Federal District Court Judge offers tutorial – proof of loss and segregation of damages

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.

You should see contact form below that will send email message to me – a new function that I’m trying out and it may or may not have gotten exactly right.


11 thoughts on “Federal District Court Judge offers tutorial – proof of loss and segregation of damages”

  1. Judge Vance is an excellent example of a judge who lets her analysis of the law lead her to a conclusion about the issue at hand. Despite her background representing corporations as an attorney, it clealry does not “burden” her to rule in plaintiffs’ favor, if she believes the law requires it.

    I am never critical of specific judges when I comment, but there are many judges who could learn a lesson from Judge Vance. Let the law, not your own personal ideology, lead you to your conclusion/ruling. This is a great ruling and someone should have made it 3 years ago. Think of how this correct ruling, like the 5th Circuit’s ruling on “mental anguish” in Dickerson, could have affected so many cases that settled for peanuts.

  2. Great opinion. However, I do have a problem with her citing Dickerson when there are 4 La. intermediate appellate court decisions and La. Supreme Ct. decisions.

    Dickerson is not new law and the fact many judges (Vance (initially until Dickerson), Africk, Berrigan, Englehardt, McNamara, Duval and Lemelle) all bought into the fabricated, made up, fraud that State Farm perpertrated early on. All of the judges I just cited issued opinions saying that plaintiffs as owners of all risks policies had the burden of segregating covered from non-covered losses. All of them ignored well established La. jurisprudence and now, statutory law (the highest form of civilian law possible).

    Federal judges here in the Eastern District of La. have ego problems and believe the 5th Circuit is the final authority on issues of state law, when it is not.

    They dismiss intermediate appellate court decisions as if the intermediate appellate court judges are somehow beneath them. I can’t tell you the number of times federal judges brushed aside the 3rd Circuit’s ruling in Landry with the retort “I don’t care, I dont have to follow it.”

    By the way, Judge Berrigan recently characterized the language Judge Vance relied upon from Dickerson as “dicta.” meaning it was not the holding of the case, just superfluous decoration.

  3. Reading Judge Vance’s opinion will show she demonstrates a full command of the case law and specifically addresses decisions that considered Dickerson dicta by name – name of case, that is.

    In addition to state case law (LA), she addresses supporting 5th Circuit opinions.

    Rick’s point about “what might have been” is well taken. However, it is my understanding that once Dickerson was decided, it became controlling on all cases still open. Consequently, it might be worthwhile to review decisions to the contrary.

  4. As Judge Berrigan’s post-Dickerson decision indicates, not all judges share Judge Vance’s opinion. Judge Vance’s opinion is only binding in her court.

    Also, I ask anybody and everybody to re-visit her early opinions on burden of proof. They were travesties. If she was such a fan or stickler for following state law on state law issues why did she initially, repeatedly hold that La. homeowners had to segregate covered from non-covered losses? I don’t know if the plaintiffs’ briefing in her early cases was any good, but I can pull multiple decisions in which she ruled that homeowners were required to segregate covered from non-covered losses.

    Also, if the burden of proof is on the insurer to prove exactly what flood damaged, how can she award a flood offset when the flood claim was paid sans evidence? it defeats the whole purpose behind the La. legislature codifying the burden of proof. She was one of the first judges to blindly award a flood offset. her Weiss jury isntructions were horrible and only Rick and Johnny’s skills as the best hurricane lawyers in La. were able to overcome the baseless, legally incorrect instructions.

    In her Chauvin decision she 12(b)6ed the plaintiffs out of court. Had she allowed the Chauvins to engage in discovery as they asked, she would have learned that State Farm’s own materials acknowledged the VPL and its application to hurricane cases.

    I respect Judge Vance more than some others, but am not sold on her “objectivity.”

  5. While your recounting of her past decisions is interesting reading, NRB, I am awed by her reflective thinking on Dickerson, a decision that is binding on her court and others.

    The only comparable example in Katrina litigation is Judge Senter’s reflection on the limits of Leonard; i.e., wind and flood are two distinct, separately occurring events.

    The research I’ve read about the various factors that influence judicial decisions reveals a system of justice built on past decisions with little consideration given to whether those decisions were well founded, much less correctly understood.

