Opinion

Lamar Advertising Company v. Zurich American Insurance Company

Court: District Court, M.D. Louisiana
Filed: Mar 29, 2021
Cited by: 0 cases
Authority: More cited than 22.5%

“Loss of business income or profits is a type of special damages that must be proved with reasonable certainty.”

How later courts described this case

“Loss of business income or profits is a type of special damages that must be proved with reasonable certainty.”
“we could find no suggestion in Louisiana law that insureds are ever relieved of the burden of proving damages.”
Only upon finding a term of the contract ambiguous will the court consider extrinsic evidence in interpreting its meaning.
upon determination of ambiguity, extrinsic evidence may be considered to determine contract's meaning

Written by the judges who cited it.

The opinion

UNITED STATES DISTRICT COURT

MIDDLE DISTRICT OF LOUISIANA

LAMAR ADVERTISING

COMPANY

CIVIL ACTION

VERSUS

NO. 18-1060-JWD-RLB

ZURICH AMERICAN

INSURANCE COMPANY

RULING AND ORDER

This matter is before the Court on two Motions for Partial Summary Judgment. The first

Motion for Partial Summary Judgment (Doc. 105) was filed by Defendant Zurich American

Insurance Company (“Zurich” or “Defendant”). Plaintiff Lamar Advertising Company (“Lamar”

or “Plaintiff”) opposes the motion. (Doc. 118.) Zurich filed a reply. (Doc. 128.)

The second Motion for Partial Summary Judgment Regarding Zurich’s Failure to Pay for

Any of Lamar’s Lost Business Income (Doc. 111) was filed by Lamar. Zurich opposes the

motion. (Doc. 120.) Lamar filed a reply. (Doc. 129.)

Oral argument is not necessary. The Court has carefully considered the law, facts in the

record, and arguments and submissions of the parties and is prepared to rule. For the following

reasons, both motions are denied.

I. Background

A. Relevant Facts

Zurich issued and delivered Policy No. MLP 4856733-06 (“Policy”), an “all risks”

commercial property insurance policy, to Lamar at 5551 Corporate Boulevard, Baton Rouge,

Louisiana 70808. (Lamar’s Statement of Material Facts That Are Not in Dispute (“SMF”) ¶ 1,

Doc. 111-2; Zurich’s Opposing Statement of Material Facts (“OSMF”) ¶ 1, Doc. 120-1.)1 The

Policy was in effect from March 1, 2017 to March 1, 2018. (SMF ¶ 3; OSMF ¶ 3.) Lamar is the

“First Named Insured” under the Policy. (SMF ¶ 4; OSMF ¶ 4.) Lamar’s Puerto Rico office is an

“Insured Location” under the Policy. (SMF ¶ 5; OSMF ¶ 5.)

Hurricane Maria made landfall in Puerto Rico on September 20, 2017, as a Category 4

hurricane, and damaged Lamar’s Puerto Rico office and its contents. (SMF ¶ 6; OSMF ¶ 6.)

Hurricane Maria was a “Named Storm” and a “Covered Cause of Loss” as defined by the Policy.

(Id.) Zurich received notice that Lamar’s Puerto Rico office was damaged by Hurricane Maria on

September 22, 2017.2 (SMF ¶ 7; OSMF ¶ 7.)

Thereafter, Zurich’s representatives inspected damages caused by Hurricane Maria at

Lamar’s Puerto Rico office on October 11, 2017, October 18, 2017, October 23, 2017, October

31, 2017, April 13, 2018, and May 12, 2018. (SMF ¶ 8; OSMF ¶ 8.)

On October 13, 2017, Zurich received the following documents from Lamar: (a) “before”

hurricane photos; (b) “after” hurricane photos; (c) a copy of the lease agreement for Lamar’s

Puerto Rico office; (d) a cost summary of improvements and furniture, fixtures, and equipment

in the office prior to the Hurricane (totaling more than $1.3 million); (e) an invoice for 80%

cleanup and 75% of gypsum demolition; and (f) an e-mail outlining the cost for cleanup and

gypsum demolition. (SMF ¶ 9; OSMF ¶ 9.)

1 Many of the facts in this case are undisputed. Generally speaking, when both the SMF and OSMF are cited, the

fact is undisputed, and the statement is taken almost verbatim from the SMF. Additionally, since the statements of

material fact are largely identical as it relates to both Zurich and Lamar’s motions for partial summary judgment, the

Court only cites to Lamar’s SMF and Zurich’s OSMF submitted with Lamar’s motion for the sake of judicial

economy.

2 The damages to Lamar’s Puerto Rico office caused by Hurricane Maria were not fully repaired until at least mid-

April 2018. (SMF ¶ 11; OSMF ¶ 11.)

On March 19, 2018, Zurich’s representatives received documentation estimating that

Lamar had sustained more than $4 million in total business income losses as a result of

Hurricane Maria. (SMF ¶ 12; OSMF ¶ 12.)

On July 13, 2018, Zurich’s representatives received documentation estimating that at

least $1,111,189 of Lamar’s total business income losses were attributable to a suspension of

Lamar’s business activities at its Puerto Rico office. (SMF ¶ 13; OSMF ¶ 13.) In reaching this

number, Lamar took its total estimated business income loss of $5 million and allocated it

between those losses attributable to income lost from damage to “billboards” and income loss

attributable to damage to the “office.” (MDD Dep., Doc. 110-3 at 16–17.)

On March 18, 2019, Zurich’s representatives received the following documents: a copy

of Lamar’s lease for its Puerto Rico office; detailed monthly statements from January 2014

through March 2018; monthly revenues broken down by charted panel from January 2014 to

March 2018; a list of contracts that were put on hold due to Hurricane Maria; and payroll

information from January 1, 2017 to March 31, 2018. (SMF ¶ 15; OSMF ¶ 15.)

B. Zurich’s “Estimate”

Zurich retained Brian Mohlenhoff to serve as its expert in forensic accounting in this

action. Mohlenhoff is employed by Matson, Driscoll, and Damico, LLP (“MDD”) and served as

its Rule 30(b)(6) corporate representative.

In March 2019, MDD prepared an estimate of the amount of business income loss Lamar

sustained attributable to its Puerto Rico office. The parties heavily dispute this document and its

significance.

Specifically, Lamar contends that MDD calculated its business income loss and estimated

that was more than $1 but less than $500,000. It cites to the following deposition testimony:

Q. Okay. For office related was it less than five hundred thousand dollars?

A. I believe so….

Q. Okay. Was it more than a dollar?

A. Yes.

(MDD Dep., Doc. 110-3 at 12–13.)

Zurich, on the other hand, denies this assertion based on Mohlenhoff’s and MDD’s

testimony that the estimate was a “corrected claim” which was prepared and given solely for

purposes of mediation. (MDD Dep., Doc. 120-4 at 11–12, 13–14; Mohlenhoff Dep., Doc. 120-5

at 13–17, 18–20.) According to Mohlenhoff, MDD’s “corrected claim” is actually Lamar's July

2018 claim presentation with numbers that reflect its own profit and loss statements. (MDD

Dep., Doc. 110-3 at 18; Mohlenhoff Dep., Doc. 120-5 at 17.) Additionally, MDD testified that it

disagreed with the allocation used in Lamar’s July 2018 claim and explained that it would

allocate the loss based on revenues by looking at “the various sources of revenue that were

achieved for this operation and where they were from and apply what was related to billboard

and what was related to the office.” (MDD Dep., Doc. 120-4 at 8–10.)

In response, Lamar argues that the fact that Mohlenhoff calls them “ ‘corrected claims’

does not change the undisputed fact that Zurich’s accountants could, and did, prepare estimates

of the amount of business interruption loss resulting from damage” to Lamar’s office. (Doc. 129-

1 at 1–2.)3

Lamar points out that Mohlenhoff, in his capacity as MDD's corporate representative,

testified that prior to his deposition, he reviewed unredacted versions of certain business loss

3 In its reply SMF, Lamar requests that the Court strike Zurich’s above response because “the record materials

Zurich cited do not support its denial of Fact No. 16.” (Doc. 129-1 at 1–2.) However, Lamar does not cite to any

rule, case, or law that requires the Court strike a response to a statement of material fact on this basis. Therefore, the

Court declines to do so.

estimates prepared by MDD for mediation purposes. (MDD Dep., Doc 110-3 at 6–7.) As to that

estimate, Mohlenhoff testified:

Q. And in the unredacted version that you looked at of that document was there

any Business Interruption loss estimates of the office that MDD prepared?

A. Yes. It was utilizing the claim percentages.…

Q. Did you make any assumptions in forming that estimate?

A. We utilized what we had to make some corrections to the claim where we

felt weren’t correct for, for trending and expenses…. I was asked by the

attorneys to come up with an estimate of loss based on the documentation I

had and to utilize what I had to come up with something to go to mediation

and try to settle the file….

(MDD Dep., Doc 110-3 at 7, 8–9.)

Moreover, during MDD’s deposition in March 2019, it testified that it currently had

enough information to prepare an estimate of at least $1. (MDD Dep., Doc. 110-3 at 23.)

