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Forrest v. Ville St. John Owners Association, Inc.

Court of Appeals of Louisiana, Fourth Circuit

November 7, 2018


          APPEAL FROM CIVIL DISTRICT COURT, ORLEANS PARISH NO. 2017-01991, DIVISION "D" Honorable Nakisha Ervin-Knott, JUDGE

          Irl R. Silverstein, David A. Silverstein COUNSEL FOR DEFENDANT/APPELLANT

          Matthew J. Farley, Richard E. Baudouin COUNSEL FOR THIRD PARTY DEFENDANT/APPELLEE

          (Court composed of Judge Edwin A. Lombard, Judge Daniel L. Dysart, Judge Paula A. Brown)

          Paula A. Brown Judge

         This appeal arises out of an insurance policy coverage dispute between the insurer, Travelers Casualty and Surety Company of America ("Travelers") and its insured, The Ville St. John Owners' Association, Inc. (the "Association"). Travelers filed a Motion for Summary Judgment contesting coverage, and the Association filed a cross-motion for summary judgment. The district court granted Travelers' motion for summary judgment and denied the Association's cross-motion; the district court dismissed, with prejudice, all of the direct action claims against Travelers. The Association appeals, seeking review of this judgment. For the reasons set forth below, the district court's judgment is affirmed.


         Tripp Forrest was Trustee for the Jack Thrash Forrest III Trust (the "Trust"), and the Trust owned unit, number 301 (the "unit"), in a condominium complex managed by the Association. On March 3, 2016, a fire occurred in the unit resulting in damage to the unit and to common elements of the condominium complex. The Association carried a commercial property insurance policy with Lloyd's, London, International Insurance Company of Hannover SE ("Lloyd's, London"), and the unit was insured under the policy.[1] The Association made a claim under the commercial property insurance policy for payment of losses suffered as a result of the fire damage to the unit and the common elements of the complex. Lloyd's, London accepted coverage for the loss and paid the Association; the payment to the Association represented specific amounts for repairing the common elements and, separately, the unit. With the payments from Lloyd's, London, the Association repaired the common elements but had insufficient monies to pay for repairs to the unit. As a result, the Trust filed a Petition and an Amended and Superseding Petition for Damages against the Association asserting the following pertinent claims:[2]

Count 1: Breach of Duty under Civil Code article 2315
17. Under La. R.S. La. R.S. 9:1123.112(D), the Association had the fiduciary, contractual, and legal duty to adjust the insurance claim reasonably both for itself as well as for the Trust. To the extent the Association failed to secure adequate compensation for the loss of both the common elements and the Trust's condominium, the Association breached that duty. Further, to the extent the Association performed minimal repairs within the Trust's unit and did so in a negligent manner, it has also breached its duties.
18. To the extent the Association failed to secure adequate compensation to repair the Trust's unit, and to the extent it negligently repaired the unit, it has proximately caused the Trust to sustain damages in that the unit remains damaged and unrepaired.
19. The Association is, therefore, liable to Mr. Forrest (in his capacity as Trustee) under article 2315 for an amount to appropriately repair the unit.
Count 2: Failure to Repair under the Louisiana Condominium Act
* * *
23. The Association has failed to "promptly" repair the Trust's unit and has likewise failed to pay the Trust the proper amount to repair the damage. This conduct violates La. R.S. 9:1123.112(G) and renders the Association liable to Mr. Forrest (in his capacity as Trustee) for the amount to repair the Trust's unit.
Count 3: Failure to Properly Spend Insurance Funds under the Louisiana Condominium Act
24. Under La. R.S. 9:1123.112(G), if the condominium is not repaired or replaced after a fire (when one of the three exclusive criteria of La. R.S. 9:1123.112(G) occur), a statutory formula directs how the insurance money must be spent.
* * *
27. The Association violated La. R.S. 9:1123.112(G)'s statutory formula to the extent it used more of the insurance funds on the common elements than the insurance company had attributed in its payment. In that case, it necessarily violated La. R.S. 9:1123.112(G)'s statutory formula again.
28. Any failure to properly spend insurance proceeds in accordance with La. R.S. 9:1123.112(G) renders the Association liable to Mr. Forrest (in his capacity as Trustee) for the difference between the insurance company's attribution of funds and what the Association later set aside for the unit's repair.[3]

         Afterwards, the Association filed a third party demand against Travelers. Travelers had issued to the Association a Community Association Management Liability Coverage Policy (the "Management Policy") that provided coverage for losses incurred due to directors and officers' alleged wrongful acts. The Association reported the Trust's claims to Travelers; Travelers denied coverage, including the duty to defend.

         In September 2017, the Association moved for a summary judgment against Travelers, requesting its third party demand be granted on the ground that there was coverage under the Management Policy. In October 2017, Travelers moved for a summary judgment seeking dismissal of the Association's third party demand arguing that coverage was excluded under the policy, and Travelers had no duty to defend the Association. A hearing on the motions was held on November 17, 2017. On December 7, 2017, the district court denied the Association's motion for summary judgment, and granted Travelers' motion for summary judgment, dismissing with prejudice all claims against Travelers. The Association, pursuant to La. C.C.P. art. 966(C)(4), requested written reasons for judgment which were provided by the district court.[4] In its written reasons, the district court found that coverage for the Trust's claims was excluded as "[t]he policy contains a clear and unambiguous exclusion precluding coverage 'for any claim based upon, arising out of, directly or indirectly resulting from, in consequence of, or in any way involving' property damage."

         From this judgment, the Association seeks review.


