Bradley v. Allstate Ins Co

REVISED MAY 11, 2010
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
FILED
May 10, 2010
No. 09-30035
Lyle W. Cayce
Clerk
FELTON BRADLEY; LUCILLE BRADLEY
Plaintiffs - Appellants
v.
ALLSTATE INSURANCE COMPANY
Defendant - Appellee
Appeal from the United States District Court
for the Eastern District of Louisiana
Before HIGGINBOTHAM and STEWART, Circuit Judges, and *ENGELHARDT,
District Judge.
CARL E. STEWART, Circuit Judge:
This appeal involves an insurance dispute arising from the total
destruction of Felton and Lucille Bradley’s home as a result of flood and wind
damage suffered during Hurricane Katrina. The Bradleys’ homeowners policy
with Allstate Insurance Company carried a dwelling limit of $105,600. The
Bradleys have received $105,139.06 in total insurance payments for their
dwelling—$41,339.06 under their Allstate homeowners policy and $63,800 from
*
District Judge, Eastern District of Louisiana, sitting by designation.
No. 09-30035
their flood insurance policy. The Bradleys filed suit against Allstate, alleging
that they were entitled to the full limits under their homeowners policy and
additional payments for loss of personal property, additional living expenses,
mental and physical distress, and Allstate’s bad faith. The district court
determined that, despite the total loss provision of the homeowners policy, the
Bradleys were only entitled to the actual cash value of their home. The district
court found that the actual cash value of the home prior to its destruction was
less than the total amount they received under their homeowners and flood
policies, and any further recovery by the Bradleys would amount to a double
recovery. The district court further held that the Bradleys had not advanced any
evidence in support of their other claims. The district court awarded the
Bradleys some relief as to additional living expenses, but granted summary
judgment in favor of Allstate on all other claims. We AFFIRM in part and
VACATE and REMAND in part.
This appeal presents the following issues: (1) whether the total loss or
actual cash value provision of the policy controls; (2) the proper definition of
actual cash value under Louisiana law; (3) how to determine whether the
insured has received a double recovery, i.e., collected insurance proceeds in
excess of actual losses; and (4) whether the district court erred by granting
summary judgment on the Bradleys’ claims for loss of personal property,
additional living expenses, mental and physical distress, and bad faith.
I. FACTUAL AND PROCEDURAL BACKGROUND
A. Factual Background
Prior to Hurricane Katrina, the Bradleys owned and resided at a house
located at 2637 Tennessee Street, New Orleans, Louisiana. The property was
insured under a homeowners policy issued by Allstate and a separate flood policy
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No. 09-30035
issued by Fidelity National Insurance Company. Like many homeowners
policies, the Bradleys’ homeowners policy specifically excluded flood damage.
The homeowners policy contained coverage limits of $105,600 for the dwelling,
$73,920 for the contents, and $10,560 for other structures.
Hurricane Katrina destroyed the Bradleys’ home in August 2005. A few
badly damaged concrete blocks were the only structural component of the house
left on the property. The Bradleys notified Allstate of their loss and filed a claim
on September 1, 2005. Allstate first sent an engineer to inspect and adjust the
loss on December 22, 2005. The engineer’s report concluded that “the structure
has been destroyed from a combination of hurricane winds and flooding.” On two
later occasions, Allstate again sent engineers to adjust the claim. On January 5,
2006, one of those Allstate adjusters concluded that “the dwelling is unlivable
due to Catastrophic Wind Damage.”
Allstate ultimately paid $41,339.06 for structural damage and $10,632 for
contents under the homeowners policy. From their flood insurance, the Bradleys
received the policy limits of $63,800 for structural damage and $6,200 for home
contents. Thus, the total payment to the Bradleys for structural damage to their
home under both policies was $105,139.06.
Allstate subsequently performed a retroactive analysis that appraised the
pre-storm market value of the Bradleys’ home at $85,000. At deposition, Mr.
Bradley testified that the pre-storm value of the home was between $85,000 and
$95,000, and Mrs. Bradley testified that the pre-storm value was in the
neighborhood of $97,000. An expert hired by the Bradleys estimated the cost to
rebuild the home at $265,427.
To date, the Bradleys have not rebuilt their Tennessee Street house,
although Mr. Bradley stated at deposition that he intends to rebuild. In order to
3
No. 09-30035
benefit from government assistance through the Road Home program, the
Bradleys attested that they will rebuild and return to the property. The Bradleys
did purchase another home in New Orleans East for $134,500, but they have not
designated that home as a replacement property.
B. Procedural History
On May 30, 2007, the Bradleys filed suit against Allstate in Louisiana
state court; Allstate removed the case to federal court based upon diversity
jurisdiction. The Bradleys claimed that Allstate breached the insurance
contract, acted negligently, and acted in bad faith. They further alleged that
under the Louisiana’s Value Policy Law (VPL), they were entitled to the full
policy limits from Allstate, without deduction or offset. The complaint
specifically sought to recover: (1) the policy limits under their homeowners
insurance, because their home was rendered a total loss; (2) additional recovery
for loss of their personal property; (3) additional living expenses (ALE); (4)
compensation for mental anguish and emotional distress related to Allstate’s
handling of their homeowners claim for structural damage; and (5) damages for
Allstate’s alleged bad faith pursuant to LA. REV. STATS. 22:1220 and 22:658.1
Through a series of orders addressing multiple motions for partial
summary judgment, motions to reconsider, motions in limine, and sua sponte
granting summary judgment, the district court awarded the Bradleys an amount
less than they claimed for ALE and granted summary judgment in favor of
Allstate on all other claims. The court held that the Bradleys were only entitled
to the actual cash value (ACV) of their home, which was less than the amount
1
This provision has been recently recodified as § 22:1892, but is referred to here as
§ 22:658.
4
No. 09-30035
they received under their homeowners and flood policies combined. On the VPL
claims, the court found that although the Bradleys “allege that the property was
damaged by wind and flood and that the home is a total loss, there is no
allegation that the total loss was caused by wind or any other peril covered
under the homeowners policy.” The court also dismissed the Bradleys’ claims for
loss of personal property for failure to introduce evidence of ownership or the
value of the items claimed. The mental and emotional distress claims were
rejected for failure to advance any evidence of mental anguish or emotional
distress. With regard to the Bradleys’ bad faith claims, the court found that
Allstate had fully paid the Bradleys’ claims under the policy and therefore there
was no “valid, underlying, substantive claim.”
