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April 3, 2025
Insurance Coverage Update
During the course of representing our clients, we occasionally call their attention to changes in the law and recent decisions that may be of interest. As a courtesy, we write to update you on some recent decisions regarding insurance coverage and bad faith that could impact future litigation.
RECENT DEGAN, BLANCHARD & NASH CASE LAW
Police Jury of Calcasieu Parish v. Indian Harbor Ins. Co., et al, No. 2024-CQ-00449, 395 So.3d 717 (Louisiana Oct. 25, 2024)
The Louisiana Supreme Court greatly curtails the ability of domestic insurers to enforce arbitration provisions. This decision will have far reaching impacts upon domestic insurance carriers underwriting risks in Louisiana. Most notably, the opinion overturns the United States Court of Appeal for the Fifth Circuit’s recent decision in Bufkin v. Indian Harbor Ins. Co., 96 F.4th 726 (5th Cir. 2024), wherein the Fifth Circuit held that a non-signatory to an arbitration agreement could compel arbitration under the doctrine of equitable estoppel in cases in which the signatory insurers and non-signatory insurers have acted in concert to evaluate, adjust, and pay the insured’s claim.
A copy of the opinion can be accessed through the following link -https://www.lasc.org/opinions/2024/24-0449.CQ.OPN.pdf. Should you have any questions regarding this opinion or its impacts, Degan Blanchard & Nash’s insurance coverage team would be happy to address them
BAD FAITH UPDATE
New statute – La. R.S. 22:1892.2
Last year, the Louisiana legislature enacted major changes to the duties imposed on insurers in its bad faith statutes. Until last year, two of these statutes, La. R.S. 22:1892 and 22:1973 also contain penalty provisions. Last year, 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 R.S. 22:1973 is repealed and La.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 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 was a presidentially declared emergency or disaster or a gubernatorially declared 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 from the date that it received satisfactory written proof of loss from the insured. That 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. However, 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.
DIRECT ACTION UPDATE
Louisiana amended its Direct Action Statute effective August 1, 2024. The below cases concern the recent changes made to Louisiana’s Direct Action Statute by Act 275.
Rogers v. Griffin, 24-537, 2024 WL 5183219 (La. App. 5 Cir. 12/20/24)
The Plaintiffs sued defendants and their liability insurer on November 16, 2023 alleging medical malpractice in connection with medical treatment that occurred in 2021. On August 29, 2024, in light of Act 275, the liability insurer filed a dilatory exception of prematurity and a peremptory exception of no cause of action, alleging that the Direct Action Statute is strictly procedural, thus, its amendment eradicating a direct cause of action against an insurer must be applied retroactively pursuant to La. C.C. art. 6. The insurer did not dispute that the Plaintiffs’ inclusion of it as a defendant was permissible at the time they filed suit, in accordance with the former language of the Direct Action Statute.
Ultimately, the Louisiana Fifth Circuit found that while the amendment to the Direct Action Statute may apply retroactively to a cause of action that arose before the effective date of August 1, 2024, the retroactivity stands only in reference to causes of action for which suit had not yet been filed, and thus a plaintiff’s right had not yet vested. Here, however, Plaintiffs invoked their right to name the insurer as a co-defendant by filing suit before the amendments to the Direct Action Statute became effective. The Court held that where the Plaintiffs exercised their procedural right to sue the tortfeasor's insurer before the effective date of the statutory amendment, the Legislature cannot revoke that vested right.
Howard v. J&B Hauling, LLC, No. CV 22-993, 2024 WL 4647820 (E.D. La. Sept. 26, 2024)
Here, the Plaintiff filed his initial complaint on April 13, 2022, relating to an auto accident. On May 13, 2024, the Plaintiff filed a Motion for Leave to File a First Amended Complaint to name a direct action defendant. The insurer argued that its addition was too late, well after the Court’s deadline to add new parties, and that Louisiana’s Direct Action Statute was recently amended to prohibit suits against insurers when the insurer is not alleging a coverage defense.
It was necessary for the United States District Court for the Eastern District of Louisiana to determine whether the Direct Action Statute applied retroactively here. The Court found that the amendment to the Direct Action Statute, which removed the right of an insured's direct action claim against insurers, save for certain, narrow exceptions, among other changes to the procedural right to sue insurers when a cause of action exists against the insured, created new procedural law, not substantive law. Because the insurer was not asserting any coverage defenses and none of the other narrow exceptions applied, the Court found that the insurer could not be named as a defendant under the amended Direct Action Statute.
Lyles v. K&B Louisiana Corp., No. CV 23-7400, 2024 WL 4665270 (E.D. La. Nov. 4, 2024)
The Plaintiff brought suit on October 23, 2023 alleging that her diagnosis of peritoneal mesothelioma was proximately caused by her regular exposure to asbestos containing talcum powder and talcum powder products. She named a drug store as a defendant and its insurers in direct action. The drug store filed for bankruptcy shortly before the lawsuit was filed. On October 4, 2024, the Plaintiff filed a First Amended, Restated, and Superseding Complaint, seeking to join another insurer as a direct action defendant, claiming that the insurer provided liability insurance to the new store she named as a defendant.
The defendants opposed the amendment, arguing, among other things, that the Plaintiff failed to allege a viable claim against the insurer because she did not properly plead a direct action under the recently amended statute. In its reasoning on this issue, the Court stated that under applicable Louisiana law, a direct action against an insurer is only available where the insured has been adjudged bankrupt, is insolvent, service on the insured has been unsuccessful, the cause of action is a result of an offense or quasi-offense between children and their parents or between married persons, the insurer is an uninsured motorist carrier, the insured is deceased, or the insured is defending under a reservation of rights. Here, the Plaintiff did not plead the existence of any of these factors. Thus, the Court found that she had not pleaded a valid claim against the insurer.
