### I N THE UNI T ED STATES COURT OF APPEALS FOR THE FI F TH CI RCUI T

No. 12-31064

DANNY KELLY, Plaintiff–Appellant
v. STATE FARM FIRE & CASUALTY COMPANY, Defendant–Appellee

Appeal from the United States District Court for the Middle District of Louisiana USDC No. 3:09-CV-619

Before HIGGINBOTHAM, CLEMENT, and PRADO, Circuit Judges. PER CURIAM: * Plaintif f –Appellant Danny Kelly (“Kelly”) sued State Farm Fire & Casualty Company (“State Farm” or “insurer”) on beha l f of Henry Thomas (“Thomas”), one of State Farm’s insured customers. Kelly asserted two bad-faith claims arising out of a car accident that occurred on November 21, 2005. Kelly alleged that State Farm f ailed to notify Thomas of a settlement o ffer and failed to settle Kelly’s c la i m a g a i nst Thomas. The district court granted summary U n i te d S t a t e s C o u rt o f A p p e a l s

F i f th C i r c u i t 

### F I L E D March 12, 2014 Ly le W . Cay ce Clerk

* Purs uant to 5 T H C I R

. R. 47. 5, the court has determ ined that this op inion s hould not be p ublis hed and is not p reced ent excep t und er the lim ited circum s tances s et forth in 5 T H C I R

. R. 47. 5. 4. Case: 12-31064 Document: 00512558652 Page: 1 Date Filed: 03/12/2014No. 12-31064

judgment i n State Farm’s favor on both counts. F or the reasons that follow, we affirm in part, reverse in part, and remand for further proceedings. I On November 2 1, 2005, a car accident occurred involving Th o mas and Kelly. Thomas and Kelly were d r i v i ng opposite directions when Thomas initiated a left turn. T homas hit Kelly while making the left turn. Kelly and a witness at the scene told police that Thomas failed to yield to oncoming traffic. Thomas maintained that he was not negligent. Kelly was taken t o a hospital by ambulance and was t reated for a fractured femur. His hospital s t ay lasted approximately six days and cost $26,803.17. On January 6, 2006, Kelly’s attorney m ailed a l etter to Thomas’s insurer, Stat e F a r m , r e garding Kelly’s claim. The letter included copies of Kelly’s hospital records and stated:

Please find e nclosed a copy of D a n n y Kelly’s Medical Summary with attached medical recor d s/reports and bills concerning h is hospital treatment for the above referenced incident involving y our insured. I will recommend release o f St a t e F a r m Insurance Company a nd your insured, Henry Thomas, Jr., for payment of your policy limits.
Please g ive m e a call i n the next ten (10) days to discuss this matter. The parties d i spute, however, when this letter w as received. Accordin g t o Ke lly’s certified-mail receipt, the le t t e r w as accepted by “G. Johnson” on J anuary 9, 2006. State Farm maintains that the letter was not received until February 14, 2006. A State Farm activity l o g i n d i c a tes that State Farm received a demand f o r “ p o licy limits $25,000.00” on February 11, 2006. 1 It does n ot appear t h a t State Farm ever responded to the letter.

1 The activity log tech nically s how s “D EM AN D REC’D : 2/ 11/ 05. ” H ow ever, s ince the accid ent did not occur until N ovem ber 2005, this is lik ely a typ o. 2 Case: 12-31064 Document: 00512558652 Page: 2 Date Filed: 03/12/2014No. 12-31064

