247 So. 3d 1175
La. Ct. App.2018Background
- Homeowner Shreves' house had a large oak tree fall in October 2009; State Farm paid for initial repairs but in 2012 the Shreves discovered a major slab crack and filed a claim.
- State Farm hired Donan Engineering (Hassenboehler), which concluded drought-driven differential settlement (not the tree) caused the slab crack; State Farm denied coverage based on that causation and a policy exclusion for settlement-related damage.
- The Shreves sued (2013); they later produced an engineer (Gadberry) who opined the tree impact caused the crack; State Farm then retained Dr. Householder, who agreed with settlement/drought causation.
- A jury found (1) the tree caused the foundation crack, (2) State Farm owed $130,600 under the policy (offset by prior payments), and (3) State Farm acted arbitrarily/capriciously in handling the claim, awarding $140,000 in noncontractual damages.
- The trial judge found the date of loss was December 2011, limited contractual damages consistent with offsets, but granted State Farm’s JNOV vacating the jury’s bad-faith/noncontractual damages and attorney-fee awards; Shreves appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether State Farm acted arbitrarily, capriciously, or without probable cause in denying the claim (bad-faith claim under La. R.S. 22:1973) | State Farm relied on cursory/unsupervised experts, failed adequate investigation, shifted defenses, and misled re: prescription—supporting bad faith. | State Farm had a reasonable, good-faith basis to deny coverage because expert opinions conflicted (drought/differential settlement vs. tree impact); it reasonably relied on its experts. | JNOV proper: reasonable jurors could not find State Farm acted in bad faith given conflicting expert opinions and timely investigation. |
| Adequacy of insurer’s reliance on outside experts and investigation | Shreves: insurer unreasonably delegated and accepted flawed expert work without scrutiny. | State Farm: it reasonably relied on independent engineering reports and obtained a peer review and a second independent expert when conflict arose. | Held for State Farm: relying on qualified experts and obtaining a second opinion was reasonable under the circumstances. |
| Whether State Farm misled insured as to prescriptive period (policy one-year provision) | Shreves: insurer attempted to rely on void one-year policy provision and created jury confusion, constituting bad faith. | State Farm: any questions about the policy period did not lull or mislead; the jury was not instructed on timing and court decided prescriptive issue pre-trial. | Held for State Farm: no evidence of misleading conduct that lulled plaintiffs; no reversible error. |
| Whether trial judge erred by considering witness credibility when granting JNOV | Shreves: judge improperly evaluated credibility (which is for jury) when granting JNOV. | State Farm: judge’s comments acknowledged he did not resolve credibility but concluded evidence overwhelmingly supported insurer’s position. | Held for State Farm: judge did not improperly decide credibility for JNOV; his remarks reflected that evidence could only reasonably support insurer on bad-faith issue. |
Key Cases Cited
- Reed v. State Farm Mut. Auto. Ins. Co., 857 So.2d 1012 (La. 2003) (defines "arbitrary, capricious, or without probable cause" and discusses vexatious refusal to pay)
- Louisiana Maintenance Servs., Inc. v. Certain Underwriters at Lloyd's of London, 616 So.2d 1250 (La. 1993) (discusses insurer duties and standards for bad-faith claims)
- Guillory v. Lee, 16 So.3d 1104 (La. 2009) (insurer not liable for penalties/fees when a reasonable basis exists to defend claim)
- Davis v. Wal-Mart Stores, Inc., 774 So.2d 84 (La. 2000) (standard for granting JNOV)
- Cooper v. Farmers Ins. Exch., 210 So.3d 829 (La. App. 2 Cir. 2016) (penal statutes construed strictly regarding insurer penalties)
- Jones v. Johnson, 56 So.3d 1016 (La. App. 2 Cir. 2010) (same principle on strict construction of penal insurance statutes)