Smith v. Fortenberry, No. CV 24-1647, 2024 WL 4462332 (E.D. La. Oct. 10, 2024)
An insurer brought this Motion to Dismiss, alleging that the Plaintiff no longer had a procedural right of action against it under the recent changes to Louisiana’s Direct Action Statute. Although the insurer acknowledged that the Plaintiff filed her suit prior to the enactment of Act 275, it claimed that the Direct Action Statute is procedural in nature, rather than substantive, and thus, the amendment must be applied retroactively as required by Article 6 of the Louisiana Civil Code.
The Plaintiff first brought this suit against the direct action insurer on March 21, 2024. The Court found that at this time, the Plaintiff’s cause of action against the direct action insurer became a vested right. Thus, the Court rejected the insurer’s argument that the new Direct Action Statute should apply, even though it was served after the law’s enactment.
Baker v. Amazon Logistics, Inc., No. CV 23-3991, 2024 WL 4345073 (E.D. La. Sept. 30, 2024)
This case involved a motor vehicle accident, resulting in the death of the decedent Plaintiff. The Plaintiffs brought suit against several defendants. On July 31, 2024, the Plaintiffs filed a Motion for Leave to Amend Their Complaint to add one of the defendant’s insurers as defendants. The defendant opposed the Motion, claiming that it violated the amended Direct Action Statute.
The Court found that because the Plaintiffs exercised their right by moving for leave to file an amended complaint adding the insurers in this case on July 31, 2024, the Plaintiffs’ right to bring the direct action against the insurer became a vested property right that could not be divested retroactively.
Maise v. River Ventures, L.L.C., No. CV 23-5186, 2024 WL 4266698 (E.D. La. Sept. 23, 2024)
This case arose after a Jones Act Seaman fell while exiting a barge in the tow of the M/V INDEPENDENCE, a tugboat owned and operated by his employer. Plaintiff filed his First Supplemental and Restated Complaint on April 29, 2024, adding the alleged insurers of his employer, pursuant to the Direct Action Statute. The insurers moved to dismiss the claims against them due to the legislative amendments to the Direct Action Statute, which were effective August 1, 2024.
The Court denied the Motion to Dismiss. The Court found that the claim was pled over three months before the amendment of the Direct Action Statue, and thus was properly brought against the insurer defendants.
DUTY TO DEFEND
Ohio Cas. Ins. Co. v. Patterson-UTI Energy, Inc., No. 23-0006, 2024 WL 5172096 (Tex. Dec. 20, 2024)
Before the Texas Supreme Court was the issue of whether an excess-insurance policy covered the insured’s legal defense expenses. The insured purchased multiple levels of insurance to protect itself from costs arising from incidents that may occur during drilling operations involving its rigs. Its underlying policy was an umbrella policy. A drilling-rig incident during the policy year led to multiple lawsuits, which the insured settled after extensive litigation. The settlement and the litigation defense expenses triggered the excess policy after exhausting the coverage limits of all lower-level policies. The excess insurer funded portions of the settlements but refused to indemnify the insured for any defense expenses. The insured sued.
Ultimately, the Texas Supreme Court found that the excess policy did not cover the insured’s legal expenses incurred in defending against the lawsuits. The excess policy provided that it would pay on behalf of the insured the amount of “loss” covered by the insurance in excess of the “Underlying Limits of Insurance.” “Loss” was defined as those sums actually paid in the settlement or satisfaction of a claim which the insured is legally obligated to pay as damages after making proper deductions for all recoveries and salvage. The Court found that the attorney’s fees were not a “loss.”
Rey Feo Scholarship Found. v. Scottsdale Indem. Co., No. SA-23-CV-01157-JKP, 2024 WL 3305750, at *1 (W.D. Tex. July 3, 2024)
In this insurance coverage action, Rey Feo Scholarship Foundation seeks coverage from its insurer, Scottsdale Indemnity Company, for a lawsuit the Original Lulac Council No. 2 filed against Rey Feo. Specifically, Rey Feo seeks coverage under two consecutive claims-made-and-reported insurance policies covering the period from July 6, 2021 to July 6, 2022 (the “21-22 Policy”) and the period from July 6, 2022 to July 6, 2023 (the “22-23 Policy”). Scottsdale maintains it had no duty to defend or indemnify Rey Feo under either policy, and filed a counterclaim seeking a declaratory judgment affirming its position. Before the United States District Court for the Western District of Texas was Defendant/Counter-Plaintiff Scottsdale Indemnity Company's Motion for Summary Judgment. Scottsdale argued that Rey Feo's case should be dismissed because Scottsdale had no duty to defend or indemnify Rey Feo under the 21-22 Policy or the 22-23 Policy. Texas courts consistently find separate proceedings constitute a single claim for insurance coverage purposes, even when those proceedings involve different causes of action. Here, the parties’ contract provided that interrelated wrongful acts need only demonstrate as a common nexus any fact, circumstance, situation, event, transaction, or cause. Thus, the Court granted Scottdale’s Motion for Summary Judgment.
Kinsale Ins. Co. v. Flyin' Diesel Performance & Offroad, L.L.C., 99 F.4th 821 (5th Cir. 2024)
Commercial general liability (CGL) insurer brought an action against, inter alia, its insured, the sponsor of a one-day “no prep” drag racing event, seeking declaration it had no duty to defend insured in connection with underlying state court action arising from an incident at the event where a car careened off the raceway and collided with spectators, causing death and serious injury. The district court partially granted the insured’s motion for summary judgment and denied the insurer’s motion for summary judgment. The United States Court of Appeal for the Fifth Circuit reversed the district court’s holdings. In its reversal, the Fifth Circuit found the CGL policy at issue was not ambiguous. The presence of “footer statement” in multiple policy endorsements, which stated “all other terms and conditions of policy remained unchanged,” did not create conflict amongst endorsements and render policy ambiguous, and the CGL policy’s “motorized vehicles” endorsement precluded coverage for the insured in the underlying action.
