Louisiana Law Blog

By Mark D. Mese

The Louisiana First Circuit Court of Appeals has issued the first Appellate Court decision dealing with the Louisiana New Home Warranty Act and its application to Chinese Drywall claims in the case of Jennifer L. Caminita, wife of/and Frank L. Caminita v. Regina, wife of/and Barney Core, Smith and Core, Inc., et al., State of Louisiana Court of Appeals, First Circuit, 2010 CA 1961.

The First Circuit has ruled that the periods of limitation set forth in the New Home Warranty Act provide the exclusive periods by which claims can be brought against home builders for alleged defects related to the installation of Chinese Drywall in new homes. In the Caminita case the First Circuit specifically found that the one year preemptive period provided by La.R.S. 9:3144A(1) was applicable to claims related to Chinese Drywall incorporated into new homes. Based on this finding, the court dismissed the action against the home builder.

This ruling by the Louisiana First Circuit Court of Appeals is the first Louisiana case reported at the appellate level on this issue and is in line with decisions by district courts last year which were also reported on the Kean Miller blog.
 

By Todd A. Rossi

Does an insurer waive its policy defenses when it breaches its duty to defend?  In Arceneaux v. Amstar Corp., 211 WL 2591701 (La. July, 2011), the insurer breached its duty to defend by issuing a denial of coverage and withdrawing from the insured’s defense.  The insurer’s action was based on the mistaken belief that its policies contained an exclusionary provision when, in fact, the exclusion was no longer effective.  According to the trial court, breaching the duty to defend resulted in a waiver of the coverage defenses.  The Louisiana Supreme Court concluded to the contrary, differentiating between a breach and a waiver.  Waiver is an intentional relinquishment of a known right or power, and occurs when an insurer with knowledge of the facts indicating non-coverage assumes or continues the defense without obtaining a non-waiver agreement to reserve its coverage defenses.  Under those circumstances, the insured is led to believe that the insurer has given up that right and the insured has the right to believe that the insured’s counsel is acting in the insured’s best interest without regard to coverage defenses.  An insurer cannot avoid liability based on a coverage defense if it has defended the insured without a reservation of rights.  To the contrary, a breach of the duty to defend is not a waiver and does not mislead the insured into believing there could be coverage because there is no expressed intent to release its right to deny coverage.  Under such circumstances, waiver principles do not apply.  Consequently, a breach of the duty to defend is not a waiver of policy defenses.

By Todd A. Rossi

In Louisiana, an insurer’s duty to defend it’s insured typically depends on the “four corners rule,” in which the court examines the allegations contained in the plaintiff’s petition and the terms of the insurance policy.  If there is the possibility of coverage, the insurer’s duty to defend is triggered. However, in Sibley v. Deer Valley Home Builders, Inc., 32 So. 3d 1034 (La. App. 2nd Cir. 2010), the court applied the four corners rule by examining not only the plaintiff’s petition, but also the insured’s third party demand against the insurer to determine if coverage might apply for the claims alleged against the insured.  No duty to defend was found because the third party demand “did not expand upon the fact that allegations of the plaintiff’s petition so as to show that those claims raised allegations of liability falling under the coverage of the CGL policy."  Accordingly, the decision indicates that this appellate court would consider the insured’s allegations against its insurer, and not only the plaintiff’s allegations, to determine the duty to defend.

By Todd A. Rossi

In Perkins v. Entergy Corp., 2010 WL 2332357 (June 10, 2010), the Louisiana Third Circuit Court of Appeal held that a non-settling insurer was obligated to pay an allocated amount of the settlement in which it did not participate.  The suit arose out of a flash fire at an industrial facility that caused significant bodily injury.  Several insurers settled, and sought an allocation and contribution from another insurer that contended its policy did not afford coverage for the underlying accident.  That insurer urged that it was prepared to defend the insured, and should not be compelled to pay for the strategic decision made by the other insurers, pointing out that the insured’s liability had yet to be adjudicated, and that the settlement was unreasonable.  The appellate court initially recognized that when more than one potentially liable insurer pays a loss “whether in satisfaction of a judgment or in settlement of a claim,” it can seek contribution from the other insurers.  The court also rejected the argument that the settlement did not provide proof of the original damages, finding that if the settlement was fair and not excessive, and would form the basis for a demand for contribution.  A reasonable prudent person would have settled the case, which was supported by the underlying facts without a separate judicial determination of the “actual” damages.

