Bank of Zachary v. Louisiana Citizens Property Insurance and McInnis Insurance Services, Inc. ( 2020 )

L NOT DESIGNATED FOR PUBLICATION
STATE OF LOUISIANA
W
46 COURT OF APPEAL
FIRST CIRCUIT
NUMBERS 2019 CA 0605 c/ w 2019 CW 0606 &
2018 CW 1775
BANK OF ZACHARY
VERSUS
LOUISIANA CITIZENS PROPERTY INSURANCE CORPORATION
AND MCINNIS INSURANCE SERVICES, INC.
Judgment Rendered:
SEP 2 2 2020
Appealed from the
Nineteenth Judicial District Court
In and for the Parish of East Baton Rouge
State of Louisiana
Docket Number 660669
Honorable Janice Clark, Judge Presiding
David S. Rubin Counsel for Plaintiff/Appellee,
Keith J. Fernandez Bank of Zachary
George P. Holmes
Baton Rouge, LA
John W. Waters, Jr. Counsel for Defendant/ V Appellant,
David E. Walle Louisiana Citizens Property
Benjamin R. McDonald Insurance Corporation
New Orleans, LA
Elliot M. Lonker Counsel for Defendant/2" d Appellant,
David S. Daly McInnis Insurance Services, Inc.
New Orleans, LA
David L. McDavid, Jr. Counsel for Intervenor/Appellee,
Zachary, LA Wesley Beale
BEFORE: WHIPPLE, C.J., GUIDRY, WELCH, PENZATO,
AND BURRIS,, JJ.
Honorable William J. Burris is serving as judge pro tempore by special appointment of
the Louisiana Supreme Court.
1
WHIPPLE, C.J.
In these consolidated appeals, defendants in the main demand, Louisiana
Citizens Property Insurance Corporation (" Citizens") and McInnis Insurance
Services, Inc. (" MIS"), appealed a November 13, 2018 judgment of the trial court
granting summary judgment in favor of plaintiff, Bank of Zachary (" the Bank")
MIS, as defendant in cross claim, also appealed a July 12, 2018 judgment of the
trial court denying its peremptory exception of no cause of action seeking
dismissal of Citizens' s cross claim against it. After consolidation of the two
appeals, argument, and submission of this matter, Citizens and MIS submitted a
joint motion for partial dismissal, which was referred to the merits of this appeal.
Citizens also separately filed a motion for dismissal of its related writ application.
For the reasons that follow, the joint motion for partial dismissal is granted;
Citizens' s motion for dismissal of its writ application is granted; the Rule to Show
Cause Orders issued in each appeal are recalled; MIS' s appeal of the trial court' s
July 12, 2018 judgment denying MIS' s peremptory exception of no cause of action
is converted to an application for supervisory writs; and the writ is denied. This
matter is remanded to the trial court for further proceedings.
FACTS AND PROCEDURAL HISTORY
On January 26, 2017, Wesley Beale confected a loan in the amount of
156, 000. 00 from the Bank to purchase and renovate a home in Gonzales,
Louisiana that was severely damaged by the August 2016 floods. The loan was
secured by a mortgage on the property in favor of the Bank. As a condition of the
loan, Beale was required to secure property, fire, and casualty insurance on the
property. Beale obtained a conforming property insurance policy, identified as
DWG -1 Builders Risk Renovations" bearing policy number 917325, effective
January 26, 2017, in the amount of $195, 000.00, from Citizens through its agent,
MIS. Endorsements titled DWG -E100, DWG -E60, and CTZ- U-0462 were
2
included in the policy. The application for the policy of insurance and the policy
itself both listed the Bank' s address as " P.O. Box 123, Zachary, LA 70791," which
was undisputedly incorrect. Prior to the mortgage closing, MIS provided the Bank
with an " ACORD —Evidence of Property Insurance" form dated January 20, 2017,
evidencing that the home was owned by Beale and insured by Citizens and
certifying the Bank' s additional interest in any policy proceeds. The form listed
the Bank' s address as " P.O. Box 4700, Zachary, LA 70791," which was also
incorrect.
Thereafter, Citizens' s underwriting department notified MIS via a producer
memo dated February 8, 2017, that it had reviewed the information contained in
the application and determined that the property was underinsured. Citizens
advised that the minimum amount of coverage required was $ 230, 000.00 and that
the policy would be endorsed to reflect the correct minimum value. Citizens sent a
second memo to MIS on February 8, 2017, advising that after reviewing the
information contained in the underwriting file, it was in need of a building permit
or contract signed by a licensed contractor, a completed Builders Risk Renovation
Endorsement Form, and interior photographs to be submitted by February 22,
2017. When the requested information was not submitted, Citizens sent a memo to
MIS on February 23, 2017, advising that a notice of cancellation had been issued
on the policy. The policy was subsequently cancelled effective March 25, 2017.