The Bradleys filed this appeal, arguing that the district court erred in
granting summary judgment. The Bradleys contend that summary judgment
was improper because: (1) the district court ignored the plain language of the
insurance contract providing for the payment of policy limits in the event of a
total loss; (2) used the wrong measure of value to determine their scope of
recovery; (3) improperly allowed Allstate to offset its payments with the
Bradleys’ recovery from their flood insurance; (4) failed to consider the weight
of the evidence regarding lost personal property and ALE; and (5) wrongly
dismissed the Bradleys’ bad faith, mental anguish, and emotional distress
claims.
II. STANDARD OF REVIEW
“This court reviews a district court’s grant of summary judgment de novo.”
Breaux v. Halliburton Energy Servs., 562 F.3d 358, 364 (5th Cir. 2009). We also
review de novo the district court’s interpretation of state law and give no
5
No. 09-30035
deference to its determinations of state law issues. See Salve Regina Coll. v.
Russell, 499 U.S. 225, 239-40 (1991). Summary judgment is appropriate when
“the discovery and disclosure materials on file, and any affidavits show that
there is no genuine issue as to any material fact and that the movant is entitled
to a judgment as a matter of law.” FED. R. CIV. P. 56(c). All the facts and evidence
must be taken in the light most favorable to the non-movant. Breaux, 562 F.3d
at 364.
Summary judgment is also proper if the party opposing the motion fails
to establish an essential element of his case. Celotex Corp. v. Catrett, 477 U.S.
317, 322-23 (1986). The non-moving party must do more than simply deny the
allegations raised by the moving party. See Donaghey v. Ocean Drilling &
Exploration Co., 974 F.2d 646, 649 (5th Cir. 1992). Rather, the nonmovant must
come forward with competent evidence, such as affidavits or depositions, to
buttress his claims. Id
III. DISCUSSION
A. Structural Damages
1. The Insurance Contract: “Total Loss” Provision
Under Louisiana law,2 an insurance policy “constitutes the law between
2
When sitting in diversity, this Court applies the substantive law of the state. In re
Katrina Canal Breaches Litig., 495 F.3d 191, 206 (5th Cir. 2007) (citing Erie R.R. v. Tompkins,
304 U.S. 64 (1938)). As stated in In re Katrina Canal Breaches Litigation:
To determine Louisiana law, we look to the final decisions of the Louisiana
Supreme Court. See id. In the absence of a final decision by the Louisiana
Supreme Court, we must make an Erie guess and determine, in our best
judgment, how that court would resolve the issue if presented with the same
case. See id. In making an Erie guess, we must employ Louisiana’s civilian
methodology, whereby we first examine primary sources of law: the constitution,
codes, and statutes. Id. (quoting Lake Charles Diesel, Inc. v. Gen. Motors Corp.,
328 F.3d 192, 197 (5th Cir. 2003)); Prytania Park Hotel, Ltd. v. Gen. Star
6
No. 09-30035
the insured and insurer, and the agreement governs the nature of their
relationship.” Cadwallader v. Allstate Ins. Co., 848 So. 2d 577, 580 (La. 2003).
“Words and phrases used in an insurance policy are to be construed using their
plain, ordinary and generally prevailing meaning, unless the words have
acquired a technical meaning.” Id. (citing LA. CIV. CODE art. 2047). “When the
words of a contract are clear and explicit and lead to no absurd consequences, no
further interpretation may be made in search of the parties’ intent.” Smith v.
Am. Family Life Assur. Co. of Columbus, 584 F.3d 212, 215-16 (5th Cir. 2009)
(citing LA. CIV. CODE art. 2046).
A contract is ambiguous only if its terms are unclear or susceptible to more
than one reasonable interpretation, or the intent of the parties cannot be
ascertained from the language employed. Cadwaller, 848 So. 2d at 580. Where
an insurance policy includes ambiguous provisions, the “[a]mbiguity . . . must be
resolved by construing the policy as a whole; one policy provision is not to be
construed separately at the expense of disregarding other policy provisions.” In
re Katrina Canal Breaches Litig., 495 F.3d 191, 206 (5th Cir. 2007) (quoting La.
Ins. Guar. Assoc. v. Interstate Fire & Cas. Co., 630 So. 2d 759, 763 (La. 1994));
LA. CIV. CODE art. 2050. “Words susceptible of different meanings must be
Indem. Co., 179 F.3d 169 (5th Cir. 1999). “Jurisprudence, even when it rises to
the level of jurisprudence constante, is a secondary law source in Louisiana.”
Prytania Park Hotel, 179 F.3d at 169 (footnote omitted); see also Am. Int’l
Specialty Lines Ins. Co., [352 F.3d 254, 261 (5th Cir. 2003)] (quoting Transcon.
Gas Pipe Line Corp. v. Transp. Ins. Co., 953 F.2d 985, 988 (5th Cir. 1992)).
Thus, although we will not disregard the decisions of Louisiana’s intermediate
courts unless we are convinced that the Louisiana Supreme Court would decide
otherwise, we are not strictly bound by them. Am. Int’l Specialty Lines Ins. Co.,
352 F.3d at 261.
Id.
7
No. 09-30035
interpreted as having the meaning that best conforms to the object of the
contract.” LA. CIV. CODE art. 2048. “Ambiguity may also be resolved through the
use of the reasonable-expectations doctrine, ‘by ascertaining how a reasonable
insurance policy purchaser would construe the clause at the time the insurance
contract was entered.’” In re Katrina Canal Breaches Litig., 495 F.3d at 206
(quoting La. Ins. Guar. Ass’n, 630 So. 2d at 764).
“If, after applying the other general rules of construction, an ambiguity
remains, the ambiguous contractual provision is to be construed against the
insurer who furnished the policy’s text and in favor of the insured finding
coverage.” Peterson v. Schimek, 729 So. 2d 1024, 1029 (La. 1999) (citing LA. CIV.
