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Louisiana Mid-Continent Oil and Gas Association v. Peerless Insurance Co.

United States District Court, M.D. Louisiana

March 18, 2019




         Before the Court is Defendant's Motion for Summary Judgment (Doc. 22) and Plaintiffs Motion for Partial Summary Judgment Regarding Insurance Coverage. (Doc. 24) Both parties filed responses. (Doc. 29, 31) For the reasons stated herein, the Motion for Summary Judgment (Doc. 22) is GRANTED IN PART and DENIED IN PART. The Motion for Partial Summary Judgment Regarding Insurance Coverage (Doc. 24) is DENIED.

         I. BACKGROUND

         Plaintiff is the owner of immovable property located at 730 North Boulevard, Baton Rouge, Louisiana ("the Property"). Defendant issued an insurance policy to Plaintiff for the Property from 2016 to 2017. (Doc. 1-2 at p. 1) On or about August 12, 2016, Baton Rouge experienced extremely heavy rainfall during which Veronica Smith ("Mrs. Smith"), Plaintiffs office manager, was notified that there was a leak at the Property. (Doc. 31-1 at p. 2) Mrs. Smith's husband, Jordan Smith ("Mr. Smith") climbed to the roof to investigate and found eight to ten inches of standing water on the flat roof. (Id.) After walking the perimeter of the roof, Mr. Smith located the drain where he found a "vortex" of water slowly draining over it. (Id.) He cleared a clump of leaves that had been clogging the drain, after which the water drained off the roof quickly. (Id.)

         Afterwards, Plaintiff reported to Defendant that interior water damage was sustained to the Property. Defendant had an insurance adjuster inspect the Property on August 29, 2016. The adjuster concluded that there was no storm related damage to the roof of the Property. (Id.) Defendant's inspector noted wear and tear and cracks on the flat portion of the roof, which he concluded allowed the water to enter the interior of the building. On September 2, 2016 Defendant denied Plaintiff's insurance claim. (Doc. 22-1 at p. 5) On August 14, 2017 Plaintiff filed suit against Defendant in the 19th Judicial District. (Doc. 1-2 at p. 1) The case was removed to federal court on October 12, 2017. (Doc. 1)

         At the core of the parties' dispute is the scope of coverage under the insurance policy. The relevant portions of the policy are as follows: Defendant is not obligated to cover damage to the interior of the Property caused by rain unless the Property first sustains damage from a covered cause of loss to the roof through which the rain enters. (Doc. 31-1 at p. 4) "Wear and tear" is not a covered cause of loss. The policy also contains an exclusion for damage resulting from "surface water." (Id. at p. 5). Both Plaintiff and Defendant seek summary judgment on the issue of whether the damage to the Property is covered by the policy. Defendant also seeks summary judgment regarding Plaintiffs claims that Defendant acted in bad faith.


         Pursuant to Rule 56, "[t]he [C]ourt shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). In determining whether the movant is entitled to summary judgment, the Court views the facts in the light most favorable to the non-movant and draws all reasonable inferences in the non-movant's favor. Coleman v. Houston Independent School Dist, 113 F.3d 528, 533 (5th Cir. 1997).

         After a proper motion for summary judgment is made, the non-movant must set forth specific facts showing there is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986). At this stage, the Court does not evaluate the credibility of witnesses, weigh the evidence, or resolve factual disputes. Int'l Shortstop, Inc. v. Rally's, Inc., 939 F.2d 1257, 1263 (5th Cir. 1991), cert, denied, 502 U.S. 1059 (1992). However, if the evidence in the record is such that a reasonable jury, drawing all inferences in favor of the non-moving party, could arrive at a verdict in that party's favor, the motion for summary judgment must be denied. Int'l Shortstop, Inc., 939 F.2d at 1263.

         On the other hand, the non-movant's burden is not satisfied by some metaphysical doubt as to the material facts, or by conclusory allegations, unsubstantiated assertions, or a mere scintilla of evidence. Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994). Summary judgment is appropriate if the non-movant "fails to make a showing sufficient to establish the existence of an element essential to that party's case." Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986). In other words, summary judgment will be appropriate only "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits if any, show that there is no genuine issue as to any material fact, and that the moving party is entitled to judgment as a matter of law." Sherman v. Hallbauer, 455 F.2d 1236, 1241 (5th Cir. 1972).


         A. Insurance Coverage

         1. Surface Water Exclusion Provision

         Defendant argues that Plaintiffs claims should be dismissed because the water on the roof was "surface water," which is explicitly excluded from coverage. (Doc. 22-1 at p. 14). Defendant points to Sherwood Real Estate and Inv. Co., Inc. v. Old Colony Ins. Co., in which the court found that rain water which accumulated on a roof constituted surface water under the plaintiffs insurance policy.[1]234 So.2d 445 (La.App. 1 Cir. 4/13/70). However, as the Louisiana Court of Appeal for the Fifth Circuit pointed out later in Cochran v. Travelers Ins. Co, this statement in Sherwood was dicta. 606 So.2d 22, 24 (La.App. 5 Cir. 9/16/92). The Sherwood court addressed ...

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