Gold Coast Commodities, Inc. v. Travelers Cas. & Sur. Co. of Am., 96 F.4th 769 (5th Cir. 2024)
Insured corporation brought a state action against its commercial insurer, seeking a declaratory judgment that the insurer had a duty to defend it in cities' underlying actions alleging insured dumped industrial waste into sewer systems. The case was removed, and the district court denied the insured’s motion for partial judgment on the pleadings and granted the insurer’s motion for partial summary judgment. On appeal, the United States Court of Appeal for the Fifth Circuit considered the pollution exclusion in the policy at issue. An insurance policy's pollution exclusion deters deliberate or negligent behavior that leads to environmental harm. When a court holds that a pollution exclusion excludes the insured from coverage, the court protects the insurer's right to disincentivize corporations from engaging in bad faith actions with a known environmental impact. The Fifth Circuit found that it was not ambiguous and was applicable to the wastewater released by the insured. Thus, the judgment of the district court was affirmed.
AUTO COVERAGE
Taylor v. Root Ins. Co., No. 23-50667, 2024 WL 3517988 (5th Cir. July 24, 2024)
An insured motorist brought a putative class action against an automobile insurer, asserting causes of action for breach of contract and violation of the Texas Prompt Payment of Claims Act (TPPCA) arising from the insurer's failure to pay an amount representing sales tax when it paid the insured the vehicle's actual cash value in a total-loss settlement. The district court dismissed the action for failure to state a claim, and the insured appealed. On Appeal, the United States Court of Appeal for the Fifth Circuit held that under Texas law, a policy provision stating that if the insurer” pay[s] for loss in money”, then such payment “will include the applicable sales tax” did not require the insurer, when making payment to the insured of a vehicle’s actual cash value in a total-loss settlement, to pay the insured the equivalent of what the sales tax would be on the sale of an automobile at the relevant price. In addition, the Fifth Circuit held that under Texas law, the policy provision requiring payment of “actual cash value” of a vehicle in a total-loss settlement also did not require payment of a sales-tax equivalent. Thus, the district court’s judgment was affirmed.
Holder v. Hebert, 23-567, 398 So.3d 745 (La. App. 5 Cir. 10/9/24)
This suit was brought for injuries sustained as the result of a motor vehicle accident. After settling the claim against the tortfeasor, the plaintiff filed a UM/UIM claim against her UM/UIM carrier. The trial court granted summary judgment in favor of the UM/UIM carrier. On appeal, the Court of Appeal of Louisiana, Fifth Circuit, found that proof of an offending motorist’s underinsured status is an essential element to be provided in a claim against a UM/UIM carrier. Because the record did not have admissible evidence showing that the plaintiff would be able to satisfy her burden of proving the offending motorist’s alleged UM/UIM status, the trial court did not err in granting summary judgment.
Martinez v. Am. Transp. Grp. Risk Retention Grp., Inc., 2023-01716 (La. 10/25/24), 395 So. 3d 731
Passengers of a vehicle brought this suit against a truck driver, truck owner, and their liability insurer to recover damages for the truck's collision with the vehicle after sliding off the road. The District Court entered judgment for the passengers in excess of the policy limits, and granted the defendants’ motion for suspensive appeal, but set the bond at an amount of judgment in excess of the policy limits. The insurer posted bond equal to the remaining policy limits, plus interest on the entire judgment and taxable costs and applied for supervisory review. The Louisiana Supreme Court held that the insurer was not required to post funds in excess of the policy limits to secure suspensive appeal for its portion of the judgment, and the insurer could devolutively appeal the remainder of the judgment in excess of the policy limits.
Attamari v. Allstate Prop. & Cas. Ins. Co., 2024-0128, 400 So.3d 1156 (La. App. 4 Cir. 10/4/24), writ denied, 2024-01352, 398 So.3d 1169 (La. 1/14/25)
An insured brought the action against his automobile insurer to recover UIM benefits and for damages for bad faith failure to pay. The Court of Appeal of Louisiana, Fourth Circuit held that the trial court was not manifestly erroneous in finding that the insurer had acted in bad faith and was arbitrary and capricious in its failure to timely tender the remainder of the plaintiff’s policy benefits.
Robinson v. Williams, 2024-0201, 2024 WL 5074672 (La. App. 1 Cir. 12/11/24)
A passenger in a motor vehicle brought this suit against his insurer, seeking UMBI benefits for injuries he sustained when another vehicle struck the insured vehicle. The trial court granted the insurer’s motion for summary judgment. On appeal, The Court of Appeal of Louisiana, First Circuit held that the insurer made a prima facie showing on its motion for summary judgment that the named insured’s rejection of UMBI coverage on the form approved by the insurance commissioner was valid.
Bradford v. Great Am. Assurance Grp., 55,893, 400 So.3d 1270 (La. App. 2 Cir. 12/18/24)
In this case, a motorist filed suit against various insurers seeking UM/UIM coverage for injuries sustained in an accident involving an unknown tortfeasor. However, the two insurers filed a motion for summary judgment, claiming that the corporate named insured had executed a valid rejection of UM/UIM coverage under their policies. The trial court granted the motion as to one insurer, but denied as to the other. The other insurer appealed. On appeal, the Court of Appeal of Louisiana, Second Circuit held that the UM/UIM rejection form was executed by the corporate insured’s legal representative, as was required by the UM/UIM statute. In addition, the modification of UM/UIM waiver form by handwritten notation “Eff”, as in effective date, on the line for date that form was executed did not invalidate form rejecting UM/UIM coverage.
Vincent v. Richardson, No. CV 22-123-JWD-SDJ, 2024 WL 758907 (M.D. La. Feb. 23, 2024)
This suit arose out of a motor vehicle accident, in which the plaintiff alleged that an underinsured vehicle driven by the defendant negligently struck the truck the plaintiff was driving. The truck driven by the plaintiff was owned and leased by two different companies. The lease requires the lessee to provide auto liability insurance, and it also required the owner/lessor to maintain bobtail and non trucking liability coverage. The court had to determine the order in the policy tower, and ultimately found two policies were co-primary.
