Opinion
CIVIL ACTION NO. 06-1744, SECTION "F".
March 12, 2008
ORDER AND REASONS
Before the Court are two motions for summary judgment: (1) Jensvold's motion for summary judgment dismissing the plaintiff's claims; and (2) America First's motion for summary judgment dismissing the plaintiff's claims. For the reasons that follow, both motions are GRANTED.
Background
This lawsuit concerns who should pay for the loss of the 1999 Piranha Dredge, which sank and was vandalized almost two years after Sioux Redi Mix chartered the Piranha from its owner, Dredging Supply Company.
On June 23, 2003, Dredging Supply leased the Piranha dredge to Sioux Redi Mix. In accordance with Section 6 of the Charter Party, Sioux was required to place hull insurance on the Piranha in an amount no less than $265,000 and furnish owner certificates. Sioux's broker furnished a certificate of insurance, which stated that Dredging Supply was a loss-payee on Sioux's inland marine insurance policy with America First; the certificate of insurance provides:
Sioux agreed to insure the dredge with a "solvent company for the joint account of owner and Charter owner . . . on American Institute term haul's form revised for the full and insurable value of said dredge, but no case less than $265,000.00." Sioux insured the dredge with America First, with original limits in the amount of $265,000, which limits were reduced by Sioux, to an amount equal to $150,000 and naming Dredging Supply on the certificate of insurance as a loss payee. Dredging Supply further maintained its own insurance coverage for the dredge, through Jensvold as its broker, with Great American.
THIS IS TO CERTIFY THAT THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD INDICATED, NOTWITHSTANDING ANY REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO WHICH THIS CERTIFICATE MAY BE ISSUED OR MAY PERTAIN, THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS, EXCLUSIONS AND CONDITIONS OF SUCH POLICIES. LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS.
The certificate also provides:
THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW.
On October 1, 2003, Sioux filed for Chapter 11 bankruptcy in Oklahoma. The proceeding was later converted to a Chapter 7 bankruptcy.
In its complaint, Dredging Supply asserts that "[f]ollowing the bankruptcy, and by agreement, the Charter Party was accepted by Order of the Bankruptcy Court, and subsequently the lease and any interest in the dredge or the lease were abandoned by the trustee in bankruptcy for [Sioux] and by order of the bankruptcy court."
On June 14, 2004, the Piranha dredge was added to the schedule of vessels of Great American's policy of insurance to Dredging Supply. That policy was in effect at the time of the alleged loss of the Piranha dredge.
On June 3, 2005, Dredging Supply learned that the Piranha had sunk and had then been vandalized. (The actual date of loss has not been determined). Three days later, Dredging Supply filed a claim with its carrier, Great American, to recover its losses. Dredging Supply also filed a claim, as a loss payee, against America First.
On July 11, 2005, in response to Dredging Supply's claim, America First sent its insured, Sioux, a reservation of rights/explanation of coverage letter that stated: "The certificate of insurance shows Dredging Supply Co. as a loss payee for the period of 5/13/2003 to 5/13/2004. Our records do not show the certificate was renewed." In the letter, America First listed some key issues as to why America First was reserving its rights and requested additional information from Sioux. (America First also "provid[ed] a copy of this letter to Dredging Supply Company in light of their interest in this equipment and since they have reported the loss to us.")
On October 27, 2005, Great American denied Dredging Supply's claim, noting five bases for denying coverage in its letter.
On February 24, 2006, Dredging Supply sued America First and Great American. More than one year later, on May 29, 2007, Dredging Supply filed an amended complaint, adding M.D. Jensvold as a defendant and asserting that "[i]f Great American's denial is upheld, then Jensvold clearly was negligent in failing to procure proper coverage for DSC's operations, including the leasing of dredges."
America First and Jensvold, separately, now move for summary judgment, urging the Court to dismiss the plaintiff's claims.
I.