Kelly’s attorney spoke w ith State Farm representatives on M arch 8 and March 22. During the March 22, 2 006 conversation, t h e representative offered to settle the case for $25,000, the policy limit. The o ffer was m emorialized in a letter dated March 2 3, 2006. Kelly’s attorney rejected the offer and proceeded to file suit. On the day that K elly rejected S tate Farm’s settlement offer, State Farm mailed a letter to Thomas informing hi m o f the possibility of personal liability and suggesting t hat h e consider retaining independent counsel. State Farm’s l e tter to Thomas d id not discuss t h e letter from Kelly’s attorney, S t a t e Farm’s offer to Kelly, or the extent of Kelly’s medical bills. At trial, Thomas was found liable for t he accident a n d judgment was rendered against him for $ 176,464.07, plus interest. State Farm promptly paid Kelly t he policy limit. Under the terms of his policy, Thomas was l i able for the remainder of the judgment. However, Thomas entered into a c o m p r o m i se agreement w ith Kelly. T homas assigned Ke l l y his right to pursue a bad faith action against State Farm in exchange for Kelly’s p romise not to e nforce the judgment against Thomas’s personal assets. Kelly filed suit against State Farm soon thereafter, alleging two counts of bad faith under Louisiana law. Kelly alleged that State Farm acted in bad faith when i t (1) f

ailed to notify Thomas o f Kelly’s January 2006 letter; and (2) failed to accept Kelly’s January 2006 settlement offer. State Farm r emoved the case to federal co u r t a n d f iled a motion for summary judgment. On November 8, 2011, the district court p artially granted State Farm’s motion. The district court granted summary judgment in State F a r m ’s favor on Kelly’s first a rgument, hold i n g t h a t the January 2006 letter d i d not constitute a settlement o ffer and that State Farm d id not have a duty to notify Thomas w hen t he lett e r was received. The district court denied summary judgment on the second point, however, stating that Kelly m ight be able to prove that State Farm’s failure to settle the claim constituted bad faith.

3 Case: 12-31064 Document: 00512558652 Page: 3 Date Filed: 03/12/2014No. 12-31064

State F arm moved for reconsideration on November 2 3 , 2 0 1 1 , a rguing that State Farm could be liable for bad faith failure to settle o nly if it failed t o accept

an a ctual offer and a cted in bad faith. According to State Farm’s contention, the district court’s finding that the January 2 0 0 6 l etter did not constitute an offer necessarily precluded liability on Kelly’s second claim. The district court agreed and revised its opinion to grant full summary judgment in State Farm’s favor. Judgment was entered accordingly, and Kelly appealed. II W e r e v i e w t h e d i s t rict court’s grant of summary judgment d e novo. M cF a u l

v. Valenzuela , 684 F.3d 564, 571 ( 5th Cir. 2012). S ummary j u d g ment is appropriate when t here is no genuine issue of m aterial fact and t he moving party has shown it i s entitled to judgment as a matter of law. Id. A dispute is “genuine” i f the evidence is sufficient for a reasonable jury to return a verdict for the n onmoving party. Hamilton v. Segue Software, Inc. , 232 F.3d 4 73, 477 (5th Cir. 2 000). A f

act issue is “ material” if its resolution could a ffect the outcome of the action. Id. We construe all facts and all reasonable inferences in the light most favorable to the non-moving party. McFaul , 684 F.3d at 571. When e v a l uating issues of state law, federal c ourts “look t o the final decisions of that state’s highest court.” Chaney v. Dreyfus Serv. Corp. , 595 F.3d 219, 229 (5th Cir. 2010). “In the absence of s uch a d e c i s i o n , ‘[federal courts] must make an Erie guess a n d d e t e rmine, in [their] best judgment, how [the
supreme court of that state] w ould resolve the issue if presented with the same case.’” Six Flags, Inc. v. Westchester S urplus Lines Ins. Co. , 565 F.3d 9 48, 954 (5th Cir. 2009) (quoting In re Katrina Canal Breaches Litig. , 495 F.3d 191, 206 (5th Cir. 2007)). “In making an Erie guess, [federal courts] defer to i n termediate state appellate court decisions, unless c onvinced by o ther persuasive d ata that the h i g h e s t c ourt o f the s tate would decide otherwise.” Mem’l Hermann

