Anco Insulations, Inc. v. National Union Fire Insurance

Citations: 787 F.3d 276; 2015 U.S. App. LEXIS 2973; 2015 WL 780570Docket: No. 13-31313

Court: Court of Appeals for the Fifth Circuit; February 24, 2015; Federal Appellate Court

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The district court granted partial summary judgment to National Union Fire Company, ruling that Anco Insulations, Incorporated's failure to timely tender claims under its insurance policy exempted National Union from reimbursing Anco for legal costs associated with late-filed lawsuits. Additionally, the court ruled in favor of National Union concerning Anco's claim for statutory penalties under Louisiana Revised Statutes 22:1973 and 22:1892. 

Anco, which sold asbestos-containing insulation from the 1970s to early 1980s, faced approximately 2,700 asbestos-related lawsuits. National Union issued a primary general liability insurance policy to Anco for the period from January 1, 1987, to January 1, 1988, without an asbestos exclusion. Anco alleged that in the late 1980s, National Union indicated to its representative that there was no asbestos coverage. In 2000, Anco's counsel permitted National Union to review files on its asbestos claims. Anco tendered two lawsuits to National Union, but under different policies, and not the one in question. 

In September 2007, Anco filed a complaint for declaratory judgment against several excess liability insurers, initially excluding National Union. During discovery, Anco discovered the existence of the relevant policy. Anco formally forwarded all pending lawsuits to National Union in April 2009 and added it as a defendant in May 2009. In 2010, Anco filed a claim against National Union for statutory penalties, asserting National Union's untimely participation in defending the lawsuits. National Union's motion for partial summary judgment in December 2011 argued it was not liable for defense costs incurred before April 23, 2009, when Anco first forwarded the asbestos lawsuits.

In April 2012, National Union sought partial summary judgment regarding Anco's claim for statutory penalties, arguing that it had assumed defense costs after Anco's tender of lawsuits in 2009 and that Anco had not incurred losses warranting penalties. The district court, in February 2013, granted this motion, finding that Anco first tendered its claims on April 23, 2009, and that Anco’s failure to promptly forward lawsuits breached the Policy's requirement for immediate notification. Consequently, the court ruled that National Union was not liable for reimbursing Anco for legal fees related to approximately 2,700 asbestos lawsuits from 1987 to 2008. The court also denied Anco’s request for statutory penalties, reasoning that Anco had not demonstrated any loss due to National Union's lack of participation in defense, and concluded that National Union’s actions did not violate Section 22:1973’s enumerated claims-settlement practices. Anco and its co-claimants, including Royal Indemnity Company, Zurich American Insurance Company, and American Guarantee Liability Insurance Company, appealed these rulings. Anco argued that the district court wrongly determined National Union's reimbursement obligation and incorrectly interpreted the requirements for Section 22:1892 penalties. The analysis section indicates that the appellate review will be de novo, adhering to Louisiana's contract interpretation principles while considering prior interpretations unless overridden by newer case law or statutes. National Union’s motion claimed it was not required to cover Anco’s defense costs prior to April 23, 2009, which the district court upheld, prompting Anco's appeal on these grounds.

A genuine dispute of material fact exists regarding the date Anco first tendered claims under the Policy. The district court determined that Anco's first tender occurred on April 23, 2009, based on Anco’s interrogatory responses, a finding Anco contests, arguing improper evidence weighing and credibility determinations. Anco presents several pieces of evidence to support its claim of an earlier tender, including testimony from Mr. Bourgeois about corporate practices, letters from National Union’s claims adjuster acknowledging prior asbestos claims, and correspondence from AIG representatives. However, the district court found this evidence insufficient. Mr. Bourgeois' testimony lacked supporting documentation, Spadacenta's letters did not address the timeliness of tender, and Kuehn’s request was irrelevant to the Policy. Anco's counsel's letters mentioned a different policy, failing to establish a genuine dispute regarding the April 23, 2009 date.

