Court Opinion

ID: 622447
Source: CourtListenerOpinion
Date Created: 2012-02-09 01:02:26+00
Date Added: 2024-06-11T17:51:00.995300
License: Public Domain

Case: 11-30670     Document: 00511751421         Page: 1     Date Filed: 02/08/2012

            IN THE UNITED STATES COURT OF APPEALS
                     FOR THE FIFTH CIRCUIT  United States Court of Appeals
                                                     Fifth Circuit

                                                                            FILED
                                                                         February 8, 2012

                                     No. 11-30670                          Lyle W. Cayce
                                   Summary Calendar                             Clerk

JOHNNY G. DeLOACH, ET AL,

                            Plaintiffs
v.

HGI CATASTROPHE SERVICES, L.L.C.; HAMMERMAN & GAINER,
INCORPORATED; LARRY D. ONEY,

                            Defendants – Third-Party Plaintiffs – Appellants
v.

CONTINENTAL CASUALTY COMPANY,

                            Third-Party Defendant – Appellee

                   Appeal from the United States District Court
                       for the Eastern District of Louisiana
                              USDC No. 2:10-CV-724

Before BENAVIDES, STEWART, and CLEMENT, Circuit Judges.
PER CURIAM:*
        HGI Catastrophe Services, LLC, Hammerman & Grainer, Inc., and Larry
D. Oney (together “Hammerman”) appeal the district court’s grant of summary

        *
         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 R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.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.
   Case: 11-30670     Document: 00511751421       Page: 2    Date Filed: 02/08/2012

                                    No. 11-30670

judgment in favor of Continental Casualty Company (“CCC”), Hammerman’s
commercial general liability (“CGL”) insurer,1 on Hammerman’s third-party
claims for defense and indemnity. The question before us is whether the district
court erred in concluding that the CGL policy, which, in relevant part, provides
coverage only for loss of “tangible property,” does not obligate CCC to defend and
indemnify Hammerman against claims for reputational damage. We affirm.
                          FACTS AND PROCEEDINGS
      The State of Louisiana manages the Road Home program, which provides
special assistance to residents affected by Hurricanes Katrina and Rita. In 2009,
HGI Catastrophe Services, LLC (“HGI”) submitted a bid in response to the
State’s request for proposal for the contract to administer the program. In
connection with its bid, HGI contacted Johnny G. DeLoach and proposed that he
serve as the Program Director in the event that HGI was awarded the contract.
When HGI won the bid, however, it informed DeLoach that he would not be the
Program Director.
      DeLoach and JG DeLoach Consulting, LLC (together “DeLoach”) then filed
a diversity suit against Hammerman, seeking damages for breach of contract,
fraudulent inducement, negligent misrepresentation, unjust enrichment, and
unfair or deceptive trade practices. Relevant to this appeal, DeLoach sought
relief for reputational damage. Hammerman filed a third-party complaint
against Houston Casualty Company (“HCC”), its errors and omissions insurer,
seeking defense and indemnity. The district court granted HCC’s motion for
summary judgment, holding that the HCC policy did not provide coverage
against DeLoach’s claims. Hammerman then filed a similar third-party
complaint against CCC, seeking defense and indemnity. Hammerman and CCC

      1
         The policy was issued to Hammerman & Grainer International, Inc. and names both
Hammerman & Grainer, Inc. and HGI Catastrophe Services, LLC as additional insureds. The
policy also covers Oney as the President of HGI Catastrophe Services, LLC.

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   Case: 11-30670      Document: 00511751421        Page: 3    Date Filed: 02/08/2012

                                     No. 11-30670

filed cross-motions for summary judgment on the issue of whether the CGL
policy provided coverage. The district court granted CCC’s motion and denied
Hammerman’s. This timely appeal followed.
                              STANDARD OF REVIEW
       We review the district court’s grant of summary judgment de novo,
applying the same standards as the district court. Nickell v. Beau View of Biloxi,
L.L.C., 636 F.3d 752, 754 (5th Cir. 2011). Summary judgment is appropriate
when the moving party can demonstrate that “there is no genuine dispute as to
any material fact and [it] is entitled to judgment as a matter of law.” FED. R. CIV.
P. 56(a).
                                     DISCUSSION
       The CGL policy at issue extends CCC’s defense obligation to all suits
seeking damages for “bodily injury” or “property damage.” The policy defines
“property damage” as:
       a. Physical injury to tangible property, including all resulting loss
       of use of that property. . . ; or
       b. Loss of use of tangible property that is not physically injured.
Hammerman sought summary judgment against CCC on the contention that
reputational damage constituted “property damage” within the meaning of the
policy, and therefore triggered CCC’s duty to defend.2 Hammerman based its
argument on two decisions of the Louisiana Court of Appeal holding that loss of
reputation qualified as property damage for purposes insurance coverage: Lees
v. Smith, 363 So. 2d 974 (La. Ct. App. 3 Cir. 1978), and Williamson v. Historic
Hurstville Ass’n, 556 So. 2d 103 (La. Ct. App. 4 Cir. 1990).