4 Case: 12-31064 Document: 00512558652 Page: 4 Date Filed: 03/12/2014No. 12-31064

Healthcare Sys. Inc. v. Eurocopter Deutschland GMBH , 524 F.3d 676, 678 (5th Cir. 2008) (internal quotation marks omitted). III The parties’ briefs a nd t he district court’s orders at times seem to conflate the various causes of a c t i o n and concomitant legal standards relevant to this lawsuit. This c onflation stems in large part from confusion over Kelly’s position

as a party in this case. Kelly’s lawsuit is premised on the a ssignment of rights he received in his settlement agreement with Thomas. I n t h e s e ttlement agreement, Thomas assigned to Kelly his right to pursue b ad faith c l a ims
aga i n s t State F arm i n e xchange for Kelly’s p romise not to pursue Thomas’s personal assets in satisfact i o n o f the j udgment. When rights are assigned by contract, the assignee—here, Kelly—stands in the shoes of t he assignor—here, Thomas. 2 See N.S.Q. Assocs. v. Beychok , 94-2760, p. 9 (La. 9/ 5 / 9 5 ) , 659 So.2d 729, 734 (noting “the general concept t h at an a ssignee usually stands in the shoes of his o r h er assignor”). Thus, whereas Kelly was a third-party claimant vis-à-vis State Farm in the parties’ earlier lawsuit—as well as during all pre-suit interactions—he stands in Thomas’s shoes as t he insured in h i s capacity as plaintiff here. Therefore, any cause of action Kelly claims here must be available to the insured. Kelly is not a sserting a third-party claimant’s claims. In fact, he specifically disclaims any t h i r d

- p a rty claims in his brief. W ith this in mind, there appear to be two possible b ases for Kelly’s bad-faith claims against State Farm: Louisiana Revised Statutes § 22:1892 and § 22:1973. We review each in turn.

2 The Louis iana Sup rem e C ourt has af f irm ed that ind ivid uals m ay as s ign thei r contract rights in the ins urance context. See In re Ka tri na Ca na l B rea ches L iti g. , 2010- 1823, p
. 11 ( La. 5/ 10/ 11) , 63 So. 3d 955, 962 ( s tating that, in the ins urance context, “the Louis iana legis lature has clearly ind icated an intent to allow p arties f reed om to as s ign contractual rights ”)

. 5 Case: 12-31064 Document: 00512558652 Page: 5 Date Filed: 03/12/2014No. 12-31064 A Section 22:1892 establi s h e s r u les governing the relationship between insurers, their i nsured, and third-party c laimants in a variety of circumstances. La. Rev. Stat. § 22:1892. For purposes of t h is suit, two provisions are potentially relevant: §§ 22:1892(A)(1) a nd (2). S ubsectio n (A) ( 1 ) states that a ll insurers “shall pay the amount of any claim due any i n s ured within thirty d ays after receipt o f satisfactory p ro o f s o f loss from t he insured or a ny p arty in i nterest.” Id. § 22:1892(A)(1) (emphasis added). Section (A)(2) states that insurers “shall
pay
. . . any reasonable m e d i c a l expenses claim d ue any bona fide third party claimant within thirty days a fter written agreement of settlement of the claim from any third party claimant.” Id. § 2 2 : 1892(A)(2) (emphasis added). 3 As explained below, Kelly does not have a c l aim under e ither provision of § 22:1892 because the facts of this case do not fall within the statutory language. Subsection (A)(1) contemplates a cause of action o nly when the i n surer fails t o p a y a claim based on a satisfactory proof of loss received f rom the insured. Id. § 22:1892(A)(1). W h i l e Kelly stands in Thomas’s s hoes as the insured for purposes of this suit, Kelly’s allegations focus o n State Farm’s failure to p ay a claim based o n a proof of loss submi t t ed by Kelly as a third-party claimant. Specifically, Kelly argues State Farm failed to settle his third-party claim after h e submitted a purported settlement letter and medical receipts in January 2006. These documents do not fall within the statute’s language. The assignment between Kelly a nd Thomas provided Kelly w ith t he a bility to make Thomas’s bad-faith c laims on his b ehalf; the assignment does not allow Kelly to shoehorn his third-party claims into § 22:1892(A)(1). Kelly has not alleged that Thomas submitted a proof of l oss to S tate Farm or that S tate Farm failed to pay Thomas b a sed on a proof of loss. Because Kelly’s purported settlement letter

