The opinion
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
COLEMAN E. ADLER & SONS,
CIVIL ACTION
LLC, ET AL.
VERSUS NO: 21-648
AXIS SURPLUS INSURANCE SECTION: “J” (5)
COMPANY, ET AL.
ORDER AND REASONS
Before the Court are two Motions to Dismiss for Failure to State a Claim (Rec.
Docs. 14, 26) filed by Marsh & McLennan Agency, LLC and Risk Placement Services,
Inc. (collectively, “Defendants”). Coleman E. Adler & Sons, LLC, Royal Cloud Nine,
LLC, and Latrobe’s on Royal, LLC (collectively, “Plaintiffs”) filed a single opposition
to both motions. (Rec. Doc. 27). Defendants filed separate replies. (Rec. Docs. 33, 37).
Having considered the motions and legal memoranda, the record, and the applicable
law, the Court finds that the motions should be GRANTED.
FACTS AND PROCEDURAL HISTORY
Plaintiffs own and operate three jewelry stores and a reception venue in
Louisiana, which were forced to close or reduce their operations by civil authority
orders due to the COVID-19 pandemic. In order to recoup their losses, Plaintiffs filed
the present suit in state court against: (1) their insurance agent, Marsh & McLennan
Agency, LLC (“Marsh”); (2) their wholesale insurance broker, Risk Placement
Services, Inc. (“RPS”); and (3) their commercial property insurer, Axis Surplus
Insurance Company (“Axis”).
During the pandemic, Plaintiffs carried commercial property insurance issued
by Axis, which covered “direct physical loss of or damage to Covered Property …
caused by or resulting from any Covered Cause of Loss.” (Rec. Doc. 1-2 at p. 36).
Plaintiffs claim that they suffered business interruption losses and allege that the
insured locations were damaged and the access to their premises were prohibited by
the government due to similar damage to other properties within one mile of the
stores’ locations. Specifically, Plaintiffs claim that these properties were “damaged”
because “[c]oronavirus was physically present in [Plaintiffs’] locations and properties
within one mile of same,” and the presence of the virus “creat[ed] a dangerous
property condition and prevented the use of [the] property, [which] is a direct physical
loss to [the] property.” (Rec. Doc. 1-2 at pp. 11-13).
In response to the instant suit, Defendants timely removed this case to this
Court, which has subject matter jurisdiction over this case pursuant to 28 U.S.C. §
1332(a). Subsequently, Axis filed a motion to dismiss for failure to state a claim,
which the Court granted after finding that the Axis policy did not cover Plaintiffs’
COVID-19 related losses. (Rec. Doc. 37).
In their complaint, Plaintiffs argue that the remaining Defendants are liable
for breach of contract and negligence arising from their: (1) failure to advise them
about the need for broader virus-related coverage; (2) failure to perform due diligence
regarding their businesses; and/or (3) failure to recommend appropriate insurance
coverage. (Rec. Doc. 1-2 at pp. 19-20). Responding to Plaintiffs’ claims, Defendants
each filed motions to dismiss, arguing that Plaintiffs have failed to allege the breach
of any duty owed to them. (Rec. Docs. 14, 26).1
LEGAL STANDARD
Under the Federal Rules of Civil Procedure, a complaint must contain “a short
and plain statement of the claim showing that the pleader is entitled to relief.” Fed.
R. Civ. P. 8(a)(2). The complaint must “give the defendant fair notice of what the
claim is and the grounds upon which it rests.” Dura Pharm., Inc. v. Broudo, 544 U.S.
336, 346 (2005) (internal citations omitted). The allegations “must be simple, concise,
and direct.” Fed. R. Civ. P. 8(d)(1).
“Under Rule 12(b)(6), a claim may be dismissed when a plaintiff fails to allege
any set of facts in support of his claim which would entitle him to relief.” Taylor v.
Books A Million, Inc., 296 F.3d 376, 378 (5th Cir. 2002) (citing McConathy v. Dr.
Pepper/Seven Up Corp., 131 F.3d 558, 561 (5th Cir. 1998)). To survive a Rule 12(b)(6)
motion to dismiss, the plaintiff must plead enough facts to “state a claim to relief that
is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible when the
plaintiff pleads facts that allow the court to “draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Id. A court must accept all well-
pleaded facts as true and must draw all reasonable inferences in favor of the plaintiff.
Lormand v. U.S. Unwired, Inc., 565 F.3d 228, 232 (5th Cir. 2009); Baker v. Putnal,
75 F.3d 190, 196 (5th Cir. 1996). The court is not, however, bound to accept as true
1 March and RPS also raise other separate arguments; however, the Court need not address those
arguments to dispose of the instant motion.
legal conclusions couched as factual allegations. Iqbal, 556 U.S. at 678. “[C]onclusory
allegations or legal conclusions masquerading as factual conclusions will not suffice
to prevent a motion to dismiss.” Taylor, 296 F.3d at 378.