Q. …Does MDD currently have enough information to prepare any estimate

of Lamar’s Business Interruption loss that’s attributable to damage to the

Puerto Rico office?

A. Yes, I have information, but I cannot attribute.

Q. And you have enough information to prepare an estimate?

A. Any is a big word.

Q. Any estimate?

A. That’s my –

Q. Any estimate—

A. – so it’s clear any –

Q. – one dollar?

A. You can – yeah

Q. Okay, it has enough information?

A. It can be very high level not real specific, but you can, yes.

(MDD Dep., Doc. 110-3 at 23–24; Doc. 120-4 at 14 (“Q. - - but MDD came to an estimate,

correct? A. - - for settlement purposes in a mediation only, for no other reason.”).)

C. Lamar’s Estimate

Lamar retained Ralph Stephens as its expert forensic accountant to calculate its business

income loss resulting from Hurricane Maria for the period of September 20, 2017 through March

2018. (Stephens Rep., Doc. 105-5 at 5.) On August 30, 2019, Zurich’s representatives received

Stephens’ report, which provides in part:

Hurricane Maria made landfall in Puerto Rico on September 20, 2017, causing

damage to Lamar Advertising Company's business operations in Puerto Rico. It is

estimated that the Puerto Rican operation's total business interruption loss ranges

from approximately $3,077,000 to $3,926,000.

To determine the business interruption loss that is attributable to the office building

that housed Lamar Advertising Company's business operations in Puerto Rico, the

scope of operations at the office building and the value the office building adds to

the Puerto Rican operations revenue generation were considered. A majority of the

operations occurs at this office building, including sales, billing, billboard design,

staging, and other activities. The office building is an integral and critical part of

the revenue generation for Lamar's Puerto Rican operations. Based on these

considerations, a 50 percent allocation of business interruption loss is appropriate.

Based on the importance of the office building, the business interruption loss

attributable to the office building as a result of Hurricane Maria is estimated to

range from approximately $1,539,000 to $1,963,000.

Although the allocation based on importance is an appropriate approach, an

alternative allocation method based on expenses was also considered. Based on an

expense allocation, the business interruption loss attributable to the office building

as a result of Hurricane Maria is estimated to range from approximately $663,000

to $859,000.

(Stephens Rep., Doc. 105-5 at 3.)

In reaching these estimates, Stephens explains in his report that:

… the Office and the billboards were dependent on each other and reported together

within Lamar PR's financial statements. As such, the business interruption loss

incurred by Lamar PR will need to be allocated between the Office and the

billboards because the Zurich Policy covers business interruption loss resulting

from a suspension of Lamar PR's business activities at the Office.

(Id. at 14.)

Likewise, Stephens explained in his deposition that:

Q. … In bold in the middle of this page, it says, "Based on the importance of

the ops building, the business interruption loss attributable to the office

building as a result of Hurricane Maria is estimated to range from

approximately $1,539,000 to $1,963,000." How was that determined?

A. That was determined by looking at the total business interruption losses and

then allocating it 50 percent to the billboards and 50 percent to the office.

Q. And how did you determine that 50 percent of the allocation should be to

the billboards and 50 percent should be to the office?

A. Because looking at it in this particular case, you had two -- two integral

parts of the business. One, you had the billboards in which the advertising

was displayed; and the other, you had the office in which all of the business

operations that -- that allowed for the billboard operations to take place.

So you had all the billing, all the contracts, all the legal, all the setup, all the

staging was done in the office. So, to have an office and no billboards, you'd

have no revenue. To have billboards and no office, you'd have no revenue,

so...

(Stephens Dep., Doc. 110-11 at 15–16.)

Zurich points out that Stephens testified that his calculations included lost revenues from

damaged billboards.4 (Stephens Dep., Doc. 105-4 at 8.) Specifically, Zurich cites to the

following portion of Stephens’ deposition:

Q. … Can you calculate Lamar's business interruption loss without using loss

of revenue from damaged billboards?

4 In its reply SMF, Lamar requests that the Court strike Zurich’s above response because the record materials Zurich

cited do not support its “qualified” response. (Doc. 129-1 at 2–3.) While the Court declines to strike Zurich’s

response, it will deem the undisputed portions of Lamar’s SMF admitted.

A. To calculate -- to calculate the loss of business revenue, you need to

calculate the loss of revenue from -- from the operations in Puerto Rico,

which include the billboards, absolutely.

Q. So, the answer is, no, you cannot calculate Lamar's business interruption

loss without using loss of revenue from damaged billboards, correct?

Mr. DeBarros: Objection; misstates the testimony.

A. Right. You would need to calculate the loss of revenue from the operations

in Puerto Rico in order to do that, which includes the revenue from the

billboards. That's correct.

(Stephens Dep., Doc. 105-4 at 9.)

D. Additional Evidence5

Under the Policy, a $250,000 deductible applies to all of Lamar’s Hurricane Maria losses.

(SMF ¶ 20; OSMF ¶ 20.) Zurich subtracted the $250,000 deductible from a January 22, 2018

check it sent to Lamar for property damage. (Id.) By August 30, 2018, Zurich had paid Lamar

$1,225,062.32 for property damage to Lamar’s Puerto Rico office and contents caused by

Hurricane Maria. (SMF ¶ 14; OSMF ¶ 14.) However, to date, Zurich has not paid Lamar a single

cent for any business income Lamar lost as a result of Hurricane Maria. (SMF ¶ 19; OSMF ¶ 19.)

1. Lamar’s Other Evidence

Lamar asserts that “Zurich’s accountant has no opinion as to whether the business income

Lamar lost” was a result of damage to its office, its billboards, “or anything else.” (Doc. 111-2 at

7.) In support of this contention, Lamar relies on MDD’s testimony where it testified that “we

5 The Court notes that certain facts relating to off-premises service interruption time element loss have been omitted

as irrelevant for the purposes of both motions. As Zurich correctly contends, Lamar’s business interruption claim,

according to its own expert, is based on lost revenues related to its Puerto Rico office and its damaged billboards.

(See Doc. 128 at 3.) Nowhere does Lamar’s expert mention a business interruption claim for losses arising from an

off-premises service interruption.

cannot attribute what amount of any loss is related to the office or billboards or anything else.”

(MDD Dep., Doc. 110-3 at 19.)

Lamar also cites to the following portion of Mohlenhoff’s deposition:

Q. You do not opine in your August 30th, 2019 report that there was no

suspension of business activities at Lamar's Puerto Rico office as a result of

Hurricane Maria, correct?

A. Correct.

Q. You do not opine in your August 30th, 2019 report that Lamar sustained no

business interruption loss as a result of a suspension of business activities

at Lamar's Puerto Rico office caused by damage to that office, correct?

A. Correct.

(Mohlenhoff Dep., Doc. 110-4 at 3.)

Zurich denies this assertion arguing that: “(1) Lamar has failed to produce sufficient

evidence to show that it sustained a business interruption loss solely attributable to damage to its

office; (2) Lamar has not produced any evidence to show that its office generated any revenue at

all; and (3) the evidence Lamar has produced in support of its claim shows that all of its revenue

was derived from billboards.” (Doc. 120-1 at 2–3.) In support of this, Zurich likewise relies on

MDD’s and Mohlenhoff’s testimony.

MDD testified that “we’ve never been provided all the documents we needed to prepare

an estimate” and that “all the revenue information provided [to it] was revenues from

billboards.” (MDD Dep., Doc. 120-4 at 18, 19; id. at 15–17 (“[Lamar] suffered a loss of revenue.

I have not been able to determine what it’s related to.”).) MDD explained:

Q. Okay. Is it MDD’s opinion that it was not essential for the operation of

Lamar’s Puerto Rico business operations to have an office or warehouse?

A. We were never provided enough information to fully understand the, the

operations.…

Q. Okay. Is it MDD’s opinion that MDD does not currently have enough

information to prepare any estimate of Lamar’s Business Interruption loss

attributable to damage to the Puerto Rico office and warehouse caused by

Hurricane Maria?

A. Yes.… We’ve never been provided all the documents we needed to

prepare an estimate…. We have general information, but I don’t have

enough to fully apply it to the pieces.

(MDD Dep., Doc. 120-4 at 17, 18.)

Likewise, Mohlenhoff testified that he still doesn’t have enough information to estimate

with reasonable certainty what amount of business interruption loss was attributable to Lamar’s

office. (Mohlenhoff Dep., Doc. 120-5 at 6.) When asked what additional information he needed,

Mohlenhoff explained:

A. As we’ve talked about, I need to understand the various documents and

what they represent. And there’s revenue streams that I don’t know what

they are. There’s revenues not assigned to a panel. I don’t know why not.

…I think it’s just a blank for some reason. I would like to know why.

Should it be, should it not be? Those are some questions I have….

… it's kind of a wide-ranging question. I'd like to walk through the

expenses, pre- and post-loss, understanding each one, what it is, what it

represents, is it related to a billboard, is it related to an office…. [If] it's

fixed? Is it variable?

(Mohlenhoff Dep., Doc. 120-5 at 7.)

