Amici or not, No member of the panel nor judge in regular active service1 of the court having requested that the court be polled on Rehearing En Banc (FED. R. APP. P. and 5TH CIR. R. 35),the Petition for Rehearing En Banc is DENIED, according to the Order issued by the 5th Circuit in Dickerson v Lexington (AIG).
Treating the Petition for Rehearing En Banc as a Petition for Panel Rehearing, the Petition for Panel Rehearing is GRANTED, the opinion of the court filed December 22, 20082 is WITHDRAWN, and the revised panel opinion filed herewith is SUBSTITUTED…
When the 5th Circuit judges focus on law and not the science of hurricane damage, the difference in their Opinions is like night and day – and a new day dawned for Burden of Proof in the substitute opinion in Dickerson v Lexington (AIG).
A plaintiff has the burden of proving that his insurer (1) received satisfactory proof of loss, (2) failed to pay within the required time, and (3) acted in an arbitrary and capricious manner…An insurer does
not act arbitrarily and capriciously, however, when it withholds payment based on a genuine (good faith) dispute about the amount of a loss or the applicability of coverage.
Lexington makes two assertions in this context. First, it contends that the district court erred by requiring it to prove that it acted in good faith because it is the plaintiff who must prove that the insurer acted in bad faith. Second, Lexington contends that the evidence offered by Dickerson was insufficient to
prove that Lexington acted arbitrarily and capriciously. We address Lexington’s assertions in turn.
…We review de novo the district court’s assignment of the burden of proof…Lexington invites our attention to an exchange between its attorney and the court at the close of the bench trial during which the district judge observed that the plaintiffs had not shown that Lexington’s actions were intentional and asked Lexington for evidence that it had acted in good faith. Lexington interprets the court’s statement to mean that the district judge believed Lexington had to prove that it had acted in good faith, instead of Dickerson having to prove that Lexington acted in bad faith.
Lexington insists that it had a good faith dispute with Dickerson over how much of the damage to the house and its contents was caused by flooding rather than by wind. The existence of such a dispute is not supported by the evidence. (emphasis added)
The insurer has pointed to nothing evidencing that it told Dickerson it was disputing his claim on the basis of flood damage; it offers no evidence of a dialogue with Dickerson over the quantum of the damage. Neither has Lexington provided evidence that its adjusters and engineers had difficulty
assigning a portion of the damage to wind, and we have found no evidence in the record to indicate that Lexington informed Dickerson that it was making or could not make such a determination.
Given the lack of evidence of a bona fide dispute and the fact that the extent of the flooding was self-evident, we cannot credit Lexington’s contention that its payments totaling about $17,000
on damage valued at seven times that much (exclusive of the flood insurer’s payment) was the result of a good faith dispute.
The district court applied the proper legal standard. It sought evidence of a basis for Lexington’s delayed payments and later stalling, but could find none…The court’s finding about whether Lexington’s dispute was in good faith is a factual determination that we review deferentially. Even if Lexington
considered the damage to be much less than Dickerson claimed, it was aware that it owed some substantial amount, albeit a lesser one; yet it did not pay Dickerson for five months following its first adjuster’s inspection.
The fact that, in the district court’s words, Lexington “all of a sudden decided or realized” on the eve of trial that it owed an additional $46,479 under Coverage A — not to mention amounts that it owed under other coverages — is further evidence that Lexington’s earlier failure to pay was without probable cause…
Dickerson’s bad faith claim hinges on the undisputed timing of Lexington’s first inspection and payment….On appeal, Lexington asserts that there was insufficient evidence presented at trial to support the finding that wind, rather than flooding, caused most of the damage to Dickerson’s home.
The 5th Circuit’s substitute opinion again affirms the district court’s judgment on Dickerson’s claim of Lexington’s bad faith conduct.
We reverse that part of the judgment which awards attorneys’ fees and remand it to the district court for further proceedings consistent with this opinion. We affirm the judgment of the district court in all other respects. REVERSED and REMANDED in part; AFFIRMED in part.
The Court’s decision to Reverse and Remand the district court’s award of attorneys’ fees is specific to the terms of Louisiana’s law on claims of mental anguish – a subject deserving of a post of its own if time permitted.
It is important to note, however, the 5th returned the decision to the district court saying:
We therefore reverse the judgment of the district court to the extent that it awarded attorneys’ fees. Because it is possible, however, that some damage was not discovered until after August 15, 2006 (Lexington made its third inspection in 2007 during which it found new damage), we remand this issue to the district court for it to consider whether attorneys’ fees under the amended version § 22:658 might apply to any part of the insurance proceeds that were paid after the effective date of the amendment.
Perhaps the day is coming when policyholders will consider the 5th Circuit their Amici, too!