Opinion ID: 213920
Heading Depth: 3
Heading Rank: 2

Heading: Penalty on amount found to be due

Text: We next consider the district court's calculation of penalties under the 2003 version of the statute. At the close of trial, the district court made two key determinations with respect to the ultimate amount found to be due from Allstate to the Plaintiffs. The district court concluded first, that the Plaintiffs were entitled to the full policy limit under their dwelling coverage; and second, that Allstate owed the Plaintiffs $10,000 under their coverage for other structures. It thus assessed penalties on the sum of $338,000 (the dwelling policy limit) and $10,000, and awarded penalties in the amount of 25 percent of $348,000. In deciding to calculate penalties on the entire amount found to be due, the district court relied on our decision in Grilletta, in which we stated: If part of a claim for property damage is not disputed, the failure of the insurer to pay the undisputed portion of the claim within the statutory delay will subject the insurer to penalties on the entire claim.  558 F.3d at 370 (emphasis added) (quoting Sher v. Lafayette Ins. Co., 973 So.2d 39, 60 (La.Ct.App. 2007)). Believing itself bound to the directive in this sentenceand thereby overlooking its specific context in Grilletta  the district court calculated penalties on the Plaintiffs' entire wind-damage claim, without discounting any amounts Allstate had timely paid. [14] Allstate contends that the district court erred as a matter of law in its calculation of the penalty due. Its argument proceeds in two steps. First, Allstate argues that under Louisiana law, statutory penalties may never be based on amounts that were disputed in good faith. It reasons that because § 22:658 liability may not be imposed where an insurer disputes a claim in good faith, so penalties may not be assessed against amounts that were disputed in good faith. We expressly rejected this argument in Grilletta, 558 F.3d at 370. Allstate attempts to circumvent this precedent by asserting that Grilletta relied on an incorrect interpretation of Louisiana Bag. Second, in an extension of its first argument, Allstate asserts that all of the amounts it has paid or must pay on the Plaintiffs' wind-damage claim were disputed in good faith, with only one exception: the $70,461.82 it untimely paid the Plaintiffs in December 2005. Allstate argues that the district court should therefore have assessed penalties on the $70,461.82 amount only. [15] In the alternative, Allstate argues that at minimum, it should not be liable for penalties on the $10,000 it timely paid the Plaintiffs for damage to their dwelling on November 4, 2005. We consider this alternative argument first.
Section 22:658(B)(1) provides in relevant part: Failure to make such payment within thirty days after receipt of such satisfactory written proofs and demand therefor. . . when such failure is found to be arbitrary, capricious or without probable cause, shall subject the insurer to a penalty, in addition to the amount of the loss, of [1] twenty-five percent damages on the amount found to be due from the insurer to the insured . . . or [2] in the event a partial payment or tender has been made, twenty-five percent of the difference between the amount paid or tendered and the amount found to be due. (emphasis added). The statutory text makes clear that an insurer is entitled to a reduced penalty where it has paid some portion of the insured's claim: in such a case, the amount paid is subtracted from the amount found to be due before applying the requisite percentage. See La. Bag Co., 999 So.2d at 1122 (finding insurer liable under § 22:658(B)(1) for the difference between the amount paid, $1,000,000, and the amount found to be due, $3,266,309). Equally clear, though not explicit in the statute, is that the reduced penalty provision applies if (and only if) the insured's partial payment complies with the statutory requirementsnamely, it is tendered within thirty days after receipt of satisfactory proofs of loss from the insured. § 22:658(A)(1). See Grilletta, 558 F.3d at 370-71 (concluding insurer had not made partial payment under the statute because it did not pay or tender anything to the Plaintiffs within the statutory deadline  (emphasis added)). Indeed, to conclude otherwise would effectively read out the statute's time-limit requirementsuch an interpretation would, for instance, permit insurers who had untimely paid 100 percent of a insured's claim to avoid statutory penalties. In this case, the district court concluded that Allstate's payment to the Plaintiffs on November 4, 2005, was timely, as it occurred within 30 days of Favel's estimate on the Plaintiffs' wind-damage claim. In calculating the statutory penalties due, the district court was therefore obligated to subtract from the amount found to be due the $10,000 Allstate had timely paid the Plaintiffs. Under the correct calculation, the penalty is 25 percent of $338,000, or $84,500. We accordingly modify the district court's penalty award from $87,000 to $84,500.