He also testified that Lamar has not supported how the office generates revenue and that

his understanding of Lamar’s income generation was that “the revenue comes from the

billboard[s]…it comes from the panels that they rent.” (Mohlenhoff Dep., Doc. 120-5 at 7–9, 10;

id. at 12 (Lamar has “totally different” revenue generation in that if the billboards are there,

“they’re getting revenue. If [they are] not, then they couldn’t charge revenue.”).)

In response, Lamar again cites to Mohlenhoff’s testimony that: (a) he “cannot attribute

what amount of [Lamar’s business interruption] loss is related to the office or billboards or

anything else” (MDD Dep., Doc. 110-3 at 19); and (b) in his August 30th, 2019 report, he does

not opine that Lamar sustained no business interruption loss as a result of a suspension of

business activities at its office caused by damage to that office. (Mohlenhoff Dep., Doc. 110-4 at

3.)6

2. Zurich’s Other Evidence

Zurich contends that Lamar has failed to produce sufficient evidence to show that it

sustained a business interruption loss solely attributable to damage to its office. In support of this

contention, Zurich re-iterates that Stephens testified that he included damaged billboards in his

calculations in reaching his August 30, 2019 estimate. (Stephens Dep., Doc. 120-3 at 8; id. at 9

(testifying that to calculate Lamar’s business interruption loss, he would need to calculate the

loss of revenue from the operations in Puerto Rico, which include the billboards).)

Zurich also relies on portions of MDD’s and Mohlenhoff’s deposition testimony where

they explain that they cannot determine what amount of loss (if any) is attributable to Lamar’s

office because they still do not have enough information. (See MDD Dep., Doc. 120-4 at 18, 19

(“we’ve never been provided all the documents we needed to prepare an estimate.”); id. at 15–

17.) (See also, Mohlenhoff Dep., Doc. 120-5 at 6 (testifying that he still doesn’t have enough

information to estimate with reasonable certainty what amount of business interruption loss was

attributable to Lamar’s office); id. at 7, 8–9, (Lamar has not supported how the office generates

revenue); see also id. at 10, 12).)

Zurich’s representative similarly testified:

Q. …What policy provision is Zurich relying on in this case to refuse payment

for Lamar's claim for lost business income? I want Zurich's position on that.

6 In its reply SMF, Lamar requests that the Court strike Zurich’s above response because “the record materials

Zurich cited do not support its denial of Fact No. 18.” (Doc. 129-1 at 3.) However, Lamar does not cite to any rule,

case, or law that requires the Court strike a response to a statement of material fact on this basis. Therefore, the

Court declines to do so.

A. Well, again, it's -- it's my understanding that they have not refused to pay,

we just need more information to determine the correct amount to pay…

Q. And so it is Zurich's position today that it still doesn't have enough

information to pay Lamar one penny for the business interruption loss

Lamar sustained as a result of Hurricane Maria, even though Zurich was

entitled to take discovery from Lamar in this case; is that correct?....

A. We need additional information, from my understanding of the file.

(Zurich Dep., Doc. 118-4 at 18–19, 20; id. at 14 (“Q. As of today, Zurich has never made any

offer whatsoever to Lamar to settle any of Lamar's claim for lost business income as a result of

Hurricane Maria, has it? A. No. My understanding is Zurich is still waiting on documentation to

support the claim.”).)

In response, Lamar contends that the above cited evidence fails to dispute that at least $1

of its business income loss resulted from a suspension of business operations at its office due to

physical damage to the office.7 (Doc. 129-1 at 3.) It then cites to Zurich’s Rule 30(b)(6)

testimony wherein Zurich’s representative testified that he was not aware of any provision in the

Policy stating that if Lamar sustained damage to both its billboards and its office, then there is no

coverage at all for Lamar's business income losses. (Zurich Dep., Doc. 110-1 at 21–22.)

E. Policy Provisions

The parties identify the following Policy provisions as relevant to the instant motions:

SECTION IV – TIME ELEMENT

4.01. LOSS INSURED

4.01.01. The Company will pay for the actual Time Element loss the Insured

sustains, as provided in the Time Element Coverages, during the Period of

Liability. The Time Element loss must result from the necessary

7 In its reply SMF, Lamar again asks the Court to strike Zurich’s above response because “the record materials

Zurich cited do not support a denial of Fact No. 21.” (Doc. 129-1 at 3.) However, Lamar does not cite to any rule,

case, or law that requires the Court strike a response to a statement of material fact on this basis. Therefore, the

Court again declines to do so.

Suspension of the Insured's business activities at an Insured Location. The

Suspension must be due to direct physical loss of or damage to Property (of

the type insurable under this Policy other than Finished Stock) caused by a

Covered Cause of Loss at the Location[.]

(Policy, Doc. 105-3 at 31.)

4.02. TIME ELEMENT COVERAGES

4.02.01. GROSS EARNINGS

4.02.01.01. Gross Earnings loss is the actual loss sustained by the Insured during the Period of

Liability.

4.02.01.02. Gross Earnings value is determined as follows:

4.02.01.02.01. The sum of:

4.02.01.02.01.01. Total net sales value of production;

4.02.01.02.01.02. Total net sales of Merchandise;

4.02.01.02.01.03. The rental income; and

4.02.01.02.01.04. Other income derived from the Insured's business activities.

4.02.01.02.02. Less the cost of the following:

4.02.01.02.02.01. Raw Stock from which production is derived;

4.02.01.02.02.02. Supplies consisting of materials consumed directly in conversion

of Raw Stock into Finished Stock or in supplying the service(s)

sold by the Insured;

4.02.01.02.02.03. Merchandise sold, including related packaging materials; and

4.02.01.02.02.04. Service(s) purchased from outsiders (not Insured's employees) for

resale, which do not continue under contract.

4.02.01.02.03. Gross Earnings loss is determined as follows:

Gross Earnings value that would have been earned during the Period of

Liability, less charges and expenses that do not necessarily continue

during the Period of Liability.

(Policy, Doc. 105-3 at 31–32.)

SECTION VII - DEFINITIONS

The following term(s) wherever used in this Policy means:

7.11. Covered Cause of Loss - All risks of direct physical loss of or damage from any

cause unless excluded….

7.56. Suspension (Suspended) -

7.56.01. The slowdown or cessation of the Insured's business activities: or

7.56.02. As respects rental income that a part or all of the Insured Location is

rendered untenantable.

(Policy, Doc. 105-3 at 64–65, 70.)

Finally, Endorsement Number 3 of the Policy provides:

It is hereby agreed and understood that the following changes are made to the policy:

Billboards, highway signs, and bus stop advertising structures are excluded from Covered

Property on this policy. (Doc. 105-3 at 93; Doc. 105-2 at ¶ 2; Doc. 118-2 at ¶ 2.)

II. Relevant Standard

“The court shall grant summary judgment if the movant shows that there is no genuine

dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R.

Civ. P. 56(a). If the mover bears his burden of showing that there is no genuine issue of fact, “its

opponent must do more than simply show that there is some metaphysical doubt as to the

material facts ... [T]he nonmoving party must come forward with ‘specific facts showing that

there is a genuine issue for trial.’ ” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S.

574, 586-587, 106 S. Ct. 1348, 89 L. Ed. 2d 538 (1986) (citations omitted). The non-mover's

burden is not satisfied 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

and internal quotation marks omitted). “Where the record taken as a whole could not lead a

rational trier of fact to find for the non-moving party, there is no ‘genuine issue for trial.’ ”

Matsushita Elec. Indus. Co., 475 U.S. at 587. Further:

In resolving the motion, the court may not undertake to evaluate the credibility of

the witnesses, weigh the evidence, or resolve factual disputes; so long as the

evidence in the record is such that a reasonable jury drawing all inferences in favor

of the nonmoving party could arrive at a verdict in that party's favor, the court must

deny the motion.

Int’l Shortstop, Inc. v. Rally's, Inc., 939 F.2d 1257, 1263 (5th Cir. 1991) (citations omitted).

III. Parties’ Arguments8

A. Zurich’s Motion for Partial Summary Judgment

1. Zurich’s Original Memorandum (Doc. 105-1)

Zurich argues that it is entitled to a partial summary judgment holding: (1) that the Policy

excludes billboards from “Covered Property,” and (2) thus, there is no coverage for Lamar’s

business interruption claim. (Doc. 105-1 at 1.)

In support of its first argument, Zurich cites to Endorsement Number 3 of the Policy

which provides, “Billboards… are excluded from Covered Property on this policy.” (Id. at 3

(citing Policy, Doc. 105-3 at 93).)

In support of its second argument, Zurich also cites to the Policy, specifically, the Time

Element coverage section, which provides in relevant part:

The Time Element loss must result from the necessary Suspension of the Insured's

business activities at an Insured Location. The Suspension must be due to direct

physical loss of or damage to Property (of the type insurable under this Policy other

than Finished Stock) caused by a Covered Cause of Loss at the Location, …

(Id. at 4 (citing Policy, Doc. 105-3 at 31 (emphasis in original)).) Based on the “plain language”

of this provision, Zurich represents that “a Time Element loss must result from the suspension of

Lamar’s business activities at an ‘Insured Location,’ and that the suspension must be due to direct

physical loss or damage to Property covered by the Policy – in this case, its office and/or

warehouse.” (Id.) However, since billboards are not Covered Property under the Policy, the Time

Element coverage does not apply to any physical loss of or damage to them. (Id.)