On June 4, 2017, the home was destroyed by a fire. Thereafter, Beale and the
Bank made claims under the policy, which Citizens denied on the basis that the
policy had been cancelled.
On August 21, 2017, the Bank filed a petition for damages against Citizens
and MIS, contending that the notices of cancellation purportedly sent by Citizens
to the Bank were improperly addressed and thus, the Bank did not receive any
notices concerning deficiencies in the policy and cancellation of the policy.
Specifically, the Bank contended that as a result of Citizens' s failure to confirm a
proper address for the Bank before sending the notices, Citizens is liable to the
Bank, as an additional loss payee under the policy, for the total loss of the home
resulting from the fire. As to MIS, the Bank contended that MIS was responsible
for providing Citizens with the Bank' s correct address on the policy application,
and because MIS provided Citizens with an incorrect address for the Bank, the
Bank did not receive the notices from Citizens on the policy, including the notice
of cancellation. Thus, the Bank averred that where MIS' s error impaired the
Bank' s ability to protect its interest by force -placing insurance or otherwise
resolving Citizens' s basis for cancelling coverage, MIS was jointly liable to the
Bank for the damages caused by its lack of proper notice to the Bank. The Bank
subsequently amended its petition to aver that the policy was a " fully earned
premium" policy and, by its terms, was non -cancellable. The Bank thus averred
that the reason Citizens cancelled the policy was not a legal or justifiable reason to
cancel the policy. The Bank contended that it was entitled to penalties pursuant to
LSA-R.S. 22: 1892, as Citizens failed to make a written offer to settle the property
damage claim or otherwise pay the claim within thirty days after receipt of
satisfactory proof of loss.
Citizens answered the Bank' s petition and filed a cross claim against MIS
contending that it sent all notices, including the notice of cancellation, to the Bank
at the address provided by MIS. Citizens averred therein that if the Bank failed to
receive the notice of cancellation, the lack of notice resulted from MIS supplying
Citizens with an incorrect address for the Bank, and, as such, any liability of
Citizens would be " solely constructive or derivative" of MIS' s failure to perform
the duty it assumed to provide Citizens with the Bank' s correct address. In an
amended cross claim, Citizens further averred that pursuant to § 12115A of Title
37, Chapter 121 of the Louisiana Administrative Code, MIS was allowed access to
El
Citizens' s online EPIC system to submit applications for coverage and bind
coverage, provided that MIS complied with all requirements of the application
process established by Citizens. According to Citizens, MIS failed to comply with
the requirements of the application process by submitting an incomplete
application package that did not contain an accurate address for the Bank and
failed to include information required by Citizens' s guidelines for a builder' s risk
policy, and by attempting to bind coverage for Beale and the Bank, thus violating
Louisiana regulations and agreements governing its access to Citizens' s system
and rendering MIS liable to Citizens for MIS' s failure to perform. Additionally,
Citizens contended that if it was obligated to pay the Bank, MIS is responsible to
Citizens for the loss it sustains " as a result of [ MIS]' s failure or omission to
perform the duty it assumed to provide the Bank' s correct address." Thus, Citizens
averred that it was entitled to indemnity from MIS for any sums it may be liable to
pay Beale and the Bank, as well as attorney' s fees and all costs, or, alternatively,
that it was entitled to contribution from MIS. After answering the Bank' s petition,
MIS responded to Citizens' s cross claim by filing a peremptory exception raising
the objection of no cause of action. In support of its exception, MIS argued that
Citizens' s cross claim against it involved only claims of negligence and that
Louisiana law no longer recognized claims for indemnity and contribution in
negligence cases. Thus, it contended that Citizens failed to state a claim for
indemnity or contribution against MIS.'
2Beale also filed a petition for intervention against Citizens and MIS, contending therein
that Citizens improperly cancelled the policy where, pursuant to the terms of the policy, it was
non -cancellable" with the premium " fully earned" upon the policy being issued, and that his
agent, MIS, failed to use reasonable care in completing his application and submitting correct
information to Citizens. Beale averred that as a result of MIS' s error, the balance of the loan has
not been paid despite the destruction of the property and that the Bank has demanded payment
from Beale on the monthly note plus interest on the debt. He thus sought judgment in his favor
for all damages caused by the acts or omissions of Citizens and MIS. However, Beale' s
intervention is not before us on appeal.
