United States District Court, E.D. Louisiana
SECTION:
“E” (2)
ORDER AND REASONS
SUSIE
MORGAN, UNITED STATES DISTRICT JUDGE
Before
the Court is a motion by Catlin Insurance Company, Inc.
(“Catlin”), seeking a ruling that Third-Party
Plaintiff Waypoint NOLA, L.L.C. (“Waypoint”) may
not assert a claim against it under La. R.S.
22:1973.[1] The motion is opposed.[2] The Court ordered
supplemental briefing on this issue after responsive
pleadings were filed.[3] Accordingly, the Court will construe this
motion as a motion for judgment on the pleadings based on a
failure to state a claim on which relief can be granted
pursuant to Rule 12(c) of the Federal Rules of Civil
Procedure.[4] For the reasons below, Catlin's motion
is GRANTED.
BACKGROUND
This
case involves the development and construction of the Hyatt
House hotel in downtown New Orleans, Louisiana (“the
Project”). The allegations in the initial pleadings are
as follows. Plaintiff Team Contractors, L.L.C.,
(“Team”) entered into a contract with Waypoint,
the owner of the Project, for the construction and/or
renovation of seven floors of the property located at 1250
Poydras Street, New Orleans, Louisiana.[5] Waypoint also
entered into an agreement by which HC Architects, L.L.C.
(“HCA”) would serve as the Project's
architect, and additionally provide “all normal
Architectural, Civil, Structural, and [mechanical,
electrical, and plumbing] (“MEP”) engineering
services.”[6] HCA, in turn, subcontracted the MEP design
work to KLG, L.L.C., now known as Salas O'Brien South,
L.L.C. (“KLG”).[7] Catlin is the professional
liability insurer for both HCA and KLG.[8]
After
HCA delivered a complete set of specifications, including
KLG's MEP plans, it was discovered that several
components of KLG's MEP system design did not comply with
New Orleans code requirements.[9] Because construction had begun on
the MEP systems before the parties recognized the code
deficiencies, Team had to remove the faulty systems and
rebuild the MEP systems from revised plans before continuing
its work.[10]
Team
filed suit in this Court on February 5, 2016, alleging breach
of contract by Waypoint and negligence on the part of
Waypoint, HCA, and KLG.[11] Waypoint filed its answer and a
third-party complaint against HCA, KLG, and Catlin on May 20,
2016.[12] As relevant to this motion, Waypoint
asserts a cause of action against Catlin under La. R.S.
22:1973.[13] Waypoint alleges that it made
satisfactory proof of loss to support its claims against
Catlin under the HLA and KLG policies, but Catlin, in bad
faith, failed to make timely payment on Waypoint's
claims.[14] Waypoint alleges that Catlin is
responsible for the damages caused by HCA and KLG, and seeks
payment of its claims and additional penalties provided by
Louisiana law.[15]
LEGAL
STANDARD
The
standard for deciding a Rule 12(c) motion for judgment on the
pleadings is the same as the standard for deciding a motion
under Rule 12(b)(6).[16] Under Rule 12(b)(6), and thus under Rule
12(c), “[t]o avoid dismissal, a complaint must contain
sufficient factual matter, accepted as true, to state a claim
to relief that is plausible on its face.”[17]“To be
plausible, the complaint's ‘[f]actual allegations
must be enough to raise a right to relief above the
speculative level.'”[18] “In deciding whether the
complaint states a valid claim for relief, we accept all
well-pleaded facts as true and construe the complaint in the
light most favorable to the plaintiff.”[19] “We do
not accept as true conclusory allegations, unwarranted
factual inferences, or legal
conclusions.”[20]
ANALYSIS
Waypoint
alleges a cause of action for penalties against Catlin
pursuant to La. R.S. 22:1973(B)(5).[21] La. R.S 22:1973(A)
defines an insurer's duty of good faith and fair dealing,
and La. R.S. 22:1973(B) establishes when an insurer may be
held liable for a bad faith breach of its duty:
(B) Any one of the following acts, if knowingly committed
or performed by an insurer, constitutes a breach of the
insurer's duties . . .:
(1) Misrepresenting pertinent facts or insurance policy
provisions relating to any coverages at issue.
(2) Failing to pay a settlement within thirty days after an
agreement is reduced to writing.
(3) Denying coverage or attempting to settle a claim on the
basis of an application which the insurer knows was altered
without notice to, or knowledge or consent of, the insured.
(4) Misleading a claimant as to the applicable prescriptive
period.
(5) Failing to pay the amount of any claim due any person
insured by the contract within sixty days after receipt
of satisfactory proof of loss from the claimant when such
failure is arbitrary, capricious, or without probable cause.
(6) Failing to pay claims pursuant to R.S. 22:1893 when such
failure is arbitrary, capricious, or without probable
cause.[22]
Waypoint
asserts a claim under subsection (B)(5). Specifically,
Waypoint alleges it provided Catlin with satisfactory proof
of its loss, Catlin did not pay the amount of the claim
within sixty days, and Catlin's failure to do so was
“arbitrary, capricious, or without probable
cause.”[23]
Catlin
argues Waypoint is not entitled to recover penalties under
La. R.S. 22:1973(B)(5) because the provision applies only to
“any person insured by the
contract.”[24] Catlin argues, even if third parties may
assert claims under subsections (B)(1)-(4), the plain
language of subsection (B)(5) limits recovery to
“person[s] insured by the contract.” It is
undisputed that Waypoint is a third-party claimant, and is
not Catlin's insured.[25] Accordingly, Catlin asserts
that Waypoint may not recover under subsection 1973(B)(5).
Catlin points to a substantial body of federal and state case
law supporting its position.[26]
In
opposition, Waypoint argues that “person insured by the
contract” should be interpreted to include third-party
claimants. Waypoint offers several arguments in support.
First, Waypoint argues that the text and legislative history
of La. R.S. 22:1973 suggest that subsection (B)(5) allows for
claims by third parties.[27] Waypoint relies on the Gauthier
v. Travelers Ins. Co., ...