Consistent with the recent decision issued in In Re Katrina Canal Breaches Consolidated Litigation [prior post here], the District Court for the Western District of Louisiana upheld a post-loss assignment of a property policy. See Disaster Relief Serv. of North Carolina, LLC v. Employers Mutual Cas. Ins. Co., No. 07-1925, 2009 U.S. Dist. LEXIS 29443 (W.D. La. April 6, 2009).
The insured's apartment complex was damaged by Hurricane Rita. The property was insured by Employers under a business protection policy that included coverage for damage to property and loss of business income. The insured hired Paramount Insurance Repair Service to do initial damage mitigation work. Without the insured's permission, Employers contacted Paramount and negotiated the scope and cost of all repairs to the property, notwithstanding the limited authority the insured had given Paramount. The insured later fired Paramount and hired Disaster Relief Services (DRS) to complete the repairs. DRS's Complaint alleged Employers then failed to adjust and provide coverage for certain property losses and damage despite receiving sufficient proofs of loss.
After purchasing the property and receiving an assignment of future insurance proceeds, DRS sued Employers. Employers moved for summary judgment, arguing the policy prohibited the assignment of "rights and duties" without the insurer's consent. Noting the decision in Katrina Canal Breaches, the court found the insured was entitled to assign the rights under Employer's policy because the assignment to DRS was executed after the property damage occurred. The assignment of rights under the policy included the insured's bad faith claims if such claims accrued to the insured at the time of the assignment. Neither party had submitted a copy of the assignment of rights to the policy, so the court could not determine when the bad faith claims accrued.
Nevertheless, the court determined Employers did not act in bad faith in failing to timely pay a claim after receiving satisfactory proofs of loss. Such a claim could only be asserted under Louisiana law if the failure to timely pay was arbitrary, capricious or without probable cause. There was no evidence of unjustified refusal to pay amounts due. Therefore, Employers' motion for summary judgment as to DRS's bad faith claims was granted.
