# Liberty Mutual Fire Insurance Company v. The Shaw Group, Inc.

> District Court, M.D. Louisiana · March 25, 2022

URL: https://www.frixlaw.com/law-library/cases/10192190

## Case

- **Court:** District Court, M.D. Louisiana
- **Decided:** March 25, 2022
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10192190

## How later opinions describe it (automated extraction)

- finding cognizable unjust enrichment claim in same suit in which plaintiff maintained claim of open account

## Opinion text

UNITED STATES DISTRICT COURT

MIDDLE DISTRICT OF LOUISIANA

LIBERTY MUTUAL FIRE INSURANCE
COMPANY
CIVIL ACTION
VERSUS
NO. 3:20-CV-871-JWD-RLB
THE SHAW GROUP, INC. (n/k/a CB&I
GROUP, INC.)

RULING AND ORDER

Before the Court is Liberty Mutual Fire Insurance Company’s Motion to Dismiss for
Failure to State a Claim (“Motion”) (Doc.18) brought by plaintiff, Liberty Mutual Fire Insurance
Company (“Liberty”). It is opposed by defendant and counterclaimant, The Shaw Group Inc., n/k/a
CB&I Group, Inc. (“Shaw”). (Doc. 23.) Liberty filed a reply brief. (Doc. 29.) The Court has
carefully considered the Motion, the pleadings, the submissions of the parties and the arguments
of counsel and is prepared to rule. For the following reasons, the Motion is granted in part and
denied in part.
I. FACTUAL OVERVIEW

This dispute concerns two commercial general liability policies issued by Liberty to Shaw
covering the policy periods of September 1, 2003, to September 1, 2004, (Doc. 18-2), and
September 1, 2004, to September 1, 2005, (Doc. 18-3) (collectively, the “Policies”). (Doc. 18-1 at
5 (citing Doc. 10 at 19–20, ¶ 9).) Each policy had a $1.5 million aggregate limit, subject to
deductibles of $500,000 and $750,000 respectively. (Docs. 18-2 at 1, 42; Doc. 18-3 at 1, 42.)
Endorsements to each policy required Shaw to reimburse Liberty for “both damages and
defense costs, including amounts paid in settlement, ‘up to the deductible amount’ for a covered
claim.” (Doc. 18-1 at 5–7 (citing Doc. 10, at ¶ 11; Docs. 18-2 and 18-3 at 42).) Liberty claims the
“deductible” included both settlement proceeds and defense costs. (Id. at 5–6.) Shaw agrees. (Doc.
52 at 1–3.) Thus, while Liberty might advance the entire $3 million limit, Shaw’s deductible
requirements had the effect of reducing the policies’ limits, so that Shaw would owe $1.25 million
when Liberty expended the full $3 million. (Doc. 18-1 at 7.) Liberty claims that “Shaw, and Shaw

alone, is responsible [under the Policies] for reimbursing to Liberty the full $1.25 million
deductible amount.” (Id. (citing Docs. 18-2 and 18-3 at 42–43).) Shaw disagrees.
Shaw purchased a second primary insurance policy from Chartis Specialty Insurance
Company, n/k/a AIG Specialty Insurance Company (“AIG”) for the same time periods that
Liberty’s policies covered (“AIG Policy”).1 (Doc. 23 at 6.) The AIG Policy had a $1 million
deductible. (Id.)
In 2012, Shaw and certain affiliates2 were named as defendants in litigation (“Abernathy
Lawsuit”)3 involving the alleged exposure of certain workers at a plant owned and operated by
Occidental Chemical Corporation (“Occidental” or “OxyChem”). (Doc. 18-1 at 8; Doc. 23 at 2.)
On November 15, 2013, Shaw “demanded defense and indemnity from Liberty with respect to the

Abernathy Lawsuit.” (Doc. 23 at 5.) Shaw claims that “Liberty repeatedly rejected [Shaw’s] tender
and wrongfully denied coverage[.]” (Id. at 5.) From Liberty’s perspective, the initial rejection was
because of “multiple coverage defenses[.]” (Doc. 18-1 at 8.) In any event, after some 17 months,
on June 5, 2015, Liberty agreed to participate in Shaw’s defense subject to a reservation of rights.
(Doc. 23 at 5; Doc. 18-1 at 8.)
During the 17 months in which Liberty refused to defend Shaw, Shaw’s other primary

1 Contractors Pollution Liability Policy No. CPO 61823904. (Doc. 23 at 6.)
2 “Shaw” will be used herein to include both Shaw and these affiliates. According to Shaw, all of the affiliates are
named insureds under the Liberty Policies. (Doc. 23 at 5.)
3 Abernathy, et al. v. Occidental Petroleum Corporation, et al., No. 2011-900266, originally filed in the Circuit Court
of Colbert County, Alabama. (Doc. 23 at 2.) Both parties refer to this as the “Abernathy Lawsuit”, and so will the
Court.
insurer, AIG, incurred the costs of the litigation according to Shaw. (See Doc. 23 at 6.) Shaw claims
that the AIG Policy “paid at least $665,591.56 in defense costs for which Liberty was responsible.”
(Id. (citing Doc. 10 at 24–26, ¶¶ 33–34, 38).) In addition, Shaw claims that it “was forced to incur
. . . at least $155,894.82” directly for its defense. (Id. (citing Doc. 10 at 26, ¶ 40).) It claims that

AIG’s “$1 million deductible . . . was fully satisfied by payments made directly by [Shaw]. . . .”
(Doc. 10 at 25, ¶ 35.)
According to Shaw, once Liberty began defending Shaw in July of 2016, Liberty began
invoicing Shaw for defense costs, and, as a result of Shaw’s “administrative error”, it paid
$62,242.65 to Liberty. (Id. at 27, ¶ 47.)
In or around December 2019, Shaw and its insurers settled the Abernathy Lawsuit, (id. at
27, ¶ 48), for a total of $26,543,092.50, (Doc. 18-4 at 1, 3, ¶ 1.) Of that amount, Liberty contributed
$3 million, and AIG contributed $3.3 million. (Id. at 3, ¶ 1.) Other insurers paid the rest. (Id.)
In March, 2020, in connection with the settlement of the Abernathy Lawsuit, Shaw and its
insurers entered into a Settlement and Mutual Release Agreement (“Insurance Settlement”) (Doc.

10 at 27, ¶ 49; Doc. 18-4). It “sets forth the various amounts that the respective parties would
contribute to fund the settlement[.]” (Doc. 10 at 27, ¶ 49.) It also purports to settle certain claims
as between Shaw and its insurers but reserves certain rights to Shaw and Liberty. (Doc. 18-4 at 3–
6, ¶¶ 1–2, 4, 7, 10; Doc. 10 at 27–28, ¶¶ 49–51.)
In May of 2020, Liberty “demand[ed] full payment of $1.25 million for deductibles and
threaten[ed] to file suit should [Shaw] fail to pay (or commit to pay) the full amount within twenty-
one days.” (Doc. 10 at 28, ¶ 55.) Shaw alleges that on October 9, 2020, Liberty stated it “would
refrain drawing on [Shaw’s] letter of credit” if Shaw “committed to paying . . . $439,627 within
thirty days[.]” (Id. at 30, ¶ 62.) Shaw paid that amount on October 29, 2020. (Id. at 30, ¶ 64.)
On December 23, 2020, Liberty sued Shaw in this Court, (Doc. 1), demanding $749,538.63
representing, Liberty alleges, the unpaid part of the $1.25 million deductible, (id. at 14, ¶ 54), plus
late payment charges, (id. at 18, ¶ 76). Liberty also asks the Court to declare that it is entitled to
“draw on Shaw’s letter of credit . . . to secure payment of the $749,538.63[,]” plus the late charge

(Id. at 19, ¶ 82).
On April 23, 2021, Shaw filed an answer and counterclaim (“Counterclaim”). (Doc. 10.)
In it, Shaw denies responsibility and liability for the amounts claimed by Liberty, (see id. at 35),
and further claims that by virtue of Liberty’s wrongful conduct, Liberty owes Shaw damages for
unjust enrichment, breach of contract and bad faith under Louisiana Revised Statutes Section
22:1973, (id. at 31–35, ¶¶ 67–91.). Shaw claims that Liberty wrongfully failed to credit towards
its deductible obligation the following amounts:
$665,591.56 Defense costs paid by AIG on behalf of Shaw which
was in fact owed by Liberty. (Id. at 26–27, ¶¶ 38, 43-
45.)

$155,894.92 Paid by Shaw directly to third parties for defense
costs. (Id. at 26, ¶ 40.)

$62,242.65 Paid by Shaw to Liberty as a result of an
“administrative error.” (Id. at 27, ¶ 47.)

$439,627.00 Paid by Shaw to Liberty only to avoid Liberty’s
drawing on Shaw’s letter of credit. (Id. at 29–30, ¶¶
60–61).

Total: $1,323,356.13
Shaw claims that it is entitled to have its deductible obligation credited with these amounts.
(See id. at 30–32, ¶¶ 65–66, 69.) The total of these payments exceeds the deductible by $73,356.03
which represents, argues Shaw, an overpayment by Shaw which Liberty owes to Shaw. (Id. at 31–
32, ¶ 69.)
Shaw utilizes three theories of liability in support of its effort to negate any obligation it
has to reimburse Liberty for amounts paid in connection with the deductible and to recover
damages and its “overpayment” of monies paid directly by Shaw or indirectly by others in
satisfaction of its deductible obligation, (id. at 30–31, ¶ 66; id. at 34, ¶ 87): unjust enrichment

(Count I, id. at 31–32, ¶¶ 67–71); breach of contract (Count II, id. at 32–34, ¶¶ 72–87); and bad
faith (Count III, id. at 34–35, ¶¶ 88–91).
In addition to demanding a credit against its deductible obligation and a return of the
overpayment, Shaw asks for a return of monies it paid to Liberty on the deductible because of
Liberty’s failure to credit AIG’s payments, (Doc. 10 at 34, ¶ 85); the amounts Shaw paid in “costs
and fees in defending itself,” (id); “all foreseeable and unforeseeable damages arising” from these
alleged breaches, (id. at 34, ¶ 86); and penalties and attorney’s fees as a result of Liberty’s bad
faith violation of its duties under La. R.S. 22:1973, (id. at 35, ¶ 90.)
In response, Liberty filed the present Motion. (Doc. 18.)
II. PARTIES’ ARGUMENTS

A. Liberty’s Motion (Doc. 18) and Original Memorandum (Doc. 18-1_

Liberty argues that Shaw’s counterclaim should be dismissed under Rule 12(b)(6) because
(i) Shaw released its claims in the Insurance Settlement, (ii) Shaw does not allege any acts of bad
faith recognized under Louisiana law, and (iii) the plain terms of Liberty’s Policies foreclose
Shaw’s unjust enrichment theory. (Doc. 18 at 1–2; Doc. 18-1 at 3–4.) In support of its motion,
Liberty attaches a copy of the Policies, (Docs. 18-2 and 18-3), and the Insurance Settlement, (Doc.
18-4). Though Rule 12(b)(6) motions are usually limited to the allegations in the complaint,
Liberty seeks to “enlarge” the pleadings to allow the Court to consider the Insurance Settlement
because it is “central to plaintiff’s [counter]claims.” (Doc. 18-1 at 12–13 (citing, among others,
Murchison Cap. Partners, L.P. v. Nuance Commc’ns Inc., 625 F. App’x 617, n. 1 (5th Cir. 2015)).)
1. Shaw released any and all claims regarding the Abernathy lawsuit.

