DENNIS R. BAGNERIS, SR., Judge.
This appeal is the consolidation of two separate appeals. Both parties appeal the judgement of the district court dated December 1, 2010. Lafayette Insurance Company, ("Lafayette"), as the appellant, appeals the judgment awarding Lourdes M. Burke a total of $511,096.32 in damages. In a separately filed appeal, Lourdes M. Burke, as the appellant, appeals the district court's grant of a motion for new trial in favor of Lafayette on the limited issue of interest and penalties in which the district court concluded ran from the date of judgment. For the reasons that follow, we affirm the judgment of the district court as to both appeals.
Clarence and Lourdes M. Burke owned a home located at 331 Calhoun Street in New Orleans. Mr. Burke was diagnosed with cancer in 2003 and at that time Ms. Burke maintained her home with the assistance of her six children. The Burkes insured her home with Lafayette and was insured at the time Hurricane Katrina destroyed the city of New Orleans. The Burke's home was damaged by the storm, and Ms. Burke contacted Lafayette after their loss. At that time, Lafayette was working with Cunningham Lindsey, an independent adjusting firm, who assigned Sharon Brehm to Ms. Burke's claim. Ms. Brehm assigned James Swindell to inspect the home.
On October 5, 2005, Mr. Swindell conducted the initial inspection of the Burke's home. He estimated the replacement cost of damage to be $24,994.38 with depreciation of $3,357.41, with a deductible of $1000, thus totaling $20,637.57. He further estimated content damages to be $16,315.97, with a depreciation of $6,772 for an actual loss value of $9,543.52.
Initially in October of 2005, Ms. Burke prepared a contents list in which she alleged $23,548 in damages
It is the contention of the parties that Ms. Burke contacted Lafayette after the first inspection with concerns about additional damages that Mr. Swindell had not included in his report. Specifically, a damaged bedroom and additional roof damage.
Jerry Suggs, another Cunningham Lindsey adjuster, was sent to Ms. Burke's property for a second inspection. Mr. Suggs concluded that Ms. Burke's roof needed to be replaced and he found additional property damage. Lafayette paid an additional $16,872.14 for property damage, $6,623.78 for contents and $4,472.71 for additional living expenses (ALE). Ms. Burke eventually gutted her home and sent Ms. Brehm an invoice of $325 for air testing to verify the house was free of mold.
River Suggs, son of Jerry Suggs, and also an adjuster for Cunningham Lindsey, was asked to perform a second supplemental inspection. After that inspection, Ms. Brehm only agreed to pay the cost of Ms. Burke's air test.
Ms. Burke spent a total of $168,659.86 in repairing her home.
Ms. Burke filed suit against Lafayette in Civil District Court for the Parish of Orleans. Her husband, Mr. Burke died prior to suit being filed. In the initial lawsuit, Eagan Insurance Agency was named as a defendant and later dismissed prior to trial. Trial held in September of 2007 resulted in a mistrial. The matter proceeded to trial in November of 2010 whereby the district court awarded the following in favor of Ms. Burke:
Lafayette filed a Motion for JNOV that was denied by the district court. Lafayette then filed a Motion for New Trial on the issue of interest on penalties wherein the district court determined that penalties run from the date of judgment.
On appeal, Lafayette seeks our review as to whether the trial court erred in (1) allowing Steven Hitchcock to offer opinions on causation; (2) finding that the improvements and modifications made by Ms. Burke were necessitated by Hurricane Katrina; (3) in failing to apply the mold limitation; (4) finding that Lafayette acted in bad faith; (5) in awarding $200,000 in consequential damages under La. R.S. 22:1973 where none were proven; and (6) awarding $200,000 in penalties under La.R.S. 22:1973 where no consequential damages were proven.
