Articles Posted in Insurance Dispute

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toxic-1189855-1024x681A unique feature of our American federal system is the separate yet intertwined system of state and federal courts. Sometimes a dispute may begin in a state court and end up in federal court. And sometimes, there may end up being parallel proceedings in both the state and federal systems. There are limits, however. A federal court can decline to hear an action if there is a parallel proceeding in the state court system. Recently, the Fifth Circuit Court of appeal was called upon to determine whether a district court erred when it declined to hear a declaratory action and related counterclaims.

In May 2012, Jeffrey Dugas II purchased an Icee cup drink from the Regency Inn in Lafayette, Louisiana. Dugas sustained injuries from the Icee cup, which was found to contain toxic chemicals; specifically sodium hydroxide, a chemical found in the hotel’s laundry facility. Sohum LLC, the owners of the Regency Inn, filed a lawsuit against their insurance provider, Century Surety Company after the insurer declined to defend Sohum in a court case brought by Dugas. Century then filed a declaratory action in federal court asking for a declaratory judgment stating that the insurance policy Sohum had in force at the time of Dugas’ injuries excluded coverage for injuries caused by harmful materials. Since Dugas’ injuries were the result of laundry chemicals, Century claimed that Sohum’s insurance policy did not cover the injuries.

Sohum brought counterclaims against Century, alleging that the insurer breached their contract by refusing to defend them in court and provide coverage for the injuries Dugas sustained. Further, Sohum claimed Century refused coverage in bad faith; that the insurer was reliable through the doctrine of estoppel based on “unspecified prior representations”; vicarious liability based on misrepresentation by the insurance company’s agents; and, lastly, unfair business practices based on the insurer’s failure to reveal material facts to Sohum. Century filed a motion to dismiss based on Sohum’s counterclaims of bad faith and unfair commercial practices.

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supreme-court-new-york-1206406-1-1024x681Car accidents have become so commonplace in our society that many states require automobile and accident insurance. If and when you find yourself in the unfortunate situation of being in a car accident, you expect the party at fault to foot the bill. That’s where insurance steps in. As insurance claims are one of the most litigated issues nationwide, the interpretation of insurance laws is not always so clear. The following case examines two specific issues that ultimately needed to be settled in the highest court in Louisiana.

In 2005, Danny Kelly and Henry Thomas were driving in opposite directions when Mr. Thomas turned left, crashing into Mr. Kelly. Mr. Kelly suffered injuries that put him in the hospital for nearly a week. Shortly after the accident, Mr. Kelly’s attorney contacted Mr. Thomas’s insurance company, State Farm, requesting payment.  The letter included copies of Mr. Kelly’s medical bills, totaling $26,803.17.  State Farm did not respond to the letter nor did the company inform Mr. Thomas of the amount of Mr. Kelly’s medical bills.  After rejecting an offer from State Farm, Mr. Kelly filed a lawsuit against Mr. Thomas. Mr. Thomas was found to be at fault for the accident and the Trial Court entered a judgment against Mr. Thomas for $176,464.07.  Mr. Thomas’s policy limit was only $25,000. Mr. Thomas and Mr. Kelly soon entered into an agreement where Mr. Kelly would receive Mr. Thomas’s right to file a lawsuit against State Farm in exchange for Mr. Kelly’s promise not to go after Mr. Thomas’s assets.  Mr. Kelly filed a lawsuit against State Farm because Mr. Kelly thought State Farm acted in bad faith by failing to notify Mr. Thomas of Mr. Kelly’s initial letter containing the total amount of medical bills as well as for failing to respond to the request to pay those bills.

The parties spent years in litigation. Much confusion revolved around the proper interpretation of La. R.S. 22:1973. Eventually, the case made its way up to the Louisiana Supreme Court to determine whether State Farm could be found liable for a bad-faith failure-to-settle claim under Louisiana law when the insurer never received a firm settlement offer.  In other words, must an insurer receive a firm settlement offer to be found liable under the statute? The statute requires the insurer to affirmatively adjust claims fairly and promptly and to make a reasonable effort to settle claims with the insured or the claimant or both. Secondly, the Louisiana Supreme Court was asked to determine whether an insurer can be found liable for misrepresenting or failing to disclose facts not related to policy coverage.

