The opinion
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
NUCOR STEEL LOUISIANA, LLC ET AL. CIVIL ACTION
VERSUS No. 21-1904
HDI GLOBAL INSURANCE CO. SECTION I
ORDER & REASONS
Before the Court are two motions1 for judgment on the pleadings, filed by
defendant, HDI Global Insurance Company (“HDI”). Plaintiffs, Nucor Steel
Louisiana, LLC (“Nucor”) and Dynamic Environmental Services, LLC (“DES”)
oppose2 the motions. HDI filed replies3 in support of the motions. For the reasons that
follow, the Court will grant the motions.
I. BACKGROUND
The facts, as alleged in the complaint, are as follows: HDI issued a commercial
general liability policy (“the HDI Policy” or “the Policy”) to DES, providing coverage
between November 1, 2016 and November 1, 2017.4 On October 10, 2016, Nucor and
DES entered into an independent contractor agreement (“the ICA”), which required,
among other things, that DES defend Nucor against, and indemnify Nucor for, claims
asserted against Nucor by DES employees, and that DES name Nucor as an
additional insured in the HDI Policy.5 An additional insured endorsement was
1 R. Doc. Nos. 21, 37.
2 R. Doc. Nos. 46, 48.
3 R. Doc. Nos. 52, 53.
4 R. Doc. No. 1, at 2 ¶ V.
5 Id. at 3 ¶ VII.
incorporated into the HDI Policy, naming as “additional insureds” entities “as
required by written contract.”6 The parties agree that this endorsement had the effect
of adding Nucor as an additional insured under the HDI Policy.7
On May 10, 2018, Bob Dale Comeaux II (“Comeaux”), a DES employee, filed a
civil action (“the Comeaux litigation”) in the 23rd Judicial District Court for the
Parish of St. James, alleging that he was exposed to hydrogen sulfide gas at Nucor’s
plant facility on May 15, 2017.8 Comeaux named as defendants Nucor, DES, and a
third entity not a party to the instant action.9
On May 10, 2019, one year after Comeaux filed suit, attorneys representing
Nucor tendered Nucor’s defense and indemnification to DES.10 On January 21, 2020,
HDI sent correspondence to Nucor’s counsel, agreeing to defend Nucor, but reserving
rights as to indemnity.11 On July 2, 2021, Comeaux’s claims as to all three defendants
were settled through payment by HDI and the insurer for a third defendant.12 On
6 Id. at 2 ¶ VI.
7 See, e.g., R. Doc. No. 1, at 2 ¶ VI; R. Doc. No. 21-1, at 5 & n.14; R. Doc. No. 46, at 17
(citing R. Doc. No. 1-6, at 4).
8 Id. at 3 ¶ VIII.
9 Id.
10 Id. at 3 ¶ IX (citing R. Doc. No. 1-5).
11 Id. at 4 ¶ X (citing R. Doc. No. 1-6). As will be discussed in greater detail infra, pp.
19–23, there is no indication that Nucor, in its capacity as an additional insured
under the HDI Policy, ever directly tendered its defense to HDI. Nucor’s tender letter
to DES only references the ICA, and not the HDI Policy. See R. Doc. No. 1-5. However,
DES was represented by counsel appointed by HDI when it received Nucor’s tender
letter. R. Doc. No. 1, at 3 ¶ IX. Additionally, in HDI’s January 21, 2020 reservation of
rights letter, HDI acknowledged that Nucor’s request for defense and indemnity was
based on the ICA as well as the HDI Policy. R. Doc. No. 1-6, at 1; see also R. Doc. No.
52, at 10.
12 R. Doc. No. 1, at 5 ¶ XIII.
August 4, 2021, HDI offered to reimburse Nucor’s post-tender defense costs, totaling
$37,067.47.13 Nucor rejected HDI’s offer, and requested that HDI reimburse all of
Nucor’s defense costs, including those costs incurred pre-tender, totaling
$135,950.75.14
Nucor then approached DES directly, demanding reimbursement of pre- and
post-tender defense costs pursuant to the indemnity provision in the ICA.15 Nucor
stated that it would institute a suit against DES to recover these costs if DES did not
voluntarily reimburse them.16 On August 9, 2021, DES sent a letter to HDI,
requesting that HDI reconsider its position regarding the reimbursement of Nucor’s
pre-tender defense costs, and stating that DES would have no choice but to reimburse
Nucor for its pre- and post-tender defense costs if HDI refused to do so.17 Ultimately,
DES reimbursed Nucor for its pre- and post-tender defense costs, and Nucor assigned
its claims, under the ICA and the HDI Policy, to DES.18
In its first motion for judgment on the pleadings, HDI requests that judgment
be entered in HDI’s favor, limiting its obligations to the post-tender defense costs
