Lighthouse Ranch for Boys, Inc. v. Safepoint Insurance Company

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF LOUISIANA

LIGHTHOUSE RANCH FOR BOYS, INC. CIVIL ACTION

VERSUS No. 22-1988

SAFEPOINT INSURANCE COMPANY SECTION I

ORDER & REASONS

Before the Court are three motions filed by defendant Safepoint Insurance

Company (“SafePoint”): a motion to confirm appraisal award,1 a motion for partial

summary judgment,2 and a motion for summary judgment.3 Plaintiff Lighthouse

Ranch for Boys (“Lighthouse Ranch”) opposes the motions.4 For the reasons below,

the Court denies the motions.

I. FACTUAL BACKGROUND

This is an insurance dispute. SafePoint insured Lighthouse Ranch’s property,

which was damaged by both Hurricane Ida in August 2021 and Hurricane Nicholas

in September 2021.5 The insurance contract between the parties contains an

appraisal provision, which states:

If we and you disagree on the value of the property or the amount of loss,

either may make written demand for an appraisal of the loss. In this event,

each party will select a competent and impartial appraiser. The two

appraisers will select an umpire. If they cannot agree, either may request

that selection be made by a judge of a court having jurisdiction. The

appraisers will state separately the value of the property and amount of loss.

1 R. Doc. No. 37.

2 R. Doc. No. 38.

3 R. Doc. No. 40.

4 R. Doc. Nos. 41, 42, 44.

5 E.g., R. Doc. Nos. 38, at 1; 42, at 1.

If they fail to agree, they will submit their differences to the umpire. Any

outcome of the appraisal will not be binding on either party. Each party will:

a. Pay its chosen appraiser; and

b. Bear the other expenses of the appraisal and umpire equally.

If there is an appraisal, we will still retain our right to deny the claim.6

On December 9, 2021, Lighthouse Ranch informed SafePoint that the insured

property had been damaged by said hurricanes.7 SafePoint’s field adjuster inspected

the property and estimated the repair costs at $53,355.36.8 Lighthouse Ranch then

provided SafePoint with an estimate of repairs totaling approximately

$2,400,000.00.9 SafePoint then invoked appraisal.10 Both parties appointed their

appraisers, who estimated the loss to be $120,029.34.11 SafePoint then issued

payment to Lighthouse Ranch in the amount of $38,569.12, representing the amount

of the award agreed to by the appraisers less deductibles, depreciation, and prior

payments.12

6 R. Doc. No. 37-5, at 54. This appraisal provision appears in the “Louisiana Changes”

addendum to the policy. The main policy document contains an appraisal provision

that states that the appraisal decision “will be binding.” Id. at 44 (emphasis added).

The parties agree, however, that the non-binding appraisal provision is the one that

governs the agreement. R. Doc. No. 41, at 3; R. Doc. No. 52, at 1.

7 R. Doc. No. 38-4, ¶ 2; R. Doc. No. 42-1, ¶ 2.

8 R. Doc. No. 38-4, ¶ 3; R. Doc. No. 42-1, ¶ 3.

9 R. Doc. No. 38-4, ¶ 4; R. Doc. No. 42-1, ¶ 4.

10 R. Doc. No. 38-4, ¶ 5; R. Doc. No. 42-1, ¶ 5.

11 R. Doc. No. 38-4, ¶¶ 7–9; R. Doc. No. 42-1, ¶¶ 7–9.

12 R. Doc. No. 38-4, ¶ 10; R. Doc. No. 42-1, ¶ 10.

Lighthouse Ranch then filed this lawsuit, alleging that SafePoint underpaid

its claims and paid them too late.13 Lighthouse Ranch has alleged claims for breach

of the duty of good faith and fair dealing, as imposed by Louisiana law.14

II. LEGAL STANDARDS

a. Motion to Confirm Appraisal Award

“‘Appraisal clauses . . . are enforceable under Louisiana law,’ and are

interpreted according to normal Louisiana principles of contract interpretation.”

Spann v So. Fidelity Ins. Co., No. 13–6134, 2014 WL 4443527, at *2 (E.D. La. Sept.

