Category: Insurance

Bad Faith Action Brought Against an Insurer Less than Ten Years after the Date of Loss Dismissed As Prescribed

01.22.2024

The Louisiana Supreme Court recently ruled a plaintiff’s bad faith insurance claim was prescribed where the policy at issue required actions to be brought within two years after the date of loss.

In Phyllis Wilson v. Louisiana Citizens Property Insurance Corporation, the plaintiff asserted a bad faith claim against an insurer. The applicable policy of insurance provided “[n]o action can be brought unless the policy provisions have been complied with and the action is started within two years after the date of loss.” The plaintiff alleged that the insurer failed to timely tender payments for losses that occurred on August 27, 2020 and October 20, 2020. However, the plaintiff did not file her suit unit January 9, 2023.

Prior to the Wilson decision, courts frequently relied on the Louisiana Supreme Court’s decision in Smith v. Citadel Ins. Co., which held that actions against insurers under Louisiana’s bad faith statutes are subject to a ten-year prescriptive period. In Smith, the Supreme Court addressed the issue of whether a bad faith action against an insurer was a delictual or tort action subject to a one-year prescriptive period, or a contractual action, which is subject to a ten-year prescriptive period under Louisiana law. The Smith court concluded that the duty of good faith owed by the insurer to the insured “emanates from the contract between the parties” such that the “insured’s cause of action is personal and subject to a ten-year prescriptive period.”

In Wilson, the Louisiana Supreme Court examined whether Smith required the Court to uphold a ten-year prescriptive period for bad faith actions even though the insurance policy at issue prohibited actions brought more than two years after the date of loss. The Wilson court ultimately concluded that an action against an insurer brought more than two years after the date of loss is prescribed where the applicable insurance policy set a term of two years for filing a claim against the insurer.

To reach this conclusion, the Wilson court cited Taranto v. Louisiana citizens Prop. Ins. Corp., which held “in the absence a statutory prohibition, a clause in an insurance policy fixing a reasonable time to institute suit is valid.” The Wilson court then turned to the applicable statute and noted that La. R.S. 22:868(B) “expressly provides that no policy ‘shall contain any condition, stipulation, or agreement limiting right of action against the insurer to a period of less than twenty-four months next after the inception of the loss when the claim is a first-party claim…’” The Wilson court noted the two-year limitation in the applicable policy was consistent with La. R.S. 22:868(B).

The court’s ruling supports the argument that policy provisions requiring actions to be filed within two years of the date of loss are enforceable. However, the Court did not disturb its holding in Smith, noting the Smith case was factually distinguishable because it did not involve a policy that contained a contractual limitation on the insured’s institution of suits.

References:

Phyllis Wilson v. Louisiana Citizens Property Insurance Corporation, No. 2023-CC-01320 (La. 1/10/2024) (per curiam), 2024 WL 108714.

Smith v. Citadel Ins. Co., 2019-00052 (La. 10/22/19), 285 So.3d 1062.

Taranto v. Louisiana citizens Prop. Ins. Corp., 2010-0105 (La. 3/15/11), 62 So.3d 721, 728.

Louisiana Supreme Court Finds Business Interruption Coverage Does Not Apply to Losses Attributable to COVID-19

04.17.2023

The COVID-19 pandemic had a profound impact on the global economy. Louisiana was not spared, and many businesses had to close as sales to their customers slowed or stopped altogether. Not surprisingly, the question arose regarding whether business interruption insurance would provide coverage to businesses in this situation. The Louisiana Supreme Court recently was asked this question in Cajun Conti, LLC v. Certain Underwriters at Lloyd’s, London and found that the policy at issue did not provide such coverage.

The mayor of New Orleans issued a proclamation on March 16, 2020, that prohibited most public and private gatherings. This applied to restaurants, whose business initially was limited to takeout and delivery services. Before the pandemic, Oceana Grill, a restaurant located in the French Quarter, could serve up to 500 customers at one time. However, it had to limit its business to takeout and delivery services when the mayor’s proclamation was announced. Because of social distancing guidelines, it remained at 60% or less capacity throughout the pandemic.

