Mt. Hawley Ins. Co. v. Advance Prods. & Sys., Inc.

972 F.Supp.2d 900

MT. HAWLEY INSURANCE CO.

v.ADVANCE PRODUCTS & SYSTEMS, INC.

Civil Action No. 12–890.

United States District Court, W.D. Louisiana, Lafayette Division.

Sept. 24, 2013.

Memorandum Granting Certification in Part Jan. 14, 2014.

Brandon Kyle Thibodeaux, Allen J. Krouse, III, Frilot L.L.C., New Orleans, LA, for Mt. Hawley Insurance Co.

Andy Joseph Dupre, Stephen M. Pesce, Harold J. Flanagan, Flanagan Partners, LLP, New Orleans, LA, for Advance Products & Systems, Inc.

MEMORANDUM RULING

REBECCA F. DOHERTY, District Judge.

Currently pending before the Court are cross-motions for summary judgment, filed by plaintiff, Mt. Hawley Insurance Co. (“Mt. Hawley”) [Doc. 15], and defendant Advance Products & Systems, Inc. (“APS”) [Doc. 16]. By way of their respective motions, the parties seek a ruling as to how to calculate the coinsurance provision of the commercial property insurance policy Mt. Hawley issued to APS. Specifically, Mt. Hawley seeks a judgment finding APS “is entitled to no additional monies under its Business Income (And Extra Expense) Coverage,” whereas APS seeks a judgment “holding that the coinsurance penalty formula in Mt. Hawley's insurance policy form requires the use of actual income and expenses to determine the amount it must pay APS for its business income losses.” [Doc. 15, p. 1; Doc. 16, p. 1] For the following reasons, Mt. Hawley's motion [Doc. 15] is DENIED, and APS's motion [Doc. 16] is GRANTED.

The following facts are not in dispute. On September 12, 2010, a fire occurred at APS's facility in Scott, Louisiana, causing significant damage. At the time of the fire, APS had Commercial Properly Insurance coverage with Mt. Hawley,¹ which included “Business Income (and Extra Expense)” coverage (“BI”).² [Doc. 15–4, p. 2] The “Limit of Insurance” for BI coverage was $500,000.00, with a coinsurance percentage of 90%.³ [Doc. 1–1, p. 6]

The parties disagree as to how the coinsurance penalty is to be calculated. Mt. Hawley contends the coinsurance penalty is to be calculated using APS's “projected Net Income for the 12 months following the inception of the policy”; APS contends the coinsurance penalty is to be calculated using APS's actual income.⁴ [Doc. 1, ¶ 29; Doc. 5, p. 9]

Summary Judgment Standard

A party claiming relief, or a party against whom relief is sought, may move, with or without supporting affidavits, for summary judgment on all or part of the claim. Fed. R. Civ. Proc. 56(a) and (b). Summary judgment is appropriate if “the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to a judgment as a matter of law.” Fed. R. Civ. Proc. 56(c)(1)(2).

When a motion for summary judgment is properly made and supported, an opposing party may not rely merely on allegations or denials in its own pleading; rather, its response must—by affidavits or as otherwise provided in this rule—set out specific facts showing a genuine issue for trial. If the opposing party does not so respond, summary judgment should, if appropriate, be entered against that party.

Fed. R. Civ. Proc. 56(e). As summarized by the Fifth Circuit in Lindsey v. Sears Roebuck and Co., 16 F.3d 616, 618 (5th Cir.1994):

When seeking summary judgment, the movant bears the initial responsibility of demonstrating the absence of an issue of material fact with respect to those issues on which the movant bears the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). However, where the non-movant bears the burden of proof at trial, the movant may merely point to an absence of evidence, thus shifting to the non-movant the burden of demonstrating by competent summary judgment proof that there is an issue of material fact warranting trial. Id. at 322, 106 S.Ct. 2548;see also, Moody v. Jefferson Parish School Board, 2 F.3d 604, 606 (5th Cir.1993); Duplantis v. Shell Offshore, Inc., 948 F.2d 187, 190 (5th Cir.1991). Only when “there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party” is a full trial on the merits warranted. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

The Supreme Court has instructed:

[T]he plain language of Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial. Where no such showing is made, “[t]he moving party is entitled to a judgment as a matter of law because the nonmoving party has failed to make a sufficient showing on an essential element of her case with respect to which she has the burden of proof.”

