James Pest Control v. Scottsdale Ins. Co.

Citation765 So.2d 485
Decision Date27 June 2000
Docket NumberNo. 99-CA-1316.,99-CA-1316.
PartiesJAMES PEST CONTROL, INC., et al. v. SCOTTSDALE INSURANCE COMPANY.
CourtCourt of Appeal of Louisiana (US)

Michael H. Hogg, Rodney Kelp Littlefield, Perlis, Hogg & Reynolds, Metairie, Louisiana, Counsel for plaintiffs-appellees.

Frederick H.N. Dwyer, Bailey & Dwyer, Mandeville, Louisiana, Counsel for defendant-appellant.

Court Composed of Judges JAMES L. CANNELLA, SUSAN M. CHEHARDY and CLARENCE E. McMANUS

McMANUS, Judge.

STATEMENT OF CASE

This is a suspensive appeal from a district court judgment finding that the former insurer of a pest control business is liable for termite damage that manifested after the policy period. For the following reasons, we reverse.

The plaintiffs, James Pest Control and Louisiana Pest Control Insurance Company (hereafter LPCIC), filed suit against Scottsdale Insurance Company (hereafter SIC) alleging that SIC is liable for termite damage to a condominium, 809 Rue Royale, that occurred during James Pest Control's policy period with SIC. LPCIC avers that the damages occurred prior to the inception of its policy with James Pest Control, therefore, SIC is indebted to its insured James Pest Control pursuant to the terms of the insurance policy and to LPCIC by subrogation and assignment.

On March 19, 1996, James Pest Control and LPCIC filed its First Supplemental and Amending Petition averring that James Pest Control entered into a contract to treat the DeLimon Condominiums including 801 Rue Royale, 803 Rue Royale, 807 Rue Royale, 809 Rue Royale, 320 Rue St. Peter, 322 Rue St. Peter and 324 Rue St. Peter, all of which were found to have sustained termite damage. LPCIC paid the claims which totaled to $43,893.39. James Pest Control and LPCIC also aver that SIC was arbitrary and capricious in refusing to pay for the damages sustained in the condominiums.

On August 6, 1997, James Pest Control and LPCIC filed a Petition for Declaratory Judgment, seeking judgment declaring that SIC provided insurance coverage to James Pest Control during the period that the damages occurred to the properties named in the suit.

On February 10, 1998, SIC filed a Motion for Summary Judgment arguing that there is no genuine issue of material facts in this case and that SIC did not provide coverage because the termite damage did not occur during its policy period.

The trial court subsequently denied both the Petition for Declaratory Judgment and the Motion for Summary Judgment in open court. In a pre-trial order, the parties stipulated that the total amount of damages are $43,893.39. After trial on the merits on June 14, 1999, the trial court rendered judgment for the plaintiffs in open court.

On June 28, 1999, the trial court signed the judgment rendered on June 14, 1999, in favor of James Pest Control, Inc. and LPCIC against SIC for these amounts:

801 Rue Royale (95% of $1154.52) $ 1,096.79 803 Rue Royale (80% of $2,522.23) $ 2,017.78 807 Rue Royale (95% of $14,066.25) $ 13,362.93 809 Rue Royale (80% of $7,481.64) $ 5,985.31 320 Rue St. Peter (80% of $2,518.00) $ 2,014.40 322 Rue St. Peter (95% of $12,448.00) $ 11,825.60 324 Rue St. Peter (80% of $3,662.75) $ 2,930.20 ___________ TOTAL $ 39,233.01

The trial court also awarded costs, expert fees in the amount of $400.00, and legal interest from the date of judicial demand which was September 28, 1995, for 809 Rue Royale and March 19, 1996, for the other condominiums. SIC timely appealed.

It was uncontested that SIC issued James Pest Control an occurrence type insurance policy. Over SIC's policy period, termite infestation and damage were discovered at the DeLimon Condominium Complex. On April 19, 1995, LPCIC replaced SIC as James Pest Control's insurer. Immediately after LPCIC began insuring James Pest Control, LPCIC was notified of termite damage at 801 Rue Royale, 803 Rue Royale, 805 Rue Royale, 807 Rue Royale, 809 Rue Royale, 320 Rue St. Peter, 322 Rue St. Peter, 324 Rue St. Peter.

Plaintiffs immediately notified SIC of the termite damage because they maintain that the damages occurred during SIC's policy period. SIC paid for the damages to 805 Rue Royale because the damage was discovered on April 18, 1995, however, SIC denied coverage for damages associated with the other units. In good faith, LPCIC paid the owners of the condominiums $43,893.39.