9, 2014) (Africk, J.) (quoting St. Charles Par. Hosp. Serv. Dist. No. 1 v. U. Fire & Cas.

Co., 681 F.Supp.2d 748, 753 (E.D. La. 2010) (Vance, J.)). “‘Appraisal provisions in

insurance contracts are strictly construed’” and “‘[a]n appraisal award issued under

an insurance policy is binding only if the appraisers have performed the duties

required of them by the policy, which is the law between the contracting parties.’” Id.

(quoting St. Charles Par. Hosp., 681 F. Supp. at 754) (further citations and quotations

omitted).

b. Motion for Summary Judgment

Summary judgment is proper when, after reviewing the pleadings, the

discovery and disclosure materials on file, and any affidavits, a court determines that

there is no genuine dispute of material fact and the movant is entitled to judgment

as a matter of law. Fed. R. Civ. P. 56(a). “[A] party seeking summary judgment always

13 See generally R. Doc. No. 1.

14 Id.

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 a material fact; it need only point out the absence of evidence

supporting the other party’s case. Id.; see also Fontenot v. Upjohn Co., 780 F.2d 1190,

1195–96 (5th Cir. 1986) (“There is no sound reason why conclusory allegations should

suffice to require a trial when there is no evidence to support them even if the movant

lacks contrary evidence.”).

Once the party seeking summary judgment carries that burden, the

nonmoving party must come forward with specific facts showing that there is a

genuine dispute of material fact for trial. See Matsushita Elec. Indus. 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). Rather, 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). If the nonmovant fails to meet their burden of showing a

genuine issue for trial that could support a judgment in favor of the nonmovant,

summary judgment must be granted. See Little, 37 F.3d at 1075–76.

“Although the substance or content of the evidence submitted to support or

dispute a fact on summary judgment must be admissible . . . the material may be

presented in a form that would not, in itself, be admissible at trial.” Lee v. Offshore

Logistical & Transp., L.L.C., 859 F.3d 353, 355 (5th Cir. 2017) (citations omitted).

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. See

Anderson, 477 U.S. at 248. 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.

III. ANALYSIS

a. Motion to Confirm Appraisal Award

Lighthouse Ranch argues that SafePoint’s motion to confirm the appraisal

award should be denied because the appraisal provision in the contract explicitly

states that “any outcome of the appraisal will not be binding on either party.”15

SafePoint agrees that the operative appraisal provision in the contract is non-

binding,16 but nevertheless asserts that “the appraisal award is enforceable” because

“the appraisers performed their duties under the Policy.”17

15 R. Doc. No. 41, at 4.

16 In its motion, SafePoint produced an appraisal provision that stated that “[a]

decision agreed to by any two [of the appraisers or umpire] will be binding.” R. Doc.

No. 37-1, at 4 (emphasis added). However, in its reply to Lighthouse Ranch’s

opposition, SafePoint states that an incorrect version of the appraisal provision was

used in its original motion “due to a clerical error” and it concedes that “the appraisal

award is not binding.” R. Doc. No. 52, at 2, 3.

17 R. Doc. No. 52, at 3.

SafePoint emphasizes that “[t]he burden of demonstrating that [an appraisal]

award should not be confirmed must fall upon the party challenging it,” and that that

burden requires a showing “that the appraiser’s honesty or integrity is suspect.”

Spann, 2014 WL 4443527, at *2. The cases that apply these principles, though, do so

in the context of contractual provisions that indicate that the appraisal award is

meant to set the amount of contractual loss. E.g., id. at *1 (interpreting appraisal

provision that stated that the appraisal award “shall determine the amount of actual

cash value and loss”); Dufrene v. Certain Interested Underwriters at Lloyds of London,

91 So.3d 397, 399 (La. Ct. App. 2012) (interpreting appraisal provision that stated

“[a] decision agreed to by any two will be binding”); St. Charles Parish Hosp., 681 F.

