Mandina, Inc. v. O'Brien

156 So.3d 99

MANDINA, INC., d/b/a Mandina's Restaurant

v.John O'BRIEN and Powell Insurance Agency.

No. 2013–CA–0085.

Court of Appeal of Louisiana, Fourth Circuit.

July 31, 2013.

Leonard L. Levenson, Donna R. Barrios, Christian W. Helmke, Weigand & Levenson, New Orleans, LA, for Plaintiff/Appellee.

Jack M. Alltmont, April L. Watson, Sessions Fishman Nathan & Israel, L.L.P., New Orleans, LA, for Defendant/Appellant.

(Court composed of Judge DANIEL L. DYSART, Judge ROSEMARY LEDET, Judge SANDRA CABRINA JENKINS).

Opinion

ROSEMARY LEDET, Judge.

This is a Hurricane Katrina-related suit by an insured against its insurance agent and his agency for negligence. The insured contends that the agent mislead it to believe that the business interruption/extra expense (“BI/EE”) coverage it purchased covered flood-related business interruption losses. Initially, the trial court granted the motion for summary judgment filed by the defendants—the agent, John O'Brien, and his agency, Powell Insurance Agency (“Powell”). Subsequently, the trial court granted the motion for new trial filed by the plaintiff—Mandina's Inc., doing business as Mandina's Restaurant (“Mandina's”). The trial court vacated its prior judgment (in which it had granted the defendants' motion for summary judgment) and denied the defendants' motion for summary judgment. At the parties' request, the trial court certified its interlocutory judgments granting the motion for new trial and denying Powell's motion for summary judgment as final judgments for purposes of immediate appeal under La. C.C.P. art. 1915.

For the reasons that follow, we convert the defendants' appeal to an application for supervisory writ, grant their writ, and reverse the trial court's judgments.

FACTUAL AND PROCEDURAL BACKGROUND

Mandina's owns and operates a popular restaurant on Canal Street in New Orleans. For over a decade before Hurricane Katrina made landfall in the New Orleans area (August 29, 2005), Mandina's obtained insurance for its restaurant and related commercial properties (its warehouse and office) from Powell. Powell provided Mandina's with both a fire/windstorm policy and a flood policy. The flood policy was provided through the National Flood Insurance Program (“NFIP”) and never included BI/EE coverage. Mandina's added BI/EE coverage to its fire/windstorm policy several years before the hurricane; however, this policy always excluded coverage for flood-related losses.

On an annual basis, Mr. O'Brien met with Mandina's owner, Tommy Mandina, to discuss and renew the policies. At these annual meetings, Mr. O'Brien presented Mandina's with a written proposal. Five days before the hurricane (August 24, 2005), Mr. O'Brien conducted the annual meeting with Mr. Mandina. At that meeting, Mr. O'Brien recommended that Mandina's increase its existing BI/EE coverage under its fire/windstorm policy from $400,000 to $500,000. Mr. Mandina accepted the recommendation. Besides increasing the limits of the existing BI/EE coverage, only minor coverage changes were made. Mandina's did not receive a copy of the 2005–06 renewal policies until after the hurricane.

As a result of the hurricane, Mandina's sustained significant flood and windstorm damages, which resulted in a substantial business interruption loss. According to Mandina's, it first learned that it lacked BI/EE coverage for its flood-related business interruption loss when it reported its loss to its insurer. This suit followed.

In its petition, Mandina's alleged that Powell and Mr. O'Brien held themselves out as experts in the insurance field and that it employed them in reliance on their expertise to recommend and secure proper and appropriate insurance coverage, including business interruption insurance in the maximum amount legally permitted. Mandina's further alleged that it was advised by Powell, through Mr. O'Brien, that it was purchasing the maximum amounts and coverage of insurance available on its properties, including business interruption insurance, and that it was not advised that the policies would not provide any coverage for flood-related business interruption. Nor was it advised that an additional policy of insurance could have been purchased that would have provided coverage for flood-related business interruption. Mandina's still further alleged that it reasonably believed that in the event of any significant loss to its properties resulting in a business interruption loss, the insurance policies it purchased from Powell would provide coverage for its business interruption claim. Based on these allegations, Mandina's averred that the defendants breached their legal and fiduciary duty to accurately and completely explain and disclose the insurance coverage available to Mandina's, including business interruption coverage, and to insure that the coverage purchased by Mandina's provided the types and amounts of coverage sought by Mandina's, including for flood-related business interruption loss.