First, Liberty argues that Shaw’s counterclaim is precluded by the Insurance Settlement.
(Doc. 18-1 at 13.) Liberty maintains that the release applies broadly to “any and all claims . . .
relating to or arising out of the Underlying Lawsuits and the claims against Shaw that are being
settled by the Shaw settlement.” (Id. at 13–14 (quoting Doc. 18-4 at 3–4, ¶ 2).) Under Louisiana
law, argues Liberty, “only one conclusion can be drawn: Shaw released the very actions asserted
in the [C]ounterclaim[.]” (Id. at 14.) According to Liberty, every claim within Shaw’s
Counterclaim falls under the broad language of the release, which covered both present and future
claims related to the Abernathy Lawsuit and the coverage provided in Liberty’s Policies. (Id. at
14–15.)
Next, Liberty contends that Shaw’s release of Liberty in the Insurance Settlement was “a
binding, enforceable compromise.” (Id. at 15.) Liberty points to Louisiana Civil Code article 3071,
which states, “[a] compromise is a contract whereby the parties, through concessions made by one

or more of them, settle a dispute or an uncertainty concerning an obligation or other legal
relationship.” (Id.) Louisiana law favors compromise. (Id. (citing Hymel v. Eagle, Inc., 2008-1287
(La. App. 4 Cir. 3/18/09), 7 So. 3d 1249, 1252).) Liberty then argues that, since this was a
compromise, Shaw is “preclude[d] . . . from bringing a subsequent action based upon the matter
that was compromised.” (Id. (quoting La. Civ. Code art. 3080).) Moreover, Liberty maintains that
when persons attempt to re-litigate claims that were released by settlement agreements, Louisiana
courts routinely dismiss such claims at the pleading stage. (Id. at 15–16 (citations omitted).)
Next, Liberty contends that the breadth of the Insurance Settlement’s release is not a reason
for invalidation. (Id. at 16 (citing Hudson v. Progressive Sec. Ins. Co., 43,857 (La. App. 2 Cir.
12/10/08), 1 So. 3d 627, 633).) According to Liberty, “Hudson recognized that such broad
language ‘evinced nothing other than an intent to settle and dismiss all claims against anyone
arising out of’ litigation and settlement.” (Id. (quoting Hudson, 1 So. 3d at 634).) Liberty claims
that the only way Shaw can avoid the enforcement of the release is by establishing some “mistaken

intent” in the agreement. (Id. (quoting Hudson, 1 So. 3d at 633).) Since Shaw acknowledges the
settlement and does not assert any mistaken intent in its counterclaim, the plain language of that
agreement controls, and Shaw’s claims are barred. (Id.)
Finally, Liberty preemptively argues that Shaw’s claims were not reserved under Paragraph
10 of the release. (Id.) According to Liberty, Paragraph 10 states that “Shaw’s release of Liberty
and other insurers is ‘not intended and do[es] not alter or affect any rights, claims or defenses that
Shaw may have to the deductible claims’ asserted by Liberty to collect the deductible.” (Id.)
Liberty argues that this language, read in pari materia with Paragraph 7 of the release, reveals that
Paragraph 10 does not provide Shaw with affirmative causes of action against Liberty surrounding
insurance coverage for the Abernathy Lawsuit. (Id. at 16–17.) Instead, Liberty contends that

Paragraph 10 was intended merely to allow Shaw to assert defenses to Liberty’s efforts to collect
the deductible. (Id. at 17.) In support, Liberty insists that Paragraph 10 reserved only Shaw’s “
‘rights, claims or defenses that Shaw may have pertaining to the deductible claims[,]’ ” and that
language cannot be read to invalidate Paragraph 2’s “much broader” language. (Id. (quoting Doc.
18-4 at 3–4, 6, ¶¶ 2, 10).) As such, Shaw’s counterclaim should be dismissed with prejudice. (Id.)
2. Shaw has not and cannot state an insurance bad faith claim against
Liberty under Louisiana law.

Second, Liberty contends that Shaw’s bad faith claim also fails because it does not allege
sufficient factual support. (Doc. 18-1 at 18.) Louisiana Revised Statutes § 22:1973 lists actions
that constitute bad faith, including:
(1) “misrepresenting pertinent facts or insurance policy provisions,”
(2) “failing to pay a settlement within thirty days,” (3) “denying
coverage or attempting to settle a claim on the basis of an application
which the insurer knows was altered,” (4) “misleading a claimant as
to the applicable prescriptive period,” and (5) “failing to pay the
amount of any claim due . . . when such failure is arbitrary,
capricious, or without probable cause.”

(Id. (quoting La. R.S. 22:1973).) Liberty argues that this punitive statute should be strictly
construed, according to Louisiana law. (Id. (citing Shreve v. State Farm Fire & Cas. Co., 52,032
(La. App. 2 Cir. 5/23/18), 247 So. 3d 1175).)
According to Liberty, Shaw “baldly claims Liberty ‘misrepresent[ed] pertinent facts,’ [but]
Shaw never assert[ed] any facts to support that threadbare accusation.” (Id. at 18.) Next, Liberty
contends that Shaw’s additional bad faith claims for Liberty’s “ ‘seeking to recover’ the deductible
and ‘threatening to draw’ on Shaw’s letter of credit [ ] are not recognized under the statute;” thus,
these allegations cannot satisfy bad faith. (Id.) As such, Liberty contends that the only potential
allegation which could support a bad faith claim is the denial of coverage allegation, but “there is
no doubt that Shaw released any such claims based on Liberty’s handling of the Abernathy Lawsuit
in the Insurance Settlement.” (Id.)
Moreover, Liberty maintains that any bad faith argument regarding Liberty enforcing its
right to collect the deductible and draw on Shaw’s letter of credit is “especially frail.” (Id. at 19.)
According to Liberty, “permit[ting] such claims would open the door to bad faith suits based on
an insurer’s enforcement of any policy provision, and would prevent insurers from enforcing their
limits, exclusions, or other terms and conditions in their policies.” (Id. (emphasis in original)
(citing Williams v. Great Am. Ins. Co., 240 F. Supp. 3d 523, 528 (E.D. La. 2017)).) The deductible
provision does not violate any state law or public policy, so “Liberty is free to enforce those
contractual provisions to which Shaw agreed.” (Id.) Since Shaw already complied in part by
reimbursing a portion of the deductible and there was no bad faith, Liberty seeks dismissal of
Shaw’s counterclaim. (Id.)
3. Shaw is exclusively liable for the deductible, and therefore Liberty was
not unjustly enriched.

Next, Liberty maintains that it was not unjustly enriched by Shaw and Shaw must still
reimburse the remaining amounts due to Liberty, described in Liberty’s complaint. (Doc. 18-1 at
19–20.) Unjust enrichment claims derive from “payments of ‘thing[s] not owed[.]’ ” (Id. at 20
(quoting La. Civ. Code art. 2299).) “A person who has received a payment or a thing not owed to
him is bound to restore it to the person from whom he received it.” (Id. (quoting La. Civ. Code art.
2299).) Notably, “an unjust enrichment claim fails when a payment is actually due and owed.” (Id.
(citing Miller v. Blattner, 676 F. Supp. 2d 485, 496 (E.D. La. 2009)).) As such, Liberty argues that
“Shaw’s payment of $439,627 was owed to Liberty, and therefore it cannot be said that Liberty
was ‘unjustly enriched.’ ” (Id.)
Liberty maintains that Shaw’s assertion that Liberty was overpaid is “directly contradicted
by its own factual allegations, which concede that Shaw agreed to pay $439,627 in October 2020
as an ‘undisputed amount’ owed to Liberty toward the deductible.” (Id. (quoting Doc. 10 at 29–
30, ¶ 61).) “[T]he Policies make clear that Shaw, and Shaw alone, is responsible for reimbursing
the full $1.25 million deductible amount to Liberty[.]” (Id. at 21.) Quoting specific portions of
those Policies’ language, Liberty asserts that these provisions undoubtedly require Shaw to

reimburse the full amount and foreclose any argument that defense costs paid by another could
satisfy this obligation. (Id.) Liberty then points the Court to Louisiana jurisprudence which
enforced policy language requiring the insured and the insured alone to pay the applicable
deductible. (Id. at 22 (citing Citgo Petro. Corp. v. Yeargin, Inc., 95-1574 (La. App. 3 Cir. 2/19/97),
690 So. 2d 154, 169–70; Titan Holdings, Inc. v. St. Tammany Police Jury, No. 88-5011, 1990 WL
170116, at *4 (E.D. La. Oct. 30, 1990); Sias v. Weiner’s Stores, Inc., 97-938 (La. App. 3 Cir.
2/11/98), 708 So. 2d 442, 446).)
Next, Liberty argues that jurisprudence has rejected the same argument that Shaw raises,
“finding that defense costs and indemnity payments by the insured and other insurers do not satisfy

a deductible when the policy specifically requires the insured to reimburse the deductible to the
insurer, as Liberty’s Polices do here.” (Id. at 23 (citing Zurich Am. Ins. Co. v. Centex Corp., 373
F. Supp. 3d 692 (N.D. Tex. 2016)).) Liberty maintains that the policy at issue in Zurich was nearly
identical to the language of the current policies. (Id.) Consequently, Liberty asks this Court to
follow the Zurich decision, “require Shaw to reimburse the full deductible amount to Liberty,” and
hold “that payments by other sources do not satisfy that obligation.” (Id. at 24.)
4. Shaw should not be permitted to take discovery or amend its
counterclaim.

Finally, Liberty argues that Shaw should not be permitted discovery nor an opportunity to
amend its counterclaim. (Doc. 18-1 at 24.) Liberty asserts that Shaw’s causes of action are barred
under the plain terms of the Policies and the Insurance Settlement, so further proceedings are futile.
(Id.) Liberty argues that under well-settled Louisiana law it is proper to deny further considerations
of extrinsic evidence when claims are barred under the clear and unambiguous terms of an
insurance policy. (Id. (citing Orleans Par. Sch. Bd. v. Lexington Ins. Co., 2012-1686 (La. App. 4
Cir. 6/5/13), 118 So. 3d 1203, 1223; Hamilton v. Willis, 2009-0370 (La. App. 4 Cir. 11/4/09), 24
So. 3d 946, 948; River Bend Cap., LLC v. Lloyd’s of London, 2010-1317 (La. App. 4 Cir. 4/13/11),
63 So. 3d 1092, 1096; Randall v. Martin, 03-1311 (La. App. 5 Cir. 2/23/04), 868 So. 2d 913, 916).)
Additionally, Liberty argues that amending the complaint would be in vain because Shaw cannot
change the language of the Policies as they are written. (Id. at 25 (citing In re Mastercard Int’l.,
No. 00-1322, 2003 WL 21783301, at *1–3 (E.D. La. Jul. 30, 2003)).)
B. Shaw’s Memorandum in Opposition (Doc. 23)

Shaw’s opposition to Liberty’s Motion primarily relies on the premise that Shaw’s “claims
were expressly preserved to respond to any assertion by Liberty of entitlement to reimbursement
of deductible amounts.” (Doc. 23 at 1.) Additionally, Shaw contends that it “could not have
released claims for Liberty’s future bad faith as a matter of law.” (Id.) In the event that Shaw’s
Counterclaim is deficient in any way, Shaw requests an opportunity to amend its Counterclaim to
correct that deficiency. (Id. at 1–2.)
Moreover, Shaw argues that Liberty’s attachment of the Insurance Settlement to its
memorandum in support was improper, and this Court should not consider that evidence on a Rule
12(b)(6) motion. (Id. at 3.) Nonetheless, Shaw contends that the Insurance Settlement expressly
preserves its claims asserted in the Counterclaim. (Id.) As a result, Shaw maintains that its
“Counterclaim establishes prima facie claims against Liberty,” so “Liberty’s Motion should be
denied.” (Id. at 4.)
1. Liberty improperly disputes the factual allegations of the
Counterclaim and attaches inappropriate evidence, which must be
stricken or disregarded by this Court.