5
In February of 2018, the Bank filed a motion for summary judgment,
contending that the undisputed facts established that it was entitled to judgment in
its favor as a matter of law on its claims against Citizens and MIS. On June 11,
2018, the trial court conducted a hearing on both the Bank' s motion for summary
judgment on the main demand and MIS' s exception of no cause of action as to
Citizens' s cross claim. At the conclusion of the hearing, the trial court granted the
Bank' s motion for summary judgment and denied MIS' s exception.
MIS then filed an application for supervisory writ of review of the trial
court' s denial of its exception with this court. This court denied the writ
application, noting that once the trial court signed a judgment granting the Bank' s
motion for summary judgment, " this will represent a final, appealable judgment"
and the denial of the exception could be reviewed on appeal at that time. See Bank
of Zachary v. Louisiana Citizens Prope Insurance, 2018 CW 0894 ( La. App. l"
Cir. 11/ 9/ 18). MIS also filed a writ application seeking review of the trial court' s
grant of summary judgment. This court denied that writ, noting that while the
proposed judgment contained a reservation regarding penalties and attorney' s fees
against Citizens, the writ application was filed only by defendant MIS; thus, once a
judgment was signed by the trial court, the granting of the Bank' s motion for
summary judgment " represents a final, appealable judgment as to [ MIS] pursuant
to Louisiana Code of Civil Procedure article 1915( A)(3)." See Bank of Zacharyy.
Louisiana Citizens Property Insurance, 2018CW0893 ( La. App. 1St Cir. 11/ 13/ 18).
In the meantime, the trial court signed a judgment dated July 12, 2018,
denying MIS' s exception of no cause of action, but nonetheless ordering Citizens
to amend its cross claim within five days of the date of the judgment " to cure the
deficiencies" in the cross claim. By separate judgment dated November 13, 2018,
the trial court granted the Bank' s motion for summary judgment and rendered
judgment in favor of the Bank against Citizens and MIS separately " in the amount
C7
of $153, 174. 34, plus interest continuing to accrue at the per diem rate of $23. 94,"
but clarifying that the total amount awarded to and collectible by the Bank " is
153, 174. 34, plus interest continuing to accrue at the per diem rate of $23. 94."
The judgment further assessed all costs to Citizens and provided that the trial court
deferred ruling on the Bank' s request for an award of penalties and attorney' s fees
against Citizens.
MIS and Citizens suspensively appealed the November 13, 2018 judgment,
contending that the trial court erred in granting the Bank' s motion for summary
judgment. Their appeals were assigned docket number 2019 CA 0605. In addition
to its appeal, Citizens filed an application for supervisory writs with this court
challenging the November 13, 2018 summary judgment, which was referred to the
merits of this appeal. See Bank of Zachary v. Louisiana Citizens Property
Insurance, 2018 CW 1775 ( La. App. Pt Cir. 4/5/ 19).
MIS also appealed the July 12, 20183 judgment denying its exception of no
cause of action as to Citizens' s cross claim, contending that the trial court erred as
a matter of law in denying its exception when claims for contribution and
indemnity have been abolished by the legislature since at least 1996 with the
enactment of a pure comparative fault scheme in negligence cases. MIS' s appeal
was assigned docket number 2019 CA 0606.
Following the lodging of these separate appeals, this court issued Rule to
Show Cause Orders in each appeal, ordering the parties in each matter to show
cause as to whether the respective appeals should be dismissed, which were each
ultimately referred to the panel to which the appeals were assigned.
Thereafter, on the unopposed motion of MIS, the matters were consolidated.
Additionally, after argument and submission of this matter, Citizens and MIS
3Although MIS referenced the date of the judgment as June 26, 2018, in its motion to
appeal, the judgment denying Citizens' s exception of no cause of action was signed by the trial
court on July 12, 2018.
7
submitted a joint motion for partial dismissal, advising that the claims by the Bank
have been settled and thus seeking dismissal of MIS' s and Citizens' s appeals in
docket number 2019 CA 0605 of the November 13, 2018 judgment in favor of the
Bank,' and Citizens' s writ application bearing docket number 2018 CW 1775, also
relating to the November 13, 2018 judgment in favor of the Bank. The motion was
referred to the merits of this appeal.
