IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

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:*

Plaintiff–Appellant Danny Kelly (“Kelly”) sued State Farm Fire &

Casualty Company (“State Farm” or “insurer”) on behalf 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 failed to notify Thomas of a settlement offer and failed

to settle Kelly’s claim against Thomas. The district court granted summary

United States Court of Appeals

Fifth Circuit

F I L E D

March 12, 2014

Lyle W. Cayce

Clerk

* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not

be published and is not precedent except under the limited circumstances set forth in 5TH CIR.

R. 47.5.4.

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judgment in State Farm’s favor on both counts. For the reasons that follow, we

affirm in part, reverse in part, and remand for further proceedings.

I

On November 21, 2005, a car accident occurred involving Thomas and

Kelly. Thomas and Kelly were driving opposite directions when Thomas

initiated a left turn. Thomas 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 to a hospital by

ambulance and was treated for a fractured femur. His hospital stay lasted

approximately six days and cost $26,803.17.

On January 6, 2006, Kelly’s attorney mailed a letter to Thomas’s insurer,

State Farm, regarding Kelly’s claim. The letter included copies of Kelly’s

hospital records and stated:

Please find enclosed a copy of Danny Kelly’s Medical

Summary with attached medical records/reports and bills

concerning his hospital treatment for the above referenced incident

involving your insured. I will recommend release of State Farm

Insurance Company and your insured, Henry Thomas, Jr., for

payment of your policy limits.

Please give me a call in the next ten (10) days to discuss this

matter.

The parties dispute, however, when this letter was received. According to Kelly’s

certified-mail receipt, the letter was accepted by “G. Johnson” on January 9,

2006. State Farm maintains that the letter was not received until February 14,

2006. A State Farm activity log indicates that State Farm received a demand

for “policy limits $25,000.00” on February 11, 2006.1It does not appear that

State Farm ever responded to the letter.

1 The activity log technically shows “DEMAND REC’D: 2/11/05.” However, since the

accident did not occur until November 2005, this is likely a typo.

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Kelly’s attorney spoke with State Farm representatives on March 8 and

March 22. During the March 22, 2006 conversation, the representative offered

to settle the case for $25,000, the policy limit. The offer was memorialized in a

letter dated March 23, 2006. Kelly’s attorney rejected the offer and proceeded

to file suit. On the day that Kelly rejected State Farm’s settlement offer, State

Farm mailed a letter to Thomas informing him of the possibility of personal

liability and suggesting that he consider retaining independent counsel. State

Farm’s letter to Thomas did not discuss the letter from Kelly’s attorney, State

Farm’s offer to Kelly, or the extent of Kelly’s medical bills.

At trial, Thomas was found liable for the accident and judgment was

rendered against him for $176,464.07, plus interest. State Farm promptly paid

Kelly the policy limit. Under the terms of his policy, Thomas was liable for the

remainder of the judgment. However, Thomas entered into a compromise

agreement with Kelly. Thomas assigned Kelly his right to pursue a bad faith

action against State Farm in exchange for Kelly’s promise not to enforce 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 it (1) failed to notify Thomas of Kelly’s January 2006 letter; and (2) failed

to accept Kelly’s January 2006 settlement offer. State Farm removed the case

to federal court and filed a motion for summary judgment. On November 8,

2011, the district court partially granted State Farm’s motion. The district court

granted summary judgment in State Farm’s favor on Kelly’s first argument,

holding that the January 2006 letter did not constitute a settlement offer and

that State Farm did not have a duty to notify Thomas when the letter was

received. The district court denied summary judgment on the second point,

however, stating that Kelly might be able to prove that State Farm’s failure to

settle the claim constituted bad faith.

