Court: Louisiana Court of Appeal; September 27, 2017; Louisiana; State Appellate Court
Drs. J. Houston and Deborah K. Bosley appealed a judgment awarding them $29,632.28 for property damage to their home due to the negligence of their roofing contractor, Oliphint Enterprises LLC. The court denied their request for a penalty and attorney fees against Oliphint's insurer, United Fire Indemnity, for improper claims adjustment. The award was partially amended to increase compensation for exterior painting but was otherwise affirmed.
The Bosleys, who reside in Shreveport, were remodeling their home in 2011, including the installation of a custom metal roof by Oliphint. During the project, a sudden thunderstorm hit on August 24, exposing a portion of the house to rain and causing water damage in several rooms. Despite attempts to mitigate the damage with tarps and buckets, significant water intrusion occurred, raising concerns about potential mold.
Oliphint notified United Fire of the incident the following day, and an adjuster, James Thomas, assessed the damage, estimating repair costs at approximately $16,648.13, after depreciation. This estimate was not provided to Ms. Bosley until a later date, and she was not given a written offer but an oral one contingent on signing a release of liability, which she refused. Ms. Bosley engaged other contractors who suggested more extensive repairs, leading to a higher quote. Thomas indicated that United Fire would only pay the actual cash value and required a release before payment, which Ms. Bosley declined, citing ongoing construction and the impracticality of the proposed repairs at that time.
Gutting the walls of certain rooms was included in the estimate provided by Thomas, regardless of mold presence, but no agreement was reached, and only wet insulation removal occurred. In early 2012, Ms. Bosley noticed a potential black mold area, but air samples tested normal for mold, with warnings of possible growth due to water damage on the ceiling. Thomas later revised his estimate to $20,436.74, excluding mold remediation, which Ms. Bosley rejected as inadequate for her damages. The Bosleys filed suit against Oliphint on August 23, 2012, claiming $35,000 in damages and alleging United Fire's refusal to negotiate. They later amended the petition to include United Fire and sought penalties and attorney fees under La. R.S. 22:1892 A(4).
On Christmas Eve 2013, the Bosleys discovered water leaking into their home due to a gap in the roof, which Oliphint acknowledged but attributed to the painting contractor's responsibility. He also noted clogged gutters contributed to the issue. Thomas, who inspected the damage, did not blame Oliphint and did not offer adjustments. In June 2014, the Bosleys amended their petition to include claims related to this second water intrusion, asserting that all damages stemmed from Oliphint’s negligence in August 2011.
The trial, which took place over four days in February and March 2016, featured testimonies from the Bosleys, Oliphint, Thomas, and various expert witnesses regarding mold and remediation. Brian Smith from Brian Builders provided estimates of $29,227.83 (including mold remediation) and $18,912.47 (excluding it), admitting his prices were higher than competitors due to wages. He indicated that the only solution for non-opening windows would involve costly repairs. Thomas Block, who previously painted the house, attributed paint failure to roof leaks, proposing costs of $8,800 for repainting or $5,600 for partial work. United Fire's estimator, Chase Pittman, quoted $17,877.35 for repairs, not accounting for window replacements or high-quality paint, noting his estimate aligned closely with another contractor's, while Smith's was significantly higher.
The district court issued a 10-page ruling in a case involving damages attributed to water intrusions. It dismissed Brian Smith's testimony as 'totally un-credible' and rejected his claims based on a non-essential wish list. The court summarized witness testimonies, accepting the consistent accounts from Martin, Pittman, and Thomas, while dismissing Block's estimate of $8,800 for painting a small area. The court found that both water intrusions were due to Oliphint's negligence and adjusted Pittman's quote from $17,877.35 to a total of $29,632.28, adding costs for insulation removal, exterior repairs, and mold remediation.
The court ruled that United Fire did not act in bad faith or arbitrarily regarding the claim, denying the Bosleys' request for penalties and attorney fees. The Bosleys subsequently sought a new trial solely on the penalty and fee issue, arguing the court incorrectly required proof of bad faith, contrary to Louisiana law. After considering arguments, the court maintained its stance, noting that the adjuster’s actions did not constitute arbitrary or capricious behavior. The Bosleys appealed, asserting that United Fire's actions were legally arbitrary and capricious under La. R.S. 22:1892. They highlighted the adjuster's delays in processing the claim, arguing this violated statutory requirements for timely settlement offers. They acknowledged that while disputes over damage extent are permissible, the insurer must still unconditionally offer the undisputed portion of the claim.
The second water intrusion is addressed under Paragraph A(3), which mandates that insurers initiate loss adjustment of property damage claims within fourteen days of notification, except in catastrophic loss cases. The claimants argue that Thomas visited shortly after the incident but failed to adjust the claim. They assert that Paragraph A(3) applies to third-party claimants as well, supported by the case Deimel v. Dewhirst. They seek penalties and attorney fees under La. R.S. 22:1892 B(1) without specifying an amount.