Oceana maintained a commercial insurance policy with loss of business income coverage and filed suit to request a declaratory judgment that the “policy provides business income coverage from the contamination of the insured premises by COVID-19.” Oceana’s insurer argued that there was no coverage under the policy because COVID-19 did not cause “direct physical loss of or damage to property” under the policy’s terms.

The trial court denied Oceana’s request for declaratory relief at trial. The appellate court reversed and found the policy’s terms ambiguous because it held “direct physical loss” could mean loss of use of the property. Because the pandemic prevented the full use of the property due to capacity limitations, the appellate court found coverage was triggered.

The Supreme Court disagreed and reversed the appellate court’s decision, finding its focus on the use of the property to be misguided. The Court found that suspension of operations “caused by direct physical loss of or damage to property,” as defined by the policy, required “the insured’s property to sustain a physical, meaning tangible or corporeal, loss or damage.” The Court noted that the restaurant’s physical structure was not lost or damaged because of the pandemic. COVID-19 restrictions did not cause damage or loss that was physical in nature. Therefore, the policy did not provide coverage for loss of business income.

Whether a policy affords coverage depends on the terms and conditions of each policy and the facts of each case. However, in light of this decision, businesses with insurance policies that include provisions with language like that at issue in Cajun Conti should not anticipate coverage for loss of business income allegedly caused by the COVID-19 pandemic.

Case References:

Cajun Conti LLC v. Certain Underwriters at Lloyd’s, London, 2022-01349 (La. 3/17/23), 2023 WL 2549132.

Appellate Court Rules a Waiver of UM Coverage Can Only Be Changed at the Insured’s Written Request

02.07.2023

Under Louisiana law, all automobile liability policies include uninsured/underinsured motorist coverage (“UM coverage”) unless the insured affirmatively rejects such coverage, selects lower limits, or selects economic only coverage in writing. The question of what qualifies as a valid rejection of UM coverage has been debated in numerous lawsuits across the state. In Barbera v. Andrade, examination of this issue continued, and the court ruled that an initial rejection of UM coverage remains effective until changed by the insured’s written request.

In Barbera, the court examined whether UM coverage was triggered under a policy when the insured, who previously waived coverage, failed to respond to the insurer’s request to complete a new UM waiver form. It was undisputed that the insured executed a valid waiver of UM coverage in 2001. In 2014, the insurer sent the insured a letter that asked the insured to complete an updated coverage selection form and return it to the insurer’s office. The insured did not execute the updated form. A driver insured under the policy was involved in a motor vehicle accident in 2017 and filed a claim for UM benefits.

The insured argued the letter sent with the waiver form in 2014 was ambiguous and could be read to mean that failure to respond would mean that UM coverage would be read into the policy by default. Evidence also showed that some of the insurer’s employees also thought the failure to respond with the updated form would result in UM coverage.

However, La. R.S. 22:1295(1)(a)(ii) provides, “An insured may change the original uninsured motorist selection or rejection on a policy at any time during the life of the policy by submitting a new uninsured motorist selection form to the insurer on the form prescribed by the commissioner of insurance.” Thus, the Court ruled that the insured’s initial rejection of UM coverage could only be changed via written request by submitting a waiver form to the insurer. The intent of the parties was inconsequential.

Because the insured executed a valid UM waiver in 2001, it remained part of the existing policy. No event, such as a change in the policy’s liability limits, occurred that required the execution of a new UM selection waiver form, and the insured did not submit a new form to the insurer to obtain UM coverage. Therefore, UM coverage was not afforded under the policy, and summary judgment was affirmed in favor of the insurer.

Case Reference: Barbera v. Andrade, 22-147 (La. App. 5 Cir. 11/30/22), 2022 WL 1733087, — So.3d —.

Legislature Responds to Louisiana Supreme Court Decision and Sets New Public Policy Regarding Insurance Coverage for Permissive Use of Non-Owned Vehicles

11.14.2022

Imagine you are visiting family during the holidays. As a favor, you take a family member’s vehicle to the gas station for a fill-up. While in transit, you get into an accident where you are at fault. Does your insurance policy provide coverage for the accident?

