Team Contractors, L.L.C. v. Waypoint NOLA, L.L.C. ( 2019 )

Case: 18-30419 Document: 00515027395 Page: 1 Date Filed: 07/09/2019
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
FILED
No. 18-30419 July 9, 2019
Summary Calendar
Lyle W. Cayce
Clerk
TEAM CONTRACTORS, L.L.C.,
Plaintiff
v.
WAYPOINT NOLA, L.L.C.,
Defendant-Third Party Plaintiff - Appellant
v.
CATLIN INSURANCE COMPANY, INCORPORATED,
Third Party Defendant - Appellee
Appeals from the United States District Court
for the Eastern District of Louisiana
USDC No. 2:16-CV-1131
Before DAVIS, HAYNES, and GRAVES, Circuit Judges.
PER CURIAM:*
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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No. 18-30419
Waypoint NOLA, L.L.C. (“Waypoint”) seeks to recover damages from
Catlin Insurance Company, Inc. (“Catlin”) for failure to pay an insurance claim
in bad faith under title 22, section 1973, of the Louisiana Revised Statutes.
Catlin moved to dismiss, arguing that Waypoint is not a “party insured by the
contract,” and thus cannot recover bad faith damages. Louisiana courts have
consistently excluded any party other than a named “insured” from recovering
bad faith damages. We thus AFFIRM.
I. Background
Waypoint is the owner and developer of the Hyatt House hotel in New
Orleans, Louisiana. It hired plaintiff Team Contractors, L.L.C. (“Team”) to
construct and renovate a portion of the hotel. It also hired HC Architects,
L.L.C. (“HCA”) to perform design services. HCA subcontracted the design work
on the mechanical, electrical, and plumbing system to KLG, L.L.C. (“KLG”).
Both HCA and KLG acquired professional liability insurance as required by
Waypoint from Catlin. Neither HCA’s nor KLG’s policy named Waypoint as
an additional insured. The contract states:
[Catlin] will pay on behalf of the Insured all sums in
excess of the deductible that the Insured becomes
legally obligated to pay as damages and claim
expenses as a result of a wrongful act in the
performance of professional services anywhere in the
world.
(all emphasis removed).
When HCA delivered its list of project specifications for the system that
incorporated KLG’s designs, it was discovered that designs did not fully comply
with the New Orleans building code requirements. Team then had to remove
the systems and replace them with revised plans that complied with the code.
Team filed suit against Waypoint for breach of contract and negligence
for the increased costs to remove and replace the systems. Waypoint filed a
third-party complaint against HCA and KLG, and against Catlin under
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Louisiana’s direct action statute and under section 1973. It alleged that Catlin
failed to timely pay a claim in bad faith after a satisfactory proof of loss. Catlin
moved to dismiss, arguing that section 1973 only provides a cause of action for
named insureds. Because the district court concluded that the statute only
creates limited causes of action for third-party claimants, it granted the motion
for judgment on the pleadings. Waypoint now appeals.
II. Standards of Review
We review de novo a district court’s grant of a motion for judgment on
the pleadings under Rule 12(c). See Gentilello v. Rege, 627 F.3d 540, 543 (5th
Cir. 2010). We review a motion for dismissal under Rule 12(c) the same as a
motion for dismissal under Rule 12(b)(6). Id. at 543-44. To survive a motion
to dismiss, a complaint must contain sufficient facts to “state a claim that is
plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). When
deciding issues of state law, we consider how the state’s highest court would
decide the issue. See Guilbeau v. Hess Corp., 854 F.3d 310, 311 & n.4 (5th Cir.
2017).
III. Discussion
Waypoint alleges that it provided satisfactory proof of its loss and that
Catlin acted in bad faith by failing to pay the amount within sixty days. The
only relevant question thus is whether Waypoint, a third-party claimant, is
statutorily allowed to recover bad faith damages.
We first turn to the plain meaning of the statute in question. Under
Louisiana law, an insurer “owes to his insured a duty of good faith and fair
dealing” and “has an affirmative duty of good faith and fair dealing to adjust
claims fairly and promptly and to make a reasonable effort to settle claims with
the insured or the claimant, or both.” LA. STAT. ANN. § 22:1973 (2012).
Subsection (B) then establishes when an insurer may be held liable for a breach
of that duty by knowingly committing certain acts. Id. § 22:1973(B). Waypoint
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argues that Catlin violated paragraph (B)(5), which specifies as a breach of
duty “[f]ailing 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.”