Rule 56 of the Federal Rules of Civil Procedure instructs that summary judgment is proper if the record discloses no genuine issue as to any material fact such that the moving party is entitled to judgment as a matter of law. No genuine issue of fact exists if the record taken as a whole could not lead a rational trier of fact to find for the non-moving party. See Matsushita Elec. Indus. Co. v. Zenith Radio., 475 U.S. 574, 586 (1986). A genuine issue of fact exists only "if the evidence is such that a reasonable jury could return a verdict for the non-moving party."Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
The Court emphasizes that the mere argued existence of a factual dispute does not defeat an otherwise properly supported motion. See id. Therefore, "[i]f the evidence is merely colorable, or is not significantly probative," summary judgment is appropriate. Id. at 249-50 (citations omitted). Summary judgment is also proper if the party opposing the motion fails to establish an essential element of his case. See Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). In this regard, the non-moving party must do more than simply deny the allegations raised by the moving party. See Donaghey v. Ocean Drilling Exploration Co., 974 F.2d 646, 649 (5th Cir. 1992). Rather, he must come forward with competent evidence, such as affidavits or depositions, to buttress his claims. Id. Hearsay evidence and unsworn documents do not qualify as competent opposing evidence.Martin v. John W. Stone Oil Distrib., Inc., 819 F.2d 547, 549 (5th Cir. 1987). Finally, in evaluating the summary judgment motion, the court must read the facts in the light most favorable to the non-moving party. Anderson, 477 U.S. at 255.
II.
A. Dredging Supply's Claim Against Jensvold is Time-Barred.
Summary judgment is appropriate because no genuine issue of material fact exists: Dredging Supply's negligence claim as against Jensvold is perempted under Louisiana law.
Under Louisiana law, a plaintiff may recover for his insurance agent's failure to procure requested insurance coverage. Karam v. St. Paul Fire Marine Ins. Co., 281 So.2d 728, 730 (La. 1973). But such a negligence claim against an insurance agent must be timely filed, or it is extinguished. Louisiana Revised Statute § 9:5606(A) provides the applicable preemptive period:
The Louisiana Supreme Court has described the nature of the insurance agent's duty and the client's right:
An insurance agent who undertakes to procure insurance for another owes an obligation . . . to use reasonable diligence in attempting to place the insurance requested and to notify the client promptly if he has failed to obtain the requested insurance. The client may recover from the agent the loss he sustains as a result of the agent's failure to procure the desired coverage if the actions of the agent warranted an assumption by the client that he was properly insured in the amount of the desired coverage."Id.
No action for damages against any insurance agent . . . whether based upon tort, or breach of contract, or otherwise, arising out of an engagement to provide insurance services shall be brought unless filed in a court of competent jurisdiction and proper venue within one year from the date of the alleged act, omission, or neglect, or within one year from the date that the alleged act, omission, or neglect is discovered or should have been discovered. However, even as to actions filed within one year from the date of such discovery, in all events such actions shall be filed at the latest within three years from the date of the alleged act, omission, or neglect.
Because the plaintiff has not alleged fraud (La.R.S. § 9:5606(C) instructs that the preemptive period does not apply in cases of fraud), Dredging Supply was required to file suit against Jensvold "within one year of the plaintiff's knowledge or constructive knowledge of the act, omission, or neglect that led to the cause of action, and no later than three years after the act, omission, or neglect actually occurred." Campbell v. Stone Ins. Co., 509 F.3d 665, 670 (5th Cir. 2007) (paraphrasing La.R.S. § 9:5606). Importantly, the Louisiana Supreme Court has observed:
A prescriptive period will begin to run even if the injured party does not have actual knowledge of facts that would entitle him to bring a suit as long as there is constructive knowledge of the same. Constructive knowledge is whatever notice is enough to excite attention and put the injured party on guard and call for inquiry. Such notice is tantamount to knowledge or notice of everything to which a reasonable inquiry may lead such information or knowledge as ought to reasonably put the alleged victim on inquiry is sufficient to start running of prescription.Campo v. Correa, 828 So.2d 502, 510-11 (La. 2002); Campbell, 509 at 671 n. 4 (noting that Campo discussed a similar statute that included a prescriptive, and not peremptive, period but stating that "the distinction is irrelevant for the standard of when a party has constructive knowledge of the action that begins the prescriptive or peremptive period").