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cold-weather-rider-1438885-1024x683People get car insurance to protect themselves in the event of a car accident.  It is thus important that one takes care to research and consider what insurance plan is best for one’s needs.  Liability insurance is designed to protect a person who owns or drives a vehicle from the costs of a lawsuit that might happen if that vehicle is in an accident. Insurance contracts define the scope of what sort of vehicles or potential plaintiffs will be considered covered under the policy.  Generally, courts prefer to preserve the “freedom of contract“, meaning that as long as the contract was not forced upon one party or contains terms that will unfairly restrict the party’s rights, the court will not attempt to break or redraft it.

Whether an insurance contract can restrict certain coverage is in Louisiana, an issue that can be determined in summary judgment.  Summary judgment is a method by which a case that does not raise any major issues of fact for a jury (or judge in a non-jury trial) to determine can be decided without the formality of a trial.  Anyone who wishes to sue under an insurance contract to determine its scope must prove the facts of the incident as well as that the accident is covered by the insurance.  Otherwise, the court will probably decide for the insurance company and not require it to pay out.

The Louisiana First Circuit Court of Appeals recently reaffirmed the idea that courts will not disturb a contract like insurance between two parties, as long as there is no ambiguity or unfairness.  In August 2012,  Lauren Stafford was riding on a motorcycle driven by Steven Fugler, when the motorcycle ran off the road and into a ditch, and both of them were thrown off as a result of the accident.  Neither of them owned the motorcycle. It was in fact owned by another person uninvolved in the case.  About a year later, Ms. Stafford sued Mr. Fugler and  State Farm as his insurance company for serious injuries she received in the accident. State Farm responded by denying her allegations and also by stating that his policy did not insure a motorcycle owned by another person. The company argued that the policy only covered a non-owned car, defining a car as a motor vehicle with at least four wheels designed for road use.  This, they claimed, excluded a two-wheeled motorcycle like the one that crashed. Because the insurance policy did not cover such a vehicle State Farm filed a summary judgment motion to effectively end the case.  The trial court, agreeing with State Farm, granted this motion and dismissed the claim

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home-sweet-home-1228389-1024x768Insurance is such a lucrative business because while almost everyone will purchase some form of it, very few will ever make a claim against the insurance company, and even fewer will be successful. This allows insurance companies to generate huge profits on premiums paid by policyholders. Unsurprisingly, those who do make claims against insurance companies can count on being challenged at every turn, as the insurance companies will hire some of the best attorneys in order to avoid shelling out a dime to cover the policyholder. That is exactly what happened when Shelter Mutual Insurance Company became a party to a suit brought by a University of Louisiana Lafayette student after her professor, the insured, went on a tirade in class.

The incident began in 2004 when UL Lafayette student Kacie Renee Spears attended a class taught by Dr. Louis Houston. During that class, Dr. Houston became extremely agitated and, in a fit of rage, threatened to kill Ms. Spears if she attempted to leave the classroom, spat in her face, and physically struck one of her fellow students. Ms. Spears was so severely distressed by the experience that she sued for damages associated with emotional and physical trauma and medical expenses, naming Dr. Houston, his homeowner’s insurer Shelter Mutual Insurance Company, and the Board of Supervisors for the University of Louisiana System as defendants.

In her complaint, Ms. Spears alleged that the University of Louisiana System was liable due to its negligent hiring, retaining, and supervising of Dr. Houston, given that he had a history of delusional and outrageous acts and had a previous delusional episode while employed by the University. Ms. Spears also asserted that Dr. Houston suffered from bipolar disorder, a mental illness that causes delusions and that, at the time that Dr. Houston exhibited the aforementioned behavior, he was suffering a delusion that may have manifested from his mental illness.