As explained by the Fifth Circuit, “ ‘a motion to dismiss an action for failure to state a
claim “admits the facts alleged in the complaint, but challenges plaintiff’s rights to relief based
upon those facts.” ’ ” (Doc. 23 at 11 (quoting Ramming v. United States, 281 F.3d 158, 162 (5th
Cir. 2001)).) Shaw emphasizes that, “unless it appears from the pleadings beyond doubt” that no
set of facts could support Shaw’s entitlement to relief in its claim, the motion to dismiss should be
denied. (Id. (quoting Oaxaca v. Roscoe, 641 F.2d 386, 391 (5th Cir. 1981)).) Consequently, argues
Shaw, anywhere Liberty’s motion “challenges factual allegations of the Counterclaim rather than
[Shaw’s] right to relief based upon the facts asserted, [the Motion] must fail.” (Id.)
In support, Shaw specifies that Liberty’s assertion that Shaw “admitted” to owing the
$439,627 it paid to Liberty is a “gross mischaracterization of the Counterclaim’s allegations[.]”
(Id.) Instead, Shaw argues that it was “forced into this agreement ‘to pay $439,627, as an
“undisputed amount” to mitigate additional collateral damages that would be caused by Liberty

wrongfully drawing on their letter of credit.’ ” (Id. (citing Doc. 10 at 29–30, ¶¶ 57–61).) Despite
calling this an “undisputed amount,” Shaw insists that it disputes what amount, if any, is actually
due and owed. (Id. at 11–12.) Additionally, Shaw contends that Liberty’s repeated assertions that
Shaw released these claims are unsupported because Shaw’s “Counterclaim establish[ed] that
these claims were expressly preserved by the Insurance Settlement.” (Id. at 12.) Shaw maintains
that these disputes concern Shaw’s factual allegations rather than challenging Shaw’s rights to
relief based upon those factual allegations, and Shaw argues this is “procedurally improper.” (Id.)
Relatedly, Shaw argues that Liberty’s attaching the Insurance Settlement to its
memorandum in support is improper. (Id.) Shaw agrees that Fifth Circuit jurisprudence allows a
court to consider more than the complaint alone for a Rule 12(b)(6) motion when those documents

are attached to such motion and are central to the claim. (Id. (citing Baudy v. Countrywide Home
Loans, Inc., No. 08-3580, 2009 WL 10737162, at *2 (E.D. La. Apr. 29, 2009)).) However, Shaw
contends that, while the Liberty Policies are central to Shaw’s claim, the Insurance Settlement is
not; instead, “the Insurance Settlement is central to Liberty’s defenses that [Shaw’s] claims have
allegedly been released.” (Id. (emphasis in original).) Since it is not central to Shaw’s claim, Shaw
argues it would be inappropriate for this Court to consider this document at this time. (Id.)
In support, Shaw argues that the Fifth Circuit clarified that courts must not consider
documents attached to the defendant’s motion to dismiss—even where the complaint refers to it—
“if it is central to the defendant’s defenses rather than the plaintiff’s allegations.” (Id. at 13 (citing
Scanlan v. Texas A&M Univ., 343 F.3d 533, 537 (5th Cir. 2003)).)
Not only is the Insurance Settlement “far from ‘central’ to [Shaw’s] claims,” but Shaw’s
Counterclaim allegation that the Insurance Settlement preserved the claims asserted within that
Counterclaim must be taken as true at the motion to dismiss level. (Id. (citing Scanlan, 343 F.3d

at 537).) Shaw argues that Liberty improperly asks this Court to rely on Liberty’s view of the
Insurance Settlement’s effect, which Shaw argues this Court cannot do because facts must be
construed in a light most favorable to Shaw for this motion to dismiss. (Id. at 13.) Accordingly,
Shaw asks this Court to disregard the Insurance Settlement and “Liberty’s factual contentions that
contradict the Counterclaim.” (Id. at 13–14.)
2. Should this Court consider the Insurance Settlement as evidence, the
language therein expressly preserves the claims within Shaw’s
counterclaim.

Alternatively, if this Court elects to consider the Insurance Settlement as evidence, Shaw
argues that it expressly preserves every claim within Shaw’s Counterclaim. (Doc. 23 at 14.)
Relying on the Insurance Settlement’s preservation of all of Shaw’s “ ‘rights, claims, and
defenses,’ ” (id. (quoting Doc. 18-4 at 6, ¶ 10)), Shaw contends that this Court must impute
meaning to that language and that this language cannot be construed in a way that disregards other
provisions of the contract, (id. (citing John Bailey Contractor, Inc. v. State, 439 So. 2d 1055, 1058
(La. 1983); Hood v. Ashby P’ship, 446 So. 2d 1347, 1351 (La. App. 1 Cir. 1984))).
Supported by a direct quote of Paragraph 10 of the Insurance Settlement, Shaw maintains
that Liberty’s assertion that this Paragraph preserves only Shaw’s defenses is contradicted by the
plain language of that Paragraph. (Id. at 14–15.) Shaw contends that its rights and claims are
expressly reserved under the Insurance Settlement just as Liberty’s deductible claims are reserved.
(Id. at 15.) Shaw argues that Liberty’s contractual interpretation “eviscerate[s]” the word “claims”
from the agreement, which is in direct contravention of “[w]ell-established principles of contract
interpretation[.]” (Id.)
In support, Shaw asserts that “[t]his Court has further recognized that under Louisiana law,
‘a compromise settles only those differences that the parties clearly intended to settle.’ ” (Id. (citing

Entergy Gulf States La., L.L.C. v. Louisiana Generating, L.L.C., 14-385, 2018 WL 11302911, at
*4 (M.D. La., Nov. 5, 2018) (Dick, J.) (quoting La. Civ. Code art. 3076)).) Accordingly, where
the parties’ interpretations are “ ‘sufficiently at odds to give rise to doubt as to whether there was
ever a meeting of the minds regarding the compromise,’ the agreement must not be construed to
release claims that a party did not clearly intend to release.” (Id. (quoting Entergy Gulf States,
2018 WL 11302911, at *4).) Thus, concludes Shaw, the Insurance Settlement cannot be construed
to release its claims, and Liberty’s motion should be denied. (Id. at 16.)
3. Alternatively, there is ambiguity as to whether the parties to the
Insurance Settlement intended to preserve the claims asserted in the
Counterclaim, and that ambiguity cannot be resolved through a Rule
12(b)(6) motion.

Alternatively, Shaw contends that, if this “Court find[s] that the Insurance Agreement does
not unambiguously preserve all claims asserted by [Shaw] in the Counterclaim, . . . there is an
ambiguity as to whether the parties intended to preserve these claims[.]” (Doc. 23 at 16.) Shaw
maintains that where the parties’ intent for a contract is not readily ascertainable from the plain
language of the contract, the contract contains an ambiguity. (Id. (citing Texas E. Transmission
Corp. v. Amerada Hess Corp., 145 F.3d 737, 741 (5th Cir. 1998); Guidry v. Am. Pub. Life Ins. Co.,
512 F.3d 177, 181 (5th Cir. 2007)).) As such, Shaw contends that the parties’ intent is a question
of fact that cannot be resolved on the pleadings. (Id. (citing Guidry, 512 F.3d at 181).) As a result,
Shaw argues that the language of Paragraph 10 of the Insurance Settlement at least creates
ambiguity that cannot be decided on a Rule 12(b)(6) motion. (Id.)
4. The Insurance Settlement cannot release claims for bad faith for
conduct after the execution of the Insurance Agreement.

While Shaw disputes that it released any claims within the Counterclaim, it especially
disagrees that the release dispelled any future bad faith claims. (Doc. 23 at 17.) In fact, Shaw
maintains that “the law does not allow the prospective release of future bad faith claims.” (Id.) In
support, Shaw cites Civil Code article 2004, which states, “ ‘Any clause is null that, in advance,
excludes or limits the liability of one party of intentional or gross fault that causes damage to the
other party.’ ” (Id.) Furthermore, the Fifth Circuit has recognized that “gross fault” within article
2004 encompasses bad faith. (Id. (citing Alonso v. Westcoast Corp., 920 F.3d 878, 885 (5th Cir.
2019)).)
Additionally, Shaw quotes the Louisiana Fourth Circuit Court of Appeal, which explained
that allowing a prospective waiver for future bad faith claims is against public policy because it
essentially invites the bad faith behavior. (Id. (citing Hymel, 7 So. 3d 1249).) Accordingly, Shaw
argues that any provision of the Insurance Settlement that could release future bad faith claims is
unenforceable under Louisiana law. (Id. at 17–18.)
5. It is inappropriate to convert Liberty’s 12(b)(6) Motion into a motion
for summary judgement.

Though Shaw acknowledges this Court’s ability to convert Rule 12(b)(6) motions into
motions for summary judgement, Shaw claims that the lack of opportunity for discovery precludes
doing so in this case. (Doc. 23 at 18.) Shaw argues that courts should decline to convert motions
to dismiss to summary judgements when there has been insufficient time for discovery or “ ‘when
the material outside the pleadings is scanty, incomplete, or inconclusive and when it will not aid
in the rational resolution of a motion for summary judgment.’ ” (Id. (quoting Poe v. Transp., No.
10-220, 2011 WL 13202941 at *1 (M.D. La. Nov. 14, 2011) (cleaned up)).)
Listing the specific bad faith actions alleged within the Counterclaim, (id. at 18–19 (citing
Doc. 10 at 29, 34 ¶¶ 60, 89)), Shaw argues that it must conduct discovery to obtain more evidence
of Liberty’s knowledge of these facts at the time of its threat against Shaw. (Id.) Additionally,
Shaw claims that the evidence attached to Liberty’s memorandum in support cannot satisfy the

Rule 56 burden, that “this litigation is in its infancy,” and that “Liberty has refused to participate
in any discovery” thus far. (Id. at 19.) Therefore, Shaw asks this Court to decline to convert the
motion to dismiss into a motion for summary judgement. (Id.)
C. Liberty’s Reply Memorandum (Doc. 29)
Liberty repeats many of the arguments made in its opening brief. The Insurance Settlement
was mentioned in Shaw’s Counterclaim and is central to same. (Doc. 29 at 4 (citing Doc. 10 at 31,
¶¶ 67–68; 28, ¶ 51; and 15,Third through Fifth Affirmative Defenses).) It contends that the weight
of Fifth Circuit jurisprudence allows consideration of settlement agreements referenced in the
complaint. (Id. at 5–6 (citations omitted).)
Liberty disputes Shaw’s contention that the reservation of matters “pertaining to the

deductible” in Paragraph 10 of the Insurance Settlement overcomes Shaw’s release in Paragraph
2. (Id. at 6.) Shaw’s attempt to cast its Counterclaim as one pertaining to the deductible “is nothing
more than a transparent attempt to escape the broad release language in Paragraph 2.” (Id. at 8.)
As to Shaw’s bad faith claim, Liberty insists this was released in Paragraph 2 of the
Insurance Settlement not once, but twice. (Id. at 12.) While Liberty concedes that “a claim under
La. R.S. 22:1973(b) is not limited to the proscribed acts listed in the statute, the alleged acts listed
in Shaw’s opposition do not give rise to liability under the Statute.” (Id. at 13.) Shaw’s
“prospective” bad faith claims were settled in the Insurance Settlement as settlement agreements
are an exception to Louisiana Civil Code article 2004’s prohibition against settlements of “future
bad acts.” (Id. at 13 (citing Hymel, 7 So.3d at 1255–56; Savoie v. Penn. Gen. Ins. Co., No. 15-
1220, 2017 WL 4574197 (E.D. La. Oct. 13, 2017).) In any event, Liberty’s acts following the
settlement amount to no more than enforcing the terms of the Policies which cannot possibly be
deemed bad faith. (Id. at 13–14.)

Liberty returns to its earlier arguments that Shaw did not “overpay” Liberty for the
Deductible because the Liberty Policies require Shaw to reimburse Liberty for what Liberty paid,
and AIG’s and Shaw’s payment to others did not reimburse Liberty for what Liberty paid. (Id. at
14–17.) The cases relied upon by Shaw involved self-insured retentions (SIRs) and not deductibles
and had no reimbursement clause comparable to the ones in the Liberty Policies. (Id. at 16–18.)
Liberty closes its Reply by arguing that Shaw should not be given the opportunity to amend
its Counterclaim since this would be futile. (Id. at 18.)
III. RULE 12(b)(6) STANDARD
“Federal pleading rules call for ‘a short and plain statement of the claim showing that the
pleader is entitled to relief[.]’ ” Johnson v. City of Shelby, Miss., 574 U.S. 10, 11 (2014) (quoting

Fed. R. Civ. P. 8(a)(2)). “They do not countenance dismissal of a complaint for imperfect
statement of the legal theory supporting the claim asserted.” Id. (cleaned up).
Interpreting Rule 8(a) of the Federal Rules of Civil Procedure, the Fifth Circuit has
explained:
The complaint (1) on its face (2) must contain enough factual matter
(taken as true) (3) to raise a reasonable hope or expectation (4) that
discovery will reveal relevant evidence of each element of a claim.
“Asking for [such] plausible grounds to infer [the element of a
claim] does not impose a probability requirement at the pleading
stage; it simply calls for enough facts to raise a reasonable
expectation that discovery will reveal [that the elements of the claim
existed].”