The Court agrees with Jensvold that Dredging Supply's claim against it has been extinguished as a matter of law.
The parties dispute what event triggered the running of the one-year period. Dredging Supply concedes that the discovery date — when the plaintiff has constructive knowledge of the act or omission giving rise to the claim — is the relevant starting point for the one-year period. See Roadhouse Bar-B-Que, Inc. V. Certain Underwriters at Lloyds, London, 909 So.2d 619, 624 (La.App. 3 Cir. 2005) ("the salient issue is when [the plaintiff] knew or should have known that the policy did not provide the coverage it wanted"). But Dredging Supply urges the Court to use the early 2007 time frame as the starting point; in early 2007, Dredging Supply received in discovery certain drafts of the Great American's October 2006 denial letter that stated "Dredging Supply's broker may not have obtained insurance that met all of Dredging Supply's needs . . . namely leasing of dredges." The language in that draft letter, says Dredging Supply, placed it "specifically" on notice regarding Jensvold's negligence. But the law does not require that a plaintiff be placed "specifically" on notice; instead, constructive notice of alleged negligence is sufficient.
Dredging Supply would impose a stricter standard akin to actual knowledge that, unless an insurance agent's negligence is spelled out, or there is smoking gun evidence that the agent was negligent, the clock does not start running. That is an unreasonable proposition that has been rejected by the Louisiana Supreme Court. See Campo, 828 So.2d at 510-11. Dredging Supply received a detailed letter from Great American, denying coverage. When faced with such a letter, a reasonable insured would question why it might not have the desired coverage, which in turn implicate the insurance agent charged with procuring the requested coverage. At the very least, the letter should have reasonably been "enough to excite attention and put [Dredging Supply] on guard and call for inquiry." See id.
Accordingly, the Court agrees with Jensvold: at the latest, early November 2005 is the relevant triggering date when the plaintiff should have discovered Jensvold's negligence. At that time, Dredging Supply was in receipt of Great American's letter denying coverage, and Dredging Supply had constructive knowledge of facts that would reasonably suggest Jensvold's negligence. See Yates v. Southwestern Life Ins. Co., No. 97-3204, 1998 WL 61033, at *5 (E.D. La. Feb. 12, 1998) (Vance, J.). "A letter indicating a coverage dispute may establish a party's knowledge of the alleged wrongful act by an insurance agent." See Ruth U. Fertel, Inc. V. Executive Risk Specialty Ins. Co., No. 01-645, 2001 WL 617545 (E.D. La. May 31, 2001) (Clement, J.) (citing Huffman v. Goodman, 784 So.2d 718 (La.App. 2d Cir. 2001)).
Indeed, by its own pleading, Dredging Supply seems to acknowledge that the letter declining coverage was critical in terms of constructive notice: In its amended complaint, Dredging Supply asserts that "[i]f Great American's denial is upheld, then Jensvold clearly was negligent in failing to procure proper coverage for DSC's operations, including the leasing of dredges." In other words, when Dredging Supply received Great American's letter denying coverage, it should have been on notice that, if Great American's reasons for denying coverage were upheld, then it did not have the coverage it desired and perhaps requested.
In Ruth U. Fertel, Inc., the court determined that the reservation of rights letter from the insurance company "greatly facilitated" the insured's discovery of the insurance agent's alleged wrongful act. Id. The court noted that "the letter at issue here is comprised of nearly six, full, single-spaced pages, which extensively cite various provisions of the disputed policy and explain [the insurance company's] reasons for reserving its rights. . . . This letter should have put [the insured] on notice that [the insurance agent] might not have properly secured the desired coverage." Id. Likewise, Great American's four-page letter specifically declares that it is denying the claim because, among other reasons, the policy specifically excluded from coverage vessels that were chartered without consent of the underwriters. That should have put the plaintiff on notice, when it received Great American's letter in late October or early November 2005, that Jensvold may not have properly secured the desired coverage.