By Kevin C. Curry

On September 30, 2010, the Internal Revenue Service issued guidance providing relief to homeowners who have suffered property losses due to the effects of certain imported drywall installed in homes between 2001 and 2009.  In particular, the IRS issued Revenue Procedure 2010-36 which enables affected taxpayers to treat damages from corrosive drywall as a casualty loss and provides a ”safe harbor” formula for determining the amount of the loss.

By Mark D. Mese

Judges in East Baton Rouge and St. Tammany Parish have issued two of the earliest rulings on the impact of the Louisiana New Home Warranty Act on claims by homeowners against contractors for damages related to Chinese Drywall. Both state district court judges have found that the Louisiana New Home Warranty Act is the exclusive remedy as between a builder and a homeowner for damages caused by Chinese Drywall. Both judges have also ruled that the Chinese Drywall incorporated into homes in Louisiana is not a structural component of the home and is thus subject to a one year warranty period.

In both of the district court cases, the courts dismissed the plaintiff’s case because the suits against the contractors were brought more than one year after the homes were occupied by the original owners.

The rulings by the district court judges should have no impact on homeowner claims against suppliers and manufacturers of Chinese Drywall as the Louisiana New Home Warranty Act only applies to the relationship and rights between a home builder and a home owner in Louisiana.
 

By Bradley C. Myers
 

The United States Supreme Court recently resolved conflicts among the Circuit Courts about the citizenship of a corporation for determining diversity of citizenship jurisdiction (1). This will allow corporations to analyze with more predictable results whether to remove a case to federal court. In Hertz Corp. v. Friend, et al, No. 08-1107 (February 23, 2010) (a unanimous decision, which is unusual in and of itself), the Court decided that when determining a corporation’s citizenship for diversity of citizenship jurisdiction, the “principal place of business” of the corporation is “the place where the corporation’s high level officers direct, control, and coordinate the corporation’s activities”—something that courts have referred to as the “nerve center” of the corporation.

By G. Trippe Hawthorne

The Louisiana Legislature has adopted House Concurrent Resolution No. 185, authored by Representative Tim Burns.  The resolution urges and requests that the Department of Health and Hospitals and the Deptartment of Insurance, in consultation with the Louisiana State Licensing Board for Contractors, investigate the health risks associated with living in homes that contain drywall imported from China, study the potential homeowners insurance coverage issues, including triggers, endorsements, and exclusions to policies that are related to drywall imported from China, and determine whether such material should be identified as a substandard, unsafe building material.  The resolution goes on to request a report of the findings and recommendations of this study to the legislature prior to the convening of the 2010 regular session.

A copy of the enrolled version of the resolution can be seen here: Download file

By Mark D. Mese

June marks the beginning of Hurricane Season and should serve as a reminder to review your personal and business property insurance coverage. The effect of recent Hurricanes on the Gulf Coast generally and Louisiana specifically have been significant with respect to both damages and the insurance covering those damages.

By Michael O'Brien and Stephen Hanemann

Hurricane Gustav recently wreaked havoc and felled trees throughout the heavily wooded areas of Southeast Louisiana.  As such, many property owners may be concerned who bears the responsibility for a fallen tree. Obviously, if a tree in a homeowner’s yard falls on his house, then that homeowner should contact his insurance agent for assistance in repairing the tree damage. The remainder of this article addresses the issue of tree-owner responsibility when a tree located on the property of one person (the “tree owner”) falls on the property of his neighbor (the “property owner”) damaging the house, car, fence or other property.

