Intended as a tutorial or not, Louisiana Federal District Court Judge Sarah Vance wrote one in her pick ’em up – put ’em down examination of the case law on proof of loss and segregation of damages. Follow her through the process that leads to an insurer must also make a specific showing of what damage was caused by the excluded cause. (Order and Reasons Imperial Trading v Travelers )
The plaintiffs in this case are the owners and lessees of commercial properties that were damaged during Hurricane Katrina. At the time of the hurricane, the properties in question were insured by defendant Travelers Property Casualty Company of America. Plaintiffs submitted a claim to Travelers shortly after the hurricane, and Travelers advanced plaintiffs $1 million for the covered losses to one property on September 25, 2005. Plaintiffs claim that Travelers failed to participate in the adjustment process in good faith after that point, reimbursing plaintiffs for portions of the covered loss in small increments over the following year but denying coverage for several claims falling under the coverage of the policy.
The plaintiff’s claim at issue in this order is for a loss of more than $8,000,000. Both parties filed motions for partial summary judgment – plaintiffs’ as to burdens of proof and segregating damages; defendant’s as to plaintiffs’ claim for damages to contents.
The parties agree that such stock was covered by the insurance policy and that it was damaged. The policy notes that the insurer “will pay for direct physical loss or damage to Covered Property caused by or resulting from a Covered Cause of Loss.” “Covered Cause of Loss” is defined as “risks of direct physical loss” unless the loss falls into a particular exclusion. “Stock” is included among the Covered Property section, and is defined elsewhere as “merchandise held in storage for sale, raw materials and inprocess or finished goods, including supplies used in their packing or shipping.”
The Lesson: Who bears the burden of segregating covered from non-covered losses once and insurer shows that an exclusion applies to some loss?
The Fifth Circuit has spoken on this point in Dickerson v. Lexington Ins. Co., 556 F.3d 290 (5th Cir. 2009). The court in that case applied Louisiana law to circumstances in which property had been damaged by both covered and excluded causes. In those circumstances, the court held that once the insured shows that the claim is covered by the policy, the burden shifts to the insurer to prove how much of the damage was caused by a non-covered cause and was thus excluded from coverage under its policy…
The court could not have been clearer in its holding. It said twice in the same paragraph that when the “proper apportionment” of covered and excluded losses was at issue, the insurer had to prove that “the damage at issue is excluded.” The insurer therefore must show “how much of the damage” was caused by an excluded peril.
The Dickerson language…was a straightforward statement of the legal standard the court determined to be applicable to the issue before it. This Court follows the burdens of proof as set forth above…
The defendant, acknowledging that the plaintiffs have carried their initial burden, argues that the damage falls into a policy exclusion. The policy states that defendant “will not pay for loss or damage caused directly or indirectly” by any excluded cause listed in the policy. “Water” is one such exclusion, and it is relevantly defined as “[f]lood, surface water, waves, tides, tidal waves, overflow of any body of water, or their spray, all whether driven by wind or not.”
Under Dickerson, an insurer must also make a specific showing of what damage was caused by the excluded cause.
The parties do not dispute that the Airline Drive location suffered heavy flooding from the levee breaks following the landfall of Katrina. Defendant, however, when showing that a loss falls within a policy exclusion, must also carry the burden of “how much of the damage” was subject to the exclusion. Dickerson, 556 F.3d at 295. It is not enough to point to the mere existence of some floodwater to carry this burden. Under Dickerson, an insurer must also make a specific showing of what damage was caused by the excluded cause.
Defendant has proceeded on its motion under the impression that the Dickerson burden allocation is not binding on this Court, and it thus has not presented evidence demonstrating that there is no genuine issue of material fact existing for trial. Even if defendant argues that all the damage to the contents at the Airline Drive location was excluded, plaintiffs have submitted sufficient evidence to preclude summary judgment.
Specifically, plaintiffs present the deposition evidence of two witnesses who arrived at the Airline Drive location before the breakage of the levees. Both witnesses testified as to broken and open thresholds in the building – specifically, the front windows and a rear overhead door – that could allow for rainwater to enter the building. Expert testimony presented by plaintiffs attests that 565 gallons of water actually did enter the building through the broken windows and 1,717 gallons through the broken rear door. Deposition evidence further indicates that winddriven rainwater may have penetrated nearly one-third of the way into the building. Furthermore, two witnesses testified as to roof damage that would allow water to leak through into the building. Lastly, a deposition witness for the plaintiff
testified that a water pipe located in the ceiling of the building burst, releasing approximately 300,000 gallons of water.
This evidence is sufficient to create a genuine issue of material fact for trial.
Judge Vance also provides a review of the requirements on both parties for a court to reach summary judgment, an abundant citations of related state law (LA), and, of course an Order:
Plaintiffs’ motion for partial summary judgment on burden shifting and segregation of damages is GRANTED. Defendant’s motion for partial summary judgment as to contents at the Airline Drive location is DENIED.
Both this post and my post on Kodrin are the result of areader-attorney who provided access to Court documents. Another has provided additional information that will be basis for my second post on Rule 30(b)(6).
Sop and I blog in addition to each operating small businesses and we welcome and appreciate documents that allow us maximum use of the time we have available for SLABBED. Our personal opinions are the result of a plain English reading as neither of us are attorneys.
My plain English reading of Judge Vance’s Order and Reasons suggests Dickerson requires the Court to ensure defendants provide information on all potential eye witnesses – including those who might provide information in Politz v Nationwide and Bossier v State Farm, for example. Efforts to screen or otherwise restrict access to the information would seem to be a legally indefensible position considering Dickerson.
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