LANCE M. AFRICK, District Judge.
The Court has pending before it objections
This insurance dispute arises out of water damage to the building at 2040 North Causeway Boulevard in Mandeville, Louisiana ("the building"). Blaze owns the building which, for purposes of this decision, is occupied by two non-party corporate entities which provide health care services: (1) Dr. Kelly G. Burkenstock, M.D., APMC and (2) Azure Spa, Inc. It is undisputed that Dr. Kelly G. Burkenstock is the sole owner of all three entities.
In 2006, an application for commercial insurance was submitted by "Dr. Kelly G. Burkenstock," "D/B/A Blaze Chaus LLC."
As a result of the application, State Farm issued Medical Office Policy No. 98-EZ-2174-3 in 2006, and such policy was renewed annually through 2013.
In a State Farm property report dated April 1, 2013, prepared before the incident giving rise to the insurance claims at issue, the "Operations Narrative Report" section reflects the following:
Blaze alleges that the insured building and its insured contents were damaged on or about December 24, 2015, by water from a burst pipe located in a ceiling.
Blaze timely filed a motion to amend its complaint to add Dr. Kelly G. Burkenstock, M.D., APMC and Azure Spa, Inc. as plaintiffs.
Several pending motions depend on a common question presented in different procedural postures: whether recovery pursuant to the Medical Office Policy is limited to the named insured, Blaze, or whether coverage is also provided to Azure Spa, Inc. and Dr. Kelly G. Burkenstock, M.D., APMC. Blaze objects to the U.S. Magistrate Judge's order denying its timely motion to amend the complaint to add those separate Burkenstock-owned entities as plaintiffs. State Farm, on the other hand, moves for partial summary judgment with respect to the unavailability of recovery for business personal property damage and business income losses suffered by any entity other than Blaze, the sole named insured. The Court will first address the issues of insurance policy interpretation and reformation raised by State Farm's motion for partial summary judgment, the resolution of which moots the objections to the U.S. Magistrate Judge's order.
Summary judgment is proper when, after reviewing the pleadings, the discovery and disclosure materials on file, and any affidavits, the court determines there is no genuine issue of material fact. See Fed. R. Civ. P. 56. "[A] party seeking summary judgment always bears the initial responsibility of informing the district court of the basis for its motion and identifying those portions of [the record] which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The party seeking summary judgment need not produce evidence negating the existence of material fact, but need only point out the absence of evidence supporting the other party's case. Id.; Fontenot v. Upjohn Co., 780 F.2d 1190, 1195 (5th Cir. 1986).
Once the party seeking summary judgment carries its burden pursuant to Rule 56, the nonmoving party must come forward with specific facts showing that there is a genuine issue of material fact for trial. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). The showing of a genuine issue is not satisfied by creating "`some metaphysical doubt as to the material facts,' by `conclusory allegations,' by `unsubstantiated assertions,' or by only a `scintilla' of evidence." Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (citations omitted). Instead, a genuine issue of material fact exists when the "evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The party responding to the motion for summary judgment may not rest upon the pleadings, but must identify specific facts that establish a genuine issue. Id. The nonmoving party's evidence, however, "is to be believed, and all justifiable inferences are to be drawn in [the nonmoving party's] favor." Id. at 255; see also Hunt v. Cromartie, 526 U.S. 541, 552 (1999).
"An insurance policy is a contract between the parties and should be construed by using the general rules of interpretation of contracts set forth in the Louisiana Civil Code." Cadwallader v. Allstate Ins. Co., 848 So.2d 577, 580 (La. 2003); see also id. ("The judiciary's role in interpreting insurance contracts is to ascertain the common intent of the parties to the contract.") (citing La. Civ. Code art. 2045). "Under Louisiana law, the interpretation of an unambiguous contract is an issue of law for the court." Amoco Prod. Co. v. Tx. Meridian Res. Exploration Inc., 180 F.3d 664, 668 (5th Cir. 1999). "When the words of the contract are clear and explicit and lead to no absurd consequences, no further interpretation may be made in search of the parties' intent." La. Civ. Code art. 2046. "A contract provision is not ambiguous where only one of two competing interpretations is reasonable or merely because one party can create a dispute in hindsight." Amoco Prod., 180 F.3d at 668-69 (quoting Tx. E. Transmission Corp. v. Amerada Hess Corp., 145 F.3d 737, 741 (5th Cir. 1998)) (internal quotation marks omitted). "In the context of contract interpretation, only when there is a choice of reasonable interpretations of the contract is there a material fact issue concerning the parties' intent that would preclude summary judgment." Id. at 669.