Because the plaintiff did not sue Jensvold until May 29, 2007 (more than one year after being charged with constructive notice of Jensvold's alleged negligence), its claim against Jensvold is time-barred.
B. Dredging Supply Is Not a Loss Payee.
Summary judgment is appropriate because no genuine issue of material fact exists: the undisputed facts are that Dredging Supply was not a loss payee on Sioux's inland marine policy with America First.
In its complaint, Dredging Supply asserts that it was named as a certificate holder and loss payee on any coverage provided by America First to Sioux relating to the Piranha dredge. America First counters that Dredging Supply was never added as a loss payee, notwithstanding the language in the certificate of insurance. Dredging Supply continues to urge that it was a loss payee, but the record evidence clearly undermines its assertion.
In the plaintiff's memorandum opposing summary judgment, plaintiff's counsel raises for the first time a claim for unjust enrichment. Even if the Court considered this newly-presented claim, the plaintiff has failed to show that it could survive summary judgment on what would be its burden of proof at trial. That is, America First "need not produce evidence negating the existence of a material fact, but need only point out the absence of evidence supporting the non-moving party's case." See Duplantis v. Shell Offshore, Inc., 948 F.2d 187, (5th Cir. 1991) (citation omitted). Dredging Supply has not produced any competent evidence in support of what would be its new claim for unjust enrichment. Where, as here, the plaintiff fails to establish the essential elements of unjust enrichment, summary judgment is appropriate. See Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986).
As noted, the certificate of insurance expressly provided:
. . . THAT THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD INDICATED, NOTWITHSTANDING ANY REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO WHICH THIS CERTIFICATE MAY BE ISSUED OR MAY PERTAIN, THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS, EXCLUSIONS AND CONDITIONS OF SUCH POLICIES. LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS.
(emphasis added).
The certificate also explicitly provides that the America First insurance policy controls, stating that:
THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW.
(emphasis added).
Dredging Supply does not contest the fact that it was never added as a loss payee on the America First policy. And it provides no factual support for its position that it was indeed a loss payee, other than the certificate of insurance which unambiguously disclaims that it is issued for informational purposes only and confers no rights upon the certificate holder. Nonetheless, Dredging Supply persists in its contention that the certificate of insurance should do what it explicitly says it does not do, to alter the coverage afforded by the policy. But "[a] certificate of insurance simply cannot be utilized [to modify] policy coverage." See Citgo Petroleum Corp. V. Yeargin, Inc., 690 So.2d 154 (La.App. 3 Cir. 1997).
To determine whether Dredging Supply is a loss payee, the Court must look to the insurance policy. Cf. Tichenor v. Roman Catholic Church of the Archdiocese of New Orleans, 32 F.3d 953, 963 (5th Cir. 1994) (noting that the policy plainly provides coverage to one of the defendants only under certain circumstances). Here, the insurance policy simply and clearly does not name Dredging Supply as loss payee; Dredging Supply provides no other support for recovery from America First under the terms of the policy. On this record, summary judgment is appropriate.
Under the clear terms of the America First policy, Dredging Supply was not a loss payee and cannot recover from America First for its loss unless America First exercises its right to adjust with Dredging Supply. The America First policy provides:
In the event of "loss" involving property of others in your care[,] we have the right to:
1. Settle the "loss" with the owners of the property. A receipt for payment from the owners of that property will satisfy any claim of yours. . . .
America First's refusal to settle directly with Dredging Supply may seem harsh, but avoiding what it might owe Dredging Supply, under the circumstances, is permitted by the policy. No duty is imposed on America First to settle with the owners of property in the care of its insured. Dredging Supply makes no other supportable argument for forcing America First to pay what it seems it might be owed.
Accordingly, Jensvold's motion for summary judgment is GRANTED and America First's motion for summary judgment is GRANTED. The plaintiff's claims against those two defendants are hereby dismissed.