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focus-me-1158253-1024x1024Uninsured and underinsured motorist coverage is an insurance add-on that protects you against another person’s failure to maintain adequate insurance. This coverage can pay for injuries and property damage caused by another motorist who is not carrying adequate insurance. However, the policy will only cover those things set out in the agreement with the insurer. All insurance agreements are considered contracts under Louisiana law. Therefore, the rules governing contracts generally apply to insurance agreements.

One case illustrates how a court might interpret an uninsured motorist coverage policy. In June 2013, an accident occurred in Natchitoches Parish, Louisiana that involved an uninsured motorist. The plaintiffs, Mr. and Mrs. Horton, were struck by another vehicle, the driver of which did not have insurance. The Horton’s Volvo was physically damaged in the accident and as a result, the car’s market value was significantly reduced. The Hortons filed a lawsuit against their insurer, ANPAC, in order to recover the loss of market value.

The uninsured motorist clause of the contract stated that the insurance company would cover property damages caused by an accident with an uninsured motor vehicle and as such, the Horton’s and ANPAC agreed that the policy should cover the physical damage to the Volvo based on the terms of the agreement. However, the parties disputed whether the contract applied to a loss in market value.

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contract-signing-1474333-768x1024No one likes to deal with insurance matters. Shopping for insurance and understanding the terms of an insurance policy can be complex. Most people are happy to just pay their monthly premiums and know that they have insurance when they need it – and then hope they never need it at all. One woman learned how complex insurance matters can be when she was injured in July of 2012 when the Pontiac Sunfire that she was driving was involved in an auto accident in Ouachita Parish.

The insurer of the other driver who was involved in the accident tendered payment to the plaintiff, Sonya Rodgers, in an amount equal to the policy limits. At the time of the accident, Rodgers was insured by State Farm. Rodgers sued State Farm alleging that she should be provided uninsured motorist coverage for the injuries she suffered in the accident. State Farm filed a motion for summary judgment arguing that uninsured motorist coverage was not provided because Rodgers rejected such coverage in April of 2010.

Rodgers contended in opposition to the motion that there was a genuine issue of material fact as to whether there was uninsured motorist coverage at the time of the accident. Rodgers argued that after the original vehicle covered under her State Farm policy became inoperable, she turned its license plate into the DMV, alerted her State Farm agent that she would no longer need the coverage because the vehicle was broken down beyond repair, and she stopped paying premiums to State Farm. Rodgers said that she considered the policy to be cancelled after she took those steps. Rodgers further said that after acquiring the Pontiac Sunfire she contacted her State Farm agent and negotiated a new policy and she believed that she had uninsured motorists coverage because State Farm never asked her to execute a new rejection of uninsured motorist coverage form. See La. R.S. 22:1295.

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IMG_1132Putting on a festival at the New Orleans Superdome is a lot of work. One vital part of that work is to confirm that the insurance policy actually covers the activities and location of the festival.  Festival Productions, Inc. – New Orleans (“FPINO”) learned this lesson the costly and hard way.  The Louisiana Fourth Circuit Court of Appeal’s decision shows the gaping hole in FPINO’s coverage that was entirely avoidable.  

In July 2005, Deborah Daniels slipped and fell on an unknown substance at the New Orleans Superdome when she was attending the Essence Festival. A year later, she filed a lawsuit in Orleans Parish alleging she suffered injuries from the fall, naming a host of defendants including FPINO, the producer of the festival, and its insurer, Maryland Casualty Company (“MCC”).   


MCC did not believe that it was required to indemnify or defend FPINO in the suit and so it filed a motion for summary judgment against FPINO.  MCC argued that FPINO’s policy did not cover damages sustained by the plaintiff because the Superdome was not a designated premises covered under the policy.  FPINO filed a cross-claim against MCC and Essence, alleging that as an insured under the policy, MCC owed FPINO a defense and indemnity, and MCC refused to do so.  

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thrown-rubbish-1561470Insurance policies can still be intact even if the insured fails to pay if the insurance company fails to follow the proper protocol in informing the insured that he or she no longer has coverage. State Farm found themselves liable for coverage in just a situation.