incurred by Nucor in the Comeaux litigation and dismissing the remainder of
plaintiffs’ claims with prejudice.19
13 Id. at 5 ¶ XIV (citing R. Doc. No. 1-7).
14 Id.
15 Id. at 6 ¶ XVI.
16 Id.
17 Id. at 6 ¶ XVII.
18 Id. at 8 ¶ XIX.
19 R. Doc. No. 21.
Plaintiffs submit that they have two avenues supporting recovery of Nucor’s
pre-tender defense costs. First, Nucor is named as an additional insured under the
HDI Policy, and plaintiffs submit that HDI is obligated to reimburse its insured’s pre-
and post-tender defense costs. Second, plaintiffs argue that HDI must reimburse DES
for its voluntary settlement of Nucor’s pre- and post-tender defense costs because the
HDI Policy’s contractual liability provision covers DES’s obligation to indemnify
Nucor pursuant to the ICA.20
First, HDI does not dispute that Nucor is an additional insured under the HDI
Policy and HDI acknowledges that it is obligated to reimburse Nucor’s post-tender
costs accordingly. However, HDI submits that it is not obligated to reimburse its
insured’s pre-tender defense costs. Second, HDI acknowledges that the ICA is an
“insured contract” for the purposes of the contractual liability provision of the HDI
Policy, but it argues that the language of the provision precludes plaintiffs from
seeking defense costs incurred by Nucor in the Comeaux action.21
Plaintiffs also argue that Nucor is entitled to recover attorney’s fees and costs
incurred in prosecuting this action, and that plaintiffs are entitled to recover
statutory penalties due to HDI’s “arbitrary and capricious conduct and/or breach of
duties,” pursuant to Louisiana Revised Statutes 22:1973 and 22:1892.22
Finally, in its second motion for judgment on the pleadings, HDI requests that
Nucor be dismissed with prejudice from the instant action, because the complaint
20 See R. Doc. No. 46, at 4, 10.
21 R. Doc. No. 21-1, at 11–13.
22 R. Doc. No. 1, at 9 ¶¶ XIII, XIV.
states that Nucor assigned “Nucor’s claims under the ICA and pursuant to the HDI
Policy against HDI.”23
II. STANDARD OF LAW
Pursuant to Rule 12(c) of the Federal Rules of Civil Procedure, a party may
move for judgment on the pleadings once the pleadings are closed, as long as the party
moves “early enough not to delay trial.” “The standard for Rule 12(c) motions is
identical to the standard for Rule 12(b)(6) motions to dismiss for failure to state a
claim.” Waller v. Hanlon, 922 F.3d 590, 599 (5th Cir. 2019) (citing Doe v. MySpace,
Inc., 528 F.3d 413, 418 (5th Cir. 2008)).
Thus, Rule 12(c)—like Rule 12(b)(6)—permits a court to dismiss a complaint,
or any part of it, where a plaintiff has not set forth well-pleaded factual allegations
that would entitle him to relief. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555
(2007); Cuvillier v. Taylor, 503 F.3d 397, 401 (5th Cir. 2007). A plaintiff’s factual
allegations must “raise a right to relief above the speculative level.” Twombly, 550
U.S. at 555. In other words, a complaint “must contain sufficient factual matter,
accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570).
A facially plausible claim is one where “the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.” Id. If the well-pleaded factual allegations “do not permit the
court to infer more than the mere possibility of misconduct,” then “the complaint has
23 R. Doc. No. 37-1, at 1 (citing R. Doc. No. 1, at 8 ¶ XIX).
alleged—but it has not ‘show[n]’—‘that the pleader is entitled to relief.’” Id. at 679
(quoting Fed. R. Civ. P. 8(a)(2)) (alteration in original).
In assessing the complaint, the Court must accept all well-pleaded factual
allegations as true and liberally construe all such allegations in the light most
favorable to the plaintiff. Spivey v. Robertson, 197 F.3d 772, 774 (5th Cir. 1999);
Lowrey v. Tex. A&M Univ. Sys., 117 F.3d 242, 247 (5th Cir. 1997). Where “the
complaint ‘on its face show[s] a bar to relief,’” then dismissal is the appropriate course.
Cutrer v. McMillan, 308 F. App’x 819, 820 (5th Cir. 2009) (quoting Clark v. Amoco
Prod. Co., 794 F.2d 967, 970 (5th Cir. 1986)).
In addition to the complaint, the court may consider “any documents attached
to the complaint, and any documents attached to the motion to dismiss that are
central to the claim and referenced by the complaint.” Lone Star Fund V (U.S.), LP v.
Barclays Bank PLC, 594 F.3d 383, 387 (5th Cir. 2010). If matters beyond
these documents are presented, “the court has ‘complete discretion’ to exclude
them.” Great Lakes Ins., S.E. v. Gray Grp. Invs., LLC, 550 F. Supp. 3d 364, 369–70
(E.D. La. 2021) (Vance, J.) (quoting Allen v. Hays, 812 F. App’x 185, 189 (5th Cir.
2020)). If, however, such documents are presented and not excluded by the court,
“the motion must be treated as one for summary judgment under Rule 56.”
Fed. R. Civ. P. 12(d).
III. LAW AND ANALYSIS
A. Assignment of Nucor’s Rights against HDI
In HDI’s second motion for judgment on the pleadings, HDI submits that Nucor
should be dismissed with prejudice from this action because the complaint states that
DES “[took] an assignment from Nucor of Nucor’s claims under the ICA and pursuant
to the HDI Policy against HDI.”24
Assignments of right are governed by Article 698 of the Louisiana Code of Civil
Procedure, which provides:
An incorporeal right which has been assigned, whether unconditionally
or conditionally for purposes of collection or security, shall be enforced
judicially by:
(1) The assignor and the assignee, when the assignment is partial; or
(2) The assignee, when the entire right is assigned.