Supp. 2d at 752 (interpreting appraisal provision that stated “[a] decision agreed to

by any two will be binding”); Prien Props., LLC v. Allstate Ins. Co., No. 07-845, 2008

WL 1733591, at *2 (W.D. La. Apr. 14, 2008) (“The Policy states that ‘a decision agreed

to by any two will be binding with regard to the value of the property or the amount

of the loss only.’ Thus, provided that both parties fulfilled the contractual conditions

of the Policy, the appraisal award is binding.”).

Cases in the Western District of Louisiana have held that an appraisal

provision like that at issue here, which explicitly states that an appraisal award is

non-binding, does not set the contractual amount of loss and cannot be confirmed as

SafePoint requests. Myers v. Allied Trust Ins. Co., 21-2734, 2022 WL 2162588, at *2

(W.D. La. June 15, 2022) (reviewing an appraisal provision substantially identical to

that at issue here and concluding “that because the appraisal is not binding, [ ] the

appraisal award cannot be confirmed”); accord LeBlanc v. Allied Trust Ins. Co., 21-

1928, 2022 WL 4597863, at *3 (W.D. La. Sept. 29, 2022) (same).

Neither party identifies, and this Court has not located, any case in which a

court confirmed an appraisal award when the operative appraisal provision explicitly

stated that the appraisal outcome would not be binding. SafePoint insists that the

Court should “enforce” the appraisal award,18 but a determination that the appraisal

award is binding as to the amount of contractual loss would be in direct contravention

of the insurance policy, “which is the law between the contracting parties.” Spann,

2014 WL 4443527, at *2.

SafePoint alternatively argues that because the policy insures against fire, and

therefore incorporates Louisiana’s statutory standard fire policy, La. Rev. Stat.

§ 22:1311(F)(2), the appraisal provision of that statute applies. In pertinent part, the

statute provides that an appraisal award “shall determine the amount of actual cash

value and loss.” The Court rejects this argument for several reasons.

First, the above-cited cases that declined to confirm non-binding appraisal

awards also rejected the standard fire policy argument, determining “that fire policies

and homeowner’s policies are two separate and distinct types of insurance.” Myers,

2022 WL 2162588, at *1 (citing GeoVera Specialty Ins. Co. v. Joachin, 18-7577, 2019

18 SafePoint argues that the appraisal award is enforceable because appraisal awards

do not divest courts of jurisdiction. R. Doc. No. 52, at 5 (referring to La. Rev. Stat.

§ 22:868, which provides that “no insurance contract” may “depriv[e] the courts of this

state of the jurisdiction of action against the insurer”). This argument does not cure

the fact that confirming the appraisal award would be in direct conflict with the

contractual language.

WL 8273471 (E.D. La. June 28, 2019) (Brown, C.J.)); LeBlanc, 2022 WL 4597863, at

*3 (noting disagreement as to whether the standard fire policy applies “to non-fire

losses when it is contained in a homeowner’s policy,” but declining to confirm the

appraisal award due to express policy language “stat[ing] that appraisal outcomes

are not binding”).

Second, the extent to which the standard fire policy applies to and alters the

homeowner’s policy is unclear. In a 1978 case, the Louisiana Supreme Court held that

the standard fire policy’s prescriptive period applied to claims brought pursuant to a

homeowners insurance policy. Grice v. Aetna Cas. & Sur. Co., 359 So.2d 1288, 1291

(La. 1978). However, in a later case, the same court suggested “that a fire policy . . . is

entirely distinct from a homeowners’ policy.” Landry v. La. Citizens Prop. Ins. Co.,

983 So.2d 66, 74 n.10 (La. 2008). Therefore, both “[t]he Fifth Circuit and other district

courts have acknowledged that there is uncertainty on whether statutory provisions

related to fire insurance policies are applicable to homeowners’ insurance policies.”

GeoVera Specialty Ins. Co., 2019 WL 8273471, at *8 (collecting cases).

Third, principles of Louisiana contract interpretation weigh against

SafePoint’s argument. Under Louisiana law, “contracts should be interpreted to give

effect to each provision,” and “specific provisions control over general.” Entergy Gulf

States La., LLC v. La. Generating, LLC, No. 14-385, 2021 WL 711470, at *2 (M.D. La.

