Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-alsd-1_06-cv-00360/USCOURTS-alsd-1_06-cv-00360-1/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1332 Diversity-Declaratory Judgement

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IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF ALABAMA

SOUTHERN DIVISION

RICHARD PREIS, et al., )

 )

Plaintiffs, )

 )

v. ) CIVIL ACTION 06-0360-WS-C

 )

LEXINGTON INSURANCE )

COMPANY, et al., )

 )

Defendants. )

ORDER

This matter is before the Court on the motion for summary judgment filed by

defendants T & B, Ltd. (“T&B”) and Allen Ladd. (Doc. 110). The parties have filed

briefs and evidentiary materials in support of their respective positions, (Docs. 111-12,

135-37, 146), and the motion is ripe for resolution. After carefully considering the

foregoing and other relevant materials in the file, the Court concludes that the motion is

due to be granted.

BACKGROUND

The plaintiffs’ home on Mobile Bay was damaged during Hurricane Katrina in

August 2005, while insured under a homeowner’s policy (“the Policy”) issued by

defendant Lexington Insurance Company (“Lexington”). T&B is the firm through which

the Policy was procured, and Ladd is the broker with T&B with whom the plaintiffs dealt. 

 The plaintiffs recovered under two flood policies issued by other entities and now seek

additional coverage from Lexington. As discussed in the Court’s order addressing

Lexington’s motion for summary judgment, the Policy does not provide coverage for

losses caused by flood. 

The lawsuit was filed in March 2006. (Doc. 3). The current, amended complaint

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asserts the following claims against T&B and Ladd:

• Count Four: Fraudulent misrepresentation

• Count Five: Fraudulent suppression

• Count Six: Negligence/wantonness

(Doc. 60 at 16-19).

DETERMINATIONS OF UNCONTROVERTED FACT

Ladd holds a non-resident license from the Louisiana insurance department. (Doc.

24, Ladd Declaration).

In its August 2004 letter to the plaintiffs enclosing the renewal terms and

conditions for their review and acceptance, T&B explicitly stated, as a separate paragraph 

on the first page of the brief correspondence, “Please be aware that flood, rising water,

wave or tidal action is not covered under your Lexington Homeowner policy.” (Doc.

111, Exhibit 7) (emphasis in original). Two weeks later, T&B mailed the renewal policy

to the plaintiffs with a one-page cover letter again stating in a separate paragraph, “Please

remember that this policy does not include Flood Insurance coverage.” (Id., Exhibit

8) (emphasis in original). Similar warnings were included in similar mailings in

connection with renewal every year, beginning in August 1997. (Id., Exhibits 3-6, 11-

17). 

 CONCLUSIONS OF LAW

The Court has subject matter jurisdiction over this matter pursuant to 28 U.S.C. §

1332. Venue is proper in this Court pursuant to 28 U.S.C. § 1391(a)(2). 

Summary judgment should be granted only if “there is no issue as to any material

fact and the moving party is entitled to a judgment as a matter of law.” Fed. R. Civ. P.

56(c). The party seeking summary judgment bears “the initial burden to show the district

court, by reference to materials on file, that there are no genuine issues of material fact

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E.g., Jones v. Sheehan, Young & Culp, P.C., 82 F.3d 1334, 1338 (5th Cir. 1996) (“Rule

56 ... does not impose upon the district court a duty to survey the entire record in search of

evidence to support a non-movant’s opposition.”); Street v. J.C. Bradford & Co., 886 F.2d 1472,

1479-80 (6th Cir. 1989) (“The trial court no longer has the duty to search the entire record to

establish that it is bereft of a genuine issue of material fact.”); Lawson v. Sheriff of Tippecanoe

County, 725 F.2d 1136, 1139 (7th Cir. 1984) (“The judge was not obliged to comb the record for

evidence contradicting the defendant’s affidavit”); Karlozian v. Clovis Unified School District,

2001 WL 488880 at *1 (9th Cir. 2001) (“While pretext evidence may have been buried in [the

plaintiff’s] 242 page deposition, a district court is not “required to comb the record to find some

reason to deny a motion for summary judgment.”) (internal quotes omitted); Adler v. Wal-Mart

Stores, Inc., 144 F.3d 664, 672 (10th Cir. 1998) (“The district court has discretion to go beyond

the referenced portions of these [summary judgment] materials, but is not required to do so.”);

see also Local Rule 7.2.

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that should be decided at trial.” Clark v. Coats & Clark, Inc., 929 F.2d 604, 608 (11th Cir.

