A3M Vacuum Services, L.L.C. v. Hub International Midwest, Ltd.
Docket: Civil Action No. 10-2766
Court: District Court, E.D. Louisiana; April 24, 2014; Federal District Court
Defendant Hub International Midwest, Limited's motion for summary judgment is denied by the Court. The case originates from a previous state court lawsuit where Lawrence and Emma Brock sued A3M Vacuum Services, L.L.C. for damages from a car accident. A3M is now suing Hub, claiming it failed to timely notify A3M’s excess liability insurer, Ace Westchester Specialty Group, about the Brock litigation, leading to Ace's refusal to provide coverage. A3M had both primary and excess liability insurance at the time of the accident, with Clarendon American Insurance Company covering the primary policy.
Hub was aware of the Brock litigation soon after it began and received correspondence indicating A3M should notify Ace immediately. Despite this, Hub did not inform Ace until March 2009, after the Brock litigation trial had concluded and a settlement offer was made to A3M. A3M ultimately rejected the settlement, and a judgment was entered against it, exceeding its primary policy limits. Ace later denied coverage, citing Hub's failure to provide timely notice. A3M filed suit against Hub, seeking damages of $236,419.70 plus interest, arguing that Hub's delay in notifying Ace was a breach of duty. Hub contends that A3M's claim is barred by peremption under Louisiana law. A3M and the other parties involved opposed Hub’s motion for summary judgment. The Court also outlines that summary judgment is appropriate only when there is no genuine dispute of material fact.
The Court evaluates whether a material factual dispute exists by examining all evidence in the record without making credibility determinations. It must favor reasonable inferences for the non-moving party, but unsupported allegations or conclusory statements cannot support or defeat a summary judgment motion. If the moving party bears the burden of proof at trial, it must provide evidence sufficient for a directed verdict if unchallenged. The non-moving party can counter this by presenting its own sufficient evidence or demonstrating that the moving party's evidence is inadequate to convince a reasonable fact-finder. Conversely, if the non-moving party has the burden of proof at trial, the moving party can fulfill its obligation by highlighting insufficiencies in the non-moving party’s evidence regarding essential elements of the claim, shifting the burden back to the non-moving party to establish genuine issues for trial with specific facts.
Regarding Louisiana Revised Statutes 9:5606(A), any legal action for damages against insurance agents or similar licensees must be filed within one year of the alleged act or its discovery, and no later than three years from the act, as these periods are peremptive and cannot be interrupted or suspended. Peremption is closely related to prescription but is stricter, as it cannot be interrupted. The burden of proof lies with the exceptor at the trial of a peremptory exception, and such statutes are interpreted against peremption. Hub argues that A3M's claim is perempted since the lawsuit was filed on April 29, 2010, and must arise from acts occurring after April 29, 2007. A3M references documents from September and October 2006 to assert that Hub was aware of a potential excess judgment related to the Brock litigation.
Hub argues that A3M’s claim is perempted due to the documents being dated before April 29, 2007. A3M, along with Clarendon and Illinois Union, counters that the peremptive period under La. R.S. 9:5606 does not apply because Hub’s employees responsible for notifying Ace were not licensed insurance agents. They also contend that the relevant starting date for the peremptive period should be based on when Hub could have avoided harm by notifying Ace, rather than when Hub was notified of a potential claim. The Court agrees with this latter argument, stating it is key to the case, and does not address the applicability of La. R.S. 9:5606 further.
La. R.S. 9:5606 establishes a three-year peremptive period that begins from the date of the alleged act, omission, or neglect. Determining this date requires assessing when Hub allegedly failed to inform Ace of the Brock litigation, which is unclear as the omission may have occurred repeatedly over time. The Court references Graham v. Conque, where the peremptive period was based on the last possible date to act, aligning with A3M's claim against Hub for failing to notify Ace timely. The Court finds it cannot establish the last date Hub could have notified Ace to prevent harm, which is critical for determining the start of the peremptive period. Consequently, Hub's inability to prove this date undermines its motion for summary judgment, as the right to action arises only when there is a violation of the plaintiff's right to be free from illegal damage.
Hub's assertion that the relevant date for notification fell before April 29, 2007, is contradicted by Louisiana law, which requires insurers to demonstrate actual prejudice for a late notice defense. Even notice received post-trial is not automatically deemed untimely. The Brock litigation did not go to trial until January 2009, and A3M rejected a settlement offer on March 20, 2009, suggesting Ace might not have been prejudiced by receiving notice of the litigation in 2007, 2008, or early 2009. Consequently, the Court cannot affirm that the date for avoiding harm necessarily occurred before April 29, 2007.
Hub claims the peremptive period began on October 20, 2006, following written notice of a potential excess judgment, arguing that extending this period would contravene the principle that continuing torts do not suspend peremptive timelines. However, the Court concludes that the case does not involve a continuing tort, as Hub’s failure to notify Ace did not result in ongoing damage but rather potential harm on the last date it could have been avoided. Thus, Hub's duty to timely notify Ace did not trigger peremption based on the dates it received notice of a possible judgment.
Furthermore, the Court is not swayed by Hub's reference to a related case involving the State of Louisiana, where the Court of Appeal addressed a different question. In that case, the State's claim against its broker for failing to inform its excess liability carrier was partially based on a second letter sent within the three-year peremptive period, which the Court deemed could represent a separate tort if it led to immediate damages. This distinction further supports the Court's conclusion that Hub has not established a preemptive claim against A3M.
Hub references the Office of Risk Management case to support the argument that the peremptive period for claims against a broker for not notifying an excess insurer could start from the date the broker received notice of the potential excess claim. This case is differentiated from the current dispute because the earlier case involved whether the peremptive period began with the first or second notification letter, while the State did not contest that it should start from the last date to avoid harm, as Clarendon argues here. The Court finds Graham v. Conque to be more relevant, concluding that the critical date for the alleged omission is when harm could last be avoided. Hub has not proven that this date was prior to April 29, 2007, failing to meet its burden for summary judgment. Consequently, the Court denies Hub’s motion for summary judgment.