Pursuant to Louisiana law, "[w]ords and phrases used in an insurance policy are to be construed using their plain, ordinary and generally prevailing meaning, unless the words have acquired a technical meaning." Cadwallader, 848 So.2d 577, 580 (La. 2003). A court should not, however, interpret an insurance contract "in an unreasonable or strained manner under the guise of contractual interpretation to enlarge or to restrict its provisions beyond what is reasonably contemplated by unambiguous terms or achieve an absurd conclusion." Id. "If the policy wording at issue is clear and unambiguously expresses the parties' intent, the insurance contract must be enforced as written." Id.
If there is any doubt or ambiguity as to a provision in an insurance contract, Louisiana law applies a rule of "strict construction" that requires that any doubt or ambiguity in an insurance contract be construed in favor of coverage to the insured and against the insurer who issued the policy. Louisiana Ins. Guar. Ass'n v. Interstate Fire & Cas. Co., 630 So.2d 759, 764 (La. 1994); see also La. Civ. Code art. 2056 ("In case of doubt that cannot be otherwise resolved, a provision in a contract must be interpreted against the party who furnished its text."); accord Valentine v. Bonneville Ins. Co., 691 So.2d 665, 668 (La.1997); Crabtree v. State Farm Ins. Co., 632 So.2d 736, 741 (La.1994). If an ambiguity exists, a court should "construe the policy `to fulfill the reasonable expectations of the parties in the light of the customs and usages of the industry.'" Louisiana Ins. Guar. Ass'n, 630 So.2d at 764 (quoting Trinity Indus., Inc. v. Ins. Co. of N. America, 916 F.2d 267, 269 (5th Cir. 1990)); see Breland v. Schilling, 550 So.2d 609, 610-11 (La. 1989) ("Ambiguity will also be resolved by ascertaining how a reasonable insurance policy purchaser would construe the clause at the time the insurance contract was entered.").
"In Louisiana, a plaintiff may sue under an insurance policy when he is a named insured, additional insured, or third-party beneficiary of the contract." Lee v. Safeco Ins. Co. of Am., No. 08-1100, 2008 WL 2622997, at *2 (E.D. La. July 2, 2008). State Farm contends that the policy unambiguously names only one insured, Blaze, and that only Blaze is covered by the policy.
The Court finds as a matter of law that the insurance policy is not ambiguous as to the identity of the named insured. The language of the policy designating Blaze Chaus LLC as the named insured is "clear and explicit" and subject to no other interpretation. La. Civ. Code art. 2046. Accordingly, only Blaze, the named insured in the unambiguous policy, can seek to enforce the policy as it is currently written. E.g., Axis Surplus Ins. Co. v. Third Millenium Ins. & Fin. Servs., 781 F.Supp.2d 320, 324 (E.D. La. Feb. 15, 2011); Weir v. Allstate Ins. Co., No. 07-55, 2008 WL 4657805, at *2 (E.D. La. Oct. 20, 2008); Continental Ins. Co. v. Emerald Star Casino Natchez, L.L.C., No. 07-3862, 2008 WL 1884046, at *5 (E.D. La. Apr. 25, 2008).
