Miranda et al v. Selective Insurance Company of the Southeast et al

RESPONSE/MEMORANDUM in Opposition

E.D. La.December 11, 2017

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF LOUISIANA PEGGY ENRIQUES MIRANDA and CIVIL ACTION JIMMY WAYNE MIRANDA NO. 2:16-cv-12555 VERSUS Section: “J” (5) SELECTIVE INSURANCE COMPANY OF THE SOUTHEAST, NATIONSTAR HON. CARL J. BARBIER, JUDGE MORTGAGE, LLC, ABC INSURANCE COMPANY, DWIGHT W. ANDRUS MAG. JUDGE MICHAEL B. NORTH INSURANCE AGENCY, INC. AND DEF INSURANCE COMPANY MEMORANDUM IN OPPOSITION OF MOTION FOR SUMMARY JUDGMENT FILED BY DWIGHT W. ANDRUS INSURANCE AGENCY, INC. MAY IT PLEASE THE COURT: Dwight D. Andrus Insurance Agency, Inc. (hereafter Andrus) has filed a motion for summary judgment stating that the Plaintiffs’ state law claim does not meet the threshold required to hold an insurance agent liable based upon Peggy Miranda’s deposition testimony. Mrs. Miranda was the primary plaintiff involved regarding the discussions with Andrus, such that it is her testimony that is most probative. Mrs. Miranda’s deposition testimony clearly creates a genuine issue of material fact in that Andrus had taken care of these transactions for the Mirandas for about 40 years. Andrus attempts to warp both Mrs. Miranda’s testimony as well as Louisiana law in its attempt to avoid the credibility determination that is required in this matter. Furthermore, this Honorable Court should not find that the defendant actually procured a policy 1 Case 2:16-cv-12555-CJB-MBN Document 154 Filed 12/11/17 Page 1 of 11 for the Mirandas, as the case law contemplates that actual completion of the sale in order to actually procure said policy. I. Procedural Background Peggy and Jimmy Miranda filed suit after discovering that the flood insurance that they believed was procured by the defendants was actually not procured as the policy was never paid for out of the escrow account held by Nationstar as had been done each year before since 2011. This Honorable Court dismissed Selective Insurance Company of the Southeast and Corelogic Solutions based upon its interpretation of the provisions and caselaw that is applicable to the NFIP. Andrus does not share in these federal protections, and as such, has filed this Motion for Summary Judgment purely based upon an incorrect interpretation of Louisiana state law as well as the misapplication of Mrs. Miranda’s testimony. Furthermore, a compromise has been reached with Nationstar, leaving Andrus as the remaining defendant in this matter regarding the outstanding damages applicable to the Mirandas contents that were destroyed during the March 2016 flood. Further complicating matters is the fact that Plaintiffs have filed a motion to remove this matter back to state court. Plaintiffs’ counsel has done this primarily based upon a prior ruling in another case before the Eastern District in years prior where after the resolution of the federal claims based upon the NFIP, the federal court chose to send the matter back down to the state court, which resulted in preemption against the insurance agent defendant. Plaintiffs cannot afford a similar situation to occur once again, so the decision was made to have this Honorable Court rule upon jurisdiction now. Should this Honorable Court believe that a remand is proper, it should not take up the merits of the defendant’s motion for summary judgment. 2 Case 2:16-cv-12555-CJB-MBN Document 154 Filed 12/11/17 Page 2 of 11 Notwithstanding, plaintiffs assert that there is a clear genuine issue of material fact precluding summary judgment in this matter. II. Law and Argument Louisiana law specifically points to the Mirandas’ burden of proof against Andrus regarding liability. The Louisiana Supreme Court in Karam specifically held that “an insurance agent who undertakes to procure insurance for another owes an obligation to his client to use reasonable diligence in attempting to place the insurance requested and to notify the client promptly if he has failed to obtain the requested insurance. The client may recover from the agent the loss he sustains as a result of the agent's failure to procure the desired coverage if the actions of the agent warranted an assumption by the client that he was properly insured in the amount of the desired coverage.” Karam v. St. Paul Fire & Marine Ins. Co., 281 So. 2d 728, 730–31 (La. 1973). However, with regards to just the first component regarding procurement, “an insurance agent's duty can be greater than merely procuring the insurance requested, depending on what services the agent holds himself out as performing and the nature of the specific relationship and agreements between the agent and his client.” White v. Allstate Ins. Co., 513 F. Supp. 2d 674, 683 (E.D. La. 2007). Andrus’ entire argument is twofold: 1) that Andrus procured a policy and had no further duty to the plaintiffs to ensure that the policy premium was paid or maintained, and 2) that the testimony of Mrs. Miranda proves that there was no contract between Andrus and the Plaintiffs to do anything more than what was done. The problem for Andrus and why this case clearly presents a genuine issue of material fact is simple – Andrus had a duty to do what it has previously done for forty years as was the arrangement and simply did not follow through. 