Additionally, Citizens filed a separate motion for dismissal, again seeking
dismissal of its writ application bearing docket number 2018 CW 1775. We will
likewise address that motion herein.
DISCUSSION
Joint Motion for Partial Dismissal and Citizens' s Motion for Dismissal
Turning first to the joint motion for partial dismissal filed by Citizens and
MIS and Citizens' s motion for dismissal of its related writ application, these
parties have advised this court in their motions that " all claims by the Bank" have
been settled. Thus, they seek dismissal of the appeals of MIS and Citizens ( 2019
CA 0605), as well as Citizens' s writ application ( 2018 CW 1775), relating to
claims arising from the November 13, 2018 judgment of the trial court, which
granted the Bank' s motion for summary judgment and rendered judgment in favor
of the Bank against Citizens and MIS in the amount of $153, 174. 34, plus interest.
MIS' s and Citizens' s challenges herein to the trial court' s November 13,
2018 judgment granting the Bank' s motion for summary judgment became moot,
abstract, or hypothetical upon the settlement of those issues in the case, which
prevents any further action or proceeding thereon. See LSA-C.C. art. 3071; St.
Charles Parish School Board v. GAF Corporation, 512 So. 2d 1165, 1172 ( La.
While the joint motion for partial dismissal actually states that the parties are seeking
dismissal of MIS' s " appeal from the judgment in favor of the Bank ... in Case No. 2019 CA
0606," it is clear from the joint motion that the reference to 2019 CA 0606 was inadvertent and
that MIS actually seeks dismissal of its appeal in 2019 CA 0605, relating to the November 13,
2018 judgment granting the Bank' s motion for summary judgment.
8
1987) ( on rehearing). Accordingly, the motion for partial dismissal is granted, and
the appeals of MTS and Citizens bearing docket number 2019 CA 0605, as well as
Citizens' s writ application bearing docket number 2018 CW 1775, which relate to
the November 13, 2018 judgment, are dismissed.' See generally ANR Pipeline
Company v. Louisiana Tax Commission, 2001- 2594 -- 2001- 2600 ( La. App. 1st Cir.
3/ 20/ 02), 815 So. 2d 178, 182- 183 ( where defendants moved to dismiss
consolidated appeals on the basis that the judgment on review was not final as to
all appellants, this court granted the motion as to one of the consolidated appeals,
but denied as to the other consolidated appeals, noting that the procedural rights
peculiar to one consolidated case are not rendered applicable to another
consolidated case by the mere fact of consolidation).
Appellate Jurisdiction
With the dismissal of Citizens' s and MIS' s appeals in 2019 CA 0605, the
only remaining appeal before this court is MIS' s appeal in 2019 CA 0606 seeking
review of the trial court' s July 12, 2018 judgment denying MIS' s peremptory
exception of no cause of action. Before addressing the merits of this appeal, we
must first address whether this case is properly before this court, as raised in this
court' s May 24, 2019 Rule to Show Cause Order, which has been referred to this
panel for disposition.
Appellate courts have the duty to examine subject matter jurisdiction sua
sponte, even when the parties do not raise the issue. Nicaud v. Nicaud, 2016- 1531
La. App. 1st Cir. 9/ 15/ 17), 227 So. 3d 329, 330. As an appellate court, we are
obliged to recognize any lack of jurisdiction if it exists. Quality Environmental
Processes Inc. v. Energy Development Corporation, 2016- 0171, 2016- 0172 ( La.
App. 1" Cir. 4/ 12/ 17), 218 So. 3d 1045, 1053. The appellate jurisdiction of this
court extends to " final judgments." See LSA-C. C. P. arts. 1911, 1915, 2083.
Because the appeals of Citizens and MIS in 2019 CA 0605 have been dismissed, we
recall the Rule to Show Cause Order issued in that appeal as moot.
6
With regard to the rule to show cause order issued in MIS' s appeal of the
trial court' s July 12, 2018 judgment denying its exception of no cause of action,
this court noted that while interlocutory judgments may be considered in an
unrestricted appeal of a final judgment, in appeal number 2019 CA 0606, MIS " is
only seeking review of the July [ 12], 2018 `` Judgment' of the district court, ...
w]hereas, in a separate appeal, namely 2019 CA 0605, [ MIS] seeks review of the
November 13, 2018 judgment of the district court, which appears to be a final
judgment rendered in this case." Thus, because MIS filed a separate appeal of the
trial court' s denial of its exception, rather than seeking review of that interlocutory
ruling in the appeal of a final judgment, this court ordered the parties to show
cause by briefs as to why the appeal in Number 2019 CA 0606 should not be
dismissed. Bank of Zachary v. Louisiana Citizens Property Insurance, 2019 CA
0606 ( La. App. 1 It Cir. 5/ 24/ 19).