According to La. R.S. 22:1296.1, a new statute that went into effect on August 1, 2022, the answer to this question is “yes,” your insurance may afford coverage under these facts.

La. R.S. 22:1296.1 now requires insurance policies issued in Louisiana to provide coverage when the driver insured under the policy operates a non-owned vehicle with the express or implied permission of the vehicle’s owner. The statue was enacted to declare a new public policy regarding this issue and was passed in response to the Louisiana Supreme Court’s decision in Landry v. Progressive Security Insurance Company, 2021-00621 (La. 1/28/22), reh’g denied, 2021-00621 (La. 3/25/22); 338 So.3d 1162.

The Landry case involved a motor vehicle accident that occurred as the defendant-driver, as a favor to the vehicle’s owner, drove the vehicle to a tire shop to repair a tire. The plaintiffs brought an action against the defendant-driver, the driver’s insurer, and the insurer of the vehicle that he drove at the time of the collision.

The Louisiana Supreme Court upheld a provision in the driver’s policy that stated coverage under such circumstances was only available when the driver’s own vehicle was out of service. Because the driver’s vehicle was not out of service, no coverage was found under the driver’s policy. In so holding, the Landry court found that public policy did not require automobile insurance liability coverage for a driver’s negligent operation of a non-owned vehicle.

The Louisiana legislature enacted La. R.S. 22:1296.1 in response to the Landry decision. The statute provides that an insurer writing automobile liability, uninsured, underinsured, or medical payments coverage shall not exclude the benefits of such coverage under its policy to an insured operating a non-owned vehicle if all of the following requirements are satisfied:

The coverage is in full force and effect.
The insured is operating a vehicle owned by another with the express or implied permission of the vehicle’s owner.
The non-owned vehicle that is being operated by the insured is not provided, furnished, or available to the insured on a regular basis.

The statute also provides this coverage is secondary to the vehicle owner’s insurance policy. Furthermore, if the coverage provided under the statute is included within the coverage provided pursuant to La. R.S. 22:1296, which addresses coverage for temporary, substitute, and rental vehicles, the provisions of La. R.S. 22:1296 determine which coverage is primary. (For additional information regarding La. R.S. 22:1296 click here.) [Sophia, please include link to blog from 5/25/22].

Let’s return to real life scenarios like those we addressed above. Perhaps you are blocked in at a party, so a friend tosses you the keys to move their car, or, like the situation in Landry, maybe you are trying to do a good deed by driving your parents’ car to a gas station for a fill-up when an accident occurs. While it remains to be seen how courts will interpret this statute in these circumstances, under the new legislation, these actions may now implicate coverage under your insurance policy.

Case Reference: Landry v. Progressive Security Insurance Company, 2021-00621 (La. 1/28/22), reh’g denied, 2021-00621 (La. 3/25/22); 338 So.3d 1162.

When Buying a House with a Flooding History, Let the Buyer Beware

10.26.2022

In Dunlap v. Empire Trading Group, LLC, the buyers of a home sued the seller and the seller’s real estate agent for fraud after the home flooded three times in the first year after they bought the home. The seller was a home-flipper who disclosed two prior flooding incidents, both of which occurred during the ten months the seller owned the home.

However, the plaintiffs later discovered the home had a substantial flooding history when they requested a flood insurance quote from the National Flood Insurance Program. The quote included a report that identified eighteen incidents of flooding and flood insurance claims at the property over the ten years before the plaintiffs purchased their home.

The plaintiffs argued the seller’s agent committed fraud because she concealed her knowledge of previous flood claims. The seller’s agent moved for summary judgment, arguing that the plaintiffs could not prove that she knew about any of the prior undisclosed flooding incidents. The plaintiffs had no direct evidence to dispute the agent’s defense.

Instead, they argued that circumstantial evidence was sufficient to defeat the motion. They claimed that because the seller had a flood policy on the home, it also would have received the same flood claim history the plaintiffs received in connection with the same federal program. However, the plaintiffs had no evidence to show the seller, or anyone affiliated with the agent’s firm, actually received the flood claim history as they alleged.