CODE. art. 2056). “The purpose of liability insurance is to afford the insured
protection from damage claims. Insurance contracts, therefore, should be
interpreted to effect, not deny, coverage.” Id. at 1028 (citing Yount v. Maisano,
627 So. 2d 148 (La. 1993)).
With these principles in mind, we turn to a review of the insurance policy
at issue. The Allstate homeowners policy states in pertinent part:
5. How We Pay for a Loss
Under Coverage A - Dwelling Protection, payment for covered loss
will be by one or more of the following methods:
...
b) Actual Cash Value. If you do not repair or replace the damaged,
destroyed or stolen property, payment will be made on an actual
cash value basis. This means there may be a deduction for
depreciation. Payment will not exceed the limit of liability shown on
the Policy Declarations for the coverage that applies to the
damaged, destroyed or stolen property regardless of the number of
items involved in the loss.
You may make a claim for additional payment as described in
paragraph “c” . . . if you repair or replace the damaged, destroyed or
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No. 09-30035
stolen covered property within 180 days of the actual cash value
payment.
c) Building Structure Reimbursement. Under Coverage A—Dwelling
Protection and Coverage B—Other Structures Protection, we will
make additional payment to reimburse you for cost in excess of
actual cash value if you repair, rebuild, or replace damaged,
destroyed or stolen covered property within 180 days of the actual
cash value payment . . . .
If you replace the damaged building structure(s) at an address other
than shown on the Policy Declarations through construction of a
new structure or purchase of an existing structure, such
replacement will not increase the amount payable under Building
Structure Reimbursement described above . . . .
e) In the event of the total loss of your dwelling and all attached
structures covered under Coverage A—Dwelling Protection, we will
pay the limit of liability shown on the Policy Declarations for
Coverage A—Dwelling Protection.3
The section of the homeowners policy referenced in 5(e), Coverage A Dwelling
Protection, provides as follows:
Coverage A
Dwelling Protection
Property We Cover Under Coverage A:
1. Your dwelling including attached structures. Structures connected to
your dwelling by only a fence, utility line, or similar connection are not
considered attached structures.
....
Losses We Do Not Cover Under Coverages A and B:
3
The policy limit of liability shown on the Policy Declarations for Coverage A—Dwelling
Protection is $105,600.
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No. 09-30035
We do not cover loss to the property described in Coverage A—Dwelling
Protection or Coverage B—Other Structures Protection consisting of or
caused by:
1. Flood, including, but not limited to surface water, waves, tidal water or
overflow of any body of water, or spray from any of these, whether or not
driven by wind.
Without addressing the section 5(e) total loss provision, the district court
held that the measure of the Bradleys’ recovery was the ACV under 5(b). The
Bradleys argue that—contrary to the determination of the district court—
section 5(e) of their homeowners policy is the controlling provision in the event
of a total loss,4 and the total loss provision entitles them to the full policy limits
of their homeowners policy. Allstate claims that the plain and unambiguous
language of section 5(e) renders it inapplicable where the total loss was caused,
in part, by a non-covered peril such as a flood. Allstate further contends that
enforcing the Bradleys’ interpretation would lead to the absurd result of
requiring Allstate to pay the limit of liability for a total loss regardless of how it
was caused, so long as some portion was caused by a covered peril.
The critical language of section 5(e) provides that “payment for covered
loss will be by one or more of the following methods . . . In the event of a total
loss of your dwelling and all attached structures covered under Coverage
A—Dwelling Protection, we will pay the limit of liability . . . .” (emphasis added).
This key provision is ambiguous; it is unclear whether the ‘total loss’ must be
‘covered under Coverage A’ or merely ‘your dwelling and all attached structures’
4
When the cost to repair exceeds the value of the property, the property is considered
a total loss. Real Asset Mgmt., Inc. v. Lloyd’s of London, 61 F.3d 1223, 1229 (5th Cir. 1995)
(citing Dumond v. Mobile Ins. Co., 309 So. 2d 776, 778 (La. Ct. App. 3d Cir. 1975)). It is
undisputed that the Bradleys’ home was rendered a total loss by Hurricane Katrina.
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No. 09-30035
must be ‘covered under Coverage A.’ Section 5(e) is therefore “susceptible of two
possible meanings: (1) in the event of a total loss, [Allstate] is required to pay the
homeowner the agreed full value of the policy as long as a covered loss causes
some damage to the property, even if a non-covered peril renders the property
a total loss; or (2) [Allstate] is only required to pay the homeowner the agreed
face value of a policy when the property is rendered a total loss by a covered
loss.” Chauvin v. State Farm Fire & Cas. Co., 495 F.3d 232, 238 (5th Cir. 2007).
In Chauvin v. State Farm Fire & Casualty Co., we concluded that a similar
provision contained in Louisiana’s VPL statute was ambiguous. Id. at 238. The
pivotal language in the statute stated that “in the case of a total loss the insurer
shall compute and indemnify or compensate any covered loss of, or damage to
such property. . . at such valuation without deduction. . . .” Id. Finding that the
provision was “susceptible of two possible meanings,” the Court then interpreted
the statute in a manner that best conformed to the purpose of the law. Id. After
carefully examining the legislative intent and history behind the VPL law, the
Court held that “the VPL only requires an insurer to pay the agreed face value
of the insured property if the property is rendered a total loss from a covered
peril.” Id. at 239.
Unlike in Chauvin, here an insurance policy is at issue rather than a
statute. Under Louisiana insurance law, ambiguities in a policy are construed
in favor of the party seeking coverage: an “ambiguous contractual provision is
to be construed against the insurer who furnished the policy’s text and in favor
of the insured finding coverage.” Peterson, 729 So. 2d at 1029 (citing LA. CIV.
CODE art. 2056); see also Pareti v. Sentry Indem. Co., 536 So. 2d 417, 420 (La.
1988) (citing Albritton v. Fireman’s Fund Ins. Co., 70 So. 2d 111, 111 (La. 1954)).
11
No. 09-30035
Therefore, because the language of the insurance contract is plainly susceptible
to more than one reasonable interpretation, subsection 5(e) must be construed
in favor of the Bradleys.