The Court, taking the complaint’s allegation as true as it must for the purpose
of this motion, concludes that Nucor completely assigned its rights under the HDI
Policy and against HDI to DES. Accordingly, the Court will grant defendant’s motion
and dismiss all of Nucor’s claims as to HDI with prejudice.25
24 R. Doc. No. 37-1, at 1–2 (citing R. Doc. No. 1, at 8 ¶ XIX).
25 DES requests leave of court to amend its complaint, in the event that the Court
dismisses Nucor, “to reflect that all claims asserted are those originally held by DES
as well as those obtained through assignment from Nucor.” R. Doc. No. 48, at 5. Such
an amendment is not necessary. The original complaint makes clear that Nucor
assigned all of its rights against HDI to DES. The Court has acknowledged this
assignment and it has dismissed Nucor’s claims accordingly, leaving only the claims
held originally by DES and those acquired by DES through Nucor’s assignment.
B. Nucor as an Additional Insured
HDI recognizes that it is required to pay Nucor’s post-tender defense costs
because Nucor is an additional insured under the HDI Policy.26 HDI states that it
remains willing to reimburse Nucor’s post-tender defense costs, and its requested
relief in the instant motion reflects its continued willingness to cover these costs.27
However, HDI argues that it is not required to pay Nucor’s pre-tender defense costs.28
(As noted above, Nucor assigned its rights against HDI to DES. Accordingly, to the
extent that the Court refers to any sum that HDI may owe to Nucor as an additional
insured, it is with the understanding that DES now has the exclusive right to recover
such a sum.)
Nucor rejected HDI’s offer to reimburse pre-tender defense costs.29 HDI
submits that its position is supported by Gully & Associates, Inc. v. Wausau Insurance
Cos., 536 So. 2d 816 (La. Ct. App. 1 Cir. 1988). The Court concurs. In Gully, the
Louisiana Court of Appeals for the First Circuit held that, because “the insurer’s duty
to provide a defense does not arise until the insurer receives notice of the litigation .
. . . [the insurer] is not responsible for the legal fees and costs incurred prior to the
notification date.” Id. at 818 (citing Moskau v. Ins. Co. of N. America, 366 So. 2d 1004,
26 R. Doc. No. 21-1, at 5.
27 R. Doc. No. 21-1, at 5. The fact that HDI remains willing to pay the post-tender
defense costs is not alleged in the complaint or evinced by any of the exhibits properly
before the Court in this Rule 12(c) motion. However, in its first motion, HDI has
requested that judgment be entered in HDI’s favor, limiting its obligations to the
post-tender defense costs incurred by Nucor in the Comeaux litigation and dismissing
the remainder of plaintiffs’ claims with prejudice. R. Doc. No. 21.
28 Id.
1006 (La. App. 1st Cir. 1978); accord Adventure Harbor Ests., LLC v. LeBlanc, No.
13-142, 2014 WL 4084897, at *4 (E.D. La. Aug. 14, 2014) (Zainey, J.); Liberty Mut.
Ins. Co. v. Jotun Paints, Inc., No. 07-3114, 2009 WL 86669, at *3–4 & n.26 (E.D. La.
Jan. 13, 2009) (Africk, J.); Anco Insulations, Inc. v. Royal Indem. Co., No. 07-657,
2010 WL 4394147, at *2–3 (M.D. La. Nov. 1, 2010); Transcon. Pipe Line Corp. v. Nat’l
Union Fire Ins. Co. of Pittsburgh, 378 F. Supp. 2d 729, 738–39 (M.D. La. 2005).
Plaintiffs attempt to overcome Gully by citing to inapposite cases, such as
Peavey Co. v. M/V ANPA, 971 F.2d 1168 (5th Cir. 1992), which stand for the
proposition that an insurer must show actual prejudice if it alleges late notice as a
basis to decline to defend the insured and to deny coverage altogether. Id. at 1172.30
Plaintiffs assert that HDI has not alleged actual prejudice in the instant motion.
However, as noted above, HDI did not deny coverage to Nucor, but instead only
declined Nucor’s request for pre-tender defense costs. Therefore, HDI need not show
that it suffered actual prejudice due to Nucor’s delay in tendering its defense.
Plaintiffs assert that the distinction between the scenarios in Peavey and Gully
is a distinction “without a difference.”31 However, it is a distinction that Louisiana
courts and the Fifth Circuit have repeatedly made, including in Gully and Peavey
themselves. See Peavey, 971 F.2d at 1178 (distinguishing Gully because the court in
30 Plaintiffs also cite to American Safety & Risk Services, Inc. v. Legion Indemnity Co.,
153 F. Supp. 2d 869 (E.D. La. 2001) (Barbier, J.), in which the court concluded that
the insurer was obligated to pay pre-tender costs after it denied coverage to the
insured. Id. at 878. So too was the case in Rovira v. LaGoDa, Inc., 551 So. 2d 790,
792, 794–95 (La. Ct. App. 5 Cir. 1989).
31 R. Doc. No. 46, at 7.
Gully noted that “the insurer [in Gully] was not denying coverage or trying to use the
late notification as a basis for denying coverage”); Gully, 536 So. 2d at 818 (concluding
that “jurisprudence holding that delayed notice of a claim does not relieve the insurer
of the obligation to provide coverage and to defend” did not “dispose[] of the matter
before [the court] since [the insurer was] not denying coverage or trying to use the
late notification as a basis for denying coverage”).
In addition to the arguments outlined above, plaintiffs emphasize the fact that
emails obtained during discovery purportedly demonstrate that HDI was aware of
HDI’s potential duty to defend Nucor in the Comeaux action as early as August 24,
2018—long before Nucor tendered its defense to DES on May 10, 2019.32 Plaintiffs
seem to imply that this manner of notice—i.e., learning of a potential duty to defend
from a source other than the insured—is sufficient to render HDI responsible for
defense costs starting from the time of receiving said notice. However, plaintiffs offer
no support for this contention, whether by reference to the language of the HDI Policy
or relevant caselaw.
