McKernan v. ABC Ins. Co.
| Decision Date | 16 April 2021 |
| Docket Number | -CONSOLIDATED WITH-2020 CA 0520,2020 CA 0519 |
| Citation | 324 So.3d 177 |
| Parties | Diane MCKERNAN v. ABC INSURANCE COMPANY, AIG Property Casualty Company, Brad Bourg, [and] Bourg Insurance Agency, Inc. |
| Court | Court of Appeal of Louisiana — District of US |
John R. Whaley, Benjamin H. Dampf, Baton Rouge, Louisiana, Counsel for Appellant Plaintiff—Diane McKernan
Heather S. Duplantis, Kate B. Mire, Baton Rouge, Louisiana, and W. Ransom Pipes, Blaine T. Aydell, Baton Rouge, Louisiana, Counsel for Appellees Defendants—Brad Bourg and Bourg Insurance Agency, Inc.
Mark L. Clark, Houston, Texas, Counsel for Appellee Defendant—AIG Property Casualty Company
Robert I. Siegel, Alistair M. Ward, New Orleans, Louisiana, Counsel for Appellee Defendant—QBE Specialty Insurance Company
Before: Whipple, C.J., Welch, and Chutz, JJ.
After the plaintiff, Diane McKernan, sustained damage to her home due to the historic flooding in Louisiana in August 2016, she sued her homeowner's insurer, alleging it failed to pay out the maximum amount of damages for flooding owed under her homeowner's policy. McKernan also sued her insurance agent, alleging professional malpractice and negligent misrepresentation claims. In this consolidated matter, McKernan appeals the trial court's November 4, 2019 judgment granting a motion for partial summary judgment in favor of her insurer, finding that it owed no further amounts under her homeowner's policy for flood damage. She also appeals the trial court's November 18, 2019 judgment that sustained a peremptory exception raising an objection of peremption and granted an alternative motion for partial summary judgment in favor of her insurance agent, dismissing her professional malpractice and negligent misrepresentation claims against her agent, with prejudice. For the following reasons, we affirm the portion of the trial court's November 4, 2019 judgment granting the insurer's motion for partial summary judgment; reverse the portion of the trial court's November 18, 2019 judgment sustaining the objection of peremption and otherwise affirm; and remand.
McKernan built her residence, located at 18722 Harbour Avenue in Baton Rouge, in 1990. From 1990 until 2008, McKernan purchased residential homeowner's insurance through State Farm Insurance Company and State Farm agent, Bill Lemoine. During that same period, McKernan obtained flood insurance through the National Flood Insurance Program ("NFIP"),1 with flood coverage limits of $250,000 structures/$ 100,000 contents. McKernan did not obtain any additional flood coverage.
In 2008, McKernan decided to switch her homeowner's insurance agency from State Farm to Bourg Insurance Agency, Inc. and agent Brad Bourg (collectively, "Bourg").2 After speaking by phone, McKernan met in-person with Bourg in October 2008, where he presented her with two homeowner's insurance policy proposals—one from Safeco Insurance Company and one from the defendant, AIG Property Casualty Company ("AIG"). McKernan purchased the AIG residential homeowner's insurance policy (the "AIG policy") from Bourg, AIG Policy No. PCG 0002945645, effective from December 1, 2008 to December 1, 2009. The AIG policy excluded coverage for loss caused by flooding, but contained an exception for flood coverage pursuant to a flood endorsement attached to and incorporated into the AIG policy, "PCHO-FLD (09/06)."3
The flood endorsement set forth that coverage for loss caused by flooding is determined upon the home's flood zone designation in one of two zones. The first zone provides the broadest available flood coverage and applies to homes designated as Flood zone B, C, or X and that are eligible for the Preferred Risk Program of the NFIP. The limits of the first zone flood coverage are $250,000 structures/$ 100,000 contents/$250,000 additional living expenses. At the time her 2008 policy issued, McKernan's residence was designated as Flood zone B, C, or X, and she was eligible for an NFIP policy; however, she did not purchase an NFIP policy.
The second zone provides flood coverage for homes designated in a Special Flood Hazard Area, Flood zone D, or designated in a B, C, or X flood zone but that are not eligible for the Preferred Risk Program of the NFIP. The second zone provides flood coverage with limits of $250,000 structures/$100,000 contents/$250,000 additional living expenses, like the first zone. However, second zone coverage is "excess" coverage or "difference in conditions" ("DIC") coverage.4
McKernan testified that she knew from her October 2008 meeting with Bourg that her flood coverage limits under the AIG policy were $250,000 structures/$ 100,000 contents/$250,000 additional living expenses, and that she no longer had a two percent hurricane deductible. McKernan did not obtain any additional flood coverage through the NFIP.