Thomas Sapp was insured under a Florida State Farm policy. The policy ran from December 3 until June 3, 2008, and the policy was renewed thereafter for consecutive six-month terms.  Sometime during Sapp’s insurance coverage, Sapp moved from Florida to New Orleans, Louisiana. State Farm was aware of his move. On August 15, 2009, Sapp was involved in an automobile accident with Roderick Lee. Subsequently, Lee sued Sapp and State Farm seeking damages for his personal injuries incurred in the accident as the result of Sapp’s alleged negligence.  State Farm denied coverage, arguing that the policy was not renewed.

In support of State Farm’s claim that they were not responsible for Lee’s damages because the policy was not renewed, State Farm presented evidence that Sapp was no longer covered by State Farm because Lee stopped making payments in February of 2009. In response, both Lee and Sapp argued that the State Farm policy was still in effect because State Farm did not send the legally required notice of cancellation for renewal.  The trial court agreed with Lee and Sapp, and granted their motions for partial summary judgment, while denying State Farm’s motion for summary judgment. The Louisiana Fourth Circuit Court of Appeals agreed with the trial court and affirmed. In determining the claim, the Fourth Circuit recognized that although the incident occurred in Louisiana, the Court had to apply Florida law because the contract arose out of Florida. However, the Court also noted that even if the Court were to have applied Louisiana law the outcome would have been the same.  

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car-wreck-1449449Anytime you get in a car can be a life and death situation. While no one ever wants to think about the worst, what will your insurance cover if the worst does happen. Your policy may not only need to cover you and those injured, it could need to cover your employer if you were driving in the scope of your employment.

On February 9th, 2009, a fatal automobile accident occurred between Croom and Rhonda, Edward, and Barbara Hickey. Croom, died after he crossed the centerline of a street in Pineville, Louisiana, and colliding with the Hickey’s vehicle. Croom was insured by Allstate insurance company, who provided his estate with a defense.

The Hickeys claimed in there suit against Croom’s estate, (represented by Allstate) that he was operating a vehicle in the “Course and Scope” of his employment with the Express Company. Express was insured by two separate policies, one from Federal Insurance Group, and an excess policy by Scottsdale Insurance Company.

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writing-hand-1553215
Most people have heard the saying “A Deal’s a Deal.”  That’s what the plaintiffs thought in a case that arose from Rapides Parish that involved eight people in one vehicle and one person in the other.  The plaintiffs were the driver and passengers in the eight-person vehicle, and they were suing for damages that were caused by the defendant in the car accident.  However, the only applicable insurance coverage to the plaintiffs was the uninsured motorist coverage issued by Safeway Insurance Company of Louisiana.  The plaintiffs eventually reached a settlement agreement with Safeway, in which Safeway agreed to pay the agreed amount of the insurance policy.  

However, the plaintiffs alleged that Safeway failed to remit the settlement fund within thirty days of the date that the settlement agreement was put into writing, as mandated by state law.   Pursuant to state law under La. R.S. 22:1973, the trial court found the agreement was put into writing on March 18, 2013, while the settlement was paid off by Safeway on the thirty-fourth day after the agreement.  Safeways appealed when the trial court ruled in favor of the plaintiffs.  The Court of Appeals disagreed with trial court’s finding and determined the day the agreement was put into writing was March 28, 2013.  The payment made by Safeway on April 22, 2013, was within the thirty-day period.

The appellate court emphasized that the thirty-day requirement is penal in nature and, therefore, the court should construe its application strictly and narrowly.  The Court consequently concluded that when a party seeks penalties for an insurer’s failure to pay a settlement in time, the party is not required to prove that the insurer was “arbitrary, capricious, or without probable cause” in failing to pay. Rather, the party is required to show that the insurer “knowingly” failed to pay.  See Sultana Corp. v. Jewelers Mut. Ins. Co, 03-360, p. 9 (La. 12/3/03), 860 So.2d 1112, 1119.  

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