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Jackson v. Berkshire Hathaway Global Insurance Services

United States District Court, W.D. Louisiana, Shreveport Division

August 14, 2019





         Berkshire Hathaway Homestate Insurance Company issued a policy of commercial auto insurance to MLJ Trucking, LLC. Two of MLJ's trucks suffered property damage in separate accidents. MLJ made two property damage claims against the policy. Berkshire paid both claims, but MLJ filed this suit against Berkshire to seek penalties under Louisiana statutes for alleged unlawful delay in making the payments. Before the court is Berkshire's Motion for Summary Judgment (Doc. 27) that raises separate attacks on the two claims. For the reasons that follow, Berkshire's motion will be denied.

         Claim No. 1

         MLJ alleged in its petition that its 2014 Peterbilt truck was damaged in an accident on July 31, 2017. MLJ reported the accident to Berkshire that same day. Berkshire assessed the damage to the truck on August 8, 2017 to be $40, 752.84, less a $1, 000 deductible. MLJ alleges that Berkshire did not pay the amount of the loss until November 28, 2017, which was more than 90 days later. Petition, ¶¶ 3-6. MLJ alleges that the late payment entitles it to penalties under La. R.S. 22:1892(B)(1) that required payment within 30 days of proof of loss and La. R.S. 22:1973 that required payment within 60 days of proof of loss. ¶¶ 7-9.

         Berkshire represents that its policy covered only those autos described on the declarations page, which referred to an attached schedule of insured autos. Claim No. 1 presented by MLJ was for a 2014 Peterbilt truck bearing VIN 1XPXDP0X9ED233253. The actual VIN on the truck was 1XPXDP0X5ED233251. Berkshire represents that the truck on which the claim was based was not identified or scheduled anywhere in the policy.

         To recover statutory penalties against an insurer under Louisiana law, the insured must have a valid underlying substantive claim upon which insurance coverage is based. Matthews v. Allstate Ins. Co., 731 F.Supp.2d 552, 566 (E.D. La. 2010), cited with approval in Naquin v. Elevating Boats, LLC, 817 F.3d 235, 240 (5th Cir. 2016). Berkshire's sole attack on Claim No. 1 is that the lack of coverage for the Peterbilt truck bearing VIN ending in 253 is fatal to the claim for penalties because there was no valid underlying claim against the policy with respect to that truck.

         But Berkshire eventually paid Claim No. 1, so one might think there could be more to the story. And there is. The summary judgment materials submitted by MLJ indicate that MLJ purchased trucks from a Mr. Turnipseed, who had insurance on those trucks thorough the Pace Insurance Agency. Mrs. Jackson, a principal in MLJ, testified that MLJ asked Pace to place the insurance on the trucks in its name. When MLJ later made a claim, it was discovered that there was a discrepancy in the VIN for one of the trucks. Mrs. Jackson testified that the VIN information had been provided to the insurer by Pace, and she did not know how Pace obtained the information. Her entire input had been to orally request that the Turnipseed trucks that MLJ purchased be scheduled on MLJ's policy. Berkshire's claims notes indicate that on August 16, 2017, less than three weeks after the claim was made, its claims personnel learned that Mr. Turnipseed had confirmed that he sold VIN 251 to MLJ, and VIN 253 had been traded in to a dealer.

         When evidence indicates that the parties to an insurance policy intended for it to provide certain coverage, but the insurance agent made a clerical error on the declarations page, the policy can be reformed to reflect the true intent of the parties. Parol evidence is admissible to show mutual error even though the express terms of the policy are clear. The party seeking reformation sometimes has the burden of proving a mutual error by clear and convincing evidence, but it need only satisfy a preponderance of the evidence burden to reform a policy in a manner that does not substantially affect the risk assumed by the insurer. Samuels v. State Farm Mutual Auto Ins. Co., 939 So.2d 1235 (La. 2006).

         That is what happened in Samuels when everyone involved admitted that there had been a clerical error by the agent who mistakenly identified an umbrella policy as a homeowner's policy and used an incorrect policy number on a renewal policy. The Supreme Court of Louisiana unanimously held that reformation was required, given the uncontested evidence of mutual error, so that the coverage reflected the true intent of the parties.

         The summary judgment record in this case gives rise to a genuine dispute as to whether the Berkshire policy should be reformed to reflect that the truck that is the subject of Claim No. 1 is covered by the policy. The evidence discussed above indicates that was the intent of both MLJ and the Pace agency, but a mistake was made in the listing of the VIN, and the mistake does not appear to have affected the risk assumed by Berkshire. Berkshire even admitted during discovery that it “paid this disputed claim as an act of good faith based upon the determination that MLJ's failure to schedule truck No. 1 was inadvertent and in order to attempt to avoid litigation.”

         Berkshire's motion for summary judgment anticipated a reformation argument. It made a brief assertion that penalties should nonetheless be unavailable because its conduct should be judged based on the facts known at the time of its action. This issue was not fully briefed. And MLJ's opposition suggests that the origin of the VIN mistake was in the sales contract between Turnipseed and MLJ, and Pace notified the Berkshire claims adjuster of the error as early as August 16, 2017. Berkshire did not pay the claim until November 28, 2017, which was more than 90 days after the clerical error was corrected. Given these facts, Berkshire has not demonstrated that it is entitled to summary judgment with respect to Claim No. 1.

         Claim No. 2

         MLJ alleged in its petition that its 2015 Peterbilt truck was damaged in an accident on August 8, 2017. MLJ reported the accident to Berkshire the next day. Berkshire assessed the loss as $47, 673.84, less a $1, 000 deductible, but MLJ did not receive a check until October 21, 2017. MLJ alleges that it is entitled to ...

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