Seacor Holdings, Inc. v. Commonwealth Insurance
635 F.3d 675
5th Cir.2011Background
- SEACOR Holdings, Inc. filed a diversity suit against Commonwealth Insurance Co. over an all-risk property policy for 2005 after Hurricanes Katrina and Rita damaged SEACOR’s property.
- Policy contained deductibles for Windstorm, Named Windstorm, and Flood, plus a cumulative liability limit of $10 million.
- SEACOR and Commonwealth disputed which deductibles and which liability limits applied to Katrina/Rita losses.
- SEACOR amended its complaint to plead bad-faith penalties under Louisiana statutes 22:1892 and 22:1973 for delayed payments.
- District court granted partial summary judgment: Named Windstorm deductible only for damages; Flood limit inapplicable; and SEACOR’s bad-faith claims rejected; SEACOR appeals that ruling.
- Commonwealth sought to interpret the policy under Louisiana contract-law principles and to defend the district court’s handling of bad-faith issues.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Katrina damages fall under Named Windstorm deductible rather than Flood | SEACOR: Katrina triggers Named Windstorm deductible (wind/atmospheric event) | Commonwealth: Katrina involved multiple perils requiring Flood and Named Windstorm deductibles | Named Windstorm deductible applies; Katrina damages fall under Named Windstorm. |
| Whether Flood liability limit applies when damages are under Named Windstorm | SEACOR: Flood limit may apply per policy, independent of windstorm | Commonwealth: If damages are under Named Windstorm, Flood limit does not apply | Flood limit does not apply where damages are proximately caused by Named Windstorm. |
| Whether insurer penalties for bad-faith claims were warranted | SEACOR: insurer acted arbitrarily by misinterpreting policy | Commonwealth: readings were reasonable defenses; penalties not warranted | Penalties/attorney fees not awarded; no arbitrary or capricious conduct established. |
| Whether policy must be construed under Louisiana contract-law to resolve deductibles and limits | SEACOR: Louisiana rules interpret words by generally prevailing meaning | Commonwealth: policy should be read consistently with other provisions; defenses valid | Court applied Louisiana contract interpretation principles; policy language read as a whole. |
| Whether SEACOR’s bad-faith claim can survive given earlier rulings and policy interpretation | SEACOR: bad faith shown by inconsistent readings like Six Flags policy | Commonwealth: distinctions from Six Flags policy justify defense | Bad-faith claim cannot survive; no clear arbitrary or capricious misinterpretation. |
Key Cases Cited
- Six Flags, Inc. v. Westchester Surplus Lines Ins. Co., 565 F.3d 948 (5th Cir.2009) (discretion in applying perils when multi-peril events occur; flood sublimit interaction)
- Howard, Weil, Labouisse, Friedrichs, Inc. v. Ins. Co. of N. Am., 557 F.2d 1055 (5th Cir.1977) (single deductible for a single casualty arising from one event)
- Roach-Strayhan-Holland Post No. 20, Amer. Legion Club, Inc. v. Continental Ins. Co., 112 So.2d 680 (La.1959) (windstorm proximate cause standard under windstorm policy)
- Lorio v. Aetna Ins. Co., 232 So.2d 490 (La.1970) (windstorm proximate cause doctrine in Louisiana)
- Louisiana Bag Co., Inc. v. Audubon Indemnity Co., 999 So.2d 1104 (La.2008) (penalties for bad-faith denial based on coverage disputes; standards vary)
- Calogero v. Safeway Ins. Co. of La., 753 So.2d 170 (La.2000) (penalties/attorney fees; insurer defenses and penalties relation)