Levy Gardens Partners 2007, L.P. v. Commonwealth Land Title Insurance
706 F.3d 622
| 5th Cir. | 2013Background
- Levy Gardens appeals a bench-trial damages ruling in a title-insurance dispute.
- Commonwealth insured Levy Gardens for a zoning-related loss on a New Orleans project; policy limit was $18,323,070.
- The 1985 ordinance and the 1995 CZO, applied via state court rulings, restricted multifamily use as of Oct. 7, 2008.
- State courts held the 1985 ordinance controlled Levy Gardens’s zoning, prohibiting multifamily housing on the property.
- District court found coverage for the diminished value of the title due to the zoning encumbrance and awarded $605,000.
- Commonwealth cross-appealed arguing there was no coverage; the district court’s rulings were sustained on appeal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the loss is covered by the title policy | Levy Gardens: coverage includes all losses from zoning encumbrance | Commonwealth: coverage limited to diminution in title value under §8 | Yes, coverage limited to diminution in title value under §8 |
| Whether the 1985 ordinance applies and preceding decisions control the zoning | ENONAC/state courts correctly applied 1985 ordinance | State court determinations are not controlling on federal insurance issues | Yes, state law Defs apply; 1985 ordinance governs zoning on policy date |
| Whether the zoning endorsement is stand-alone coverage | Endorsement insures title value against zoning, not use-only coverage | Endorsement operates independently of Section 8 | Endorsement is not stand-alone; read with §8 to cover title diminution |
| Notice and Section 3 prejudice reduction | Noncompliance with notice does not bar recovery given prejudice minimal | Noncompliance could reduce liability for prejudice | District court’s findings of minimal prejudice upheld; no reduction in damages |
| Penalty allocation under La. Rev. Stat. 22:1892/22:1973 | Penalty should be imposed for arbitrary delay | Actions were in good faith with reasonable coverage dispute | No penalties awarded; district court not clearly erroneous |
Key Cases Cited
- Bell v. State of Md., 378 U.S. 226 (1964) (state-law questions deferential to state courts)
- First American Bank v. First American Transport Title Ins. Co., 585 F.3d 833 (5th Cir. 2009) (Section 8 construed; valuation guidance beyond foreclosure price)
- ENONAC v. Levy Gardens Partners 2008, LLC, 20 So.3d 1131 (La. App. Ct. 2009) (Louisiana courts held 1985 ordinance applies)
- Bozeman v. Commonwealth Land Title Ins. Co., 470 So.2d 465 (La. App. Ct. 1985) (endorsement limits cannot defeat known risk coverage)
- Reed v. State Farm Mut. Auto. Ins. Co., 857 So.2d 1012 (La. 2003) (fact-intensive; arbitrary/capricious standard for penalties)
- Louisiana Bag Co., Inc. v. Audubon Indem. Co., 999 So.2d 1104 (La. 2008) (penalties require lack of probable cause; substantial questions negate penalties)
- Gloria S. S. Co. v. Smith, 376 F.2d 46 (5th Cir. 1967) (final-decree concept reviewed in insurance dispute)
- Water Craft Management LLC v. Mercury Marine, 457 F.3d 484 (5th Cir. 2006) (standard for reviewing factual-findings)
- First American Bank v. First American Transport Title Ins. Co., 585 F.3d 833 (5th Cir. 2009) (ambiguity not found in Section 8; coverage defined by §8)