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Kief Hardware, Inc. v. Hartford Fire Insurance Co.

United States District Court, E.D. Louisiana

May 18, 2018

KIEF HARDWARE, INC.
v.
HARTFORD FIRE INSURANCE CO.

         SECTION: "A" (1)

          ORDER AND REASONS

          JAY C. ZAINEY UNITED STATES DISTRICT JUDGE

         The following motions are before the Court: Motion for Partial Summary Judgment (Rec. Doc. 43) filed by plaintiff, Kief Hardware, Inc.; Motion for Partial Summary Judgment (Rec. Doc. 44) filed by defendant, Hartford Fire Insurance Co. Both motions are opposed. The motions, submitted on April 18, 2018, are before the Court on the briefs without oral argument. For the reasons that follow, Plaintiff's motion is GRANTED and Defendant's motion is DENIED.

         I. BACKGROUND

         On September 9, 2015, Plaintiff's property located at 16230 Highway 3235, Cut Off, Louisiana 70345, sustained damages as a result of a fire. The building was originally a hardware store established in 1944, which was being used for storage at the time of the fire. The Lafourche Parish Fire District (“LPFD”) responded to the blaze. Captain Ryan P. Collins was first to arrive on the scene. Captain Collins prepared the incident report. The cause of the fire was undetermined but nothing in the report suggests that the fire was intentionally set. (Rec. Doc. 44-2). The LPFD contacted the State Fire Marshal to investigate the cause of the fire.

         Michael Russell with the Office of State Fire Marshal (“OSFM”) responded to the scene. His initial report reiterated that the cause of the fire was undetermined and the status of the investigation was open. (Rec. Doc. 44-3). In the incident report Russell stated that the OSFM was called in to investigate due to the “unusual circumstances.” (Id.). To wit, the building was vacant and for sale, and during the fire cleanup the owner, Mr. James Cabirac, had arrived at the scene and removed the video recorder. (Id.). The very next sentence in the report clarifies, however, that Mr. Cabirac had secured the video recorder to examine it to determine if there were any recordings that would show what happened. (Id.). But again, nothing in the report suggests that the fire was intentionally set.

         Plaintiff initiated this action in state court on September 9, 2016, to recover unpaid losses, as well as damages, penalties, and attorney's fees pursuant to La. R.S. 22:1892 and § 1973. Hartford removed the case to federal court.

         The motions currently before the Court are essentially cross motions directed at the claims asserted under La. R.S. 22:1892, which provides for mandatory penalties when certain criteria are met. Plaintiff moves for partial summary judgment awarding penalties and attorney's fees for Hartford's alleged violation of the statute. Hartford, on the other hand, moves to have all of Plaintiff's “bad faith” claims dismissed on summary judgment.

         A nonjury trial is scheduled to commence on July 25, 2018.

         II. DISCUSSION

         Although Plaintiff seeks recovery for additional amounts allegedly owed under its policy for property damage, $375, 935.96 was the undisputed amount owed to Plaintiff. This total comprises a business personal property damage payment of $62, 890.71, and a building coverage payment of $313, 045.25. These payments were made on February 2, 2016, and on February 25, 2016, respectively. It is undisputed that Hartford's own adjuster finalized reports as to these amounts no later than October 21, 2015.[1] (Rec. Doc. 43-5, CIA reports). Thus, payment to Plaintiff of the “undisputed” amounts owed was not made until 104 days and 127 days after receipt of satisfactory proof of loss, for business personal property damage and building damage, respectively.[2]

         Louisiana Revised Statute § 22:1892 mandates that an insurer pay the amount of any claim due within thirty (30) days after receipt of satisfactory proof of loss from the insured or any party in interest. La. R.S. 22:1892 (A)(1). Failure to timely make such payment when such failure is found to be arbitrary, capricious, or without probable cause, shall subject the insurer to a penalty, in addition to the amount of the loss, of fifty percent (50%) damages on the amount found to be due from the insurer to the insured, as well as reasonable attorney's fees and costs. La. R.S. 22:1892(B)(1). Once the requirements of the statute are satisfied, penalties and attorney's fees are mandatory rather than discretionary. See Calogero v. Safeway Ins. Co., 753 So.2d 170, 174 (La. 2000) (interpreting predecessor statute La. R.S 22:658).

         The phrase “arbitrary, capricious, or without probable cause” is synonymous with “vexatious, ” and a “vexatious refusal to pay” means “unjustified, without reasonable or probable cause or excuse.” La. Bag Co. v. Audubon Indem. Co., 999 So.2d 1104, 1114 (La. 2008) (quoting Reed v. State Farm Auto. Ins. Co., 857 So.2d 1012, 1021 (La. 2003)). Both phrases describe an insurer whose willful refusal of a claim is not based on a good-faith defense. Id. Penalties should be imposed only when the facts “negate probable cause for nonpayment.” Id. (quoting Guillory v. Travelers Ins. Co., 294 So.2d 215, 217 (La. 1974)). In the absence of reasonable and legitimate questions as to the extent of the insurer's liability, an insurer who fails to pay the undisputed amount has acted in a manner that is, by definition, arbitrary, capricious, or without probable cause, and will be subject to penalties under the statute. Id. at 1116.

         Again, Hartford received satisfactory proof of loss as to undisputed amounts on October 21, 2015. Although the cause of the fire had initially been undetermined, Hartford knew as of October 2, 2015, that its own investigator had ruled out arson and that the cause of the fire was likely a faulty electrical sign. (Rec. 43-17, HART-002028). This conclusion was confirmed in the investigator's report sometime in November 2015.[3] Therefore, as of November 2015 Hartford could no longer legitimately resist payment based on a question that its arson exclusion might preclude coverage. Nonetheless, Plaintiff was not paid the undisputed amounts until February 2016. If Hartford's withholding of payment of the undisputed amount for more than thirty days was arbitrary, capricious, or without probable cause then Plaintiff is entitled to penalties and attorney's fees under ยง ...


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