8 The Court notes that certain arguments relating to off-premises service interruption time element loss have been

omitted as irrelevant for the purposes of both motions.

Despite this, Zurich points out that Lamar made a business interruption claim using lost

revenues from damage to its billboards. In support of this contention, Zurich relies on the testimony

of Lamar’s forensic accountant, Stephens, who testified: (1) that the business interruption

calculations he prepared for Lamar included lost revenues from damaged billboards and (2) that

he did not and could not calculate a business interruption loss without using loss of revenues from

its damaged billboards. (Id. at 4–5 (citing Stephens Dep., Doc. 105-4 at 64, 65).) Therefore, based

on Stephens’ testimony, and the fact that billboards are not Covered Property under the Policy,

Zurich concludes that it is entitled to a partial summary judgment holding that there is no coverage

for Lamar’s business interruption claim. (Id. at 5.)

2. Lamar’s Opposition (Doc. 118)

In opposition, Lamar argues that Zurich’s position should be rejected for three reasons.

First, Zurich mischaracterizes Stephens’ testimony. (Doc. 118 at 10–12.) According to Lamar, it

is “not Stephens’ testimony (as Zurich represents) that all of Lamar’s lost business income was

due ‘solely’ to the damaged billboards.” (Id. at 12.) On the contrary, Stephens testified that at

least $663,000 of Lamar’s business income losses were due to a suspension of business

operations at its office resulting from physical damage to that office, which is covered by the

Policy. (Id.)

Additionally,

Stephens testified that his business interruption calculations “include lost revenues

from damaged billboards” and that he “would need” to consider lost revenues from

damaged billboards in his calculations because he took the total business income

losses Lamar sustained due to all causes of loss (including lost revenues due to

damage to the office, as well as lost revenues due to damage to the billboards) and

then segregated those total business income losses between: (i) losses attributable

to a suspension of business operations at Lamar’s Puerto Rico office because of

damage to the Puerto Rico office and its contents; and (ii) losses attributable to

damage to Lamar’s billboards. … Therefore, the only evidence Zurich relies on to

support its motion does not even support its position.

(Id. at 10–11, 12 (citing Stephens Dep., Doc. 118-2; Stephens Rep., Doc. 118-2 at 28).)

Second, the issue raised in Zurich’s motion—whether Lamar’s lost business income

resulted solely from damage to its office or damage to billboards—"is inherently a factual issue

as to the cause of Lamar’s business income loss,” which cannot be decided on summary

judgment “unless reasonable minds could not differ” on the issue after drawing all reasonable

inferences in Lamar’s favor. (Id. at 2, 12–13 (citing Int’l Shortstop, 939 F.2d at 1263).)

Lamar then cites to four cases which “demonstrate the insured’s minimal burden in

opposing its insured’s summary judgment motion on the issue of the causation of a business

income loss.” (Id. at 13–16.) Specifically, Lamar cites to Evans and Clover, wherein the court

denied the insurer’s motion for summary judgment because there was a dispute as to whether the

business interruption claim was caused by roof damage (as the insured testified) or other factors

(as the insurer contended). (Id. at 13–14 (citing Evans v. Lafayette Ins. Co., 2007 WL 4545883

(E.D. La. Dec. 18, 2007); Clover v. Allstate Ins. Co., 2008 WL 821961 (E.D. La. Mar. 26,

2008)).)

Lamar cites ABM Industries for the proposition that “the concurrence of damage to

property that is covered by the policy and damage to property that is not covered by the policy

does not bar an insured’s claim for lost business income due to damage to property that is

covered by the policy.” (Id. at 15–16 (citing Zurich Am. Ins. Co. v. ABM Indus., Inc., 397 F.3d

158, 167 (2d Cir. 2005)).)

Lastly, Lamar points out that the court in Courtenay noted, “[t]he cause of the suspension

is a question of fact to be determined at trial, and if Plaintiff meets its burden of establishing that

the suspension was caused by direct physical loss to property resulting from a Covered Cause of

Loss, then coverage is triggered.” (Id. at 14–15 (quoting Courtenay, Hunter & Fontana, LLP v.

Massachusetts Bay Ins. Co., 2008 WL 3876421, at *3 (E.D. La. Aug. 19, 2008)).)

Thus, applying the above principles to this case, Lamar argues that reasonable jurors,

drawing all reasonable inferences in its favor, could render a verdict that its business income

losses were due to “direct physical loss of or damage” to its Puerto Rico office, which it contends

is covered by the Policy. (Id. at 16–17.)

Finally, Lamar argues that:

While Zurich failed to prove that all of Lamar’s business income losses are

unambiguously excluded from coverage under the Policy, Lamar met its burden of

opposing Zurich’s motion for summary judgment simply by showing that: (a)

Lamar sustained a business income loss; [and] (b) there was significant damage to

the office, warehouse, paperwork, computers, desks, phones, chairs, stock, and

other equipment resulting in a suspension of business activities at the Office for

months….

When Ralph Stephens’ testimony is put in its correct context and the full summary

judgment record is considered, not only is summary judgment in Zurich’s favor

unwarranted because a juror drawing all reasonable inferences in Lamar’s favor

could render a verdict that Lamar’s business income loss was due to “direct physical

loss of or damage” to Lamar’s office, warehouse, and contents (covered by [the]

Policy), […] but Lamar is affirmatively entitled to a summary judgment that Zurich

is liable for penalties, attorneys’ fees, and costs due to Zurich’s failure to timely

pay even $1 of Lamar’s lost business income claim.

(Id. at 13, 16–17.)

3. Zurich’s Reply (Doc. 128)

In response, Zurich contends that its motion presents two “simple” coverage issues: (1)

whether Lamar’s billboards are excluded as Covered Property from the Policy; and (2) whether

coverage is excluded for Lamar’s business interruption claim because it was calculated using lost

revenues from its damaged billboards. (Doc. 128 at 1.)

Preliminarily, Zurich represents, that contrary to Lamar’s argument, interpretation of the

Policy is at issue, not causation, which can properly be resolved on summary judgment. (Id. at 1–

2 (citing Principal Health Care v. Lewer Agency, 38 F.3d 240, 242 (5th Cir. 1996)).) As such,

the cases Lamar relies on are distinguishable from the case at hand because there is no question

in this case that Lamar’s business interruption loss was caused by a covered peril. (Id. at 2–3, 6–

9.)

It then points out that Lamar does not dispute the first issue—that its billboards are

excluded from Covered Property under the Policy. (Id. at 2.) Thus, the only remaining issue is

“whether Lamar can calculate a business interruption claim related solely to damage to its office,

without using lost revenue from its damaged billboards.” (Id.) And again, Zurich contends that

since Stephens testified that he did not and could not calculate Lamar’s business interruption

claim without using lost revenues from damaged billboards, there is no coverage under the

Policy. (Id. at 2, 3–4.)

Zurich also takes issue with Lamar’s contention that it has affirmatively established that

Zurich is liable for at least $1 in business income loss covered under the Policy. (Id. at 5.)

According to Zurich, (1) Lamar has failed to produce sufficient evidence to show that it

sustained a business interruption loss solely attributable to damage to its office; (2) Lamar has

not produced any evidence to show that its office generated any revenue at all; and (3) the

evidence Lamar has produced in support of its claim shows that all its revenue was derived from

billboards. (Id.)

Moreover, Stephens’ testimony that he cannot calculate Lamar’s business interruption

loss without using lost revenues from damaged billboards directly contradicts Lamar’s claim that

at least some of its business interruption loss was due to damage to its office and not damage to

its billboards. (Id. (citing Stephens Dep., Doc. 105-4 at 64, 65).)

B. Lamar’s Motion for Partial Summary Judgment

Lamar’s motion centers on the applicability of La. R.S. 22:1892. Both parties agree that

to recover under this statute, an insured must prove that: (1) the insurer received satisfactory

proof of the loss; (2) the insurer failed to pay the claim within thirty days of receiving

satisfactory proof of loss; and (3) the insurer’s failure to pay the claim was arbitrary, capricious,

or without probable cause. (Doc. 111-1 at 25–26; Doc. 120 at 5.)

1. Lamar’s Original Memorandum (Doc. 111-1)

Lamar begins with some of the same arguments included in its opposition to Zurich's

motion for partial summary judgment. It first argues that the undisputed material facts support

that it has made a prima facie showing that Zurich is liable for at least $1 of lost business income

as covered by the Policy. (Doc. 111-1 at 6.)

Lamar then argues that Zurich is liable for penalties, attorneys’ fees, and costs under La.

R.S. 22:1892 because all three elements are met. It first contends that there is no genuine dispute

of material fact that Zurich received “satisfactory proof of loss” no later than August 30, 2019.