McKernan renewed the AIG policy every year until 2016, when her residence flooded on August 14, 2016. McKernan timely received copies of every AIG policy covering her property from 2008 to 2016.
When McKernan renewed her AIG policy in 2013, however, the policy contained a change in her home's flood zone designation.5 The flood zone designation on her residence changed from Flood zone B, C, or X to Flood zone A or V. Thus, the policy in effect at the time McKernan's residence flooded on August 14, 2016, indicated that her residence was located in Flood zone A or V. The policy further indicated that Flood zone A or V is defined as a "Special Flood Hazard Area."6 When McKernan made a claim under her AIG policy, AIG informed her that based upon her residence's flood zone designation under the AIG policy, her home was located within the second zone of coverage, and she was covered for loss caused by flooding with limits of $250,000 structures/$100,000 contents/$250,000 additional living expenses. However, her coverage was in excess of any NFIP policy, or in the DIC between an NFIP policy and her AIG policy.
AIG admitted that while its practice is to send notice to its insureds when there is a change in coverage at the time a policy is renewed, AIG did not provide notice to McKernan nor to Bourg in 2013 that her home's flood zone designation had changed, although AIG did deliver McKernan a copy of her 2013-2014 policy containing the change. Due to AIG's failure to send notice to McKernan that her flood zone designation and flood coverage had changed, AIG agreed to reform the policy and provide McKernan flood coverage under the 2015-2016 policy as if her home was located in the first zone and provide her flood coverage with limits of $250,000 stractures/$ 100,000 contents/$250,000 additional living expense. Accordingly, AIG paid Ms. McKernan $250,000 for flood damage to her structures and $100,000 for flood damage to her contents. In the year following the flood, AIG paid Ms. McKernan a total of $162,000 in additional living expenses. However, McKernan alleged that based on AIG's own estimation, she suffered flood damages of over $1,674,895.18.7
McKernan filed a petition for damages against AIG, Bourg, and QBE Specialty Insurance Company ("QBE"), Bourg's professional liability insurer.8 McKernan alleged that AIG was negligent for materially changing the flood coverage provided in her homeowner's insurance policy to "excess" or "DIC" coverage and failing to notify her of the change. McKernan also alleged a breach of contract, arguing that AIG breached the terms of her homeowner's insurance by misrepresenting pertinent policy provisions, including the purported flood coverage limits; refusing to make payment due; and not tendering payment in a timely fashion. McKernan further alleged that AIG breached its duties of good faith and fair dealing, as set forth in La. R.S. 22:1892 and La. R.S. 22:1973, by failing to pay her claim within thirty days after receiving satisfactory proof of loss and arbitrarily, capriciously, and without probable cause failing to pay the amount of her claim due within sixty days after receiving satisfactory proof of the loss.9
McKernan asserted a professional malpractice claim against Bourg, alleging that he failed to procure McKernan's desired insurance coverage and failed to procure flood coverage underlying the excess/DIC flood coverage under the AIG policy. McKernan also asserted a negligent misrepresentation claim, asserting that Bourg misled her into believing she had flood coverage when she did not, based on an October 6, 2015 email exchange between Bourg and McKernan's assistant.10 McKernan further alleged that QBE provided professional liability insurance to Bourg, which covered his alleged negligent acts, errors, and omissions.
McKernan further alleged that the actions and inactions on behalf of AIG and Bourg, regarding deficiencies in what she believed to be her insurance coverage and flood zone designation under the AIG policy, constituted silence or inaction resulting in fraud under La. C.C. art. 1953, thereby nullifying any peremptive period set forth in La. R.S. 9:5606, the insurance agent malpractice statute. Alternatively, she alleged that these actions constituted a continuing tort and/or each successive renewal and payment was payment of a thing not owed.
McKernan filed a motion for partial summary judgment regarding her flood coverage under the AIG policy, arguing that she was entitled to a judgment finding that the AIG policy provided her coverage for her losses up to the limits listed on the policy's declarations page: $2,404,422 dwelling/$1,476,159 contents. McKernan alleged that AIG had a duty to notify her of the material changes it made to her homeowner's insurance policy in 2013—that the flood zone designation on her residence changed from Flood zone B, C, or X to Flood zone A or V. McKernan argued that AIG admitted that it failed to notify her of the material change to her policy, which she contended precluded AIG from relying on an "undisclosed" policy limitation. She argued...
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