3 The p arties d o not d is p ute that the thirty- d ay period w as not m et here. 6 Case: 12-31064 Document: 00512558652 Page: 6 Date Filed: 03/12/2014No. 12-31064

a n d m e d i c al receipts did not constitute “ a satisfactory proof of loss from t he i nsured,” Kelly cannot maintain a claim under § 2 2:1892(A)(1) a s a matter o f law. Id. Therefore, summary judgment is appropriate. Fed. R. Civ. P. 56(a). Kelly cannot maintain a claim under subjection ( A)(2) either, for two

reasons. First, Kelly has e x p r e s s ly disavowed any third-party claims in this suit, and subsection (A)(2) on l y pertains to such claims. See L a. Rev. Stat. § 22:1892(A)(2). S e cond, subsection (A)(2) only mandates p ayment by an insurer when the insurer a nd third-party claimant have p r o d u ced a written settlement agreement. Id. Since neither party s uggests that a settlement was reached between State Farm a nd Kelly, Kelly c a nnot maintain a cause of action under subsection (A)(2). State Farm is thus entitled to judgment as a m atter of law. Therefore, summary judgment is appropriate. Fed. R. Civ. P. 56(a). B S e c t i o n 2 2:1973 conta i n s t w o r e l e v a n t s u b s e c t i o n s : s u b s e c t i o n ( A ) d e s c r ib e s broad duties that insurers owe to t h e i r insured and subsection (B) lists acts which constitute a breach of insurers’ d u tie s w hen knowingly committed. Subsection (A) states that insurers owe t h eir insured “a duty of good faith and fair dealing” and an “affirm a t ive duty

. . . t o make a reasonable effort to settle claims.” La. Rev. Stat. § 22:1973(A). 4 Two parts of subsection ( B) are relevant

4 The p arties d ebate how the Fif th Circuit’s op inions in Com m erci al Uni on Insura nce Co. v
. M issi on Insura nce Co. , 835 F. 2d 587 ( 5th Cir. 1988) , and Brow n v
. Li berty M utua l Fi re Insura nce Co. , 168 F. Ap p ’x 558 ( 5th Cir. 2006) , im pact this cas e. In Com merci a l U ni on , the court held that “Louis iana law only im p os es liability f or an exces s j ud g m ent agains t a p rim ary ins urer if that ins urer f ailed to accep t an actual of f er to s ettle within its p olicy lim its and s uch f ailure w as negligent, arbitrary and / or in bad faith. ” 835 F. 3d at 588. T he court reached this conclus ion w hile ack now led g ing that “Louis iana cou r t s h ave not exp licitly articulated the requirem ent

. . . that a f irm s ettlem ent of

fer be on the t a b l e b e f o r e an ins urer can be held liable f or its arbitrary ref

us al to s ettle. ” Id. at 588 n. 2. I n Brow n , an unp ublis hed d ecis ion, the court rejected the bad

- faith claim at is s ue in part becaus e a letter s ent by the p laintif f d id not cons titute an actual of f er. 168 F. Ap p ’x at 563. Wh i l e t h e p r e c i s e sc o p e o f a bad

- f aith f ailure- to- settle claim p robably d es erves attention f rom the Louis iana Sup rem e Court, w e are nevertheles s bound by p rior p reced ent hold ing that
an actual o f

f e r i s r e q u i red in ord er to m aintain s uch a claim

. See French v
. A l l sta te Indem

. 7 Case: 12-31064 Document: 00512558652 Page: 7 Date Filed: 03/12/2014No. 12-31064

here: (B)(1), which forbids “misrepresenting pertinent facts

. . . relating to any coverages at issue[;]” and (B)(5), which states that a n insur e r v i olates its duty if it “[f]ail[s] t o p a y t h e a mount of any claim due any person insured by the contract w i t h i n s ixty days after receipt of s atisfactory p r oof of loss from the claimant when such f