COVID-19
Always Smiling Prods., LLC v. Chubb Nat'l Ins. Co., No. 22-55915, 2023 WL 11849867 (9th Cir. July 11, 2024)
Plaintiff, Always Smiling Productions LLC, a corporation that produces a television series, appealed the district court's judgment on the pleadings in favor of Defendant, Chubb National Insurance Company, an insurance provider. Plaintiff asserted several claims for breach of contract regarding Defendant's denial of coverage for losses that Plaintiff incurred from COVID-19-related disruptions and delays in the production of its television show. The United States Court of Appeal for the Eighth Circuit affirmed the district court’s granting of judgment on the pleadings. In affirming the district court’s ruling, the Eighth Circuit found that the district court correctly held that the Plaintiff did not allege covered losses under the policy’s imminent-peril provision and civil-authority provision. In addition, the Eight Circuit found that the district court correctly held that the loss-or-damage condition did not provide coverage to the Plaintiff, and the Plaintiff was not entitled to covered under the due-diligence condition.
SXSW, L.L.C. v. Fed. Ins. Co., No. 22-50933, 2024 WL 1216560, at *1 (5th Cir. Mar. 21, 2024)
This appeal involves an insurance coverage dispute between SXSW, LLC and Federal Insurance Company. The district court granted summary judgment to the insurance company. SXSW, LLC (“SXSW”) hosts a yearly festival in Austin, Texas known as “South by Southwest.” In 2020, however, the City of Austin cancelled the festival because of the COVID-19 pandemic. There was a class action lawsuit filed against SXSW by persons who purchased wristbands, tickets, passes, and badges for the 2020 festival. SXSW attempted to make a claim with its insurance carrier. In the midst of the class action litigation, SXSW sued Federal, alleging breach of contract, breach of implied covenant of good faith and fair dealing, and violations of the Texas Insurance Code. SXSW moved for partial summary judgment, arguing that there was no genuine issue of material fact as to Federal's duty to defend. Federal moved for summary judgment on all of SXSW's claims due to lack of coverage. The district court found that SXSW sought a covered loss and timely tendered the Bromley Complaint to Federal but then held that the Policy's exclusions excused Federal from defending or covering the Bromley litigation. The United States Court of Appeal for the Fifth Circuit reversed the district court’s ruling, finding that the policy exclusions for Contract and Professional Services did not bar coverage.
Baylor Scott & White Holdings v. Factory Mut. Ins. Co., 105 F.4th 816 (5th Cir. 2024)
The insured as an operator of a non-profit health system, and brought this suit against its commercial property insurer for denying coverage under its all risk policy for business interruption losses allegedly caused by COVID-19. The United States Court of Appeal for the Fifth Circuit held that there was no coverage. In its reasoning, the Court cited precedent holding that in the context of COVID-19 commercial insurance coverage disputes that while COVID-19 does great physical harm to people, it does not physically damage property within the plain meaning of the word physical.
Cinemark Holdings, Inc. v. Factory Mut. Ins. Co., No. 23-40453, 2024 WL 3673544, at *1 (5th Cir. Aug. 6, 2024)
Cinemark Holdings, Inc. and affiliated companies sued Factory Mutual Insurance Company seeking coverage under Cinemark's all-risk property insurance policies for “physical loss or damage” caused by COVID-19. The district court granted summary judgment for Factory Mutual, holding that COVID-19 does not physically harm property under Texas law. The United States Court of Appeal for the Fifth Circuit affirmed, citing its prior holding (Baylor Scott & White Holdings, above) that COVID-19 does not physically harm property.
TECH AND CYBER
Sw. Airlines Co. v. Liberty Ins. Underwriters, Inc., 90 F.4th 847 (5th Cir. 2024)
Southwest Airlines, the insured, brought this action against its commercial excess insurer, Liberty Insurance Underwriters, asserting claims for breach of contract, bad faith, and declaratory judgment on the issue of coverage for the costs related to a computer system failure it suffered in July 2016. Southwest calculated that it ultimately incurred more than $77 million in losses as a result of the system failure and resulting flight disruptions. To recoup those losses, it began climbing the cyber risk insurance tower, and, by March 2018, it had collected $50 million from AIG and the other insurers on the first three tiers. When it reached Liberty, however, its claim was denied. The District Court granted summary judgment in favor of Liberty, to which Southwest appealed. On Appeal, the United States Court of Appeals for the Fifth Circuit held that the district court should not have granted summary judgment as a matter of law on the basis of the policy's main insuring provision. In addition, the Fifth Circuit held that the district court erred in granting summary judgment on the basis of various policy exclusions as well.
HURRICANE AND PROPERTY
GOSPEL LIGHT ERITREAN, BAPTIST CHURCH, Plaintiff, v. THE OHIO CASUALTY INSURANCE COMPANY, et al., Defendants. Additional Party Names: Farmers Gen. Ins. Agency, Inc., No. 3:23-CV-1971-N, 2024 WL 3555378 (N.D. Tex. July 25, 2024)
This case arises out of an insurance coverage dispute regarding Gospel Light Eritrean, Baptist Church’s (“Gospel Light”) property. Gospel Light's property was covered by a commercial property insurance policy provided by The Ohio Casualty Insurance Company (“OCIC”), which Gospel Light purchased through Farmers General Insurance Agency, Inc.'s (“Farmers General”). In February 2021, Gospel Light made a claim for property damage resulting from a winter storm under this policy. OCIC made several payments pursuant to the insurance policy but ultimately determined that Gospel Light was underinsured on both a replacement cost and an actual cash value basis. The United States District Court for the Norther District of Texas’s Order addressed Defendant Farmers General’s motion to dismiss. Because Plaintiff Gospel Light had failed to plead facts sufficient to state a claim for violation of the Texas Deceptive Trade Practices Act (“DTPA”), violation of the Texas Insurance Code (“TIC”), negligent misrepresentation, or breach of fiduciary duty, the Court granted the motion as to those claims. However, the Court determined Gospel Light had stated a claim for negligence and denied the motion with respect to that claim. Additionally, the Court granted Gospel Light leave to amend its complaint.
