Court Opinion

ID: 40713
Source: CourtListenerOpinion
Date Created: 2010-04-25 20:52:33+00
Date Added: 2024-06-11T17:16:33.920918
License: Public Domain

United States Court of Appeals
                                                               Fifth Circuit
                                                            F I L E D
              IN THE UNITED STATES COURT OF APPEALS
                                                            February 9, 2006
                      FOR THE FIFTH CIRCUIT
                                                        Charles R. Fulbruge III
                      _____________________                     Clerk

                           No. 05-30225
                      _____________________

RANDALL BROWN, ON BEHALF OF MICHAEL A. TRACY,

                     Plaintiff - Appellant,

                                v.

LIBERTY MUTUAL FIRE INSURANCE COMPANY; ET AL,

                      Defendants,

LIBERTY MUTUAL FIRE INSURANCE COMPANY,

                      Defendant - Appellee.

_________________________________________________________________

           Appeal from the United States District Court
               for the Middle District of Louisiana
                       No. 3:04-CV-00002-SCR
_________________________________________________________________

Before JOLLY, GARZA, and PRADO, Circuit Judges.

EDWARD C. PRADO, Circuit Judge:*

     Plaintiff Randall Brown appeals from the district court’s

grant of summary judgment in favor of Defendant Liberty Mutual

Fire Insurance Company (“Liberty Mutual”).    Brown filed suit

against Liberty Mutual based on an assignment of rights from

Liberty Mutual’s insured, Michael Tracy.   Brown claims that

Liberty Mutual failed to meet its contractual duty to act in good

     *
       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this opinion should not be published and is not precedent except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.
                           No. 05-30225
                                -2-

faith in handling his claim, which arose from an automobile

accident that was Tracy’s fault.   Brown alleges that Liberty

Mutual failed to settle the claim within Tracy’s policy limits

and breached its duty to keep Tracy informed and defend the claim

against him.   Therefore, Brown claims that Liberty Mutual is

liable for the amount of the excess judgment against Tracy, which

includes damages, penalties, and attorney’s fees under the

penalty provision of Louisiana Revised Statutes §§ 22:658 and

22:1220.   On appeal from the district court’s grant of summary

judgment in favor of Liberty Mutual, we AFFIRM.

               I. FACTUAL AND PROCEDURAL BACKGROUND

     The relevant facts are largely undisputed.   On February 26,

2001, Michael Tracy reported to his insurer, Defendant Liberty

Mutual, that he was involved in a three-car accident three days

earlier.   Tracy’s vehicle rear-ended a woman’s vehicle that in

turn hit Plaintiff Randall Brown’s vehicle.   Liberty Mutual

assigned an investigator/adjustor to the claim.   Brown hired an

attorney to pursue his property damage and bodily injury claims.

     On March 5, Brown’s attorney advised Liberty Mutual that he

was injured in the accident, without providing specific

information about the injuries.    On March 15, the attorney’s firm

sent a letter, signed by a case manager, to Liberty Mutual,

requesting the amount of Tracy’s policy limits and asking Liberty
                            No. 05-30225
                                 -3-

Mutual to “tender your policy.”    In addition, the firm attached

an MRI report to the letter that stated that Brown had a

herniation and disc bulge, but did not state the likely cause of

either.1    Brown’s attorney did not provide Liberty Mutual any

other information about Brown’s medical condition and denied

Liberty Mutual’s requests for authorization to obtain Brown’s

medical records.    Brown had back surgery on May 25, 2001.

     On June 8, 2001, Brown filed suit against Tracy and Liberty

Mutual alleging that Brown suffered serious personal injuries as

a result of the vehicle accident on February 23.    Liberty Mutual

assigned an attorney to the case who sent Tracy a letter advising

him of a potential excess judgment arising in the lawsuit.     The

attorney later advised Tracy to notify any excess insurer of the

potential exposure and counseled him to consult an attorney who

specializes in asset protection.    Although Liberty Mutual

authorized the attorney to settle Brown’s claims for the $25,000

policy limits, Brown refused.    At a later date, Brown sent

Liberty Mutual a settlement letter, offering to settle the claim

     1
         The March 15 letter states in relevant part:

     We have received a copy of a MRI [sic] of the clients [sic]
     lumbar of which we have enclosed a copy for your review and
     record. The results are positive for a herniation and a
     disc bulge . . . . We are requesting at this time due to
     the severity of the injuries sustained by the client in the
     accident that you tender your policy.

     We are also requesting a confirmation of the amount of your
     insureds [sic] policy. Please provide this information.
                            No. 05-30225
                                 -4-

for $150,000.    Liberty Mutual refused.

       After holding a bench trial on March 6, 2003, the magistrate

judge rendered judgment in favor of Brown against Tracy and

Liberty Mutual in an amount in excess of $300,000, plus interest

and court costs.    Liberty Mutual paid its policy limits, plus

interest and court costs.    Thereafter, Tracy assigned all his

rights against Liberty Mutual to Brown.    Brown then filed suit as

Tracy’s assignee against Liberty Mutual seeking recovery of the

amount of the excess judgment, plus penalties and attorney’s

fees.