a ilure is arbitrary, capricious, or without probable cause.” Id. §§ 22:1973(B)(1), (B)(5). While subsection (A) s tates t he duties of insurers in broad, precatory terms, the Louisiana Supreme Court has held t hat the li s t of conduct in subsection (B) constitutes the exclusive list of conduct that provides a cause of action under § 22:1973. T heriot v. Midland Risk Ins. Co. , 95-2895, p
. 15–16 (La. 5/20/97) , 694 So. 2d 184, 193. The Louisiana Supreme C ourt c onsidered the
scope of § 22:1973 in the c o n t e x t of third-party claims, but i n termediate Louisiana c o u r t s have n evertheless interpreted T heriot as h olding that subsection (B) provides an exhaustive list of p ossible c a u s e s o f action for the insured under § 22:1973. See, e.g. , Arvie v. Safeway Ins. Co. of La. , 2006-1266,
p
. 2 (La. App. 3 Cir. 2/7/07), 951 So. 2d 1284, 1285; McGee v. Omni I ns. Co. , 2002-1012, p. 7–8, 10–11 (La. App. 3 Cir. 3/5/03), 840 So. 2d 1248, 1254, 1256. 1 A violation of (B)(1) “can occur w hen an i nsurer e ither m akes untrue statements to an insured concerning pertinent facts or fails to d i vulge pertinent

Co. , 637 F. 3d 571, 589 ( 5th Cir. 2011) ( af f irm ing bind ing ef

f ect of p rior Fif

th Circuit p reced ent on a state- law is sue abs ent a clear change in law )

. Since the January 2006 letter f rom K elly’s attorney only s tated th a t K elly’s attorney w ould “recom m end ” a releas e in exchange f or p aym ent of the p olicy’s lim it, the letter d id not cons titute an of f er. See M

cPherson v
. Ci ngul a r Wi rel ess, LLC , 2007- 0462, p. 5–7 ( La. Ap p
. 3 Cir. 10/ 3/ 07) , 967 So. 2d 573, 577–78 ( hold ing that “noncom m ittal” language in an em p l o y e e hand book d id not m od if y the parties ’ contract of
em p loym ent) ; Res tatem ent ( Second ) of Contracts § 26 ( 1981) ( “A m anif es tation of w illingnes s to enter into a bargain is not an of f er if the p er s o n t o w h o m it is ad d res s ed k now s or has
reas on to k now that the p ers on m ak ing it d oes not intend to conclud e a bargain until he has
m ad e a f urther m anif

es tation of as s ent. ”)

. Theref ore, Kelly cannot m aintain a caus e of action
as a m atter of law , and State Farm w as entitled to s um m ary jud gm ent on K elly’s bad

- f aith f ailure- to- s ettle claim

. 8 Case: 12-31064 Document: 00512558652 Page: 8 Date Filed: 03/12/2014No. 12-31064

facts t o the i nsured.” McGee , 840 So. 2d at 1256. Some intermediate a ppellate courts have held that ( B)(1) is only violated when an insurer misrepresents facts about coverage, not f

acts concerning liability. See, e.g. , Talton v. USAA Cas. Ins. Co. , 2 006-1513, 2007-1414, p. 20 (La. App. 4 Cir. 3/19/08), 981 So. 2d 696, 710; Strong v. Farm Bureau I ns. Co. , 32,414, p. 5 (La. App. 2 Cir. 10/29/99), 743 So. 2d 949, 953. “A misrepresentation relating to a c o v erage issue would involve facts about the p olicy itself, such as the amount o f coverage, lapse or expiration of the policy, or exclusions from coverage.” Strong , 743 So. 2 d at 953. An insurer also has “an i n d e p e n d e n t duty t o keep its insured informed of the status of sett l e m ent negotiations[.]” Teague v. S t. Paul Fire & Marine I ns. Co. , 2006-1266, p. 62 (La. App. 1 Cir. 4/7/09), 10 So. 3d 8 06, 845. T his i ncludes a duty to inform the insured about offers to settle that are made and received, offering input on the settlement decision, a nd generally keeping t h e insured a pprised of those facts necessary f or the insured t o make a decision t h a t i s i n their own p e r s o n a l interest. Arvie , 951 So. 2d at 1285; M cGee , 840 So. 2d a t 1254, 12 5 6 ; Lafauci v. Jenkins , 2001-2960 (La. App. 1 Cir. 1/15/03), 844 So. 2d 19, 2 7-29. As explained below, it is not c l e a r that State Farm is entitled to judgment as a matter of law on Kelly’s (B)(1) claim. A s s uch, we reverse the district court’s grant of summary judgment. In McGee , an insurer was f ound to ha v e v i o l a ted ( B)(1) when it “consistently failed to communicate the status of the claim to [the insured] on a regular b asis” and, when it did communicate with the i nsure d , i t “failed to communicate t he pertinent f a c t s n e cessary for [the insured] to consider in determining what was in h er p ersonal interest.” McGee , 840 So. 2d at 1256. The insurer in Arvie committed s imilar bad f aith conduct and also “failed to offer [its insured] input into the settlement decision.” A r vie , 951 So. 2d at 1286. The only communication between State Farm a nd T h o m a s a lleged here consisted of a single letter in which State Farm told T homas that h e m i g h t face personal