Requiring payment of the policy limits under the total loss provision,
subject to reductions for non-covered losses under the policy, is consistent with
the outcome in Real Asset Management v. Lloyd’s of London, 61 F.3d 1223 (5th
Cir. 1995). There we found that the Louisiana VPL required that the insurer pay
the policy limits where Hurricane Andrew destroyed the insured property,
resulting in a total loss. Id. at 1229. We held, however, that the policy limits
owed for the total loss were subject to reduction for the insured’s failure to
mitigate the loss. Id. at 1230. The question of “the extent of damages that can
be shown to have been caused by the [insured’s] failure to mitigate” was
remanded with the instruction that “the [insurer] bears the clear burden to show
what extent of damages should be mitigated.” Id.
Additionally, nothing in subsection 5(e) or Coverage A—Dwelling
Protection indicates that the provision is triggered only in the case of a total loss
that is completely caused by a covered event. Rather, the intent of the parties
appears to be to prevent, in the event of a total loss, a dispute regarding whether
the loss should be valued at an amount different from the value of the home
listed on the policy. In other words, the contract bars either party from arguing
after the loss that the insured property had a greater or lesser value than the
policy amount.
Nor does the Bradleys’ interpretation of the total loss provision lead to the
absurd consequences that Allstate insists will result. Allstate asserts that the
Bradleys’ reading of the policy would necessarily mean that an insured whose
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No. 09-30035
house incurs only one dollar in wind-related damages, such as a few shingles
blown off the roof, but also suffered devastating flood damage, would be entitled
to receive the full limits of their policy.5 But section 5 clearly addresses the
methods of “payment for covered losses.” Thus, Allstate is permitted to withhold
payment for non-covered losses.
Therefore, under the total loss provision the Bradleys are entitled to
recover up to the Coverage A policy limit of $105,600 for covered losses. The
district court erred by ignoring the total loss provision under section 5(e) and
granting summary judgment to Allstate based on ACV under section 5(b).
2. Louisiana Insurance Law: Actual Cash Value
The district court found that the ACV of the Bradley’s home was $97,000
because the market value of the Bradleys’ home at the time that it was destroyed
did not exceed $97,000. Allstate contends that the district court correctly
determined the ACV of the Bradleys’ home based on its pre-storm value and
appropriately held that they were not entitled to recover further payment under
their homeowners policy. The Bradleys argue that ACV is properly calculated as
the replacement value of the home less depreciation, but that—regardless—
ACV is not the correct measure of their potential recovery.
“The touchstone for . . . determining actual cash value is the basic
principle that an adequately insured person should incur neither economic gain
nor loss when his property is destroyed . . . .” Bingham v. St. Paul Ins. Co., 503
So. 2d 1043, 1045 (La. App. 2d Cir. 1987). The homeowners policy does not define
5
Allstate’s interpretation suffers from its own reductio ad absurdum. By Allstate’s
logic, a home with a minor amount of termite damage, which catches fire and burns to the
ground, would not trigger section 5(e) because the policy excludes loss caused by “insects,
rodents, birds, or domestic animals.”
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No. 09-30035
ACV. Louisiana law defines ACV as “reproduction cost less depreciation.”
Hackman v. EMC Ins. Co., 984 So. 2d 139, 143 (La. App. 5th Cir. 2008) (citing
Real Asset Mgmt., 61 F.3d at 1228 n.7); see also La. Dept. Ins., Insurance
Bulletin No. 06-06 (“ACV is the amount needed to repair or replace the damaged
or destroyed property, minus the depreciation.”).6 ACV is determined by
calculating the cost of duplicating the damaged property with new materials of
like kind and quality, less allowance for physical deterioration and depreciation.
Real Asset Mgmt., 61 F.3d at 1230-31.7 Actual cash value is not necessarily
synonymous with market value at the time of the loss. Id. at 1227-28.
Thus, ACV is computed as the cost of replacing the building as it existed
at the time of the accident, taking into account the replacement costs within a
reasonable time after the accident, minus depreciation. The district court erred
by calculating ACV based on the pre-storm market value of the house and
6
Available at http://www.ldi.state.la.us/docs/CommissionersOffice/legal/Bulletins/
Bul06_06_Cur_CommercialAndHomeown.pdf.
7
In Bingham v. St. Paul Ins. Co., the Louisiana Court of Appeals explained:
This court had occasion to establish the definition of the term “actual
cash value” as limited by the term “not exceeding the amount which it would
cost to repair or replace the property with material of a like kind and quality.”
In Mercer v. St. Paul Fire and Marine Insurance Company, 318 So. 2d 111 (La.
App. 2d Cir. 1975), we approved the assessment in Reliance Insurance Company
v. Board of Supervisors, Louisiana State University Agricultural and Mechanical
College, 255 F. Supp. 915 (E.D. La. 1966), that in determining actual cash
value, the court should consider original cost, possible appreciation and
depreciation, the nature of the property lost and the current replacement cost.
This court further stated that “[t]he touchstone for the court in determining
actual cash value is the basic principle that an adequately insured person
should incur neither economic gain nor loss when his property is destroyed by
fire.”
503 So. 2d at 1045.
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No. 09-30035
holding that there were no disputed issues of material fact regarding the ACV
of the Bradleys’ home.
3. Louisiana Insurance Law: No Double Recovery
An insured party in Louisiana may generally “recover under all available
coverages provided that there is no double recovery.” Cole v. Celotex, 599 So. 2d
1058, 1080 (La. 1992) (quoting 15A Couch on Insurance § 56:34 (2d ed. 1983));
see also Albert v. Farm Bureau Ins. Co., 940 So. 2d 620, 622 (La. 2006) (“. . .