In its first assignment of error, Lafayette argues that it objected to the testimony of Steven Hitchcock, a public adjuster retained by Ms. Burke after suit was filed. Mr. Hitchcock testified as to the causation of the damages to Ms. Burke's home. Lafayette objected to such testimony because it claims that Mr. Hitchcock did not examine the house prior to it being gutted and repaired and that he failed to offer an opinion about causation or price differentials until the day before trial. Further, Lafayette maintains that Mr. Hitchcock did not decipher the damages caused by mold and the damages caused by wind.
Ms. Burke offers numerous arguments as to why the district court was correct in considering Mr. Hitchcock's testimony. Ms. Burke argues that Mr. Hitchcock's report and testimony concerned only one cause of damage which was the winds from Hurricane Katrina. More compelling, however, for this Court is Ms. Burke's contention that when the lawsuit was filed, Lafayette's answer and defenses failed to include a mold defense, that Lafayette never submitted an expert report and never deposed Mr. Hitchcock nor did it file a Motion in Limine prior to the first trial. Additionally, Lafayette's Motion to Amend its Answer to raise the issue of mold as a defense was denied by the district court. Further, Mr. Hitchcock was tendered and accepted as an expert witness without objection at the first trial and even though during the second trial, the objection was again raised, it was overruled.
Appellate courts review of a trial court's decision to allow or exclude expert testimony is conducted under an abuse of discretion standard. Cheairs v. State Dep't. of Transp. and Dev., 2003-0680 (La.12/3/03), 861 So.2d 536; Hooper v. Travelers Ins. Co. 2010-1685, p.6 (La. App. 4 Cir. 9/28/11), 74 So.3d 1202, 1205.
A trial court is accorded broad discretion in determining whether expert testimony should be admissible and who should or should not be permitted to testify as an expert. Everhardt v. Louisiana Department of Transp. and Dev., 2007-0981, p. 15 (La.App. 4 Cir. 2/20/08), 978 So.2d 1036, 1048 (citations omitted). Whether an expert meets the qualifications of an expert witness and the competency of the expert witness to testify in specialized areas is within the sound discretion of the trial court. Id. A trial court's decision to qualify an expert will not be overturned absent an abuse of discretion. Jouve v. State Farm Fire and Cas. Co., 2010-1522, p.6 (La. App. 4 Cir. 8/17/11), 74 So.3d 220, 224-25.
This Court customarily references Daubert v. Merrell Dow Pharmaceuticals, Inc. 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed. 2d 469 (1993) in analyzing expert witnesses. However, in Cheairs, 2003-0680 at pp. 1-2 861 So.2d at 538, the Supreme Court reasoned:
The record supports that Mr. Hitchcock was trained by State Farm and became a licensed property and casualty adjuster who inspected approximately 1000 properties for various owners. Mr. Hitchcock testified to inspecting Ms. Burke's home after the repairs were complete. He testified that he interviewed Ms. Burke and her children and viewed photographs of the property in order to complete his inspection report. Mr. Hitchcock's testimony was interrupted by Lafayette's objection at which time the district court heard and considered each parties arguments outside the presence of the jury. Lafayette maintained that Mr. Hitchcock's testimony caused a mistrial in the first case, but the district court reasoned that there was a distinct difference between the circumstances resulting in the mistrial in the original case and allowing Mr. Hitchcock to testify at that time.
Mr. Hitchcock met the Daubert qualifications in the first trial. The district court has great discretion in accepting Mr. Hitchcock as an expert witness. We do not see where such discretion was abused, and therefore we will not reverse the district court's decision allowing Mr. Hitchcock to testify as an expert and in accepting his opinion on causation.
In its second assignment of error, Lafayette asserts that the district court erred in concluding that the repairs made by Ms. Burke were necessitated by Hurricane Katrina. It maintains that the testimony of Ms. Burke and her daughter only offer the theory that the house was gutted due to the mold and that had Mr. Hitchcock's opinion on causation been excluded, it would be evident that Ms. Burke made improvements and modifications to the home that were unnecessary.
Ms. Burke argues that not only did the testimony of Mr. Hitchcock confirm that damage to her home was caused by Hurricane Katrina, but Jerry Suggs, Lafayette's own adjuster testified to the like.