9 Case: 12-31064 Document: 00512558652 Page: 9 Date Filed: 03/12/2014No. 12-31064

liability and that he should consider seeking independent counsel. At no point d id State Farm i nform Thomas the extent to which Kelly’s medical bills e xceede d his p olicy limits, nor d id State Farm tell Thomas that it had made a settlement offer that was r ej ected by Kelly. In short, State Farm sent a single, cursory communication to Thomas, and it cannot be said as a matt e r o f law that this letter c ommu n i c a t e d t h e p e r t i n e n t f a c t s n e c essary for Thomas t o determine what

was in his best interest. Therefore, State Farm was not entitled to judgment as a matter of law on Kelly’s claim under § 22:1973(B)(1). Fed. R. Civ. P. 56(a). 2 Under § 22:1973(B)(5), i t is the p l aintiff’s burden to show that the insured submitted a satisfactory proof of loss, wh i c h is one that is sufficient to fully apprise t he insurer of the insured’s cl a i m
. R e e d v. S tate Farm Mut. Auto. Ins. Co. , 2 003-0107, p. 13 ( La. 10/21/03), 857 S o. 2d 1012, 1020 ( stating that the “one who claims entitlement” has the “burden o f proving” r e c e i p t of a satisfactory proof of loss); see also McDill v. Utica Mut. Ins. Co. , 475 So. 2d 1085, 1089 (La. 1985) (defining “satisfactory proof of loss”). Moreover, § 22:1973(B)(5) does not provide a cause of action b ased on third-party proofs o f loss. Langsford v. Flattman , 2003-0189, pp. 3–4 (La. 1/21/04), 864 So. 2d 149, 151. Kelly’s c laim under § 2 2:1973 fails f o r t h e s a me reason that his claim

u n d e r § 2 2:1892(A)(1) failed, see supra Part I II.A: Kelly has not alleged that Thomas submitted a proof of loss to State Farm that went unpaid. Rather, the premise of Kelly’s c ase is his allegation that State Farm failed to a ct when his attorney sent State Farm a t h ird-party demand letter. A s discussed earlier, assuming arguendo that Kelly’s letter constituted a satisfactory proof o f loss at all, t he letter was a proof of loss from a third-party claimant. The assignment between Kelly and Thomas does not a llow Kelly to shoehorn otherwise i neligible claims into Louisiana’s insurance statutes. Section 2 2:1973 does not provide a

10 Case: 12-31064 Document: 00512558652 Page: 10 Date Filed: 03/12/2014No. 12-31064

cause of action when an insurer fails to pay a third party’s c laim based on a proof of loss. Therefore, summary judgment is appropriate. Fed. R. Civ. P. 56(a). IV For the f oregoing reasons, we AFFIRM IN PART and REVERSE IN PART the distr i c t c o u r t ’s g rant of summary j udgment. We REMAND to the district court for further proceedings consistent with this opinion.

11 Case: 12-31064 Document: 00512558652 Page: 11 Date Filed: 03/12/2014