Lormand v. U.S. Unwired, Inc., 565 F.3d 228, 257 (5th Cir. 2009) (quoting Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 556 (2007)).
Applying the above case law, the Western District of Louisiana has stated:
Therefore, while the court is not to give the “assumption of truth” to
conclusions, factual allegations remain so entitled. Once those
factual allegations are identified, drawing on the court's judicial
experience and common sense, the analysis is whether those facts,
which need not be detailed or specific, allow “the court to draw the
reasonable inference that the defendant is liable for the misconduct
alleged.” [Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)]; Twombly,
55[0] U.S. at 556 [ ]. This analysis is not substantively different from
that set forth in Lormand, supra, nor does this jurisprudence
foreclose the option that discovery must be undertaken in order to
raise relevant information to support an element of the claim. The
standard, under the specific language of Fed. Rule Civ. P. 8(a)(2),
remains that the defendant be given adequate notice of the claim and
the grounds upon which it is based. The standard is met by the
“reasonable inference” the court must make that, with or without
discovery, the facts set forth a plausible claim for relief under a
particular theory of law provided that there is a “reasonable
expectation” that “discovery will reveal relevant evidence of each
element of the claim.” Lormand, 565 F.3d at 257; Twombly, 55[0]
U.S. at 556 [ ].

Diamond Servs. Corp. v. Oceanografia, S.A. De C.V., No. 10-177, 2011 WL 938785, at *3 (W.D.
La. Feb. 9, 2011) (citation omitted).
In deciding a Rule 12(b)(6) motion, all well-pleaded facts are taken as true and viewed in
the light most favorable to the plaintiff. Thompson v. City of Waco, Tex., 764 F.3d 500, 502 (5th
Cir. 2014) (citing Doe ex rel. Magee v. Covington Cnty. Sch. Dist. ex rel. Keys, 675 F.3d 849, 854
(5th Cir. 2012) (en banc)). The Court “need not, however, accept the plaintiff’s legal conclusions
as true.” Id. at 502–03 (citing Iqbal, 556 U.S. at 678). The task of the Court is not to decide if the
plaintiff will eventually be successful, but to determine if a “legally cognizable claim” has been
asserted. Id. at 503 (cleaned up).
IV. DISCUSSION
A. Can the Insurance Settlement Be Considered in Connection with This Motion?

A threshold issue is whether the Court can consider the Insurance Settlement in deciding
this 12(b)(6) motion. Liberty claims that in this agreement, Shaw settled and released the rights it
now urges in the Counterclaim. Shaw argues that because this agreement is not attached to or
central to the Counterclaim, it is extrinsic to Liberty’s Rule 12(b)(6) Motion and may not be
considered by the Court. (Doc. 23 at 12–14.)
The general rule regarding what may be considered in deciding a Rule 12(b)(6) motion is
well known.
“In determining whether a plaintiff's claims survive a Rule 12(b)(6)
motion to dismiss, the factual information to which the court
addresses its inquiry is limited to (1) the facts set forth in the
complaint, (2) documents attached to the complaint, and (3) matters
of which judicial notice may be taken under Federal Rule of
Evidence 201.”

Gomez v. Galman, 18 F.4th 769, 775 (5th Cir. 2021) (per curiam) (quoting Walker v. Beaumont
Indep. Sch. Dist., 938 F.3d 724, 735 (5th Cir. 2019)). See also Innova Hosp. San Antonio, Ltd.
P'ship v. Blue Cross & Blue Shield of Georgia, Inc., 892 F.3d 719, 726 (5th Cir. 2018).
However, there is an exception to this rule: a court may consider documents attached to a
motion to dismiss “where the complaint refers to the documents and they are central to the claim.”
Kane Enters. v. MacGregor (USA) Inc., 322 F.3d 371, 374 (5th Cir. 2003) (citing Collins v.
Morgan Stanley Dean Witter, 224 F.3d 496, 498–99 (5th Cir. 2000)). See also Wilson v. GMFS
LLC, No. 18-840, 2019 WL 8301667, at *3 (M.D. La. May 24, 2019); McCann v. Best Buy Co.,
No. 17-108, 2017 WL 5985570, at *2 (M.D. La. Dec. 1, 2017).
Here, the Insurance Settlement is attached to Liberty’s Motion, (Doc. 18-4), and is referred
to in Shaw’s Counterclaim, (Doc. 10 at 27–28, ¶¶ 49–52). Two of the three prerequisites for the
application of the exception are therefore clearly present. However, Shaw contends the Insurance
Settlement is “far from ‘central’ ” to its claims against Liberty and therefore the exception does
not apply. (Doc. 23 at 13). While it may be central to Liberty’s defenses, Shaw argues, it is not
central to Shaw’s claims. (Id. at 12–14.)

Liberty counters that the Insurance Agreement is central to Shaw’s Counterclaim and
enumerates the ways in which it is. (Doc. 29 at 4–5 (citing Doc. 10 at 31, ¶¶ 67–68; 28, ¶ 51; and
15, Third through Fifth Affirmative Defenses).)
Here, the Court agrees with Liberty. Paragraphs 50 and 51 of the Counterclaim state:

50. Pursuant to the Insurance Settlement, Liberty admitted that
its policies provided coverage or waived the right to challenge that
its policies provided coverage in favor of the Shaw Defendants.
Liberty further released all of its claims against the other
participating insurers, but expressly reserved “all rights and claims
to recover from [Shaw] arising out of the deductible provisions of
the Liberty Mutual Policies.”

51. Conversely, [Shaw] expressly reserved all of its rights,
claims, or defenses associated with the deductible provisions of the
Liberty Policies or with Liberty’s right to pursue recovery of the
“deductible amount” from [Shaw].

(Doc. 10 at 28, ¶¶ 50, 51; see also Doc. 18-4 at 5–6, ¶¶ 7, 10.)

These are the very rights Shaw is pursuing against Liberty in the Counterclaim. The Court
finds that the Insurance Agreement is central to Shaw’s claims against Liberty and therefore may
be considered in connection with the present Motion.
B. What Was Released and Reserved in the Insurance Settlement and Is There
Ambiguity?

The pertinent portions of the relevant paragraphs of the Insurance Settlement read as
follows:
2. Shaw Release of Insurers

Except for and subject to the rights specifically reserved in
Paragraph 10 below, with respect to the policies issued to Shaw . . .
by the Insurers . . . and in consideration of . . . payments by the
Insurers of the $26,543,092.50 required by the Shaw Settlement . .
., Shaw . . . hereby release[s], aquit[s], and discharge[s] the Insurers
. . . from any and all claims, actions, causes of actions, obligations,
indebtedness, breaches of duty, breaches of claims handling, bad
faith, claims for declaratory relief, claims for injunctive relief and
other equitable relief, suits, liens, damages, losses, costs or expense,
including attorney fees, claims for defense and/or indemnity and/or
insurance coverage of any kind (including but not limited to, any
claims for bad faith or statutory penalties of any kind) . . . past,
present or future . . . relating to or arising out of the Underlying
Lawsuits and the claims against Shaw that are being settled by the
Shaw Settlement. . . . This reservation by Shaw is not inconsistent
with, nor is it intended to nullify Liberty Mutual’s . . . right to pursue
collection of any deductibles owned under [its policy] . . . as
specifically reserved below in paragraph[ ] 7. . . .

7. Liberty Mutual’s Reservation of Rights and Exceptions
to Release of Shaw

Notwithstanding . . . any other provision of this Agreement, and in
consideration of Liberty Mutual’s payment on behalf of Shaw for
the settlement memorialized in the Shaw Settlement, Shaw and
Liberty Mutual agree and acknowledge that the Shaw Agreement
and this Agreement are not intended to and do not alter or affect any
rights of Liberty Mutual or obligations of Shaw owed to Liberty
Mutual under the Liberty Mutual Policies. . . . Shaw and Liberty
Mutual further agree that Liberty Mutual’s rights and claims to
recover from Shaw arising out of the deductible provisions of the
Liberty Mutual Policies are expressly reserved, and are not
addressed, waived, released or affected by the Shaw Settlement or
this Agreement. . . .

10. Shaw’s Exceptions to Release of Insurers

Notwithstanding the agreements in the Shaw Settlement between
certain Claimants in the Lawsuits and . . . Shaw[,] . . . or any other
provision of this Agreement, Shaw and the Insurers agree and
acknowledge that the Shaw Settlement and this Agreement are not
intended to and do not alter or affect any rights, claims or defenses
that Shaw may have pertaining to the deductible claims excepted
and reserved by the Insurers in Paragraph[ ] 7 . . . of this Agreement,
and Shaw’s rights, claims and defenses are expressly reserved, and
are not addressed, waived, released or affected by the Shaw
Settlement or this Agreement.

(Doc. 18-4 at 3–6, ¶¶ 2, 7, 10.)

In interpreting contracts, the Louisiana Supreme Court has instructed:

Contracts have the effect of law for the parties and the interpretation
of a contract is the determination of the common intent of the parties.
The reasonable intention of the parties to a contract is to be sought
by examining the words of the contract itself, and not assumed.
When the words of a contract are clear and explicit and lead to no
absurd consequences, no further interpretation may be made in
search of the parties' intent. Common intent is determined, therefore,
in accordance with the general, ordinary, plain and popular meaning
of the words used in the contract. Accordingly, when a clause in a
contract is clear and unambiguous, the letter of that clause should
not be disregarded under the pretext of pursuing its spirit, as it is not
the duty of the courts to bend the meaning of the words of a contract
into harmony with a supposed reasonable intention of the parties.
However, even when the language of the contract is clear, courts
should refrain from construing the contract in such a manner as to
lead to absurd consequences. Most importantly, a contract must be
interpreted in a common-sense fashion, according to the words of
the contract their common and usual significance. Moreover, a
contract provision that is susceptible to different meanings must be
interpreted with a meaning that renders the provision effective, and
not with one that renders it ineffective. 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.

Clovelly Oil Co., LLC v. Midstates Petroleum Co., LLC, 2012-2055 (La. 3/19/13); 112 So. 3d 187,
192 (cleaned up). See also Trinity Med. Servs., LLC v. Merge Healthcare Sols., Inc., No. 17-592,
2020 WL 97162, at *14 (M.D. La. Jan. 8, 2020) (deGravelles, J.).
Liberty contends the claims Shaw is pursuing in the Counterclaim are not the rights it
reserved in the Insurance Settlement, i.e., the “rights, claims or defenses that Shaw may have
pertaining to the deductible[.]” (Doc. 18-4 at 6, ¶ 10.) Rather, argues Liberty, Shaw’s claims made
in the Counterclaim are “based on Liberty’s claims handling and the underlying mercury exposure
litigation.” (Doc. 18-1 at 3; see also id. at 10–11 (conceding that Shaw reserved rights regarding
its “defenses to the deductible,” but arguing that “Shaw did not, however, reserve any rights to
challenge or contest Liberty’s claims handling or defense of the Abernathy Lawsuit or to assert
new causes of action related to insurance coverage. . . .”).) Indeed, Liberty accuses Shaw of “thinly

disguis[ing]” its claim as one pertaining to the deductible when in fact it is one for Liberty’s alleged
“belated agreement to participate” in its defense. (Doc. 29 at 7–8.)
Shaw responds that Liberty is “edit[ing] and mischarateriz[ing]” Paragraph 10 which
“expressly reserves all of [Shaw’s] rights, claims, and defenses pertaining to the deductible claims
of its insurers.” (Doc. 23 at 8 (emphasis in original); see also id. at 15 (“Under Liberty’s wishful
contractual interpretation, . . . the word ‘claims’ is eviscerated from the Insurance Settlement.”).)
Here the Court agrees with Shaw. The language in Paragraphs 2, 7, and 10 of the Insurance
Settlement, when read in isolation and in pari materia, are clear and unambiguous: while Shaw
gave up broad rights in Paragraph 2, both Liberty and Shaw reserved all their “rights, claims and
defenses” pertaining to the deductible. In doing so, both parties made clear that these reservations

were made deliberately and were intended to be excepted from the broad release. Paragraph 10
clearly states that Shaw’s “expressly reserved” rights are “are not addressed, waived, released or
affected by the Shaw Settlement or this Agreement.” (Doc. 18-4 at 6, ¶ 10 (emphasis added).)
It is also clear that the claimed damages and the allegedly wrongful conduct of Liberty
giving rise to same “pertain” to the deductible. These rights therefore were not released in the
Insurance Agreement and are reserved to Shaw. The damages that Shaw claims flow from
Liberty’s wrongful conduct all deal with amounts Shaw argues were paid toward the deductible
and have the effect of reducing the deductible or requiring the return of amounts paid on the
deductible. Specifically, they are:
$665,591.56 Defense costs paid by AIG on behalf of Shaw which
Shaw claims were in fact owed by Liberty and which
should reduce Shaw’s deductible obligation. (Doc.
10 at 26–27, ¶¶ 38, 43-45.)