The trial court' s July 12, 2018 judgment denying MIS' s exception of no
cause of action is an interlocutory ruling and not appealable. See Peak
Performance Physical Therapy _& Fitness, LLC v. Hibernia Corporation, 2007-
2206 ( La. App. 1" Cir. 6/ 6/ 08), 992 So. 2d 527, 530, writ denied, 2008- 1478 ( La.
10/ 3/ 08), 992 So. 2d 1018 ( involving the denial of a peremptory exception of
prescription). While an appellant is entitled to seek review of all adverse
interlocutory rulings prejudicial to him in an unrestricted appeal taken from a final
judgment, Landry v. Leonard J. Chabert Medical Center, 2002- 1559 ( La. App. l'
Cir. 5/ 14/ 03), 858 So. 2d 454, 461 n.4, writs denied, 2003- 1748 & 2003- 1752 ( La.
10/ 17/ 03), 855 So. 2d 761, in the current procedural posture of this matter, there is
no unrestricted appeal of a final judgment before the court. Although this court
had previously granted MIS' s motion to consolidate the appeals of the July 12,
2018 judgment denying MIS' s exception and the November 13, 2018 judgment
10
granting the Bank' s motion for summary judgment, the appeal of the November
13, 2018 judgment is no longer before this court.
Nonetheless, we have authority to exercise our supervisory jurisdiction and
treat the appeal of this interlocutory judgment as an application for supervisory
writs. See Stelluto v. Stelluto, 2005- 0074 ( La. 6/ 29/ 05), 914 So. 2d 34, 39
appellate court may exercise its discretion to convert an appeal to an application
for supervisory writs, even where the appellate court had previously denied a writ
application).'
As mentioned above, MIS previously filed a writ application through which
it sought review of the trial court' s denial of its exception.' This court however,
denied the writ, noting that " once the district court issues a signed judgment
granting [ the Bank' s] Motion for Summary Judgment against [ MIS], this will
represent a final, appealable judgment, and ... the denial of [MIS' s] Peremptory
Exception of No Cause of Action may be reviewed on appeal at that time."
Because MIS clearly sought to preserve its right to seek review of the trial
court' s adverse interlocutory judgment, and because no undue prejudice results to
Citizens by conversion of the instant appeal to an application for supervisory writs
of review, in the interests of justice and fairness, as well as judicial economy, we
exercise our discretion and convert this appeal to an application for supervisory
writs. See LSA- C.C.P. art. 2164; State ex rel. Department of Social Services v.
Howard, 2003- 2865 ( La. App. 1St Cir. 12/ 30/ 04), 898 So. 2d 443, 444 n. 1; Catania
ex rel. Catania v. Stephens, 2014- 1292, 2014- 1293, p. 7 ( La. App. 1St Cir. 3/ 17/ 1. 5),
2015 WL 1231425; Samuel v. Rem , 2015- 0464, p. 5 ( La. App. 1" Cir. 9/ 31/ 16),
6See also Herlitz Construction Company, Inc. v. Hotel Investors of New Iberia, Inc., 396
So. 2d 878 ( La. 1981) ( per curiam) (" A court of appeal has plenary power to exercise
supervisory jurisdiction over district courts and may do so at any time, according to the
discretion of the court").
The writ application was docketed as number 2018 CW 0894.
II
2016 WL 4591885, writ denied, 2016- 1785 ( La. 11/ 29/ 16), 211 So. 3d 387. We
thus recall the May 24, 2019 Rule to Show Cause Order issued in 2019 CA 0606
and will review the July 12, 2018 denial of MIS' s exception of no cause of action
pursuant to our supervisory jurisdiction.
