Danny Kelly v. State Farm Fire & Casualty Company
169 So. 3d 328
La.2015Background
- Kelly was injured in a 2005 automobile collision with Thomas, whose State Farm policy covered Thomas.
- Kelly incurred about $26,803 in medical expenses; State Farm later paid the policy limit of $25,000.
- In January 2006 Kelly’s attorney sent State Farm medical records and a settlement recommendation to release for policy limits; no response was received.
- In March 2006 State Farm offered $25,000 to settle; Kelly rejected the offer and later sued Thomas.
- After judgment against Thomas for $176,464.07, Thomas settled with Kelly and assigned his bad-faith rights to Kelly.
- The district court granted partial summary judgment to State Farm on one claim and denied it on the other, leading to a Fifth Circuit certified questions proceeding.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether 22:1973(A) supports a bad-faith claim without a firm offer | Kelly (insured) argues insurer can be liable for bad faith regardless of offers. | State Farm argues a firm offer is required to trigger duties under A. | Yes; insurer may be liable under A without a firm offer. |
| Whether 22:1973(B)(1) permits misrepresentation claims not tied to coverage | Kelly contends misrepresentation can include non-coverage facts under B(1). | State Farm contends misrepresentation is limited to coverage-related facts. | Yes; misrepresentation may involve pertinent facts not tied to coverage. |
Key Cases Cited
- Theriot v. Midland Risk Ins. Co., 694 So.2d 193 (La. 1997) (insurer's duties toward insured; third-party claimant limitations)
- Smith v. Audubon Ins. Co., 679 So.2d 372 (La. 1996) (case-by-case factors to assess insurer bad faith; no firm-offer requirement)
- Commercial Union Ins. Co. v. Mission Ins. Co., 835 F.2d 587 (5th Cir. 1988) (insurer bad-faith liability limited by a firm settlement-offer rule (pre-A statute))
- Stanley v. Trinchard, 500 F.3d 411 (5th Cir. 2007) (recognizes insured cannot be limited to exclusive B(1) list; implied covenant theory)
- Durio v. Horace Mann Ins. Co., 74 So.3d 1159 (La. 2011) (strict construction of La. R.S. 22:1973; penal/statutory interpretation guidance)