Louisiana law does not allow for double recovery of the same element of
damages.”). The fundamental principle of a property insurance contract is to
indemnify the owner against loss, that is “to place him or her in the same
position in which he would have been had no [accident] occurred.” Berkshire
Mut. Ins. Co. v. Moffett, 378 F.2d 1007, 1011 (5th Cir. 1967). Consequently,
“while an insured may not recover in excess of his actual loss, an insured may
recover under each policy providing coverage until the total loss sustained is
indemnified.” Cole, 599 So. 2d at 1080 (quoting Appleman, Insurance Law and
Practice § 5192 (1981)).
a. Measure of Loss for Purposes of Determining Double Recovery
As discussed above, the district court incorrectly found that the ACV of the
Bradley’s home was $97,000 because the evidence established that the market
value of the Bradleys’ home did not exceed $97,000 at the time that it was
destroyed by Hurricane Katrina. The court held that because the Bradleys had
already collected $105,139.06 from flood and homeowners coverage combined,
any additional recovery would amount to a double recovery. Relying upon Cole
v. Celotex, the district court therefore held that the Bradleys were not entitled
to further recovery as a matter of law.
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No. 09-30035
Allstate contends that the Bradleys were not entitled to recover any
further payment under their homeowners policy because they have already
recovered the ACV of the property, relying on the incorrect definition of ACV.8
Any further payment, Allstate insists—and the district court found—would
amount to a double recovery and windfall to the Bradleys. The Bradleys argue
that the district court should have used their expert’s estimate of the “cost of
rebuild or replace” as the proper measure of damages for determining whether
there has been a double recovery.
In order to determine whether there has been a double recovery by an
insured party, the court must ascertain actual loss relative to amounts already
recovered under the homeowners policy and other insurance coverages. In the
context of evaluating double recovery—or whether any of the insured’s losses
remain uncompensated—the insured’s scope of recovery is measured by the
actual loss, not by the total amount of insurance coverage.
A review of decisions under Louisiana law demonstrates that actual loss
has alternately been measured by the cost of repair, replacement, or
8
As stated above, the correct measure of ACV under Louisiana law is replacement cost
minus depreciation. Further, Allstate’s position that actual loss for purposes of double recovery
should be based on the pre-storm market value of the home would effectively invalidate the
total loss provision of the policy. The policy limits and premium for the policy reflect Allstate’s
estimate of the home’s pre-storm value. Real Asset Mgmt., 61 F.3d at 1227-28. Yet according
to Allstate’s interpretation, if the home were completely destroyed by wind, then Allstate would
still not be required to pay the policy limits ($105,600) because the payment would exceed the
pre-storm value ($97,000). This reads the total loss provision out of the contract and amounts
to a windfall for Allstate. Such a construction does not reflect the intent of the parties, as
expressed by the words of the policy. See LA. CIV. CODE art. 2049 (“A provision susceptible of
different meanings must be interpreted with a meaning that renders it effective and not with
one that renders it ineffective.”).
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No. 09-30035
ACV—depending on the circumstances of each case.9 Recovery for up to the
amount of replacement costs turns on whether those additional costs have been
or will be incurred. Using replacement costs as the measure of actual loss only
in such limited circumstances squares with the general principles of double
recovery; replacement costs constitute recovery of a different element of damages
than ACV. See Albert, 940 So. 2d at 622 (“Louisiana law does not allow for
double recovery of the same element of damages”). Where contested, the proper
measure of actual loss, like the measure of recovery under the policy, is a
question of fact. See Bennett v. State Farm Ins. Co., 869 So. 2d 321, 325-26 (La.
App. 3d Cir. 2004) (question of fact whether, under insurance coverage, carport
required repair or replacement); Higginbotham v. New Hampshire Indem. Co.,
498 So. 2d 1149, 1151-52 (La. App. 3d Cir. 1986) (question of fact whether, under
insurance coverage, roof required repair or replacement).
Thus, the contested question of whether the appropriate measure of the
Bradleys’ actual loss is the cost to rebuild presents a genuine issue of material
fact. The fact-finder must evaluate whether the Bradleys may recover rebuilding
costs based on their professed intent to rebuild. The fact-finder must then
additionally decide whether the Bradleys’ expert’s estimate of $265,427
9
The district courts of the Eastern District of Louisiana, presiding over the bulk of the
Louisiana Hurricane Katrina insurance disputes, have adopted varying positions. See Davis
v. Allstate Ins. Co., No. 07-4572, 2009 WL 122761 (E.D. La. Jan. 15, 2009) (measuring the
scope of loss for double recovery purposes by “the value of the property” without articulating
how the value is determined); Creecy v. Metro. Ins. Co., 06-9307, 2008 WL 4758625 (E.D. La.
Oct. 30, 2008) (analyzing double recovery in terms of total cost of repair to insured’s home);
Johnson v. State Farm Fire & Cas. Co., No. 07-1226, 2008 WL 2178059 (E.D. La. May 19,
2008) (measuring scope of loss for double recovery purposes by cost of rebuilding destroyed
home); Wellmeyer v. Allstate Ins. Co., No. 06-1585, 2007 WL 1235042, at *3-4 (E.D. La. Apr.
26, 2007) (noting a dispute of fact as to whether the “value” was properly characterized by pre-
storm actual cash value or some other measure of value).
17
No. 09-30035
represents a reasonable figure for rebuilding costs. Subtracting insurance
payments already received10 results in the losses still recoverable under the
homeowners policy, subject to the policy limits.11 Alternatively, if the fact-finder
concludes that the Bradleys are not rebuilding or replacing, then the starting
point for the double recovery analysis would be the ACV of their property.
Because the district court treated ACV as synonymous with the pre-storm
market value of the Bradleys’ home, it incorrectly held that there was no
evidence suggesting the Bradleys had uncompensated losses.
b. Covered v. Excluded Losses
The Bradleys additionally argue that because of the mutually exclusive
nature of the wind and flood policies, the distinct coverages preclude double
recovery for the same element of damages. They assert that the district court
erred in its order-of-operations; after the court determines which contractual
provision of the policy controls, the Bradleys claim that the district court’s next
step must be evaluating whether the losses resulted from covered or excluded
10
The double recovery rule applies to all available coverages—an insurer may not
benefit from offsets for payments received by the insured from the United States Small
Business Association (SBA) or Road Home Program. See Cole, 599 So. 2d at 1080 (an insured
may “recover under all available coverages provided that there is no double recovery”). Rather,
the SBA and Road Home programs are government incentives to return to New Orleans and
to offset the costs of returning home where the costs associated with returning far exceed the
amounts recoverable to insureds under their policies. See Metoyer v. Auto Club Family Ins. Co.,
536 F. Supp. 2d 664, 670-71 (E.D. La. 2008) (Louisiana Recovery Authority benefits paid to
insured homeowner do not result in a credit against homeowners insurance liability because
“it could not have been the intention of the Federal Government grant writers, or the
Louisiana Legislature that insurance companies should benefit from the provisions of the
LRA”).