First Baptist Church of Lake Charles LA v. Bhd. Mut. Ins. Co., No. 2:21-CV-03332, 2024 WL 3488095, at *1 (W.D. La. July 19, 2024)
This case involved property damage as a result of Hurricane Laura, which made landfall near Lake Charles, Louisiana on August 27, 2020, and then Hurricane Delta, which made landfall near Lake Charles on October 9, 2020. Before the United States Direct Court for the Western District of Louisiana was a Motion for Partial Summary Judgment filed by Defendant Brotherhood Mutual Insurance Company (“Brotherhood”). In its Motion, Brotherhood asked the Court to rule that Plaintiff's policy limits under the Building Coverage for Plaintiff’s Hodges Properties is $18,948,000.00, and that Plaintiff, First Baptist Church of Lake Charles, Louisiana (“First Baptist”) cannot recover more than the Policy limits in contractual damages. In the alternative, Brotherhood requested that the Court issue a ruling regarding the Policy Limits available in this matter. The Court denied Brotherhood’s motion for partial summary judgment finding that the Coverage Limit for the Building only applies to the Building, and the Coverage Limit for the IBD only applies to interior damage, gutters and downspouts.
Hodge v. Louisiana Farm Bureau Mut. Ins. Co., 55,656, 388 So.3d 1281 (La. App. 2 Cir. 6/26/24)
Insured lessee of farmland filed a petition for damages against his liability insurer, one of the insurer's adjusters, and the insured's purported errors and omissions (E & O) insurer, seeking to recover after one of Plaintiff’s employees caused damage to the lessor's farm irrigation equipment. The trial court entered judgment awarded damages to the insured Plaintiff. On appeal, the Court of Appeal of Louisiana, Second Circuit held that it was manifest error for the trial court to assume that the Plaintiff triggered the insuring agreement. While the Court noted that because it held that there was no coverage due to Plaintiff’s failure to trigger the insuring agreement, the “personal property in the care, custody or control” exclusion provided an additional basis for its ruling.
Sec. First Ins. Co. v. Visca, No. 4D2023-0961, 2024 WL 2836943 (Fla. Dist. Ct. App. June 5, 2024)
Insured homeowners brought action against their homeowners insurer, alleging breach of policy due to insurer's denial of coverage for damages sustained by home due to Hurricane Irma. The trial court entered judgment after jury verdict for the insured and denied the insurer’s post-trial motions for directed verdict and new trial, and the insurer appealed. The District Court of Appeal of Florida, Fourth District held that the insureds failed to provide the insurer with “prompt notice” of roof damage caused by Hurricane Irma, as required for determination that the insured were not entitled to coverage under the policy, and there was a factual issue as to whether untimely notice prejudiced the insurer and precluded summary judgment for the insurer on the insured’s claim.
Newman v. Am. Home Assurance Co., Inc., No. 22-CV-20979-JB, 2024 WL 1209801, at *1 (S.D. Fla. Mar. 20, 2024), motion to certify appeal denied, No. 22-CV-20979, 2024 WL 1240612 (S.D. Fla. Mar. 22, 2024)
Defendant American Home Assurance Company, Inc. (“American Home”) issued a homeowner's policy to Joel and Edith Newman (the “Newmans”), which insured their home during the period of September 22, 2016, to September 22, 2017 (the “Policy”). The Policy was marketed to high-net worth individuals by AIG's Private Client Group and differs from standard form homeowners policies used by other insurers. On or about October 12, 2017, American Home received notice of Plaintiffs' claim arising from Hurricane Irma. Having been unable to agree on the amount of loss, American Home demanded an appraisal of the loss pursuant to the terms of the Policy. The Newmans filed a complaint against American home, which included allegations of bad faith handling of their claim. The United States District Court for the Southern District of Florida concluded that as a matter of law, the Appraisal Awards constituted a determination of liability that satisfied the necessary prerequisite to filing a statutory bad faith claim.
First Baptist Church of Iowa, Louisiana v. Church Mutual Insurance Company, S.I., 105 F.4th 775 (5th Cir. 2024) (Obtained by Degan, Blanchard & Nash)
Insured property owner made a property loss claim arising out of Hurricane Laura, which made landfall in Louisiana in August 2020. After a three-day bench trial, the Trial Court accepted the Plaintiff’s damage estimate and rendered a verdict based upon the estimate presented by the Plaintiff, which used a January 2023 price list. The United States Fifth Circuit Court of Appeal reversed the Judgment insofar as it violated the valuation provision of the insurance policy, because “the policy is clear: the cost of repairing or replacing the damaged property is determined based upon prices ‘as of the time of loss or damage.’” Accordingly, the case was remanded for recalculation of damages using prices from the time of loss.
First United Pentecostal Church v. Church Mutual Insurance Company, 119 F.4th 417 (5th Cir. 2024) (Obtained by Degan, Blanchard & Nash)
Insured property owner made a property loss claim arising out of Hurricane Laura. The Plaintiff argued, among other things, that the insurer’s failure to make payments to the Church until months after the initial inspection was clear “bad faith,” because it was well beyond that statutory 30-day period. After a bench trial, the District Court awarded damages plus statutory penalties, attorney fees, and costs. The United States Fifth Circuit Court of Appeal reversed the Judgment for statutory penalties, finding that the “district court failed to grapple with the fact that there were ‘reasonable and legitimate question[s]’ as to the extent and causation of a claim” in “clear error.” Specifically, the Fifth Circuit acknowledged that an engineer was hired following the carrier’s inspection, because there were outstanding questions about the extent of the loss, particularly to the roof. In January 2021, the adjuster revised his estimate upon receipt of the engineer’s report, “which indicates that there were reasonable and legitimate questions about the extent of [the insurer’s] liability, particularly the extent of the loss as to the roof.”