(Id. at 29.) According to Lamar, “satisfactory proof of loss” is a flexible requirement, that does

not need to be in a formal style and is satisfied when an insurer has “enough information to act

upon a claim.” (Id. at 28 (quoting Austin v. Parker, 672 F.2d 508, 520 (5th Cir. 1982)).) Lamar

outlines that Louisiana courts have found the following to constitute satisfactory proof of loss: a

handwritten estimate of the cost of repairs (id. at 26 (citing Sevier v. United States Fid. & Guar.

Co., 497 So. 2d 1380 (La. 1986))); proof of insurance, photographs, and salvage information (id.

at 27 (citing State Farm Mut. Auto. Ins. Co. v. Norcold, Inc., 2011-1355 (La. App. 3 Cir. 4/4/12);

88 So. 3d 1245)); an independent adjuster’s opportunity to discover the extent of damages, but

failure to do so (id. (citing Aghighi v. La. Citizens Prop. Ins. Corp., 2012-1096 (La. App. 4 Cir.

6/19/13); 119 So. 3d 930, 934)); an insurer’s constructive knowledge of the policy limits when it

failed to reasonably investigate the claim (id. (citing Haynes v. Shumake, 582 So. 2d 959, 962–63

(La. Ct. App. 2d Cir. 1991))); and an insured’s first claim under the policy, even though the

claim was still “a work in progress” (id. at 27–28 (quoting R.J. Tricon Co., LLC v. Travelers Ins.

Co., 2009 WL 5173993 (E.D. La. Jan. 8, 2009))).

In addition to this flexible standard, Louisiana courts have “uniformly held that ‘[b]road

latitude is given in proving lost profits because this element of damages is often difficult to

prove,’ ‘such damages need be proven only within reasonable certainty,’ and ‘[p]roof of such

losses need only be as precise as circumstances in a particular situation allow.’ ” (Id. at 28

(citations omitted).)

Under the flexible standards set out above, Lamar argues that Zurich received satisfactory

proof of loss by August 30, 2019, because Zurich had: (a) pictures, documentation, and multiple

inspections showing that Lamar’s office was severely damaged, and that no business operations

were being conducted in that office for months; (b) documentation estimating that Lamar

sustained at least $4 million in total business income losses as a result of Hurricane Maria; (c)

two estimates from Lamar that it sustained at least $663,000 in business income losses

attributable to suspension of business operations at its office; and (d) an estimate from Zurich’s

accountant that Lamar had sustained more than $1 but less than $500,000 in business income

losses attributable to suspension of operations at its office. (Id. at 29–30.)

Lamar then avers that there is no genuine dispute of material fact that Zurich failed to pay

within 30 days of receiving satisfactory proof of loss on August 30, 2019, since it has not paid

for any of that loss to date. (Id. at 30.)

Lastly, Lamar argues that there is no genuine dispute of material fact that Zurich’s failure

to timely pay was “by definition, arbitrary, capricious, or without probable cause.” (Id.) Lamar

maintains that Louisiana courts have found an insurers’ actions to be arbitrary, capricious or

without probable cause when they are unjustified, lack a reasonable basis, or are without

probable cause or excuse. (Id. at 30–31 (citing Reed v. State Farm Mut. Auto. Ins. Co., 2003-

0107 (La. 10/21/03); 857 So. 2d 1012).)

According to Lamar, the Louisiana Supreme Court in La. Bag Co., Inc. v. Audubon

Indem. Co., 2008-0453 (La. 12/2/08); 999 So. 2d 1104, explained that under La. R.S. 22:1892,

[w]here there is a substantial, reasonable and legitimate 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. This court held in

McDill that an insurer cannot ‘stonewall’ an insured simply because the insured is

unable to prove the exact extent of his damages. Where the exact extent of the

damages is unclear, an insurer must tender the reasonable amount which is due. We

have defined the “amount that is due” as ‘a figure over which reasonable minds

could not differ . . .’ Any insurer who fails to pay said undisputed amount has acted

in a manner that is, by definition, arbitrary, capricious or without probable cause.

(Id. at 31.)

Based on the foregoing, Lamar rejects Zurich’s assertion that it still needs “more

information to determine the correct amount to pay” as contrary to Zurich’s “affirmative duty to

adjust claims fairly and promptly and to make a reasonable effort to settle claims with the

insured.” (Id. at 32.) Zurich’s behavior is “the precise type of stonewalling the Louisiana

Supreme Court prohibited in La. Bag and McDill.” (Id. (citing La. Bag, 999 So. 2d at 1119–20).)

In sum, Lamar asks the Court to find Zurich liable under La. R.S. 22:1892 because

Zurich received satisfactory proof of loss by August 30, 2019; Zurich has issued no payment on

this claim to date; and this failure to pay is by definition arbitrary, capricious, and without

probable cause. (Id. at 33–34.)

2. Zurich’s Opposition (Doc. 120)

In opposition, Zurich repeats verbatim many of the arguments made in its motion for

partial summary judgment. Zurich first re-urges its argument that Lamar has not made a prima

facie showing that Zurich is liable for any business income loss under the Policy. (Doc. 120 at 6.)

It also rejects Lamar’s reliance on Mohlenhoff’s estimate:

What Mr. Mohlenhoff prepared – solely for purposes of mediation – was a

“corrected claim,” i.e., it was Lamar’s own July 13, 2018 claim submission with

corrected numbers that actually reflect revenue and expense trends from Lamar’s

own financial records. Moreover, it was prepared for the [sole] purpose of

determining what Lamar’s claim submission would be valued at if Zurich accepted

Lamar’s methodology. As Lamar knows, neither Zurich nor Mr. Mohlenhoff has

ever accepted Lamar’s methodology for calculating its alleged business income

loss, because it uses lost revenue from damaged billboards and is based on a false

allocation of expenses – rather than revenues – between its office and its billboards.

Mr. Mohlenhoff’s revision of Lamar’s own defective and disputed claim

submission is not prima facie evidence of liability.

(Id. at 6–7.)

Next, Zurich addresses Lamar’s bad faith claim. Preliminarily, Zurich contends that

“summary judgment is not appropriate when a claim for bad faith penalties depends on factual

determinations concerning the reasonableness of the insurer’s actions.” (Id. at 5–6 (citing

Hartenstein v. State Farm Fire and Cas. Ins. Co., No. 07–4594, 2008 WL 2397713, at *3 & n.

22 (E.D. La. June 10, 2008)).) It also points out that because La. R.S. 22:1892 is penal in nature,

it must be strictly construed. (Id. at 6.)

Zurich then raises an issue with the first element of the statute—satisfactory proof of loss.

Specifically, it argues that it has not received satisfactory proof of loss because “Lamar has failed

to produce sufficient evidence to show that it sustained a business interruption loss solely

attributable to damage to its office.” (Id. at 7.) Lastly, Zurich re-iterates that there is no coverage

for Lamar’s business interruption claim under the Policy. (Id. at 8–9.)

3. Lamar’s Reply (Doc. 129)

In response, Lamar contends Zurich is liable under the statute because Zurich had

“satisfactory proof” that Lamar suffered at least $1 in covered business income loss and Zurich

failed to pay for any of that loss to date. (Doc. 129 at 2–5.)

It then argues that Zurich failed to demonstrate a genuine issue of material fact sufficient

to preclude summary judgment because it did not identify specific evidence in the record: (a) that

Lamar did not sustain at least $1 in lost business income attributable to its office; (b) that a

Policy exclusion clearly and unambiguously excludes all of Lamar’s claim; or (c) that Zurich did

not receive “satisfactory” proof of loss. (Id. at 5.)

Lamar rejects Zurich’s reliance on Stephens’ and Mohlenhoff’s testimony as

“misplaced”. (Id. at 4.) According to Lamar, Mohlenhoff’s assertion that he prepared

“corrected claims” and not “estimates”, does not create a genuine issue of material fact because:

(1) on August 30, 2019, Zurich received Stephens’ report, which estimated that Lamar sustained

at least $663,000 in lost business income attributable to its office; and (2) Mohlenhoff does not

opine that Lamar did not sustain at least $1 in business income loss as a result of a suspension of

Lamar’s operations due to physical damage to the office. (Id.)

Lamar also rejects Mohlenhoff’s assertion that “[a]ll the revenue information provided

[to him] was revenues from billboards” as conclusory, unsubstantiated, and immaterial. (Id. at 6.)

Lamar explains:

That Lamar “generates revenue” by leasing billboards is not material to Lamar’s

Motion. Even accepting as true Brian Mohlenhoff’s bald assertion, … [it] does not

change the undisputed material fact that at least some of Lamar’s business income

was lost because Lamar had no office and no business equipment for months; nor

does it affirmatively establish that all of the income Lamar lost was due to damaged

billboards. Brian Mohlenhoff’s clear and unequivocal testimony was that: (a) he

“cannot attribute what amount of Lamar’s business interruption loss is related to

the office or billboards or anything else”; and (b) he does not opine that Lamar

sustained no business income loss as a result of a suspension of business activities

at Lamar’s Puerto Rico office caused by damage to the office. Therefore, there is

no genuine issue of material fact here.

(Id. at 7–8.)