Based upon these facts, the court agreed that without evidence that the seller’s agent actually received the flood claim history or otherwise had knowledge of it, the plaintiffs could not carry their burden of proving misrepresentation by the agent.

Case Reference: Dunlap v. Empire Trading Group, LLC, 2021-0180 (La. App. 1 Cir. 10/18/21), 331 So. 3d 932.

Louisiana Supreme Court Uses Reason to Decide Case Involving Tragic Facts

09.16.2022

Sometimes in law, the facts of a case may threaten to eclipse the legal issue. However, Louisiana law instructs the fact finder to see through the facts, and their sometimes tragic nature, and apply the law as written. As Aristotle once wisely said, “The Law is reason free from passion.”

In Kazan, et. al. v. Red Lion Hotels Corporation, et. al., 2021-CC-01820 (La. 6/29/22), the Louisiana Supreme Court recently ruled on a case with tragic facts, and its ruling provides an example of Aristotle’s description of law in action. In Kazan, a female patron was in the parking lot of a motel when a male patron approached her and used Kazan’s vehicle to abduct her from the premises. The car was later found submerged in a lake, and Kazan’s body was recovered from the water. The family filed a tort suit against several parties, including the motel’s owner and its insurer, the Great Lakes Insurance Company SE.

Great Lakes filed a motion for summary judgment and asked to be dismissed on grounds that coverage for the event was excluded from its policy. Specifically, the insurer argued that bodily injury caused by an “assault,” “battery,” or “physical altercation” was excluded under the policy’s terms. Great Lakes further argued that the kidnapping and ultimate death of the patron was excluded under the policy as bodily injury caused by an assault, battery, or physical altercation. The Louisiana Supreme Court agreed and reversed the decision of the trial and appellate courts.

Under Louisiana law, “[a]n insurance policy is a contract between the parties and should be construed using the general rules for the interpretation of contracts.” Id. at p. 3. “When the words of an insurance policy are clear and explicit and do not lead to absurd consequences, courts must enforce the language as written.” Id. at p. 3. “Courts lack authority to alter the terms of an insurance policy under the guise of interpretation and should not create an ambiguity where none exists.” Id. at p. 3.

With these basic rules in mind, the Court carefully reviewed the wording of the exclusion in the Great Lakes policy which stated as follows: “This insurance does not apply to ‘bodily injury,’ ‘property damage,’ or ‘personal advertising injury’ arising out of an ‘assault,’ ‘battery,’ or ‘physical altercation.’” “Physical altercation” was defined in the policy as “a dispute between individual [sic] in which one or more persons sustain bodily injury arising out of the dispute.” Citing Merriam-Webster’s dictionary, the Court defined the term “dispute” as “verbal controversy” or “quarrel.”

Based upon the evidence in the case, the Court found the female patron was involved in a “dispute” with her male attacker, and ultimately sustained bodily injury as a result of the dispute. Therefore, the patron was injured in a physical altercation, as defined under the specific terms of the Policy, and coverage for the event was excluded under the policy’s terms.

The Court noted as follows: “The facts of this case are undoubtedly tragic. Nonetheless, absent a conflict with statutory provisions or public policy, insurers are entitled to limit their liability by imposing reasonable conditions upon the policy obligations they contractually assume. That is what Great Lakes did in the insurance policy at issue here.” Despite the tragic facts presented in the case, in so holding, it appears the court agreed with Aristotle’s belief that the Law is Reason Free from Passion.

UM Waiver Completed by Insured’s Assistant Found Invalid

08.01.2022

Uninsured/underinsured motorist coverage (“UM coverage”) is included in all automobile liability policies by Louisiana law unless the insured “rejects [UM] coverage, selects lower limits, or selects economic only coverage.” What constitutes an adequate rejection of UM coverage has been the crux of countless lawsuits across the state. Recently, in Havard v. Jeanlouis, et al, 2021-C-00810 (La. 6/29/22), the Louisiana Supreme Court examined the validity of a corporate representative’s signature in the context of execution of a UM waiver form. Louisiana courts have found that without a valid signature, UM coverage generally may not be waived.

