Oubre v. Louisiana Citizens Fair Plan

• Decision Date: 20 January 2012
• Docket Number: No. 2011–C–0097.,2011–C–0097.
• Citation: 79 So.3d 987
• Parties: Geraldine OUBRE and Linda Gentry on their Behalf, as well as Others, Similarly Situated v. LOUISIANA CITIZENS FAIR PLAN.
• Court: Louisiana Supreme Court

79 So.3d 987

Geraldine OUBRE and Linda Gentry on their Behalf, as well as Others, Similarly Situated
v.
LOUISIANA CITIZENS FAIR PLAN.

No. 2011–C–0097.

Supreme Court of Louisiana.

Dec. 16, 2011.Rehearing Denied Jan. 20, 2012.

[79 So.3d 990]

Ates Law Firm, APLC, John Robert Ates, Destrehan, LA, Robert Elton Arceneaux, Metairie, LA, Beevers & Beevers, LLP, Wiley Jerell Beevers, Stephen L. Mauterer, Gretna, LA, Herman, Herman, Katz & Cotlar, LLP, Stephen Jay Herman, Steven J. Lane, The Law Offices of Fred Herman, Fred L. Herman, New Orleans, LA, for Applicant.

Hailey, McNamara, Hall, Larmann & Papale, LLP, Richard Terrell Simmons, Jr., John T. Culotta, Daren A. Patin, John E. Unsworth, Jr., Metairie, LA, James D. Caldwell, Attorney General, Uma Maheswari Subramanian, Assistant Attorney General, Wegmann & Babst, LLC, James Anthony Babst, New Orleans, LA, Cynthia Anne Wegmann, for Respondent.

KNOLL, Justice.

[2011-0097 (La. 1] This class action litigation presents two issues of first impression for this Court. The first issue, over which the Third and Fifth Circuits are divided, is whether an insurer is subject to the penalties imposed by former La.Rev.Stat. § 22:658(A)(3) for its untimely initiation of loss adjustment in the absence of a showing of bad faith. The second issue is whether the provisions of former La.Rev.Stat. § 22:1220(C) cap those penalties at five thousand dollars when damages are not proven.¹

After class certification, plaintiffs/class representatives sought summary judgment in favor of numerous class members for the penalties provided by La.Rev.Stat. § 22:658(A)(3) arising out of the failure of Louisiana Citizens Property Insurance Corporation (“Citizens”) to timely initiate loss adjustment on the enumerated members' insurance claims. The District Court granted summary judgment in plaintiffs' favor and awarded five thousand dollars in penalties for each compensable claim, totaling $92,865,000. The Court of Appeal reversed, finding a factual determination of whether the insurer breached its duty of good [2011-0097 (La. 2] faith was required before assessing penalties. We granted this writ to resolve the split in the circuits regarding the proof necessary to award the penalties for failure to timely initiate loss adjustment under La.Rev.Stat. § 22:658(A)(3) and correspondingly La.Rev.Stat. § 22:1220(C). Oubre v. Louisiana Citizens Fair Plan, 11–0097 (La.4/8/11), 61 So.3d 673. For the following reasons, we find the plain language of La.Rev.Stat. § 22:658(A)(3) does not require a showing of bad faith by the insurer, but simply requires proof of notice and inaction for over thirty days. We further find the provisions of La.Rev.Stat. § 22:1220(C) cap the penalties for such inaction at five thousand dollars when damages are not proven. Finding no error in the District Court's award of the statutory cap for each failure to timely initiate, we reverse the judgment of the Court of Appeal and reinstate the District Court's judgment.

[79 So.3d 991]

FACTS

On November 18, 2005, Geraldine Oubre and Linda Gentry (“plaintiffs”) on their behalf as well as others similarly situated filed this class action proceeding against their insurer, Citizens. In their petition, plaintiffs alleged they were insureds of Citizens on August 29, 2005, when Hurricane Katrina struck the Louisiana coastline, and/or on September 24, 2005, when Hurricane Rita made landfall. Plaintiffs further alleged, as a result of these storms, they suffered property damage covered by their Citizens policies and they timely notified Citizens of their losses, but Citizens failed to comply with its statutory duty to timely initiate loss adjustment as set forth in La.Rev.Stat. § 22:658(A)(3), which provided, in relevant part:

In the case of catastrophic loss, the insurer shall initiate loss adjustment of a property damage claim within thirty days after notification of loss by the claimant. Failure to comply with the provisions of this Paragraph shall subject the insurer to the penalties provided in R.S. 22:1220.

2011-0097 (La. 3] La.Rev.Stat. § 22:658(A)(3). Therefore, plaintiffs sought the statutory penalties set forth in La.Rev.Stat. § 22:1220, which in Subsection C specifically provided for “penalties assessed against the insurer in an amount not to exceed two times the damages sustained or five thousand dollars, whichever is greater.” La.Rev.Stat. § 22:1220(C).