Exception of No Cause of Action
MIS challenges the denial of its exception raising the objection of no cause
of action as to Citizens' s cross claim against it for indemnity or contribution
against MIS. A peremptory exception raising the objection of no cause of action
tests the legal sufficiency of the petition by determining whether the law affords a
remedy under the facts alleged in the pleading. CLB61 Inc. v. Home Oil
Company, LLC, 2017- 0557, 2017- 0558 ( La. App. 1St Cir. 11/ 1/ 17), 233 So. 3d
656, 660. No evidence may be introduced at any time to support or controvert the
objection that the petition fails to state a cause of action. Tracer Security Services,
Inc. v. Ledet, 2018- 0269 ( La. App. 11 Cir. 9/ 24/ 18), 259 So. 3d 353, 355. Rather,
the exception is triable on the face of the pleading, and for purposes of determining
the issues raised by the exception, the well -pleaded facts in the pleading must be
accepted as true. The only issue at the trial of the exception is whether, on the face
of the pleading, the plaintiff is legally entitled to the relief sought. CLB61, Inc.,
233 So. 3d at 660.
Every reasonable interpretation must be accorded the language of the
petition in favor of maintaining its sufficiency and affording the plaintiff the
opportunity of presenting evidence at trial. Tracer Security Services, Inc., 259 So.
3d at 355. Because the exception of no cause of action raises a question of law and
the trial court' s decision is based solely on the sufficiency of the petition, review of
the trial court' s ruling on the exception is de novo. Tracer Security Services, Inc.,
259 So. 3d at 355.
12
In arguing that the trial court erred as a matter of law in denying its
exception of no cause of action, MIS contends that this case is a pure negligence
case. It further asserts that since the introduction of pure comparative fault in
1996, solidary liability amongst all joint tortfeasors was abolished, and, thus,
claims for contribution and indemnity are no longer recognized under our law.
According to MIS, after the enactment of a pure comparative fault system, the fault
of everyone ( whether a party or non -parry) is assessed, and no party is liable for
more than his assessed virile share of fault. Therefore, MTS argues, Citizens has
failed to state a cause of action against MIS for contribution or indemnity.
Prior to amendments in 1987 and 1996, the principle of solidary liability
among joint tortfeasors had been apart of Louisiana' s civil tradition for more than
150 years. See Dumas v. State Department of Culture, Recreation & Tourism,
2002- 0563 ( La. 10/ 15/ 02), 828 So. 2d 530, 533. By amendment in 1987, the
legislature limited solidarity among non -intentional joint tortfeasors by providing
for solidary liability only to the extent necessary for a victim to recover fifty
percent of his recoverable damages. LSA- C. C. art. 2324 ( as amended by Acts
1987, No. 373); See Dumas, 828 So. 2d at 534. Thereafter, by amendment in
1996, the Louisiana legislature abolished solidary liability among noxi -intentional
tortfeasors and placed Louisiana in a pure comparative fault system, such that a
non -intentional joint tortfeasor is no longer solidarily liable with another for
damages attributable to the fault of that other tortfeasor. LSA- C. C. arts. 2323 &
2324( B) ( as amended by Acts 1996, No. 3, 1' Ex. Sess.); See Dumas, 828 So. 2d at
535.
However, MIS' s reliance on Louisiana' s pure comparative fault system in
support of its exception is misplaced. Citizens' s cross claim against MIS is not
based on its status as a joint tortfeasor with MIS. Rather, Citizens, in its original
and amended cross claims, asserts a claim against MIS, alleging that MIS breached
13
a duty, imposed by regulation and accepted by MIS, to accurately and completely
submit the application for insurance and that MIS' s breach of this duty directly
caused harm or potential loss to Citizens in the form of whatever policy
proceeds it may be obligated to pay the Bank or Beale under the policy.
Specifically, Citizens averred in its cross claim that pursuant to provisions of
the Louisiana Administrative Code, MIS was allowed to access Citizens' s online
EPIC system to submit applications for and bind coverage, but that in so doing,
MIS, as a " producer," assumed a duty to comply with the requirements of the
application process established by Citizens. Moreover, according to the allegations
of the pleading, before being given access to Citizens' s EPIC system, MIS agreed
to Citizen' s Subscriber Agreement, which also provided that any authority
extended to MIS was conditioned upon its compliance with the standards,
guidelines, and requirements established by Citizens, as well as the requirements of
Regulation 87 of the Louisiana Administrative Code and the Louisiana Revised
Statutes. Citizens further averred that in applying for coverage for Beale and the
Bank, MIS failed to comply with the application process established by Citizens.
Thus, Citizens asserted, if it is required to pay policy proceeds to Beale or the
Bank, MIS is responsible to Citizens for the loss it sustains as a result of MIS' s
failure to perform.
Accordingly, considering these allegations of the cross claim, the question
this court must answer in determining whether on the face of the cross claim
Citizens is legally entitled to relief against MIS is whether MIS in fact owed a duty
to Citizens, which, if breached, would render MIS liable to Citizens for damages
Citizens may suffer.