We find that this assignment is without merit. As we concluded above, Mr. Hitchcock's testimony was proper, and Lafayette offers no legal basis for this Court to rule otherwise.
Lafayette maintains that the district court failed to apply the mold limitation under the insurance policy and that Ms. Burke offered no credible evidence on the issue of causation; once again arguing that Mr. Hitchcock's testimony should have been excluded.
A review of the record reveals that Lafayette failed to meet its burden of proof in support of its contention that the policy's exclusions should have been enforced on the issue of mold, nor does Lafayette offer any legal analysis to support its argument on appeal. Additionally, Lafayette did not prove at trial that the cause mold was not a result of water intrusion from Hurricane Katrina.
Ms. Burke cites Blackburn v. National Union Fire Ins. Co. of Pittsburgh, 2000-2668 (La. 4/3/01), 784 So.2d 637, wherein the plaintiff was involved in a rear-end accident and sued the defendants. The issue arose as to coverage for a person operating the vehicle outside the named insured or outside the course and scope of that person's named employment. The Court established, that "[t]he insurer bears the burden of proving the applicability of an exclusionary clause within a policy." (citations omitted). Blackburn, 2000-2668 at p. 6, 784 So 2d at 641. Clearly there is a distinction between the type of insurance policy in the instant case and the type of insurance policy in Blackburn. Our review of the record supports that mold became a secondary factor argued at trial after Lafayette established a tear-down cost without indicating whether the cause of the tear-down was due to mold, winds, or another cause. On appeal, we cannot rule on this matter when Lafayette fails to offer this Court a legal argument that was offered at trial wherein it proved that the mold exclusion should have applied. This argument is also without merit.
The district court found that Lafayette acted in bad faith and awarded Ms. Burke $200,000 in consequential damages under La. R.S. 22:1973
Since Hurricane Katrina struck the city of New Orleans, the issue of bad faith attributable to insurance companies is becoming all too familiar within Louisiana's legal system. We rely on Sher v. Lafayette Ins. Co. 2007-2441, pp. 26-27 (La. 4/8/08), 988 So.2d 186, 206-07, what we deem to be a landmark case in Hurricane Katrina litigation. The Court stated:
This Court discussed arbitrary and capricious conduct in relation to R.S. 22:658 in the case of Reed v. State Farm Mut. Auto Ins. Co., 03-0107, (La.10/21/03), 857 So.2d 1012, where we reasoned:
Lafayette relies on La. R.S. 22:1892 and La. R.S. 22:1973, without specifying the exact language in the statutes that support its argument. Lafayette argues that Ms. Burke gutted her house without Lafayette's knowledge and that absent Mr. Hitchcock's testimony, Ms. Burke offered no evidence that the damages were related to Hurricane Katrina and that Lafayette offered "good faith" defenses and that the jury erred in finding it acted arbitrary and capricious.
Ms. Burke counters Lafayette by arguing that its defenses are nothing more that post litigation excuses that are not in good faith. Hurricane Katrina destroyed New Orleans on August 29, 2005. The record reveals that an initial inspection of Ms. Burke's home was on October 5, 2005 (a timely response considering the city's mass destruction). Lafayette issued the initial payment to Ms. Burke on December 29, 2005 and another payment on March 15, 2006. As recited above, Ms. Burkes initiated this lawsuit on October 10, 2006 after much back and forth with Lafayette.
The burden of proof at trial was on Ms. Burke to show that Lafayette's actions were arbitrary and capricious. We can only reverse such a finding if we conclude that there was a reasonable and legitimate question as to the extent and causation of Ms. Burke's claim; there was not. Lafayette was in bad faith. Clearly the damage to Ms. Burke's home was substantial, additional adjusters were hired to inspect the property which resulted in Ms. Burke being left with unpaid expenses and unable to fully repair her home for a substantial period of time. At trial, Lafayette did not prove that a reasonable doubt existed as to the severity of the damages to Ms. Burke's, home and its failure to pay within the statutory time period was arbitrary and capricious.
