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Nature of Suit Code: 240
Nature of Suit: Torts to Land
Cause of Action: 

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IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 09-30485

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IN RE: KATRINA CANAL BREACHES LITIGATION

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LOUISIANA STATE, Individually and on behalf of State of Louisiana,

Division of Administration, Office of Community Development ex rel;

JAMES D CALDWELL, also known as Buddy Caldwell, proper plaintiff

party, in place of Charles C. Foti, Jr.,

Plaintiffs-Appellees

v.

ANPAC LOUISIANA INSURANCE COMPANY; AMERICAN NATIONAL

GENERAL INSURANCE COMPANY; AMERICAN NATIONAL PROPERTY

& CASUALTY COMPANY; REPUBLIC FIRE AND CASUALTY

INSURANCE COMPANY; AUTO CLUB FAMILY INSURANCE COMPANY;

AEGIS SECURITY INSURANCE COMPANY; AIG CENTENNIAL

INSURANCE COMPANY; AIU INSURANCE COMPANY; ALLSTATE

INDEMNITY COMPANY; ALLSTATE INSURANCE COMPANY; AMERICA

FIRST INSURANCE COMPANY; AMERICAN BANKERS INSURANCE

COMPANY OF FLORIDA; AMERICAN FAMILY INSURANCE; AMERICAN

GENERAL PROPERTY INSURANCE COMPANY; AMERICAN INSURANCE

COMPANY; AMERICAN MANUFACTURERS MUTUAL INSURANCE

COMPANY; AMERICAN MODERN INSURANCE GROUP; AMERICAN

MODERN SURPLUS LINES INSURANCE COMPANY; AMERICAN

RELIABLE INSURANCE COMPANY; AMERICAN SECURITY INSURANCE

COMPANY; AMERICAN SUMMIT INSURANCE COMPANY; AMERICAN

SOUTHERN HOME INSURANCE COMPANY; AMERICAN WESTERN

HOME INSURANCE COMPANY; AMICA MUTUAL INSURANCE

COMPANY; ARMED FORCES INSURANCE EXCHANGE; ASSURANCE

COMPANY OF AMERICA; AUDUBON INSURANCE COMPANY; BALBOA

INSURANCE COMPANY; CERTAIN UNDERWRITERS AT LLOYDS OF

United States Court of Appeals

Fifth Circuit

F I L E D

July 28, 2010

Lyle W. Cayce

Clerk

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LONDON, London Market Insurers; CHUBB INDEMNITY INSURANCE

COMPANY; CHUBB CUSTOM INSURANCE COMPANY; CHUBB

NATIONAL INSURANCE COMPANY; CLARENDON NATIONAL

INSURANCE COMPANY; ECONOMY PREMIER ASSURANCE COMPANY;

EMPIRE FIRE & MARINE INSURANCE COMPANY; EMPIRE INDEMNITY

INSURANCE COMPANY; ENCOMPASS INSURANCE COMPANY OF

AMERICA; ENCOMPASS PROPERTY AND CASUALTY COMPANY;

FARMERS INSURANCE EXCHANGE; FEDERAL INSURANCE COMPANY;

FIDELITY AND DEPOSIT INSURANCE COMPANY OF MARYLAND;

FIDELITY NATIONAL INSURANCE COMPANY; FIDELITY NATIONAL

PROPERTY AND CASUALTY INSURANCE COMPANY; FIREMAN’S

FUND INSURANCE COMPANY; GREAT NORTHERN INSURANCE

COMPANY; HANOVER AMERICAN INSURANCE COMPANY; HANOVER

INSURANCE COMPANY; HARTFORD ACCIDENT & INDEMNITY

COMPANY; HARTFORD CASUALTY INSURANCE COMPANY;

HARTFORD FIRE INSURANCE COMPANY; HARTFORD INSURANCE

COMPANY OF THE MIDWEST; HARTFORD INSURANCE COMPANY OF

THE SOUTHEAST; ET AL; HOMESITE INSURANCE COMPANY; HORACE

MANN INSURANCE COMPANY; HORACE MANN PROPERTY AND

CASUALTY INSURANCE COMPANY; LAFAYETTE INSURANCE

COMPANY; LEXINGTON INSURANCE COMPANY; LIBERTY MUTUAL

FIRE INSURANCE COMPANY; LIBERTY MUTUAL INSURANCE

COMPANY; LOUISIANA FARM BUREAU MUTUAL INSURANCE

COMPANY; LOUISIANA FARM BUREAU CASUALTY INSURANCE

COMPANY; MASSACHUSETTS BAY INSURANCE COMPANY;

