La Louisiane Bakery Co. v. Lafayette Ins. Co..

• Decision Date: 08 February 2011
• Docket Number: No. 09–CA–825.,09–CA–825.
• Citation: 61 So.3d 17
• Parties: LA LOUISIANE BAKERY COMPANY, LTD.v.LAFAYETTE INSURANCE COMPANY.
• Court: Court of Appeal of Louisiana — District of US

61 So.3d 17

LA LOUISIANE BAKERY COMPANY, LTD.

v.LAFAYETTE INSURANCE COMPANY.

No. 09–CA–825.

Court of Appeal of Louisiana, Fifth Circuit.

Feb. 8, 2011.

J. Douglas Sunseri, Svetlana Crouch, Attorneys at Law, Metairie, LA, for Plaintiff/Appellee.Stephen R. Barry, Wendell R. Verret, Attorneys at Law, New Orleans, LA, for Defendant/Appellant.Panel composed of Judges MARION F. EDWARDS, FREDERICKA HOMBERG WICKER, and JUDE G. GRAVOIS.FREDERICKA HOMBERG WICKER, Judge.

[5 Cir. 2] This appeal arises from an insurance dispute. La Louisiane Bakery Company Ltd., plaintiff/appellee/insured, sought to recover wind-related damages for loss of business interruption in the wake of Hurricane Katrina. Lafayette Insurance Company, defendant/appellant/commercial insurer, argued that the policy's anticoncurrent causation clause (“ACC clause”) barred recovery. Lafayette asserted that loss of utility service, flooding, and “sump pump” overflow—excluded perils—contributed concurrently or sequentially to the loss sustained by wind damage—a covered peril. The jury disagreed and found that La Louisiane sustained a loss of business income exclusively as a result of a covered loss. The judgment rendered in conformity with the jury verdict awarded La Louisiane $83,247 for loss of business income; $25,000 for damages pursuant to La.R.S. 22:1220; ¹ and, $25,000 for penalties pursuant to La.R.S. 22:1220. Lafayette now appeals. We find: (1) The jury was not manifestly erroneous in finding that the ACC clause was inapplicable. (2) The jury was not manifestly [5 Cir. 3] erroneous nor did it abuse its discretion in its award for loss of business income. (3) The jury was not manifestly erroneous in awarding bad-faith penalties. Therefore, we affirm.

Facts

La Louisiane, a commercial bakery owned by three partners, has operated for years in Harahan, Louisiana. Mr. Ovidio S. Fernandez, the bakery partner who regularly performed bakery maintenance and repairs, testified at trial about the damages the bakery sustained as a result of Hurricane Katrina. He stated that wind damages resulted in business interruption from August 29, 2005 to October 9, 2005. Mr. Fernandez explained that on the heels of the storm he conducted short-term repairs, including temporary repair of the roof and overhead door. Thereafter, the bakery hired a roofing contractor who completed the roof repair around September 23, 2005. According to Mr. Fernandez, typically the health department would not permit him to operate unless the building was water tight. Mr. Fernandez also testified that the bakery lacked power for 2 to 5 days. But, he was unable to open his business even after the power came back on. When electricity was restored, the bakery ovens and mixers would not operate. Without operational equipment, Mr. Fernandez could not open his business.

While Mr. Fernandez testified that the bakery could not re-open its doors to a 60–65% operation until October 9, 2005, Lafayette, the bakery's wind insurer, introduced a survey form, purportedly from the Louisiana Health Department, which it argued showed that the bakery was open on September 15. This form, purportedly signed by a La Louisiane owner/representative on September 15, 2005, indicated that the bakery regained power on September 12, 2005 with no physical damage to the building on that date.

[5 Cir. 4] Mr. Fernandez denied that the handwriting or signature on the form was his and indicated that he did not know who signed the document.

La Louisiane had both a flood insurance policy and a wind damage policy. Only the wind policy, however, provided for loss of business interruption. On September 23, 2005, Lafayette Insurance Company, the wind damage insurer, sent Dan Potter, its independent Crawford Company adjuster, to inspect the bakery. Mr. Potter reported to Lafayette that there was 1 to 2 1/2 inches of flooding within the building along with minimal wind damage. Lafayette paid the wind damage loss reported by Mr. Potter, including damage to the computers. It did not, however, pay for business interruption loss. Mr. Potter's report stated that the estimated loss for the dwelling (gross loss) was $4651.33 less the deductible of $3002 for a net loss of $1649.33. For the contents, the gross loss was $1750 with a deductible of $2636, leaving a net loss of no claim.

