DeLoach v. HGI Catastrophe Services, L.L.C.

Case: 11-30670 Document: 00511751421 Page: 1 Date Filed: 02/08/2012
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
February 8, 2012
No. 11-30670 Lyle W. Cayce
Summary Calendar Clerk
JOHNNY G. DeLOACH, ET AL,
Plaintiffs
v.
HGI CATASTROPHE SERVICES, L.L.C.; HAMMERMAN & GAINER,
INCORPORATED; LARRY D. ONEY,
Defendants – Third-Party Plaintiffs – Appellants
v.
CONTINENTAL CASUALTY COMPANY,
Third-Party Defendant – Appellee
Appeal from the United States District Court
for the Eastern District of Louisiana
USDC No. 2:10-CV-724
Before BENAVIDES, STEWART, and CLEMENT, Circuit Judges.
PER CURIAM:*
HGI Catastrophe Services, LLC, Hammerman & Grainer, Inc., and Larry
D. Oney (together “Hammerman”) appeal the district court’s grant of summary
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
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No. 11-30670
judgment in favor of Continental Casualty Company (“CCC”), Hammerman’s
commercial general liability (“CGL”) insurer,1 on Hammerman’s third-party
claims for defense and indemnity. The question before us is whether the district
court erred in concluding that the CGL policy, which, in relevant part, provides
coverage only for loss of “tangible property,” does not obligate CCC to defend and
indemnify Hammerman against claims for reputational damage. We affirm.
FACTS AND PROCEEDINGS
The State of Louisiana manages the Road Home program, which provides
special assistance to residents affected by Hurricanes Katrina and Rita. In 2009,
HGI Catastrophe Services, LLC (“HGI”) submitted a bid in response to the
State’s request for proposal for the contract to administer the program. In
connection with its bid, HGI contacted Johnny G. DeLoach and proposed that he
serve as the Program Director in the event that HGI was awarded the contract.
When HGI won the bid, however, it informed DeLoach that he would not be the
Program Director.
DeLoach and JG DeLoach Consulting, LLC (together “DeLoach”) then filed
a diversity suit against Hammerman, seeking damages for breach of contract,
fraudulent inducement, negligent misrepresentation, unjust enrichment, and
unfair or deceptive trade practices. Relevant to this appeal, DeLoach sought
relief for reputational damage. Hammerman filed a third-party complaint
against Houston Casualty Company (“HCC”), its errors and omissions insurer,
seeking defense and indemnity. The district court granted HCC’s motion for
summary judgment, holding that the HCC policy did not provide coverage
against DeLoach’s claims. Hammerman then filed a similar third-party
complaint against CCC, seeking defense and indemnity. Hammerman and CCC
1
The policy was issued to Hammerman & Grainer International, Inc. and names both
Hammerman & Grainer, Inc. and HGI Catastrophe Services, LLC as additional insureds. The
policy also covers Oney as the President of HGI Catastrophe Services, LLC.
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No. 11-30670
filed cross-motions for summary judgment on the issue of whether the CGL
policy provided coverage. The district court granted CCC’s motion and denied
Hammerman’s. This timely appeal followed.
STANDARD OF REVIEW
We review the district court’s grant of summary judgment de novo,
applying the same standards as the district court. Nickell v. Beau View of Biloxi,
L.L.C., 636 F.3d 752, 754 (5th Cir. 2011). Summary judgment is appropriate
when the moving party can demonstrate that “there is no genuine dispute as to
any material fact and [it] is entitled to judgment as a matter of law.” FED. R. CIV.
P. 56(a).
DISCUSSION
The CGL policy at issue extends CCC’s defense obligation to all suits
seeking damages for “bodily injury” or “property damage.” The policy defines
“property damage” as:
a. Physical injury to tangible property, including all resulting loss
of use of that property. . . ; or
b. Loss of use of tangible property that is not physically injured.