The language of the HDI Policy repeatedly indicates that the insured must
notify HDI regarding legal actions or occurrences that may give rise to liability. For
32 Id. at 8–10 (citing R. Doc. Nos. 46-5, 46-6). The Court would need to convert the
instant motion into a motion for summary judgment in order to consider such
discovery materials, because they were not referred to in, nor attached to, the
complaint. Fed. R. Civ. P. 12(d); see also, e.g., Allen, 812 F. App’x at 189
(citing Sullivan v. Leor Energy, LLC, 600 F.3d 542, 546 (5th Cir. 2010)). However, for
reasons set forth immediately below, these materials would not alter the Court’s
analysis, even if they were properly before the Court. Accordingly, the Court declines
to consider the materials.
instance, the HDI Policy states that the insured “must see to it that [HDI is] notified
as soon as practicable of an ‘occurrence’ or an offense which may result in a claim.”33
The Policy further states that, “[i]f a claim or ‘suit’ is brought against any insured,
[the insured] must . . . [n]otify [HDI] as soon as practicable.”34 The Policy reiterates
that the insured “must see to it that [HDI] receive[s] written notice of the claim or
‘suit’ as soon as practicable,” and that the insured must “[i]mmediately send [HDI]
copies of any demands, notices, summonses or legal papers received in connection
with the claim[.]”35
Additionally, the HDI Policy states that “[n]o insured will, except at that
insured’s own cost, voluntarily make a payment, assume any obligation, or incur any
expense, other than for first aid, without [HDI’s] consent.”36 In Adventure Harbor
Estates, LLC v. LeBlanc, No. 13-142, 2014 WL 4084897 (E.D. La. Aug. 14, 2014)
(Zainey, J.), the court considered a similar policy provision. Id. at *4. The court
observed that, in light of the fact that the insured waited approximately a year to
notify the insurer that an action had been filed against the insured—as is also the
case in the instant action37—there was “no argument to be made in this case that
exigencies forced the [insured] to incur expenses to defend the suit before [the
33 R. Doc. No. 1-2, at 16.
34 Id.
35 Id. (emphasis added).
36 Id. (emphasis added).
37 See R. Doc. No. 1, at 3 ¶¶ VIII, IX (alleging that the Comeaux action was filed on
May 10, 2018, and that Nucor tendered its defense to counsel appointed by HDI to
represent DES on May 10, 2019). As noted supra, n.11, Nucor tendered its defense to
DES, rather than HDI.
insurer] could step in to provide a defense.” Id. The court noted that it was the
insured’s prerogative to retain the attorney of their choice before notifying the insurer
of the action, “but under the clear terms of the policy they had to exercise that
prerogative at their own cost.” Id. Accordingly, the court concluded that the insurer
was not required to reimburse the insured’s pre-notice defense costs. Id.
The Fifth Circuit’s analysis in Ingalls Shipbuilding v. Federal Insurance Co.,
410 F.3d 214 (5th Cir. 2005), is also instructive on this issue.38 In Ingalls, the court
concluded that an insurance company was only obligated to reimburse the insured’s
defense costs starting on the date upon which the insurance company became aware
of the insured’s letter demanding a defense, and not before. Id. at 227. The court
reached this conclusion even though the insurance company, prior to receiving the
insured’s demand letter, “was not only aware of the [underlying tort] suit, but
participated actively in the settlement proceedings as counsel for [another insured
party].” Id. The court reasoned that the insured entity, which was a corporation, was
“a sophisticated party and, as such, could have been expected to request a defense
under the policy if it had desired one.” Id. Further, “it would be absurd to require an
insurance company to force itself on such a sophisticated party if its services have not
been requested.” Id. Accordingly, the Court concludes that HDI is not obligated to
reimburse the pre-tender defense costs of its insureds or additional insureds,
including Nucor.
38 The court applied Texas law in this case, but its analysis remains persuasive.
C. Contractual Liability Coverage
1. Nucor’s Defense Costs
Whereas an insurer’s duty to defend does not arise until the insurer receives
notice or tender, the same principle does not apply to indemnitors, such as DES. See,
e.g., Bollinger Marine Fabricators, LLC v. Marine Travelift, Inc., No. 14-1743, 2015
WL 4937839, at *10 (E.D. La. Aug. 18, 2015) (Vance, J.) (noting the distinction
between insurers and indemnitors on this issue and concluding that the indemnitor
must reimburse pre-tender defense costs). “[T]he general rule is that an indemnitee
is not required to provide notice, let alone tender a defense, to the indemnitor under
an indemnification contract, unless the contract itself requires notification or tender
of defense.” Id. (quoting Smithson v. Wolfe, 1999 WL 33656866, at *4 (N.D. Iowa Jul.
19, 1999)). The ICA’s indemnity provision provides no notice requirement, and the
Court will not impute one. See id. (citing Fontenot v. Mesa Petroleum Co., 791 F.2d
1207, 1221 (5th Cir. 1986)).