$155,894.92 Defense costs paid by Shaw directly to third parties
which Shaw claims should reduce Shaw’s deductible
obligation. (Id. at 26, ¶ 40.)

$62,242.65 Paid by Shaw to Liberty as a result of an
“administrative error” but which should nonetheless
reduce Shaw’s deductible obligation. (Id. at 27, ¶
47.)

$439,627.00 Paid by Shaw only to avoid Liberty’s drawing on
Shaw’s letter of credit but which should nonetheless
reduce Shaw’s deductible obligation. (Id. at 29–30,
¶¶ 60–61).

Total: $1,323,356.13
All of the above-enumerated damages involve defense costs which Liberty claims is part
of the deductible owed by Shaw. According to Liberty, “[e]ach of the Policies contain[s]
endorsements that expressly make Shaw responsible for both damages and defense costs[.]” (Doc.
18-1 at 5–6 (referencing “Amendatory Endorsement – Deductible,” Docs. 18-2 and 18-3 at 42);
see also Liberty’s Complaint, Doc. 1 at 10–11, ¶¶ 37–44).) Each of these items claimed in the
Counterclaim deal with defense costs and therefore “pertain” to deductibles. Because claims
pertaining to deductibles were reserved to Shaw and by the express language of Paragraph 10 “are
not addressed, waived, released or affected by” the Insurance Settlement, (Doc. 18-4 at 6, ¶ 10),
the Court finds that the Insurance Settlement did not settle Shaw’s Counterclaim and did not
release same.
As stated above, Shaw utilizes three theories of liability in support of its effort to negate
any obligation it has to reimburse Liberty for amounts Liberty paid in connection with the
deductible, and to recover damages and the alleged “overpayment” of monies paid directly by AIG
and Shaw in satisfaction of its deductible obligation, (Doc. 10 at 30–31, ¶ 66): unjust enrichment
(Count I, Doc. 10 at 31–32, ¶¶ 67–71); breach of contract (Count II, id. at 32–34, ¶¶ 72–87); and
bad faith (Count III, id. at 34–35, ¶¶ 88–91).
These claims will be addressed separately, starting with Shaw’s breach of contract claim.

However, all of these claims, to one degree or another, hinge on the viability of Shaw’s claim
(disputed by Liberty) that defense costs paid by AIG and Shaw to others reduces the amount owed
by Shaw on the deductible. That issue, in turn, hinges on the interpretation of the Liberty Policies.
C. Has Shaw Stated a Claim for Breach of Contract?
1. Arguments of the Parties
Shaw claims that Liberty breached its contracts of insurance with Shaw by wrongfully
refusing for nearly seventeen months to defend Shaw in the Abernathy Lawsuit. (Doc. 10 at 32, ¶¶
76–77.) As a result, the “breach caused [Shaw] to incur substantial expenses and fees in defending
itself against the Abernathy Lawsuit.” (Id. at 33, ¶ 78.) Specifically, Shaw paid $155,894.82 “out
of pocket in connection with defense of the Abernathy Lawsuit.” (Id. at 33, ¶ 79.)

Shaw alleges that Liberty also breached the Liberty Policies by, as alleged elsewhere in the
Counterclaim, (1) “failing to credit [Shaw] for payments made by AIG on behalf of [Shaw] in
satisfaction of [Shaw’s] deductible obligations to Liberty”, (id. at 34, ¶ 84); (2) “forc[ing]” Shaw
“to pay Liberty amounts not due to prevent Liberty from wrongfully drawing on its letter of credit”,
(id. at 34, ¶ 85); and (3) forcing Shaw “to incur substantial costs and fees in defending itself against
Liberty’s unfounded deductible claims”, (id.).
Liberty responds by repeating its arguments that Shaw released these claims in the
Insurance Settlement, (see, e.g., Doc. 29 at 11–12); that payments by Shaw and the other insurers
did not satisfy Shaw’s deductible obligation to Liberty, (see, e.g., id. at 12); and that Shaw did not
“overpay” its deductible, (see, e.g., id. at 14–18). Liberty explains that its initial refusal to defend
was based on multiple coverage defenses and its ultimate agreement to participate in Shaw’s
defense under a reservation of rights was a “business accommodation.” (Doc. 18-1 at 8; see also
Liberty’s Complaint, Doc. 1 at 8–10, ¶¶ 31–37.)

The specific arguments of the parties on each of these points is considered in detail below.
But the viability of the arguments depends largely on the proper interpretation of Liberty’s
Policies.
2. Applicable Law – Breach of Contract
This Court has explained:

“A contract is an agreement by two or more parties whereby
obligations are created, modified, or extinguished.” La. Civ. Code
art. 1906. “The central elements of a breach of contract action are
the existence of a contract, a party's breach thereof, and damages.”
Favrot v. Favrot, 2010-0986 (La. App. 4 Cir. 2/9/11), 68 So.3d
1099, 1108-09 (quoting Hercules Machinery Corp. v. McElwee
Bros., Inc., 2002 WL 31015598, at *9 (E.D. La. Sept. 2, 2002)).
Stated differently, the elements of a cause of action for breach of
contract are: “(1) the obligor's undertaking of an obligation to
perform (the contract), (2) the obligor failed to perform the
obligation (the breach), and (3) the failure to perform resulted in
damages to the obligee.” Denham Homes, L.L.C. v. Teche Federal
Bank, 14-1576 (La. App. 1 Cir. 9/18/15), 182 So.3d 108,118.

JMF Med., LLC v. Team Health, LLC, 490 F. Supp. 3d 947, 973 (M.D. La. 2020).
3. Applicable Law - Interpretation of the Liberty Insurance Policy
Not surprisingly, the parties differ in their interpretation of the pertinent parts of the Liberty
Policies. The Louisiana Supreme Court laid out the comprehensive and well-established
framework for interpreting insurance policies under Louisiana law in Sims v. Mulhearn Funeral
Home, Inc., 2007-0054 (La. 5/22/07), 956 So. 2d 583, which this Court now quotes in full:
In analyzing insurance polices, certain elementary legal principles
apply. First and foremost is the rule that an insurance policy is a
contract between the parties and should be construed using the
general rules of interpretation of contracts set forth in the Civil
Code. LeBlanc v. Aysenne, 05–0297, p. 3 (La. 1/19/06), 921 So. 2d
85, 89; Edwards v. Daugherty, 03–2103, p. 11 (La. 10/1/04), 883
So. 2d 932, 940; Cadwallader v. Allstate Insurance Co., 02–1637,
p. 3 (La. 6/27/03), 848 So. 2d 577, 580; Louisiana Insurance
Guaranty Association v. Interstate Fire & Casualty Co., 93–0911,
p. 5 (La. 1/14/94), 630 So. 2d 759, 763.

According to those rules, the responsibility of the judiciary in
interpreting insurance contracts is to determine the parties' common
intent. See, [La. Civ. Code] art. 2045; Edwards, 03–2103, p. 11, 883
So. 2d at 940; Cadwallader, 02–1637 at 3, 848 So. 2d at
580; Blackburn v. National Union Fire Insurance Co. of
Pittsburgh, 00–2668, p. 6 (La. 4/3/01), 784 So. 2d 637, 641. Courts
begin their analysis of the parties' common intent by examining the
words of the insurance contract itself. See, [La. Civ. Code] art.
2046; Succession of Fannaly v. Lafayette Insurance Co., 01–
1355, p. 3 (La. 1/15/02), 805 So. 2d 1134, 1137; Blackburn, 00–
2668 at 6, 784 So. 2d at 641 (“[T]he initial determination of the
parties' intent is found in the insurance policy itself.”). In
ascertaining the common intent, words and phrases in an insurance
policy are to be construed using their plain, ordinary and generally
prevailing meaning, unless the words have acquired a technical
meaning, in which case the words must be ascribed their technical
meaning. See, [La. Civ. Code] art. 2047; Edwards, 03–2103 at 11,
883 So. 2d at 940–941; Cadwallader, 02–1637 at 3, 848 So. 2d at
580; Succession of Fannaly, 01–1355 at 3, 805 So. 2d at 1137.

An insurance contract is to be construed as a whole and each
provision in the contract must be interpreted in light of the other
provisions. One provision of the contract should not be construed
separately at the expense of disregarding other provisions. See, [La.
Civ. Code] art. 2050; Hill v. Shelter Mutual Insurance Co., 05–
1783, p. 3 (La. 7/10/06), 935 So. 2d 691, 694; Succession of
Fannaly, 01–1355 at 4–5, 805 So. 2d at 1137; Peterson v.
Schimek, 98–1712, p. 5 (La. 3/2/99), 729 So. 2d 1024, 1029. Neither
should an insurance policy be interpreted in an unreasonable or a
strained manner so as to enlarge or to restrict its provisions beyond
what is reasonably contemplated by its terms or so as to achieve an
absurd conclusion. LeBlanc, 05–0297, at 3, 921 So. 2d at
89; Edwards, 03–2103 at 11, 883 So. 2d at 941; Cadwallader, 02–
1637 at 3, 848 So. 2d at 580; Peterson, 98–1712 at 5, 729 So. 2d at
1028.

When the words of an insurance contract are clear and explicit and
lead to no absurd consequences, no further interpretation may be
made in search of the parties' intent and courts must enforce the
contract as written. See, [La. Civ. Code] art. 2046; Hill, 05–1783 at
3, 935 So. 2d at 694; Peterson, 98–1712 at 4–5, 729 So. 2d at 1028.
Courts lack the authority to alter the terms of insurance contracts
under the guise of contractual interpretation when the policy's
provisions are couched in unambiguous terms. Cadwallader, 02–
1637 at 4, 848 So. 2d at 580; Succession of Fannaly, 01–1355 at
4, 805 So. 2d at 1138. The rules of contractual interpretation simply
do not authorize a perversion of the words or the exercise of
inventive powers to create an ambiguity where none exists or the
making of a new contract when the terms express with sufficient
clarity the parties' intent. Edwards, 03–2103 at 12, 883 So. 2d at
941; Succession of Fannaly, 01–1355 at 4, 805 So. 2d at
1138; Peterson, 98–1712 at 5, 729 So. 2d at 1029.

Nevertheless, if, after applying the general rules of contractual
interpretation to an insurance contract, an ambiguity remains, the
ambiguous contractual provision is generally construed against the
insurer and in favor of coverage. See, [La. Civ. Code] art.
2056; Succession of Fannaly, 01–1355 at 4, 805 So. 2d at
1138; Peterson, 98–1712 at 5, 729 So. 2d at 1029. Under this rule
of strict construction, equivocal provisions seeking to narrow an
insurer's obligation are strictly construed against the
insurer. Edwards, 03–2103 at 12, 883 So. 2d at
941; Cadwallader, 02–1637 at 4, 848 So. 2d at 580; Carrier v.
Reliance Insurance Co., 99–2573, p. 12 (La. 4/11/00), 759 So. 2d
37, 43. This strict construction principle applies, however, only if
the ambiguous policy provision is susceptible to two or more
reasonable interpretations; for the rule of strict construction to apply,
the insurance policy must be not only susceptible to two or more
interpretations, but each of the alternative interpretations must be
reasonable. Edwards, 03–2103 at 12, 883 So. 2d at
941; Cadwallader, 02–1637 at 4, 848 So. 2d at 580; Carrier, 99–
2573 at 12, 759 So. 2d at 43.

The determination of whether a contract is clear or ambiguous is a
question of law. Edwards, 03–2103 at 12–13, 883 So. 2d at
941; Cadwallader, 02–1637 at 4, 848 So. 2d at 580; Louisiana
Insurance Guaranty Association, 93–0911 at 7, 630 So. 2d at 764.
Moreover, when a contract can be construed from the four corners
of the instrument without looking to extrinsic evidence, the question
of contractual interpretation is answered as a matter of law and
summary judgment is appropriate. Robinson v. Heard, 01–1697, p.
4 (La. 2/26/02), 809 So. 2d 943, 945; Peterson, 98–1712 at 5, 729
So. 2d at 1029.
Sims, 956 So. 2d at 588–90. See also Apollo Energy, LLC v. Certain Underwriters at Lloyd's,
London, 387 F. Supp. 3d 663, 670–71 (M.D. La. 2019) (deGravelles, J.).
4.Was Liberty’s deductible reduced by amounts paid by AIG?
Shaw’s contention that Liberty was “overpaid” hinges on its argument that AIG’s payment
of defense costs, which Shaw reimbursed to AIG, reduces the deductible amount on Liberty’s
Policies. The viability of this argument depends on the proper interpretation of the Policies’
“Amendatory Endorsement – Deductible” clause. (Docs. 18-2 and 18-3 at 42–43.) They are
identical in the two Policies. They state, in pertinent part:
You [Shaw] are responsible, up to the deductible amount shown
above, for the total of:

a. all damages, including amounts paid in settlement of a claim or
“suit”, plus

b. any other expenses described in SUPPLEMENTARY
PAYMENTS – COVERAGES A AND B;

because of “personal injury” and “property damage” as the result of
any one “occurrence”.