"As with other written agreements, insurance policies may be reformed if, through mutual error or fraud, the policy as issued does not express the agreement of the parties." Fruge v. Amerisure Mut. Ins. Co., 663 F.3d 743, 748 (5th Cir. 2011). "In the absence of fraud, the party seeking reformation has the burden of proving a mutual error in the written policy." Samuels v. State Farm Mut. Auto. Ins. Co., 939 So.2d 1235, 1240 (La. 2006). A "mistake is mutual if the contract has been written in terms which violate the understanding of both parties; that is, if it appears that both have done what neither intended." Hall Ponderosa, LLC v. Petrohawk Properties, L.P., 90 So.3d 512, 518 (La. App. 3 Cir. 2012). "Louisiana law is clear: a party may present extrinsic evidence to prove mutual mistake, even when the language of the contract is not ambiguous." Fruge, 663 F.3d at 748. "To reform an instrument, there must be clear proof of the antecedent agreement as well as the error in committing it to writing." Id. (internal quotation marks omitted). "A determination of mutual error is essentially a question of fact. . . ." Teche Realty & Inv. Co. v. Morrow, 673 So.2d 1145, 1148 (La. App. 3 Cir. 1996).
The burden of proof on a party seeking to reform an insurance policy depends on the nature of the reformation. If the reformation does "not substantially affect the risk assumed by the insurer," then the "normal burden of proof by a preponderance of the evidence" applies. Samuels, 939 So. 2d at 1240. When a party seeks "to prove that the insurer had insured a substantially different and greater risk than that expressed by the written policy," then the mutual mistake justifying reformation must be proved by clear and convincing evidence. See id.
State Farm does not address the applicable burden of proof. Because the proposed reformation goes to which parties are entitled to coverage but not to the scope or amount of coverage, the Court concludes that the preponderance standard applies. See 15 William Shelby McKenzie & H. Alston Johnson, III, La. Civ. L. Treatise § 1:5 ("For example, clear and convincing proof of mutual error would be necessary to delete an express coverage exclusion, but only a preponderance of the evidence would be required to establish mutual error as to the identity of the named insured.").
In support of reformation, Blaze argues that the policy should "reflect the parties' true intent: That the insured was and is Dr. Kelly Burkenstock."
As it is unambiguously written, the policy insures only Blaze. The question is, therefore, whether "it appears that both [parties] have done what neither intended." Hall Ponderosa, LLC, 90 So. 3d at 518. The Court concludes that, on the basis of the available summary judgment record and the justifiable inferences such record supports, there is a genuine issue of material fact as to the intent of the parties.
"Parol[] evidence is admissible to show mutual error even though the express terms of the policy are not ambiguous." Samuels, 939 So. 2d at 1240. The insurance policy application was submitted in the name of "Dr. Kelly Burkenstock" "D/B/A Blaze Chaus, LLC." The application described the business activities at the insured building as "INTERNAL MEDICINE DOCTOR," and requested the "Physicians and Surgeons Endorsement."
State Farm cites only one case addressing reformation.
Essentially, State Farm places the blame for any error squarely on Dr. Burkenstock as the only person who knew that Blaze owned only the building and who could have taken steps to ensure that the correct entities had been named as insureds. State Farm is certainly right, but it does not cite any cases refusing to reform a policy to correct a mutual mistake simply because one of the parties could have corrected the mistake. Furthermore, State Farm's briefing is largely silent as to its own intent in issuing the Medical Office Policy. Accordingly, on the state of the summary judgment record as it presently stands, the Court concludes that there is a genuine issue of material fact regarding the intent of the parties to the insurance contract which could support reformation of the policy and the addition of another named insured.
The Court concludes, however, that such fact question does not extend to whether the parties mutually intended to insure Azure Spa, Inc. Reformation on the basis of mutual mistake requires that the mistake be "shared by both parties to the instrument at the time of reducing their agreement to writing." Hall Ponderosa, LLC, 90 So. 3d at 518 (emphasis added). The undisputed record reflects that Azure Spa, Inc., did not exist as an entity until 2009, after the policy was initially issued.
As a result, State Farm's motion for partial summary judgment should be granted with respect to the recovery of any losses incurred by Azure Spa, Inc. and denied with respect to the recovery of any losses incurred by Kelly G. Burkenstock, M.D., APMC.
Plaintiff shall file an amended complaint adding Kelly G. Burkenstock, M.D., APMC as a plaintiff on or before Tuesday, October 6, 2015. Such amended complaint shall not add any additional defendants or factual allegations which are the subject of the pending second motion to amend the complaint.
Finally, State Farm's in limine motion