Justia U.S. 5th Circuit Court of Appeals Opinion Summaries

In March 2013, Woodsboro Farmers Cooperative contracted with E.F. Erwin, Inc. to construct two grain silos. Erwin subcontracted AJ Constructors, Inc. (AJC) for the assembly. AJC completed its work by July 2013, and Erwin finished the project in November 2013. However, Woodsboro noticed defects causing leaks and signed an addendum with Erwin for repairs. Erwin's attempts to fix the silos failed, leading Woodsboro to hire Pitcock Supply, Inc. for repairs. Pitcock found numerous faults attributed to AJC's poor workmanship, necessitating complete deconstruction and reconstruction of the silos, costing Woodsboro $805,642.74.Woodsboro sued Erwin in Texas state court for breach of contract, and the case went to arbitration in 2017. The arbitration panel found AJC's construction was negligent, resulting in defective silos, and awarded Woodsboro $988,073.25 in damages. The Texas state court confirmed the award in September 2022. In December 2018, TIG Insurance Company, Erwin's insurer, sought declaratory relief in the United States District Court for the Southern District of Texas, questioning its duty to defend and indemnify Erwin. The district court granted TIG's motion for summary judgment on the duty to defend, finding no "property damage" under the policy, and later ruled there was no duty to indemnify, as the damage was due to defective construction.The United States Court of Appeals for the Fifth Circuit reviewed the case. The court found that there were factual questions regarding whether the damage constituted "property damage" under the insurance policy, as the silos' metal parts were damaged by wind and weather due to AJC's poor workmanship. The court determined that the district court erred in granting summary judgment for TIG and concluded that additional factual development was needed. The Fifth Circuit reversed the district court's decision and remanded the case for further proceedings. View "TIG Insurance Company v. Woodsboro Farmers Coop" on Justia Law

In this case, a primary insurer, Westport Insurance Corporation, and an excess insurer, Pennsylvania National Mutual Casualty Insurance Company, disputed liability for a judgment against their mutual insured, Insurance Alliance (IA). IA was sued by Lake Texoma Highport LLC for failing to procure requested insurance coverage, resulting in significant property damage. IA had a primary insurance policy with Westport and an excess policy with Penn National. Westport controlled the defense and rejected multiple settlement offers from Highport. A jury found IA liable, resulting in a $13.7 million judgment.The United States District Court for the Southern District of Texas determined that Penn National breached its duties to defend and indemnify IA. However, a jury found that Westport violated its Stowers duty by not accepting reasonable settlement offers. The district court ruled that Penn National's breaches occurred after Westport's Stowers violation and thus did not impact the case outcome.The United States Court of Appeals for the Fifth Circuit reviewed the case. The court affirmed that Penn National breached its duties but held that Westport's Stowers duty was triggered by Highport's settlement offers, which Westport unreasonably rejected. The court found that the district court's jury instructions were correct and that Penn National had standing to assert a Stowers claim. The court also concluded that the district court did not err in its jury instructions or in setting aside the jury's verdict regarding the May 2009 demand.Ultimately, the Fifth Circuit affirmed the district court's judgment, holding that Westport was liable for the excess judgment due to its Stowers violation, and Penn National was entitled to reimbursement for the amount it paid on IA's behalf. View "Westport Insurance Corporation v. Pennsylvania National Mutual Casualty Insurance Company" on Justia Law