Lastly, Lamar contends that Stephens’ testimony does not create a genuine issue of

material fact. Again, Stephens explained that in calculating Lamar’s total business income loss,

he segregated billboard losses from office related ones and concluded that Lamar sustained at

least $663,000 in business income losses attributable to physical damage to the office. (Id. at 5–

6.) Thus, based on the undisputed evidence, there is no genuine issue of material fact that Zurich

is liable under La. R.S. 22:1892 because it received satisfactory proof of loss for Lamar’s

business interruption claim by August 30, 2019, and to date, has failed to pay any of that loss.

(Id. at 10.)

IV. Law and Analysis

A. Contract Interpretation

A special subset of principles governs the treatment of contracts at this procedural stage.

Generally, under controlling Louisiana law, “[w]hen a contract can be construed from the four

corners of the instrument, interpretation of the contract presents a question of law that can be

decided on summary judgment.” Young v. Tolintino, 44, 631 (La. App. 2 Cir. 12/2/09); 26 So. 3d

835, 838; see also, e.g., Sims v. Mulhearn Funeral Home, Inc., 2007-0054 (La. 05/22/07), 956

So. 2d 583, 590. As such, determining whether a contract is unambiguous and interpreting an

unambiguous contract are treated as questions of law. See La. Civ. Code art. 2046; Sport Tech,

Inc. v. SFI Mfg., 36,413 (La. App. 2 Cir. 12/20/02); 838 So. 2d 807, 816; NAB Natural Res.,

L.L.C. v. Willamette Indus., 28,555 (La. App. 2 Cir. 08/21/96); 679 So. 2d 477, 480; Brown v.

Drillers, Inc., 93-1019 (La. 01/14/94); 630 So. 2d 741, 748. If, however, the contract is

ambiguous, its opacity can only be resolved by a duly appointed factfinder, not a court on a

motion for summary judgment. See, e.g., Prejean v. Guillory, 2010-0742 (La. 7/2/10); 38 So. 3d

274, 279; Elston v. Montgomery, 46,262 (La. App. 2 Cir. 05/18/11); 70 So. 3d 824, 830–31.

As the Supreme Court of Louisiana has often repeated, “[a]n 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.” Carbon v. Allstate Ins. Co., 97-3085 (La.

10/20/98), 719 So. 2d 437, 439. “Interpretation of a contract is the determination of the common

intent of the parties.” La. Civ. Code art. 2045; Clovelly Oil Co., LLC v. Midstates Petroleum Co.,

LLC, 12-2055 (La. 03/19/13); 112 So. 3d 187, 192. The parties’ reasonable intention must be

determined “by examining the words of the contract itself, and not assumed.” Lobell v.

Rosenberg, 2015-0247 (La. 10/14/15); 186 So. 3d 83, 89.

In this process, courts give contract terms their plain, ordinary, and generally accepted

meaning unless the contract provides more specialized ones. Lambert v. Md. Cas. Co., 418 So.

2d 553, 559 (La. 1982). “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; Tri-State Bank & Trust v. Moore, 609 So. 2d 1091, 1094 (La. Ct. App. 1992). “Each

provision in a contract must be interpreted in light of the other provisions so that each is given

the meaning suggested by the contract as a whole.” La. Civ. Code art. 2050; Olympia Minerals,

LLC v. HS Res., Inc., 2013-2637 (La. 10/15/14); 171 So. 3d 878, 894.

B. Bad Faith Statute

Courts in Louisiana have set forth that an insured seeking to recover the statutory

penalties under La. R.S. 22:1892 must establish three elements: “(i) that the insurer received a

satisfactory proof of loss, (ii) that the insurer failed to pay the claim within the applicable

statutory period, and (iii) that the insurer's failure to pay was arbitrary and capricious.” Grilletta

v. Lexington Ins. Co., 558 F.3d 359, 368–69 (5th Cir. 2009). One who claims entitlement to

penalties and attorney fees has the burden of proving the insurer received satisfactory proof of

loss as a predicate to a showing that the insurer was arbitrary, capricious, or without probable

cause. Reed v. State Farm, 857 So. 2d 1012, 1020 (La. 2003). Further, La. R.S. 22:1892 “must be

strictly construed because it is penal in nature.” Richardson v. GEICO Indem. Co., 2010-0208

(La. App. 1 Cir. 9/10/10), 48 So. 3d 307, 314, writ denied, 2010-2473 (La. 12/17/10), 51 So. 3d

7).

With regard to the first factor, Louisiana has adopted “liberal rules concerning the lack of

formality relative to proof of loss.” Sevier v. U.S. Fid. & Guar. Co., 497 So. 2d 1380, 1384 (La.

1986). Satisfactory proof of loss, as required for an insured to obtain penalties from an insurer, is

that which is sufficient to fully apprise the insurer of the claim and extent of the damage. La.

Bag, 2008-0453, p.16, 999 So. 2d at 1115; McDill v. Utica Mutual Ins. Co., 475 So. 2d 1085,

1089 (La. 1985). So long “as the insurer obtains sufficient information to act on the claim, ‘the

manner in which it obtains the information is immaterial.’ ” Sevier, 497 So. 2d at 1384 (quoting

Austin v. Parker, 672 F.2d 508, 520 (5th Cir. 1982)). Thus, a “satisfactory proof of loss occurs

when the insurer has adequate knowledge of the loss.” In re Hannover Corp. of America, 67 F.3d

70, 73 (5th Cir. 1995) (citations omitted).

Whether and when the insurer received “satisfactory proof of loss” sufficient to trigger

the payment periods is a question of fact. 15 William Shelby McKenzie & H. Alston Johnson,

III, La. Civ. L. Treatise: Insurance Law and Practice § 11:5 (4th ed. 2020) (citing McDill, 475

So. 2d at 1089; La Louisiane Bakery Co. Ltd. v. Lafayette Ins. Co., 61 So. 3d 17 (La. Ct. App.

5th Cir. 2011); Iteld v. Four Corners Const., L.P., 133 So. 3d 312 (La. Ct. App. 4th Cir. 2014);

Lemoine v. Mike Munna, L.L.C., 148 So. 3d 205 (La. Ct. App. 1st Cir. 2014)).

Whether an insurer’s conduct is arbitrary and capricious is also finding of fact. Id. The

Louisiana Supreme Court has cautioned that summary judgment is rarely appropriate when

determining if an insurers actions were arbitrary and capricious. In Merwin v. Spears, 2012-0946

(La. 6/22/12), 90 So. 3d 1041, 1042, the Louisiana Supreme Court reversed a district court’s

grant of summary judgment explaining:

[F]or purposes of plaintiffs' penalty claim, the issue is whether Farmers' failure to

make timely payment was arbitrary, capricious, or without probable cause. La. R.S.

22:1892. We conclude there are genuine issues of material fact as to whether

Farmers' initial decision to deny the claim, based on its investigation and

consultation with plaintiffs' expert, was reasonable under the totality of the facts.

Therefore, the district court erred in granting summary judgment on this issue.

Merwin v. Spears, 2012-0946 (La. 6/22/12), 90 So. 3d 1041, 1042.

C. Analysis

The Court will first address Zurich’s motion, which raises questions of Policy coverage

and interpretation. The Court will then address Lamar’s motion, which will require the Court to

determine whether Lamar is entitled to bad faith penalties under La. R.S. 22:1892 for its business

interruption claim. Related to this issue is whether there is at least some portion of Lamar’s claim

which is undisputed.

1. Zurich’s Motion for Partial Summary Judgment

Preliminarily, the parties dispute whether the determination of coverage for the business

interruption claim can be properly resolved on summary judgment. Lamar contends that

Zurich’s motion cannot be resolved on summary judgment because it raises factual issues as to

the cause of its business income loss. (Doc. 118 at 12–13.) On the other hand, Zurich argues

causation is not the issue, interpretation is, which can properly be resolved on summary

judgment. (Doc. 128 at 1–2.) The Court agrees with Zurich: whether Lamar’s business

interruption claim is prohibited based on the language of the Policy is a legal question that can

properly be resolved on summary judgment. McGuire v. Am. S. Home Ins. Co., 2007-0810 (La.

App. 4 Cir. 10/10/07), 969 So. 2d 681, 684 (citing Robinson v. Heard, 01–1697, p. 4 (La.

2/26/02), 809 So. 2d 943, 945)) (“Interpretation of an insurance policy usually involves a legal

question which can be resolved properly in the framework of a motion for summary judgment.”).

As such, the four cases that Lamar cites to “demonstrate the insured’s minimal burden in

opposing its insured’s summary judgment motion on the issue of the causation of a business

income loss,” are distinguishable on this ground alone. (Doc. 118 at 13–16.) For example, in

Evans, the question before the court was whether the cessation of the insured’s business was

caused by wind damage to its roof (a covered peril) or other factors such as lack of power and a

mandatory evacuation order (non-covered perils). Evans v. Lafayette Ins. Co., 2007 WL

4545883, at *3 (E.D. La. Dec. 18, 2007). The court denied the insurer’s motion for summary

judgment because there were disputed issues of fact regarding the cause of the business

interruption loss. Id. There was no dispute that the property itself was covered under the

insurance policy issued in that case.