Mr. Stephen Pierce was the bakery's flood adjuster. He testified that he inspected the bakery on October 6, 2005. While at the bakery Mr. Pierce saw people working, however he did not know whether they were cleaning or baking. He opined that the business was operating.

Interestingly, Mr. Fernandez stated that he did not call the flood adjuster. Mr. Fernandez gave only Mr. Potter, the Lafayette wind adjuster, the dimensions of every piece of equipment in every room as well as photographs. Mr. Fernandez thought it was odd that Mr. Pierce, the flood adjuster, already had the information and pictures that Mr. Fernandez had given to Mr. Potter when he arrived at the bakery.

The flood adjuster testified that he made an educated guess that the water line inside the building was approximately 10 inches or lower and that there was minimal flooding. The repairs that he allowed for were not completed on October [5 Cir. 5] 6 when he did his inspection. The flood insurer paid La Louisiane $56,354.26 for building damage and $13,500 for loss of contents. Among other things, the flood insurer paid the cost of cleanup. Mr. Pierce testified that he discussed the nature of the flooding with Mr. Fernandez and Mr. Fernandez agreed with the water levels that he used.

Mr. Potter, the wind adjuster, concluded in his report that the property suffered wind damage to the roof as well as interior ceiling damage and that water fell upon a few of the bakery contents. Mr. Potter's report contained photographs of rust stains on the walls showing the runs of paint or rust material stain down the walls from the ceiling area.

Other photographs also documented damage to the overhead door, and a paint damaged window near computer equipment indicating “wind driven water” entered around the framing and put waterspouts on the windowsill. Mr. Potter concluded that there was major flooding but he also thought there was a “window of benefit” for loss of income, as noted in his report:

[T]here is some loss of income but most really was caused by the flooding and loss of power along with mandatory evacuation. I have requested for the insured to provide us with accounting information about the loss of income. I would think some window of benefit would be available as he was shut down due to no power as well as wind damages to the roof which are covered under this policy. The flooding really shut him down for some period.

Mr. Potter reported that Mr. Fernandez told him the operation was back and running on September 16, 2005. However, most of his employees were nowhere to be found.

Only Mr. Fernandez testified about the bakery's condition in the week following the hurricane—September 5 or 6. Because there was no electricity, Mr. Fernandez could not inspect the interior at that point. Outside, he saw a debris line more than five feet from the door. Therefore, he assumed that no flood water [5 Cir. 6] entered the building. The garage door, however, collapsed allowing water to enter. But, he saw no indication that there had been any type of floodwaters touching the garage door. Shortly thereafter, around September 6 or 7, he was able to inspect the bakery's interior.

Mr. Fernandez testified that he noticed additional damage when he was able to enter the bakery:

Two roof sheets were peeled back over the office hallway letting sunshine enter; roof caps were missing; flashing was missing; the roof fan's blades were completely gone; all of the exhaust stacks for the ovens and water heater were missing; the heating element for the front air-conditioning unit was missing; everything in the office was wet, including the carpet; the office wall and panel were stained from water entering from above, indicating a roof leak; and, the insulation in the ovens was wet from water coming from the roof.

As Mr. Fernandez explained, overwhelmingly the bakery equipment was raised above the floor with engines and other electrical and mechanical components located above the equipment. According to Mr. Fernandez, the 8–10 feet tall large ovens were not operational due to wind-driven rain from the roof. He explained that the lowest point on any of the ovens was 3 to 6 inches from the ground. Water entered from the opening created by the damaged roof causing rain to enter the ovens. He explained that if the stack were exposed, as in this case, water would get into the insulation in the oven and then travel onto the floor. After the hurricane, he saw no protection to prevent water from running down the stack into the insulation. He saw no evidence or indication that floodwaters touched his ovens.

Mr. Fernandez testified none of the other kitchen items, such as mixers, were damaged by floodwaters. There were no motors, equipment or wires from 1 1/2 feet [5 Cir. 7] below on the large 3 1/2 foot tall mixers. The freezer was off the floor by 3 1/2 feet. All of the electronics, compressors, and fans were bolted on the roof of the freezer unit. He stated that the refrigerator and the elevated freezer should have been sealed and the water should not get in there unless it entered from above. The “sheeter,” which was used to prepare the dough, was mounted on legs and wheels. The chain and motors were probably 3 to 4 inches off the ground to 6 1/2 to 8 inches above the ground. The cast iron “rounders,” which were used to make rolls, had a pan that was almost 2 or 3 inches from the floor. It had a pump that was probably about 6 1/2 to 8 inches off the floor.

He stated that smaller mixers sat directly on the floor but these mixers were 15 to 20 feet from the front door.

In addition, Mr. Fernandez testified that there was...