The Havard court recognized that a corporation cannot “sign” its own name, and that an authorized representative must act on its behalf. Under the facts of this case, an administrative assistant attempted to execute a UM waiver form at the corporate representative’s direction with a stamp of the representative’s signature. The plaintiff argued that the use of the stamp did not meet the requirements for proper execution of the UM waiver form at issue.

Considering these facts, the court noted that Louisiana law of mandate provides that “when the law prescribes a certain form for an act, a mandate authorizing the act must be in that form.” The court continued: “Accordingly, where one individual signs a UM form on behalf of another individual and authority is not conferred by law, our Civil Code requires this authority be in writing.”

While the corporate representative in Havard verbally instructed his administrative assistant to complete the waiver with his signature stamp, no written mandate existed between the representative and the assistant to confirm this authority. Absent the written mandate, the court disregarded the express intention of the corporate representative and held the form invalid.

The court recognized the impracticality of its holding. However, it also commented “Concerns over the practical impact within the insurance industry in scrutinizing stamped signed UM forms are unavailing. Inconvenience is not absurdity. The insurer has the authority, opportunity, and responsibility to assure the UM form is completed properly. … Practical considerations regarding increased due diligence requirements are matters of policy best directed to the legislature.”

Cases involving UM waiver forms are fact-sensitive. Havard involved unique facts where the company’s authorized agent did not sign the UM waiver form personally. While Havard may be limited to its facts, it reminds that proper execution of a UM waiver form is necessary for UM coverage to be properly waived.

Louisiana Supreme Court Provides Updated Guidance on Execution of UM Waiver Forms

Insurance Coverage for “Temporary Substitute Autos” in Louisiana

05.25.2022

Louisiana insurance law recognizes a practical problem faced by many: the need to obtain alternative transportation when the car won’t start. Under La. R.S. 22:1296, any insurance on your personal vehicle must also extend to vehicles that are used as “temporary substitute autos.”

The statute provides that a car’s status as a “temporary substitute auto” depends on how the term is defined in the particular auto policy at issue. However, some rules typically apply to determine whether the auto is a “temporary substitute.” First, the use must be temporary, i.e. limited in duration. Second, the car must be a substitute for the auto insured under the policy and used for the same purpose. Third, policies typically limit coverage to substitute vehicles that the driver does not own.

Some policies also limit coverage by requiring that the substitution be needed for a purpose identified in the policy, such as the breakdown, repair, or destruction of the covered auto.

While the statute generally defers to the definition of “temporary substitute auto” provided in the policy, sometimes courts will overrule the insurer’s definition. For instance, in State Farm Mutual Automobile Insurance Company v. Safeway Insurance Company, 50-098 (La. App. 2 Cir. 9/30/15), 180 So.3d 450, the relevant policy defined a “temporary substitute auto” as a substitute for the owned auto when the owned auto was “being serviced or repaired by a person engaged in the business of selling, repairing, or servicing motor vehicles.” The case involved a motor vehicle accident that occurred while the policy holder operated a borrowed vehicle but before she brought her usual vehicle to a mechanic.

Citing the terms of the policy, the insurer denied coverage on grounds that the policy required the “temporary substitute auto” not only take the place of the driver’s usual vehicle, but also that the driver take the car to a mechanic before coverage would extend to the substitute vehicle. However, the court found this requirement to be against the public policies behind La. R.S. 22:1296 and found coverage under the policy extended to the borrowed vehicle.

To Be or Not To Be Specific—Fact Pleading in Louisiana

03.09.2022

Louisiana is a fact-pleading state. Accordingly, Louisiana law requires that a petition contain “a short, clear and concise statement of all causes of action and material facts arising out of the transaction or occurrence that is the subject matter of the litigation.” See La. C.C.P. art. 891. Generally, the pleader must state what act or omission he will establish at trial. Legal conclusions disguised as factual allegations do not meet the pleading standards required by Louisiana law.

