In Landry Architecture, LLC v. Valley Forge Ins. Co., No. 09-3974, 2009 U.S. Dist. LEXIS 99109 (E.D. La. Oct. 23, 2009), the insured's claims for business income losses resulting from Hurricane Katrina and breach of the implied covenant of good faith and fair dealing did not survive the insurer's motion to dismiss on statute of limitations grounds.
The insured purchased a property policy from Valley Forge in August 2002. The policy was renewed on an annual basis thereafter. In June 2002, Valley Forge issued a notice that Landry's policy would no longer cover business income loss resulting from windstorm or hail. The insured renewed its policy in August 2004 and again in August 2005. Therefore, the policy in effect during Hurricane Katrina was in place almost four years before the insured filed suit.
Valley Forge tendered $32,741 in February 2009, but denied claims for business income loss. The insured filed suit on May 29, 2009. Valley Forge moved to dismiss based on a two year statute of limitations for Katrina-related claims. The district court noted that Hurricane Katrina struck August 29, 2005, at which point the prescriptive period began to run. The insured's claims, filed four years later, were therefore barred on the face of the complaint.
The insured raised various theories to argue the statute of limitations was tolled. The court disagreed with each. First, Valley Forge's investigation, adjustment, and negotiation of the claim did not toll the prescription period under Louisiana law. Second, the tender of $32,741 did not interrupt or toll the prescriptive period. Third, the insured's bad faith count could not survive even though it was not based upon a claim for breach of an insurance contract. Under a Louisiana statute, a litigant had to first have a valid, substantive underlying claim upon which insurance coverage was based in order to pursue a bad faith claim.
Interestingly, this third claim would probably survive a motion to dismiss on similar grounds in a Hawai`i court. Under Hawai`i law, an insurer can breach the implied covenant of good faith and fair dealing even if benefits are not due and owing under the policy. See The Best Place, Inc. v. Penn Am. Ins. Co.,82 Hawai`i 120, 133, 920 P.2d 334, 347 (1995)(quoting Rawlings v. Apodaca, 726 P.2d 565, 573 (Ariz. 1986)("The implied covenant is breached, whether the carrier pays the claim or not, when its conduct damages the very security which the insured sought to gain by buying insurance"); Wailua Assoc. v. The AETNA Cas. & Sur. Co., 27 F. Supp. 2d 1211, 1220 (D. Haw. 1998)(bad faith delay in appraising and investigating claim).