DISCUSSION
Under Louisiana law, an insurance agent owes his client a duty of “reasonable
diligence.” Isidore Newman School v. J. Everett Eaves, Inc., 2009-2161 (La. 7/6/20),
42 So. 3d 352, 356. An insurer fulfills this duty by procuring the insurance requested
by the client. Id. For this reason, “[i]t is the insured’s responsibility to request the
type of insurance coverage.” Mandina, Inc. v. O’Brien, 2013-0085 (La. App. 4 Cir.
7/31/13), 156 So. 3d 99, 112.
In Offshore Production Contractors, Inc. v. Republic Underwriters Insurance
Co. the Fifth Circuit held that an insurance agent may have a heightened duty to
recommend coverage under Louisiana law, depending on the agent’s representations
of his services and the relationship and agreements between the agent and his client.
910 F.2d 224, 229 (5th Cir. 1990). However, in Isidore Newman School, the Louisiana
Supreme Court held that insurance agents are not obligated “to spontaneously or
affirmatively identify the scope or the amount of insurance coverage the client needs.”
42 So. 3d at 359. Reconciling these two cases, courts have held that the Louisiana
Supreme Court’s holding in Isidore Newman School limits the application of the
heightened duty to recommend coverage established by the Fifth Circuit in Offshore
Production to narrow factual situations.2 Specifically, an insurance agent may have
2 See VCS, LLC v. Mt. Hawley Ins. Co., No. CV 21-92, 2021 WL 1399879, at *9 (E.D. La. Apr. 14,
2021) (Brown, C.J.); Hernandez v. State Farm Gen. Ins. Co., No. 13-5783, 2014 WL 1457813, at *3
a heightened duty only where the agent has reason to know that the client had “a
specific risk about which the client expressed concern” or “requested coverage for
specific circumstances.” Hernandez, 2014 WL 1457813, at *3; VCS, LLC, 2021 WL
1399879, at *9.
In this case, Plaintiffs do not allege that they made a specific request for a
policy that would have covered their COVID-19 related losses, nor do Plaintiffs argue
that they expressed any concerns about COVID-19 related risks. Instead, Plaintiffs
argue that Defendants owed a heightened duty to Plaintiffs because they held
themselves out as experts in marketing insurance to their businesses on their
respective websites. (Rec. Doc. 1-2 at pp. 14-16).
Plaintiffs cite two non-binding cases with similar factual allegations to support
their argument. VCS, LLC, 2021 WL 1399879, at *9 (Brown, C.J.); Sika Invs., LLC v.
RLI Corp., No. CV 21-404, 2021 WL 2134697, at *4 (E.D. La. May 26, 2021) (Feldman,
J.). In both of these cases, the plaintiffs alleged that the defendant insurance agents
held themselves out in their marketing materials, such as their websites, as experts
in providing insurance appropriate to the plaintiffs’ respective businesses. Id. In each
decision, the court held that these representations were sufficient to establish that
these defendant insurance agents owed a heightened duty to the plaintiffs, and these
agents may have breached their duty by failing to recommend virus-related coverage.
Id.
(E.D. La. 2014) (Morgan, J.); Lightfoot v. Hartford Fire Ins. Co., No. 07-4833, 2010 WL 11545223, at
*4 (E.D. La. 2010) (Zainey, J.).
However, there are two fatal flaws in Plaintiffs’ argument that Defendants’
websites established a heightened duty of care. First, Plaintiffs’ complaint contains
no allegation that they viewed these websites prior to renewing their policy. If
Plaintiffs never viewed the website, then these representations could not have
affected their expectations of Defendants’ services, and thus, no heightened duty
could have been established.
Second, even if Plaintiffs had viewed the websites prior to contracting or
renewing their contracts with Defendants, the Court disagrees that these
representations created a heightened duty of care under the facts of this case. It is
clear that Isidore Newman School limits the application of the heightened duty of
insurance agents established in Offshore Production to situations where the client, at
the least, communicates specific concerns or requests coverage for specific
circumstances. Plaintiffs have made no allegations that such communications or
requests were made to Marsh, much less RPS, which is a wholesale insurance broker
that never communicated with Plaintiffs.
For the above reasons, the Court concludes that Defendants did not owe
Plaintiffs a heightened duty of care. Therefore, they did not breach their duty because
they did not fail to provide any insurance coverage requested by Plaintiffs. See Isidore
Newman School, 42 So. 3d at 356.
CONCLUSION
Accordingly,
IT IS HEREBY ORDERED that the Motions to Dismiss (Rec. Docs. 14, 26)
filed by Marsh & McLennan Agency, LLC and Risk Placement Services, Inc. are
GRANTED. Plaintiffs’ claims against Marsh & McLennan Agency, LLC and Risk
Placement Services, Inc. are hereby DISMISSED WITH PREJUDICE.
New Orleans, Louisiana, this 30th day of June, 2021.
Ut KK] (VOM
CARL J. BAR ry RV
UNITED STATES DISTRICT JUDGE