Thus, while Nucor is not entitled to reimbursement of pre-tender defense costs
by virtue of being an additional insured under the HDI Policy, there remains the issue
of whether DES is entitled to recover its payment of Nucor’s pre- and post-tender
defense costs from HDI, pursuant to the contractual liability provision of the HDI
policy. Plaintiffs submit that this settlement payment falls within the contractual
liability coverage of the HDI Policy, while HDI contends that it does not.39
39 R. Doc. No. 21-1, at 11–13; R. Doc. No. 46, at 10.
The HDI Policy’s exception to the exclusion pertaining to contractual liability
(in other words, the section setting forth the conditions under which contractual
liability is covered by the Policy) states, in relevant part:
2. Exclusions
This insurance does not apply to:
. . . .
b. Contractual Liability
“Bodily injury” or “property damage” for which the insured is
obligated to pay damages by reasons of the assumption of liability
in a contract or agreement. This exclusion does not apply to liability
for damages:
(1) That the insured would have in the absence of the
contract or agreement; or
(2) Assumed in a contract or agreement that is an “insured
contract” . . . . Solely for the purposes of liability assumed
in an “insured contract”, reasonable attorneys’ fees and
necessary litigation expenses incurred by or for a party
other than an insured are deemed to be damages because
of “bodily injury” or “property damage”, provided;
(a) Liability to such party for, or for the cost of, that
party’s defense has also been assumed in the same
“insured contract”; and
(b) Such attorney fees and litigation expenses are for
defense of that party against a civil or alternative
dispute resolution proceeding in which damages to
which this insurance applies are alleged.40
The HDI Policy further provides that “[t]he word ‘insured’ means any person or
organization qualifying as such under Section II – Who Is An Insured.”41 Section II
was amended by subsequent endorsement,42 which states:
40 R. Doc. No. 1-2, at 7 (emphasis added).
41 Id. at 6.
42 Id. at 29–30 (Endorsement Form CG 20 10 04 13).
A. Section II – Who is an Insured is amended to include as an
additional insured the person(s) or organization(s) shown in the
Schedule, but only with respect to liability for “bodily injury”, “property
damage” or “personal and advertising injury” caused, in whole or in part,
by:
1. Your acts or omissions; or
2. The acts or omissions of those acting on your behalf;
in the performance of your ongoing operations for the additional
insured(s) . . . .43
The Schedule contained in this endorsement states that the additional insured
person(s) or organization(s) are those that are “required by written contract.”44 The
parties agree that this endorsement had the effect of adding Nucor as an additional
insured under the HDI Policy.45
HDI does not dispute that the ICA is an “insured contract” within the meaning
of the contractual liability provision.46 However, HDI disputes that the contractual
liability provision requires HDI to reimburse DES for its settlement of Nucor’s
defense costs in the Comeaux action.47
In support, HDI notes that the contractual liability provision states, in
relevant part, that the Policy extends to “reasonable attorneys’ fees and necessary
litigation expenses incurred by or for a party other than an insured.”48 HDI submits
43 Id. at 29 (emphasis added).
44 Id.
45 See, e.g., R. Doc. No. 1, at 2 ¶ VI; R. Doc. No. 21-1, at 5 & n.14; R. Doc. No. 46, at
17 (citing R. Doc. No. 1-6, at 4).
46 R. Doc. No. 21-1, at 9.
47 Id.
48 Id. at 11 (citing R. Doc. No. 1-2, at 7) (emphasis added).
that, because Nucor is an insured under the policy, its attorney’s fees and costs in the
Comeaux litigation are expressly exempted from contractual liability coverage.49
Plaintiffs assert that this provision does not apply to Nucor, because “as an
‘additional insured’ under the HDI Policy, Nucor was not ‘an insured’, as defined by
the HDI Policy.”50 In support of this interpretation, plaintiffs cite to “Section II – Who
is An Insured,” which does not include “additional insureds” in the definition of
“insureds.”51 However, plaintiffs omit mention of the endorsement that, as noted
above, amended Section II to include additional insureds within the definition of
insureds.52 Thus, under the express language of the contractual liability provision,
HDI is not required to reimburse DES for Nucor’s pre- or post-tender defense costs in
the Comeaux litigation.
Although the language of the policy provides a sufficient basis to conclude that
HDI is not required to reimburse DES for its settlement of Nucor’s defense costs, the
Court will address HDI’s additional argument that it is not required to reimburse
DES because DES unilaterally settled with Nucor in violation of the HDI Policy.53
The Policy provides, in pertinent part:
49 Id. at 12.
50 R. Doc. No. 46, at 19. Plaintiffs raise this argument with respect to whether
plaintiffs are entitled to attorney’s fees and costs arising from the prosecution of the
instant action, rather than with respect to the recovery of defense costs arising from
the Comeaux litigation. However, because plaintiff’s interpretation presumably
applies to the issue of defense costs, the Court addresses it here.
51 Id. at 18–19 (citing R. Doc. No. 1-2, at 6).
52 R. Doc. No. 1-2, at 29. Of course, plaintiffs are aware of this endorsement, because
they cite it for the proposition that Nucor is an additional insured under the Policy.
See, e.g., R. Doc. No. 1, at 2 ¶ VI; R. Doc. No. 46, at 2.
53 R. Doc. No. 21-1, at 9–11.
No insured will, except at that insured’s own cost, voluntarily make a
payment, assume any obligation, or incur any expense, other than for first
aid, without our consent.54
In support, HDI cites Ortiz v. MeadWestvaco Corp., 274 So. 3d 158 (La. Ct. App. 3
Cir. 2019), wherein the court, considering a similar consent-to-settle provision,
observed that “liability must be determined either by a court or by the claimant, the
[insurance] company, and the insured jointly.” Id. at 168 (quoting Rosenthal v. Sec.