1991). Once the moving party has satisfied its responsibility, the burden shifts to the

nonmoving party to show the existence of a genuine issue of material fact. Id. “If the

nonmoving party fails to make ‘a sufficient showing on an essential element of her case

with respect to which she has the burden of proof,’ the moving party is entitled to

summary judgment.” Id. (quoting Celotex Corp. v. Catrett, 477 U.S. 317 (1986))

(footnote omitted). 

Parties may not, by the simple expedient of dumping a mass of evidentiary

material into the record, shift to the Court the burden of identifying evidence supporting

their respective positions.1

 Similarly, “[t]here is no burden upon the district court to

distill every potential argument that could be made based upon the materials before it on

summary judgment.” Resolution Trust Corp. v. Dunmar Corp., 43 F.3d 587, 599 (11th

Cir. 1995). Accordingly, the Court’s review of the parties’ evidentiary submissions is

limited to the portions to which they have specifically cited. The Court’s review is

similarly limited to those legal arguments expressly advanced by the parties.

The parties agree that Louisiana’s choice-of-law rules apply (because suit was

filed there) and that those rules dictate that Louisiana law governs the timeliness of the

plaintiffs’ claims against T&B and Ladd. (Doc. 112 at 6-9; Doc. 135 at 12, 24).

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Louisiana provides a special peremptive period for actions against insurance

agents, which reads in pertinent part as follows:

A. No action for damages against any insurance agent, broker, solicitor, 

or other similar licensee under this state, 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.

...

C. The peremptive period provided in subsection A of this Section shall not 

apply in cases of fraud, as defined in Civil Code Article 1953.

La. Rev. Stat. § 5606.

It is uncontroverted that Ladd holds an insurance license from the state of

Louisiana. (Doc. 24). Even though T&B apparently holds no such license, “[b]ecause

the acts of an insurance agent are generally imputable to the insurer he represents, we

conclude La. R.S. 9:5606’s peremptive periods apply to the claims against [the insurer].” 

Klein v. American Life & Casualty Co., 858 So. 2d 527, 531 (La. Ct. App. 1st Cir. 2003);

accord Kobeszko v. State Farm Fire & Casualty Co., 2007 WL 1486315 at *1 (E.D. La.

2007). The plaintiffs have identified no misconduct of T&B other than that of Ladd, its

agent. Accordingly, Section 5606 applies equally to both defendants.

The plaintiffs’ claims against T&B and Ladd are for damages, (Doc. 60 at 16-19),

and they arise out of an engagement to provide insurance services. On its face, Section

5606 applies to all such claims, regardless of how they are cast, and the plaintiffs’ claims

of misrepresentation, suppression, negligence and wantonness (including negligent and/or

wanton breach of fiduciary duty) fall within the statute. E.g., Klein, 858 So. 2d at 530,

531 (Section 5606 applies to claims of negligence and breach of fiduciary duty). The

exclusion of fraud cases provided in subsection C addresses only the three-year period;

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Other intermediate courts have ruled that Subsection C exempts fraud claims from

the one-year period. Shermohmad v. Ebrahimi, 945 So. 2d 119, 121-22 (La. Ct. App. 5th

Cir. 2006); Klein, 858 So. 2d at 531 n.4. Neither provides reasoning for its conclusion. 

In contrast, Huffman reviewed the history of the provision and explained why the

legislature’s usage of the singular “period” reflected that only the three-year period was

addressed by subsection C. Cf. Granger v. Middleton, 948 So. 2d 1272, 1275 (La. Ct.

App. 3rd Cir. 2007) (employing the same reasoning to conclude that the substantively

identical provision governing legal malpractice claims excludes fraud claims only from

the three-year period, not the one-year period). The Court accepts Huffman for two

reasons. First, it is persuaded that Huffman correctly interprets the statute. Second, the

plaintiffs have not challenged the defendants’ reliance on Huffman. (Doc. 112 at 10). 

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fraud claims are subject to the one-year period. Huffman v. Goodman, 784 So. 2d 718,

727 (La. Ct. App. 2nd Cir. 2001).2

 The plaintiffs do not contest any of these points. The

issue thus becomes whether they timely filed suit under this section. 

It is first necessary to identify the scope of the claims at issue in this action. With

respect to the plaintiffs’ claims of misrepresentation and suppression, the amended

complaint alleges but one: that Ladd misrepresented that the Policy covered all damages

caused by hurricane and suppressed that the Policy did not in fact do so. (Doc. 60 at 16-

17). In brief, the plaintiffs assert additional misrepresentations and omissions. (Doc. 135

at 15-16, 18-19, 22-24). Because these allegations were not made in the amended

complaint, they are not part of the lawsuit. E.g., Brown v. Snow, 440 F.3d 1259, 1266

(11th Cir. 2006) (“[T]he discussion of a potential claim in a deposition does not satisfy the

requirement of Rule 8(a).”); Coon v. Georgia Pacific Corp., 829 F.2d 1563, 1568 (11th

Cir. 1987) (“[T]he inclusion of claims in the pretrial stipulation, the mention of them in

discovery and the filing of motions concerning those claims were not a substitute for the

factual allegations of a complaint under Federal Rule of Civil Procedure 8(a).”). 