Regarding the issue of excusing the untimely tender, the district court rejected Anco's argument that National Union's breach of duty to investigate the claims warranted an excuse for tardiness. The court ruled that Anco did not provide specific evidence of false representations by National Union concerning coverage or the asbestos exclusion. On appeal, Anco contends that the untimely tender should be excused because National Union failed to conduct a comprehensive policy search when it received earlier tenders in 2000.

Mr. Bourgeois testified that he was aware in the 1980s that AIG claimed no asbestos coverage under its policy, and Mr. Spadacenta allegedly informed Zurich employee Mr. Nilson that Anco lacked asbestos coverage under its primary policies. The district court correctly rejected Anco's argument to excuse its late tender of claims, noting that although Anco referenced Mr. Cerone’s expert testimony suggesting National Union should have conducted a policy search in 2000, it failed to cite applicable law, rendering this argument irrelevant. Anco's claim that Louisiana law imposes a duty on National Union to search its policies upon receiving tenders was unpersuasive, with the cited case, Vaughn v. Franklin, distinguishable due to differing facts regarding the parties involved.

The district court found no material fact issue created by Mr. Bourgeois’s testimony regarding National Union's denial of asbestos coverage, as it lacked supporting documentation and was inconsistent with the broader record. Additionally, Mr. Nilson's August 16, 2000 letter did not indicate any misrepresentation by National Union, as Mr. Spadacenta clarified the policies discussed were those acknowledged during the 2000 tenders. The court determined Anco's first tender occurred on April 23, 2009, and ruled that this late tender was not excusable, concluding National Union was not liable for legal costs incurred prior to that date related to lawsuits filed between 1987 and 2008. Anco's assertion on appeal that Louisiana law mandates insurers to demonstrate prejudice from late tenders to deny coverage was countered by the understanding that timely notice can be an express condition precedent to coverage, which does not require a showing of prejudice for enforcement.

In MGIC Indemnity Corporation v. Central Bank of Monroe, Louisiana, it was determined that when an insurance policy mandates that the insured must fully comply with all terms as a condition precedent to coverage, the insured's failure to promptly notify the insurer of a lawsuit relieves the insurer of any obligation to cover defense costs. Specifically, Anco was found to have tendered the defense for underlying lawsuits late, on April 23, 2009, despite the policy's requirement for immediate notification of claims. Consequently, Anco's non-compliance with the notice provision precluded any coverage for expenses incurred after that date, and the insurer was not required to demonstrate prejudice from the late notice.

Additionally, National Union's motion for partial summary judgment against Anco's claim for statutory penalties was granted by the district court. The court found that Anco did not plead sufficient conduct to support a violation under La.R.S. 22:1973(A) and failed to establish any actual damages related to claims under Section 22:1892(B)(1) for lawsuits filed after April 23, 2009. Anco's appeal challenged the necessity to prove actual damages under Section 22:1892, referencing the Louisiana Supreme Court's ruling in Oubre v. Louisiana Citizens Fair Plan. Section 22:1892(A)(1) stipulates that insurers must pay claims within thirty days of receiving satisfactory proof of loss, and to recover penalties under this section, the insured must demonstrate that the insurer received satisfactory proof, failed to pay timely, and acted arbitrarily or capriciously, meeting all three criteria to qualify for penalties.

The district court deemed Anco’s request for statutory penalties related to lawsuits filed between 1987 and 2008 as moot due to the dismissal of those claims with prejudice. The focus then shifted to lawsuits filed from 2009 onwards, where Anco alleged it tendered approximately 65 asbestos-related lawsuits to National Union from January 2009 to March 2010, claiming that National Union had not timely engaged in its defense despite making some responses. The court found that genuine issues of material fact existed regarding whether National Union provided a defense within thirty days of receiving satisfactory proof of loss, but did not determine whether Anco had submitted satisfactory proof of loss. The court noted that Anco had not provided evidence of out-of-pocket costs incurred in defending the lawsuits, leading to a ruling in favor of National Union because Anco failed to demonstrate actual damages, thus precluding recovery of Section 22:1892 penalties for lawsuits filed after 2009. 