In Maloney Cinque, L.L.C. v. Pacific Ins. Co., Ltd. 2011-0787 (La.App. 4 Cir., 1/25/12), ___ So.3d ___, we recognized "that the determination of whether an insurer acted in bad faith turns on the facts and circumstances of each case, because a prerequisite to any recovery under the statute is a finding that the insurer not only acted (or failed to act), but did so arbitrarily, capriciously, and without probable cause. As this determination is largely factual, great deference is accorded the trier-of-fact." (citation omitted). Lafayette acted in bad faith. The testimony in the record is voluminous. It includes testimony from the original inspector, James Swindle; Lafayette's subsequent inspector; Jerry Suggs; Ms. Burke's public adjuster, Steven Hitchcock; and the Burkes. The evidence in the record includes reports from the adjusters, correspondence letters between the insurance company and Ms. Burke, various assessments of the damages indicating the cost to fix the damages and outlines of the policy limits.
Also, at trial, Lourdes A. Burke, Ms. Burke's daughter, offered testimony that her mother was upset and angry and would get mad about the "run around" she felt Lafayette was giving to her. She testified that her mother's face was always red and that her mother spent numerous hours on the phone with Lafayette and the insurance commissioner's office trying to secure the necessary funds to start her rebuilding. Ms. Burke had no choice but to sue Lafayette and the testimony reveals that process was long, tedious and emotionally draining.
In the recent decision of Durio v. Horace Mann Ins. Co., 2011-0084 (La. 10/25/11) 74 So.3d 1159, the Supreme Court affirmed the award for mental anguish after Ms. Durio's lengthy battle with her insurance company was resolved in the court. The Supreme Court ruled that the inaction of the insurance company and its intentional delay in paying Ms. Durio caused Ms. Durio great anxiety which she was able to prove at trial. In the instant matter, is Ms. Burke was no able to return to her home until October 2008 and almost six years later this case is still in the courts because Lafayette failed to timely remit payment to Ms. Burke. Further, in the long egregious process, Ms. Burke lost her husband. We find that the record supports that Ms. Burke suffered mentally at the hands of Lafayette and her anguish was proven at trial and therefore punishable under the theory of consequential damages.
We, like the trial court, established that Lafayette acted in bad faith. Lafayette seeks this Court's reversal of bad faith penalties or in the alternative argues that the most Ms. Burke can be awarded under La. R.S. 22:1973 is $5,000. Lafayette further maintains that the district court dismissed any claim under La. R.S. 22:1892 and Ms. Burke failed to prove actual damages related to the breach.
The statute clearly sets out the guidelines for penalties to be "assessed against the insurer in an amount not to exceed two times the damages sustained or five thousand dollars, whichever is greater." La. R.S. 22:1973.
This Court in Audubon Orthopedic and Sports Medicine, APMC v. Lafayette Ins. Co., 2009-0007 (La. App. 4 Cir. 4/21/10), 38 So.3d 963, thoroughly analyzed and compared La. R.S. 22:658 and La. R.S. 22:1220
The trial court has great discretion in assessing damages and we will not disturb the jury's findings absent a clear abuse of discretion. Ruffin v. Burton, 2008-0893 (La. App. 4 Cir. 5/27/09), 34 So.3d 301. The award of $200,000 in penalties does not shock the conscious nor does the award go against legal precedent. We will not disturb the award for penalties on appeal.
In this consolidated matter, Ms. Burke appeals the judgement of the district court wherein the district court granted Lafayette's motion for a new trial for the limited purpose of determining the date upon which interest on the penalties begin to accrue. The district court determined that the bad faith penalties begin to run not from the date of judicial demand, but from the date of judgment.