This concept recently was examined in Henderson v. State Farm Mut. Auto. Ins. Co., 2021-0654 (La. App. 4 Cir. 12/17/21), 2021 WL 7162224, where the court considered bad faith allegations the plaintiff tried to assert against an insurer in his petition for damages. At the time of the underlying accident, the plaintiff was a passenger in a Lyft vehicle that was struck by an unknown driver. Steadfast Insurance Company was the Lyft driver’s insurer, and the plaintiff named Steadfast as a defendant to recover damages under its policy.

The plaintiff later amended his petition to seek uninsured/underinsured motorist benefits under the Steadfast policy. He also sought penalties from Steadfast for alleged bad faith and dealing in its insurance practices. In turn, Steadfast filed an exception of no cause of action, arguing that plaintiff’s petition only contained legal conclusions and not specific facts, which were insufficient to support a cause of action. The trial court overruled the exception.

The Fourth Circuit Court of Appeal reversed the decision. Plaintiff’s amended petition alleged that Steadfast “refused to deal with him in good faith, including but not limited to, refusing to issue unconditional (McDill) tenders and taking actions in violation of La. R.S. 22:1892 and La. R.S. 22:1973.” The plaintiff also generally alleged the insurer acted “arbitrarily, capriciously and without probable cause” in its failure to pay money under its policy.

The Court noted that the plaintiff’s allegations were legal conclusions asserted as facts, which could not be considered as well-pleaded factual allegations for purposes of a no cause of action. Importantly, the court reiterated that a court may not consider legal conclusions “clothed as facts,” citing Hooks v. Treasurer, 06-0541, p. 10 (La. App. 1 Cir. 5/4/07), 961 So.2d 425, 431-32. Accordingly, the plaintiff’s allegations, absent additional information, were insufficient to state a cause of action. The plaintiff failed to state specific actions or omissions that would be established at trial. Hence, he failed to state a cause of action.

Renewed or Was it New? Dispute over UM Coverage in Auto Policy

02.28.2022

Louisiana law requires UM coverage in automobile liability insurance policies in the same amount as the policy’s bodily injury liability coverage. UM coverage will be included in the policy unless the insured rejects UM coverage, selects lower limits, or selects economic-only coverage. This rejection, selection of lower limits, or selection of economic-only coverage must be made on a form prescribed by the commissioner of insurance and must be signed by the insured or its legal representative. See La. R.S. 22:1295. If a rejection form is not completed, UM coverage will be read into the policy. However, a valid UM waiver form executed for a policy of insurance remains in effect when that policy is renewed with a few exceptions. Generally, execution of a new waiver form is not required unless a new policy is issued or the liability limits increased. These basic principles were considered in the recent First Circuit decision in Johnson, et al. v. Bass, Geico General Ins. Co., and GoAuto Management Services, LLC, 2021 CA 0139 (La. App. 1 Cir. 12/22/21).

In Johnson, the plaintiff obtained a policy of insurance from GoAuto on July 17, 2015 and validly rejected UM coverage on the commissioner’s UM rejection form. The plaintiff renewed the policy multiple times and also completed an “Application for Personal Automobile Insurance” on February 23, 2018 to add her husband and an additional vehicle to the policy.

The Johnson plaintiff was in a motor vehicle accident on November 26, 2019 and claimed UM benefits under the policy. She argued that the insurance application she completed in February 2018 to add a new driver and a new vehicle to the policy created a new policy of insurance that required completion of a new UM waiver form. Because a new UM waiver form was not executed in February 2018, the plaintiff argued that UM coverage should be read into the policy. Thus, the question posed to the court was whether the 2018 policy became new or was simply a renewal. The trial court found that the policy was a renewal and dismissed the UM claim.