11
If the fact finder decides that the Bradleys’ actual loss is rebuilding costs and their
expert’s estimate of $265,427 is reasonable, then deducting their combined flood and
homeowners policy payments of $105,139.06 from the estimated rebuilding cost of $265,427,
the Bradleys’ remaining uncompensated loss is $160,287.94.
18
No. 09-30035
causes. They aver that only after the fact-finder12 segregates damages caused by
wind and those caused by flood, will it be discernible whether there will be a
double recovery by the insured. The district court’s summary judgment ruling
addressed the issue of double recovery first, and granted summary judgment
before reaching the contested issue of causation.
An insured “whose property sustains damage from flood and wind can
clearly recover for his or her segregable wind and flood damages except to the
extent that he seeks to recover twice for the same loss.” Johnson v. State Farm
Fire & Cas. Co., No. 07-1226, 2007 WL 2178059, at *2 (E.D. La. May 19, 2008)
(citing Weiss v. Allstate Ins. Co., No. 06-3774, 2007 WL 891869, at *2 (E.D. La.
Mar. 21, 2007)). Insureds are entitled to recover any previously uncompensated
losses that are covered by their homeowners policy and which, when combined
with their flood proceeds, do not exceed the value of their property. Id. The
homeowners and flood insurance policies provide distinct coverages; each
protects against a different form of damage. See Ferguson v. State Farm Ins. Co.,
No. 06-3936, 2007 WL 1378507, at *4 (E.D. La. May 9, 2007) (“While it is true
that plaintiffs paid for two separate policies, one homeowners and one flood, that
12
Generally, it is the task of the fact-finder to apportion the damage caused by wind
and the damage caused by flood. Dickerson v. Lexington Ins. Co., 556 F.3d 290, 295 (5th Cir.
2009). As we explained in Dickerson:
Under Louisiana law, the insured must prove that the claim asserted is covered
by his policy. Once he has done this, the insurer has the burden of
demonstrating that the damage at issue is excluded from coverage. Thus, once
[the insured] proved his home was damaged by wind, the burden shifted to [the
insurer] to prove that flooding caused the damage at issue, thereby excluding
coverage under the homeowners policy. As no one disputes that at least some of
the damage to the [the insured’s] home was covered by the homeowners policy,
[the insurer] had to prove how much of that damage was caused by flooding and
was thus excluded from coverage under its policy.
Id. (internal citations omitted).
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No. 09-30035
does not equate to double coverage in the event of a given loss. The flood policy
is not excess insurance. Instead, it covers a loss not covered by the homeowner
policy.”). The interplay between the segregation of flood and wind losses and the
double recovery rule ensures that proper adjustment by the insurance companies
or segregation of covered and excluded damages will, in theory, prevent the
insured from receiving a double recovery.13
But payments under flood policies, like any insurance disbursement, may
not always be entirely accurate. Fundamentally, Allstate and the Bradleys
dispute who receives the potential windfall from an overpayment by the flood
policy.14 As the Bradleys advocate, by first segregating losses into those covered
by wind and flood, and allowing the insured to collect all the proceeds for losses
caused by wind—regardless of prior payments from flood insurance—the insured
would receive the benefit of an overpayment by the flood insurance. If the
insured were to collect flood overpayments plus the correct wind payments,
13
As discussed in Ferguson:
Plaintiffs achieved full coverage by having two policies, so that either
homeowner or flood insurance would cover any loss in full, or at least to the
value they selected in their contracts. Plaintiffs could have purchased more
insurance coverage on either policy by paying higher premiums. By choosing a
lower level of coverage, the plaintiffs assumed some of the risk of any potential
loss for the benefit of a lower premium. . . .
Ferguson, 2007 WL 1378507, at *4.
14
The Bradleys’ flood policy is a write-your-own policy under the National Flood
Insurance Program (NFIP). The purpose of the NFIP is “to provide flood insurance protection
to property owners in flood-prone areas under national policy promulgated by the Federal
Emergency Management Agency (FEMA).” National Flood Insurance Act of 1968, Pub. L. No.
90-448, §§ 1302-1376, 42 U.S.C. §§ 4001-28. Congress also adopted a program to permit
insurance companies to write their own flood insurance policies, remitting the premiums to the
National Flood Insurance Administration. See 44 C.F.R. § 62.23-24. Write-your-own companies
draw money from FEMA through letters of credit to disburse claims. Id. Consequently, United
States Treasury funds are used to pay the insured’s claims. See Gowland v. Aetna, 143 F.3d
951, 955 (5th Cir. 1988).
20
No. 09-30035
recovery under wind and flood insurance coverages combined would exceed
actual losses; the insured would be receiving an unlawful double recovery.
Therefore, the district court first evaluates whether the insured has
already been fully compensated by payments under wind and flood insurance.
If the court concludes that the homeowners’ insurer is not liable for further
payments to the insured because additional payments would result in a double
recovery, then the homeowners’ insurer effectively receives the benefit of the
overpayment by the flood insurance. Whether “the flood insurance overpayments
. . . would have to later be returned to the federal government is not at issue
here. . . .” Ferguson, 2007 WL 1378507, at *5 n.34. But it is worth noting that the
benefit will not necessarily serve to enrich the insurer, because NFIP policies
contain a subrogation clause providing:
Whenever we make a payment for a loss under this policy, we are
subrogated to your right to recover for that loss from any other
person. That means that your right to recover for a loss that was
partly or totally caused by someone else is automatically transferred
to us to the extent that we have paid you for the loss . . . . If you
make any claim against any person who caused your loss and
recover any money, you must pay us back first before you may keep
any of the money.
44 C.F.R. 61.13, App. A(1) subsection (VII)(S) (2002).
Because Louisiana’s double recovery bar prevents the insured from
recovering in excess of actual loss, a district court does not necessarily err by
evaluating double recovery prior to the resolution of disputed issues of causation.