The case involves a dispute between Century Surety Company, acting as a subrogee of Triangle Engineering, L.P., and Colgate Operating, L.L.C. over the interpretation of a Master Services/Sales Agreement (MSA) and the insurance policies of the parties. Colgate, an oil well operator, and Triangle, an oilfield consultancy, entered into the MSA in April 2017, which included mutual indemnity provisions supported by liability insurance. Both parties purchased insurance, but Colgate's coverage was significantly higher than Triangle's. Following an accident involving a worker, Century, as Triangle’s subrogee, sought reimbursement from Colgate for a settlement payment.The United States District Court for the Western District of Texas granted summary judgment in favor of Colgate. The court rejected affidavits from Colgate’s vice president and Triangle’s sole member, which were intended to clarify the parties' intentions at the time of the MSA signing. The district court concluded that the MSA did not specify a ceiling for insurance coverage and applied the "lowest common denominator rule" from the Texas Supreme Court’s decision in Ken Petroleum Corp. v. Questor Drilling Corp., limiting Colgate’s indemnity obligation to $6 million, the amount of coverage Triangle had purchased.The United States Court of Appeals for the Fifth Circuit reviewed the case de novo and affirmed the district court’s judgment but on different grounds. The appellate court agreed that the district court correctly excluded the extrinsic evidence but found that the MSA itself provided both a floor and a ceiling of $5 million for mutual indemnity coverage. The court held that Colgate’s insurance policies did not alter this limit and that Colgate was not liable to Century beyond the $5 million specified in the MSA. Thus, the court affirmed the district court’s judgment in favor of Colgate. View "Century Surety Co. v. Colgate Operating" on Justia Law

In 2021, Shannon Carson was injured in an automobile accident in Louisiana while driving an 18-wheeler truck owned by his employer. The accident was caused by another driver, Jamarcea Washington, who was insured by GEICO and died in the collision. Carson's employer's truck was insured by American Millenium Insurance Company, which provided $75,000 in underinsured motorist (UIM) coverage. Carson also had a personal automobile insurance policy with USAA, which provided $50,000 in UIM coverage. Carson settled with GEICO and American Millenium for their policy limits and then sought additional UIM benefits from his USAA policy.The case was initially filed in Louisiana state court and then removed to the United States District Court for the Western District of Louisiana based on diversity jurisdiction. The district court granted summary judgment in favor of USAA, concluding that Carson, as a Class II insured under South Carolina law, was prohibited from stacking his personal UIM insurance on top of the American Millenium UIM coverage. Carson filed a Rule 59(e) motion, arguing that he was entitled to "port" his personal UIM coverage under South Carolina law. The district court denied the motion, maintaining that the case involved stacking, not portability, and that Carson had already received the statutory limit for UIM coverage.The United States Court of Appeals for the Fifth Circuit reviewed the case de novo. The court concluded that South Carolina law does not prevent Carson from recovering UIM benefits under his personal automobile insurance policy with USAA. The court distinguished between stacking and portability, noting that while stacking is prohibited for Class II insureds, portability allows an insured to recover under their personal UIM policy when their vehicle is not involved in the accident. The court vacated the district court's summary judgment and remanded the case for further proceedings consistent with its opinion. View "Carson v. USAA Casualty Insurance" on Justia Law

Christa Taylor purchased an automobile insurance policy from Root Insurance Company. After her vehicle was damaged in a hailstorm, Root determined it to be a total loss and paid Taylor the vehicle's actual cash value of $22,750. However, Root did not include an amount representing the sales tax in this payment. Taylor argued that the policy required Root to pay the applicable sales tax in addition to the actual cash value and filed a putative class action for breach of contract and violation of the Texas Prompt Payment of Claims Act (TPPCA).The United States District Court for the Western District of Texas reviewed the case. Root moved to dismiss Taylor's claims under Federal Rule of Civil Procedure 12(b)(6). The magistrate judge recommended granting Root's motion and denying Taylor's request for leave to amend her complaint. The district court conducted a de novo review, agreed with the magistrate judge, and dismissed the suit. Taylor then appealed the decision.The United States Court of Appeals for the Fifth Circuit reviewed the case de novo. The court held that the insurance policy's language required Root to pay only the "applicable sales tax," and since a total-loss settlement is not considered a sale under Texas law, no sales tax was applicable. The court also noted that actual cash value does not include taxes and fees payable to purchase a replacement vehicle under Texas law. Consequently, Root did not breach the policy, nor did it violate the TPPCA. The court affirmed the district court's dismissal of Taylor's claims. View "Taylor v. Root Insurance" on Justia Law