The defendants moved for summary judgment on the basis that Mandina's could not satisfy its evidentiary burden to establish that they breached any duty. In support, they offered Mr. O'Brien's affidavit and Mr. Mandina's deposition, which they contended established the following undisputed facts:

• John O'Brien (Powell) sold Mandina's Restaurant commercial insurance for at least a decade before Hurricane Katrina struck the New Orleans area.

• For at least several years prior to Hurricane Katrina, Mandina's windstorm/fire policies included business interruption and extra expense coverage (“BI/EE”).

• A reading of Mandina's past policies explains that BI/EE applies only if the BI/EE loss is a result of a covered loss. Flood has always been specifically excluded as not being a covered loss.

• Tommy Mandina testified as the corporate representative for Mandina's Restaurant that he knew that he had no BI/EE coverage under Mandina's flood policy.

• Tommy Mandina testified that he knew that Mandina's fire/windstorm policy excluded flood coverage.

• Mandina's contention is that it was buying BI/EE coverage for a “catastrophic loss,” and Tommy Mandina thought that would include BI/EE coverage for flood.

• Tommy Mandina testified that he did not review Mandina's insurance policies upon receipt to verify whether the BI/EE coverage included flood as a covered cause of loss.

• Tommy Mandina admits that John O'Brien never told him that Mandina's had BI/EE coverage in the event of a flood.

• Tommy Mandina never asked John O'Brien whether Mandina's BI/EE coverage included flood as a covered cause of loss.

• Tommy Mandina never asked John O'Brien prior to Hurricane Katrina to obtain BI/EE coverage for Mandina's which would include flood as a covered cause of loss.

Finding the Louisiana Supreme Court's decision in Isidore Newman School v. J. Everett Eaves, Inc., 09–2161 (La.7/6/10), 42 So.3d 352, “on point,” the trial court granted the defendants' motion for summary judgment. In its written reasons for judgment, the trial court stated:

Defendant argues that in cases against agents for failure to give accurate advice as to the extent of coverage, liability only attaches when there is some specific question from the insured. Absent a specific question from the insured, the agent may presume that the insured understands that policy's terms. Isidore Newman School v. J. Everett Eaves, Inc., 42 So.3d 352, 357 (La.2010). In the Newman case, the Supreme Court also said that that client is charged with the duty of reviewing an insurance policy to make sure his needs are met. Id.

It is telling that on page 359 of Newman, the Supreme Court specifically quotes from the annual Insurance Proposal rendered to Newman in 2003 for the policy that pre-dated Katrina by two full years. The point made by the Supreme Court is that Newman (like Mandina here) had years to read the relevant coverage.

It is also telling that a careful review of Mr. Mandina's deposition (pages 16 to 18) shows that Mr. Mandina:

• admits that he never asked John O'Brien whether he had business interruption for flood and O'Brien never told him that he had business interruption for flood;

• concedes that he knew the flood policy did not provide business interruption coverage;

• states he knew that his other policy was for “fire and windstorm” and specifically excluded flood.

It is simply not reasonable to assume that the business interruption portion of the fire/windstorm policy would cover business interruption caused by flood. This is on point with Newman. (Emphasis in original).

In response, Mandina's filed a motion for new trial. In support, Mandina's presented the trial court with the following enumeration of facts that it contends it established in opposing the motion for summary judgment:

• Each year POWELL would make specific recommendations as to what insurance coverage should be obtained and what amounts should be obtained because each year the coverages and amounts of coverage being offered by the insurers changed and as a result the coverages and amounts being recommended by POWELL would change.

• MANDINA relied upon POWELL as the expert and would purchase the maximum insurance coverage recommended by POWELL.

• Five days before the occurrence of Hurricane Katrina, POWELL met with MANDINA and was quite emphatic in recommending that MANDINA raise its business interruption coverage limits due to the close proximity of Hurricane Katrina to Louisiana.

• As a result of its meeting with POWELL five days before the occurrence of Hurricane Katrina, and the increase in coverage for business interruption recommended by POWELL, MANDINA was led to believe that it had coverage for business interruption losses caused by wind, flood, and fire.

• MANDINA never received its policies prior to the occurrence of Hurricane Katrina, it did not have its policies to review prior to the occurrence of the hurricane.

• After the occurrence of Hurricane Katrina, upon re-opening its business, MANDINA purchased business interruption coverage for

...