April 30, 2025

Recent Changes in the Law and Important Decisions Concerning Property Litigation in Louisiana

             In representing our clients, we occasionally call their attention to changes in particular areas of the law and recent decisions that may be of interest. As a courtesy, we have compiled some of those recent legislative updates and court decisions concerning property damage claims in Louisiana.

BAD FAITH UPDATE

New statute – La. R.S. 22:1892.2

            The new bad faith statute was enacted to curtail the insurance crisis by stemming litigation awards in a bid to attract new carriers to Louisiana. The statute provides more time for the insurer to pay a catastrophic loss, imposes a duty of good faith upon the insured when asserting a claim for insurance coverage, and provides for a liberative prescriptive period of two (2) years for penalties and attorney’s fees.

             Last year, the Louisiana legislature enacted major changes to the duties imposed on insurers in its bad faith statutes. Effective July 1, 2024, La. R.S. 22:1973 is repealed and La. R.S. 22:1892 has been amended. Now with the repeal of La. R.S. 22:1973, La. R.S. 22:1892 will be the main statute that courts look to when evaluating bad faith claims.

            In addition, the legislature enacted a new statute for catastrophic losses, La. R.S. 22:1892.2. “Catastrophic loss” means a loss that arose from a natural disaster, windstorm, or significant weather-related event that resulted in a presidential or gubernatorial emergency or disaster. For a catastrophic loss involving residential property, an insurer has sixty days to pay undisputed amounts to the insured after receipt of satisfactory written proof of loss. If the property is a non-residential immovable property, such as a commercial property, then an insurer has ninety days after receipt of satisfactory written proof of loss from the insured. The period can be extended up to an additional thirty days if the Louisiana Commissioner of Insurance deems appropriate.

        R.S. 1892.2 also provides a notice requirement for the insured as a condition precedent to making a claim for bad faith damages. The insurer shall be given sixty days’ written notice of the alleged 1892.2 violation by the insured. This is known as the “cure period notice”. If, after sixty days, the insurer pays the full amount alleged due in the notice, together with any actual expenses incurred by the insured and claimed in the notice, including any attorney fees not to exceed twenty percent of the amount alleged under the policy, there shall be no further cause of action. If the insurer makes a partial payment during the sixty-day period, the penalty otherwise due, if any, on the amount actually paid by the insurer within sixty days of the insurer’s receipt of the cure period notice, shall be reduced by half.

At this time, there are no reported cases involving the newly enacted La. R.S. 22:1892.2.

RECENT DEGAN, BLANCHARD & NASH CASE LAW

First Baptist Church of Iowa, Louisiana v. Church Mut. Ins. Co., S.I., 105 F.4th 775 (5th Cir. 2024)

Degan, Blanchard & Nash Secures Favorable Ruling from the United States Fifth Circuit Court of Appeals.

          In this Hurricane Laura litigation, DBN successfully appealed the trial court’s holding that the policy language providing that the cost of repairing or replacing the damaged property is determined at the time of the loss was ambiguous. In addition, Church Mutual was successful in its appeal of an award of $164,235.42 for the repair and replacement of electrical wiring when the plaintiff’s expert did not include a narrative describing the pre-hurricane condition of the electrical system and only charged the plaintiff $4,500 for the repairs. The court found that any award over $4,500 for the electrical repairs was clearly erroneous. The court affirmed the trial court’s calculation of penalties on the amount found to be due without a deduction for payments made before the judgment was rendered.

Marbury v. United Nations Ins. Co., 2024 WL 4026011 (W.D. La. 2024)

Degan, Blanchard & Nash Secures Dismissal Based On Lack of Insurable Interest.

         Plaintiff filed suit under a contract of insurance for damage allegedly sustained to her property caused by Hurricane Laura.  Upon investigation, DBN learned that the property was actually owned by the church where the plaintiff was employed as a youth pastor. Although an insurable interest can be demonstrated when one contributes financially to the construction and maintenance of a home, the church paid the mortgage, and the plaintiff failed to present evidence that she contributed financially to the maintenance or construction of the home.  DBN successfully obtained a dismissal of the case pursuant to a motion for summary judgment. 

NOTABLE RULINGS ON PROCEDURE

Charter Oak Fire Ins. Co. v. Bremermann Mech., Inc., No. CV 2:21-1486, 2025 WL 958215 (E.D. La. Mar. 31, 2025)

Court Dismisses Water Damage Suit for Lack of Proof.