On July 11, 2006, the District Court granted class certification, and in an amended judgment rendered on July 17, 2006, the court issued the following class definition:

All present or past insureds of Louisiana Citizens Property Insurance Corporation a/k/a LOUISIANA CITIZENS FAIR PLAN, hereinafter referred to as “LCPIC”, who, on or after August 29, 2005, provided notification of loss resulting from Hurricanes Katrina and/or Rita to LCPIC, and whose loss adjustment was not initiated within thirty (30) days after notification of loss.

Although Citizens appealed, the Court of Appeal, Fifth Circuit, affirmed the class certification, Oubre v. Louisiana Citizens Fair Plan, 07–66 (La.App. 5 Cir. 5/29/07), 961 So.2d 504, and this Court denied writ, Oubre v. Louisiana Citizens Fair Plan, 07–1329 (La.9/28/07), 964 So.2d 363.

After the expiration of the discovery deadline, plaintiffs filed a motion for partial summary judgment, asking the court to decide, as a matter of law, what constitutes an “initiation of loss adjustment” under La.Rev.Stat. § 22:658(A)(3). In their motion, plaintiffs argued, as a matter of law, Citizens did not initiate loss adjustment until its adjusters contacted the insured to set an appointment to inspect the loss. They further contended Citizens admitted to such by posting on its website a notification that adjustment would begin when it made contact with its policyholders.² Citizens opposed this motion, arguing

[79 So.3d 992

the issue concerned the [2011-0097 (La. 4] reasonableness of its actions under the circumstances and, thus, presented genuine issues of material fact, which precluded summary judgment.

By judgment rendered on September 18, 2008, the District Court granted partial summary judgment in favor of plaintiffs, reasoning:

When deciding what constitutes initiating loss adjustment, courts have consistently held that “the insurer must take some substantive and affirmative step to accumulate the facts that are necessary to evaluate the claim.” Phillips v. Osmun, 967 So.2d 1209, 1216 (La.App. 3rd Cir.10/24/07); citing, Chatoney v. Safeway Insurance Company, 00–1189, (La.App. 3 Cir. 6/13/01), 2001 WL 665207, 801 So.2d 448; McClendon v. Economy Fire & Casualty Insurance Company, 98–1573 (La.App. 3 Cir. 4/7/99), 732 So.2d 727, 731. This court finds that making an appointment to assess the damage to the property or an adjuster inspecting the property without an appointment does satisfy the requirements of La. R.S. 22:658(A)(3).

Both the appellate court and this Court declined to exercise supervisory jurisdiction, denying Citizens' applications for supervisory review of this judgment. Oubre v. Louisiana Citizens Fair Plan, 08–1157 (La.App. 5 Cir. 11/12/08), writ denied, 08–2826 (La.2/6/09), 999 So.2d 779.

On October 28, 2008, plaintiffs filed a motion for summary judgment, seeking judgment in favor of 11,020 class members, identified as Group I, in the amount of $55,100,000, representing penalties in the amount of $5,000 per class member as provided by La.Rev.Stat. § 22:1220(C). On December 30, 2008, plaintiffs filed a second motion for summary judgment, seeking judgment in favor of 7,174 class members, identified as Group II, for $35,870,000. That same day, [2011-0097 (La. 5] plaintiffs filed a third motion for summary judgment, seeking judgment in favor of 379 class members, identified as Group III, for $1,895,000. In support of all three motions, plaintiffs submitted affidavits and spreadsheets listing the 18,573 policyholders and the corresponding dates when they reported their losses and when an adjuster either made an appointment to inspect the property or actually inspected the property if no appointment was made.

Also on December 30, 2008, Citizens filed several pleadings, seeking summary resolution of plaintiffs' claims. First, Citizens filed a motion for partial summary judgment on the basis that some class members had previously executed a receipt or release discharging Citizens from all claims arising from damage to their properties sustained as a result of Hurricanes Katrina and Rita. Second, Citizens filed a cross-motion for partial summary judgment regarding liability under La.Rev.Stat. § 22:658, arguing a factual determination was first required as to whether “the insurer's actions were arbitrary, capricious, and without probable cause before liability or penalties may be imposed.” Third, Citizens filed a motion for summary judgment on the basis that Citizens was not an “insurer” within the meaning of Louisiana law and was, therefore, not subject to the penalties prescribed by La.Rev.Stat. § 22:658 and/or La.Rev.Stat. § 22:1220. Finally, Citizens filed a motion for partial summary judgment, arguing the Emergency Orders executed by the State of Louisiana and the advance payments made to class members relieved Citizens of liability for penalties in this matter. Plaintiffs opposed each of these motions.

On January 30, 2009, the District Court heard argument of counsel and, by judgment rendered on March 20, 2009, denied the majority of defendant's motions, finding Citizens was in fact an insurer within

[79 So.3d 993]

the meaning of Louisiana law and the mass advance payments did not constitute loss adjustment. The District Court [2011-0097 (La. 6] likewise found La.Rev.Stat. § 22:658(A)(3) does not provide an exception for failure to initiate loss adjustment within thirty days and further determined the statute does not require a factual determination of the insurer's conduct before penalties may be imposed. However, the District Court did grant...