Citadel Broadcasting Corp. v. Axis U.S. Insurance Co.
162 So. 3d 470
La. Ct. App.2015Background
- Hurricane Katrina (Aug. 29, 2005) damaged three Citadel radio stations (KKND, KMEZ, WDVW), which were off-air for 17, 32 and 134 days respectively. Citadel had an AXIS policy (1/1/05–1/1/06) covering property, business interruption (BI), contingent BI (CBI) and a 365‑day extended period of indemnity (EPI).
- Citadel submitted a claim; AXIS initially paid some property and restoration-period BI amounts and loss-adjustment expenses but denied EPI BI and CBI, invoking Exclusion K (loss of market) and arguing listeners were not customers.
- Citadel sued for breach of contract and statutory bad faith (La. R.S. 22:658/1892). After a six‑day jury trial, jury awarded: $3,273,237 for BI during the 365‑day EPI, $2,383,751 for post‑EPI CBI through 6/30/07, $250,000 LAE, $2,953,494 bad‑faith penalty, and $2,953,494 attorneys’ fees (total damages $11,813,976).
- AXIS appealed, challenging causation proof for lost profits, the bad‑faith finding, the attorneys’ fees award, the LAE award, admission of Citadel’s expert (Brophy), and denial of a new trial.
- The appellate court affirmed findings on causation, bad faith, LAE, expert testimony admission, and denial of new trial; it vacated and remanded only the attorneys’ fees award for a hearing on admissible evidence of fees.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Causation for lost profits | Citadel argued lost profits were provable with reasonable certainty by comparing expected pre‑Katrina performance to actual post‑Katrina results, supported by witness observations and Brophy’s forensic analysis | AXIS argued Citadel failed to prove losses were caused by a covered event and needed customer‑by‑customer proof | Affirmed: evidence (witnesses, records, expert analysis) supported jury finding of $5,906,988 in covered losses |
| Statutory bad faith (penalty) | Citadel argued AXIS had satisfactory proof, failed to timely pay covered amounts, and acted arbitrarily/capriciously (denial reliance on Exclusion K inconsistent) | AXIS argued it had reasonable basis to deny coverage and dispute amounts | Affirmed: jury reasonably found all elements met and awarded penalty |
| Attorneys’ fees award for bad faith | Citadel requested attorney fees equal to the penalty amount and argued jury may award under statute | AXIS argued no admissible evidence of fees was presented at trial | Vacated and remanded: award unsupported by record; fee amount to be determined after evidentiary hearing |
| Loss Adjustment Expenses (LAE) for expert costs | Citadel argued Brophy’s fees fit LAE language covering expenses to assess/prepare/certify a claim | AXIS argued trial expert fees (hired for litigation) fall outside LAE | Affirmed: policy language covered the expenses; $250,000 LAE award sustained |
| Admissibility of plaintiff’s expert (Brophy) | Citadel relied on Brophy’s methodology (records, interviews, policy) to calculate losses | AXIS sought Daubert hearing and contemporaneous objections; later challenged reliability | Waived and overruled: AXIS failed to preserve the challenge; trial court did not abuse discretion in admitting Brophy |
| Use of deposition excerpts and new trial request | AXIS wanted to publish deposition portions in its case‑in‑chief and raised other trial object/erroneous admissions | AXIS argued evidentiary rulings prejudiced its defense | Affirmed: trial court acted within discretion declining to publish depositions (witnesses appeared live); petition admission harmless; no abuse of discretion in denying new trial |
Key Cases Cited
- La Louisiane Bakery Co. v. Lafayette Ins. Co., 61 So.3d 17 (La. App. 5 Cir. 2011) (lost‑profits proof requires reasonable certainty)
- Maloney Cinque, L.L.C. v. Pacific Ins. Co., 89 So.3d 12 (La. App. 4 Cir. 2012) (lost‑profits proof need not be mathematically certain)
- McDill v. Utica Mut. Ins. Co., 475 So.2d 1085 (La. 1985) (insurer must tender reasonable undisputed amount when dispute exists)
- Sher v. Lafayette Ins. Co., 988 So.2d 186 (La. 2008) (definition of arbitrary/capricious for penalties)
- Rivet v. State, DOTD, 680 So.2d 1154 (La. 1996) (requirement of record evidence to support attorney‑fee awards)
- Willwoods Community v. Essex Ins. Co., 33 So.3d 1102 (La. App. 5 Cir. 2010) (jury cannot award statutory fees absent evidentiary support)
- Hill v. Shelter Mut. Ins. Co., 935 So.2d 691 (La. 2006) (contract interpretation follows clear policy language)
- Versluis v. Gulf Coast Transit Co., 17 So.3d 459 (La. App. 4 Cir. 2009) (trial court’s admission of expert testimony reviewed for abuse of discretion)