We [Liberty] are responsible for those amounts of damages to which
this insurance applies (subject to the applicable limits of insurance)
and Supplementary Payments that exceed the applicable deductible
amount shown above.

We [Liberty] have the right but not the duty to advance any part or
all of the deductible amount. If we exercise this right, you must
promptly reimburse us for any such amounts advanced. All such
amounts advanced remain your sole and exclusive liability. . . .

(Doc. 18-2 at 42; Doc. 18-3 at 42.)
The “SUPPLEMENTARY PAYMENTS – COVERAGES A AND B” provision states in
pertinent part:
1. We will pay, with respect to any claim we investigate or settle,
or any “suit” against an insured we defend:

a. All expenses we incur. . . .
(Doc. 18-2 at 11, 75; Doc. 18-3 at 11, 73.)4
Liberty and Shaw agree that “expenses” as used in the “Amendatory Endorsement –
Deductible” clause and the “SUPPLEMENTARY PAYMENTS – COVERAGES A AND B”
provision includes defense costs. (Doc. 51 at 3 and Doc. 52 at 2–3 (both citing, inter alia,
Amerisure Mut. Ins. Co. v. Arch Specialty Ins. Co., 784 F.3d 270, 275 (5th Cir. 2015)).)
While Shaw concedes that “it is obligated to satisfy [Liberty’s] deductible,” it argues it
“has fully satisfied the obligation in part by AIG’s payment of defense costs that were owed by
Liberty.” (Doc. 23 at 26.) In its Counterclaim, Shaw alleges that one of its other insurers, AIG,
paid $665,591.56 in defense costs “on behalf of [Shaw].” (Doc. 10 at 26, ¶ 38.) According to Shaw,
Liberty should give Shaw credit against its deductible for these and other payments made by AIG
since they were made “in satisfaction of [Shaw’s] deductible obligation pursuant to the Liberty
Policies.” (Id. at 26, ¶ 39.)

The starting point for Shaw’s argument is that there is no “explicit restrictive language” in
the Policies that would “support an interpretation that only [Shaw] could discharge its deductible
obligations.” (Doc. 23 at 23.) It then points the Court to La. Civ. Code art. 1855 (“Performance [of
an obligation] may be rendered by a third person, even against the will of the obligee, unless the
obligor or the obligee has an interest in performance only by the obligee”), La. Civ. Code art. 1766
(“When the performance requires the special skill or qualifications of the obligor, the obligation is
presumed to be strictly personal on the part of the obligor” and therefore “its performance can be

4 There are two Supplementary Payments provisions in each policy. (Doc. 18-2 at 11, 75; Doc. 18-3 at 11, 73.) While
the parties disagree as to which one applies in this case, (compare Doc. 51 at 3–4, with Doc. 52 at 2), the dispute does
not matter since the operative language for purposes of this case is identical in each.
enforced . . . only against the obligor”), and various cases including Continental Casualty Co. v.
North America Capacity Insurance Co., 683 F.3d 79 (5th Cir. 2012), to support its position. (Doc.
23 at 23–27.)
Liberty counters that its Policies are clear and explicit that “Shaw, and Shaw alone, is

responsible for reimbursing to Liberty the full $1.25 million deductible amount[.]” (Doc. 18-1 at
7, 21.) It points the Court to seven separate statements in the Policies that support its position,
(Doc. 18-1 at 21 (quoting Docs. 18-2 and 18-3 at 42–43)), including, “All such amounts advanced
shall remain your [Shaw’s] sole and exclusive liability,” (id. (emphasis added) (quoting Docs. 18-
2 and 18-3 at 42)). It contends that its position is supported by Louisiana jurisprudence. (Doc. 18-
1 at 22–24 (citations omitted).) Furthermore, the language of the Policies is explicit that Shaw is
to reimburse Liberty for what Liberty has expended, language inconsistent with Shaw’s position
that monies spent independently by AIG can offset Shaw’s obligation to Liberty. (Doc. 29 at 16.)
Finally, Liberty urges that the cases relied upon by Shaw are distinguishable. (Doc. 29 at 16–18.)
In resolving disputes about the meaning of contracts in general, a court must start with the

language of policy.
When the words of a contract are clear and explicit and lead to no
absurd consequences, no further interpretation may be made in
search of the parties' intent. Common intent is determined, therefore,
in accordance with the general, ordinary, plain and popular meaning
of the words used in the contract.

Clovelly Oil, 112 So. 3d at 192 (cleaned up).
The rule is the same when the contract is one for insurance. “When the words of an
insurance contract are clear and explicit and lead to no absurd consequences, no further
interpretation may be made in search of the parties' intent and courts must enforce the contract as
written.” Sims, 956 So. 2d at 589 (citations omitted).
The language here is clear and explicit: Shaw’s deductible obligation requires it to
reimburse to Liberty expenses that Liberty advanced. The Policies are clear and explicit that Shaw
owes Liberty reimbursement of the deductible amounts expended by Liberty, and AIG’s payment
of third parties on Shaw’s behalf does not satisfy that obligation. For example, the Policies provide:

- “You will reimburse us for any deductible amounts that we
advance or are required to by law to pay.” (Docs 18-2 at 42
(emphasis added).)

- “If we exercise this right [to advance deductible payments], you
must promptly reimburse us for any such amounts advanced.”
(Id. (emphasis added).)

In Zurich American Insurance Co. v. Centex Corp., 373 F. Supp. 3d 692 (N.D. Tex. 2016),
an insured made an argument identical to the one made by Shaw here, i.e., that controlling law
“permits other entities to satisfy a deductible on the insured's behalf, even where the language of
the policy appears to require payment by the insured itself.” Id. at 698. But the Court rejected that
argument based on language in the Zurich policy similar to that found in Liberty’s Policies.
But the Zurich Policy requires Centex to reimburse the deductible
to Zurich. The Fifth Circuit has noted that “reimbursement requires
one to put forth something in order to be paid back.” TIG Ins. Co. v.
Eagle Inc., 294 Fed. App'x 920, 923 (5th Cir. 2008) (internal
quotation marks and citation omitted). The language of the
Deductible Endorsement comports with this definition of
“reimbursement.” It specifically requires Centex to reimburse
Zurich “for deductible amounts that [Zurich] pay[s] on [Centex's]
behalf.” Centex App. 734. In other words, the policy requires Centex
to pay back deductible amounts that Zurich puts forth, obliging
Centex to meet the reimbursable requirement after Zurich covers the
deductible amount, not before.

Zurich Am. Ins., 373 F. Supp. 3d at 699.
Here the situation is the same. AIG’s payment of defense costs to third parties does not
reimburse Liberty for amounts Liberty paid in connection with the case.
Shaw points the Court to cases it contends support its position but these cases are inapposite
in that they involved self-insured retention (“SIR”) provisions without the clear and explicit
reimbursement requirement found in Liberty’s Policies: Cont'l Cas. Co. v. N. Am. Capacity Ins.
Co., 683 F.3d 79, 90 (5th Cir. 2012) (“Although it is undisputed that Encompass never paid its

self-insured retention limit, the policy does not explicitly require the insured to pay the amount
itself.”); Am. Econ. Ins. Co. v. Scottsdale Ins. Co., No. 14-188, 2015 WL 12764955, at *14–16
(S.D. Tex. Oct. 29, 2015) (holding that a third party’s payment of defense costs satisfied the SIR);
Nationwide Mut. Ins. Co. v. Certain Underwriters at Lloyd's, London, No. 15-5503, 2016 WL
3648610, at *4 (N.D. Cal. July 7, 2016) (allowing an insured to satisfy SIR obligation by
purchasing other insurance to make the payment.); Intervest Const. of Jax, Inc. v. Gen. Fid. Ins.
Co., 133 So. 3d 494, 503 (Fla. 2014) (answering a question posed to it by the U.S. Court of
Appeals, Eleventh Circuit, and “find[ing] that the General Fidelity policy allows the insured to
apply indemnification payments received from a third party toward satisfaction of its $1 million
self-insured retention”); Intervest Const. of Jax, Inc. v. Gen. Fid. Ins. Co., 746 F.3d 1261, 1263

(11th Cir. 2014) (mem.) (adopting the opinion of the Florida Supreme Court). See also 15 William
Shelby McKenzie and H. Alston Johnson, Louisiana Civil Law Treatise, Insurance Law and
Practice § 7.23 (4th ed. 2021) (drawing distinction between deductible and SIR).
Liberty points the Court to other language in its Policies which supports its position that
AIG’s payments to third parties do not satisfy Shaw’s deductible obligation, (Doc. 18-1 at 21; Doc.
29 at 15), including, “All such [deductible] amounts advanced shall remain your [Shaw’s] sole and
exclusive responsibility,” (Docs. 18-2 and 18-3 at 42.)
In conclusion, the Court finds that the clear and explicit language of the Policies requires
the deductible amounts expended by Liberty to be reimbursed to Liberty and that AIG’s payments
to third parties made on Shaw’s behalf do not reduce Shaw’s deductible obligation. Accordingly,
Liberty’s Motion is granted insofar as Shaw claims a credit or right of reimbursement of AIG’s
payments of $665,591.56, and this claim will be dismissed.
It is not clear from the Counterclaim whether Shaw is claiming a credit against the

deductible for the $155,894.82 paid by Shaw to third parties for defense costs based on the same
arguments it makes in connection with the amounts paid by AIG. (See, e.g., Doc. 10 at 33, ¶¶ 80–
82.) For the reasons previously detailed, because this money was not paid to Liberty to reimburse
it for money Liberty spent, this amount cannot be deducted from Shaw’s deductible obligation on
this ground. However, the Court considers next whether Shaw can claim this amount as a damage
item for breach of contract.
5. Does Shaw state a breach of contract claim for damages or credit
because of Liberty’s wrongful refusal to timely defend it?

In its Counterclaim, Shaw alleges that it paid $155,894.82 directly “to various entities in
connection with the defense of the Shaw Defendants [in] the Abernathy Lawsuit[.]” (Doc. 10 at
26, ¶ 40. See also Doc. 23 at 6.) Shaw incurred these costs “from the time of [Shaw’s] initial tender
of defense and indemnity to Liberty until Liberty’s belated agreement to participate [in Shaw’s
defense] seventeen months later[.]” (Doc. 10 at 31, ¶ 67.) Shaw alleges that Shaw was forced to
spend these monies “as a result of Liberty’s refusal to fulfill its defense obligations” arising under
the Insurance Policies. (Id. at 33, ¶ 79.) According to Shaw’s Counterclaim,
Liberty wrongfully rejected the tender and denied coverage . . .
[because] Liberty erroneously asserted that the Liberty Policies’
Total Pollution Exclusion excluded any potential coverage, and
further erroneously stated that the Shaw Defendants’ “alleged
involvement at the facility did not begin until 2008, well after the
policy periods of the [Liberty Policies], the last of which expired in
2005.”
(Id. at 21, ¶ 17.) Shaw claims that another erroneous reason given for Liberty’s denial was that
“the Complaints . . . in the Abernathy Lawsuit contained no allegations that the Shaw Defendants
were present and working within the OxyChem plant during the Liberty Coverage Period.” (Id. at
22, ¶ 20.) In addition, Liberty “misreprent[ed] pertinent facts and/or policy provisions. . . .” (Id. at

34, ¶ 89.)
For purposes of the present Motion, these allegations must be taken as true and viewed in
the light most favorable to Shaw. Thompson, 764 F.3d at 502–03 (citation omitted). Furthermore,
as this Court has already explained, because these allegations are alleged to have adversely affected
Shaw’s deductible obligation, they “pertain” to the deductible and were reserved in the Insurance
Settlement.
The Court therefore finds that Shaw’s claim meets the requirements for a breach of
contract: the existence of an insurance contract between the parties, an alleged breach and resulting
damages. JMF Med., 490 F. Supp. 3d at 973. Shaw has stated a claim for breach of contract for
the recovery of damages caused by the breach, including $155,894.82.