         In Charter Oak Fire Ins. Co. v. Bremermann Mechanical, Inc., the court dismissed a $2.3 million subrogation suit arising from a major water leak in the Hale Boggs Federal Building, finding no evidence that HVAC subcontractors caused the damage. The plaintiffs, insurers of the general contractor, claimed a faulty drain valve cap failed—but the court held that the valve had been improperly opened by an unknown third party and that no admissible evidence linked the subcontractors to the incident.

Lee v. D.R. Horton, Inc., No. CV 21-442-SDD-EWD, 2025 WL 467346 (M.D. La. Jan. 23, 2025)

HOA Dispute Dismissed on Federal RICO Claims, Based on a Lack of Standing.

       In Lee v. D.R. Horton, a group of homeowners alleged that D.R. Horton and its affiliates engaged in a RICO conspiracy to improperly elevate lots in their subdivision, causing flooding and property damage. However, the federal court ruled the plaintiffs lacked “prudential standing” to bring a civil RICO claim because the alleged predicate acts—fraudulent permit applications—were too remote from the harm suffered. The court later denied plaintiff’s Motion for Leave to File Amended and Restated Complaint, declined supplemental jurisdiction over the remaining state law claims and dismissed the case without prejudice, allowing plaintiffs to re-file in state court.

Indian Harbor Ins. Co. v. Covington Flooring Co., Inc., No. 24-30243, 2025 WL 416992 (5th Cir. Feb. 6, 2025)

Lessee Recovers $6.4 Million in Damages After Fire.

         In Indian Harbor Ins. Co. v. Covington Flooring, the Fifth Circuit upheld a $6.4 million jury award to St. Augustine high school after a subcontractor caused a fire during Hurricane Ida repairs. Covington argued the school, as a lessee of the property, had no right to recover property damages, but the court affirmed the holding that Louisiana law gives lessees a right of action for third-party disturbances. The court also upheld the district judge’s decision to allow key witnesses to testify as non-retained experts, finding no abuse of discretion. This case affirms both lessee rights under Louisiana law and court discretion on broad admissibility of fact-based, expert testimony.

Martinez v.  American Transport Group Risk Retention Group, Inc., 2023-01716 (La. 10/25/24) 395 So.3d 731

The Louisiana Supreme Court Ruled That an Insurer is Not Required to Post a Bond Exceeding its Policy Limit to Secure a Suspensive Appeal.

          The issue in this case was whether an insurer, with a policy limit lower than the total judgment, can appeal the judgment on behalf of itself and its insureds without posting a bond for the entire judgment amount. The Louisiana Supreme Court ruled that an insurer is not required to post a bond exceeding its policy limit to secure a suspensive appeal. The Court emphasized that requiring an insurer to post a bond beyond its contractual limits would violate the principles of insurance law and the constitutionally protected rights of contract.

        The Court clarified that while the trial court must set a bond equal to the full judgment amount, the insurer may limit its bond to its policy limit. The insurer can then suspensively appeal the judgment for the portion covered by the policy and devolutively appeal the remainder. The Court remanded the case for further proceedings, amending the trial court's order to reflect that the insurer only needs to post a bond for the part of the judgment within its policy limits.

Addison Kennon Goff IV et al. v. Ocean Harbor Casualty Insurance Co., 2024 WL 5125264 (E.D. La. Dec. 16, 2024)

Court Allows Amendment in Hurricane Ida Insurance Dispute.

          In Addison Kennon Goff IV et al. v. Ocean Harbor Casualty Insurance Co., the court granted plaintiffs’ motion to amend their complaint, allowing them to argue that Ocean Harbor’s unconditional tender of insurance proceeds interrupted prescription. Ocean Harbor sought to dismiss the case, claiming it was filed beyond the two-year deadline. The court found that Louisiana law remains unsettled on whether an unconditional tender tolls prescription, ruling that the amendment was not futile, and that litigation should proceed.

Rapides Station Land Co. LLC v. Markel Am. Ins. Co., 2024 WL 5294938 (W.D. La. Dec. 3, 2024)

Expert Testimony Partially Excluded in Hurricane Laura Insurance Case.

        In Rapides Station Land Co. LLC v. Markel American Insurance Co., the court granted in part and denied in part Markel’s motion to exclude certain expert testimony by a public adjuster. While the court ruled that the public adjuster can testify on damage causation, repair costs, industry standards, and Markel’s claim handling, it barred him from offering opinions on Markel’s intent or motivations and from providing legal conclusions. The ruling reaffirms that public adjusters can serve as experts in insurance disputes, but their testimony must remain within factual and industry-specific bounds.

ARBITRATION ISSUE

Arrive Nola Hotel, LLC v. Certain Underwriters at Lloyds, London, No. CV 24-1585, 2025 WL 871608 (E.D. La. Mar. 20, 2025)

Federal Court Orders Arbitration in Post-Fire Insurance Dispute Over New Orleans Hotel.