The Fifth Circuit held that when there are reasonable and legitimate questions about the extent of the loss, an insurer should not be found in “bad faith” simply due to an allegedly untimely payment. Ultimately, this ruling confirms that insurers have a right to obtain professional evaluations to adjust complex claims without being subject to penalties in Louisiana simply because there was no adjustment and payment within 30 days.
Lifepoint Church of Sulphur v. Church Mutual Ins. Co., S.I., W.D. La. 2:22-CV-02080, 2022 WL 16545664 (2024). (Obtained by Degan, Blanchard & Nash)
Late last year, DBN tried a federal jury trial in the liberal Western District of Louisiana regarding an alleged property loss in 2020. At the outset of trial, the Plaintiff requested over $3.4 million in alleged damages. The amount was based off alleged contractual losses as well as Louisiana’s draconian statutory penalties. Once the Plaintiff rested its case, DBN moved for a directed verdict seeking the dismissal of all bad faith claims. The District Court granted DBN’s motion eliminating all bad faith claims as well as potential exposure for attorney’s fees, reducing the claim to approximately $1.7 million. Given the testimony elicited at trial, the cross examinations, but the admission there was some contractual loss, the jury returned a verdict of less than $700,000.00.
Triay v. Nat'l Gen. Ins. Co., No. CV 23-03471, 2024 WL 4346542, at *1 (E.D. La. Sept. 30, 2024)
This case concerned an insurance claim for residential property damage arising out of Hurricane Ida, which made landfall in Louisiana on August 29, 2021. The Plaintiff made a claim for breach of contract and bad faith violations after being unsatisfied with the sum paid by his insurer for the damages. The Plaintiff named as a defendant an unrelated insurer entity; thereafter, the Plaintiff sought leave to amend his complaint to name the proper insurer party. The proper insurer filed a Motion to Dismiss, claiming that the Plaintiff failed to file a first-party claim within the time limitation set forth in La. R.S. 22:868(B) and the terms of the policy, that is, 24 months.
Here, the Plaintiff did not sue or serve the proper insurer in the original complaint. Instead, he sued a completely distinct and separate insurance company. He did not make a mistake or misname the party. Because the Plaintiff’s amended complaint finally naming the correct insurer was filed after the time limitation, the Court found that prescription was not interrupted as to the proper party. Thus, the Court granted the Motion to Dismiss, dismissing Plaintiff’s claims with prejudice.
Willeford v. Privilege Underwriters Reciprocal Exch., 2024-0489, 399 So.3d 834 (La. App. 4 Cir. 9/27/24)
The insured filed suit against his insurer, claiming that he was not adequately reimbursed for damages sustained to his home as the result of Hurricane Ida. The insured filed a motion for appointment of an umpire, after the insurer declined to participate in the appraisal process. The Court of Appeal of Louisiana, Fourth Circuit held that the insurer’s failure to comply with the appraisal provision resulted in a waiver of its right to appoint an appraiser. The relevant policy’s appraisal provision did not give the insurer the option to decline to participate.
Leboeuf v. Bankers Specialty Ins. Co., 2023-784, 2024 WL 3062266 (La. App. 3 Cir. 6/20/24), reh'g denied (Oct. 30, 2024)
The insureds brought this bad faith action against their homeowners insurer to recover additional living expenses and costs of contents destroyed by Hurricanes Laura and Delta. The trial signed preliminary default and granted default judgment against the insurer. On appeal, the Court of Appeal of Louisiana, Third Circuit found that the insureds were not required to give notice of intent to obtain a default judgment.
Com. Restoration Co., LLC v. Nanaki, LLC, 2024-251, 2024 WL 5244518 (La. App. 3 Cir. 12/30/24)
An insured Limited Liability Company owned a hotel damaged in Hurricane Laura. It terminated a contractor it had retained to perform restoration work. The contractor sued the insured LLC to recover the amount owed for the work performed, and the insured filed a third-party demand against its commercial property insurer for breach of contract, statutory penalties and fees, and consequential damages, alleging the insurer failed to timely pay the insured’s claim in full. On appeal, the Court of Appeal of Louisiana, Third Circuit found the insurer acted in bad faith, and the insurer was obligated to pay the insured for full replacement cost value for the building damages and business personal property damages. The Court amended the judgment to reflect the consequential damages of $615,955.76 and total damages, penalties, and attorney fees owed to the insured in the amount of $8,009,876.94 from $9,649,843.94. Otherwise, the trial court’s judgment was affirmed. Importantly, the Court awarded damages for replacement cost value, even though the insurer pointed out that there was no evidence that the insured repaired the damaged property. The Court reasoned that the evidence showed that the insured was unable to complete repairs or replace damaged property due to the insurer’s significant underpayment of the claim. In addition, the Court’s ruling finds that satisfactory proof of loss “is a flexible requirement” finding that this occurred when the first adjuster inspected the property and found “substantial damages.”
ENVIRONMENTAL
Monlezun v. State Farm Fire & Cas. Co., No. 2:22-CV-05746, 2024 WL 4846218 (W.D. La. Nov. 20, 2024)
Before the Court was a Motion for Partial Summary Judgment concerning a Pollution Exclusion that excluded bacteria, wherein the defendant insurer moved for judgment in its favor to preclude Plaintiffs from recovering any damages related to the alleged contamination or bacteria in their home. The Court agreed with the insurer that the policy clearly and unambiguously excluded damage resulting from contaminants and pollutants, and, therefore, any contractual damages must be dismissed. In addition, the Court agreed that the Plaintiffs would not be able to carry their burden of proof as to the cause of bacteria. Without proof of causation, the Plaintiffs could not show that any alleged bacteria in their home was caused by Hurricane Laura.
Gold Coast Commodities, Inc. v. Travelers Cas. & Sur. Co. of Am., 96 F.4th 769 (5th Cir. 2024)
An insured corporation brought a state action against its commercial insurer, seeking a declaratory judgment that its insurer had a duty to defend it in the city’s underlying actions alleging that the insured dumped industrial waste into sewer systems. The case was removed to federal court, and the United States District Court for the Southern District of Mississippi denied the insured's motion for partial judgment on the pleadings and granted the insurer's motion for partial summary judgment. The insured appealed. On appeal, the United States Court of Appeals for the Fifth Circuit affirmed the district court’s decision, holding that the applicable policy’s pollution exclusion barred coverage.