MERASTAR INSURANCE COMPANY; MERITPLAN INSURANCE

COMPANY; METROPOLITAN CASUALTY INSURANCE COMPANY;

METROPOLITAN PROPERTY AND CASUALTY INSURANCE COMPANY;

NATIONAL LLOYDS INSURANCE COMPANY; NATIONAL SECURITY

FIRE & CASUALTY COMPANY; NATIONAL UNION FIRE INSURANCE

COMPANY OF LOUISIANA; NATIONAL UNION FIRE INSURANCE

COMPANY OF PITTSBURGH, PENNSYLVANIA; OMEGA ONE

INSURANCE COMPANY; SCOTTSDALE INSURANCE COMPANY;

SECURITY PLAN FIRE INSURANCE COMPANY; SHELTER GENERAL

INSURANCE COMPANY; SHELTER MUTUAL INSURANCE COMPANY;

SOUTHWEST BUSINESS CORPORATION; STANDARD FIRE INSURANCE

COMPANY; STATE FARM FIRE & CASUALTY COMPANY; STATE FARM

GENERAL INSURANCE COMPANY; TRINITY UNIVERSAL INSURANCE

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COMPANY; UNION NATIONAL FIRE INSURANCE COMPANY; UNITED

FIRE AND CASUALTY COMPANY; UNITED FIRE AND INDEMNITY

COMPANY; UNITED SERVICES AUTOMOBILE ASSOCIATION; UNITRIN

AUTO AND HOME INSURANCE COMPANY; UNITRIN PREFERRED

INSURANCE COMPANY; USAA; CASUALTY INSURANCE COMPANY;

USAA GENERAL INDEMNITY COMPANY; USAA; VIGILANT INSURANCE

COMPANY; VOYAGER INDEMNITY INSURANCE COMPANY; VOYAGER

PROPERTY AND CASUALTY INSURANCE COMPANY; ZC STERLING

CORPORATION; ZC STERLING INSURANCE AGENCY INC; ZURICH

AMERICAN INSURANCE COMPANY; ZURICH NORTH AMERICA;

METLIFE INC,

Defendants-Appellants

Appeal from the United States District Court

for the Eastern District of Louisiana

Before JONES, Chief Judge, PRADO, Circuit Judge, and O’CONNOR, District

Judge.

*

EDITH H. JONES, Chief Judge:

In this interlocutory appeal, the Defendants—over 200 insurance

companies—challenge approximately 151,000 homeowner’s insurance claims

brought by the State of Louisiana based upon policyholders’ purported

assignments of policy rights to the State. Because no controlling Louisiana

Supreme Court precedent has determined whether an insurance contract’s antiassignment clause prohibits post-loss assignments of policy rights, because this

issue is case-dispositive, and because either the State or the insurers stand to

lose billions of dollars in claims, we certify the post-loss assignment question to

the Louisiana Supreme Court.

 District Judge, Northern District of Texas, sitting by designation. *

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I. Factual Background and Procedural History

To provide relief in the aftermath of hurricanes Katrina and Rita,

Congress appropriated federal funds, administered by the Department of

Housing and Urban Development (HUD), to affected states. Louisiana

distributed some of those funds via the “Road Home” program, which provided

grants of up to 150,000 dollars to Louisiana homeowners to repair uninsured or

under-insured property damage. Purporting to fulfill an obligation under federal

law to “prevent recipients from receiving any duplication of benefits,” the State

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required Road Home grant recipients to execute a “Limited

Subrogation/Assignment Agreement.” It stated, in pertinent part:

I/we hereby assign to the State of Louisiana . . . to the extent of the

grant proceeds awarded or to be awarded to me under the [Road

Home] Program, all of my/our claims and future rights to

reimbursement and all payments hereafter received or to be

received by me/us: (a) under any policy of casualty or property

damage insurance or flood insurance on the residence, excluding

contents (“Residence”) described in my/application for Homeowner’s

Assistance under the Program (“Policies”): (b) from FEMA, Small

Business Administration, and any other federal agency, arising out

of physical damage to the Residence caused by Hurricane Katrina

and/or Hurricane Rita.