In Clover, the question before the court was whether the insured’s business interruption

loss was caused by physical damage to the building from a hurricane, or because she decided not

to re-open her store and move to another state. Clover v. Allstate Ins. Co., 2008 WL 821961, at

*3 (E.D. La. Mar. 26, 2008). Like the court in Evans, the court in Clover denied the insurer’s

motion for summary judgment because there were disputed issues of fact regarding the cause of

the business interruption loss. Id. at *4. Again, there was no dispute that the property itself was

covered under the insurance policy.

In Zurich American, the insured—which provided janitorial, lighting and engineering

services throughout the World Trade Center (“WTC”) complex—sought business interruption

coverage for income derived from property that it “used” and “controlled”, such as freight

elevators, janitorial closets, and storage rooms. Zurich Am. Ins. Co. v. ABM Indus., Inc., 397 F.3d

158, 166 (2d Cir. 2005). The district court held that it could not recover under the business

interruption provision because “[t]he undisputed cause of the interruption here was the

destruction of the World Trade Center, which would have totally interrupted the ABM business

here in issue regardless of what happened to the freight elevators, loading docks, etc.” Id. at 167.

However, the Second Circuit found that since the destruction of the WTC and the properties

owned by ABM were simultaneous, the ruination of the WTC was the cause of ABM's business

interruption such that it could recover under the policy. Id.

Courtenay also involved a business interruption claim where the cause of the plaintiff’s

suspension of business was in question. Courtenay, Hunter & Fontana, LLP v. Massachusetts

Bay Ins. Co., 2008 WL 3876421, at *3 (E.D. La. Aug. 19, 2008). The defendant contended that

the plaintiff’s operations were suspended in accordance with the Civil Authorities and Utilities

sections of the insurance policy. Id. The plaintiff, on the other hand, sought recovery under the

business income section of the policy by “implicitly contending that it suspended its operations

due to property damage at the premises.” Id. The court noted that under the express terms of the

policy in that case, the cause of the suspension would determine whether coverage under the

business income section applied. Id. It explained “[t]he cause of the suspension is a question of

fact to be determined at trial, and if Plaintiff meets its burden of establishing that the suspension

was caused by direct physical loss to property resulting from a Covered Cause of Loss, then

coverage is triggered.” Id.

Unlike the above cases, there is no question that Lamar’s business interruption was

caused by a Covered Cause of Loss—Hurricane Maria. (SMF ¶ 6, Doc. 111-2; OSMF ¶ 6, Doc.

120-1.) Instead, the question before the Court is whether, under the terms of the Policy, lost

business income is only payable when operations are suspended simultaneously due to damage

to covered property and damage to excluded property.

Now, turning to the heart of the matter, it is undisputed that billboards are excluded from

Covered Property under the Policy. (Doc. 105-2 at ¶ 2; Doc. 118-1 at ¶ 2; Doc. 105-3 at 93.)

Based on this, Zurich argues that there is no coverage for any of Lamar’s lost business income

because the Policy requires that the loss be caused “solely,” “directly,” or “exclusively” from

damage to covered property. (Doc. 128 at 3.) However, the language in the Policy fails to

support Zurich's position. The Time Element coverage section states in relevant part as follows:

The Time Element loss must result from the necessary Suspension of the Insured's

business activities at an Insured Location. The Suspension must be due to direct

physical loss of or damage to Property (of the type insurable under this Policy

other than Finished Stock) caused by a Covered Cause of Loss at the Location, …

(Policy, Doc. 105-3 at 31 (emphasis added).)

Notably, the words “solely,” “directly,” and “exclusively” are absent from this provision.

Thus, to prevail on this argument, Zurich would have the Court read language into the contract

which does not appear in the Policy. As Lamar correctly contends, there is no requirement that

the business income loss or even the Suspension of business activities “directly”, “solely”, or

“exclusively” result from physical loss of or damage to Property of the type insured by the

Policy. Instead, the Policy only requires that the damage to property causing the interruption in

operations must be attributable to a Covered Cause of Loss.

Under a plain reading of the Policy, if Lamar can establish that it suspended operations

due to damage to Property (of the type insurable under this Policy…), including its office, that

resulted from a non-excluded peril, then coverage under the business interruption section is

triggered, even if business income may also have been lost because of damage to billboards.

Again, nothing in the Policy restricts business interruption coverage to situations where damage

must be related solely to Covered Property. Additionally, Zurich has not directed the Court to

any provision in the Policy that provides that if there is damage to both the office and the

billboards, then there is no coverage at all for Lamar's business income losses.

After a thorough reading of the Policy, the Court finds that the Policy is clear and

unambiguous on its face and can be enforced as written. As the Louisiana Supreme Court stated,

“the rules of construction do not authorize a perversion of the words or the exercise of inventive

powers to create an ambiguity where none exists.” Cadwallader v. Allstate Ins. Co., 2002-1637

(La. 06/27/03); 848 So. 2d 577, 580. Applying the established rules of construction, the Court

concludes that the argument set forth by Zurich is not a reasonable interpretation of the Policy.

As such, the Court is not required to consider extrinsic evidence in interpreting its

meaning. Lloyds of London v. Transcontinental Gas Pipe Line Corp., 101 F.3d 425 (5th Cir.

1996) (Only upon finding a term of the contract ambiguous will the court consider extrinsic

evidence in interpreting its meaning.); Liberty Mut. Ins. Co. v. Pine Bluff Sand & Gravel Co., 89

F.3d 243, 246 (5th Cir. 1996) (upon determination of ambiguity, extrinsic evidence may be

considered to determine contract's meaning). Nevertheless, even if the Court were to consider

extrinsic evidence, Stephens’ testimony, which Zurich heavily relies on, does not support its

position.

Zurich represents Stephens’ testimony to be that all of Lamar’s lost business income was

due “solely” to the damaged billboards. However, nowhere in the record does Stephens say this.

On the contrary, Stephens estimated that at least $663,000 of Lamar’s business income losses

were due to a suspension of business operations at its office resulting from physical damage to

the office. (Stephens Rep., Doc. 105-5 at 3.) In reaching this estimate, Stephens testified that he

took the total business income losses Lamar sustained due to all causes of loss and segregated

those losses attributable to a suspension of business operations at the office from those

attributable to damage to the billboards. (Stephens Rep., Doc. 105-5 at 3; Stephens Dep., Doc.

118-2 at 9–19.)

Thus, it is immaterial that Stephens testified: (1) “that the business interruption

calculations he prepared for Lamar included lost revenues from damaged billboards” and (2) that

he did not and could not calculate a business interruption loss without using loss of revenues

from its damaged billboards because he segregated them out. (Stephens Dep., Doc. 105-4 at 8,

9.) And again, there is nothing in the Policy that prohibits this.

Additionally, Zurich’s representative testified that he was not aware of any provision in

the Policy stating that if Lamar sustained damage to both its billboards and its office, then there

is no coverage at all for Lamar's business income losses. (Zurich Dep., Doc. 110-1 at 21–22.)

In sum, not only is Zurich’s interpretation of the Policy unreasonable, it has failed to

establish that “there is no reasonable interpretation of the policy, when applied to the undisputed

material facts shown by the evidence supporting the motion, under which coverage [for Lamar’s

business income losses] could be afforded.” Reynolds v. Select Properties, Ltd., 93-1480 (La.

4/11/94), 634 So. 2d 1180, 1183. Therefore, Zurich’s motion for partial summary judgment is

denied.

2. Lamar’s Motion for Partial Summary Judgment

The Court now turns to Lamar’s motion for partial summary judgment which turns on

whether Lamar has proven that “[Zurich] received satisfactory proof of loss… [and Zurich’s]

failure to pay was arbitrary and capricious.” Grilletta v. Lexington Ins. Co., 558 F.3d 359, 368–

69 (5th Cir. 2009).

Fully distilled, Lamar’s motion is predicated on a single conclusion: no jury could

reasonably construe the evidentiary record in such a manner as to find that Zurich was not

“arbitrary, capricious or without probable cause” when it failed to tender a payment for Lamar’s

business income loss. Here, however, if a jury were to believe Zurich's experts and disbelieve

that of Lamar, that jury could so conclude. True, a jury may not find Zurich's experts to be

credible; true, these experts' opinions may not prove persuasive, their cogency overwhelmed by

the weight of contrary testimony. But, just as true, the jury may find that Zurich's experts are

worthy of belief and that Lamar never provided Zurich with data sufficient to allow it to

determine the loss attributable to the covered property. Thus, at present, evidence for Zurich's

side of this argument, amounting to far more than a scintilla, can be assembled from the extant

record. “In these and similar cases, courts have again and again concluded that the dueling

theories of ostensibly credible experts create a triable issue of fact….” Lalumandier v. State

Farm Mut. Auto. Ins. Co., No. 13-426-JWD-RLB, 2016 WL 3211515, at *3 (M.D. La. Jan. 28,

2016) (deGravelles, J.) (collecting cases). Such issues must be resolved by a jury and not by any

court, for a “reasonable jury could [still] return a verdict for the nonmoving party,” Id. (quoting

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct. 2505, 2510, 91 L. Ed. 2d 202

(1986)). Lamar's bad faith claim is just such a contest.

a. Coverage

Preliminarily, the Court notes there are questions of fact as to whether Lamar met its

initial burden of establishing a prima facie showing it made a satisfactory proof of loss as to at

least a portion of its business interruption claim, i.e. that at least a portion of the claim is

undisputed.