Feb. 23, 2021) (citations and quotations omitted). Louisiana law further directs that

the Court must strictly construe the appraisal provision. Spann, 2014 WL 4443527,

at *2. Similarly, ambiguous provisions in insurance contracts are to be construed in

favor of the insured. In re Katrina Canal Breaches Litig., 495 F.3d 191, 207 (5th Cir.

2007) (citing La. Ins. Guar. Ass’n v. Interstate Fire & Cas. Co., 630 So.2d 759, 763 (La.

1994)). The policy specifically provides that the appraisal award is non-binding. To

the extent that the standard fire policy’s statement that the appraisal “shall

determine the amount of loss” is in tension with that explicit statement, that tension

must be resolved in favor of the Lighthouse Ranch.

SafePoint further relies on an amendment to La. Rev. Stat. § 22:1892 that

requires all “[r]esidential property insurance polices [to] contain” an appraisal

provision providing that “a written agreement signed by the umpire and either

party’s appraiser shall set the amount of loss.” La. Rev. Stat. § 22:1892(G). However,

even if the language of this amendment was applicable to this case, a finding this

Court does not make, this provision was made effective “[o]n or after January 1,

2022,” and the coverage period of the contract at issue here commenced on June 5,

2021.19 See La. Rev. Stat. § 22:1982(G) (2021).

Finally, SafePoint relies on Louisiana Department of Insurance Directive 173,

which provides “that all residential property insurance policies contain the appraisal

provision that is set forth in [the] newly enacted” version of § 22:1892(G).20 However,

that directive was effective January 25, 2022, and, as noted, the policy at issue went

into effect in June 2021. Moreover, the version of Directive 173 in effect at the time

of the policy’s inception specifically provided that “[a]n appraisal provision that states

19 R. Doc. No. 37-5, at 18.

20 Directive 173, LA. DEP’T OF INS., (Jan. 25, 2022) (available at

https://www.ldi.la.gov/onlineservices/documentsearch/).

that the appraisal process is ‘binding’ or ‘final’ or uses similar language is not lawful

in Louisiana.”21

The Court is persuaded that, under these circumstances, the appraisal award

should not be confirmed. Because the contract clearly states that the appraisal award

“shall not be binding,” the Court must give effect to that provision. The motion to

confirm the appraisal award will therefore be denied.

b. Motions for Summary Judgment

i. Motion for Partial Summary Judgment

In its motion for partial summary judgment, SafePoint’s asserts that

Lighthouse Ranch’s claims for penalties and attorneys fees should be dismissed

because “SafePoint invoked the appraisal process to resolve [the] dispute [as to the

amount of loss] in good faith.”22 In opposition, Lighthouse Ranch argues that genuine

issues of material fact preclude summary judgment, specifically arguing that

SafePoint violated § 22:1973(B)(1), which provides that an insurer breaches its duty

of good faith if it knowingly “[m]isrepresent[s] pertinent facts or insurance policy

provisions relating to any coverages at issue.”23 Lighthouse Ranch argues that

SafePoint’s reliance on the binding version of the appraisal provision, which both

parties agree is inapplicable, “has caused Lighthouse material harm by delaying

resolution of the matter.”24

21 R. Doc. No. 41-2, at 3.

22 R. Doc. No. 38-1, at 7.

23 R. Doc. No. 42, at 2.

24 Id. at 5.

The Court concludes that summary judgment is not warranted. It is

undisputed that SafePoint has paid the amount of damages identified in the

appraisal. However, SafePoint states that “[o]n or about December 17, 2021, a field

adjuster assigned by SafePoint inspected the [p]roperty” and “ subsequently prepared

an estimate for [ ] repairs totaling $53,366.36 and submitted this estimate to

SafePoint.”25 SafePoint further states that “[t]hereafter, SafePoint received”

Lighthouse Ranch’s $2.4 million estimate, and SafePoint then invoked appraisal.26

However, SafePoint does not state whether the $53,366.36 amount was paid and, if

so, when it was paid.