According to the State, the Road Home program created perverse

incentives for insurance companies and insured homeowners—some insurers

inadequately adjusted and paid grant-eligible homeowners’ claims, and some

grant-eligible homeowners had little motivation to file claims or challenge low

insurance settlements. Consequently, Road Home applications and grant

The State cites to 72 Fed. Reg. 70,472-01 (Dec. 11, 2007) to support its statement that 1

“[f]ederal law demanded that States disbursing these funds “[e]stablish procedures to prevent

recipients from receiving any duplication of benefits.” The regulation, however, allocates this

responsibility to the Secretary of HUD and outlines five steps HUD was taking to satisfy the

directive. Louisiana’s obligation derived from its HUD-approved Road Home Action Plan,

which stated that “the State must not duplicate insurance of any type . . . or other payments

received by the homeowner for structural repairs required for . . . damages [incurred during

hurricanes Katrina and Rita].”

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amounts drastically increased, creating a one billion dollar projected shortfall

in the program.

To remedy this situation, and pursuant to the assignment agreements,

the State sued the Defendants—allegedly all of the insurers who wrote property

insurance in Louisiana at the time of the hurricanes—in state court in Orleans

Parish. The State sought to recover the funds expended and anticipated to be

expended under the Road Home program and a declaration of the insurers’

duties under the “all risk” policies they had issued to Road Home applicants.

The Defendants successfully removed the case to federal district court

under the Class Action Fairness Act (CAFA). According to the Defendants, the

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insurance industry has paid more than 40 billion dollars to homeowners as a

result of Katrina and Rita losses. The insurers argue that the State’s suit is an

attempt to obtain yet more money from the insurers, even in situations where

the homeowner was satisfied with the amount paid, had already filed a lawsuit

against the insurer, or had reached a settlement agreement. Moreover, the

State brought suit without investigating whether the Defendants had actually

failed to make sufficient payment on individual homeowners’ claims.

The Defendants subsequently filed a Rule 12(b)(6) motion to dismiss,

arguing, inter alia, that (1) the State’s claims failed as a matter of law because

anti-assignment clauses in the homeowner’s policies invalidated the purported

The State used the class action device because, at the time suit was filed, thousands 2

of Road Home grant applications were pending and these future recipients had not yet

executed assignments. The class was defined as:

All current and former citizens of the State of Louisiana who have applied for and

received or will receive funds through the Road Home Program, and who have executed

or will execute a subrogation or assignment in favor or the State, and to whom

insurance proceeds are due and/or owed for damages sustained to any such recipient’s

residence as a result of any natural or man made occurrence associated with

Hurricanes Katrina and/or Rita under any policy of insurance . . . .

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assignments to the State, and (2) the State’s claims are time-barred by the

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contractual suit limitation period in the policies if the insured did not sue the

insurer or the State did not obtain an assignment within two years of the loss.

Making an Erie guess, the district court denied the motion to dismiss,

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holding that the contractual anti-assignment provisions did not bar post-loss

assignments under Louisiana law and that the State’s filing of the putative class

action lawsuit tolled the contractual suit limitation periods in the policies. The

district court also denied the Defendants’ motion for reconsideration, but

certified that order for interlocutory appeal pursuant to 28 U.S.C. § 1292(b).

This appeal followed.

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II. Discussion

The parties have not moved this court to certify the post-loss assignment

question to the Louisiana Supreme Court, but the State did not object to

certification when questioned at oral argument. Moreover, Louisiana Supreme

Court Rule XII, section 2, provides that certification “may be invoked by . . . any

circuit court of appeal of the United States upon its own motion . . . .” We are

acutely aware that “[c]ertification is not a panacea for resolution of those

complex or difficult state law questions which have not been answered by the

highest court of the state,” Transcon. Gas Pipeline Corp. v. Transp. Ins. Co.,

958 F.2d 622, 623 (5th Cir. 1992), but “certification may be advisable where

The language of the various anti-assignment clauses is not identical. Many clauses 3

state that “[a]ssignment of this policy will not be valid unless we give our written consent,”

and others state that “[n]o interest in this policy can be transferred without our written

consent.” The parties nonetheless agree that all of the insurance contracts contain an antiassignment clause that, by its plain terms, purports to bar any assignment. The State does

not contend that the insurers consented to the assignments.

 Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S. Ct. 817 (1938). 4

The parties briefed and argued whether the limitations issue was properly before 5

this court pursuant to the § 1292(b) certification order and, reaching the merits, whether the

insurance contracts’ suit limitation provisions bar some or all of the State’s claims. For

reasons of judicial economy, this court does not address these questions at this time.