Regarding satisfactory proof of loss, Anco did not specify in its amended complaint that its tender of lawsuits constituted proof of loss. National Union highlighted the absence of billing records or documentation demonstrating Anco's incurred damages. Anco did not address this lack of evidence, reiterating its belief that the district court misinterpreted Section 22:1892(B)(1). While Louisiana law does not strictly define "satisfactory proof of loss," it requires that proof sufficiently informs the insurer of the insured's claims, and the courts apply liberal standards for proof. The district court's lack of a definitive finding on whether Anco met its burden of proof complicates the matter. National Union argued that the absence of billing records implied Anco did not provide sufficient proof of loss to initiate the thirty-day payment period, but the court disagreed with this conclusion.

Proof of loss is determined to be a factual question, and the court's finding regarding Anco's failure to submit satisfactory proof of actual losses cannot be interpreted as a failure to meet the burden of proof. While Anco's defense tender may not qualify as satisfactory proof under Louisiana's liberal rules, the court cannot ascertain whether Anco met its burden based on the current record. The district court correctly ruled that Anco needed to demonstrate actual damages to recover statutory penalties. Anco argues on appeal that the court erred by denying recovery of penalties under Section 22:1892(B)(1) due to a lack of demonstrated losses. The law on this issue is ambiguous, with the district court citing Vaughn v. Franklin, which concluded that an insured cannot recover penalties if they have not sustained any harm from a co-insurer's failure to provide timely defense. Anco contends that Louisiana courts now allow for penalties without proof of actual damages, referencing Oubre v. Louisiana Citizens Fair Plan. However, National Union argues that Oubre is irrelevant as it pertains to a different statute, Section 22:1973(C). The court agrees with National Union, stating that Oubre does not apply to the current situation involving discretionary penalties under Section 22:1892(B)(1) as opposed to mandatory penalties under Section 22:1973(C). The distinction lies in the statutory language; Section 22:1892(B)(1) specifies penalties in addition to the amount of loss, while Section 22:1973(C) outlines penalties based on damages sustained.

Section 22:1892 and Section 22:1973 both establish an insurer's obligation to pay claims timely, but they differ notably in their penalty provisions. Section 22:1892(B)(1) mandates penalties to be awarded 'in addition' to actual loss amounts, whereas penalties under Section 22:1973(C) are discretionary. Anco's failure to demonstrate actual losses due to National Union’s alleged non-compliance with defense cost contributions prevents recovery of statutory penalties under Section 22:1892. Consequently, the district court's grant of partial summary judgment in favor of National Union is affirmed. National Union requires insured parties to specify the relevant policy when submitting claims; failure to do so results in claims being 'kicked-back.' The court dismissed Anco’s claims for statutory penalties regarding lawsuits filed before April 23, 2009, due to Anco's untimely tendering of those lawsuits. Royal Indemnity does not support Anco’s appeal of the district court's judgment concerning Anco’s bad faith claims. Anco provided National Union with two DVDs of approximately 2700 asbestos-related petitions on April 23, 2009, but there is no documentation of actual tendering for the Mason and Valdes lawsuits, only acknowledgment letters from Mr. Spadacenta. Louisiana law stipulates that timely notice is a condition precedent for recovery against an insurer, emphasizing that compliance with policy terms is necessary for any claims. The balance of equities approach is inapplicable when both parties are sophisticated businesses familiar with contract terms.

The district court improperly combined the first two prongs of the proof of loss test, which requires the insured to show (1) the insurer received satisfactory proof of loss and (2) the insurer failed to pay the claim within thirty days. The insurer is considered to have received proof of loss if it obtains sufficient information to act on the claim, as established in Richardson v. GEICO Indem. Co. Additionally, satisfactory proof of loss does not need to be in writing, supported by cases including Youngblood v. Allstate Fire Ins. Co. and Richardson. The distinction between La. Rev. Stat. Ann. 22:1892(B)(1) and 22:1973(C) is noted, with the former imposing a mandatory penalty for insurers failing to act timely, while the latter allows for discretionary penalties. Louisiana courts interpret Section 22:1892(B)(1) as "penal in nature," requiring strict adherence to its language without added requirements. The legislature's intent is presumed to align with established statutory construction principles, as emphasized in the comparison of the two sections.