As SafePoint recognizes, when there is “dispute as to the extent or amount of

the loss, the insurer can avoid the imposition of penalties only by unconditionally

tendering the undisputed portion of the claim.” La. Bag Co., Inc. v. Audobon Indem.

Co., 999 So.2d 1104, 1115 (La. 2008); accord Wells v. So. Fidelity Ins. Co., No. 18-

1696, 2019 WL 118015, at *1, *4 (E.D. La. Jan. 7, 2019) (Milazzo, J.) (concluding that

the insurer “reimbursed [p]laintiff the undisputed costs of repair at every stage of the

claims process,” by paying its own adjuster’s estimate four days after it was issued

and then paying “the updated costs” after appraisal was completed). In the instant

motion, however, SafePoint never informs the Court whether or when it paid the

$53,366.36 that its own adjuster stated it owed.27 The Court therefore cannot

25 R. Doc. No. 38-1, at 2.

26 Id.

27 It is possible that this amount was accounted for in the payment that SafePoint

made after appraisal. However, the appraisal process concluded in December of 2022,

conclude that SafePoint is entitled to summary judgment with respect to Lighthouse

Ranch’s claims for penalties and attorneys fees.

ii. Motion for Summary Judgment

The insurance policy between the parties states that it is “void if you or any

other insured, intentionally conceal or misrepresent a material fact” related to the

policy or insured property.28 In its motion for summary judgment, SafePoint argues

that Lighthouse Ranch “made exaggerated proof of losses as part of the claim

investigation” and that “plaintiff’s knowledge of the falsity is undeniable.”29

Pursuant to Louisiana law, an insurer may avoid coverage due to material

misrepresentations by the insured if (1) the insured made false statements (2) with

the actual intent to deceive and (3) the misstatements materially affected the risk

assumed by the insurer. Chavez v. Homesite Ins. Co., 834 F. Supp. 2d 504, 507 (E.D.

La. 2011).

It is undisputed that Lighthouse Ranch submitted an estimate of damages

containing approximately $2.4 million, and that the appraisers’ estimates were

significantly lower. SafePoint argues that Lighthouse Ranch was “aware that damage

occasioned by the[ ] storms was approximately $50,000,” citing to a post from what

appears to the plaintiff’s Facebook page soliciting donations in that amount.30

approximately one year after SafePoint’s adjuster’s initial estimate. See R. Doc. No.

38-11 (appraisers’ agreement dated December 14, 2022).

28 R. Doc. No. 40-1, at 3.

29 Id. at 2.

30 R. Doc. No. 40-1, at 5; R. Doc. No. 40-11, at 1 (post from September 4, 2021, stating

that “we have estimated $50,000 in damages” and soliciting donations). SafePoint

SafePoint cites no further evidence in support of its motion. Lighthouse Ranch objects

that the Facebook post is unauthenticated, and further argues that a request for

$50,000 in donations does not prove that later professional estimates were false.31

The Court finds that genuine issues of material fact preclude summary

judgment on this issue, even assuming that the Facebook post is competent summary

judgment evidence. “[S]ummary judgment is rarely proper when an issue of intent is

involved.” Guillory v. Domtar Inds., Inc., 95 F.3d 1320, 1326 (5th Cir. 1996). The

contention that “no reasonable juror could conclude that [Lighthouse Ranch’s]

[alleged] misrepresentations were not intentional” simply because it requested a

lower amount in donations than it requested in insurance coverage borders on

frivolous.

IV. CONCLUSION

For the foregoing reasons,

IT IS ORDERED THAT the motion to confirm the appraisal award,32 the

motion for partial summary judgment,33 and the motion for summary judgment34

are DENIED.

provides various other posts from what appears to be Lighthouse Ranch’s Facebook

page soliciting donations for an expansion. R. Doc. No. 40-11.

31 R. Doc. No. 44.

32 R. Doc. No. 37.

33 R. Doc. No. 38.

34 R. Doc. No. 40.

New Orleans, Louisiana, March 16, 2023.

LAN M. AFRICK

UNITED STATES DISPRICT JUDGE

14