011, State Farm removed the case to this Court on the basis of diversity
jurisdiction.
On December 5, 2011, Morris was deposed by State Farm’s attorney.
On January 3, 2013, State Farm filed the instant Motion for Partial Summary Judgment.
On January 24, 2013, Morris filed an Opposition to Motion for Summary Judgment2 [Doc. No.
56] and a Memorandum in Opposition to Motion for Partial Summary Judgment (“Opposition
Memorandum”) [Doc. No. 58]. On January 31, 2013, State Farm filed a Reply.
II.

Law and Analysis
A.

Standard of Review

Under Federal Rule of Civil Procedure 56, summary judgment “should be rendered if the
pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no
genuine issue as to any material fact and that the movant is entitled to judgment as a matter of
law.” FED . R. CIV . P. 56(c)(2). The moving party bears the initial burden of informing the court
of the basis for its motion by identifying portions of the record which highlight the absence of
genuine issues of material fact. Topalian v. Ehrmann, 954 F.2d 1125, 1132 (5th Cir. 1992). A
fact is “material” if proof of its existence or nonexistence would affect the outcome of the lawsuit
under applicable law in the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A
dispute about a material fact is “genuine” if the evidence is such that a reasonable fact finder
could render a verdict for the nonmoving party. Id.
2

The Opposition to Motion for Summary Judgment is actually a response, by numbered
paragraph, to State Farm’s Motion for Summary Judgment, as well as a Statement of
Uncontested Facts in Opposition to Defendant’s Motion for Partial Summary Judgment.
3

If the moving party can meet the initial burden, the burden then shifts to the nonmoving
party to establish the existence of a genuine issue of material fact for trial. Norman v. Apache
Corp., 19 F.3d 1017, 1023 (5th Cir. 1994). The nonmoving party must show more than “some
metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio
Corp., 475 U.S. 574, 586 (1986). In evaluating the evidence tendered by the parties, the Court
must accept the evidence of the nonmovant as credible and draw all justifiable inferences in its
favor. Anderson, 477 U.S. at 255.
B.

La. Rev. Stat. 22:1892 and 22:1973.

State Farm moves for summary judgment on Morris’ claims for attorney’s fees and
penalties pursuant to La. Rev. Stat. 22:1892 and 22:1973.
“An insurer . . . owes to his insured a duty of good faith and fair dealing. The insurer has
an affirmative duty to adjust claims fairly and promptly and to make a reasonable effort to settle
claims with the insured or the claimant, or both. Any insurer who breaches these duties shall be
liable for any damages sustained as a result of the breach.” La. Rev. Stat. 22:1973(A). Both La.
Rev. Stat. 22:1892 and 22:1973 provide for penalties against an insurer if its failure to pay a
claim after receiving satisfactory proof of loss is arbitrary, capricious, or without probable cause.3
Jones v. Johnson, 45,847 (La. App. 2d Cir.12/15/10), 56 So.3d 1016. Both statutes are penal in
nature and must be strictly construed. Hart v. Allstate Ins. Co., 437 So.2d 823 (La. 1983).
Louisiana Revised Statute 22:1892 provides in pertinent part:
3

The statutes prohibit “virtually identical” conduct, but there is a difference between the
time periods allowed for payment. Korbel v. Lexington Ins. Co., 308 Fed. App’x 800, 803 (5th
Cir. 2009)(quotation omitted). Upon receipt of satisfactory proof of loss, La. Rev. Stat. 22:1892
requires payment within 30 days, but La. Rev. Stat. 22:1973(B)(5) requires payment within 60
days.
4

Failure to make such payment [of a claim due] within thirty days after receipt of
such satisfactory written proofs and demand therefor or failure to make a written
offer to settle any property damage claim, including a third-party claim, within
thirty days after receipt of satisfactory proofs of loss of that claim, as provided in
Paragraphs (A)(1) and (4) of this Section, respectively, or failure to make such
payment within thirty days after written agreement or settlement as provided in
Paragraph (A)(2) of this Section when such failure is found to be 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, payable to the insured, or to any of said employees, or in the event a
partial payment or tender has been made, fifty percent of the difference between
the amount paid or tendered and the amount found to be due as well as reasonable
attorney fees and costs. Such penalties, if awarded, shall not be used by the insurer
in computing either past or prospective loss experience for the purpose of setting
rates or making rate filings.
Id. at (B)(1). Louisiana Revised Statute 22:1973 provides in pertinent part:
B.

Any one of the following acts, if knowingly committed or performed by an
insurer, constitutes a breach of the insurer's duties imposed in Subsection
A of this Section:

...
(5)

(6)

C.

Failing 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.
Failing to pay claims pursuant to R.S. 22:1893 when such
failure is arbitrary, capricious, or without probable cause.

In addition to any general or special damages to which a claimant is
entitled for breach of the imposed duty, the claimant may be awarded
penalties assessed against the insurer in an amount not to exceed two times
the damages sustained or five thousand dollars, whichever is greater. Such
penalties, if awarded, shall not be used by the insurer in computing either
past or prospective loss experience for the purpose of setting rates or
making rate filings.

Id. at (B)-(C).