Hammerman sought summary judgment against CCC on the contention that
reputational damage constituted “property damage” within the meaning of the
policy, and therefore triggered CCC’s duty to defend.2 Hammerman based its
argument on two decisions of the Louisiana Court of Appeal holding that loss of
reputation qualified as property damage for purposes insurance coverage: Lees
v. Smith, 363 So. 2d 974 (La. Ct. App. 3 Cir. 1978), and Williamson v. Historic
Hurstville Ass’n, 556 So. 2d 103 (La. Ct. App. 4 Cir. 1990).
2
On appeal, Hammerman argues that the district court erroneously failed to analyze
whether any of DeLoach’s separate theories triggered CCC’s duty to defend under the policy.
As CCC points out, the district court focused its discussion on the question of whether
reputational damage constitutes property damage because that was the argument upon which
Hammerman principally relied.
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As the district court thoroughly explained, previous decisions of this court
have rejected the reasoning of Lees and Williamson. See, e.g., Selective Ins. Co.
of Southeast v. J.B. Mouton & Sons, Inc., 954 F.2d 1075, 1079 (5th Cir. 1992)
(“‘[T]angible’ property corresponds to the Louisiana civilian concept of ‘corporeal’
property.” (citing City of New Orleans v. Baumer Foods, Inc., 532 So. 2d 1381,
1383 (La. 1988)); Lamar Adver. Co. v. Cont’l Cas. Co., 396 F.3d 654, 663 (5th Cir.
2005). In Lamar Advertising we interpreted a CCC policy virtually identical to
the one at issue and stated:
While it is true that in Williamson, the Louisiana Fourth Circuit
Court of Appeal held that loss of profits constitutes injury to
“tangible property,” we find that the holding in Williamson does not
compel us to depart from our more recent treatment of this issue in
Selective Insurance. In Williamson, the complaint in the underlying
action alleged that the defendant’s defamatory remarks about the
plaintiff and his business venture caused reputational injury, i.e.,
intangible property, and thereby, caused him consequential loss of
profits. The Louisiana Fourth Circuit held that injury to reputation
and loss of profitability constitute damages to “tangible property”
within the meaning of a homeowner’s policy that defined property
damage as “physical injury to or destruction of tangible property
including loss of its use.” As Continental accurately points out,
however, the court in Williamson based its interpretation of the
policy on a Webster’s Dictionary definition of the term tangible. The
Williamson court considered neither the Louisiana Supreme Court’s
declaration that tangible property is corporeal property nor any
provision of the Louisiana Civil Code in reaching this conclusion.
Moreover, the Williamson court’s broad interpretation of the term
tangible would render meaningless the provision under
Continental’s policy agreeing to pay only those damages caused by
physical damage to tangible property. Such an interpretation would
make all damages recoverable under the policy. By contrast, this
court’s interpretation of the terms tangible property as pronounced
in Selective Insurance, is far more consonant with the language
under Continental’s policy and is consistent with Louisiana civil law
methodology. Accordingly, we hold that loss of profits that do not
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flow from injury to tangible property is not a loss covered by this
policy’s property damage provision.
396 F.3d at 665 (internal citations and footnotes omitted). Lamar Advertising is
dispositive of this appeal. “[I]n the absence of a subsequent state court decision
or statutory amendment which makes this Court’s [prior] decision clearly wrong,
we are bound by a prior panel’s interpretation of state law.” Am. Int’l Specialty
Lines Ins. Co. v. Canal Indem. Co., 352 F.3d 254, 271 n.4 (5th Cir. 2003) (second
alteration in original) (internal citations and quotation marks omitted). One’s
reputation is not tangible property, and the purely economic losses resulting
from damage thereto are not “property damage” within the meaning of the
policy.
Hammerman also contends that the district court erroneously relied on
inaccurate factual findings in ruling on the parties’ cross-motions, but it has
failed to demonstrate that any of the asserted inaccuracies were material to the
district court’s judgment.
CONCLUSION
For the above reasons, the judgment of the district court is AFFIRMED.
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