The Policy at issue is an “all risk” policy, which creates “a special type of coverage that

extends to risks not usually covered under other insurance.” (SMF ¶ 1, Doc. 111-2; OSMF ¶ 1,

Doc. 120-1.) See Dow Chemical Co. v. Royal Indem. Co., 635 F.2d 379, 386 (5th Cir. 1981).

Under an “all-risk” policy, an insured need only prove direct physical loss to covered property.

Living Word Bible Church, Inc. v. Travelers Indem. Co., No. 07-7450, 2009 WL 2856127, at *2

(E.D. La. Sept. 1, 2009). Once an insured has proven a loss covered under the policy, the burden

shifts to the insurer to prove policy limits or exclusions. Tunstall v. Stierwald, 809 So.2d 916,

921 (La. 2002). This burden placed on the insurer is a heavy one since the policy must contain a

clear and unambiguous expression of exclusion from coverage. Auster Oil & Gas, Inc. v. Stream,

891 F.2d 570, 580 (5th Cir. 1990); Scarborough v. Northern Assurance Co. Of Am., 718 F.2d

130, 134 (5th Cir. 1983); Burlington Res., Inc. v. United Nat'l Ins. Co., 481 F. Supp. 2d 567, 571

(E.D. La. 2007).

It is largely undisputed that Zurich is liable for some loss of business income under the

Policy. Both parties agree that under the Policy: Lamar is the First Named Insured; the office

was an Insured Location; and Hurricane Maria was a Named Storm and a Covered Cause of

Loss. (SMF ¶¶ 4–6, Doc. 111-2; OSMF ¶¶ 4–6, Doc. 120-1.) Likewise, both parties agree that the

office was physically damaged by Hurricane Maria. (SMF ¶¶ 6–11; OSMF ¶¶ 6–11; Zurich Dep.,

Doc. 118-4 at 16.)

The parties dispute mainly centers on the amount of the business income loss. Under

Louisiana law, damages for loss of profits may not be based on speculation and conjecture. La

Louisiane Bakery Co. v. Lafayette Ins. Co., 09-825 (La. App. 5 Cir. 2/8/11), 61 So. 3d 17, 34.

However, as Louisiana courts have held, “such damages need be proven only within reasonable

certainty ... [b]road latitude is given in proving lost profits because this element of damages is

often difficult to prove and mathematical certainty or precision is not required.” Id. (citing Cox

Commc'ns v. Tommy Bowman Roofing, LLC, 04-1666, (La. App. 4 Cir. 3/15/06), 929 So. 2d 161,

166–67; Louisiana Farms v. Louisiana Depart't of Wildlife and Fisheries, 95–845, (La. App. 3

Cir. 10/9/96), 685 So. 2d 1086, 1105; Lavigne v. J. Hofert Co., 431 So. 2d 74, 77 (La. App. 1

Cir. 1983)). “Accordingly, where it is not possible to state or prove a perfect measure of lost

earnings, ‘courts have reasonable discretion to assess damages based upon all the facts and

circumstances of the case.’ ” Ochsner Clinic Found. v. Lexington Ins. Co., 226 F. Supp. 3d 658,

673–74 (E.D. La. 2017) (quoting Cotton Bros. Baking Co. v. Indus. Risk Insurers, 774 F. Supp.

1009, 1028 (W.D. La. 1989)). “Proof of such losses need only be as precise as circumstances in a

particular situation allow.” Id. at 674 (citing Citadel Broad. Corp. v. Axis U.S. Ins. Co., 2014-

0326 (La. App. 4 Cir. 2/11/15), 162 So.3d 470, 475). See also, Nick Farone Music Ministry v.

City of Bastrop, 179 So. 3d 629, 631 (La. App. 2015) (“Loss of business income or profits is a

type of special damages that must be proved with reasonable certainty.”); Bayle v. Allstate Ins.

Co., 615 F.3d 350, 361 (5th Cir. 2010) (“we could find no suggestion in Louisiana law that

insureds are ever relieved of the burden of proving damages.”).

Lamar argues that it has made a prima facie showing that Zurich is liable for at least $1 in

covered business income loss based on Lamar’s Rule 30(b)(6) testimony that it needed its Puerto

Rice office to generate revenue (Doc. 110-13 at 15, 18–19) and Stephens’ expert report which

estimated that Lamar lost at least $663,000 in business income because of damage to its office

caused by Hurricane Maria (Doc. 110-12 at 5).

However, Zurich disputes this and argues that there are genuine issues of material fact

precluding summary judgment based on: (1) Stephens’ testimony that he included losses

resulting from damage to billboards when calculating Lamar’s lost business income attributable

to its office; and (2) Mohlenhoff’s testimony that: (a) he does not accept Lamar’s methodology

for calculating its business income loss; (b) “[a]ll the revenue information provided [to him] was

revenues from billboards”; and (c) that he prepared “corrected claims” for the sole purpose of

mediation. (Doc. 120 at 6–9.)

Here, Stephens’ and Mohlenhoff’s disagreement as to how to calculate Lamar’s covered

business income loss creates a genuine issue of material fact precluding summary judgment. See

Evans v. Lafayette Ins. Co., No. 06-6783, 2007 WL 4545883, at *3 (E.D. La. Dec. 18, 2007)

(“The experts for opposing sides take different approaches to the business loss analysis. Disputed

issues of fact preclude the granting of summary judgment on this issue.”) Again, Stephens

testified that he segregated the total business income loss between those losses resulting from

damage to the office and those losses resulting from damage to billboards and concluded that

Lamar sustained at least $663,000 in lost business income as a result of a suspension of its

operations due to physical damage to the office. (Stephens Rep., Doc. 105-5 at 3; Stephens Dep.,

Doc. 118-2 at 9–19.) On the other hand, Mohlenhoff testified that both MDD and Zurich rejected

Lamar’s estimates because they include lost revenues from damaged billboards and are based on

an allocation of expenses between the office and billboards instead of revenues. (MDD Dep.,

Doc. 120-4 at 8–10.)

Mohlenhoff also testified that Lamar has not supported how the office generates revenue

and that his understanding of Lamar’s income generation was that “the revenue comes from the

billboard[s]…it comes from the panels that they rent.” (Mohlenhoff Dep., Doc. 120-5 at 5, 7–9;

see also id. at 12 (“the ultimate income comes from the billboard[s]”).)

Likewise, MDD testified that “[it] cannot attribute what amount of any loss is related to

the office or billboards or anything else.” (MDD Dep., Doc. 110-3 at 19; id. at 15–17; id. at 18,

19 (“we’ve never been provided all the documents we needed to prepare an estimate” and that

“all revenue information provided [to it] was revenues from billboards.”); id. at 21 (“They lost

revenues, but … that’s different than business suspension.”).)

Thus, while it is undisputed that Zurich is liable for some loss under the Policy, Lamar

has failed to establish what amount Zurich is liable for since Lamar has not provided Zurich and

its accountants with enough information to determine that amount. And although MDD testified

that it had enough information to prepare an estimate of at least $1 (see MDD Dep., Doc. 110-3

at 23), Zurich’s representative testified to the contrary:

Q. Is it Zurich's position today that Zurich does not owe Lamar a single penny

for any lost business income that Lamar sustained as a result of Hurricane

Maria?

A. No, that is not our position.

Q. Well, will Zurich acknowledge today that Lamar sustained at least $1 of lost

business income as a result of Hurricane Maria that is covered by Zurich's

policy?

Mr. King: Object to the form of the question.

A. No.

Q. Zurich will not acknowledge that?

A. That is correct.

Q. Zurich acknowledges that Lamar's Puerto Rico office was physically

damaged as a result of Hurricane Maria, correct?

A. Correct.

(Zurich Dep., Doc. 118-4 at 15–16.)

b. Bad Faith

Turning to Lamar’s bad faith claim, and construing the evidence in a light most favorable

to Zurich and drawing reasonable inferences in its favor (as required), the Court concludes that

there are fact questions as to whether and when Zurich received satisfactory proof of loss. Based

on the evidence, a reasonable juror could conclude that Zurich has not received satisfactory proof

of loss on Lamar’s business interruption claim. The best evidence of this is Zurich’s Rule

30(b)(6) testimony which shows that it needs more information to verify and valuate the claim

and, specifically, to determine which portion of the loss is attributable to damage to the office.

Again, Zurich’s representative testified:

Q. …What policy provision is Zurich relying on in this case to refuse payment

for Lamar's claim for lost business income? I want Zurich's position on that.

A. Well, again, it's -- it's my understanding that they have not refused to pay,

we just need more information to determine the correct amount to pay.…