3 Case 2:16-cv-12555-CJB-MBN Document 154 Filed 12/11/17 Page 3 of 11 Andrus began monitoring the transactions when their mortgage company required escrow deposits beginning in 2011. Andrus’ previous actions belie their argument regarding a lack of duty for an insurance agent. A. Regardless of the definition of procurement, Andrus’ prior actions clearly lends to a genuine issue of material fact The arrangement since the Mirandas can remember, would be for Peggy Miranda to seek out Andrus’ help regarding the renewal of a new policy year and follow their instructions, including when Andrus notified her before in 2014 of a policy lapse. Q. Do you remember any time before March 2016 when you received notice that your flood insurance was not in place, and you took steps to get it back into effect? A. Yes. Q. Approximately when was that? A. I wish I could remember. It was either – I think it was 2014. Q. And tell me what happened in 2014? A. I was informed by Dwight Andrus that the mortgage company had not paid the flood insurance yet. So I wrote to them and told them that— Q. Wrote to who? A. Nationstar. And I have, you know, records of that in one of those secure email things. And I told them that my insurance company told me they haven’t paid my flood insurance out of my escrow and they needed to do it right away. And they wrote back and said they were forwarding it to their insurance department. Q. And did the flood insurance get written at that point in time? A. I don’t know about written. I just know it appeared on the escrow again. Deposition of Peggy Miranda, Pgs. 52:8- 53:8 It should be clear that Andrus had a duty to ensure that the policy placed in 2016 just as it had been placed in 2014. Andrus had a history of monitoring the policy for the Mirandas, and openly held itself out as the entity who would take care of everything for the Mirandas regarding the placement of the policy, including making sure that it did indeed place. Even if this 4 Case 2:16-cv-12555-CJB-MBN Document 154 Filed 12/11/17 Page 4 of 11 Honorable Court sides with Andrus in its assertion that simply generating a piece of paper with a policy number meets the definition of procurement, “an insurance agent's duty can be greater than merely procuring the insurance requested, depending on what services the agent holds himself out as performing and the nature of the specific relationship and agreements between the agent and his client.” White v. Allstate Ins. Co., 513 F. Supp. 2d 674, 683 (E.D. La. 2007). With regard to that special relationship between the Mirandas and Andrus: Q. Okay. Do you recall receiving any of these notices [Exhibits C, D, E, and F of Andrus’ memorandum in support]? A. Yes. Q. What did you do when you received them? A. Because they said “Don’t pay” here and this looks the same to us. We filed it and didn’t pay, because it said, “Do not pay. Do not pay. Do not pay. Do not pay.” Over and over, it says it came out of escrow, so we still thought it was coming out of escrow. Q. Then [Andrus’ Exhibit F], does it have the same language. And that’s the November 11, 2015, final notice. Does that have the same language on there about “Do not pay. Do not pay. Do not pay.” A. It said to “Choose one of the following options.” And I don’t remember this one at all – the final notice – that yellow part. I just remember it being green like all the other ones. And I remember always picking the better option. Like whichever one was higher, we picked it. Pgs. 65:13 – 66:11. Q. Do you recall having any discussions – A. I do. Q. …Around November 15, when you were getting these notices from Selective, did you have any discussions or emails with Dwight Andrus about the status of your flood insurance? A. I can look up the emails. I probably do. But I do remember a discussion with one of the ladies in the office. And I think at that time I had questioned why the three options had the same amounts and which one to choose. She told me to mark Option A. At that time, they had a change in personnel. So the person that I always talked to -- there was a new lady. I probably have it in my address book. I usually write down if somebody changes: “Sandy is no longer there. It’s now – whoever.” So there was a change in personnel at that time. The lady who took care of us for all those years always made sure we were totally covered on everything. 5 Case 2:16-cv-12555-CJB-MBN Document 154 Filed 12/11/17 Page 5 of 11 Pgs. 69:6 – 70:3. Q. Is there anything on any of the documents that we have looked at that would indicate that you would have mailed – filled out some form selecting flood coverage or the option and mailed it directly to Andrus, as opposed to mailing it to Selective or Nationstar? A. I don’t remember mailing anything, but I do know that I would always call Dwight Andrus – the office – before I would go to any of these people, because I don’t know them personally. I always went to the person that was a name that I could talk to that handled my particular account. So I would have connected with Dwight Andrus before I called the 800-somewhere and talked to somebody I don’t know. But I don’t recall mailing anything. I’m sorry. I really don’t remember that. Pgs 73:19 – 74:12 Q. Right, but at the end of the day, you had to pick it and check it and mail it in to somebody, correct? A. Or talk to them on the phone to my lady at Dwight Andrus. We did a lot of things over the phone like that. 78:3-8 