       Liberty Mutual moved for summary judgment after completion

of discovery, arguing that the undisputed facts do not establish

a claim under Louisiana’s bad faith statutes or any applicable

law.    The magistrate judge granted the motion.   Brown appeals,

claiming that there are genuine issues of material fact

supporting his claim that Liberty Mutual failed to meet its

contractual duty to act in good faith in handling the insurance

claim.    Brown alleges that Liberty Mutual failed to settle the

claim within Tracy’s policy limit and breached its duty to keep

Tracy informed and defend the claim against him.     Brown therefore

claims that Liberty Mutual is liable for the amount of the excess

judgment against Tracy, which includes damages, penalties, and

attorney’s fees under the penalty provisions of Louisiana Revised

Statutes §§ 22:658 and 22:1220.    LA. REV. STAT. §§ 22:658 and
                             No. 05-30225
                                  -5-

22:1220.

                   II. SUMMARY JUDGMENT STANDARD

     This court reviews an appeal from summary judgment de novo,

employing the same standards as the district court.    See Urbano

v. Continental Airlines, Inc., 138 F.3d 204, 205 (5th Cir. 1998).

Summary judgment is appropriate when, viewing the evidence in the

light most favorable to the nonmoving party, the record reflects

that no genuine issue of material fact exists, and the moving

party is entitled to judgment as a matter of law.   FED. R. CIV.

P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 255

(1986); Price v. Federal Exp. Corp., 283 F.3d 715, 719 (5th Cir.

2002).   Summary judgment is granted where a party fails to

establish the existence of an element essential to the case and

on which the party has the burden of proof.    Celotex Corp. v.

Catrett, 477 U.S. 317, 322 (1986).    If the moving party carries

its burden under Rule 56(c), the burden shifts so that the

opposing party must direct the court’s attention to specific

evidence in the record that demonstrates that it can satisfy a

reasonable jury that it is entitled to verdict in its favor.

Anderson, 477 U.S. at 252.    Mere scintilla of evidence will not

satisfy the opposing party’s burden.    Little v. Liquid Air Corp.,

37 F.3d 1069, 1075 (5th Cir. 1994).
                           No. 05-30225
                                -6-

                         III. DISCUSSION

     This court has jurisdiction to hear this case as there is

complete diversity between the parties and the amount in

controversy exceeds $75,000.   28 U.S.C. § 1332.

     Brown asserts that the March 15 letter requesting Tracy’s

insurance company to “tender your policy” amounts to an offer to

settle, thereby obligating the insurance company to have kept

Tracy informed of the negotiations to prevent liability for

excess judgment.   Brown’s claim rests upon the violation of two

relevant statutes: Louisiana Revised Statutes §§ 22:658 and

22:1220.   LA. REV. STAT. §§ 22:658 and 22:1220.   These statutes

set forth the liability insurer’s duty to act in good faith and

to deal fairly in handling claims.   However, the facts do not

support Brown’s claims under either of these statutes.

     Section 22:120 provides in pertinent part:

     A. An insurer, . . . owes to his insured a duty of good
     faith and fair dealing. The insurer has an affirmative duty
     to adjust claims fairly and promptly and to make a
     reasonable effort to settle claims with the insured or the
     claimant, or both. Any insurer who breaches these duties
     shall be liable for any damages sustained as result of the
     breach.

     B. Any one of the following acts, if knowingly committed or
     performed by an insurer, constitutes a breach of the
     insurer’s duties imposed in Subsection A:

     (1) Misrepresenting pertinent facts or insurance policy
     provisions relating to any coverages at issue.
     (2) Failing to pay a settlement within thirty days after an
     agreement is reduced to writing.
     (3) Denying coverage or attempting to settle a claim on the
                            No. 05-30225
                                 -7-

     basis of an application which the insurer knows was altered
     without notice to, or knowledge or consent of, the insured.
     (4) Misleading a claimant as to the applicable prescriptive
     period.
     (5) Failing to pay the amount of any claim due to 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.

The list of acts found in subsection B, each of which constitute

a breach of the insurer’s duty to an insured and claimants, is

exclusive.    Theriot v. Midland Risk Ins. Co., 694 So.2d 184, 189

(La. 1997).   Brown does not cite any facts demonstrating that

Liberty Mutual breached its duty in any of the enumerated

circumstances under which an insurer neglects its duties of good

faith and fair dealing to its insured under subsection B.

     Section 22:658(A) penalizes the arbitrary or capricious

failure either to pay, inter alia, (1) a claim due the insured

“within thirty days after receipt of satisfactory proofs of loss”

from the insured, or (2) a third-party claim “within thirty days

after written agreement of settlement.”    LA. REV. STAT. §

22:658(A)(1), (2).   Brown does not allege any facts that support

his claim under subsection A against Liberty Mutual.    However,

while citing to this statute, Louisiana courts have allowed an

award of attorney’s fees in cases where an insurer’s bad faith

refusal to settle led to an excess judgment.    Louque v. Allstate

Ins. Co., 314 F.3d 776, 781 (5th Cir. 2003); see also Maryland

Cas. Co. v. Dixie Ins. Co., 622 So.2d 698, 703 (La. Ct. App.