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State Farm moved for reconsideration on November 23, 2011, arguing that

State Farm could be liable for bad faith failure to settle only if it failed to accept

an actual offer and acted in bad faith. According to State Farm’s contention, the

district court’s finding that the January 2006 letter 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

We reviewthe district court’s grant of summary judgment de novo. McFaul

v. Valenzuela, 684 F.3d 564, 571 (5th Cir. 2012). Summary judgment is

appropriate when there is no genuine issue of material fact and the moving

party has shown it is entitled to judgment as a matter of law. Id. A dispute is

“genuine” if the evidence is sufficient for a reasonable jury to return a verdict for

the nonmoving party. Hamilton v. Segue Software, Inc., 232 F.3d 473, 477 (5th

Cir. 2000). A fact issue is “material” if its resolution could affect 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 evaluating issues of state law, federal courts “look to 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 such a decision, ‘[federal courts]

must make an Erie guess and determine, in [their] best judgment, how [the

supreme court of that state] would resolve the issue if presented with the same

case.’” Six Flags, Inc. v. Westchester Surplus Lines Ins. Co., 565 F.3d 948, 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 intermediate

state appellate court decisions, unless convinced by other persuasive data that

the highest court of the state would decide otherwise.” Mem’l Hermann

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Healthcare Sys. Inc. v. Eurocopter Deutschland GMBH, 524 F.3d 676, 678 (5th

Cir. 2008) (internal quotation marks omitted).

III

The parties’ briefs and the district court’s orders at times seem to conflate

the various causes of action and concomitant legal standards relevant to this

lawsuit. This conflation stems in large part from confusion over Kelly’s position

as a party in this case. Kelly’s lawsuit is premised on the assignment of rights

he received in his settlement agreement with Thomas. In the settlement

agreement, Thomas assigned to Kelly his right to pursue bad faith claims

against State Farm in exchange for Kelly’s promise not to pursue Thomas’s

personal assets in satisfaction of the judgment. When rights are assigned by

contract, the assignee—here, Kelly—stands in the shoes of the assignor—here,

Thomas.2 See N.S.Q. Assocs. v. Beychok, 94-2760, p. 9 (La. 9/5/95), 659 So.2d

729, 734 (noting “the general concept that an assignee usually stands in the

shoes of his or her 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 the insured in his capacity as

plaintiff here. Therefore, any cause of action Kelly claims here must be available

to the insured. Kelly is not asserting a third-party claimant’s claims. In fact, he

specifically disclaims any third-party claims in his brief. With this in mind,

there appear to be two possible bases for Kelly’s bad-faith claims against State

Farm: Louisiana Revised Statutes § 22:1892 and § 22:1973. We review each in

turn.

2The Louisiana Supreme Court has affirmed that individuals may assign their contract

rights in the insurance context. See In re Katrina Canal Breaches Litig., 2010-1823, p. 11 (La.

5/10/11), 63 So. 3d 955, 962 (stating that, in the insurance context, “the Louisiana legislature

has clearly indicated an intent to allow parties freedom to assign contractual rights”).

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A

Section 22:1892 establishes rules governing the relationship between

insurers, their insured, and third-party claimants in a variety of circumstances. 

La. Rev. Stat. § 22:1892. For purposes of this suit, two provisions are potentially

relevant: §§ 22:1892(A)(1) and (2). Subsection (A)(1) states that all insurers

“shall pay the amount of any claim due any insured within thirty days after

receipt of satisfactory proofs of loss from the insured or any party in interest.” 

Id. § 22:1892(A)(1) (emphasis added). Section (A)(2) states that insurers “shall

pay . . . any reasonable medical expenses claim due any bona fide third party

claimant within thirty days after written agreement of settlement of the claim

from any third party claimant.” Id. § 22:1892(A)(2) (emphasis added).3 As

explained below, Kelly does not have a claim under either 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 only when the insurer

fails to pay a claim based on a satisfactory proof of loss received from the

insured. Id. § 22:1892(A)(1). While Kelly stands in Thomas’s shoes as the

insured for purposes of this suit, Kelly’s allegations focus on State Farm’s failure

to pay a claim based on a proof of loss submitted by Kelly as a third-party

claimant. Specifically, Kelly argues State Farm failed to settle his third-party

claim after he 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 and Thomas provided Kelly with the ability to make

Thomas’s bad-faith claims on his behalf; 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 loss to State Farm or that State Farm failed to pay

Thomas based on a proof of loss. Because Kelly’s purported settlement letter

3 The parties do not dispute that the thirty-day period was not met here.

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and medical receipts did not constitute “a satisfactory proof of loss from the

insured,” Kelly cannot maintain a claim under § 22:1892(A)(1) as a matter of

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 expressly disavowed any third-party claims in this suit,

and subsection (A)(2) only pertains to such claims. See La. Rev. Stat.

