Dickerson v. Lexington Ins. Co.
| Decision Date | 21 January 2009 |
| Docket Number | No. 07-30823.,No. 07-30868.,07-30823.,07-30868. |
| Citation | 556 F.3d 290 |
| Parties | Dale DICKERSON; Shirley Dickerson,<SMALL><SUP>*</SUP></SMALL> Plaintiffs-Appellees, v. LEXINGTON INSURANCE COMPANY, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Soren E. Gisleson (argued), Herman, Herman, Katz & Cotlar, New Orleans, LA, for Plaintiffs-Appellees.
John Baay, Robert I. Siegel (argued), Michael David Cangelosi, Gieger, Laborde & Laperouse, New Orleans, LA, for Defendant-Appellant.
Adrianne Landry Baumgartner, Porteous, Hainkel & Johnson, New Orleans, LA, for Nat. Ass'n of Mut. Ins. Co., Amicus Curiae.
Richard L. Fenton, Sonnenschein, Nath & Rosenthal, Chicago, IL, for Allstate Ins. Co., Amicus Curiae.
Judy Y. Barrasso, Barrasso, Usdin, Kupperman, Freeman & Sarver, New Orleans, LA, for Liberty Mut. Fire Ins. Co., Liberty Mut. Ins. Co. and Metropolitan Property & Cas. Ins. Co., Amici Curiae.
Gordon Paul Serou, Jr., Law Offices of Gordon P. Serou, Jr., New Orleans, LA, for Am. Bankers Ins. Co. of FL and Am. Sec. Ins. Co., Amici Curiae.
John Powers Wolff, III, Keogh, Cox & Wilson, Ltd., Baton Rouge, LA, for Arnica Mut. Ins. Co., Amicus Curiae.
James K. Ordeneaux, Plauche, Maselli, Parkerson, LLP, New Orleans, LA, for LA Farm Bur. Mut. Ins. Co., LA Farm Bur. Cas. Ins. Co. and Southern Farm Bur. Ins. Co., Amici Curiae.
Ralph S. Hubbard, III, Lugenbuhl, Wheaton, Peck, Rankin & Hubbard, New Orleans, LA, for Hanover Ins. Co., Hanover Am. Ins. Co., MA Bay Ins. Co., Metropolitan Property & Cas. Ins. Co., Standard Fire Ins. Co., and Travelers Indem. Co., Amici Curiae.
Christopher Raymond Pennison, Larzelere, Picou, Wells, Simpson, Lonero, Metairie, LA, for Republic Fire & Cas. Ins. Co., Am. Nat. Property & Cas. Co., Am. Nat. Gen. Ins. Co., and ANPAC LA Ins. Co. Amici Curiae.
Alan S. Gilbert, Sonnenschein, Nath & Rosenthal, Chicago, IL, for Horace Mann Ins. Co., Horace Mann Property & Cas. Ins. Co. and Teachers Ins. Co., Amici Curiae.
Howard Bruce Kaplan, Bernard, Cassissa, Elliott & Davis, Metairie, LA, for Lafayette Ins. Co. and United Fire & Cas. Co., Amici Curiae.
Appeal from the United States District Court for the Eastern District of Louisiana.
Before KING, HIGGINBOTHAM, and WIENER, Circuit Judges.
Plaintiffs-Appellees Dale and Shirley Dickerson sued Defendant-Appellant Lexington Insurance Company ("Lexington") for its failure to pay his homeowner's policy claim timely following Hurricane Katrina. After a one-day bench trial, the district court awarded Dickerson $175,467 in damages, penalties, and attorneys' fees and costs, ruling that Lexington acted in bad faith in violation of Louisiana statutes. Lexington appeals the judgment. We affirm in part and reverse in part.
Dale and Shirley Dickersons' home in Marrero, Louisiana, was extensively damaged by Hurricane Katrina in August 2005. There was evidence of flooding throughout the first floor; Dickerson estimated that the water had risen to a level of approximately two feet inside his house. There was also evidence of extensive damage from wind and rain.1 There was a hole in the roof. Furniture was warped and waterlogged. Carpets were moldy. An attic door had blown open exposing the crawl space to the wind and water. A light fixture on the first floor still contained an inch of water when the Dickersons returned home in mid-September following the storm.
The Dickersons held a homeowner's insurance policy issued by Lexington. That policy's four classes of coverage for wind damage and the limits of each were:
Coverage A (Building, i.e. home) — $153,000
Coverage B (Outbuildings) — $15,300
Coverage C (Contents) — $76,500
Coverage D (Additional living expenses) — $30,600
Like many homeowner's policies, the Dickersons' policy did not cover flood damage. They held federal flood insurance issued through a different carrier, which coverage paid $108,342 on their Katrina-related claim: $62,042 for damage to their home and $46,300 for damage to its contents.
