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Citadel Broadcasting Corp. v. Axis U.S. Ins. Co.

Court of Appeal of Louisiana, Fourth Circuit

February 11, 2015

CITADEL BROADCASTING CORPORATION AND CITADEL BROADCASTING COMPANY
v.
AXIS U.S. INSURANCE COMPANY A/K/A AXIS REINSURANCE COMPANY

Page 471

[Copyrighted Material Omitted]

Page 472

APPEAL FROM CIVIL DISTRICT COURT, ORLEANS PARISH. NO. 2007-13559, DIVISION " C" . HONORABLE SIDNEY H. CATES, JUDGE.

ROBERT J. DAVID, JR., JUNEAU DAVID, APLC, Lafayette, Louisiana -and- RANDALL A. SMITH, SMITH & FAWER, L.L.C., New Orleans, Louisiana -and- JOHN B. BERRINGER, PAUL E. BREENE, JEAN M. FARRELL, REED SMITH, LLP, New York, New York, Counsel for Plaintiff/Appellee.

STEVEN W. USDIN, ANDREW J. GRAEVE, ESQ., BARRASSO USDIN KUPPERMAN FREEMAN & SARVER, LLC, New Orleans, Louisiana -and- CARIN DORMAN BROCK, JOHN J. PAPPAS, ESQ., PRO HAC VICE, CHRISTOPHER M. RAMEY, ESQ., PRO HAC VICE, BUTLER PAPPAS WEIHMULLER KATZ CRAIG, LLP, Mobile, Alabama, Counsel for Defendant/Appellant.

Court composed of Chief Judge James F. McKay III, Judge Dennis R. Bagneris, Sr., Judge Sandra Cabrina Jenkins.

OPINION

JAMES F. MCKAY III, Judge

Page 473

[2014-0326 La.App. 4 Cir. 1] This case arises out of a disputed insurance claim for business interruption losses caused by Hurricane Katrina. The defendant, AXIS U.S. Insurance Company a/k/a AXIS Reinsurance Company, appeals a trial court judgment where the jury awarded the plaintiffs, Citadel Broadcasting Corporation and Citadel Broadcasting Company, a total damage award of $11,813,976.00. On appeal, we affirm in part, vacate in part, and remand in part.

FACTS AND PROCEDURAL HISTORY

On August 29, 2005, when Hurricane Katrina made landfall, it caused widespread damage to businesses and residences throughout the New Orleans area. At the time of Katrina, Citadel Broadcasting Corporation and Citadel Broadcasting Company (Citadel) owned and operated three radio stations that broadcast in and around New Orleans: KKND (102.9 FM), KMEZ (106.7 FM), and WDVW (92.3 FM). All three radio stations suffered physical damage from Katrina and all were off the air for varying periods of time. WDVW was off the air for seventeen (17) days. KMEZ was off the air for thirty-two (32) days. KKND was off the air for [2014-0326 La.App. 4 Cir. 2] one hundred thirty-four (134) days. Prior to the hurricane, Citadel had obtained a comprehensive insurance policy, with a policy period of January 1, 2005 to January 1, 2006, from AXIS Surplus Insurance Company a/k/a AXIS Reinsurance Company (AXIS). The policy covered both physical damages and business interruption (BI) losses. The policy also insured against the loss of contingent business interruption income (CBI). Both ordinary BI and CBI losses were covered under a three hundred

Page 474

sixty-five (365) day extended period of indemnity (EPI) provided for by the policy.

In the aftermath of the hurricane, Citadel filed a claim with AXIS. Initially, AXIS paid Citadel $414,092.00 (after deductible) for all its Hurricane Katrina property damage and $1,277,760.00 for its business interruption lost profits during the period of restoration for its three radio stations. AXIS also paid Citadel's loss adjustment expenses in the amount of $250,787.00 (the amount Citadel paid to AON Risk Services, Inc. of Georgia (AON) to calculate and present Citadel's insurance claim to AXIS). However, AXIS refused to pay Citadel's ordinary BI claims during the EPI or any part of Citadel's CBI claims. Then, AXIS denied coverage outright, asserting that Exclusion K of its policy applied, and that Citadel's CBI claims were not covered because Citadel's listeners were not its customers.

Thereafter, Citadel sued AXIS for breach of the insurance contract and insurance " bad-faith" arising out of a Hurricane Katrina claim for lost profits. Following a six-day trial in November of 2013, the jury returned a verdict in [2014-0326 La.App. 4 Cir. 3] Citadel's favor. The jury awarded Citadel $3,273,237.00 for all lost profits during the three hundred sixty-five (365) days after each of the three radio stations had returned to operation. The jury awarded $2,383,751.00 for CBI losses subsequent to the three hundred sixty five (365) days through June 30, 2007. The jury also awarded $250,000.00 for the trial expert fees covered under the insurance contract. Additionally, the jury found that AXIS committed insurance " bad-faith" pursuant to La. R.S. 22:1892 and awarded a penalty of $2,953,494.00 plus attorneys' fees in the amount of $2,953,494.00. On December 10, 2013, the trial court entered judgment on the jury's ...


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