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Breton Sound Oyster Company, LLC v. Stiel Insurance Co. of New Orleans Inc.

Court of Appeals of Louisiana, Fourth Circuit

December 12, 2018


          APPEAL FROM 25TH JDC, PARISH OF PLAQUEMINES NO. 57-482, DIVISION "A" Honorable Kevin D. Conner, Judge



          Court composed of Judge Terri F. Love, Judge Joy Cossich Lobrano, Judge Sandra Cabrina Jenkins


         This is an insurance agent malpractice case. Stiel Insurance Company of New Orleans, Inc. ("Stiel"); Elson DeLaune; and Westport Insurance Corporation ("Westport") (collectively, "Stiel Defendants"), appeal a partial summary judgment by which they were found to have negligently failed to procure commercial liability insurance requested by appellee, Breton Sound Oyster Company, L.L.C. ("Breton Sound"). The Stiel Defendants also appeal a subsequent jury verdict finding that this failure to procure insurance coverage caused Breton Sound damages in the form of lost profits, policy premiums, attorney's fees, and costs. Breton Sound has filed an Answer to Appeal and Demand for Damages for Frivolous Appeal ("Answer to Appeal"). The Stiel Defendants filed a Motion to Dismiss as Untimely Breton Sound's Answer to Appeal ("Motion to Dismiss"). For the reasons that follow, we affirm. We deny the relief sought in Breton Sound's Answer to Appeal. We also deny the Stiel Defendants' Motion to Dismiss as moot.


         Breton Sound, located in Plaquemines Parish, harvests and sells oysters from its own oyster beds, and purchases and brokers oysters from local fishermen. Breton Sound contracts with retailers, including its largest single customer, Bon Secour Fisheries, Inc. ("Bon Secour"), a large, regional seafood distributor located in Bon Secour, Alabama. Breton Sound's member/manager is Louis Carl Pannagl, who has owned the oyster business since 1984. Christopher L. Nelson is the Vice-President of Bon Secour, which was Breton Sound's "first and most important customer."

         On July 21, 2007, Breton Sound entered into an Indemnity Agreement with Bon Secour, in which Breton Sound agreed to:

defend, indemnify and hold harmless [Bon Secour] and its employees, agents, representatives, directors and customers (individually, an "Indemnitee") from all actions, suits, claims, demands, and proceedings ("Claims"), and any judgements [sic], damages, losses, debts, liabilities, penalties, fines, costs and expenses (including reasonable attorneys fees) resulting therefrom whether arising out of contract, tort, strict liability, misrepresentation, violation of applicable law and/or any cause whatsoever:
* * *
(III) brought or commenced by a person or entity against any Indemnitee for the recovery of damages for the injury, illness and/or death of any person, or loss or damage arising out of or alleged to have arisen ou[t] of (a) the delivery, sale, resale, labeling, use o[r] consumption of any product or (b) the negligent acts or omissions of Seller; provided, however, that Seller's indemnification obligations hereunder shall not apply to the extent that Claims are caused by the negligence of Buyer. (Emphasis added.)

         Paragraph 3 of the Indemnity Agreement ("Paragraph 3") included a provision regarding insurance coverage, in which Breton Sound agreed to:

maintain in effect insurance coverage with reputable insurance companies covering . . . commercial general liability . . . including product liability and excess liability, all with such limits as are sufficient in [Bon Secour's] reasonable judgement [sic], to protect [Breton Sound and Bon Secour] from the liabilities insured against by such coverages. . . .

         The Indemnity Agreement further required that Bon Secour "be named as an additional insured using form CG2015 Broad Form Vendor's Endorsement or its equivalent with respect to the commercial general liability policy, including products liability."[1]

         After the execution of the Indemnity Agreement, Mr. Pannagl met with Mr. DeLaune, an insurance agent employed by Stiel, to purchase insurance that would comply with Paragraph 3. Thereafter, Mr. DeLaune procured a CGL Form CG2026 policy from Century Surety Company ("Century") for the coverage period August 13, 2007 through August 13, 2008 (the "Policy").[2] The Policy had the following exclusion in Endorsement CGL 1701 0705:

This insurance does not apply to: . . . .
6. Mold, Fungi, Bacteria, Air Quality, Contaminants, Minerals or Other Harmful Materials
a. "Bodily injury" . . . arising out of, caused by, or contributed to in any way by the existence, growth, spread, dispersal, release, or escape of any mold, fungi, lichen virus, bacteria or other growing organism that has toxic, hazardous, noxious, pathogenic, irritating or allergen qualities or characteristics. This exclusion applies to all such claims or causes of action, including allegations that any insured caused or contributed to conditions that encourage the growth, depositing or establishment of such colonies of mold, lichen, fungi, virus, bacteria or other living or dead organism. . . . (Emphasis added.)

         In July 2008, Basilio Garcia, Jr., who had a preexisting medical condition, ate a raw oyster allegedly containing vibrio vulnificus bacteria at a buffet in Colorado. After eating the oyster, Mr. Garcia developed a bacterial infection and died. The oyster was allegedly traced back to Bon Secour, and from Bon Secour to Breton Sound.