Ins. Grp. of New Haven, 205 So. 2d 816, 817–18 (La. Ct. App. 1 Cir. 1967). Further,
the court noted that there were “no provisions of the policy under which the insured
has any right to make any determination as to his own liability. His fear as to being
the subject of a civil suit is groundless since the company is obligated to defend any
suit filed against him[.]” Id. (quoting Rosenthal, 205 So. 2d at 817–18).
Plaintiffs counter that the instant matter falls within several exceptions to this
consent-to-settle rule.55 As noted in Ortiz, “Louisiana courts have declined to enforce
consent-to-settle and no-action clauses in certain situations, such as when (1) the
insurer “wrongfully refuses to defend its insured,” or “(2) the insurer ‘denies coverage
where there is coverage, or unjustifiably delays settlement, forcing the insured to
settle separately.’” Id. at 168–69 (first quoting Arceneaux v. Amstar Corp., 66 So. 3d
438, 452 (La. 2011), then quoting Emile M. Babst Co., Inc. v. Nichols Constr. Corp.,
488 So. 2d 699, 703 (La. Ct. App. 1 Cir. 1986)). The central thrust of these exceptions
is that the insurer was wrongful or unjustified in denying coverage. Because the
54 Id. at 9 (citing R. Doc. No. 1-2, at 16).
55 R. Doc. No. 46, at 13.
Court concurs with HDI’s interpretation of the Policy, the Court also concludes that
HDI’s conduct was not wrongful or unjustified, and thus that these exceptions do not
apply.
2. Nucor’s Prosecution Costs
The ICA provides, in relevant part, that DES must indemnify Nucor for
attorney’s fees and expenses “incurred [by Nucor] in enforcing [DES’s]
indemnification obligations.”56 Plaintiffs argue that “[p]ursuant to the indemnity
provisions of the ICA, Nucor is entitled to recover from HDI the attorney’s fees and
costs incurred in prosecuting this action[.]”57
The Court’s analysis with respect to whether the contractual liability provision
covers DES’s reimbursement of Nucor’s defense costs in the Comeaux litigation,
applies with equal weight to the issue of whether the provision covers Nucor’s costs
in prosecuting this action. The Policy’s exclusion of “attorneys’ fees and necessary
litigation expenses incurred by or for . . . an insured” is not limited to defense costs.58
Further, even if the contractual liability provision did not exclude an insured’s
litigation fees and costs, DES would not be entitled to recover Nucor’s prosecution
costs under Louisiana law. In Steptore v. Masco Construction Co., 643 So. 2d 1213
(La. 1994), the Louisiana Supreme Court observed that, “[g]enerally, if the insured
56 R. Doc. No. 1-3, at 5.
57 R. Doc. No. 1, at 9 ¶ XIII. The Court notes that this paragraph of the complaint is
in error. The ICA is between Nucor and DES, and thus, Nucor is entitled to recover
prosecution fees from DES, and not from HDI. However, there remains the question
of whether DES, having settled Nucor’s claims for prosecution fees pursuant to the
ICA, is entitled to reimbursement from HDI for this settlement payment, pursuant
to the contractual liability provision of the HDI Policy.
58 R. Doc. No. 1-2, at 7.
hires an attorney to represent him in coverage disputes, he will have to bear those
costs himself,” unless the insurance contract or a statute provides for recovery of such
costs. Id. at 1218. Accordingly, the court held that the insured was not entitled to
recover prosecution costs. Id. Accord Monaghan v. United Rentals, 2012 WL 832284,
at *1–3 (M.D. La. Mar. 9, 2012). In this case, while the ICA provides for the recovery
of prosecution costs, the HDI Policy does not. Therefore, while Nucor is entitled to
recover such fees from DES pursuant to the ICA, Nucor is not entitled to recover
prosecution fees from HDI pursuant to the Policy. Nor is DES entitled to seek
reimbursement from HDI, pursuant to the Policy, for DES’s settlement payment of
Nucor’s prosecution fees.
D. Waiver
As stated above, the Court concludes that HDI is not required to reimburse
Nucor’s pre-tender defense or prosecution costs. However, there remains the question
of whether HDI, through its conduct and correspondences pertaining to this matter,
can be deemed to have waived its defenses as to reimbursement of pre-tender defense
and prosecution costs.
“Waiver occurs when there is an existing right, a knowledge of its existence
and an actual intention to relinquish it or conduct so inconsistent with the intent to
enforce the right as to induce a reasonable belief that it has been relinquished.”
Steptore v. Masco Const. Co., 643 So. 2d 1213, 1216 (La. 1994). “Reliable proof of
waiver is necessary, and the burden is on the party claiming waiver to establish its
existence.” FDIC v. Duffy, 47 F.3d 146, 150 (5th Cir. 1995) (citing Tate v. Charles
Aquillard Ins. & Real Est., Inc., 508 So. 2d 1371, 1375 (La. 1987)).
First, the Court must determine whether HDI waived its argument that it is
not required to reimburse its insured’s pre-tender defense costs. Plaintiffs argue that
HDI waived this argument because its January 2020 reservation of rights letter
states that HDI will defend Nucor, but it does not state that it will not reimburse
Nucor’s pre-tender defense costs.59 HDI argues, in general, that it “did not
intentionally relinquish any right to act in conformity with the policy and Louisiana
law.”60 The Court concludes that HDI’s omission of an explicit distinction between
pre- and post-tender defense costs does not rise to the level of intentional waiver,
especially considering the caselaw establishing that insurers are not required to
reimburse the insured’s pre-tender defense costs.