Where the value of the property in question has been conclusively established,
a district court may find as a matter of law that the insured is limited to a
specific recovery. Lambert v. State Farm Fire & Cas. Co., 568 F. Supp. 2d 698,
703 (E.D. La. 2008) (citing Broussard v. State Farm Fire & Cas. Co., No. 06-
21
No. 09-30035
8084, 2007 WL 2264535, at *5 (E.D. La. Aug. 2, 2007). But where the insurer has
not conclusively established the value of the property or the cost to rebuild—as
here—the court cannot find as a matter of law that the insured is limited to a
specific recovery based on the insurer’s asserted valuation of the property. Id.
c. Application of Total Loss Provision and No Double Recovery
For the reasons discussed above, the total loss provision in section 5(e)
dictates that the Bradleys are entitled to recover the full policy limits for covered
losses, subject to the prohibition against double recovery.15 Whether additional
recovery by the Bradleys amounts to a double recovery depends on whether their
actual loss is calculated based on rebuilding or replacement costs, or ACV.16 The
appropriate measure of actual loss presents a question of fact here, because it
turns on the contested question of whether the Bradleys will be rebuilding the
property; Mr. Bradley’s sworn testimony that he intended to rebuild the property
created a genuine issue of material fact. Upon remand, the fact-finder must
determine whether to calculate the Bradleys’ actual loss according to the cost of
rebuilding or replacing, or ACV. The fact-finder must additionally arrive at the
proper figure for actual loss. As long as the Bradleys’ combined recovery under
their homeowners and flood policies is less than their actual loss, then the
double recovery rule does not preclude the Bradleys from receiving additional
compensation under their homeowners policy.
15
The Bradleys have recovered $41,339.06 for structural damage and the policy
provides for recovery up to $105,600; the policy therefore allows for further recovery of up to
$64,260.94 for covered losses.
16
Even if the ACV of the Bradleys’ home is less than the policy limits recoverable under
the total loss provision, recovery of the policy limits would not amount to a double recovery on
that basis alone. Rather, the total loss provision functions as a stipulation as to the amount
of the ACV in the event of a total loss.
22
No. 09-30035
Assuming the double recovery rule does not bar further payments to the
Bradleys, then under the total loss provision they are entitled to recover up to
the policy limits of the homeowners policy. But while the Bradleys would
preliminarily be entitled to recovery, deductions may be made by Allstate for
excluded losses. The losses attributable to excluded events, specifically flood-
related damages, raise factual questions inappropriate for summary judgment.
Under the Dickerson framework, Allstate bears the burden of establishing how
much of the total loss is attributable to flood damage. Dickerson, 556 F.3d at 295.
The Bradleys’ policy, of course, contains one additional, crucial limitation: by the
explicit terms of the contract, Allstate is liable for no more than the stated policy
limits regardless of the extent of the Bradleys’ loss.
B. Louisiana Revised Statutes 22:658 and 22:1220
The Bradleys asserted claims for bad faith and mental and physical
distress under Louisiana Revised Statutes §§ 22:658 and 22:1220 related to
uncompensated loss for damage to their home.
A cause of action for penalties under § 22:658 requires a showing that: (1)
the insurer has received satisfactory proof of loss; (2) the insurer fails to tender
payment within thirty days of receipt thereof; and (3) the insurer’s failure to pay
is arbitrary, capricious or without probable cause. LA. REV. STAT. ANN. § 22:658.
With respect to mental anguish damages, “[t]he conduct prohibited in R.S.
22:658(A)(1) is virtually identical to the conduct prohibited in R.S. 22:1220(B)(5):
the failure to timely pay a claim after receiving satisfactory proof of loss when
that failure to pay is arbitrary, capricious, or without probable cause.” Sher v.
Lafayette Ins. Co., 988 So. 2d 186, 206 (La. 2008) (quoting Reed v. State Farm
Mut. Auto Ins. Co., 857 So. 2d 1012, 1020 (La. 2003)). Thus, “a plaintiff
attempting to base her theory of recovery against an insurer on [§§ 22:658 and
23
No. 09-30035
22:1220] must first have a valid, underlying, substantive claim upon which
insurance coverage is based.” Clausen v. Fid. & Deposit Co. of Md., 660 So. 2d
83, 85-86 (La. Ct. App. 1st Cir. 1995).
The district court did not speak to the arbitrariness of the insurer’s failure
to pay; it instead granted summary judgment in favor of Allstate on the §§
22:658 and 22:1220 claims based on its conclusion that the Bradleys had not
carried their burden of establishing a valid, underlying breach of contract.
Because the §§ 22:658 and 22:1220 claims are inextricably intertwined with the
underlying breach of contract claims, we do not reach the question of entitlement
to recovery under §§ 22:658 and 22:1220. We have held that the district court
improperly granted summary judgment on the issue of the uncompensated
structural damages and we therefore vacate the grant of summary judgment on
the §§ 22:658 and 22:1220 claims as well, and remand for reconsideration
consistent with this opinion.
C. Loss of Contents of the Home
The Bradleys initially filed a loss of contents claim for $36,378, which
included loss of jewelry, two flat-screen televisions, digital recording equipment,
DVD equipment, VCRs, computers, leather jackets, and a mink coat. The claim
relied upon the original purchase price of these items rather than their ACV as
required under the policy.17 Mr. Bradley signed a “Personal Property Inventory
Loss Form” for that amount on February 20, 2006. Mrs. Bradley testified that
17
The section of the policy, “What You Must Do After A Loss,” provides in part:
(c) separate damaged from undamaged property. Give us a detailed list
of the damaged, destroyed or stolen property, showing the quantity, cost, actual
cash value and the actual loss claimed.
(d) give us all accounting records, bills, invoices and other vouchers, or
certified copies which we may reasonably request to examine and permit us to
make copies.
24
No. 09-30035
they were unable to obtain verification for many of the items on the list. Allstate
determined that only $14,877.39 worth of the claimed contents were recoverable
without further documentation. After deducting for depreciation, Allstate paid
the Bradleys $10,632.43, and requested additional documentation as to the
remaining contents.
