582 F. App'x 290
5th Cir.2014Background
- Thomas caused the car accident with Kelly on Nov 21, 2005; Kelly was injured (fractured femur) and treated over six days.
- Kelly obtained a judgment against Thomas in excess of policy limits; Thomas assigned his right to sue State Farm for bad faith to Kelly.
- Kelly alleged two bad-faith theories against State Farm: failure to notify Thomas of a settlement offer and failure to settle Kelly’s claims against Thomas.
- State Farm paid the policy limits after Thomas’s liability was determined; Thomas settled with Kelly, assigning the bad-faith claim to Kelly.
- Kelly and State Farm moved for rehearing; the panel withdrew its prior opinion and certified two questions to the Louisiana Supreme Court because controlling state-law precedents were unclear.
- The court determined certification was appropriate to resolve determinative Louisiana-law questions under Section 22:1973.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Can an insurer be liable for bad-faith failure-to-settle without a firm offer? | Kelly argues 22:1973(A) imposes an affirmative duty to settle; no firm offer needed. | State Farm contends liability requires a firm settlement offer and rejection/acceptance. | Certify question to Louisiana Supreme Court; issue unresolved. |
| Can an insurer be liable for misrepresentation or nondisclosure not related to coverage under 22:1973(B)(1)? | Kelly argues non-coverage misrepresentations can breach 22:1973(B)(1) (e.g., status of claim). | State Farm argues only coverage-related misrepresentations trigger liability. | Certify question to Louisiana Supreme Court; issue unresolved. |
Key Cases Cited
- Theriot v. Midland Risk Ins. Co., 694 So. 2d 184 (La. 1997) (limits on third-party claims under 22:1973(A))
- Stanley v. Trinchard, 500 F.3d 411 (5th Cir. 2007) (insured may sue for generalized bad-faith failure-to-settle)
- Arvie v. Safeway Ins. Co. of La., 951 So. 2d 1284 (La. App. 3 Cir. 2007) (conflicting views on 22:1973(B)(1) misrepresentation)
- McGee v. Omni Ins. Co., 840 So. 2d 1248 (La. App. 3 Cir. 2003) (non-coverage-related misrepresentation under 22:1973(B)(1))
- Versai Mgmt. Corp. v. Clarendon Am. Ins. Co., 597 F.3d 729 (5th Cir. 2010) (dicta on 22:1973(B)(1) coverage-related misrepresentations)
- Commercial Union Ins. Co. v. Mission Ins. Co., 835 F.2d 587 (5th Cir. 1988) (pre-enactment rule on bad-faith failure-to-settle)
- Katrina Canal Breaches Litig., 613 F.3d 504 (5th Cir. 2010) (certification of state-law questions where unclear)