Peggy Miranda asserts in her deposition testimony that it would have been more logical for her to call Andrus regarding the notices than mailing them back to Selective, since Andrus handled everything for them. This certainly makes sense based upon what Andrus did in 2014 in coordinating with Peggy Miranda upon the mortgage servicer failing to pay the policy in 2014. Based upon the following, there is material question of fact with regards to how Andrus held itself out to the Mirandas regarding the services they were supposed to render, such that it should be a credibility determination made by the Court as to what those services were supposed to be. The Mirandas certainly believed and trusted based upon Andrus’ representations and actions that the 2016 policy was in place. The Mirandas had a contract with Andrus to procure insurance for them for approximately 40 years. While Andrus may have its own interpretation as to what the 6 Case 2:16-cv-12555-CJB-MBN Document 154 Filed 12/11/17 Page 6 of 11 contract with the Mirandas constituted, Andrus certainly cannot state that it was not responsible for placing the Mirandas flood insurance policy when it had done so for each previous year. B. Andrus’ definition of procurement is not a correct interpretation of Louisiana law and common usage Of particular note in Karam, the situation regarding the procurement of insurance by the agent and the relationship between the agent and the plaintiff was as follows: At trial Darbonne quite candidly testified that the plaintiff had requested as much property damage liability coverage on the laundromat as Darbonne could obtain. Darbonne testified that the most property damage liability coverage he could write was $100,000. Darbonne stated that it was his intention to procure $100,000 coverage on Karam's laundromat, but that he had only procured $10,000 coverage through an error on his part. Karam testified that he relied on Darbonne to procure as much property damage liability coverage on his laundromat as he could write. The invoice sent to Karam by Darbonne billing Karam for the property damage liability coverage indicated that Darbonne had procured $100,000 in property damage liability coverage on Karam's laundromat. Karam v. St. Paul Fire & Marine Ins. Co., 281 So. 2d 728, 730 (La. 1973). This is the crux of the issue before this Honorable Court: to procure insurance requires that insurance be in place. Darbonne (the insurance agent in Karam) attempted to procure $100,000.00 for Mr. Karam, but only procured $10,000.00. In this matter, Andrus attempted to procure a policy for the maximum limits in structure and contents, as had been done and instructed by Andrus for the last 40 years, but in 2016 procured zero coverage. Such an interpretation makes complete sense as the insurance agent is supposed to undertake to procure, i.e. obtain coverage, and use reasonable diligence to attempt to place said insurance. If the insurance placement does not go through, as what happened with Selective, the agent has a duty to notify the client promptly that the agent has failed to obtain the insurance. If 7 Case 2:16-cv-12555-CJB-MBN Document 154 Filed 12/11/17 Page 7 of 11 the actions of the insurance agent warrant an assumption by the Mirandas that the desired coverage is in place, then they have a cause of action. In this matter, Andrus attempted to place policy, failed to place the policy as Selective was never paid for it, and then failed to notify the Mirandas that their policy coverage never went into effect. Andrus’ response was no response, unlike their proper response in 2014 when they apprised the Mirandas that the policy was not procured due to Nationstar’s failure to remit payment to the insurer. See Peggy Miranda’s Deposition attached as Exhibit B to Andrus’ Memorandum in Support, Pgs 52:8 – 53:8. Certainly Andrus’ prior action in 2014 belies its current position that it had no duty to inform the Mirandas that the policy failed to place because of non-payment. Furthermore, Selective Insurance Company of the Southeast was dismissed because no policy ever went into effect because payment was never received, i.e the policy under federal law was never procured. Had the policy been procured as is Andrus’ responsibility to do, then the Mirandas would not be in the situation that they currently find themselves facing. In Isidore Newman School v. J. Everett Eaves, Inc., 42 So.3d 352 (La. 2010), the Louisiana Supreme Court again looked to the law concerning insurance agents. It analyzed the judicial precedent in support of its ruling, which included Graves v. State Farm Mutual Auto Ins. Co., 01–1243 (La.App. 3 Cir. 6/26/02), 821 So.2d 769, and stated that the third circuit “held that the insurance agent had no affirmative duty to inquire into the client's financial condition and make recommendations about higher auto liability coverage, or that the client purchase an umbrella policy; the only duty imposed on the agent is to obtain the coverage requested by the customer.” Isidore Newman Sch. at 357. Andrus clearly did not fulfill its duty in obtaining the coverage requested by the Mirandas for the 2016 year. 8 Case 2:16-cv-12555-CJB-MBN Document 154 Filed 12/11/17 Page 8 of 11 Plain language and case law has defined the term “procure,” and clearly contemplates the actual completion of the task. For example, the Fifth