        Following a dispute over unpaid insurance proceeds after a 2022 fire, the U.S. District Court for the Eastern District of Louisiana granted a motion to compel arbitration and stay litigation in favor of both foreign and domestic insurers. Arrive NOLA Hotel had sued its insurers alleging underpayment for property damage and bad faith claims handling. The court found that the insurance policy’s arbitration clause met all four requirements of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. It rejected arguments that the arbitration agreement was invalid due to delayed notice or Louisiana law, holding that federal law preempted state restrictions on arbitration. Significantly, the court held that both foreign and domestic insurers could compel arbitration under federal equitable estoppel principles, citing the Fifth Circuit’s decision in Bufkin Enterprises v. Indian Harbor Ins. Co., 96 F. 4th 726 (5th Cir. 2024) and finding allegations of concerted conduct in the complaint. The court dismissed the contrary position taken by the Louisiana Supreme Court in Police Jury of Calcasieu v. Indian Harbor Ins. Co. 2024-00449 (La. 10/25/24), 395 So.3d 717 as subordinate to federal law under the Convention and the Boyle preemption test (Boyle v. United Technologies Corp., 487 U.S. 500, 108 S.Ct. 2510, 101 L.Ed.2d 442 (1988)).

Brothers Petroleum, LLC v. Certain Underwriters at Lloyd’s, No. CV 23-445, 2025 WL 1179461 (E.D. La. April 23, 2025)

Court Vacates Arbitration Order.

        In a case arising out of Hurricane Zeta and Hurricane Ida damage, the court overruled its prior decision to compel arbitration pursuant to an arbitration clause contained in two different surplus lines polices that required all disputes to be referred to an arbitration tribunal in New York. The court rejected the defendants’ argument that the New York arbitration tribunal (the “Convention”) was per se applicable in this single policy document subscribed to by both foreign and domestic insurers as the language in the policies mandated that the policies “shall be constructed as a separate contract between the Insured and each of the Insurers,” and, therefore, the absence of a foreign party made the Convention inapplicable. The court cited the Louisiana Supreme Court’s recent decision in Police Jury of Calcasieu v. Indian Harbor Ins. Co., 2024-00449 (La. 10/25/24), 395 So.3d 717, that a domestic insurer cannot use equitable estoppel to enforce arbitration through a foreign insurer’s policy. The court recognized the opposite decision in Arrive Nola Hotel, No. CV 24-1585, 2025 WL 871608 (E.D. La. Mar. 20, 2025) by another section in the Eastern District but declined “the invitation to craft an entirely new doctrine of reliance on federal common law in the context of Convention cases.”

UNINSURED MOTORIST PRESCRIPTION

Attamari v. Allstate Prop. & Cas. Ins. Co., 2024-0128, 400 So.3d 1156 (La. App. 4 Cir. 10/4/24)

Court Affirms Default Judgment Against Allstate, Reduces Bad Faith Penalties in UM Case.

       The Louisiana Fourth Circuit Court of Appeal upheld a default judgment against Allstate, ruling that the insurer failed to timely respond to a lawsuit over uninsured motorist (UM) benefits following a 2018 car accident. The court denied Allstate’s contention that the Petition was prescribed because it was filed more than two (2) years after the accident. The court found that the Petition was not prescribed because it was filed within 2 years of Allstate’s tender offer. The trial court’s original award of $15,000 in bad faith penalties and $7,500 in attorney’s fees was deemed excessive, and both were reduced to comply with Louisiana’s penalty calculations of 50% of the difference between the amount owed and the tender offer. The court denied Allstate’s appeal regarding the validity of the default judgment, finding that plaintiff provided sufficient evidence at the hearing on the default judgment including evidence of medical treatment, time missed from work, and no additional insurance available from the tortfeasor.  

NOTABLE RULINGS ON BAD FAITH

C & S Properties - I, LLC v. Foremost Ins. Co. Grand Rapids Michigan, 2025 WL 71876 (E.D. La. Jan. 10, 2025)

Court Dismisses Hurricane Ida Claim, Grants Leave to Amend.

        The court granted the insurer’s motion to dismiss a lawsuit concerning insurance claims for three properties damaged by Hurricane Ida, citing insufficient factual details in the complaint. The plaintiff alleged breach of contract and bad faith, but the petition lacked specific details regarding the alleged satisfactory proof of loss and failed to provide any dates to support its claim that the insurer failed to make a tender timely. The court stated that a plaintiff must present “more than a sheer possibility that a defendant has acted unlawfully.” The court allowed the plaintiff 14 days to amend its complaint to correct the deficiencies.