6. Is Liberty’s deductible reduced by amounts paid by Shaw directly to
Liberty?

Shaw paid the following items directly to Liberty in satisfaction of its deductible
obligation:
$62,242.65 Paid by Shaw to Liberty as a result of an
“administrative error.” (Doc. 10 at 27, ¶ 47.)

$439,627.00 Paid by Shaw to Liberty only to avoid Liberty’s
drawing on Shaw’s letter of credit. (Id. at 29–30, ¶¶
60–61.)

Shaw claims that the $62,242.64 was paid to Liberty as a result of an “administrative error”
which it was not required to pay because “a substantial portion of its deductible obligations to
Liberty had already been satisfied.” (Doc. 10 at 27, ¶ 47.) As to the $439,627, Shaw claims that it
paid Liberty this amount only “to prevent Liberty from wrongfully drawing on [Shaw’s] letter of
credit thereby causing additional damages to [Shaw].” (Doc. 23 at 33 (citing Doc. 10 at 29–, ¶¶
61–64).)

The payment of these amounts supports Shaw’s allegation that, when combined with
AIG’s payments and its own, Liberty’s deductible was “overpaid” therefore entitling Shaw to the
amount of overpayment. The Court has rejected that argument. However, to the extent Shaw’s
Counterclaim is simply asking for a credit against its deductible obligation for the amounts paid
by Shaw directly to Liberty, it would appear that it is entitled to a credit. Liberty does not appear
to be arguing otherwise. (See Doc. 1, ¶¶ 46, 51, and 54 (conceding that Shaw has “voluntarily paid
$500,461.375 toward the Deductible Amounts” under the Policies but insisting that “Shaw has
refused to reimburse the remaining $749,583.63.”)).) For the reasons given earlier, to the extent
that Shaw is demanding repayment of these amounts from Liberty based on the assumption that
Shaw is entitled to take credit for the amounts paid by AIG, Liberty’s Motion is granted.

D. Has Shaw Stated a Claim for Bad Faith Pursuant to La. R.S. 22:1973?
1. Arguments of the Parties
Shaw claims that Liberty breached its statutory obligation of good faith and fair dealing
under La. R.S. 22:19736 by,
among other things, (1) misrepresenting pertinent facts and/or
policy provisions relating to the coverages applicable to the
Abernathy Lawsuit, (2) wrongfully denying coverage with respect
to the Abernathy Lawsuit, (3) seeking to recover from [Shaw]
deductible amounts that had already been satisfied and/or that
Liberty was aware [Shaw] disputed; and, (4) wrongfully threatening

5 The Court notes that there appears to be a small difference between Liberty’s and Shaw’s calculations of the total of
these amounts. The total of the amounts paid by Shaw directly to Liberty, according to Shaw’s Counterclaim, is
$501,869.65. (See Doc. 10 at 27, ¶ 47; 29–30, ¶¶ 60–61.)
6 In Shaw’s Counterclaim, Shaw erroneously refers to the pertinent statute as La. R.S. 22:1793. (Doc. 10 at 34, ¶ 88.)
to draw on [Shaw’s] letter of credit for amounts not due and/or that
Liberty was aware [Shaw] disputed.

(Doc. 10 at 34, ¶ 89.) It claims that these “bad faith breaches . . . serve as a complete defense to,
an offset against, Liberty’s deductible claims[,] . . . [and] [a]ccordingly, [Shaw] is entitled to
recover all amounts allowed by applicable law.” (Id. at 35, ¶ 91.)
Shaw denies that the Insurance Settlement released the bad faith claims but, to the extent
it did, it could not have released Shaw’s cause of action for Liberty’s conduct after the settlement
(including “wrongfully threatening to draw on [Shaw’s] letter of credit for amounts not due and/or
that Liberty was aware [Shaw] disputed”). (Doc. 10 at 34, ¶ 89.) This is because such a release
would contravene Louisiana Civil Code Article 2004 which declares null a contractual provision
which “in advance, excludes or limits the liability of one party of intentional or gross fault that
causes damage to the other party.” (Doc. 23 at 17 (quoting La. Civ. Code art. 2004).) Acts of bad
faith have been held to be within the meaning of “gross fault.” (Id. at 17–18 (citations omitted).)
Liberty argues that Shaw’s bad faith claim was settled and released by virtue of the
Insurance Settlement. (Doc. 18-1 at 18.) As to Shaw’s argument that prospective settlement of a
bad faith claim is prohibited by La. Civ. Code Art. 2004, Liberty responds that this prohibition
“does not apply to settlement agreements[] because public policy ‘favors settlement and
compromise.’ ” (Doc. 29 at 13 (quoting and citing Hymel, 7 So.3d at 1255–56; Savoie, 2017 WL
4574197).)

Next, Liberty maintains that Shaw’s bad faith claim also fails because Shaw does not allege
specific facts to support such a cause of action.” (Id. at 13–14.) Finally, while Liberty concedes
that the acts constituting bad faith listed in La. R.S. 22:1973(b) are not exclusive, what Shaw
accuses Liberty of doing does not constitute bad faith but was merely Liberty “enforcing its rights
under the policy.” (Id.; Doc. 18-1 at 19.)
2. Applicable Law – Bad Faith
Louisiana Revised Statutes Section 22:1973 states, in pertinent part:
§ 1973. Good faith duty; claims settlement practices; cause of
action; penalties

A. An insurer, including but not limited to a foreign line and surplus
line insurer, owes to his insured a duty of good faith and fair dealing.
The insurer has an affirmative duty to adjust claims fairly and
promptly and to make a reasonable effort to settle claims with the
insured or the claimant, or both. Any insurer who breaches these
duties shall be liable for any damages sustained as a result of the
breach.

B. Any one of the following acts, if knowingly committed or
performed by an insurer, constitutes a breach of the insurer's duties
imposed in Subsection A of this Section:

(1) Misrepresenting pertinent facts or insurance
policy provisions relating to any coverages at issue.

(2) Failing to pay a settlement within thirty days after
an agreement is reduced to writing.

(3) Denying coverage or attempting to settle a claim
on the basis of an application which the insurer
knows was altered without notice to, or knowledge
or consent of, the insured.

(4) Misleading a claimant as to the applicable
prescriptive period.

(5) Failing to pay the amount of any claim due any
person insured by the contract within sixty days after
receipt of satisfactory proof of loss from the claimant
when such failure is arbitrary, capricious, or without
probable cause.

(6) Failing to pay claims pursuant to R.S. 22:1893
when such failure is arbitrary, capricious, or without
probable cause.

C. In addition to any general or special damages to which a claimant
is entitled for breach of the imposed duty, the claimant may be
awarded penalties assessed against the insurer in an amount not to
exceed two times the damages sustained or five thousand dollars,
whichever is greater. Such penalties, if awarded, shall not be used
by the insurer in computing either past or prospective loss
experience for the purpose of setting rates or making rate filings.

La. R.S. 22:1973
“This statute recognizes the jurisprudentially established duty of good faith and fair dealing
owed to the insured, which is an outgrowth of the contractual and fiduciary relationship between
the insured and the insurer.” Republic Ins. Co. v. Hous. Auth. of New Orleans, No. 08-4748, 2013
WL 1897135, at *8 (E.D. La. May 2, 2013) (cleaned up). The Louisiana Supreme Court has
recently reiterated:
In [Kelly v. State Farm Fire & Casualty Co.,] . . . we acknowledged
the reasoning in Stanley v. Trinchard, 500 F.3d 411 (5th Cir. 2007),
in which the federal court explained “[i]nasmuch as it is not the
statute that creates the insured's cause of action against the insurer,
the bases for an insured's cause of action for a breach of the implied
covenant of good faith and fair dealing are not limited to the
prohibited acts listed in La. R.S. 22:[1973](B).” [Kelly, 14-1921 (La.
5/15/15), 169 So. 3d 328, 336] (quoting Stanley, 500 F.3d at 427).

Smith v. Citadel Ins. Co., 2019-00052 (La. 10/22/19), 285 So. 3d 1062, 1069. The Louisiana
Supreme Court continued:
The insurer's duty to act in good faith includes the duty to deal fairly
in handling claims. Smith v. Audubon Ins. Co., 95-2057 (La. 9/5/96),
679 So. 2d 372, 376. Additionally, this court has stated that “. . . in
every case, the insurance company is held to a high fiduciary duty
to discharge its policy obligations to its insured in good faith—
including the duty to defend the insured against covered claims and
to consider the interests of the insured in every settlement.” Pareti
v. Sentry Indem. Co., 536 So. 2d 417, 423 (La. 1988).

Id. at 1067.
“It is generally accepted that an insurer must carefully consider the interests of its insured,
instead of only consulting its own self-interests, when handling and settling claims in order to
protect the insured from exposure to excess liability” Id. (quoting Holtzclaw v. Falco, Inc., 355
So. 2d 1279, 1283–84 (La. 1977)).
3. Discussion
Assuming the truth of Shaw’s allegations and drawing all reasonable inferences in favor of

Shaw, the Court finds that Shaw has stated a claim for bad faith against Liberty for at least some
of the bad faith allegations made. The four areas of allegedly wrongful conduct supporting Shaw’s
bad faith claim are:
(1) misrepresenting pertinent facts and/or policy provisions relating
to the coverages applicable to the Abernathy Lawsuit, (2)
wrongfully denying coverage with respect to the Abernathy
Lawsuit, (3) seeking to recover from [Shaw] deductible amounts
that had already been satisfied and/or that Liberty was aware [Shaw]
disputed; and, (4) wrongfully threatening to draw on [Shaw’s] letter
of credit for amounts not due and/or that Liberty was aware [Shaw]
disputed.

(Doc. 10 at 34, ¶ 89.)
The first two claims of alleged bad faith, when joined together, accuse Liberty of willfully
misrepresenting both the underlying facts giving rise to Shaw’s exposure in the Abernathy Lawsuit
and the provisions in Liberty Policies in order to wrongfully deny coverage. These broad
allegations are supported by specific ones: see id. at 19–24, ¶¶ 6–31. Liberty’s Motion is denied
as to this part of the bad faith claim. Because of its alleged bad faith, Shaw was forced to spend
$155,894.82 in defense costs before Liberty agreed to participate in Shaw’s defense. (Id. at 26, ¶
40.)
The Court finds that Shaw has not stated a cause of action for the third area of alleged bad
faith conduct on the part of Liberty, i.e. Liberty’s “seeking to recover from [Shaw] deductible
amounts that had already been satisfied and/or that Liberty was aware [Shaw] disputed.” (Id. at
34, ¶ 89.) Here, the Court finds that, for reasons already given, Shaw is not entitled to a credit in
its deductible obligation to Liberty through amounts paid by AIG. Therefore, Liberty cannot be in
bad faith for denying that claim.
Similarly, Shaw’s fourth main area of alleged bad faith also seems to be premised on its
allegation that Shaw is entitled to a credit for AIG’s payments. Furthermore, Shaw’s Counterclaim

does not provide facts to explain or support why Liberty’s threat to draw on Shaw’s letter of credit
given by Shaw to secure repayment of the deductible could be in bad faith otherwise. Therefore,
Liberty’s Motion as to the third and fourth areas of Liberty’s alleged bad faith is granted.
E. Has Shaw Stated a Claim for Unjust Enrichment?
1. Arguments of the Parties
Based on essentially the same allegations made in connection with the breach of contract
and bad faith claims, Shaw claims that Liberty was wrongfully overpaid and thus “Liberty was
unjustly enriched and [Shaw] was impoverished.” (Doc. 10 at 31, ¶ 68. See generally id. at 31–32,
¶¶ 67–71.) Shaw claims it is “entitled to recover the full amount of its overpayment from Liberty.”
(Id. at 32, ¶ 71.)