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important state interests are at stake and the state courts have not provided

clear guidance on how to proceed.” Free v. Abbott Labs., Inc., 164 F.3d 270, 274

(5th Cir. 1999) (citing Transcon., 958 F.2d at 623). Certification is advisable

here.

A. Louisiana Civil Code Article 2653

“When faced with unsettled questions of Louisiana law, [federal courts]

adhere to Louisiana’s civilian decision-making process, by first examining

primary sources of law: the constitution, codes, and statutes.” Moore v. State

Farm Fire & Cas. Co., 556 F.3d 264, 270 (5th Cir. 2009). To determine whether

the insurance contracts’ anti-assignment clauses bar post-loss assignments to

the State, the Defendants contend that Louisiana Civil Code article 2653 is the

beginning and end of the matter. Article 2653 provides that “[a] right cannot be

assigned when the contract from which it arises prohibits assignment of that

right.” Because the policies’ anti-assignment clauses broadly prohibit any

assignment without the insurers’ consent, the insurers argue that the post-loss

assignments to the State are invalid.

The State responds, and we agree, that Article 2653 begs the question

presented in this case: whether Louisiana courts would interpret the antiassignment clauses in these homeowner’s insurance policies as prohibiting postloss assignments. Louisiana interpretive rules provide that “[w]hen the words

of a contract are clear and explicit and lead to no absurd consequences, no

further interpretation may be made in search of the parties’ intent.” LA. CIV.

CODE ANN. art. 2046. The anti-assignment clauses at issue here are broadly

worded and clearly do not exclude post-loss assignments from the prohibition,

but, like Article 2653, Article 2046 does not end the inquiry because even

unambiguous insurance contract provisions cannot conflict with statutory law

or public policy. See 15 WILLIAM SHELBY MCKENZIE & H. ALSTON JOHNSON, III,

LA. CIV. L. TREATISE, Insurance Law and Practice § 4 (3d ed. 2006). Thus, the

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issue before this court is whether the Louisiana Supreme Court would hold that

a contractual prohibition on post-loss assignments violates public policy.

The Louisiana Supreme Court has not answered this question, so we “look

to the decisions of intermediate state courts for guidance,” Terrebonne Parish

Sch. Bd. v. Columbia Gulf Transmission Co., 290 F.3d 303, 317 (5th Cir. 2002)

(citations omitted). Unfortunately, the Louisiana appellate decisions conflict.

B. Geddes & Moss, Lucien Tile, and the Majority Rule

The State points to a 1936 Louisiana appellate court case, Geddes & Moss

Undertaking & Embalming Co. v. Metro. Life Ins. Co., 167 So. 209 (La. Ct. App.

1936), which invalidated an anti-assignment clause as applied to a post-loss

assignment of the right to life insurance proceeds. Geddes & Moss cited the

“great weight of authority” in other jurisdictions and reflected in leading

treatises that anti-assignment clauses are contrary to public policy when applied

to post-loss assignments. Id. at 210. Indeed, the general majority rule supports

the Geddes & Moss conclusion. See 44 Am. Jur. 2d Insurance § 787 (2009)

(“General stipulations in policies prohibiting their assignment except with the

insurer’s consent . . . apply only to assignments before loss, and accordingly do

not prevent an assignment of a claim or an interest in insurance money then

due. . . . [A] provision against an assignment after loss is generally held

unenforceable, as inconsistent with the covenant of indemnity or the right to

assign a claim for money due, and as contrary to public policy.”); 3 Couch on Ins.

§ 35:7 (“. . . the great majority of courts adhere to the rule that general

stipulations in policies prohibiting assignments thereof except with the consent

of the insurer apply only to assignments before loss . . . the assignment before

loss involves a transfer of a contractual relationship while the assignment after

loss is the transfer of a right to a money claim.”) According to the cases, the

predominant purpose of a no-assignment clause is to protect the insurer from

unanticipated underwriting exposure, but “after events giving rise to the

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insurer’s liability have occurred, the insurer’s risk cannot be increased by a

change in the insured’s identity.” Id.