United Fire references La. R.S. 22:1892 A(4) and Paragraph B(1), arguing that a breach incurs penalties only if the insurer's failure to make a written offer is arbitrary, capricious, or without probable cause. Although Thomas did not provide a written offer within 30 days following satisfactory proof of loss, the insurer contends that an oral offer was made, challenging the claim of arbitrary conduct. Furthermore, United Fire argues that it is not obligated to make an unconditional tender to third-party claimants, citing Mallett v. McNeal and Riser v. Shelter Mutual Ins. Co. The insurer also states that Ms. Bosley indicated she would not settle, thereby negating the necessity for any further action, referencing Coleman-Lyons 2800 v. Bryan. Additionally, the presentation of a release by Thomas is argued to constitute a written settlement offer under Paragraph A(4).
Regarding the second water intrusion, United Fire claims that both Oliphint and Thomas promptly assessed the situation, concluding it was unrelated to Oliphint's workmanship, thus no further action was warranted. La. R.S. 22:1892 outlines insurers' obligations to promptly adjust claims and make settlement offers, with penalties for noncompliance. The statute applies to third-party claims, requiring only written settlement offers, and does not mandate unconditional payments. The duty to initiate loss adjustment requires insurers to take substantial steps to gather necessary facts for claim evaluation, as demonstrated in Block v. St. Paul Fire & Marine Ins. Co.
Opening a file or making phone calls does not qualify as initiating loss adjustment, based on case law. A thorough investigation within 14 days is not mandated. R.S. 22:1892 is penal and must be strictly interpreted. The terms 'arbitrary, capricious, or without probable cause' align with 'vexatious,' indicating an insurer's willful denial lacking a good-faith basis. Claimants do not need to prove bad faith on the insurer's part. The district court did not provide factual findings regarding United Fire's failure to issue a written offer to the Bosleys within 30 days, but the record suggests a reasonable basis for denying penalties.
In the first incident, Ms. Bosley expressed reluctance to repair water damage due to ongoing construction, which influenced the claim handling. Her refusal to settle was based on concerns about undiscovered damage, suggesting United Fire's actions were not arbitrary or vexatious. In the second incident, inspections revealed that the damage was caused by the Bosleys’ own maintenance issues, indicating United Fire's due diligence in evaluating the claim, despite the district court's rejection of some opinions.
Regarding exterior repairs, the Bosleys contested a limitation to three gallons of paint and the exclusion of their original painter. They argued for full indemnification under Louisiana Civil Code, asserting that restoration costs should reflect true damages and that such costs might exceed market value unless deemed exorbitant.
Block seeks an award of $5,600 for repainting two areas of exterior siding, but United Fire contends that this estimate is excessively inflated. The legal principle cited is that parties responsible for damages must repair the harm caused, supported by Louisiana Civil Code art. 2315 and relevant case law. The objective is to restore property to its pre-damage condition, typically measured by the cost of restoration if repairs are viable. Block testified that he previously used a high-quality paint, ArmorCoat, which is significantly superior to standard paint. There was no evidence presented to suggest that a simple repair with ordinary paint could restore the property to its original condition, leading to the conclusion that it was an abuse of discretion for the court not to award the full cost of restoration.
The court's prior judgment was compared to a similar case involving a fire-damaged building, where restoration costs were ultimately awarded despite initial valuations. Block's estimate for repainting with ArmorCoat was adjusted for depreciation and a previously awarded amount, resulting in an amended judgment for an additional $5,100.
Regarding the window repairs, the Bosleys claim damages for the removal and reworking of windows in two rooms, asserting a right to full indemnification based on contractor testimony about the costs involved. They argue that previous refurbishments of all windows indicated they were functional before the damage occurred. The court, however, upheld its decision not to award damages, citing evidence that the windows were already problematic prior to the water damage and that new insulation may have exacerbated the issue. United Fire maintains that the court acted within its discretion in this matter.
United Fire's contention relies on the testimony of Smith, deemed entirely unbelievable by the district court. Under the manifest error-clearly wrong standard for appellate review, factual findings by the trial court can only be overturned if clearly erroneous based on the complete record. The appellate court must assess whether the trial judge's conclusions were reasonable, not whether they were right or wrong. Although water intrusion typically causes window issues, several witnesses attributed the problems partly to foam insulation installed in 2011, which retains moisture and leads to condensation. This was supported by testimonies from the Bosleys' HVAC contractor, construction consultant, and environmental consultant, all confirming the negative impact of the insulation on humidity levels and window conditions. Ms. Bosley's admission regarding the windows' functionality prior to water intrusion also suggested they were imperfect. Consequently, the district court's causation finding was upheld without manifest error.
The judgment was affirmed regarding the denial of the plaintiffs' claims for a statutory penalty, attorney fees, and costs for window removal and reworking. However, it was amended to award $5,100 for painting and repairs to restore the exterior to its pre-intrusion condition. A total judgment of $34,732.28 was ordered in favor of the Bosleys against Oliphint Enterprises LLC and United Fire Indemnity Co., with the defendants responsible for all costs. Additionally, the record did not indicate if the Bosleys made any claim against their homeowners' insurance. United Fire's argument regarding the timing of a meeting with Ms. Bosley was contradicted by testimony from both parties. The court's initial finding of no bad faith was deemed irrelevant since bad faith is not a requirement for penalties under La. R.S. 22:1892 B(1).