With respect to the plaintiffs’ negligence/wantonness claim, the amended

complaint alleges that T&B and Ladd: (1) failed to understand the terms and coverages of

the Policy; (2) failed to disclose that a hurricane is an excluded peril; (3) failed to disclose

that water damage primarily caused by wind or hurricane is excluded; (4) failed to

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The plaintiffs’ assertion that T&B and Ladd failed to disclose their alleged agency

relationship with Lexington, (id. at 18-19), even if intended as a claim of

negligence/wantonness rather than the suppression claim they call it elsewhere, (id. at

16), lies outside the amended complaint and so is not part of this lawsuit.

4

It does not, as the plaintiffs suggest (without citation to authority), begin to run

only when the injured party “ha[s] a legal cause of action.” (Doc. 135 at 26). On its face,

the statute provides that the peremptive period begins to run when the wrongful conduct

occurs, is discovered, or should be discovered, independent of whether the injured party

has suffered damage. Indeed, “peremption [on a legal malpractice claim under Section

5605] begins to run when a client knows or should have known of an act, omission, or

negligence by their attorney even though the cause of action may not ripen into a

justiciable claim until the client experiences some damages.” Atlas Iron & Metal Co. v.

Ashy, 918 So. 2d 1205, 1213 (La. Ct. App. 3rd Cir. 2006). The same principle applies to

the substantively identical Section 5606. Commonwealth Land Title Co. v. Jones, 948 So.

2d 1243, 1248-49 (La. Ct. App. 3rd Cir. 2007). 

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disclose that personal property losses relating to weather are excluded; (5) failed to

disclose that Lexington took the positions identified in paragraphs (2) - (4); and (6) failed

to contact Lexington to determine its position on these issues. (Doc. 60 at 18-19, ¶¶ 54-

55). Their embedded claim for breach of fiduciary duty is limited to breach of duties “as

aforesaid.” (Id., ¶ 56). 

In their brief, the plaintiffs make no mention of items (2) - (5), which are in any

event only restatements of their suppression claim. They articulate their challenge under

items (1) and (6) as follows: Ladd failed to place excess flood coverage, either because

he didn’t understand that the Policy didn’t provide flood coverage, or because he did

understand but nevertheless failed to secure appropriate coverage. If he didn’t understand

that the Policy didn’t provide flood coverage, it was because he didn’t adequately review

the Policy and didn’t contact Lexington to find out, and he didn’t do those things because

he didn’t understand that he had a duty to do so. (Doc. 135 at 17-21).3

The peremptive period of Section 5606 is tied to the “alleged act, omission, or

neglect.”4

 Based on the plaintiffs’ allegations that are properly part of this lawsuit, the

alleged acts, omissions and neglect consist of: (1) misrepresenting that the Policy covers

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While the plaintiffs characterize Ladd’s alleged lack of understanding of his

duties and the Policy as negligent, (Doc. 135 at 6, 16, 17), these matters merely explain

why Ladd negligently failed to procure excess flood coverage; it is only that failure which

is potentially actionable.

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all hurricane damage; (2) suppressing that the Policy does not do so; and (3) negligently

or wantonly failing to obtain excess flood coverage.5

 T&B and Ladd argue that each of

these occurred in 1995, when the plaintiffs obtained insurance coverage, and the plaintiffs

concede that they occurred that year. However, they argue that these acts, omissions and

neglect recurred, most recently during the August 2004 renewal process. (Doc. 135 at 2-

3, 26-27). They argue further that they “did not actually know about” the acts, omissions

and neglect until Lexington denied their claim scant weeks before they filed suit. (Id. at

26-27). 

It is true that the Policy was renewed in August 2004 but, “[i]n order for each

renewal to be the basis of a separate tort, the complained of conduct must consist of

separate and distinct acts, each of which gives rise to immediately apparent damages.” 

Biggers v. Allstate Insurance Co., 886 So. 2d 1179, 1182 (La. Ct. App. 4th Cir. 2004);

accord Bel v. State Farm Mutual Automobile Insurance Co., 845 So. 2d 377, 382 (La. Ct.