Erny v. Aegis Sec. Ins. Co., No. CV 23-6041, 2024 WL 3877497 (E.D. La. Aug. 20, 2024)

Court Grants Summary Judgment for Aegis Security in Hurricane Ida Case.

          The court dismissed bad faith claims against Aegis Security Insurance Company in a dispute with homeowners in Grand Isle over Hurricane Ida damage. The homeowners alleged that Aegis acted arbitrarily and capriciously by delaying payment and disputing coverage. However, the court found that Aegis reasonably investigated the claim, hiring an engineer to determine whether damage was caused by wind (covered) or flood (excluded) when the insurance adjuster recommended that an engineer was needed to determine the cause of the loss. Because Aegis issued policy limits within a reasonable timeframe after confirming wind-related damage, the court ruled that its conduct was not in bad faith.

Com. Restoration Co., LLC v. Nanaki, LLC, 2024-251, 2024 WL 5244518 (La. App. 3 Cir. 12/30/24)

AmGuard Ordered to Pay Over $8 Million for Bad Faith Handling of Hurricane Laura Insurance Claim.

       A Louisiana appellate court affirmed in part and reversed in part a $9.6 million judgment against AmGuard Insurance Company, reducing the award to $8 million. The case involved Nanaki, LLC, the owner of a Days Inn in Kinder, Louisiana, which suffered extensive damage from Hurricane Laura. The court found that AmGuard significantly underpaid the claim, withheld over $1.7 million in undisputed funds for months, and acted arbitrarily and capriciously, justifying penalties under La. R.S. 22:1892. However, the court reversed certain penalties for mitigation costs and adjusted the lost business income award.

2715 Marietta, LLC v. Axis Surplus Ins. Co., 2023 WL 8773747 (E.D. La. Dec. 19, 2023)

Court Dismisses Bad Faith Claims in Hurricane Ida Insurance Dispute.

       In a ruling favoring Axis Surplus Insurance Company, a Louisiana federal court granted partial summary judgment, dismissing plaintiff’s bad faith claims regarding a Hurricane Ida suit. The dispute arose when Axis denied coverage for roof damage, citing policy exclusions for wear and tear, rust, and pre-existing damage. Axis relied on three expert reports concluding that the damage resulted from long-term deterioration rather than hurricane-related winds. The court found that Axis had a legitimate basis for its denial, noting that an insurer is not in bad faith when there is a reasonable dispute over coverage.

Steven-Reynolds v. Wilshire Ins. Co., No. 2:22-CV-01238, 2024 WL 4235714 (W.D. La. Sept. 19, 2024)

Court Rules in Favor of Insurer in Hurricane Damage Dispute.

          The U.S. District Court for the Western District of Louisiana ruled in favor of Wilshire Insurance Company, rejecting claims of bad faith and breach of contract. The case stemmed from damage sustained by the plaintiff’s rental properties in Lake Charles during Hurricanes Laura and Delta. Plaintiff argued the payments were untimely and sought additional damages and penalties under Louisiana’s bad faith statutes. The court found that a payment made on April 8, 2021, based on an engineer’s report of February 11, 2021, was timely. Because the report had to be reviewed by the plaintiff’s expert to differentiate between Hurricane Laura and Hurricane Delta damages, and plaintiff had not yet made a claim for Hurricane Delta damages, the court found the delay to be reasonable.

Mathews v. Foremost Ins. Co., No. 1:23-CV-00214, 2024 WL 4113698 (W.D. La. Sept. 6, 2024)

Court Dismisses Claims for Roof Replacement, Construction Costs, and Bad Faith Penalties.

        The U.S. District Court for the Western District of Louisiana partially granted the insurer’s motion for summary judgment in a dispute over Hurricane Laura damages. The court dismissed claims for full roof replacement, increased construction costs, and multiple bad faith penalties, ruling that Foremost had a reasonable basis to deny coverage for pre-existing wear and tear and that policy terms limited recoverable costs to the time of loss. However, the court denied summary judgment on the interior damage claim, finding that a jury must decide whether the insurer acted in bad faith by failing to investigate and settle the claim after receiving new expert evidence.

Gentilly, LLC v. State Farm Fire & Cas. Co., No. CV 23-262, 2024 WL 5246606 (E.D. La. Dec. 30, 2024)

Court Dismisses Bad Faith Claim as Insurer’s Conduct Was Not Arbitrary and Capricious.