§ 22:1892(A)(2). Second, subsection (A)(2) only mandates payment by an

insurer when the insurer and third-party claimant have produced a written

settlement agreement. Id. Since neither party suggests that a settlement was

reached between State Farm and Kelly, Kelly cannot maintain a cause of action

under subsection (A)(2). State Farm is thus entitled to judgment as a matter of

law. Therefore, summary judgment is appropriate. Fed. R. Civ. P. 56(a).

B

Section 22:1973 contains two relevant subsections: subsection (A) describes

broad duties that insurers owe to their insured and subsection (B) lists acts

which constitute a breach of insurers’ duties when knowingly committed. 

Subsection (A) states that insurers owe their insured “a duty of good faith and

fair dealing” and an “affirmative duty . . . to make a reasonable effort to settle

claims.” La. Rev. Stat. § 22:1973(A).4 Two parts of subsection (B) are relevant

4 The parties debate how the Fifth Circuit’s opinions in Commercial Union Insurance

Co. v. Mission Insurance Co., 835 F.2d 587 (5th Cir. 1988), and Brown v. Liberty Mutual Fire

Insurance Co., 168 F. App’x 558 (5th Cir. 2006), impact this case. In Commercial Union, the

court held that “Louisiana law only imposes liability for an excess judgment against a primary

insurer if that insurer failed to accept an actual offer to settle within its policy limits and such

failure was negligent, arbitrary and/or in bad faith.” 835 F.3d at 588. The court reached this

conclusion while acknowledging that “Louisiana courts have not explicitly articulated the

requirement . . . that a firm settlement offer be on the table before an insurer can be held

liable for its arbitrary refusal to settle.” Id. at 588 n.2. In Brown, an unpublished decision,

the court rejected the bad-faith claim at issue in part because a letter sent by the plaintiff did

not constitute an actual offer. 168 F. App’x at 563.

While the precise scope of a bad-faith failure-to-settle claim probably deserves attention

from the Louisiana Supreme Court, we are nevertheless bound by prior precedent holding that

an actual offer is required in order to maintain such a claim. See French v. Allstate Indem.

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here: (B)(1), which forbids “misrepresenting pertinent facts . . . relating to any

coverages at issue[;]” and (B)(5), which states that an insurer violates its duty

if it “[f]ail[s] to pay the amount of any claim due any person insured by the

contract within sixty days after receipt of satisfactory proof of loss from the

claimant when such failure is arbitrary, capricious, or without probable cause.” 

Id. §§ 22:1973(B)(1), (B)(5).

While subsection (A) states the duties of insurers in broad, precatory

terms, the Louisiana Supreme Court has held that the list of conduct in

subsection (B) constitutes the exclusive list of conduct that provides a cause of

action under § 22:1973. Theriot v. Midland Risk Ins. Co., 95-2895, p. 15–16 (La.

5/20/97), 694 So. 2d 184, 193. The Louisiana Supreme Court considered the

scope of § 22:1973 in the context of third-party claims, but intermediate

Louisiana courts have nevertheless interpreted Theriot as holding that

subsection (B) provides an exhaustive list of possible causes of 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 Ins. 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 when an insurer either makes untrue

statements to an insured concerning pertinent facts or fails to divulge pertinent

Co., 637 F.3d 571, 589 (5th Cir. 2011) (affirming binding effect of prior Fifth Circuit precedent

on a state-law issue absent a clear change in law). Since the January 2006 letter from Kelly’s

attorney only stated that Kelly’s attorney would “recommend” a release in exchange for

payment of the policy’s limit, the letter did not constitute an offer. See McPherson v. Cingular

Wireless, LLC, 2007-0462, p. 5–7 (La. App. 3 Cir. 10/3/07), 967 So. 2d 573, 577–78 (holding that

“noncommittal” language in an employee handbook did not modify the parties’ contract of

employment); Restatement (Second) of Contracts § 26 (1981) (“A manifestation of willingness

to enter into a bargain is not an offer if the person to whom it is addressed knows or has

reason to know that the person making it does not intend to conclude a bargain until he has

made a further manifestation of assent.”). Therefore, Kelly cannot maintain a cause of action

as a matter of law, and State Farm was entitled to summary judgment on Kelly’s bad-faith

failure-to-settle claim.