An " insurance producer" is " a person required to be licensed under the laws
of this state to sell, solicit, or negotiate insurance" and includes all persons or
business entities otherwise referred to in the Louisiana Insurance Code as
14
insurance agent' or `` agent,' or `` insurance broker' or `` broker,' or `` insurance
solicitor' or `` solicitor,' or `` surplus lines broker."' LSA- R.S. 22: 1542( 6); LAC 37,
Pt. XII, § 12107. Producer licenses are issued by the Louisiana Commissioner of
Insurance, and the license authorizes a producer to make an application for and
procure policies of insurance in the lines of insurance to which the producer has
been duly licensed. LSA-R.S. 22: 1542( 8). Every producer duly licensed to sell
property and casualty insurance may sell insurance policies that are issued by
Citizens through its FAIR and Coastal Plans.8 LSA-R.S. 22: 2313( A).
As set forth by statute, the governing board of Citizens has the duty to
formulate criteria and an application process to certify qualified licensed property
and casualty insurance producers to bind insurance coverage for the FAIR and
Coastal Plans. LSA-R.S. 22: 2313( B). Regulation 87, set forth in Chapter 121 of
Title 37 of the Louisiana Administrative Code and titled " Regulation 87 --
Louisiana Citizens Property Insurance Corporation Producer Binding
Requirements," was promulgated by the Board of Directors of Citizens pursuant to
that authority granted under the Louisiana Insurance Code. See LAC 37, Pt. XIII,
12103. Regulation 87 applies to all duly licensed insurance producers who have
applied to Citizens and have met the qualifications for binding authority and
establishes the guidelines and requirements for licensed and qualified insurance
producers to have binding authority to write applications of property and casualty
insurance for the FAIR Plan and the Coastal Plan issued by Citizens. See LAC 37,
12101 &
Pt. XIII, § § 12105.
Pursuant to Regulation 87, in order to bind coverage, the insurance producer
must " submit to Citizens a completed application warranting compliance with
applicable requirements established by Citizens" or, more specifically, " shall
The Louisiana Citizens Property Insurance Corporation, a non-profit corporation, was
created to provide residential property insurance solely for applicants who are unable to procure
insurance through the voluntary market. LSA-R.S. 22: 2291, 2293( A) & 2297( A.).
15
complete and submit the on- line application for property and casualty insurance
coverage to Citizens and shall comply with all requirements of the application
process that have been established by Citizens." LAC 37, Pt. XIII, §§12111( A)( 5)
121. 15( A). Additionally, each insurance producer who has authority to bind
coverage with Citizens is responsible to ensure that it " properly follows all of the
underwriting procedures established by Citizens." LAC 37, Pt. XIII, §12121.
Thus, pursuant to statute and regulation, an insurance producer with
authority to bind coverage with Citizens owes a corresponding duty to submit a
completed application to Citizens that complies with all of Citizens' s requirements,
a duty which we conclude may render the producer liable to Citizens for any
breach resulting in loss. See American Central Insurance Co. v. Boucher & Slack
Insurance Agency, 38, 310 ( La. App. 2nd Cir. 4/ 7/ 04), 870 So. 2d 523, 526, writ
denied, 2004- 1405 ( La. 9/ 24/ 04), 882 So. 2d 1143 ( where independent insurance
agency exposed insurer to liability for its action contrary to the insurer' s
instructions, court found insurance agency responsible for the insurer' s loss, noting
that where an insurer is exposed to liability for policy claims because of actions by
the agent beyond the agent' s authority or contrary to instructions, the agent is
accountable to the insurer for the insurer' s loss); Chiasson v. Whitney, 427 So. 2d
470, 476- 477 ( La. App. 5 I Cir.), writs denied, 433 So. 2d 179, 180 and 183 ( La.
1983); also see generally Millers Casualty Insurance Company of Texas v. Cypress
Insurance Agency, Inc., 273 So. 2d 602, 604- 605 ( La. App. 1. 11 Cir. 1973) ( where
insurance agency intentionally back -dated a policy, it exceeded its authority and
thus was responsible for the amount the insurer was forced to pay on the claim);
and Toups v. Equitable Life Assurance, 94- 1232 ( La. App. 3" Cir. 5/ 3/ 95), 657 So.
2d 142, 148, writs denied, 95- 2102, 95- 2110, 95- 2113 ( La 12/ 8/ 95), 664 So. 2d
421 ( on rehearing) ( where an insurer is exposed to liability for policy claims
16
because of action by its agent beyond the agent' s authority or contrary to
instructions, the agent is accountable to the insurer for its loss).