         The Association asserts the district court erred by dismissing the third-party demand and granting Travelers' motion for summary judgment. In challenging the district court's judgment, the Association assigns two errors: (1) the district court erred in finding the Management Policy unambiguously excluded coverage for the Trust's claims; and (2) the district court erred in failing to find Travelers had the duty to defend the Association against the Trust's claims as required by the Management Policy.

         "A motion for summary judgment is a procedural device used when there is no genuine issue of material fact for all or part of the relief prayed for by the litigant." Tate v. Touro Infirmary, 17-0714, p. 1 (La.App. 4 Cir. 2/21/18), So.___3d ___, ___, [5] writ denied, 18-0558 (La. 6/15/18), 245 So.3d 1027 (citing La. C.C.P. art. 966(A)(1)). An appellate court's review of summary judgments is de novo, and it employs the same criteria district courts consider when determining if a summary judgment is proper. Madere v. Collins, 17-0723, p. 6 (La.App. 4 Cir. 3/28/18), 241 So.3d 1143, 1147 (citing Kennedy v. Sheriff of E. Baton Rouge, 05-1418, p. 25 (La. 7/10/06), 935 So.2d 669, 686). In Chanthasalo v. Deshotel, 17-0521, p. 5 (La.App. 4 Cir. 12/27/17), 234 So.3d 1103, 1107 (quoting Ducote v. Boleware, 15-0764, p. 6 (La.App. 4 Cir. 2/17/16), 216 So.3d 934, 939, writ denied, 16-0636 (La. 5/20/16), 191 So.3d 1071), this Court espoused:

This [de novo] standard of review requires the appellate court to look at the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, to determine if they show that no genuine issue as to a material fact exists, and that the mover is entitled to judgment as a matter of law. . . . A genuine issue is one as to which reasonable persons could disagree; if reasonable persons could reach only one conclusion, no need for trial on that issue exists and summary judgment is appropriate. To affirm a summary judgment, we must find reasonable minds would inevitably conclude that the mover is entitled to judgment as a matter of the applicable law on the facts before the court.

         "Interpretation of an insurance policy usually involves a legal question that can be resolved properly within the framework of a motion for summary judgment." Thebault v. Am. Home Assur. Co., 15-0800, p. 5 (La.App. 4 Cir. 4/20/16), 195 So.3d 113, 116 (citing Bonin v. Westport Ins. Corp., 05-0886, p. 4 (La. 5/17/06), 930 So.2d 906, 910). In the case sub judice, Travelers, the insurer, has the burden of proving that a claimed loss fell within the policy exclusion. Supreme Servs. & Specialty Co., Inc. v. Sonny Greer, Inc., 06-1827, p. 6 (La. 5/22/07), 958 So.2d 634, 639 (citation omitted).

         Property Damage Exclusion

         In the case sub judice, there are no factual issues in dispute, only a legal question-whether the Management Policy excluded coverage of the Trust's claims against the Association.[6]

         This Court explained in Burmaster v. Plaquemines Parish Government, 10-1543, p. 4 (La.App. 4 Cir. 3/30/11), 64 So.3d 312, 316, (citation omitted), that "[a]n insurance policy is a contract between the parties and should be construed employing the general rules of interpretation of contracts set forth in the Louisiana Civil Code." The extent of coverage is determined by "[t]he parties' intent as reflected by the words in the policy," and "[s]uch intent is to be determined in accordance with the general, ordinary, plain and popular meaning of the words used in the policy, unless the words have acquired a technical meaning." Louisiana Ins. Guar. Ass'n v. Interstate Fire & Cas. Co., 93-0911 (La. 1/14/94), 630 So.2d 759, 763 (citations omitted)(footnote omitted). "An insurance contract is to be construed as a whole, and one portion thereof should not be construed separately at the expense of disregarding another." Pareti v. Sentry Indem. Co., 536 So.2d 417, 420 (La. 1988) (citation omitted). In Doerr v. Mobil Oil Corp., 00-0947, p. 6 (La. 12/19/00), 774 So.2d 119, 124, [7] the Supreme Court, citing La. C.C. art. 2046, held that the "Civil Code is clear that if a contract does not lead to absurd consequences it will be enforced as written." Additionally, "courts have no authority to alter the terms of policies under the guise of contractual interpretation when the policy provisions are couched in unambiguous language." Pareti, 536 So.2d at 420 (citations omitted). On the other hand, any ambiguity in a policy "should be construed in favor of the insured and against the insurer. Id. If an insurance policy provision is amenable to two or more reasonable interpretations, "it is considered ambiguous and must be liberally construed in favor of coverage." Chicago Prop. Interests, L.L.C. v. Broussard, 08-526, p. 7 (La.App. 5 Cir. 1/13/09), 8 So.3d 42, 47 (citation omitted). This Court, in Burmaster, 10-1543, at p. 8, 64 So.3d at 319 (citation omitted) opined, that although an exclusion could have been worded more explicitly, it "does not necessarily deem it ambiguous." Likewise, insurers can limit their liability absent a conflict with statutory provisions or public policy. Pareti, 536 So.2d at 421 (citations omitted).

         The Management Policy issued by Travelers to the Association was a claims-made-reported policy. "Insured Person" was defined in the Management Policy and provided in pertinent part:

[D]uly elected or appointed member of the board of directors, officer, member of the board of trustees, member of the board of managers, member of the board of regents, member of the board of governors, or a functional equivalent thereof, member of a duly constituted committee, or volunteers of the Insured Entity or any Executive Officer. Insured Person also means any Community Association Management.

         The Management Policy provided general coverage for "Loss for Directors and Officers Wrongful Acts." "Directors and Officers Wrongful Act" was defined in ...

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