The Defendants, however, direct this court’s attention to R. L. Lucien Tile

Co. v. Am. Sec. Ins. Co., 8 So. 3d 753 (La. App. 4th Cir. 2009), a case decided

shortly after the district court denied the insurers’ Motion to Dismiss but which

the district court declined to follow in refusing to reconsider. Lucien Tile

involved property insurance covering wind and rain damage from Hurricane

Katrina. The court enforced an anti-assignment clause to invalidate a post-loss

assignment of all claims “against anyone . . . arising out of the ownership of” the

insured property. Id. at 756. The court did so without identifying any public

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policy grounds that would justify narrowly construing the anti-assignment

clause to allow post-loss assignments. Moreover, Lucien Tile is consistent with

several cases from other jurisdictions that effectuate anti-assignment clauses

against post-loss assignments. See Del Monte Fresh Produce (Haw.) Inc. v.

Fireman’s Fund Ins. Co., 183 P.3d 734, 747 (Haw. 2007); Holloway v. Republic

Indem. Co., 147 P.3d 329, 334 (Or. 2006); Conoco, Inc. v. Republic Ins. Co.,

819 F.2d 120, 124 (5th Cir. 1987) (applying Texas law).

Thus, far from providing clear guidance as to how the Louisiana Supreme

Court would proceed, Louisiana appellate court decisions, as well as the cases

of other jurisdictions, are inconsistent.

C. Public Policy Implications

Complicating matters further, it is not clear to us that the facts of this case

comport with the policy considerations underlying the majority rule. Unlike

The State incorrectly describes Lucien Tile as “simply ruling that the two documents 6

at issue failed to assign Lucien Tile any rights under the ASIC policy.” It is true that an initial

assignment was held not to apply to the insurance policy, but Lucien Tile never ruled that the

second, broader assignment of all claims “against anyone . . . arising out of ownership of” the

insured property was insufficient potentially to assign rights against the insurer. The court

held flatly that the assignment, lacking the insurer’s consent, was invalid.

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Geddes & Moss, this case does not involve a simple transfer of a right to claim

an undisputed amount of money due. Here, more akin to pre-loss assignments,

contractual duties are indeed transferred to the State because the policies

impose reciprocal duties on insureds to provide timely notice, substantiate their

claims, and mitigate losses. Nor does this case contemplate a simple change in

the insured’s identity, resulting in no increased risk to the insurer. Instead, the

State seeks to re-litigate claims that may have already been pursued by the

insured, subjecting the Defendants to multiple lawsuits by a third party whose

only evidence of underpayment is that Road Home applications increased to the

point of a projected budget shortfall.

When certifying an insurance interpretation to the Supreme Court of

Alabama, this court explained that “[w]hen the state law is in doubt especially

on the underlying public policy aims, it is in the best administration of justice

to afford the litigants a consistent final judicial resolution by utilizing the

certification procedure.” Barnes v. Atl. & Pac. Life Ins. Co. of Am., 514 F.2d 704,

706 (5th Cir. 1975). We follow that admonition here and certify the question.

CERTIFICATION

Because interpretation of the policy provisions at issue is a matter of

Louisiana law that will determine the outcome of this case and because there are

no clear controlling precedents in the decisions of the Louisiana Supreme Court,

we hereby invoke the certification privilege granted by Louisiana Supreme Court

Rule XII.

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 Louisiana Supreme Court Rule XII, section 1 reads: 7

When it appears to the Supreme Court of the United States, or to any circuit court of 

appeal of the United States, that there are involved in any proceedings before it

questions or propositions of law of this state which are determinative of said cause

independently of any other questions involved in said case and that there are no clear

controlling precedents in the decisions of the supreme court of this state, such federal

court before rendering a decision may certify such questions or propositions of law of

this state to the Supreme Court of Louisiana for rendition of a judgment or opinion

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We certify the following question to the Louisiana Supreme Court:

1) Does an anti-assignment clause in a homeowner’s insurance policy,

which by its plain terms purports to bar any assignment of the

policy or an interest therein without the insurer’s consent, bar an

insured’s post-loss assignment of the insured’s claims under the

policy when such an assignment transfers contractual obligations,

not just the right to money due?

If the Louisiana Supreme Court accepts this certificate, the answers

provided will determine the outcome of this appeal. We disclaim any intent that

the Louisiana Supreme Court confine its reply to the precise form or scope of the

legal questions certified. We retain cognizance of this appeal while it is pending

before the Louisiana Supreme Court and transfer the record and appellate briefs

with our certification to the Supreme Court of Louisiana.

QUESTION CERTIFIED.

concerning such questions or propositions of Louisiana law. This court may, in its

discretion, decline to answer the questions certified to it.

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