         In a significant ruling, the U.S. District Court for the Eastern District of Louisiana granted summary judgment in favor of State Farm, dismissing Gentilly, LLC’s bad faith claims. The dispute arose from Hurricane Ida damage to the Gentilly Shopping Center, with plaintiff alleging that State Farm acted in bad faith by delaying payments and underestimating damages. However, the court found that State Farm consistently acted within reasonable timelines, engaged multiple experts to assess the damage, and made payments based on legitimate appraisals. The court rejected claims that State Farm’s delays in inspections or payments were vexatious, noting logistical challenges, scheduling constraints, and evolving damage assessments. The court ruled that the plaintiff failed to show that State Farm’s conduct was arbitrary or capricious, leading to the dismissal of all bad faith claims with prejudice.

CONCLUSION

         As our clients continue to navigate the ever-evolving landscape of Louisiana property and bad faith law, staying informed and proactive is key. The insights shared in this edition highlight challenges and opportunities, underscoring the importance of adaptability and strategic action. We look forward to providing you with additional property and bad faith updates and perspectives in our next newsletter.

DEGAN, BLANCHARD & NASH PROPERTY PRACTICE GROUP

      Degan, Blanchard & Nash’s property practice group has handled property cases involving both commercial and residential buildings as well as a wide variety of alleged property issues.  Regarding the handling of property claims, it is impossible in the limited space available to give a comprehensive treatment of the issues involved and the nature of the risks assumed in the defense under the normal property insurance policy.  The firm has handled cases including but not limited to foundation subsidence, residential mold, and improperly applied roofs.  We have handled these cases under both first and third-party property policies as defense counsel and coverage counsel. 

          With offices in New Orleans, Baton Rouge and Lafayette, Degan, Blanchard & Nash has particular expertise in responding to natural disasters and other cataclysmic events.  For example, Degan, Blanchard & Nash has a firm-wide task force and comprehensive plan devoted to serving insurance industry clients in response to claims arising from hurricanes, tornadoes, and floods.  Several insurers appointed Degan, Blanchard & Nash as primary handling counsel for all of their Hurricane Katrina claims, and the firm has been retained by numerous other insurance clients to handle Hurricane Laura, Delta and Ida claims for property damage and bad faith.  Degan, Blanchard & Nash has longstanding relationships with various experts and consultants whose assistance is vital to successfully resolving claims.

         Our defense of claims and subrogation efforts generally arise from losses occurring as a result of: 1) weather related incidents, such as wind, lightning, or hail damage; freezing of plumbing, heating or air conditioning; and damage caused by accumulated ice or snow; 2) damage-producing incidents that can be readily traced to some specific human action, such as theft, operation of a vehicle or aircraft, vandalism, malicious mischief, breaking of glass or falling objects; 3) damage-producing incidents, which have their source as some type of human conduct, but as to which the causal relationship may be somewhat more diffuse, such as explosion, civil strife or riot, smoke, collapse of a building, unusual discharge of water or sudden surge of electrical current.  Our firm fully understands all issues that may arise in the defense of insureds and their insurers from claims for damages, or ancillary claims that can periodically arise, such as “bad faith.”  The ability of our lawyers to defend claims and to work with our insurance coverage practice team allows our firm to not only defend these claims, but to protect the subrogation interests and the insurers’ interests wherever possible.

        The firm has extensive experience helping clients investigate and resolve business interruption claims.  We have been involved in business interruption claims arising out of COVID-19.  In addition, our property coverage attorneys regularly take examinations under oath and conduct fraud and arson investigations.  We can assist in forensic accounting issues.  Our firm’s trial attorneys serve our insurance clients by pursuing and trying subrogation actions following resolution of first-party disputes.  

        The attorneys in our property practice group, whether acting as defense counsel or coverage counsel, recognize the need to tread the fine line between opposing plaintiffs’ claims and being able to work constructively with plaintiffs’ attorneys to resolve claims at the most advantageous time for the best possible result.  We strongly believe in early resolution of claims whenever possible, once we have determined the value, if any, of the claim presented.  Our strategy is to vigorously defend each claim after consultation with the client and, after sufficient discovery has been completed, proceeding with motions for summary judgment and determining whether to prepare the case for trial or to seek a settlement (or both).  We prefer to work every claim as if it will proceed to trial in order to ensure that plaintiffs’ counsel will not be able to “hold us hostage” and demand an exorbitant settlement because the defense is not prepared, as the case gets closer to trial.

Sidney W. Degan, III                                                                  Managing Partner 
E-Mail: sdegan@degan.com

DEGAN, BLANCHARD & NASH 
A PROFESSIONAL LAW CORPORATION
NEW ORLEANS | BATON ROUGE | LAFAYETTE
WEBSITE: WWW.DEGAN.COM

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