Opinion ID: 1808850
Heading Depth: 1
Heading Rank: 18

Heading: Penalty Provisions

Text: Plaintiff argues the appellate court erred when it found the post-Katrina amendment to La.Rev.Stat. § 22:658 inapplicable to his claims. In its rejection of this argument, the majority opinion, while recognizing Lafayette's continuing duty of good faith and fair dealing, grounds its holding on the basis that the plaintiff's claim arose prior to the amendment, i.e., he submitted a satisfactory proof of loss prior to the amendment thereby triggering the time period set forth in the statute. In addition, the majority further opines the plaintiff did not discover new damage after the amendment of the statute became effective for which Lafayette failed to pay. Op. at 199. In my view the analysis is fundamentally flawed by finding the application of the amendment is limited to the filing of a satisfactory proof of loss triggering the time period set forth in the statute rather than based upon the conduct of the insurer. Further, the majority's analysis frustrates and fails to recognize the Legislature's strong public policy efforts to discourage the arbitrary and capricious conduct of the insurer in dealing fairly and in good faith with their insured. Because the insurer's obligation is a continuing obligation, the application of the amendment is not limited to the time frame set forth in the statute, thus I find it only necessary to examine whether Lafayette breached its duty of good faith and fair dealing after the amendment became effective. [1] La.Rev.Stat. §§ 22:658 and 22:1220 impose a duty of good faith and fair dealing on an insurer, specifically to adjust claims fairly and promptly and to take reasonable steps to settle valid claims. Chargois v. Guillory, 97-439 (La.App. 3 Cir. 10/29/97), 702 So.2d 1068, 1069. Recognizing this duty and applying it to post-Katrina cases, I agree with the decisions of the U.S. District Courts for the Eastern District of Louisiana on this issue that have recognized this duty is a continuing duty of good faith and fair dealing on the insurer's part, and have applied the amended version of La.Rev.Stat. § 22:658 prospectively where the insurer's misconduct continued after August, 15, 2006, the effective date of the amendment. See e.g., Goodwyne v. State Farm Fire & Cas. Co., 2007 WL 4365437 (E.D.La.12/11/07); Kodrin v. State Farm Fire Ins. Co., 2007 WL 4163437 (E.D.La.11/21/07) Conlee v. Fireman's Fund Ins. Co., 2007 WL 2071860 (E.D.La.7/17/07). As a matter of analysis, one of the federal courts stated: In Manuel v. Louisiana Sheriff's Risk Management Fund, 664 So.2d 81, 86 (La.1995), the Louisiana Supreme Court dealt with whether section 1220 applied to the plaintiff's bad faith claims, when at the time of the accident, section 1220 had not yet been enacted. In Manuel, the application of the penalty centered around the failure of the insurer to pay funds per a settlement agreement reached by the parties. The actual settlement of the claim with the insurer and the failure of the insurer to pay the funds in accordance with the settlement occurred one year after the enactment of Section 1220. While the event triggering the insurance claim occurred before the enactment, the alleged breach of the insurer's duty of good faith and fair dealing occurred and continued to occur after the enactment of the statute. As such, the Louisiana Supreme Court found that, although the breach occurred after the statute's enactment, retroactivity was not an issue. Instead, the Court applied the statute prospectively and found that the insurer was subject to the newly enacted penalty provisions. During oral argument in the instant case, defense counsel admitted that an insurer owes an insured a continuing duty of good faith and fair dealing. While it seems that Defendant's alleged misconduct (alleged failure to promptly pay Plaintiffs' claims) may have begun before the amendment to 22:658, Plaintiffs allege that Defendant's misconduct continued after the effective date of the amendment on August 15, 2006. In fact, Defendant did not pay anything to Plaintiffs until January 5, 2007. Consequently, the Court concludes that Defendant's post-amendment misconduct coupled with Defendant's continuing duty to fairly and promptly adjust claims may suggest a finding that, as a matter of law, Defendant is subject to the 2006 amendment to Section 658. Thus, Plaintiff's potential recovery of penalties under La. R.S. 22:658 should be 50 percent of the amount found to be due, if any, under the homeowners policy. Conlee, at . In the case at hand, we affirm the lower courts' findings of the insurer's unfair dealings and bad faith conduct with their insured, but the majority fails to recognize this conduct after the effective date of the amendment. In my view, this reasoning is flawed and diminishes an insurer's continuing obligation of good faith and fair dealing with its insured. Under the majority's rationale, even if the proof of loss is submitted by the insured before the effective date of the amendment and the conduct of the insurer changes after the effective date of the amendment, the amendment cannot be applied because the proof of loss was filed before the effective date. This is simply wrong. The basis for imposing the penalty is conduct and the filing of a proof of loss does not toll the application of the penalty other than to set up an expectation of payment to the insured. The majority's limitation of the amendment's application to the filing of the proof of loss is a misinterpretation of the statute. The majority recognizes that Lafayette repeatedly refused to pay plaintiff's Katrina property damages because of its contention the property was poorly maintained. Indeed, even the majority opinion finds Lafayette's actions were `vexatious,' and thus arbitrary, capricious, and without probable cause[,] and affirms the jury's finding that Lafayette failed to timely adjust the plaintiff's claim. Op. at 207. Even after Lafayette learned on September 5, 2006, well after the effective date of the amended version of La.Rev.Stat. § 22:658, it had inspection reports in its own files showing the property was well maintained, it failed to tender payment. The insurer's continuing duty to deal fairly and in good faith with its insured did not stop when plaintiff filed his proof of loss. The majority's interpretation of this statute limits the insurer's obligation of good faith and fair dealing to the filing of the property loss and the time frame set out for payment of the loss, which is internally inconsistent with a continuing duty requirement. This interpretation misses the entire focus and purpose of the penalty statutethe bad faith conduct of the insurer. The majority takes the teeth out of the consequences for a breach of a continuing duty and renders it meaningless. So now, as soon as an insured files a proof of loss and the time delays as set forth in the statute expire, the continuing duty of good faith and fair dealing ceases to be required. I disagree. The conduct of defendant in this case exemplifies the type of conduct the Legislature was trying to discourage when it amended the statute. Thus, I find the amendment applies under the facts of this case.