Rich Land Seed Co. Inc. v. B L S W Pleasure Corp, No. 3:21-CV-01070, 2023 WL 5186862 (W.D. La. Aug. 11, 2023)
Plaintiff alleged that WG Gas, LLC (“WG Gas”) contaminated its properties through oil and gas exploration activities. The contamination alleged in the suit comprises oilfield waste, including radioactive material, produced water, drilling fluids, chlorides, hydrocarbons, and heavy metals. These pollutants are allegedly polluting both surface and subsurface areas of Plaintiff's land. The primary issue before the Court was whether Plaintiff's claims, centered on localized contamination and well abandonment, fell within the Policy's coverage scope. Ultimately, the Court found that Plaintiff had not demonstrated that the work performed by WG Gas was purely remedial in nature so as to be excluded from coverage under the Policy’s Pollution Exclusion. Therefore, because issues of fact existed on these points, summary judgment was denied as to the Pollution Exclusion.
EMPLOYMENT
Tokio Marine Am. Ins. Co. v. Ace Am. Ins. Co., No. 2:22-CV-05366, 2024 WL 4499189 (W.D. La. Oct. 15, 2024)
Before the Court was defendant insurer Ace’s Motion for Summary Judgment. The underlying case involved an individual sustaining injuries in an electrocution accident while employed by one company (“NES”) but working on behalf of another (“MHPSA”). A third company (“CB&I”) had issued a purchase order to MHPSA. Ace maintained in its Motion that CB&I was neither a named insured, nor an additional insured. Included in Ace’s argument was that the policy’s contract endorsement provides that no coverage or defense shall be afforded to an additional insured under the Endorsement “where there is no coverage under the Ace Policy for the named insured.” Ace argued that the contract endorsement does not provide coverage to CB&I because NES, as the plaintiff’s employer, would not be covered under the Ace Policy with respect to the plaintiff’s alleged damages because the Ace Policy contained an Employer’s Liability exclusion. The United States District Court for the Western District of Louisiana agreed with Ace. Currently, an appeal has been filed with the United States Fifth Circuit.
Diodene v. Gusman, No. CV 21-491, 2025 WL 893857 (E.D. La. Mar. 24, 2025)
Before the Court was a Motion for Summary Judgment filed by Defendant ProAssurance Specialty Insurance Company (“ProAssurance”), which was opposed by Plaintiff, in addition to other defendants in this action. Plaintiff instituted this action seeking damages for injuries sustained after she was attacked by an inmate at Orleans Parish Prison. Plaintiff was employed by Wellpath, LLC as a licensed practical nurse. Wellpath provided health care services to inmates pursuant to a contract with Orleans Parish Sheriff’s Office. ProAssurance argued that Plaintiff’s bodily injury claims were specifically excluded from the coverage provided by the Policy under the “Employer's Liability Exclusion” and the “Insured Bodily Injury Exclusion.” The United States District Court for the Eastern District of Louisiana agreed, finding that because Plaintiff was an employee of a covered subsidiary and was acting within the scope of her employment when she was attacked, she qualifies as an “insured” under the Policy. Because Plaintiff was an “insured” under the Policy, any bodily injury sustained by her was specifically excluded from coverage, according to the “Insured Bodily Injury Exclusion.”
PROFESSIONAL LIABILITY
Jacksonville Realty, LLC v. Certain Underwriters at Lloyd's, No. 4:23-CV-1131-JDK, 2024 WL 4575100 (E.D. Tex. Oct. 15, 2024)
This suit involved an insurance coverage dispute regarding a policy providing errors and omissions coverage related to professional services, including escrow services. The insured refused to pay escrow funds after termination of an agreement between two other parties. Indemnity was sought by the party the insured refused to pay. The United States District Court for the Eastern District of Texas found that the willfulness of the insured’s failure to comply with the escrow instructions was a material fact that was in dispute, so summary judgment was precluded.
LIBERTY MUTUAL FIRE INSURANCE COMPANY, Plaintiff, v. NORTH TARRANT INFRASTRUCTURE LLC, FERROVIAL CONSTRUCTION US CORP AND WEBBER LLC, Defendants., No. 4:23-CV-01043-O, 2025 WL 863470 (N.D. Tex. Mar. 19, 2025)
Liberty Mutual Fire Insurance Company (“Plaintiff”) issued an insurance policy (the “Policy”) to North Tarrant Infrastructure, LLC (“NTI”), Ferrovial Construction US Corp., and Webber, LLC (collectively, “Defendants”) for a construction project Defendants were undertaking on a stretch of toll road. The Policy excluded coverage for “ ‘bodily injury’, ... arising out of the rendering of or failure to render any professional services,” including “[p]roviding engineering, architectural or surveying services to others in your capacity as an engineer, architect or surveyor; and [p]roviding or hiring independent professionals to provide, engineering, architectural or surveying services in connection with construction work you perform.” As to this exclusion, the United States District Court for the Northern District of Texas found that the allegations in the underlying lawsuits unequivocally covered the Defendants’ maintenance and operation of the roadway. The Court found that there was no duty to defend, but the question of the duty to indemnify was not yet ripe.