by Todd A. Rossi

In Sher v. Lafayette Insurance Co. (La. 2008), an apartment unit was flooded when levees failed immediately following Hurricane Katrina. The insurer inspected the property to determine the amount of covered loss and concluded that most of the building’s damage was due to poor maintenance, disrepair, and flooding. Checks totaling slightly more than $2,700 were tendered but rejected. Although the term “flood” was not defined in the policy, the Louisiana Supreme Court rejected the argument that the definition depended on whether the event resulted from a natural disaster or a man-made one, instead focusing on the prevailing meaning of the word “flood,” i.e., the overflow of a body of water causing a large amount of water to cover an area that is usually dry. Accordingly, the court did not find the term ambiguous, and found that the levee breaches were covered by the flood exclusion. 

by Todd A. Rossi

In Landry v. Louisiana Citizens Property Insurance Co. (La. 2008), the Louisiana Supreme Court rejected a homeowner’s breach of contract claim against the insurer for failure to pay the face value of the policy after their house was totally destroyed by Hurricane Rita. The parties did not dispute that the insurance in question covered any loss caused by wind and rain, and that the policy specifically excluded damages caused by flood waters. Even so, the homeowner claimed that Louisiana’s statutory law (R.S. 22:695) obligated the insurer to pay the face value of the policy. The insurer responded, asserting several defenses, including damages caused by flood, high tides, and storm surge. The statute in question was the Louisiana Value Policy Law (R.S. 22:695), that sets forth the methodology to compute loss and that its provisions are not altered due to concurrently causing damages, even if one of such damages is not covered. 

by Todd A. Rossi

by Todd A. Rossi

Louisiana courts preclude summary judgments on insurance coverage matters until the underlying litigation is resolved and the factual basis for the insured’s liability is determined. For example, in Vidrine v. Constructors, Inc., 953 So.2d 193 (La. App. 3rd Cir. 2007), welders, pipe fitters and their helpers brought action against the employer and plant owner to recover for asbestos exposure allegedly arising during a plant renovation. One of the insurers filed a motion for summary judgment, asserting there was no coverage based on an exclusionary provision for bodily injury caused or aggravated "by the conditions of your employment." Under that provision, the employee’s last day of last exposure had to occur during the policy period. The insurer based its summary judgment on the plaintiffs’ petition and discovery responses that alleged asbestos exposure beyond the last day of the policy period.

by Todd A. Rossi

According to the Louisiana Supreme Court, a commercial general liability policy unambiguously excluded coverage for a contractor’s faulty workmanship. Supreme Services & Specialty Co. Inc. v. Sonny Greer, 958 So.2d 634 (La. 2007). The homeowner instituted legal action claiming that cracks in the slab were the result of faulty and defective design and construction, alleging causes of action based on breach of contract and breach of warranty. Relying on the "work product" exclusion in the policy, the court recognized that it reflected the insurance company’s intent to "avoid the possibility that coverage under a CGL policy will be used to repair and replace the insured’s defective products and faulty workmanship."

In State of Louisiana v. All Property and Casualty Insurance Carriers Authorized and Licensed to Do Business in the State of Louisiana, 2006-2030 (La. 8/25/06), the Louisiana Supreme Court upheld Acts 739 and 802 of the 2006 legislative session.

Act 739 extends to September 1, 2007, the filing period for Katrina-related claims under homeowner, personal property, tenant, condominium and commercial insurance policies, with a similar extension to October 1, 2007 for Rita-related claims.

by Mark D. Mese

Owners of property in Louisiana continue to face problems and delays in collecting payments for property damage related to Hurricanes Katrina and Rita. The vast majority of homeowner policies issued to insureds in the State of Louisiana, and possibly some commercial policies, limit an insureds right to file suit on insurance claims to a period of twelve months. See LSA-R.S. 22:691.   The one-year prescriptive date for damages related to Hurricane Katrina is August 29, 2007. The one-year prescriptive date for damage claims related to Hurricane Rita is September 24, 2007. 

From an article in today's Insurance Journal, the Louisiana Commissioner of Insurance has issued an advisory letter to the companies with homeowners insurance policies in Louisiana, requesting their cooperation in extending from one to two years the prescriptive period for policyholders with Hurricane Katrina and/or Rita claims, the Louisiana Department of Insurance reported.

The article notes further, "To assist policyholders, the names of insurance companies who agree to extend the prescriptive period will be listed on the Department's Web site and publicized through a variety of mediums."