App. 1st Cir. 2003). Otherwise, the renewals are “nothing more than a continuation of the

ill effects of an original unlawful act.” Id. As noted in an authority the plaintiffs

encourage the Court to employ, (Doc. 135 at 29), “[t]he inquiry is whether the actions of

the insurance agents at the time of renewal can be construed to constitute an act separate

from the initial policy procurement.” Fidelity Homestead Association v. Hanover

Insurance Co., 458 F. Supp. 2d. 276, 280 (E.D. La. 2006). 

The plaintiffs do not attempt to meet this standard. They do not, for example,

argue (or provide evidence) that Ladd, in August 2004, made an affirmative

representation that the plaintiffs had full hurricane coverage, suppressed the fact that they

did not, or elected not to obtain excess flood coverage. On the contrary, the only

communication they cite is the cover letter enclosing the renewal terms and conditions for

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review and acceptance. (Doc. 135 at 11). That document on its face reflects that the only

provisions subject to discussion were: the amount of other structures coverage; the

amount of personal property coverage; the wind deductible; water back-up coverage; and

the addition of coverage for loss of use. (Doc. 111, Exhibit 7). The plaintiffs expressly

acknowledge the absence of any affirmative misrepresentation after November 1997. 

(Doc. 135 at 22).

Even had the plaintiffs demonstrated the existence of a jury issue as to new acts,

omissions or neglect in August 2004, they did not file suit until March 2006, over 18

months later. Accepting for present purposes the plaintiffs’ representation that they did

not actually learn that they lacked full hurricane coverage until Lexington denied their

claim shortly before they filed suit, the issue becomes whether they “should have ...

discovered” the wrongful conduct before March 2005. The answer is plainly “yes.”

In its August 2004 letter to the plaintiffs enclosing the renewal terms and

conditions for their review and acceptance, T&B explicitly stated, as a separate paragraph 

on the first page of the brief correspondence, “Please be aware that flood, rising water,

wave or tidal action is not covered under your Lexington Homeowner policy.” (Doc.

111, Exhibit 7) (emphasis in original). Two weeks later, T&B mailed the renewal policy

to the plaintiffs with a one-page cover letter again stating in a separate paragraph, “Please

remember that this policy does not include Flood Insurance coverage.” (Id., Exhibit

8) (emphasis in original). Similar warnings were included in similar mailings in

connection with renewal every year, beginning in August 1997 — a total of 14 such

warnings. (Id., Exhibits 3-6, 11-17). The plaintiffs have not acknowledged, much less

controverted, any of this evidence.

The peremptive period begins “when a plaintiff obtains actual or constructive

knowledge of facts indicating to a reasonable person that he or she is the victim of a tort. 

... 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

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In limited circumstances, an insured may not have a duty to examine his policy.

See Louisiana Home Builders Association Self-Insurers’ Fund v. Adjustco, Inc., 630 So.

2d 630, 635 (La. Ct. App. 1st Cir. 1993). The plaintiffs neither invoke this rule nor offer

any evidence to establish its applicability. In any event, the rule would not aid them even

if it applied, because the plaintiffs were placed on notice by cover letters, quite

independent of the Policy provisions themselves. See Roadhouse, 909 So. 2d at 621, 624

(in a suit for failure to place adequate coverage, the plaintiff’s failure to review the policy

was irrelevant, because the cover letters accompanying the policy set forth the policy

limits and thereby triggered the peremptive period).

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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.” Roadhouse Bar-B-Que, Inc. v. Certain Underwriters, 909 So.

2d 619, 623 (La. Ct. App. 3rd Cir. 2005). That is, the peremptive period does not begin to

run only when the plaintiff has irrefutable evidence that he has been wronged; rather, it

begins when he receives sufficient notice of a problem that a reasonable person would

inquire further, if the resulting reasonable inquiry would disclose the wrongful conduct. 

 Here, the plaintiffs were on exceptionally clear notice that the Policy did not cover

flood damage. That exclusion from coverage was patently in tension with the plaintiffs’

alleged belief that the Policy covered flooding from a hurricane, and it would have caused

a reasonable person to inquire of the defendants as to whether such flooding was covered. 

The plaintiffs do not suggest that T&B, Ladd or Lexington would not have confirmed that

flooding from hurricanes was excluded, had they simply been asked. Thus, as a matter of

law the peremptive period began to run in or before August 2004 and expired long before

the plaintiffs filed suit.6

 

Because the plaintiffs’ claims are time-barred, the Court pretermits discussion of

the defendants’ remaining arguments, several of which appear meritorious. For the

reasons set forth above, the motion for summary judgment filed by T&B and Ladd is

granted. All claims against these defendants are dismissed with prejudice.

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DONE and ORDERED this 20th day of June, 2007.

s/ WILLIAM H. STEELE

UNITED STATES DISTRICT JUDGE

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