In its cross claim, Citizens averred that its application procedures and
underwriting guidelines required that the application include photographs, a local
permit or contract signed by a licensed contractor performing the renovations, and
Form CTZ- U-0462 signed and dated by both the insured and the producer. As
further alleged in the cross claim, before submitting the application, MIS had to
acknowledge, on a screen within the EPIC system, that it understood that Citizens
would " rely on the truth and correctness" and " completeness of this application ...
and all attachments to the application." However, according to the allegations of
the pleading, MIS supplied incorrect information on the application when it
incorrectly listed the Bank' s address and, further, submitted an application that was
incomplete in that it did not contain the mandatory items listed above. Citizens
further averred in its cross claim that the incompleteness of the application
submitted by MIS prevented the application from being accepted by Citizens,
resulting in coverage never going into effect and ultimately leading to Citizens
issuing a notice of cancellation to both Beale and the Bank. Citizens also averred
that any resulting lack of notice to the Bank was also the result of MIS' s actions in
failing to supply the Bank' s correct address in the application. Thus, Citizens
contended that if it is cast in judgment to Beale or the Bank, MIS is responsible to
Citizens for any loss sustained by Citizens as a result of MIS' s failure to perform
the duty it assumed to provide the Bank' s correct address. Accepting these factual
allegations of the cross claim as true, which we must for the purposes of ruling on
the exception, we conclude that Citizens has stated a cause of action against MIS.
Accordingly, finding no error in the portion of the trial court' s July 12, 2018
17
judgment denying MIS' s exception of no cause of action, we hereby deny the writ
application.9
CONCLUSION
Based on the above and foregoing reasons, the Rule to Show Cause Orders
in 2019 CA 0605 and 2019 CA 0606 are recalled; the joint motion for partial
dismissal filed by McInnis Insurance Services, Inc. and Louisiana Citizens
Property Insurance Corporation is granted; Louisiana Citizens Property Insurance
Corporations' s motion for dismissal of its related writ application is granted; the
parties' appeals of the November 13, 2018 judgment docketed as 2019 CA 0605
are dismissed; the writ application docketed as 2018 CW 1775 is dismissed;
McInnis Insurance Services, Inc.' s appeal of the July 12, 2018 judgment denying
its peremptory exception of no cause of action as to the cross claim of Louisiana
Citizens Property Insurance Corporation, docketed as 2019 CA 0606, is converted
to an application for supervisory writs of review, and the writ application is denied;
and this matter is remanded to the trial court for further proceedings. Costs of this
appeal are assessed two- thirds to McInnis Insurance Services, Inc., and one- third to
Louisiana Citizens Property Insurance Corporation.
RULE TO SHOW CAUSE ORDERS RECALLED; JOINT MOTION
FOR PARTIAL DISMISSAL GRANTED AND APPEAL NUMBER 2019 CA
0605 DISMISSED; CITIZENS' S MOTION FOR DISMISSAL OF ITS WRIT
APPLICATION GRANTED AND WRIT NUMBER 2018 CW 1775
DISMISSED; APPEAL NUMBER 2019 CA 0606 CONVERTED TO
APPLICATION FOR SUPERVISORY WRITS OF REVIEW AND WRIT
DENIED; REMANDED.
9While the trial court' s July 12, 2018 judgment denied MIS' s exception of no cause of
action, a ruling with which we find no error on supervisory review, the judgment also ordered
Citizens to amend its cross claim within five days " to cure the deficiencies" in the cross claim.
Nonetheless, because Citizens has not complained about this portion of the trial court' s July 12,
2018 judgment, the propriety of that language is not before us.
18
STATE OF LOUISIANA
COURT OF APPEAL
FIRST CIRCUIT
NUMBER 2019 CA 0605 C W 2019 CA 0606
BANK OF ZACHARY
VERSUS
LOUISIANA CITIZENS PROPERTY INSURANCE CORPORATION
MCINNIS INSURANCE SERVICES, INC.
PENZATO, J., dissents in part, and assigns reasons.
I respectfully dissent in part from the portion of the majority opinion that
converts MIS' s appeal in 2019 CA 0606 to an application for supervisory writs. I
do not find that the factors set forth in Herlitz Construction Company, Inc. v. Hotel
Investors of New Iberia, Inc., 396 So. 2d 878 ( La. 198 1) ( per curiam), have been
met.
Accordingly, I would dismiss appeal number 2019 CA 0606.