The Dickersons notified Lexington of their wind damage claim under their homeowner's policy in mid-September 2005, and a Lexington insurance adjuster inspected the property on October 1. The adjuster wrote a report in November 2005, but also wrote a second report that he sent to Lexington on February 4, 2006.2 Lexington issued a check to Dickerson for $11,335 on March 2, 2006, indicating that it was for hurricane damage to the home under Coverage A.
Dickerson sued Lexington, claiming that it had breached the contract by failing to pay; and, additionally, that Lexington had breached its statutory duty of good faith through its unjustifiable failure to pay promptly and in full.3 That suit was filed in May 2006. In June 2006, Dickerson sought additional payment from Lexington based in part on his claim that the structure of his home had been twisted in the storm. In response, Lexington sent a different adjuster to the property and eventually paid Dickerson an additional $2,200 under Coverage A. Finally, in May 2007, Lexington sent yet another adjuster to the Dickerson home who found that, in fact, the home had suffered far more wind damage than Lexington previously thought. That inspection resulted in a check to Dickerson for $103,756 in June 2007, about a month before the bench trial in this case.4
Lexington's response to Dickerson's lawsuit was that it had made a good faith effort to settle the claim, but that its adjusters had returned with conflicting information and had determined that the bulk of the home's damage was caused by flooding, thus falling outside the Dickersons' policy coverage. Lexington also contended that Dickerson had breached the insurance contract by failing to mitigate the damage to his home that had been caused by an improperly secured roof tarp and by failing to submit an itemized list of the damaged contents.
After a one-day bench trial conducted in July 2007, the district court held for Dickerson on all claims and entered a judgment for $122,362. The amount of the judgment included $50,000 in penalties under § 22:1220. Separately, the court awarded Dickerson attorneys' fees of $53,105, bringing the total award to $175,467.
Lexington timely appealed, contending that (1) there was insufficient evidence for a fact-finder to conclude that wind, rather than flooding, caused the subject damage to Dickerson's home and contents, (2) the trial court improperly calculated the value of the contents of Dickerson's home in violation of the terms of the insurance policy, (3) there was insufficient evidence to support a finding that Lexington had acted in bad faith, (4) § 22:1220 does not authorize recovery of mental anguish damages, (5) alternatively, there was insufficient evidence to support a determination that Lexington's bad faith actions had caused Dickerson mental anguish, and (6) attorneys' fees are impermissible under the applicable version of § 22:658.
When sitting in diversity, we apply the substantive law of the state.5 In this case, we apply Louisiana law.
In the appeal of a bench trial, we review findings of fact for clear error6 and conclusions of law and mixed questions of law and fact de novo.7
On appeal, Lexington asserts that there was insufficient evidence presented at trial to support the finding that wind, rather than flooding, caused most of the damage to Dickerson's home. As wind damage is covered by Dickerson's homeowner's policy but flood damage is not, Lexington would not be liable for any damage attributable to flooding.8 None disputes that, in addition to flooding, both wind and rain caused damage, but the parties disagree on the proper apportionment of the causes of the damage between flooding and wind.
Under Louisiana law, the insured must prove that the claim asserted is covered by his policy.9 Once he has done this, the insurer has the burden of demonstrating that the damage at issue is excluded from coverage.10 Thus, once Dickerson proved his home was damaged by wind, the burden shifted to Lexington to prove that flooding caused the damage at issue, thereby excluding coverage under the homeowner's policy. As no one disputes that at least some of the damage to the Dickerson home was covered by the homeowner's policy, Lexington had to prove how much of that damage was caused by flooding and was thus excluded from coverage under its policy.
Dickerson's trial expert, a New Orleans general contractor, testified that wind and rain from the storm caused approximately 70 percent of the damage. The same percentage results when the estimated total value of damage to the home and its contents is reduced by the amount that Dickerson's flood insurer paid following Katrina, although Dickerson's expert also testified that he had not known the total amount that the flood insurance had paid until after he came up with his own estimate of the breakdown between the two causes of damage.
Lexington did not submit a competing percentage. Instead, it offered the testimony of its own adjuster who provided the court with estimates of rebuilding costs. Dickerson contended at trial that those costs were too low because they did not reflect inflated post-Katrina prices for materials and labor. Lexington also attempted to deconstruct Dickerson's expert's estimate by identifying individual components of the damage and assigning their cause to either flood or wind. For example, because flooding damaged the electrical wiring, Lexington maintained that the entire replacement cost of the wiring system throughout the house could be attributed to flooding. Dickerson's expert conceded that some of the figures in his estimate could be attributed entirely to flood damage, but insisted that he had accounted for that in calculating the 70-30 ratio.
At trial, the question of flood versus wind damage essentially turned on witness credibility, as the quantity and quality of the...
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