Next, the Court must consider whether HDI waived its argument that the
contractual liability provision excludes legal costs incurred by or for an insured. The
Court’s analysis on this issue is complicated by the fact that the parties have often
comingled their arguments pertaining to the “additional insured” and “contractual
liability” provisions both prior to, and during, this litigation. For instance, Nucor
tendered its demand for defense and indemnification to DES, rather than HDI.61 In
its tender letter, Nucor refers only to the ICA between Nucor and DES as the basis
59 R. Doc. No. 62, at 7.
60 R. Doc. No. 63, at 3.
61 R. Doc. No. 1-5.
for its demand.62 The letter does not refer to HDI or the HDI Policy. There is no
indication that Nucor, in its capacity as an additional insured under the HDI Policy,
ever directly tendered its defense to HDI. The parties have not explained how or when
the letter was eventually transmitted to HDI, although they note that DES was
represented by counsel appointed by HDI when it received Nucor’s tender letter.63
The next correspondence referenced in the complaint is HDI’s January 2020
reservation of rights letter, which is addressed to counsel for Nucor.64 The letter
appears to indicate that a copy of the letter was provided to DES.65 In the letter, HDI
states that it is in receipt of Nucor’s tender of the Comeaux matter to DES.66 HDI
states that “Nucor’s request for defense and indemnity . . . is based on a contract
between [ ] Nucor and DES as well as the commercial general liability policy HDI
issued to DES.”67 HDI acknowledges both that Nucor is an additional insured under
the HDI Policy and that the ICA “falls within” the Policy’s exception to the contractual
liability exclusion. The letter includes excerpts of the relevant provisions.68 In the
letter, HDI states that it will defend Nucor, and it also states that its indemnification
of Nucor is subject to certain reservations.69
62 Id.
63 R. Doc. No. 1, at 3 ¶ IX.
64 R. Doc. No. 1-6.
65 Id. at 5.
66 Id. at 1.
67 Id.
68 Id. at 2–5.
69 Id. at 1.
The purpose of HDI’s references to the contractual liability provision is
somewhat unclear, given that the letter is addressed to Nucor and includes an offer
to defend and indemnify Nucor (subject to certain reservations). After all, HDI’s
obligation to defend and indemnify Nucor arises only from the fact that Nucor is an
additional insured under the HDI Policy. Any obligations that HDI has under the
contractual liability provision of the Policy are owed to DES, and not to Nucor.
Because the letter does not make any representations as to HDI’s duty to
defend DES against an indemnity claim brought by Nucor, nor is the letter addressed
to DES, it would be difficult to conclude that HDI waived its arguments regarding its
obligations to DES under the contractual liability provision of the HDI Policy. While
HDI’s reservation letter certainly could have been written with greater precision and
clarity, the Court nevertheless concludes that plaintiffs have not met their burden of
establishing that HDI intentionally relinquished its right to assert that it is not
required to reimburse Nucor’s litigation costs pursuant to the contractual liability
provision. See Duffy, 47 F.3d at 150.
Additionally, even assuming that the letter provided adequate notice to DES
regarding HDI’s position as to contract liability coverage for DES’s indemnity
obligations under the ICA, the Court concludes that HDI would not have waived the
relevant defense. The letter states that the ICA’s “indemnity provision falls within
the exception to the [HDI Policy’s contractual liability] exclusion.”70 The letter also
provides the text of this exception, including the provision limiting the exception to
70 Id. at 5.
“reasonable attorneys’ fees and necessary litigation expenses incurred by or for a
party other than an insured.”71 While the ICA “falls within” the contractual liability
provision—insofar as HDI would be obligated to provide coverage to DES if DES
indemnified Nucor for damages owed to Comeaux—the ICA could nevertheless still
be subject to the limitations set forth in the contractual liability provision, including
the limitation as to insured’s litigation fees and costs.72
E. Statutory Penalties
Plaintiffs allege that HDI has been arbitrary and capricious in its handling of
DES’s and Nucor’s claims, in violation of Louisiana Revised Statutes 22:1973 and
22:1892.73 “The prohibited conduct under La. R.S. 22:1973 and La. R.S. 22:1892 is
virtually identical: the failure to timely pay a claim after receiving satisfactory proof
of loss when that failure to pay is arbitrary, capricious, or without probable
cause.” Pelle v. Munos, 296 So. 3d 14, 25 (La. App. 1 Cir. 2020).74 “Because these two
statutes are penal in nature, they are strictly construed.” Id.
“[A]n insurer who does not tender unconditionally a reasonable payment, a
figure over which reasonable minds could not differ, will be subject to penalties and
attorney fees.” Gaspard v. S. Farm Bureau Cas. Ins. Co., 155 So. 3d 24, 31 (La. App.
71 Id. at 2. The letter also includes the text of Section II, as amended by an
endorsement, which specifies who qualifies as an insured. Id. at 3–4.
72 Because the Court concludes that HDI did not waive the relevant defenses, it need
not reach HDI’s argument that plaintiffs failed to assert waiver and estoppel in their
complaint. See R. Doc. No. 63, at 5–6.
73 R. Doc. No. 1, at 8 ¶ XXI, 9 ¶ XIV.
74 “The primary difference between these two statutes is the different time periods
allowed for payment, thirty days under La. R.S. 22:1892 and sixty days under La.
R.S. 22:1973.” Pelle v. Munos, 296 So. 3d at 25.
