One significant problem that can arise in the underwriting of property insurance policies is that the location intended to be insured is not correctly identified in the policy documents. In a recent summary judgment decision, a Louisiana federal court concluded that a policy which unambiguously listed the insured premises as one address could not be reformed to change the insured premises to another address where the insured had in fact moved its business. Because the insured had received notice of the policy documents more than six years before filing suit, the insured’s claims were also time-barred.
In Southwest Veterinary Services, Inc. v. Hartford Casualty Ins. Co., 2013 U.S. Dist. LEXIS 80667 (W.D.La., June 6, 2013), the Southwest Veterinary Clinic (“Southwest”) acquired an insurance policy from The Hartford for a veterinary clinic located at 419 Shell Beach Drive, Lake Charles, Louisiana (the policy erroneously identified the address as “419 Shelby Drive”). In September 2005, the veterinary clinic sustained damage during Hurricane Rita. As a result, Southwest relocated its clinic to 411 Woodruff Street, Lake Charles, Louisiana. About two months after the relocation, an officer of Southwest notified the insurance agent who had brokered the policy that Hurricane Rita destroyed the Shell Beach Drive location, and that 411 Woodruff Street was now Southwest’s mailing address and insured premises address. The insurance agent allegedly indicated that the information would be passed onto Hartford. Subsequently, a “Policy Change Endorsement” was issued reflecting a change in mailing address only. The policy was then renewed in October 2006 and October 2007. Each time, the renewal reminder documents identified Southwest’s mailing address as 411 Woodruff Street and the insured premises address as 419 Shelby Drive.
In September 2008, Hurricane Gustav struck the Lake Charles area and caused damage to Southwest’s Woodruff Street location. Southwest filed a claim for the damage, which was denied on the basis that Woodruff Street was not the insured premises address listed in the policy. Specifically, Hartford claimed that it was only notified of a change in mailing address and not a change in address of the insured premises itself.
Thereafter, in July 2012, Southwest brought suit to recover losses of pharmaceutical medicine, loss of business income, loss of property, loss of records and papers, and loss of accounts receivable, along with bad faith damages and “other damages.” In response, the Hartford moved for summary judgment, arguing that because the policy listed 411 Woodruff Street as the mailing address only, it was not responsible for coverage of the Woodruff Street location. Alternatively, Hartford argued that Southwest’s claims should be dismissed because they were untimely filed.
In ruling on Hartford’s motion for summary judgment, the trial court first held that the policy documents clearly and unambiguously identified the insured premises address as 419 Shelby Drive and that a newly acquired property extension did not apply. The trial court also rejected Southwest’s argument that the policy should be reformed on the basis of mutual mistake. In support of its reformation argument, Southwest sought to impute the insurance agent’s knowledge onto Hartford by offering parol evidence in the form of an affidavit from its officer stating that the insurance agent assured him the insured premises address would be changed. Hartford countered by offering evidence to demonstrate that the insurance agent was an independent insurance broker and, therefore, the agent of the insured, not the insurer. The court concluded that neither party submitted sufficient evidence on the issue of mutual mistake and, therefore, declined to reform the policy.
The trial court next addressed Hartford’s argument that La. Rev. Stat. § 9:5606 barred Southwest’s claims. La. Rev. Stat. § 9:5606, provides in relevant part:
A. No action for damages against any insurance agent … whether based upon tort, or breach of contract, or otherwise, arising out of an engagement to provide insurance services shall be brought unless filed … within one year from the date of the alleged act, omission, or neglect, or within one year from the date that the alleged act, omission, or neglect is discovered or should have been discovered. However, even as to actions filed within one year from the date of such discovery, in all events such actions shall be filed at the latest within three years from the date of the alleged act, omission, or neglect. . . .
D. The one-year and three-year periods of limitation provided in Subsection A of this Section are peremptive periods within the meaning of Civil Code Article 3458 and, in accordance with Civil Code Article 3461, may not be renounced, interrupted, or suspended.
Specifically, Hartford argued that, even if the insurance agent was considered its agent, Southwest’s claims should still fail because: (1) the policy renewal documentation provided Southwest with constructive notice of the claimed errors in the policy as early as October 2006 and (2) a claim against an insurance agent for supplying incorrect information is perempted if it is not brought within the time period provided in La. Rev. Stat. § 9:5606. The trial court agreed.
According to the trial court, if an insured has constructive notice that its insurance policy may not provide the coverage its insurance agent promised, the insured’s resulting claim against its insurance agent and/or its insurance company may be perempted if not brought within the time period provided in La. Rev. Stat. § 9:5606. Applying this reasoning to the facts of the case, the court explained that Southwest first requested the change to the insured’s premises address in November 2005. Thereafter, Southwest received policy renewal documentation listing the insured’s premises address as 419 Shelby Drive as early as October 2006. That documentation provided the insured with constructive notice of the claimed error. Consequently, the court held that by not filing suit until July 2012, almost six years after it first received notice of the claimed error, Southwest’s claim was perempted by operation of La. Rev. Stat.§ 9:5606.
Finally, because the trial court found that Southwest did not have a valid underlying claim for insurance coverage, it also dismissed Southwest’s bad faith claims.
This decision is potentially helpful to insurers litigating disputes where the insured contends that the address listed on the policy was not the address that was intended to be insured.