OTHER AREAS
Lombard v. Nobre, 2023-0746, 398 So.3d 1 (La. App. 4 Cir. 6/18/24)
Driver brought an intentional tort battery claim against his neighbors, a father and son, in connection with an altercation during which the father confronted the driver and the son allegedly struck the driver in the face, resulting in injuries to the driver and criminal charges against the neighbor. The neighbors filed a third-party demand against the statutory obligor for the father's homeowners' insurer, which was in receivership. After the trial, the trial court awarded the driver $2,500 in general damages and $1,065 in medical expenses, reduced by 20% percent due to comparative fault, and determined that the insurance policy exclusion for “criminal act[s]” barred coverage for the driver's claims. The driver appealed the trial court’s ruling. On appeal, the Court of Appeal of Louisiana, Fourth Circuit affirmed the judgment. In its holding, the Court found that the trial court judgment applied comparative fault to determine damages, and the evidence supported the trial court’s allocation of 20% fault to the driver and 80% fault to the neighbors. In addition, the Court found that the evidence supported the general damage award of only $2,500 to the driver and the exclusion in the neighbor’s homeowner’s policy for criminal acts barred coverage for damages owed by the neighbor to the driver.
Chet Morrison Contractors, L.L.C. v. Spartan Directional, LLC, 2023-0981, 398 So.3d 1103 (La. App. 1 Cir. 6/14/24)
A horizontal drilling contractor brought action against subcontractor's insurer for breach of contract and bad faith after it had denied coverage on the ground that the contractor was not an additional insured on the subcontractor's installation floater policy for horizontal drilling project. The trial court entered summary judgment in favor of the insurer, and the contractor appealed. The Court of Appeal of Louisiana, First Circuit held that the contractor was not entitled to equitable reformation of the policy in order to afford coverage to the contractor as an additional insured. The Court reasoned that there was no evidence indicating that the insurer offered or impliedly offered coverage for the contractor, regardless of whether the underwriters understood or should have understood from the incomplete information provided in the application that subcontractor sought to obtain a policy with coverage for the contractor as an additional insured.
DA Exterminating Co. v. Discon, 24-116, 398 So.3d 1239 (La. App. 5 Cir. 10/30/24)
An employer company brought this action against its insurance agent and his alleged employers, seeking damages for their alleged failure to process a change of beneficiary form for an employee making the company the only beneficiary of a life insurance policy. Ultimately, the Court of Appeal of Louisiana, Fifth Circuit, found that these claims had preempted. Annual policy renewals did not constitute continuing tort, as would preclude application of preemption to claims.
Ladner v. Ochsner Baptist Med. Ctr., L.L.C., 2024-0543 2024, WL 5054503 (La. App. 4 Cir. 12/10/24)
An employee of a roofing contractor and his spouse brought a personal-injury suit against the owner of a medical center, a related entity, and the roofing contractor’s CGL carrier after the employee fell to the bottom of an elevator shaft whether the contractor was engaged in roofing work. The owner of the medical center filed a third-party demand for indemnification against the roofing contractor, alleging that the contractor was required to have CGL coverage and excess coverage naming the medical center’s owner as an additional insured. The related entity also filed cross claims alleging it was an additional insured. The Court of Appeal of Louisiana, Fourth Circuit, held that the Louisiana Construction Anti-Indemnity Act applied, and the indemnification provisions were enforceable only to the extent of negligence on the party of the contractor or its employees.
Flowers v. Jena Band of Choctaw Indians, 2023-728, 396 So.3d 992 (La. App. 3 Cir. 6/12/24), reh'g denied (Aug. 21, 2024), writ not considered, 2024-01177, 396 So.3d 960 (La. 12/11/24)
A casino patron filed suit against the Jena Band of Choctaw Indians, casino, and insurance services company for injuries allegedly sustained while at the casino. The district court dismissed the claims, with prejudice, on sovereign immunity grounds. The Court of Appeal for Louisiana, Third Circuit affirmed the judgment, holding that the patron did not have a right of direct action against the insurer and that the trial court acted within its discretion in denying the patron leave to file a second supplemental and amending petition.
CONCLUSION
As our clients continue to navigate the ever-evolving legal landscape of Louisiana insurance coverage, staying informed and proactive is key. The insights shared in this edition highlight both challenges and opportunities, underscoring the importance of adaptability and strategic action. We look forward to bringing you more insurance coverage updates and perspectives in our next newsletter.
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DEGAN, BLANCHARD & NASH INSURANCE COVERAGE PRACTICE GROUP
Our insurance coverage practice group is one of the largest in the state and includes twelve partners and eleven associates who concentrate almost exclusively on providing insurance coverage counseling and litigation representation. They have worked to advise insurers regarding commercial and regulatory matters, bad faith exposure, liaised with co-counsel, investigators and consultants on coordinated defense activities, and participated in settlement negotiations and mediations. Although the insurance coverage group focuses on coverage advice and litigation needs of insurers, our coverage lawyers are also skilled in defending coverage and bad faith issues in the trial and appellate courts. This is a necessity in Louisiana where, due to the state's Direct Action statute, insurers are most often sued directly by plaintiffs, rather than in the context of declaratory judgment coverage actions brought by their insureds. Our coverage group maintains a national practice and includes partners licensed to practice in the state courts of Louisiana and many other states as well.
The insurance coverage group provides coverage opinions and litigation defense of claims arising under general liability, property, transportation, marine, workers’ compensation and employers’ liability, builders’ risk, professional liability, commercial package, energy, umbrella and excess liability policies. Personal lines experience includes claims arising under property, homeowners, automobile, farm liability, and personal umbrella policies.
The insurance coverage attorneys employ a disciplined and structured approach to coverage analysis that relies, in the first instance, upon a careful and focused consideration of the specific claim at issue in light of the terms, structure, purpose, and organization of the policy or policies. When appropriate, we also take into account the underwriting, risk assessment, and premium structure of the policy, the availability of other types of insurance to cover the loss in question, and public policy considerations as they relate to the insurability of a particular loss. In contrast to those who may look solely to the jurisprudence of a particular forum for guidance (which, in our experience, is not always directly applicable and, in many cases, can be analytically incorrect), our approach enables our attorneys to identify, illuminate, and resolve complex, and even unique, coverage problems in a concise, coherent and logically consistent fashion. This approach frequently enables us to anticipate and address, in our initial analysis, issues that otherwise might only become apparent much later in the claims handling process.
Sidney W. Degan, III Managing Partner
E-Mail: sdegan@degan.com
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