210 So. 3d 829
La. Ct. App.2016Background
- After a March 30, 2013 hailstorm, James and Sheila Cooper submitted a homeowner’s claim to Farmers Insurance Exchange (FIE) for roof and resulting interior water damage.
- FIE’s April 2, 2013 inspection found minimal wind damage, no hail damage, and attributed much damage to wear, improper installation, and long-term leakage; estimated insured loss $684.99 (below $1,000 deductible).
- The Coopers hired public adjuster Richard Meyers who estimated $25,705.27 in storm damage; FIE re-inspected on November 14, 2013 and increased its estimate to $1,091.45 and issued a check for $91.45 over the deductible.
- The Coopers sued for bad faith under La. R.S. 22:1892 and 22:1973. Parties invoked their policy’s appraisal clause; each side selected an appraiser and the appraisers agreed to a $17,500 award, which FIE paid.
- Coopers claimed they effectively received only $9,625 after fees and argued FIE acted in bad faith by undervaluing the claim before appraisal; FIE defended its investigative and coverage-based positions and said it conceded in appraisal to avoid litigation.
- Trial court credited FIE’s expert (Crawford) that most damage was excluded (wear, faulty installation) and that tendering $17,500 pre-appraisal was not arbitrary, capricious, or without probable cause; judgment for FIE affirmed on appeal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether FIE’s pre-appraisal handling of the claim was arbitrary, capricious, or without probable cause (bad faith) | Cooper: FIE had satisfactory proof of loss and should have paid the $17,500 appraisal amount earlier; failure to do so shows bad faith | FIE: evidence supported a low covered-loss estimate (wear, improper installation, excluded causes); concessions in appraisal were tactical to avoid litigation | Court: No manifest error; FIE had reasonable basis and acted in good faith, so no bad faith penalties awarded |
| Whether appraisal award resolves coverage dispute or proves insurer acted in bad faith | Cooper: appraisal award of $17,500 establishes the amount of loss and demonstrates FIE’s prior refusal was arbitrary | FIE: appraisal concessions were a compromise/mediation-like result; prior coverage analysis legitimately excluded much claimed damage | Court: Appraisal result did not retroactively make FIE’s pre-appraisal conduct arbitrary; appraisal used to settle dispute, but trial court properly assessed pre-appraisal conduct on evidence presented |
| Weight of expert evidence and burden of proof | Cooper: contested FIE’s estimates and relied on public adjuster estimates (not called at trial) | FIE: presented expert testimony and adjuster reports showing exclusionary causes; Cooper failed to rebut with expert testimony | Court: Credited FIE’s expert; Coopers’ failure to present their appraiser or other expert was fatal to proving bad faith |
| Whether insurer may concede larger amount in appraisal to avoid litigation without admitting prior bad faith | Cooper: concession indicates insurer undervalued claim earlier | FIE: permissible litigation strategy to concede on appraisal to resolve dispute | Held: Court accepted FIE’s explanation as legitimate settlement tactic and not proof of bad faith |
Key Cases Cited
- Jones v. Johnson, 56 So.3d 1016 (La. App. 2d Cir. 2010) (elements and standards for imposing penalties under insurer bad-faith statutes)
- Block v. St. Paul Fire & Marine Ins. Co., 742 So.2d 746 (La. App. 2d Cir. 1999) (insurer need not face penalties when reasonable doubt exists as to causation/extent)
- McDill v. Utica Mut. Ins. Co., 475 So.2d 1085 (La. 1985) (definition of satisfactory proof of loss sufficient to apprise insurer)
- Reed v. State Farm Mut. Auto. Ins. Co., 857 So.2d 1012 (La. 2003) (definition of "arbitrary, capricious, or without probable cause" synonymous with vexatious refusal)
- Guillory v. Lee, 16 So.3d 1104 (La. 2009) (penalties inappropriate where insurer has reasonable basis and acts in good-faith reliance on defense)