The Louisiana Supreme Court recently held that an insurance agent’s negligent handling of a claim did not justify an award for mental anguish in Prest v. Louisiana Citizens Property Corp., 2012-0513 (La. 12/4/12). In Prest, it was alleged that the agent negligently failed to process a request for increased insurance sent more than 10 days prior to Hurricane Katrina.
Based upon representations from their agent, plaintiffs believed their property was insured up to the requested amounts for Katrina-related damages. However, the insurance company denied the additional coverage because the request for additional coverage was not reviewed.
The plaintiffs filed suit and settled the claim for insurance benefits. They reserved in the settlement the right to pursue a negligence claim against their insurance agent and took that claim to trial.
At trial, the Trial Court found the agent negligent and awarded damages to include a $75,000 award for “frustration, inconvenience and mental anguish.” The Fourth Circuit affirmed. The Supreme Court likewise upheld the finding of negligence. However, it reversed the award for mental damages.
Generally, if a defendant’s conduct is merely negligent and only causes mental disturbance without physical injury, the defendant is not liable for damages. Moresi v. State, 567 So. 2d 1081, 1095 (La. 1990). An exception to this rule exists when there is a likelihood of genuine or serious mental distress arising from “special circumstances.”
The Supreme Court did not feel that the facts involving the additional insurance created “special circumstances” sufficient to disregard the general rule that emotional damages are not recoverable in the absence of physical injury. In its ruling, the Court acknowledged that the plaintiffs were likely stressed and inconvenienced by the insurer’s failure to pay. Nevertheless, the Court did not find that the plaintiffs’ stress was any greater than that experienced by a host of Louisiana citizens affected by Hurricane Katrina.