Id. § 22:1973(B)(5). Catlin argues that Waypoint is not a “person insured by
the contract” within the meaning of the statute. We agree.
Under Louisiana law, an “insured” is “the party named on a policy or
certificate as the individual with legal rights to the benefits provided by such
policy.” LA. STAT. ANN. § 22:1962(B). When the statute refers to a “person
insured by the contract,” it contains the specific language referring only to an
entity named as an insured. Waypoint argues that while it is not an “insured,”
the statute imposes a duty to not only the insured, but also to a “claimant.”
Though that is true generally of subsection (A), Waypoint’s claim is based
entirely on paragraph (B)(5), which refers more specifically to a “person
insured by the contract.” Because paragraph (B)(5) uses the specific language
of “person insured by the contract,” it limits the insurer’s duty to only named
insureds.
As Waypoint notes, substituting “insured” for “person insured” would
moot the distinction that the legislature made between “the insured,” “the
claimant,” and “any person.” Subsection (A) first creates a duty to the insured
of good faith and fair dealing, and then to the insured or the claimant to make
a reasonable effort to settle claims. Id. § 22:1973(A). However, in paragraph
(B)(5), the use of the word “claimant” is used only in reference to the “person
insured by the contract” having a cause of action for failure to pay claims in
bad faith. A “person insured by the contract” does not include third-party
claimants. See Toerner v. Henry, 812 So. 2d 755, 758 (La. Ct. App. 2002)
(noting that the provisions are subject to strict interpretation).
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Louisiana courts have consistently applied that interpretation. The
Louisiana Supreme Court held in 2004 that while the statute uses the word
“claimant,” it is only applicable to a person insured by the contract, which
excludes a third-party claimant. Langsford v. Flattman, 864 So. 2d 149, 151
(La. 2004). Waypoint attempts to distinguish Langsford from the present case
by arguing that it is a third-party beneficiary to the professional liability
contract, not a victim of an automobile accident like the plaintiff in Langsford.
We see no reason why the principle in Langsford cannot be applied here.
Langsford held that “a third party claimant such as plaintiff is not a person
insured by the contract for purposes of La. R.S. 22:1220(B)(5).” Id. The Court
in Langsford was not deciding this as a one-off; it cited Louisiana appellate
courts in support of the general proposition that the jurisprudence has held
that a third-party claimant has no cause of action under the statute. Id. The
Louisiana appellate courts have all held that only named “insureds” may bring
a suit for bad faith damages. See e.g., Toerner v. Henry, 812 So. 2d 755, 757-
58 (La. Ct. App. 2002); Moxley v. Cole, 736 So. 2d 249, 256 (La. Ct. App. 1999);
Smith v. Midland Risk Ins. Co., 699 So. 2d 1192, 1197 (La. Ct. App. 1997);
Armstrong v. Rabito, 663 So. 2d 512, 514 (La. Ct. App. 1995). 1
Waypoint cites the Louisiana Supreme Court’s decision in Theriot v.
Midland Risk Insurance Co., 694 So. 2d 184 (La. 1997), as expanding the cause
of action for bad faith damages to third-party claimants. In Theriot, the court
held that “[t]here is no question” that subsection (B) does “create certain
limited causes of action in favor of third-party claimants.” Id. at 193.
Importantly, the specific issue presented here was not before the court in
Theriot: “Plaintiff admitted that [the insurer] not committed any of the
1 We have previously followed those Louisiana courts, albeit in a non-precedential
opinion, and limited paragraph (B)(5) to named insureds. See New England Ins. Co. v.
Barnett, 465 F. App’x 302, 312 (5th Cir. 2012) (per curiam).
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enumerated acts listed in Subsection B, but claimed that Midland was
nevertheless liable for violating broad general duties set forth in Subsection A
of the statute.” 694 So. 2d at 185. Several Louisiana intermediate appellate
courts have specifically noted that distinction. See e.g., Paul v. Allstate Ins.
Co.,720 So. 2d 1251 (La. Ct. App. 1999) (writ denied); Venible v. First Fin. Ins.
Co., 718 So. 2d 586 (La. Ct. App. 1998) (writ denied). In Langsford, the
Louisiana Supreme Court construed Theriot as “caution[ing] that these
statutes must be strictly construed in favor of a limited expansion of third
party rights rather than a drastic expansion of such rights.” 864 So. 2d at 151.
Following that directive, we decline to expand the statute beyond its clear
language. Thus, because Waypoint is a third-party claimant, it has not
sufficiently alleged a right to relief for Catlin’s failure to pay a claim in bad
faith.
AFFIRMED.
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