954 F. Supp. 2d 429
E.D. La.2013Background
- Owner Michael Marcelle discovered a bat colony and guano accumulation in his New Orleans house attic/walls in February 2012 and filed a homeowners' claim under a Southern Fidelity Insurance Company (SFIC) policy.
- SFIC's policy insured ‘direct physical loss’ but contained exclusions for (1) “birds, vermin, rodents, insects or domestic animals” and (2) discharge/release of “pollutants,” with “pollutants” defined to include "waste."
- SFIC inspected within a week, denied coverage within 30 days, and informed Marcelle that the policy did not cover bat removal/mitigation. Marcelle hired a wildlife contractor who documented guano, urine, odor, and recommended remediation.
- Marcelle sued in state court for breach of contract and statutory penalties under La. R.S. §§ 22:1892 and 22:1973 for arbitrary/capricious denial; SFIC removed to federal court on diversity grounds.
- SFIC moved for summary judgment, arguing the vermin and pollutant/waste exclusions bar coverage; Marcelle argued bats are not "vermin" and guano is not "waste."
- The district court found the vermin term ambiguous (construed for coverage) but held the pollutant/waste exclusion unambiguously covered bat guano and granted summary judgment to SFIC; statutory bad‑faith/penalty claims were dismissed for lack of evidence of vexatious conduct.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether bats are “vermin” under the policy exclusion | Bats are not "vermin," so damages are covered | Bats are bothersome animals and fall within "vermin" | “Vermin” is ambiguous; construed against insurer — favors coverage on that ground |
| Whether bat guano/urine constitute “waste” or “pollutants” excluded by the policy | Guano/urine are animal byproducts, not human-generated "waste" or environmental pollutants | Guano/urine are contaminants/waste that migrated and contaminated the home, triggering the pollutant exclusion | Guano and urine unambiguously fall within “waste/pollutants”; exclusion applies — coverage barred |
| Whether insurer’s denial was arbitrary, capricious, or without probable cause (statutory penalties) | Denial was unreasonable and constituted bad faith | Denial was based on reasonable interpretation of policy exclusions and prompt investigation | No evidence plaintiff offered to show insurer acted vexatiously; statutory penalties dismissed |
Key Cases Cited
- Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574 (U.S. 1986) (summary judgment standard)
- Anderson v. Liberty Lobby, 477 U.S. 242 (U.S. 1986) (reasonable jury standard for genuine issue)
- Celotex Corp. v. Catrett, 477 U.S. 317 (U.S. 1986) (movant's burden on summary judgment)
- Cadwallader v. Allstate Ins. Co., 848 So.2d 577 (La. 2003) (contract interpretation rules for insurance policies)
- Reed v. State Farm Mut. Auto. Ins. Co., 857 So.2d 1012 (La. 2003) (statutory penalty/bad faith standards)
- Hirschhorn v. Auto-Owners Ins. Co., 809 N.W.2d 529 (Wis. 2012) (bat guano held to be a pollutant/waste excluded under identical policy language)