Ms. Burke maintains that Lafayette committed many bad acts and that interest on the penalties should have been calculated from the date of judicial demand because the acts of bad faith occurred prior to the date of filing and as such, she is owed prejudgment interest. Ms. Burke relies on La. R.S. 22:1973 and argues that once bad faith is found on behalf of the insurer, it is a clear and unequivocal that prejudgment interest should be awarded. Ms. Burke relies on Sharbono v. Steve Lang & Son Loggers, 97-0110 p.11 (La. 7/1/97), 696 So.2d 1382, 1389, maintaining that damages "relate back" to the earlier date to calculate the damages to make the plaintiff whole.
Once again, Lafayette maintains that the only penalties awarded in the instant case were awarded under La. 22:1973 and not La. R.S. 22:1892 and that the district court dismissed any penalties under La. R.S. 22:1827 and that Ms. Burke cannot raise the issue on appeal.
This Court noted in Nicholson v. Transit Management of Southeast Louisiana, 2006-0706, p.14 (La. App. 4 Cir. 2/14/01), 781 So.2d 661, 671, that "[o]ur extensive research of Louisiana jurisprudence reveals that the rules applied by courts to the attorney fee interest issue are inconsistent and confusing". Therefore we must review the instant case independent of other cases (or as we legally express; a case-by-case basis). Here we agree with the district court that Lafayette was in bad faith in failing to timely compensate Ms. Burke under La. R.S. 22:1973. Yet the award of $200,000 in penalties is not to make Ms. Burke whole, but to deter future arbitrary and capricious behavior by Lafayette; it is to penalize. At the same time, we cannot overlook that Ms. Burke did receive some payments prior to filing suit against Lafayette. With that, it is within the district court's discretion in determining when the award begins to run. The date of judicial demand is well within the legal precedent and does not violate any legal principals. Once again we look to our landmark case of Sher, 2007-2441 at p. 21 988 So.2d 203, (quoting Sharborno v. Steve Lang & Son Loggers, 97-0110 (La. 7/1/97) 696 So.2d 1382, 1389) as guidance.
There was no error by the district court in determining the accrual on interest and penalties. We affirm.
For the reasons stated above we affirm the judgment dated December 1, 2012 in its entirety.
BELSOME, J., CONCURS IN THE RESULT WITH REASONS.
I respectfully concur in the result reached by the majority, but write separately to further discuss the award of damages and penalties under La. R.S. 22:1973.
Recently the Louisiana Supreme Court interpreted the language of 22:1973 and explained its applicability to consequential damages resulting from an insurer's breach of its duties to fairly adjust claims and the penalties that may be applied under the statute. Durio v. Horace Mann Ins. Co., 2011-0084, p.18-19 (La. 10/25/11), 74 So.3d 1159, 1171. The Durio opinion construed the statute to limit the penalties available to two times the consequential damages award. Id.
The statute provides six enumerated acts that, if knowingly committed by an insurer, constitute a breach of its duties. La. R.S. 22:1973 B. One such act is the failure to pay a covered loss "within 60 days of the receipt of satisfactory proof of loss from the claimant when such failure is arbitrary, capricious, or without probable cause." La. R.S. 22:1973 B(5). Thus, in order to establish a claim for damages under La. R.S. 22:1973 B(5), an insured must first prove that the insurer breached its duty of good faith and fair dealing by arbitrarily and capriciously failing to pay the amount of a claim after proof of loss had been provided. La. R.S. 22:1973. Next, it must be proven that the insured suffered damages from that breach. Often times, as in this case, those damages consist of emotional distress, mental anguish, and inconvenience. See, Durio, supra; Dickerson v. Lexington Ins. Co., 556 F.3d 290, 303-304 (5th Cir.2009). Once the trier of fact has calculated a consequential damages award for the insurer's bad faith dealings, the statute warrants the award of penalties for that breach up to two times the amount of the consequential damages.
Whether the insurer acted in bad faith is a question of fact that must be determined on a case-by-case basis affording great deference to the trier of fact. Smith v. Audubon Ins. Co., 95-2057, (La. 9/5/96), 679 So.2d 372. In the instant case, the jury reviewed documentary evidence and heard testimony regarding Mrs. Burke's long and arduous ordeal that has spanned more than six years.