1 Cir. 2014) (citing La. R.S. 22:1973, 22:1892; McDill v. Utica Mut. Ins. Co., 475 So.2d
1085, 1092 (La. 1985)). However, “[i]n those instances where there are substantial,
reasonable, and legitimate questions as to the extent of an insurer’s liability or an
insured’s loss, failure to pay within the statutory time period is not arbitrary,
capricious, or without probable cause.” Id. at 38 (citing Louisiana Bag Company,
Inc., 999 So.2d 1104, 1114 (La. 2008)).
“In order to recover under La. R.S. 22:1973 and La. R.S. 22:1892, a plaintiff
must first have a valid, underlying, substantive claim upon which insurance coverage
is based.” Pelle, 296 So. 3d at 25 (citing Clausen v. Fid. and Deposit Co. of Md., 660
So. 2d 83, 85 (La. App. 1 Cir. 1995)). Accord Bradley v. Allstate Ins. Co., 620 F.3d 509,
526 (5th Cir. 2010); RD Props. of Metairie, LLC v. Scottsdale Ins. Co., No. 13-4927,
2014 WL 12724664, at *5 (E.D. La. Mar. 7, 2014) (Brown, J.); Kosak v. Louisiana
Farm Bureau Cas. Ins. Co., 316 So.3d 522, 530–31 (La. App. 1 Cir. 2020); Phillips v.
Patterson Ins. Co., 813 So. 2d 1191, 1195 (La. App. 3 Cir. 2002). “The penalties
authorized by these statutes do not stand alone; they do not provide a cause of action
against an insurer absent a valid, underlying insurance claim.” Pelle, 296 So. 3d at
25 (citing Clausen, 660 So. 2d at 85).
Thus, for instance, in Naquin v. Elevating Boats, LLC, 817 F.3d 235 (5th Cir.
2016), where the Fifth Circuit resolved a coverage dispute against an insured, it also
concluded that the insured had “no valid underlying claim” and therefore, the district
court did not err in dismissing the insured’s bad faith claims brought pursuant to La.
R.S. 22:1973. Id. at 240 (citing Matthews v. Allstate Ins. Co., 731 F. Supp. 2d 552, 566
(E.D. La. 2010)).
DES makes several allegations as to HDI’s bad faith in its complaint and
opposition memorandum. As set forth above, the Court has concluded that the only
“valid underlying claim” in this action is Nucor’s claim—now assigned to DES—for
post-tender defense costs arising from the Comeaux litigation. Thus, the Court need
only resolve DES’s allegations of bad faith that relate to this underlying claim for
post-tender defense costs.75 Specifically, the Court must determine whether HDI
timely and unconditionally tendered a payment as to this amount. Pelle, 296 So. 3d
at 25; Gaspard, 155 So. 3d at 31.
In the complaint, DES submits that HDI should be subjected to statutory
penalties because it failed to reimburse Nucor’s pre- and post-tender defense costs,
totaling $132,023.25, within thirty days of receiving of receiving satisfactory proofs
of loss.76 In their opposition memorandum, DES more specifically asserts that “HDI’s
failure to pay to Plaintiffs, or pay into the registry of the court, [Nucor’s post-tender
defense costs totaling] $37,067.47[, which HDI] agreed was owed . . . is per se
arbitrary, capricious and without probable cause.”77 This assertion is perplexing
75 Because the Court has concluded that DES does not have valid underlying claims
as to HDI’s obligation to reimburse DES for Nucor’s pre-tender defense or prosecution
costs, the Court need not reach DES’s arguments that HDI acted in bad faith by
failing to timely tender payment as to those costs.
76 R. Doc. No. 1, at 8 ¶ XXI. Again, because DES does not have a valid underlying
claim as to pre-tender defense costs, the Court will not consider bad faith arguments
pertaining to said costs.
77 R. Doc. No. 46, at 21 (citing Lamar Advertising Co. v. Zürich Am. Ins. Co., 473 F.
Supp. 3d 632, 642–43 (M.D. La. July 20, 2020)).
given that, according to DES’s own complaint, HDI offered to pay this sum on August
4, 2021, and Nucor rejected this offer.78 DES attached the email in which HDI’s claims
processor offered to make said payment to Nucor, wherein the claims processor states
that it requires payee information and a W-9 form in order to process the payment.79
DES does not allege that this offer was untimely; instead, DES appears to suggest
that the fact that the payment still has not been completed renders the payment
untimely. However, by DES’s own allegations, Nucor refused to accept this payment.
DES cannot now assert HDI’s failure to process its offered payment as a basis for bad
faith penalties.
IV. CONCLUSION
Accordingly, for the reasons stated herein,
IT IS ORDERED that the second motion80 for judgment on the pleadings is
GRANTED and that Nucor’s claims are DISMISSED WITH PREJUDICE.
IT IS FURTHER ORDERED that the first motion81 for judgment on the
pleadings is GRANTED and that judgment be rendered in HDI’s favor, limiting its
obligations to reimbursement of DES’s payment of the post-tender defense costs
incurred by Nucor in the Comeaux litigation.
IT IS FURTHER ORDERED that the remainder of DES’s claims—as to
DES's reimbursement of Nucor’s pre-tender defense costs arising in the Comeaux
78 R. Doc. No. 1, at 5 ¶ XIV, 6 ¶ XV.
79 R. Doc. No. 1-7.
80 R. Doc. No. 37.
81 R. Doc. No. 21.
action, Nucor’s litigation costs in pursuing coverage under the ICA and the HDI
Policy, and penalties pursuant to La. R.S. 22:1892 and 22:1793—are DISMISSED
WITH PREJUDICE.
New Orleans, Louisiana, June 1, 2022.
acyl AFRICK
UNITED STATES DISTRICT JUDGE
27