Insurer Prevails on Summary Judgment for Bad Faith Claim

    The court granted summary judgment to the insurer on the insured’s claim for bad faith due to denial of the claim. Treigle v. State Farm Fire and Cas. Ins. Co., 2023 U.S. Dist. LEXIS 87786 (E.D. La. May 19, 2023).

    The insured’s home sustained serious water damage due to Hurricane in August 2021. Her policy with State Farm excluded losses related to surface water and mold. 

    The insured reported the loss from Hurricane Ida after she returned to her home and found two inches of standing water in the house. State Farm advised the insured to hire a water mitigation company to help with the water. The insured contacted 7 Brothers Company to start mitigation, including tearing out the disposing of wet building materials. 

    In September, State Farm representative David Long inspected the property alongside the insured’s contractor. Long found that parts of the interior that had been allegedly damaged, including floors, drywall, and ceilings, and been completely gutted. Long noted that he did not observe any storm created opening, but wind driven rain may have entered ridge vents for approximate 8 hours. Photographs showing the property after drywall and flooring had been removed seemed to indicate mitigation took place from the floor up, suggesting the floors may have been most severely impacted and the little drywall that could be seen in the photos did not appear to show obvious water damage.

    State Farm sent a denial letter for losses caused by surface water and advised that the covered loss was below the deductible. The insured sued for breach of contract and bad faith.

    The insured bore the burden of proving her claim for bad faith damages, including proving that State Farm’s denial was arbitrary and capricious. Under Louisiana law, if State Farm was able to prove there were legitimate questions as to whether the cause of the loss was covered or not, the burden shifted to the insured to set out specific facts to show a genuine issue concerning whether those questions existed.

    Here, there was legitimate doubt as to whether the insured’s losses occurred as a result of flooding and mold or wind and rain. First, neither the insured nor her contractor were able to produce photos or videos of the house after the storm damage occurred and before the mitigation work began. Second, it was likely that the damage was the result of surface water, rather than water entering through the roof. Therefore, State Farm did not act arbitrarily or capriciously in denying the claim and summary judgment was appropriate on the bad faith claim.