5

The burden is on the insured to establish: “(i) that the insurer received a satisfactory proof
of loss, (ii) that the insurer failed to pay the claim within the applicable statutory period, and (iii)
that the insurer’s failure to pay was arbitrary and capricious.” Grilleta v. Lexington Ins. Co., 558
F.3d 359, 368 (5th Cir. 2009) (quoting Boudreaux v. State Farm Mut. Auto. Ins. Co., 896 So.2d
230, 233 (La. App. 4th Cir. 2005) (other citation omitted)). When determining whether an insurer
acted arbitrarily, capriciously or without probable cause, the courts consider the facts available to
the insurer at the time. Reed v. State Farm Mut. Auto Ins. Co., 857 So.2d 1012, 1021,
2003-0107 (La. 10/21/03). An insurer’s actions are arbitrary, capricious, or without probable
cause when its refusal of a claim is not based on a good faith defense. Wallace v. State Farm
Mut. Auto. Ins. Co., 36,099 (La. App.2d Cir.6/14/02), 821 So.2d 704. “The 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, 857 So.2d at 1021.
Arson provides a good faith defense if the insurer can show by a preponderance of the
evidence that the fire was of incendiary origin and that plaintiff was responsible for it. See
Sumrall v. Providence Washington Ins. Co., 221 La. 633, 60 So.2d 68 (1952); Rist v.
Commercial Union Ins. Co., 376 So.2d 113 (La. 1979). “[M]otive, plus the incendiary nature of
the fire, would, in the absence of believable rebuttal evidence, be sufficient to sustain the
affirmative defense pleaded by the insurer.” Sumrall, 60 So.2d at 70.
In its Motion for Partial Summary Judgment, State Farm argues that it did not act
abritrarily, capriciously, or without probable cause, but denied Morris’ claim because (1) the fires
were intentionally set and accelerated; (2) Morris had made misrepresentations regarding his
knowledge, activities, and involvement in the events prior to and at the time of the fires; (3)
6

Morris had made misrepresentations and concealed facts regarding his knowledge of events and
activity subsequent to the fires; and (4) Morris had motive and opportunity to set the fires.
First, the Court notes that the pending Motion for Partial Summary Judgment does not
address the ultimate issue of whether Morris, or someone acting on his behalf, intentionally set
fire to his home; that issue is reserved for trial. Even where evidence at trial is insufficient to
establish an arson defense, the insurer may still have been justified in asserting that defense when
initially denying the claim. See McClain v. General Agents Ins. Co. of America, Inc.
438 So.2d 599, 601 (La. App. 2nd Cir. 1983). The Court’s review of the pending motion is
limited to whether there are genuine issues of material fact that State Farm’s denial of Morris’
claim was arbitrary, capricious or without probable cause. See, e.g. Hartenstein v. State Farm
Fire and Cas. Ins. Co., No. 07-4594, 2008 WL 2397713, at *3 & n. 22 (E.D. La. June 10, 2008)
(summary judgment denied when the plaintiff’s pre-litigation expert provided insurer with
information contradicting the insurer’s expert report, creating a fact issue on the reasonableness
of the insurer’s conduct).
However, the Court finds that State Farm has failed to present sufficient evidence to
render summary judgment in its favor at this time. The Court must base its review on the
information and evidence available to State Farm at the time the claim was denied. Yet, in this
case, neither party has informed the Court of that date. Further, State Farm refers to Morris’
“sworn statement,” but then cites the Court to his deposition testimony, but Morris’ deposition
was not taken until December 5, 2011, after this lawsuit was initiated. Thus, State Farm could
not have considered Morris’ testimony about his finances or his opportunity to commit this
alleged arson prior to denying his claim.
7

Excluding the evidence provided after the initiation of this lawsuit, the Court finds that
the only undisputed facts before it are Newcomer’s expert report concluding that the fires were
intentionally set and accelerated and that Morris did not reside in the home at the time of the
fires.4 The facts, standing alone, are insufficient to support summary judgment. Accordingly,
State Farm’s Motion for Partial Summary Judgment is DENIED.5
III.

Conclusion
For the foregoing reasons, State Farm’s Motion for Partial Summary Judgment [Doc. No.

52] is DENIED.
MONROE, LOUISIANA, this 25th day of February, 2013.

4

State Farm may have additional evidence that was available to it prior to the denial of
Morris’ claim; however, by failing to identify the date the claim was denied and failing to clearly
identify the evidence that was available on that date, State Farm has left the Court with no choice
but to deny its Motion for Partial Summary Judgment. State Farm may revisit this argument at
trial after the presentation of evidence by moving for judgment as a matter law.
5

Given the Court’s conclusion, it need not reach Morris’ argument that State Farm acted
in bad faith by failing to pay Morris’ mortgagee, Chase Mortgage Services, Inc. (“Chase”).
However, the Court notes that State Farm correctly points out that its obligation to pay Chase
under La. Rev. Stat. 22:1892 and 22:1973 is triggered by receipt of satisfactory proof of loss. If
as State Farm asserts, it did not receive satisfactory proof of loss from Chase, then it cannot have
acted arbitrarily, capriciously, or without probable cause on this basis.
8