    Consequently, I beg her continued reflection and applaud both she and Judge Senter for applying their time and talent to two very difficult issues.

    Their resulting orders provide their colleagues with an analysis of the related 5th Circuit decisions and a model for the application of those decisions to Katrina litigation.

    We have seen the fruit of his labor lead to an increase in just decisions both here and in Louisiana – proving that the abiding respect of one’s colleagues can be as powerful as a binding order.

    Although I’ve not seen any research on Katrina litigation to confirm this, I am of the opinion that, in some cases, judges have made a poor decision because counsel’s preparation was inadequate to address the issue and achieve any other result.

    Typically, the “poor preparation” I see is a presumption the judge has command of the underlying issues resulting in an excellent brief that, unfortunately, is built on sand and not rock.

    There are certainly other reasons but evidence suggests my observation merits some consideration.

    Bottom line, holding Judge Vance alone accountable for a decision, or any judge for that matter, may be as unjust as the decision reached — and reflective thinking serves the goose, the gander, and the cause of justice equally well.

  6. I left an entry appluading Judge Vance’s decision last p.m. Nowdy, but it didn’t show up. It was some new way of making an entry and it didn’t work for me. Anyway, I’ll say it again – CHALK ONE UP FOR THE PLAINTIFFS AND THANK YOU JUDGE VANCE FOR BEING SMART !!

    Yeah, it may be an Order here and Order there (and maybe -and most probably so – she made previous rulings not favorable to Plaintiffs – but what Judge doesn’t?? THE FACTS MAKE THE CASE – NOT THE JUDGE. Further, anyone that knows anything about ins. law is familiar w/the fact that the INSURED submits their PROOF OF LOSS asking their INSURER for a sum of $ and the carrier responds – they either (a) pay it all, (b) pay it in part or (c) deny the claim.

    Regarding “THE LESSON” question of above:

    “..Who bears the burden of segregating covered from non-covered losses once an insurer shows that an exclusion applies to some loss?”

    First of all, the insurer isn’t “showing” anything about how an exclusion applies to a loss – they may “exclude” something and, therefore, deny (or partially pay a claim), but they aren’t “showing” anyone anything.

    I’m not an atty. (I’m a Plaintiff’s insurance legal secretary – but you don’t have to be a rocket scientist to figure this one out anyway): IF THE INS. CO. DENIES PART OF THE CLAIM THEN IT’S THEIR BURDEN (& THEIR DUTY OF GOOD FAITH) TO EXPLAIN [AND LATER PROVE IN LITIGATION if they force their ins’d to that point] WHY THEY’RE EXCLUDING COVERAGE AND NOT PAYING WHAT’S DEMANDED IN THE PROOF OF LOSS. The insured did their duty and followed their “requirements” of the policy by timely submitting the Proof so if their carrier isn’t going to pay it or just pays a portion thereof, it’s the carrier’s “burden” and duty to (a) act in good faith, (b) conduct a full and fair investigation, (c) prevent spoliation of evidence, etc., etc., etc., and a host of other things on behalf of their INSURED – the ones who pays their salaries, health ins., 401ks, etc.

    In the $8 million dollar case b4 Jdg. Vance, I noted that Travelers initially paid $1 million dollars out, but after that payment, the Plaintiff/Insured said they:

    “…Travelers failed to participate in the adjustment process in good faith…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.”

    Again, kudos to Judge Vance (and any other Judge) that rightfully follows the law.


  7. Thanks, Shirley. That’s certainly a fancy way to say “stuck in the mud”.

    I guess “good cause” doesn’t include “it was wrong” but surely a judge can correct his or her own errors and not compound them as Judge Senter did with his decision in Robohm.

  8. We here in La. are not a common law state. Our Civil Code and statutes are the highest form of authority. Jurisprudence constante is what we refer to it as.

    I would be shocked if any of the judges on camp St. knew what jurisprudence constante referred to.

  9. NBR: that may be, but that doesn’t change what the definition of STARE DECISIS is. Different way of saying it that’s all.

    I believe it is the attys. job to educate the Court on anything they believe they’re not aware of – that’s what attys. are for – well, one of the things anyway.


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