      2
        On appeal, Hammerman argues that the district court erroneously failed to analyze
whether any of DeLoach’s separate theories triggered CCC’s duty to defend under the policy.
As CCC points out, the district court focused its discussion on the question of whether
reputational damage constitutes property damage because that was the argument upon which
Hammerman principally relied.

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                                  No. 11-30670

      As the district court thoroughly explained, previous decisions of this court
have rejected the reasoning of Lees and Williamson. See, e.g., Selective Ins. Co.
of Southeast v. J.B. Mouton & Sons, Inc., 954 F.2d 1075, 1079 (5th Cir. 1992)
(“‘[T]angible’ property corresponds to the Louisiana civilian concept of ‘corporeal’
property.” (citing City of New Orleans v. Baumer Foods, Inc., 532 So. 2d 1381,
1383 (La. 1988)); Lamar Adver. Co. v. Cont’l Cas. Co., 396 F.3d 654, 663 (5th Cir.
2005). In Lamar Advertising we interpreted a CCC policy virtually identical to
the one at issue and stated:
      While it is true that in Williamson, the Louisiana Fourth Circuit
      Court of Appeal held that loss of profits constitutes injury to
      “tangible property,” we find that the holding in Williamson does not
      compel us to depart from our more recent treatment of this issue in
      Selective Insurance. In Williamson, the complaint in the underlying
      action alleged that the defendant’s defamatory remarks about the
      plaintiff and his business venture caused reputational injury, i.e.,
      intangible property, and thereby, caused him consequential loss of
      profits. The Louisiana Fourth Circuit held that injury to reputation
      and loss of profitability constitute damages to “tangible property”
      within the meaning of a homeowner’s policy that defined property
      damage as “physical injury to or destruction of tangible property
      including loss of its use.” As Continental accurately points out,
      however, the court in Williamson based its interpretation of the
      policy on a Webster’s Dictionary definition of the term tangible. The
      Williamson court considered neither the Louisiana Supreme Court’s
      declaration that tangible property is corporeal property nor any
      provision of the Louisiana Civil Code in reaching this conclusion.
      Moreover, the Williamson court’s broad interpretation of the term
      tangible would render meaningless the provision under
      Continental’s policy agreeing to pay only those damages caused by
      physical damage to tangible property. Such an interpretation would
      make all damages recoverable under the policy. By contrast, this
      court’s interpretation of the terms tangible property as pronounced
      in Selective Insurance, is far more consonant with the language
      under Continental’s policy and is consistent with Louisiana civil law
      methodology. Accordingly, we hold that loss of profits that do not

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                                  No. 11-30670

      flow from injury to tangible property is not a loss covered by this
      policy’s property damage provision.
396 F.3d at 665 (internal citations and footnotes omitted). Lamar Advertising is
dispositive of this appeal. “[I]n the absence of a subsequent state court decision
or statutory amendment which makes this Court’s [prior] decision clearly wrong,
we are bound by a prior panel’s interpretation of state law.” Am. Int’l Specialty
Lines Ins. Co. v. Canal Indem. Co., 352 F.3d 254, 271 n.4 (5th Cir. 2003) (second
alteration in original) (internal citations and quotation marks omitted). One’s
reputation is not tangible property, and the purely economic losses resulting
from damage thereto are not “property damage” within the meaning of the
policy.
      Hammerman also contends that the district court erroneously relied on
inaccurate factual findings in ruling on the parties’ cross-motions, but it has
failed to demonstrate that any of the asserted inaccuracies were material to the
district court’s judgment.
                                CONCLUSION
      For the above reasons, the judgment of the district court is AFFIRMED.

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