The case revolves around Wapiti Energy, L.L.C. ("Wapiti"), the owner of a 155-foot tank barge, the SMI 315, which broke free of its moorings and ran aground in marshland owned by a third party during Hurricane Ida. The vessel was insured under a marine package policy issued by Clear Spring Property and Casualty Company ("Clear Spring"). The policy provided coverage for wreck removal expenses that are compulsory by law. After the incident, Wapiti incurred expenses in removing the stranded vessel from the marshland and sought reimbursement from Clear Spring. Clear Spring, however, moved for summary judgment, arguing that the removal of the SMI 315 was not compulsory by law, and thus, it was not obligated to reimburse the expenses.The United States District Court for the Southern District of Texas ruled in favor of Clear Spring, concluding that removal of the SMI 315 was not compulsory by law and dismissing Wapiti’s claims. Wapiti appealed this decision.The United States Court of Appeals for the Fifth Circuit reviewed the case and reversed the lower court's decision. The court concluded that the removal of the SMI 315 was compelled by the Louisiana possessory action, which made removal compulsory by law. The court reasoned that at the time of the incident, a reasonable owner would know that the barge stranded on a third party's property would expose them to a high probability of having to comply with an injunction mandating the removal of the vessel. Therefore, Wapiti's proactive removal of the vessel from the third party's marshland was warranted, and Clear Spring was obligated to reimburse the expenses. The case was remanded for further proceedings consistent with this opinion. View "Wapiti Energy v. Clear Spring Property and Casualty Co." on Justia Law

Ian Simpson purchased a life insurance policy from Transamerica Life Insurance Company and named his then-fiancée, Holly Moore, as the primary beneficiary and his father, Jeffrey Simpson, as the contingent beneficiary. After Ian and Holly married and subsequently divorced, Ian died without changing the policy beneficiaries. The divorce decree stipulated that Holly was divested of all rights to Ian's life insurance policies. After Ian's death, both Holly and Jeffrey claimed the policy proceeds, leading Transamerica to file an interpleader action in federal court.The district court ruled in favor of Holly, holding that Texas Family Code § 9.301, which generally strips an ex-spouse of beneficiary interests in insurance policies after a divorce, only applies if the insured and the beneficiary were married when the insurance policy was purchased. The court reasoned that since the policy was purchased before Ian and Holly's marriage, Holly was not considered "the insured's spouse" at the time of the policy's inception, and therefore, the divorce decree did not divest her of the insurance proceeds.On appeal, the United States Court of Appeals for the Fifth Circuit reversed the district court's judgment. The appellate court interpreted § 9.301 to focus on the marital relationship at the time of the divorce decree's rendition, regardless of when the insurance policy was purchased. The court held that since Holly was Ian's spouse at the time of the divorce decree, § 9.301 divested her of her beneficiary interest in the policy. Therefore, the court ruled in favor of Jeffrey Simpson, the contingent beneficiary. View "Simpson v. Moore" on Justia Law

Baylor Scott & White Holdings (BSW), the largest nonprofit health system in Texas, purchased a specialized commercial property insurance policy from Factory Mutual Insurance Co. (FM) to cover its facilities. The policy covered two types of claims—“Property Damage” and “Time Element” claims, which are synonymous with “business interruption” loss. BSW submitted a claim under the policy for its business interruption losses as a result of COVID-19, totaling over $192 million. FM denied the claim, stating that the only coverage under the policy for losses arising from COVID-19 came from the Communicable Disease Response Extension and the Interruption by Communicable Disease Extension, which had already been exhausted.FM moved to dismiss the amended complaint for failure to state a claim. The district court granted FM’s motion to dismiss, finding that BSW had not plausibly alleged “physical loss or damage” under the policy, and that the Contamination Exclusion and Loss of Use Exclusion barred BSW’s recovery under the policy. BSW appealed the district court’s dismissal order.The United States Court of Appeals for the Fifth Circuit affirmed the decision of the district court. The court held that, in the context of COVID-19 commercial-insurance coverage disputes, COVID-19 does not physically harm property. The court found that the alleged uniqueness of the policy’s language did not change this determination. The court also rejected BSW's contention that its complaint was wrongly dismissed because it included specific factual allegations of demonstratable, measurable, and tangible alteration of property caused by COVID-19. The court concluded that, as a matter of law, COVID-19 does not affect property in a “physical” way. View "Baylor Scott & White v. Factory Mutual" on Justia Law