Lujan v. National Wildlife Federation, 497 U.S. 871, 884, 110 S.Ct. 3177, 111 L.Ed.2d 695 (1990) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 322–23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)). The Court later states:

In ruling upon a Rule 56 motion, “a District Court must resolve any factual issues of controversy in favor of the non-moving party” only in the sense that, where the facts specifically averred by that party contradict facts specifically averred by the movant, the motion must be denied. That is a world apart from “assuming” that general averments embrace the “specific facts” needed to sustain the complaint. As set forth above, Rule 56(e) provides that judgment shall be entered against the nonmoving party unless affidavits or other evidence set forth specific facts showing that there is a genuine issue for trial. The object of this provision is not to replace conclusory allegations of the complaint or answer with conclusory allegations of an affidavit. Rather, the purpose of Rule 56 is to enable a party who believes there is no genuine dispute as to a specific fact essential to the other side's case to demand at least one sworn averment of that fact before the lengthy process of litigation continues.

Id. at 888–89, 110 S.Ct. 3177 (1990) (internal quotations and citations omitted). The Fifth Circuit has further elaborated:

[The parties'] burden is not satisfied with ‘some metaphysical doubt as to the material facts,’ by ‘conclusory allegations,’ by ‘unsubstantiated assertions,’ or by only a ‘scintilla’ of evidence. We resolve factual controversies in favor of the nonmoving party, but only when there is an actual controversy, that is, when both parties have submitted evidence of contradictory facts. We do not, however, in the absence of any proof, assume that the nonmoving party could or would prove the necessary facts. ... [S]ummary judgment is appropriate in any case where critical evidence is so weak or tenuous on an essential fact that it could not support a judgment in favor of the nonmovant.

Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir.1994) (en banc) (citations and internal quotations omitted).

Finally, in evaluating evidence to determine whether a factual dispute exists, “credibility determinations are not part of the summary judgment analysis.” Id. To the contrary, in reviewing all the evidence, the court must disregard all evidence favorable to the moving party that the jury is not required to believe, and should give credence to the evidence favoring the nonmoving party, as well as that evidence supporting the moving party that is uncontradicted and unimpeached. Roberts v. Cardinal Servs., 266 F.3d 368, 373 (5th Cir.2001).

Applicable Law

The parties agree the contract is governed by Louisiana law. “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 Fontenot v. Diamond B Marine Services, Inc., 937 So.2d 425, 428 (La.App. 4 Cir.2006). “The judiciary's role in interpreting insurance contracts is to ascertain the common intent of the parties to the contract.” Cadwallader at 580;La. Civ.Code art.2045. “The parties' intent, as reflected by the words of the policy, determine [sic] the extent of coverage.” Reynolds v. Select Properties, Ltd., 634 So.2d 1180, 1183 (La.1994).

The words of an insurance contract are not to be read in isolation, as “[e]very insurance contract shall be construed according to the entirety of its terms and conditions as set forth in the policy, and as amplified, extended, or modified by any rider, endorsement, or application attached to or made a part of the policy.” La.R.S. § 22:881. “When the words of a 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. “The words of a contract must be given their generally prevailing meaning. Words of art and technical terms must be given their technical meaning when the contract involves a technical matter.” La. Civ.Code art.2047. “Words susceptible of different meanings must be interpreted as having the meaning that best conforms to the object of the contract.” La. Civ.Code art.2048. “A provision susceptible of different meanings must be interpreted with a meaning that renders it effective and not with one that renders it ineffective.” La. Civ.Code art.2049.

“When determining whether or not a policy affords coverage for an incident, it is the burden of the insured to prove the incident falls within the policy's terms. On the other hand, the insurer bears the burden of proving the applicability of an exclusionary clause within a policy.” Doerr v. Mobil Oil Corp., 774 So.2d 119, 124 (La.2000) (internal citations omitted). “Importantly, when making this determination, any ambiguities within the policy must be construed in favor of the insured to effect, not deny, coverage.” Id. Co-insurances clauses are subject to “strict...