         On May 29, 2009, Century sent a letter notifying Breton Sound of a wrongful death claim made by Linda Lopez on behalf of the estate of Mr. Garcia ("Reservation of Rights Letter"). Century cited the bacterial exclusion, and reserved its right to deny coverage to both Breton Sound and Bon Secour.

         In July 2009, Ms. Lopez filed suit in Colorado against Breton Sound, Bon Secour and others asserting a products liability claim for the contaminated oyster that caused Mr. Garcia's death ("Lopez Suit").

         On September 16, 2009, Century informed Breton Sound that it was not only denying indemnification for the Lopez Suit, but also denying Breton Sound a defense to the suit, citing the bacterial exclusion. On September 18, 2009, Mr. Pannagl received the first of several letters from Bon Secour's attorneys demanding that Breton Sound indemnify Bon Secour in the Lopez Suit.

         On January 26, 2010, Breton Sound filed a Petition for Damages and Declaratory Judgment ("Petition") in Plaquemines Parish naming as defendants Stiel, Mr. DeLaune, and their errors and omissions carrier, Westport. Breton Sound sought damages caused by the Stiel Defendants' negligent failure to procure an insurance policy that did not exclude bacterial contamination. Breton Sound also sought a declaratory judgment that all claims that had arisen or might arise through the period August 13, 2007 through August 13, 2009 "that implicate a claim that would be covered but for Endorsement CGL 1701 0705, shall be covered by Stiel and Mr. Delaune."

         In June 2010, the Colorado Supreme Court dismissed Breton Sound from the Lopez Suit based on lack of personal jurisdiction.

         On September 10, 2010, Breton Sound amended its Petition adding Century as a defendant, and alleging, in the alternative to its allegations against the Stiel Defendants, that Century was required to defend and/or indemnify Breton Sound under the Policy.

         On January 20, 2011, Breton Sound filed a Second Amended and Supplemental Petition for Damages and For Declaratory Judgment ("Second Amended Petition"), praying that Century "be found to [have] acted in bad faith," and thus "be cast in judgment for attorney's fees, costs, penalties, and damages including aggravation, inconvenience and loss of business reputation." Breton Sound also named Bon Secour as a defendant, alleging that Bon Secour was negligent in purchasing unprocessed, raw gulf oysters, most of which contained the vibrio vulnificus bacteria. Breton Sound also sought a declaratory judgment that Breton Sound was not required to defend or indemnify Bon Secour. On May 5, 2011, the Lopez plaintiffs dismissed Bon Secour from the Lopez Suit after a global resolution of the action.

         On June 29, 2011, Breton Sound entered into a confidential settlement agreement with Century resolving all claims between them. On August 5, 2011, Breton Sound dismissed its claims against Century, with prejudice. Thereafter, Breton Sound filed a Third Amended Petition for Damages ("Third Amended Petition") omitting all claims against Century, Bon Secour, and others. In the Third Amended Petition, Breton Sound prayed for an award against the Stiel Defendants for "the full amount of Petitioner's damages, including but not limited to, attorney's fees, court costs and expert witness fees. . . [and] including any and all business and other consequential losses."

         On May 29, 2015, Breton Sound moved for partial summary judgment against the Stiel Defendants solely on the issue of liability for negligent failure to procure the requested insurance coverage. The motion was heard on August 24, 2015. On September 25, 2015, the trial court signed a judgment granting Breton Sound's Motion for Partial Summary Judgment on the issue of liability.

         On January 24, 2017 through January 27, 2017, the case was tried to a jury on the issue of damages only. On February 10, 2017, after the jury reached a verdict in favor of Breton Sound, the trial court rendered a judgment against the Stiel Defendants awarding Breton Sound $831, 886.00 in lost profits; $19, 277.10 in reimbursement for policy premiums; and $63, 227.41 in attorney's fees and costs. Overall, the Stiel Defendants were cast in judgment jointly and solidarily for the amount of $914, 390.51, together with interest from the date of demand until paid and for all court costs, expert witness fees and taxable costs.

         The Stiel Defendants suspensively appealed. On January 22, 2018, Breton Sound filed an Answer to Appeal, requesting damages from the Stiel Defendants for filing a frivolous appeal. On February 8, 2018, the Stiel Defendants filed a Motion to Dismiss the Answer to Appeal as untimely.


         The Stiel Defendants list five assignments of error:

• The trial court erred in granting Breton Sound partial summary judgment determining the Stiel Defendants' liability for failure to procure coverage when the trial court never determined that Century's coverage denial was valid.
• The trial court erred in granting Breton Sound's partial summary judgment determining the Stiel Defendants' liability for failure to procure coverage when fact issues remained regarding whether Breton Sound provided Stiel with an indemnity contract specifying a CG2015 Broad Form Vendor's Endorsement that Stiel ignored in placing coverage.
• The trial court erred in excluding evidence of Breton Sound's settlement with Century, alleged to be jointly liable for defense fees and costs, resulting in Breton ...

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