The case involves First Baptist Church of Iowa, Louisiana (FB Church) and Church Mutual Insurance Company, S.I. (CM Insurance). FB Church sued CM Insurance for failing to pay benefits for property damage caused by Hurricane Laura under an insurance policy. The property included three buildings: the main church, a parsonage, and a vacant building. After the hurricane, FB Church reported the loss to CM Insurance, which then hired a third-party administrator to adjust the loss. The administrator estimated the total loss at $630,000 before deductibles. However, FB Church was dissatisfied with how its claim was being handled and hired a public adjuster, who prepared an estimate of over $1 million in damages. FB Church then sued CM Insurance, alleging claims for additional covered losses and for statutory penalties, costs, and attorney’s fees under Louisiana Revised Statutes § 22:1892.The United States District Court for the Western District of Louisiana found in favor of FB Church, awarding it damages, statutory penalties, attorney’s fees, and costs. CM Insurance appealed the decision to the United States Court of Appeals for the Fifth Circuit.The Fifth Circuit affirmed in part and reversed in part. The court agreed with the district court that CM Insurance failed to adjust the claim and that FB Church was entitled to statutory penalties. However, the court found that the district court erred in calculating damages based on prices in January 2023 instead of at the time of loss, and in awarding any damages for slab repair and damages in excess of $4,500 for the sanctuary’s electrical repair. The case was remanded for recalculation of damages. View "First Baptist Church of Iowa, Louisiana v. Church Mutual Insurance, S.I." on Justia Law

The case involves SKAV, L.L.C., the owner of a Best Western hotel in Abbeville, Louisiana, and Independent Specialty Insurance Company. The hotel was damaged by Hurricane Laura in August 2020, and SKAV filed a claim on a surplus lines insurance policy it had purchased from Independent Specialty. The policy contained an arbitration clause requiring all disputes to be settled by arbitration. However, SKAV sued Independent Specialty in the Western District of Louisiana, alleging that the insurance company had failed to adequately cover the hotel's hurricane damage under the policy's terms. Independent Specialty moved to compel arbitration, but the district court denied the motion, citing a prior decision that concluded that § 22:868 of the Louisiana Revised Statutes voids an arbitration provision in a contract for surplus lines insurance.The case was appealed to the United States Court of Appeals for the Fifth Circuit. The main dispute was the effect of § 22:868 of the Louisiana Revised Statutes on the insurance policy's arbitration clause. The statute bars insurance policies from depriving Louisiana courts of jurisdiction and permits, in limited circumstances, forum- and venue-selection provisions. The court noted that there were conflicting decisions on this issue from district courts in Louisiana and New York.The Fifth Circuit Court of Appeals affirmed the district court's decision. The court concluded that the arbitration clause in the surplus lines insurance policy was void under § 22:868. The court reasoned that the Louisiana Legislature's 2020 amendments to the statute did not reverse the state's longstanding anti-arbitration policy. The court also rejected Independent Specialty's argument that the issue of the arbitration clause's validity must itself go to arbitration, stating that when a statute prevents the valid formation of an arbitration agreement, the court cannot compel arbitration, even on threshold questions of arbitrability. View "S. K. A. V. v. Independent Specialty Insurance Co." on Justia Law