1993).
                            No. 05-30225
                                 -8-

     Louisiana law obligates an insurance company to keep its

insured informed of settlement negotiations to protect him from

exposure to excess liability but states that determinations as to

what constitutes bad faith or lack of good faith depends on the

facts and circumstances of each case.      Roberie v. Southern Farm

Bureau Cas. Ins. Co., 194 So.2d 713, 716 (La. 1967); Lafauci v.

Jenkins, 844 So.2d 19, 28 (La. Ct. App. 2003).     Failure to settle

a claim within the policy limits is not in itself proof of bad

faith.    Smith v. Audobon Ins. Co., 679 So.2d 372, 376 (La.

1996)(“In the absence of bad faith, a liability insurer generally

is free to settle or to litigate at its own discretion, without

liability to its insured for a judgment in excess of the policy

limits.”); see also Commercial Union Ins. Co. v. Mission Ins.

Co., 835 F.2d 587, 588 (5th Cir. 1988)(“As interpreted by this

court, 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.”).

The insurer’s conduct should be judged at the time at which the

insurer could have and should have settled within the policy

limits.    See Robin v. Allstate Ins. Co., 870 So.2d 402, 409 (La.

Ct. App. 2004)(“[A] determination of whether an insurer’s refusal

to pay a claim is arbitrary and capricious, or without probable

cause, hinges on the facts known by the insurer at the time a
                            No. 05-30225
                                 -9-

decision to refuse to pay the claim is made.”) The following six

factors should be considered in determining whether an insurer

acted arbitrarily or in bad faith in failing to compromise: (1)

the probability of the insured’s liability, (2) the adequacy of

the insurer’s investigation of the claim; (3) the extent of

damages recoverable in excess of policy coverage; (4) the

rejection of offers in settlement after trial; (5) the extent of

the insured’s exposure as compared to that of the insurer; and

(6)the nondisclosure of relevant factors by the insured or

insurer.    Cousins v. State Farm Mut. Auto. Ins. Co., 294 So.2d

272, 275 (La. Ct. App. 1974).   “Even if a liability insurer is

not in bad faith in its evaluation of a claim or in refusing to

settle a claim, it may still be found to be in bad faith for

failure to keep its insured informed of the status of settlement

negotiations and other developments affecting his excess

exposure.”    Lafauci, 844 So.2d at 29.

     Brown argues that the March 15 letter received by Liberty

Mutual requesting it to “tender your policy” amounts to a

settlement offer.   In addition, Brown maintains that Liberty

Mutual had adequate information through the MRI report that

should have alerted it that Brown’s claim might exceed the policy

limits.    Brown asserts that Liberty Mutual intentionally failed

to inform Tracy of an offer to settle for the policy limits.    If

it is reasonable to infer from the phrase “tender your policy”
                           No. 05-30225
                               -10-

that a settlement offer has been made, then Liberty Mutual would

have acted in bad faith in not apprising Tracy of the settlement

offer.

     We agree with the district court that no reasonable

inference can be drawn from the March 15 letter that it was an

offer to settle Brown’s claims for the policy limits: the letter

is from a case manager, not an attorney; the letter does not

mention the words “settle” or “settlement”; the letter requested

information about the policy limits.   All these make it difficult

to view the phrase “tender your policy” as a bona fide offer to

settle Brown’s claims.   The shortcomings of the letter are

plainly evident when we compare the March 15 letter to the

content of Brown’s settlement letter offering to settle his

claims for $150,000: it was signed by an attorney, the word

“settle” appeared in the first sentence, and it clearly set forth

a settlement amount.

     Brown’s argument that Liberty Mutual inferred that March 15

letter was a settlement offer is unavailing.   Brown points out

that on March 29, 2001, Liberty Mutual’s adjustor checked a box

marked “yes” next to the question, “Has the claimant pressed for

quick settlement?” on the initial claim assessment form.

However, this is a scintilla of evidence that is not supported by

the content of the March 15 letter.    The initial claim assessment

form does not provide any information to support the inference
                             No. 05-30225
                                 -11-

that this “yes” checkmark was based on the March 15 letter.

     Finally, Brown’s argument that Liberty Mutual had adequate

information that Brown’s claims might exceed the policy limits

once it received the MRI report is unpersuasive.    The MRI report

did not contain any information on the causation of Brown’s

injuries.    Liberty Mutual attempted but was unable to obtain

information on causation.    Liberty Mutual timely appointed an

attorney upon the filing of Brown’s lawsuit against Tracy, and

the attorney timely advised Tracy of the potential for excess

liability.

                            IV. CONCLUSION

     Brown fails to demonstrate a genuine issue of material fact

to support a finding that Liberty Mutual acted in bad faith by

failing to settle for the policy limits, or to inform Tracy of

the potential for excess liability or of any settlement offers

that could have prevented his exposure to an excess judgment.

Accordingly, we AFFIRM the district court’s grant of summary

judgment in favor of Liberty Mutual.