During the discovery process, Allstate propounded the following
interrogatory:
Interrogatory No. 13
Provide an itemized statement of all damages sought against
Allstate Insurance Company in this action of any kind or nature
whatsoever, including, but not limited to, any and all compensatory
damages, penalties and otherwise, and identify all documents
relating thereto.
With respect to their contents claim, the Bradleys answered “contents in the
amount of $14,877.16.” The Bradleys never attempted to amend their answer
pursuant to Rule 26(e), nor have they argued that this response was error.
Based on the Bradleys’ failure to put forth any summary judgment
evidence of the value of the specific items claimed and the answer to
Interrogatory No. 13, the district court concluded that there was no genuine
issue of material fact regarding uncompensated loss of contents, and granted
summary judgment in Allstate’s favor on this issue. Allstate asserts that the
district court correctly held that no material facts are in dispute regarding the
Bradleys’ claim for uncompensated loss of contents. The Bradleys claim that the
original, handwritten two-page loss of contents list totaling $36,878 establishes
a genuine issue of material fact regarding their recovery under the homeowners
policy.
25
No. 09-30035
Ordinarily, an affidavit in conjunction with a list of lost contents suffices
to raise a genuine issue of material fact. Lambert, 568 F. Supp. 2d at 709. In
response to Allstate’s motion for summary judgment, however, the Bradleys did
not offer even an affidavit as to the value of their lost contents. The failure to
advance any Rule 56(c) proof, together with the concession in their interrogatory
response,18 demonstrates that no genuine issue of material fact exists as to the
value of the lost contents. Therefore, the district court did not err in concluding
that Allstate was entitled to judgment as a matter of law on the claim for loss of
contents.
D. Additional Living Expenses
The policy provides for ALE as follows:
1. Additional Living Expense
a) We will pay the reasonable increase in living expenses necessary
to maintain your normal standard of living when a direct physical
loss we cover under Coverage A–Dwelling Protection, Coverage
B–Other Structures Protection or Coverage C–Personal Property
Protection makes your residence premises uninhabitable.
When the Bradleys evacuated, they initially went to a relative’s home in
Alabama. Allstate advanced $850 to the Bradleys shortly after the evacuation.
After approximately two or three weeks, the Bradleys moved to Phoenix City,
18
Although interrogatory responses are not binding judicial admissions, FED. R. CIV.
P. 33(c), they may be used as evidence for assessing summary judgment, FED. R. CIV. P. 56(c).
See Mahler v. Klein Karoo Landboukooperasie, No. 94-10635, 1995 WL 371037, at *4 n.3 (5th
Cir. June 5, 1995) (unpublished) (citing Thurman v. Sears, Roebuck & Co., 952 F.2d 128, 136
n.23 (5th Cir. 1992)). Federal Rule of Civil Procedure 56(c) provides that “if the pleadings, the
discovery and disclosure materials on file, and any affidavits show that there is no genuine
issue as to any material fact and the moving party is entitled to judgment as a matter of law.”
(emphasis added); see also, Kohler v Jacobs, 138 F.2d 440, 441 (5th Cir. 1943)
(“[I]nterrogatories are in the nature of evidence, and . . . may be considered on a motion for
summary judgment under Rule 56.”).
26
No. 09-30035
Alabama, and lived in a hotel that was paid for by FEMA for two weeks. The
Bradleys then moved to an apartment in Phoenix City, where they lived for
three or four months. The Bradleys presented evidence that they participated in
a Section 8 housing assistance program and received $179 toward their rent,
beginning in September 2005. The out-of-pocket cost for rent was $280 per
month, and FEMA reimbursed the Bradleys for two months of rent payments.
The Bradleys also received $2,000, which FEMA provided to Katrina victims.
The Bradleys next moved to Columbus, Georgia, where they signed a 12-month
lease on an apartment, with monthly rent of $600. In June 2007 the Bradleys
returned to New Orleans.
The district court sua sponte granted summary judgment in favor of the
Bradleys for ALE incurred while living in Columbus, awarding them $7,200. The
district court concluded that Allstate did not act in bad faith in failing to pay
ALE because the Bradleys did not present evidence of ALE in a timely manner.
The Bradleys assert that there exist genuine issues of material fact
regarding unpaid ALE. They argue that leases provided to Allstate for the period
that they lived outside of New Orleans are sufficient to establish a genuine issue
regarding uncompensated expenses, and any payments that they received from
Section 8 and FEMA should not be credited to Allstate. Allstate argues that, by
definition, the Bradleys’ living expenses did not increase during a time period in
which they incurred no expenses because they received payments from other
sources, such as FEMA.
The Bradleys have not presented evidence establishing a genuine issue of
material fact regarding further uncompensated ALE; no estimate has been
provided regarding uncompensated losses. Because the Bradleys have not
established any plausible breach of contract for unpaid ALE, there is no basis for
27
No. 09-30035
asserting a bad faith claim against Allstate with respect to unpaid ALE. The
district court did not err in granting summary judgment on both the breach of
contract claim and the related bad faith claim for ALE.
IV. CONCLUSION
The district court erred by ignoring the total loss provision of the
homeowners policy, instead relying on the ACV provision and granting summary
judgment in favor of Allstate based on its conclusion that the double recovery
rule barred further recovery by the Bradleys. The district court also erred by
utilizing an incorrect method of calculating ACV, rather than using replacement
cost minus depreciation as required by Louisiana law. Because the district court
granted summary judgment on the §§ 22:658 and 22:1220 claims based upon its
determination that the Bradleys could not show an underlying breach of
contract, we vacate the grant of summary judgment on the §§ 22:658 and
22:1220 claims. Lastly, the Bradleys’ interrogatory response and absence of Rule
56(c) evidence regarding loss of contents demonstrates that, for purposes of
summary judgment, they failed to meet their threshold burden of proof
regarding the loss of contents; the district court did not err in concluding that
there was no genuine issue of material fact regarding uncompensated loss of
contents
For the reasons discussed above, the district court’s grant of summary
judgment is VACATED and REMANDED for consideration consistent with this
opinion as to the breach of contract and related bad faith claims for
uncompensated structural damage to the Bradleys’ home. The summary
judgment is AFFIRMED with respect to the claim for loss of contents and ALE
and the associated claims of bad faith.
28