Circuit, in dealing with the definition regarding government contracts held the following: T]he Federal Circuit has adopted the definition of procurement now codified at 41 U.S.C. § 111, specifically that “the term ‘procurement’ includes all stages of the process of acquiring property or services, beginning with the process for determining a need for property or services and ending with contract completion and closeout.” Rothe Dev., Inc. v. U.S. Dep't of Def., 666 F.3d 336, 339 (5th Cir. 2011); Distrib. Solutions, Inc. v. United States, 539 F.3d 1340, 1345 (Fed.Cir.2008). Procurement in this aspect makes sense – in order for the employment of the contract to be fulfilled, an actual completion and closeout of the object of the contract is required. With regards to real estate broker commissions, which work similar to that of insurance agent commissions, a “procuring cause” has been defined as follows: Procuring cause has been defined as a cause originating or setting in motion a series of events which, without break in their continuity, result in the accomplishment of the prime object of the employment of the broker, which may variously be a sale or exchange of the principal's property, an ultimate agreement between the principal and a prospective contracting party, or the procurement of a purchaser who is ready, willing and able to buy on the principal's terms.” (Citations omitted) (Emphasis ours). Creely v. Leisure Living, Inc., supra, at pages 821-822. Moody v. Thibodeaux, 495 So. 2d 1328, 1330 (La. Ct. App.), writ denied, 497 So. 2d 1387 (La. 1986). The prime object of the employment of the broker or real estate agent is the same as the prime object of the employment of the insurance agent – to obtain the object of the contract, i.e. the sale and commission. Insurance agents make a commission off of the sale of policy in the same manner as the real estate broker makes a commission off of the sale of property – 9 Case 2:16-cv-12555-CJB-MBN Document 154 Filed 12/11/17 Page 9 of 11 procurement means the actual obtaining of the object of the contract, which in this case means coverage. Black’s Law Dictionary, 2d. Ed., defines the term “procurement” as follows: “The entire process of purchasing goods that includes the purchasing decision, the selection of the goods, and the payment made by the buyer to purchase the goods. It involves (1) planning the purchase, (2) determination of the standards, (3) development of specifications, (4) researching and selecting the supplier, (5) analysis of the value, (6) financing, (7) negotiating the price, (8) purchase, (9) supply contract administration, (10) controlling the inventory and (11) disposals. Andrus’ argument that it was not required to pay the premiums misses the entire mark of what is required under Louisiana state law regarding the fiduciary duty owed to the client. Andrus was not responsible for paying the premium, but it was responsible to use reasonable diligence to inform the Mirandas that they needed to pay said premium because Nationstar failed to do so. The plaintiffs specifically engaged Andrus to do this, and it failed to do so even after giving direction to the Mirandas regarding the filling out of Selective’s forms. Based upon the case law and clear common usage of “procurement” and Andrus’ failure to alert the Mirandas that the insurance was not placed, Andrus’ Motion for Summary Judgment should be denied. Conclusion Andrus had a duty to procure and monitor the Mirandas insurance coverage based upon its representations to the Mirandas that they would take care of everything involving their insurance needs, just as they have done for over forty years. The testimony of Ms. Miranda creates a genuine issue of material fact as to whether Andrus’ duty was greater than merely procuring the insurance requested, depending on what services Andrus held itself out as 10 Case 2:16-cv-12555-CJB-MBN Document 154 Filed 12/11/17 Page 10 of 11 performing and the nature of the specific relationship and agreements between Andrus and the Mirandas. A credibility determination is required as to whether this Honorable Court believes that the agent was given the information by the Mirandas and led the Mirandas by their non- action into believing that they were covered. Furthermore, the definition of procurement required Andrus to notify the Mirandas when the policy was not placed. For these reasons, Andrus’ Motion for Summary Judgment should be denied. Respectfully submitted, /s// Richard J. Wolff_______________________ J. DOUGLAS SUNSERI (#19173) RICHARD J. WOLFF (#32777) NICAUD & SUNSERI LAW FIRM, L.L.C. A Group of Professional Law Corporations 3000 18th Street Metairie, LA 70002 (504) 837-1304 CERTIFICATE OF SERVICE I hereby certify that on this 11th day of December, 2017, I electronically filed the foregoing with the Clerk of Court by using the CM/ECF system, which will send a notice of electronic filing to all counsel registered for electronic service. I further certify that I have served a copy of the foregoing pleading on all parties to this proceeding not registered for electronic service, by e-mailing, faxing, and/or mailing the same by United States mail, properly addressed and first class postage prepaid. /s/ Richard J. Wolff _________________________________ RICHARD J. WOLFF 11 Case 2:16-cv-12555-CJB-MBN Document 154 Filed 12/11/17 Page 11 of 11