FACTS

At trial, Robert A. James, Sr., testified that he was the owner of James Pest Control from 1964 to 1995. James Pest Control was insured by SIC from April 18, 1989 to April 19, 1995. Around April of 1984, James Pest Control began treating the DeLimon condominiums. Mr. James testified that James Pest Control treated soil prior to laying the condominiums' foundation. After the condominiums were erected, James Pest Control trenched and treated around the perimeter of the building.

Mr. James testified that on June 15, 1993, the prospective owner spotted dead termites in 801 Rue Royale and James Pest Control inspected the condominium pursuant to that complaint. On June 9, 1994, James Pest Control found termite damage to the window frame and door-frames of 801 Rue Royale. The owner of 801 Rue Royale filed a claim, and SIC paid it. On May 12, 1995, James Pest Control was notified that there was a swarm of termites in the kitchen. On May 18, 1995, James Pest Control inspected a hole in the wall but saw no visible damage. On June 26, 1995, James Pest Control received a complaint that a few boards outside on the rear patio had old termite damage. On cross-examination, Mr. James testified that the first evidence of termite damage in 1995 at 801 Rue Royale was noted on June 27, 1995.

Mr. James testified that James Pest Control treated 803 Rue Royale in 1993 because either termites were spotted or the owners changed the soil. In 1994, James Pest Control inspected the condominium. On cross-examination, Mr. James testified that he first had notice that there was termite damage in 1995 at 803 Rue Royale on June 7, 1995.

Mr. James testified that James Pest Control was informed on May 8, 1995, of termite damage in the front wall and window at 807 Rue Royale. Mr. James testified that there was also evidence of termite tunnels in the ceiling wall on January 12, 1995, indicating old termite damage. On June 1, 1995, James Pest Control conducted an inspection of the condominium and found evidence of live termites in the wall. On cross-examination, Mr. James testified that he first had notice that there was termite damage in 1995 at 807 Rue Royale on June 28, 1995.

Mr. James testified that on September 28, 1994, Formosan termites were found at 809 Rue Royale in the fascia boards on the left side of the porch. SIC paid for the damage to the fascia boards. On June 1, 1995, James Pest Control found termites in the front wall. On cross-examination, Mr. James testified that he first had notice that there was termite damage in 1995 at 809 Rue Royale on June 28, 1995.

On July 17, 1995, Mr. James testified that he had notice that termite damage was discovered at 320 Rue St. Peter. On July 18, 1995, James Pest Control first learned that 322 Rue St. Peter had live termites. Mr. James testified that he was first notified that there was termite damage at 322 Rue St. Peter on July 18, 1995.

On June 26, 1995, termites were found in the rear living room of 324 Rue St. Peter. On August 21, 1995, the area was treated by the front door to keep termites from entering the building. On cross-examination, Mr. James testified that he was first notified of termite damage at 324 Rue St. Peter on June 26, 1995.

Mr. James testified that he notified LPCIC of termite damage to condominiums 801 Rue Royale, 805 Rue Royale, 807 Rue Royale, and 324 Rue St. Peter on July 14, 1995. On July 17, 1995, Mr. James testified that he notified LPCIC that there was termite damage to 322 Rue St. Peter. Mr. James admitted that SIC usually paid the claims for termite damage when James Pest Control filed a claim.

Mr. James testified that Formosan termites did most of the damage, noting, however, termite sightings in a home does not indicate that there is damage to that home. Further, Mr. James testified that evidence of termite swarming is not evidence of damage to a building or structure. Mr. James stated that an infestation of termites occurs when over 100 termites are spotted in a building.

Mr. Robert Kunst was accepted by the trial court as an expert in the field of termites and aging termite damage. Mr. Kunst testified that he inspected James Pest Control's records, and he inspected the exterior of 801 Rue Royale, 803 Rue Royale, 805 Rue Royale, 807 Rue Royale, 809 Rue Royale, 320 Rue St. Peter, 322 Rue St. Peter, and 324 Rue St. Peter.

Mr. Kunst testified that termites attack a whole building and that there are two basic types of subterranean termites in Louisiana. He explained that the termites move their tentacles looking for cellulose material to eat, and as the termites find cracks in the structures, more termites migrate to the site until a colony developes within the structure. Mr. Kunst testified that the biomass of termites determines the rate at which a building or wood can be ingested. Mr. Kunst testified that termite damage occurs at a faster rate when the biomass of the termite colony increases. It is generally accepted in the pest control profession that if termites are found in a building, there must be termite damage. For example, the State of Louisiana specifies that there must be disclosure of termite sightings on the Wood Destroying Insect Reports as part of an act of sale for a house.

Mr. Kunst opined that most of the infestations in these condominiums began between 1990 to 1992. These condominium buildings were treated with chlorinated hydrocarbon, which is a chemical that is extremely repulsive to insects. The termites, according to Mr. Kunst, broke through one of the chlordane barriers or chlorinated hydrocarbon barrier by gaining access...

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