Turning to Allstate's central argument, we next consider how courts have assessed penalties under § 22:658. We do not interpret the penalty provision of § 22:658(B)(1) against a blank slate. The Louisiana Supreme Court has recently issued two decisions of relevance here, Sher and Louisiana Bag Company, and we recently addressed this issue in Grilletta. As an initial matter, we reject outright Allstate's suggestion that we may ignore or otherwise disregard our holding in Grilletta. It is a well-settled Fifth Circuit rule of orderliness that one panel of our court may not overturn another panel's decision, absent an intervening change in the law, such as by statutory amendment, or the Supreme Court, or our en banc court. Jacobs v. Nat'l Drug Intelligence Ctr., 548 F.3d 375, 378 (5th Cir.2008). Allstate has pointed to no intervening law since Grilletta that would give us occasion to reconsider that decision, nor have we found any in our own research. Indeed, Allstate has not identified any relevant Louisiana case that interprets the phrase amount found to be due in the way it urges us to. We also cannot agree with Allstate that Grilletta is inconsistent with Sher or Louisiana Bag. In fact, we conclude that all three cases are in accord with one another. We summarize the cases briefly. In Sher, the Louisiana Fourth Circuit Court of Appeal concluded that the insurer, Lafayette Insurance Company, was liable for § 22:658 penalties because it had failed to pay an undisputed portion of Sher's claim. With respect to penalties, Lafayette argued that it should not be subject to penalties on the parts of the claim it had disputed in good faith. Lafayette thus noted that it had withheld payment in good faith on the plaintiff's business personal property (BPP) claim, and therefore should not be subject to penalties on that claim. The court rejected Lafayette's argument, agreeing with Sher that whether [Sher's] claim for BPP was disputed in good faith is irrelevant due to the fact that the failure to pay lost rents and property damage was in bad faith, which dictates that the trial court assess penalties on Mr. Sher's entire claim pursuant to Warner. Sher v. Lafayette Ins. Co., 973 So.2d 39, 62 (La.Ct.App.2007) (emphasis added) (citing Warner v. Liberty Mut. Fire Ins. Co., 543 So.2d 511 (La.Ct.App.1989)). The Louisiana Supreme Court granted certiorari, adjusted the award for payment due, and similarly concluded that because Lafayette failed to tender the undisputed portion of plaintiff's lost rents, it was liable for penalties on the entire amount the court determined was due under the contract. Sher, 988 So.2d at 207. In Louisiana Bag, the insurer sent the insured a $1,000,000 advance on an insurance claim before it had received satisfactory proof of loss. 999 So.2d at 1110. Once it received the satisfactory proof of loss, however, the insurer failed to timely pay the balance due. The Louisiana Supreme Court concluded that the insurer was thus liable for § 22:658 penalties. The court calculated penalties on the difference between the amount ultimately found to be due, $3,266,309, and the $1,000,000 partial payment that was timely made. In doing so, the court noted that the insurer's failure to timely pay any one of [the undisputed portions of the insured's claim] would have been sufficient to render [it] liable under La. R.S. § 22:658 for the difference between the amount paid, $1,000,000, and the amount found to be due, $3,266,309. Id. at 1122 (emphasis added). Finally, in Grilletta, we held that § 22:658 penalties were due on the entire amount of the insured's claim, including amounts withheld and disputed in good faith. We rejected the insurer's argumentidentical to the one Allstate makes herethat the phrase amount found to be due in the penalty provision means that amount over which reasonable minds could not differ. 558 F.3d at 370. We also noted that while the insurer in Louisiana Bag had timely made partial payment, the insurer in Grilletta did not pay or tender anything to the Plaintiffs within the statutory deadline. Id. at 371. We therefore concluded the insurer was liable for penalties on the entire amount found to be due, without any subtraction for amounts paid. Id. [16] In light of our prior decision in Grilletta, we conclude that the district court was correct to interpret amount found to be due in § 22:658 as the entire amount ultimately found to be due to the Plaintiffs.