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LLC v. Fidelity National Indemnity Insurance Co.

United States District Court, E.D. Louisiana

November 7, 2014




Before the Court is Defendant Fidelity National Indemnity Insurance Company's ("Fidelity") "Motion for Summary Judgment."[1] Having considered the motion, the memorandum in support, the memorandum in opposition, the reply memorandum, the record, and the applicable law, the Court will grant the motion.

I. Background

A. Factual Background

This litigation arises out of an insurance dispute between Plaintiffs Cardon Property 4, LLC and Cardon Real Estate Holdings No. 4, LLC (collectively, "Cardon") and their flood insurance carrier, Fidelity, following Hurricane Isaac.[2] Fidelity is a Write-Your-Own ("WYO") Program carrier participating in the U.S. Government's National Flood Insurance Program ("NFIP") pursuant to the National Flood Insurance Act of 1968.[3] Fidelity is a signatory to the Arrangement promulgated by the Federal Emergency Management Agency ("FEMA") in its capacity as the agency charged by Congress with running the NFIP.[4]

On September 14, 2007, Cardon entered a "bond for deed" contract with K-Lo Enterprises ("K-Lo") for the real property - a convenience store - which is the subject of this litigation.[5] K-Lo purchased all of the movables located within the building for $100, 000.[6] After September 14, 2007, K-Lo did not purchase any additional contents for use in the convenience store.[7] K-Lo never purchased a flood insurance policy for which it was a named insured, and K-Lo was never named as an insured on the flood insurance policy at issue in this case.[8]

On or about August 29, 2012, the convenience store experienced a temporary condition of flooding.[9] Fidelity issued a Standard Flood Insurance Policy ("SFIP") to Cardon, covering the convenience store and the contents therein.[10] The SFIP was effective from April 9, 2012 until April 9, 2013.[11] Fidelity contacted an independent adjusting firm, Colonial Claims Corporation ("CCC"), to begin adjusting the claim pursuant to the applicable federal rules promulgated by FEMA.[12] CCC sent an independent adjuster, Danny Branham, to inspect Cardon's property.[13] Branham inspected the property, assessed the flood damage, and prepared a damage estimate of $246, 438.56.[14] Branham also prepared a supplemental building claim estimate of $4, 125.53 for additional building items.[15] Branham received several inventories of contents from Cardon, and prepared an estimate of lost/damaged contents which totaled $160, 801.64.[16] Cardon signed a Proof of Loss for $164, 927.27 on March 26, 2013.[17]

On October 3, 2014, Fidelity issued a check to Cardon as an advance payment on the building damage claim in the amount of $75, 000.[18] A second check for building damage was issued on February 22, 2013 in the amount of $171, 438.56.[19] Fidelity issued a final check for building damages in the amount of $4, 125.53.[20] Fidelity issued two checks for contents in the total amount of $160, 801.64.[21]

On April 15, 2013, Cardon submitted to Fidelity a signed Proof of Loss for the net claim amount of $998, 000, which equals the policy limit for contents of $500, 000 and the policy limit for building damage of $500, 000, minus the $1, 000 deductible for each.[22] Cardon's claim for building damages is based on a September 4, 2013 estimate by Gulf Coast Adjusting and an August 8, 2013 report by Gurtler Brothers Consulting, Inc.[23] No building repair estimate was submitted by Cardon to Fidelity prior to August 14, 2013.[24] Fidelity has no evidence of a waiver from the Federal Insurance Administrator for Cardon's claim and property, beyond the amounts that Fidelity has already paid to Cardon.[25] The deadline for submission of a Proof of Loss is normally 60 days after a loss, but FEMA extended the deadline for Hurricane Isaac for a period of 240 days. Accordingly, the Proof of Loss deadline was extended to April 2013.[26]

B. Procedural Background

Cardon filed the complaint in the pending matter on August 14, 2013, [27] alleging that Fidelity failed to timely pay Cardon's full claim under the building and contents limits of the policy.[28] Also on August 14, 2013, Cardon filed a separate petition against Defendant General Star Indemnity Company ("General Star") for failure to properly investigate, adjust, and pay Cardon's building and contents insurance claims arising out of damages to the convenience store from Hurricane Isaac.[29] General Star removed the case to federal court, where it was consolidated with Cardon's lawsuit against Fidelity on January 17, 2014.[30] On October 8, 2014, Cardon and General Star filed a joint Motion for Partial Dismissal, stating that they resolved their dispute and requesting that Cardon's claims against General Star be dismissed.[31] The Court granted the motion on October 10, 2014 and dismissed the lawsuit against General Star while specifically reserving all claims against Fidelity.[32] Fidelity filed the pending Motion for Summary Judgment on September 29, 2014.[33] On October 8, 2014, Cardon filed a memorandum in opposition.[34] On October 14, 2014, Fidelity filed a reply in support of its motion.[35]

II. Parties' Arguments

A. Fidelity's Arguments in Support of its Motion for Summary Judgment

Fidelity first contends that Cardon failed to submit a proper Proof of Loss for the disputed amount with supporting documentation prior to the start of litigation and prior to FEMA's Proof of Loss deadline.[36] According to Fidelity, Article VII(J)(4)(f) of the SFIP provides: "Within 60 days after the loss, send us a proof of loss, which is your statement of the amount you are claiming under the policy signed and sworn to by you, and which furnishes us with the following information... (f). Specifications of damaged buildings and detailed repair estimates."[37] The SFIP Proof of Loss requirement, according to Fidelity, calls for a signed and sworn Proof of Loss as well as documentation that supports the amount claimed in that proof of loss.[38] Here, Fidelity argues, Cardon did not provide "specifications of damaged buildings and detailed repair estimates."[39] Fidelity cites several Fifth Circuit cases for the contention that failure to timely submit a signed and sworn Proof of Loss bars recovery, [40] and several cases from other sections of this Court which, according to Fidelity, hold that a lack of verifying documentation renders a Proof of Loss submission deficient.[41] It is undisputed, Fidelity contends, that Cardon failed to provide any supporting documentation with its Proof of Loss prior to filing suit and prior to the FEMA deadline following Hurricane Isaac.[42]

Even if the flood adjuster, Danny Branham, was not thorough in his evaluation of the building damages, Fidelity argues, Article VII(J)(7) states that the flood adjuster hired by the WYO carrier to investigate the claim to assist with the insured's proof of loss is "a matter of courtesy only, and you must still send us a proof of loss within sixty days after the loss even if the adjuster does not furnish the form or help you complete it."[43]

Fidelity next argues that under Article III(B) of the SFIP, Cardon cannot obtain recovery for contents that it did not own at the time of loss.[44] According to Fidelity, it is undisputed that Cardon sold the movables within the Ferry Stop convenience store to K-Lo on September 14, 2007, and did not subsequently purchase any additional contents to place within the convenience store.[45] Fidelity points to the Cash Sale of Movables, signed by Cardon on September 14, 2007, which allegedly gave "all of the Seller's right, title and interest in and to the following described movable property: All furniture, fixtures, inventory, equipment, shelving, racks, coolers, and all other property, located at 3762 Highway 39, Braithwaite, LA 70040."[46] According to Fidelity, K-Lo purchased the moveables outright, with no loan or financing from Cardon.[47] Nonetheless, Fidelity contends, numerous items listed by Cardon as "contents" were, in fact, included in Branham's estimate of building damages and paid to ...

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