The First Circuit affirmed and rejected the plaintiff’s argument holding, “the language of La. R.S. 22:1295 is clear and unambiguous; only changes in the ‘limits of liability’ to an existing policy will create a new policy that requires the completion of a new UM selection form.” Despite multiple renewals, the liability limits of the policy did not change from the date it was issued through the date of the accident. Importantly, the limits also did not change when the new driver and vehicle were added to the policy in February 2018. Thus, no new policy was created. The original rejection of UM coverage remained in effect, and the plaintiff’s claims against her alleged UM insurer were dismissed.

What to do if your Home or Business is Damaged by Flood or Storm

05.18.2021

Unfortunately, recent flooding and storm events have again affected our area in Louisiana. Many people experienced flooding and storm damage to their homes and businesses. If you experienced flood or storm damage, please consider following these steps to ensure your damage claim is properly documented and submitted:

DOCUMENT, DOCUMENT, DOCUMENT – Once you are able, make sure to document the damages to your home and contents. Whether for a homeowners or flood insurance policy or to obtain government assistance, take plenty of photos and video of the damage. Make a list of the items that were damaged or destroyed. One way to organize this list is to group items from each room together, approximate its age, where it was purchased, and its value when purchased. It will be more difficult to document your claim once the cleanup or rebuilding begins.

OBTAIN MULTIPLE ESTIMATES -To the extent you are able, obtain multiple estimates for the work needed on your home. Pay for the estimate if necessary. If you have three estimates and the amounts are close, they are much more credible. Also, try and get as much detail as possible in each estimate, including specific materials to be used, dimensions, and finishes.

NOTIFY YOUR INSURER – Whether a homeowners or flood policy claim, or other insurance claim related to your business, promptly notify your insurer of your damage. Your insurer will send someone to inspect the damage and start your claim. Provide as much information as possible to make their job as easy as possible. That will likely quicken the pace of your claim.

FLOOD CLAIMS – If you have flood insurance, it is likely provided by the federal government through the National Flood Insurance Program (NFIP). There are specific rules for submitting your claim through the NFIP. YOU MUST SUBMIT FEMA FORM 086-0-11 (NOTICE OF LOSS) WITHIN 120 DAYS OF YOUR DAMAGE. You can find this form here.

Insurance: “ACV,” Depreciation, or Both

02.19.2021

In Louisiana, we are all too familiar with natural disasters. Every “hurricane season,” we hope the storm causes only minor inconvenience; but history teaches us to prepare for more. When these storms come, home and business owners inevitably make post-disaster insurance claims to repair the damage. While the specific amount owed for property damage is determined by the terms of the policy, the amount received may be affected by when (and if) the damage is repaired.

An insurer will work with you to identify the “actual cash value” or “ACV” of the damaged property when handling your claim. “ACV” is defined as the cost to repair/replace the damage, less depreciation. Jouve v. State Farm Fire and Cas. Co., 2010-1522 (La.App. 4 Cir. 8/17/11), 74 So.3d 220. Many policies provide that an insurer is not obligated to provide you with more than the “ACV” of the damage, unless and until you actually make repairs. Later, you can recover the depreciation amount once you submit proof that the repairs are complete. Courts have enforced such provisions in many cases, regardless of the type of loss.

So, what happens if you never make the repairs? Simply, the insurance company may never owe the depreciation. In Hackman v. EMC Ins. Co., 07-552 (La.App. 5 Cir. 3/25/08), 984 So.2d 139, the plaintiff’s property was damaged by a fire. The insurer paid the ACV of the loss but withheld depreciation pending repairs. The plaintiff never made the repairs and ultimately sold the property. The Court ruled the plaintiff was not entitled to recover the difference.

Similarly, in Jouve v. State Farm Fire & Cas. Co., supra, the plaintiffs’ home was damaged by wind during Hurricane Katrina. Their insurer paid the ACV of the loss. Thereafter, the plaintiffs sold the home “as is” and sought recovery for the depreciation. The court reviewed the policy and found the plaintiffs’ sale of the home without repairs limited their recovery to ACV.

As with any insurance claim, you should always read your policy before losses occur to ensure you understand its terms and conditions. Maybe add this as an unusual step to your hurricane checklist. As these cases show, your ultimate recovery can be affected by what you do, or do not do, following the loss.