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facts to the insured.” McGee, 840 So. 2d at 1256. Some intermediate appellate

courts have held that (B)(1) is only violated when an insurer misrepresents facts

about coverage, not facts concerning liability. See, e.g., Talton v. USAA Cas. Ins.

Co., 2006-1513, 2007-1414, p. 20 (La. App. 4 Cir. 3/19/08), 981 So. 2d 696, 710;

Strong v. Farm Bureau Ins. Co., 32,414, p. 5 (La. App. 2 Cir. 10/29/99), 743 So.

2d 949, 953. “A misrepresentation relating to a coverage issue would involve

facts about the policy itself, such as the amount of coverage, lapse or expiration

of the policy, or exclusions from coverage.” Strong, 743 So. 2d at 953. An insurer

also has “an independent duty to keep its insured informed of the status of

settlement negotiations[.]” Teague v. St. Paul Fire & Marine Ins. Co.,

2006-1266, p. 62 (La. App. 1 Cir. 4/7/09), 10 So. 3d 806, 845. This includes a duty

to inform the insured about offers to settle that are made and received, offering

input on the settlement decision, and generally keeping the insured apprised of

those facts necessary for the insured to make a decision that is in their own

personal interest. Arvie, 951 So. 2d at 1285; McGee, 840 So. 2d at 1254, 1256; 

Lafauci v. Jenkins, 2001-2960 (La. App. 1 Cir. 1/15/03), 844 So. 2d 19, 27-29. As

explained below, it is not clear that State Farm is entitled to judgment as a

matter of law on Kelly’s (B)(1) claim. As such, we reverse the district court’s

grant of summary judgment.

In McGee, an insurer was found to have violated (B)(1) when it

“consistently failed to communicate the status of the claim to [the insured] on a

regular basis” and, when it did communicate with the insured, it “failed to

communicate the pertinent facts necessary for [the insured] to consider in

determining what was in her personal interest.” McGee, 840 So. 2d at 1256. The

insurer in Arvie committed similar bad faith conduct and also “failed to offer [its

insured] input into the settlement decision.” Arvie, 951 So. 2d at 1286. The only

communication between State Farm and Thomas alleged here consisted of a

single letter in which State Farm told Thomas that he might face personal

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liability and that he should consider seeking independent counsel. At no point

did State Farm inform Thomas the extent to which Kelly’s medical bills exceeded

his policy limits, nor did State Farm tell Thomas that it had made a settlement

offer that was rejected by Kelly. In short, State Farm sent a single, cursory

communication to Thomas, and it cannot be said as a matter of law that this

letter communicated the pertinentfacts necessary for Thomas to 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), it is the plaintiff’s burden to show that the insured

submitted a satisfactory proof of loss, which is one that is sufficient to fully

apprise the insurer of the insured’s claim. Reed v. State Farm Mut. Auto. Ins.

Co., 2003-0107, p. 13 (La. 10/21/03), 857 So. 2d 1012, 1020 (stating that the “one

who claims entitlement” has the “burden of proving” receipt 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 based on third-party proofs of loss. Langsford v.

Flattman, 2003-0189, pp. 3–4 (La. 1/21/04), 864 So. 2d 149, 151.

Kelly’s claim under § 22:1973 fails for the same reason that his claim

under § 22:1892(A)(1) failed, see supra Part III.A: Kelly has not alleged that

Thomas submitted a proof of loss to State Farm that went unpaid. Rather, the

premise of Kelly’s case is his allegation that State Farm failed to act when his

attorney sent State Farm a third-party demand letter. As discussed earlier,

assuming arguendo that Kelly’s letter constituted a satisfactory proof of loss at

all, the letter was a proof of loss from a third-party claimant. The assignment

between Kelly and Thomas does not allow Kelly to shoehorn otherwise ineligible

claims into Louisiana’s insurance statutes. Section 22:1973 does not provide a

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cause of action when an insurer fails to pay a third party’s claim based on a proof

of loss. Therefore, summary judgment is appropriate. Fed. R. Civ. P. 56(a).

IV

For the foregoing reasons, we AFFIRM IN PART and REVERSE IN PART

the district court’s grant of summary judgment. We REMAND to the district

court for further proceedings consistent with this opinion.

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