The record established that Mrs. Burke's home sustained considerable damage from Hurricane Katrina. She reported the claim and Lafayette sent James Swindell to inspect the property on October 5, 2005. In November 2005, Mrs. Burke submitted a list of her damaged contents and additional living expenses that she had incurred up until that point.
Mr. Swindell issued an estimate for repairs and contents loss on December 18, 2005. On December 29, 2005, Lafayette issued a check for repairs in the amount of $20,637.57. Mrs. Burke immediately followed up with a supplemental proof of loss for the tear out costs and the cost of replacing her roof. No check was issued by Lafayette, but a second adjuster, Jerry Suggs, was sent out to the property in March 2006. After Mr. Suggs inspection a supplemental payment was made for ALE ($4,077.71), repairs ($16,872.14), and contents ($11,353.43). Later in March, Mrs. Burke submitted an additional proof of loss regarding her ALE. Ms. Brehm handled the claims file for Lafayette and determined that in March of 2006 the ALE file should be closed and she refused payment for any additional repairs. Additional proof of loss was provided by Mrs. Burke in June 2006. No additional payments were made. Lafayette's response for further payments was that she would have to file suit. Suit was filed on October 10, 2006.
After filing suit to preserve her claim, Mrs. Burke hired a private adjuster and submitted yet another proof of loss in November 2006. At that time Lafayette refused any further inspections, adjustments or payments, even though the independent adjuster's estimate to repair was substantially higher than the payments made to Mrs. Burke.
Ultimately, the repairs to Mrs. Burke's home cost $168,659.86. Although she had policy limits under Coverage A of $106, 000.00, Mrs. Burke was only paid $37,989.01 under Coverage A. At trial, it was also established that other amounts were owed to Mrs. Burke under different coverages but had not been paid.
In order for Lafayette to overcome a bad faith claim under La. R.S. 22:1973, it must show that it reasonably tried to settle the claim and had a reasonable basis for the denial of additional coverage. Lafayette asserts two defenses to support it acted in good faith. First, Lafayette suggests that the difference in their adjustment and payment of the claim can be explained by improvements, upgrades and modifications. The record is void of evidence to support that claim. Secondly, Lafayette suggests that the tear out was due to mold and the policy contained a mold exclusion. This can only be characterized as disingenuous and a furtherance of their bad faith. The Lafayette adjusters made no mention of mold only wind damage. The wind damage resulted in water intrusion and as the claims process lingered mold developed. There is no evidence to suggest otherwise.
Accordingly, the jury had more than enough information to conclude that Lafayette's failure to pay Mrs. Burke's claim was arbitrary, capricious and without probable cause. The jury was also presented with evidence of the damage that resulted from Lafayette's bad faith. Mrs. Burke and her daughter testified as to the long ordeal that they endured due to Lafayette's callous approach to Mrs. Burke's claim even though she was providing satisfactory proofs of loss. The testimony also described the toll the process took on Mrs. Burke emotionally. Mrs. Burke's daughter explained her mother's anger and frustration over several years leading up to the trial. Even though Mrs. Burke stated she is not an emotional person by nature she explained that this process made her feel as though she was at war and left her not feeling well. This anxiety was documented in the claims file with a note explaining Mrs. Burke was "distraught as to no payment made." Mrs. Burke spent hours upon hours on the phone trying to have her claim paid so she could rebuild. It was more than three years after the storm before she could reside in her home again and at that time she had only been paid a small fraction of the repair costs she had incurred.
Again, the jury had sufficient information to conclude that Mrs. Burke endured great anxiety and inconvenience for six years leading up to the trial of this matter. The decision to award her consequential damages in the amount of $200,000.00 was well warranted. In assessing penalties, the jury had the option of awarding up to two times the consequential damages award or $400,000.00. In their discretion, the jury chose $200,000.00 as the penalty. I find these awards to be fully supported by the record and I agree with the affirmation of the trial court judgment.