Liberty responds simply that the amounts paid to Liberty by Shaw were “due and owed . .
. and therefore cannot give rise to any unjust enrichment claim as a matter of law.” (Doc. 18-1 at
20.) As to that portion of the claim based on amounts paid by AIG, Liberty returns to its refrain
that credit was not due because the deductible endorsement requires Shaw, and Shaw alone, to
reimburse Liberty for what Liberty has paid. (Id. at 21–24.) The payments by AIG to third parties
did not do that. (Id.)
2. Applicable Law - Unjust Enrichment Claim

Louisiana Civil Code article 2298 sets out the cause of action for unjust enrichment:

A person who has been enriched without cause at the expense of
another person is bound to compensate that person. The term
“without cause” is used in this context to exclude cases in which the
enrichment results from a valid juridical act or the law. The remedy
declared here is subsidiary and shall not be available if the law
provides another remedy for the impoverishment or declares a
contrary rule.

La. Civ. Code art. 2298.

To establish a claim for unjust enrichment under Louisiana law, a
claimant must prove: “(1) an enrichment, (2) an impoverishment,
(3) a connection between the enrichment and the resulting
impoverishment, (4) an absence of ‘justification’ or ‘cause’ for the
enrichment and impoverishment, and (5) no other remedy at law.”
Brown v. Coleman Investments, Inc., 993 F. Supp. 432, 439 (M.D.
La. 1998), citing Baker v. Maclay Properties Co., 648 So. 2d 888,
897 (La. 1995) (citations omitted). Courts may “ ‘resort to equity
only in cases of unjust enrichment for which there is no justification
in law or contract.’ ” Id., citing SMP Sales Mgt., Inc. v. Fleet Credit
Corp., 960 F.2d 557, 560 (5th Cir. 1992) (citations omitted). Stated
simply, “ ‘[q]uasi-contractual remedies may not supplant a contract
between the parties.’ ” Id., quoting Marple v. Kurzweg, 902 F.2d
397, 401 (5th Cir. 1990) (citations omitted) (emphasis added).

JMF Med., 490 F. Supp. 3d at 979–80.

In addition to its claim of unjust enrichment, Shaw urges two other causes of action: breach
of contract and bad faith. The existence of these two claims necessarily precludes Shaw’s ability
to recover for unjust enrichment. Id. at 980 (“[B]oth the state and federal courts hold that the
existence of a contract between the parties alone defeats a claim for unjust enrichment.”); Williams
v. Chesapeake Operating, Inc., No. 10-1906, 2011 WL 13160764, at *2 (W.D. La. Sept. 14, 2011)
(“It is well-established that the absence of an available remedy at law is a threshold requirement,
as the unjust enrichment remedy is available only to fill a gap in the law where no express remedy
is provided.” (cleaned up)).
There are circumstances in which a plaintiff’s assertion of other causes of action does not
require dismissal of an unjust enrichment claim at the motion stage.
To the extent that Defendant is positing that an unjust enrichment
claim may never be pleaded alongside another claim, the Court
disagrees. This Court has rejected the “blanket proposition that no
plaintiff may ever plead an unjust enrichment claim alongside a
claim which would grant a remedy at law.” Prop. One, Inc. v.
USAgencies, L.L.C., 830 F. Supp. 2d 170, 181 (M.D. La. 2011). This
Court has held that the law does not compel “an election of remedies
between a contractual theory and an unjust enrichment theory prior
to filing a complaint.” Id. See also Cent. Facilities Operating Co. v.
Cinemark USA, Inc., No. CIV.A. 11–660–JJB, 2014 WL 3866086,
at *5 (M.D. La. Aug. 6, 2014) (finding cognizable unjust enrichment
claim in same suit in which plaintiff maintained claim of open
account).

With the validity of Plaintiff's contract with Defendant still in
question, and with no other potential remedies at law, the Court does
not find a sufficient basis to dismiss Plaintiff's unjust enrichment
claim at summary judgment based on the availability of other
remedies at law.

United States ex rel. Sun Coast Contracting Servs., LLC v. DQSI, LLC, No. 13-568, 2014 WL
7246936, at *5 (M.D. La. Dec. 17, 2014) (Jackson, J.) (emphasis added). See also Schott, Tr. for
Est. of InforMD, LLC v. Massengale, No. 18-759, 2019 WL 4741811, at *17 (M.D. La. Sept. 27,
2019) (deGravelles, J).
But here, neither party questions the existence or validity of the insurance contract at issue.
The question is whether the contract was breached and, if so, what damages flow from that breach.
It is the availability of the remedy at law, not its success, that precludes the unjust enrichment
claim. As the Court explained in Sun Coast Contracting Servs.:
A plaintiff need not ultimately prevail on another claim for a court
to find that it was available. “The existence of a ‘remedy’ which
precludes application of unjust enrichment does not connote the
ability to recoup your impoverishment . . . It merely connotes the
ability to bring the action or seek the remedy.” Carriere v. Bank of
La., 702 So. 2d 648, 672 (La. 1996). For example, courts have found
remedies at law available even when claims based in law were time-
barred or never advanced. See, e.g., Walters v. MedSouth Record
Mgmt., LLC, 38 So. 3d 241, 242 (La. 2010); JP Mack Indus. LLC v.
Mosaic Fertilizer, LLC, 970 F. Supp. 2d 516, 520–23 (E.D. La.
2013).

Sun Coast Contracting Servs., 2014 WL 7246936, at *4.
Under these circumstances, the Court finds that Shaw fails to state a valid claim for unjust
enrichment. JMF Med., 490 F. Supp. 3d at 980; Andretti Sports Mktg. Louisiana, LLC v. NOLA
Motorsports Host Comm., Inc., No. 15-2167, 2015 WL 13540096, at *7–8 (E.D. La. Dec. 2, 2015)
(“The existence of another remedy at law will preclude an unjust enrichment claim.”); Reel Pipe,
LLC v. USA Comserv, Inc., No. 18-6646, 2019 WL 127055, at *4 (E.D. La. Jan. 8, 2019) (“USA
Comserv cannot state a claim for unjust enrichment because other remedies are available at law.”
(citation omitted)); Cf. Schott, 2019 WL 4741811, at *17 (declining to dismiss unjust enrichment
claim because, inter alia, “the validity of the other claims in the Complaint [was] still in
question.”).
V. WHETHER TO ALLOW AN AMENDMENT OF THE COUNTERCLAIM
Shaw asks for the opportunity to amend its Counterclaim in the event the “Court find[s]
the Counterclaim to be deficient in stating a claim entitling [Shaw] to the relief sought. . . .” (Doc.

23 at 33.) Liberty opposes that request arguing that an “opportunity to amend would be futile.”
(Doc. 29 at 18.)
“[A] court ordinarily should not dismiss the complaint except after affording every
opportunity to the plaintiff to state a claim upon which relief might be granted.” JMCB, LLC v.
Bd. of Com. & Indus., 336 F. Supp. 3d 620, 641 (M.D. La. 2018) (deGravelles, J.) (quoting Byrd
v. Bates, 220 F.2d 480, 482 (5th Cir. 1955)). Moreover, the Fifth Circuit has stated:
In view of the consequences of dismissal on the complaint alone,
and the pull to decide cases on the merits rather than on the
sufficiency of pleadings, district courts often afford plaintiffs at least
one opportunity to cure pleading deficiencies before dismissing a
case, unless it is clear that the defects are incurable or the plaintiffs
advise the court that they are unwilling or unable to amend in a
manner that will avoid dismissal.

Great Plains Tr. Co. v. Morgan Stanley Dean Witter & Co., 313 F.3d 305, 329 (5th Cir. 2002).
Further:
As the numerous case[s] . . . make clear, dismissal under Rule
12(b)(6) generally is not immediately final or on the merits because
the district court normally will give the plaintiff leave to file an
amended complaint to see if the shortcomings of the original
document can be corrected. The federal rule policy of deciding cases
on the basis of the substantive rights involved rather than on
technicalities requires that the plaintiff be given every opportunity
to cure a formal defect in the pleading. This is true even when the
district judge doubts that the plaintiff will be able to overcome the
shortcomings in the initial pleading. Thus, the cases make it clear
that leave to amend the complaint should be refused only if it
appears to a certainty that the plaintiff cannot state a claim. A district
court's refusal to allow leave to amend is reviewed for abuse of
discretion by the court of appeals. A wise judicial practice (and one
that is commonly followed) would be to allow at least one
amendment regardless of how unpromising the initial pleading
appears because except in unusual circumstances it is unlikely that
the district court will be able to determine conclusively on the face
of a defective pleading whether the plaintiff actually can state a
claim for relief.

JMCB, 336 F. Supp. 3d at 642 (quoting 5B Charles A. Wright, Arthur R. Miller, et al., Federal
Practice and Procedure § 1357 (3d ed. 2016)).
Accordingly, the Court will act according to the “wise judicial practice” and grant leave
to amend. See Watkins v. Gautreaux, 515 F. Supp. 3d 500, 519 (M.D. La. 2021) (deGravelles, J.)
(citing, inter alia, Fetty v. La. State Bd. of Private Sec. Exam’rs, No. 18-517, 2020 WL 520026, at
*15 (M.D. La. Jan. 31, 2020) (deGravelles, J.).
However, the Court reminds both parties of the need for judicial economy and their
obligations under Federal Rule of Civil Procedure 11. Specifically, by signing the pleading, all
attorneys must “certif[y] that to the best of [their] knowledge, information, and belief, formed after
an inquiry reasonable under the circumstances: . . .
(2) the claims, defenses, and other legal contentions are warranted
by existing law or by a nonfrivolous argument for extending,
modifying, or reversing existing law or for establishing new law;
[and]

(3) the factual contentions have evidentiary support or, if
specifically so identified, will likely have evidentiary support after
a reasonable opportunity for further investigation or discovery[.]

Fed. R. Civ. P. 11(b)(2), (3). Thus, if it appears to Shaw’s counsel that they have no viable way
of curing the defects to any dismissed claims (e.g., for unjust enrichment), then they should
abandon same. Similarly, Liberty is reminded of its oblgation in raising arguments opposing any
amended Counterclaim. In sum, given the complexity of this case, and given the Court’s caseload
(both generally and since the COVID-19 pandemic began), both parties are encouraged to act in a
way to maximize judicial economy and conserve party, attorney, and judicial resources. Given the
quality of attorneys in this case, the Court has little doubt that counsel will abide by this instruction.
VI. CONCLUSION
For the reasons stated above, Liberty Mutual Fire Insurance Company’s Motion to Dismiss
for Failure to State a Claim (“Motion”) (Doc.18) is GRANTED IN PART and DENIED IN
PART as follows:
1) Liberty’s Motion is GRANTED insofar as Shaw claims a credit for or right of
reimbursement of AIG’s payments of $665,591.56, and this claim will be DISMISSED
WITHOUT PREJUDICE.
2) Liberty’s Motion is GRANTED insofar as Shaw claims a credit for $155,894.82 based on
Shaw’s contention that Shaw’s payments to third parties reduced its deductible obligation
to Liberty, and this claim will be DISMISSED WITHOUT PREJUDICE.
3) Liberty’s Motion is GRANTED insofar as Shaw claims amounts allegedly “overpaid”
above the Liberty Policies’ combined deductibles of $1,250,000, and this claim will be
DISMISSED WITHOUT PREJUDICE.
4) Liberty’s Motion is GRANTED to the extent Shaw is demanding repayment of amounts

paid by Shaw directly to Liberty (approximately $501,869.65) based on the assumption
that Shaw is entitled to take credit for the amounts paid by AIG, and this claim is
DISMISSED WITHOUT PREJUDICE.
5) Liberty’s Motion is GRANTED as to Shaw’s bad faith claims for Liberty’s alleged (a)
seeking to recover from Shaw deductible amounts that had already been satisfied and/or
that Liberty was aware Shaw disputed, and (b) wrongfully threatening to draw on Shaw’s
letter of credit for amounts not due, and these claims will be DISMISSED WITHOUT
PREJUDICE.
6) Liberty’s Motion is GRANTED insofar as Shaw claims damages for unjust enrichment,
and this claim will be DISMISSED WITHOUT PREJUDICE.

7) In all other respect, Liberty’s Motion is DENIED.
IT IS FURTHER ORDERED that Shaw is hereby given twenty-eight (28) days in which
to amend the Counterclaim to cure the deficiencies detailed in this ruling. Failure to do so will
result in the dismissal of these deficient counterclaims against Liberty with prejudice.
Signed in Baton Rouge, Louisiana, on March 25, 2022.

S

JUD GE JOHN W. deGRAVELLES
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10192190. Public record. Not legal advice.