|October 8, 2012|
Previously published on October 2012
Of the insurer duties enumerated in Louisiana Revised Statute 22:1973, failure to fund a settlement within 30 days has not been among the more commonly breached. Thus, when the First Circuit recently delivered its opinion in Instant Replay Sports, Inc. v. Allstate Insurance Company, 2011 CA 1414 (La.App. 1 Cir. 09/05/12), it made an impression. For insurers, the lesson is cautionary.
The facts are simple. Instant Replay Sports, a business in Slidell, LA, insured by Allstate, was damaged during Hurricane Katrina. Suit on Allstate’s commercial policy included property damage and personal injury claims. A mediated settlement concluded after two days with a written agreement signed on September 11, 2009. Critically, the agreement stated that plaintiff would be responsible for satisfying outstanding liens and that payment would be delivered within 30 days.
Disagreements over details of the Allstate drafts delivered in satisfaction of the settlement contributed to final payments not being delivered until November 3, 2009. Plaintiff’s brought bad faith claims against Allstate for failure to tender payment within 30 days of written settlement agreement. Allstate successfully opposed the claim on motion for summary judgment in the trial court. The First Circuit reversed and remanded.
The 4-1 majority opinion held that the written agreement completed on September 11, 2009 triggered Allstate’s 30 day payment obligation. The insurer argued that details of the agreement, in particular, the precise amount of the SBA lien, were unresolved at that time and delayed the payment obligation until 30 days after September 24, 2009.
Had Allstate prevailed on the triggering event, they may or may not have still breached their duty. The question was rendered moot when the First Circuit agreed with plaintiff that September 11 was the correct written settlement agreement date.
Judge McClendon, writing for the majority, based the decision on two primary considerations. First, the settlement agreement executed on September 11 declared that “all liens ... will be paid by the plaintiff(s), including but not limited to all requirements under the law to satisfy the lien or rights of the [SBA].” In short, their agreement severed the SBA lien from considerations relevant to form and timing of payment. Second, the agreement itself declared that payment would be delivered “within 30 days.”
The First Circuit concluded that the trial court not only erred in granting summary judgment in favor of Allstate, but that Allstate was, as a matter of law, in breach of its 22:1973(B)(2) duty. Plaintiff’s bad faith claim was remanded to the trial court for assessment of a penalty.