Preview:

AUDUBON ORTHOPEDIC                                                                *                    NO. 2009-CA-0007
AND SPORTS MEDICINE,
APMC                                                                              *
                                                                                  COURT OF APPEAL
VERSUS                                                                            *
                                                                                  FOURTH CIRCUIT
LAFAYETTE INSURANCE                                                               *
COMPANY                                                                           STATE OF LOUISIANA
                                                                                  *
CONSOLIDATED WITH:                                                                CONSOLIDATED WITH:
AUDUBON ORTHOPEDIC AND                                                            NO. 2009-CA-0916
SPORTS MEDICINE, APMC
VERSUS
LAFAYETTE INSURANCE
COMPANY
APPEAL FROM
CIVIL DISTRICT COURT, ORLEANS PARISH
NO. 2006-7501, DIVISION ―I-14‖
Honorable Piper D. Griffin, Judge
Judge Patricia Rivet Murray
(Court composed of  Chief Judge Joan Bernard Armstrong, Judge Patricia Rivet
Murray, Judge James F. McKay, III, Judge Terri F. Love, Judge David S. Gorbaty)
MCKAY, J., CONCURS IN PART AND DISSENTS IN PART FOR THE
REASONS ASSIGNED BY JUDGE LOVE
LOVE, J., CONCURS IN PART AND DISSENTS IN PART AND ASSIGNS
REASONS
J. Douglas Sunseri
Svetlana Crouch
NICAUD & SUNSERI, L.L.C.
3000 18th Street
Metairie, LA 70002
COUNSEL FOR PLAINTIFF/APPELLEE




Howard B. Kaplan
Robert A. McMahon, Jr.
David M. McDonald
BERNARD, CASSISA, ELLIOTT & DAVIS, A PLC
1615 Metairie Road - P.O. Box 55490
Metairie, Louisiana   70055-5490
COUNSEL FOR DEFENDANT/APPELLANT
AFFIRMED IN PART, AMENDED IN PART AND REVERSED IN PART




These consolidated appeals by Lafayette Insurance Company concern two of
three judgments rendered by the trial court based upon a jury verdict that found
Lafayette was liable to its insured, Audubon Orthopedic and Sports Medicine, for
breach of its business interruption policy.  Lafayette contends that the trial court
committed legal error by issuing the second ―amended‖ judgment and the third
judgment, which was limited to the issue of attorney fees.    Audubon disputes these
contentions and answers the appeal seeking modifications of the second and third
judgments.  For the reasons that follow, we affirm in part, amend in part and
reverse in part.
FACTS AND PROCEEDING BELOW
On August 15, 2006, Audubon filed the instant suit alleging that Lafayette
failed to fully pay Audubon’s business interruption claim for its two locations, one
in uptown New Orleans and one in Metairie, which were damaged by Hurricane
1




Katrina.  Audubon sought compensatory damages for breach of contract, as well as
penalties under La. R. S. 22:1220 and 22:6581 for Lafayette’s failure to pay timely.
The matter was tried to a jury in Civil District Court in Orleans Parish on
October 16-18, 2007.    The jury found Lafayette owed Audubon both damages and
statutory penalties for Lafayette’s breach of its duties under the policy, returning its
verdict on a form that consisted of 22 separate interrogatories.  The trial concluded
with the trial judge reading into the record the jury’s responses to each
interrogatory.  Following the trial, Lafayette submitted a proposed judgment based
upon the jury’s verdict.  On October 31, 2007, the trial court signed the judgment
proposed by Lafayette, which awarded the following: (1) Business income loss in
the amounts of $240,819.582 for Audubon’s uptown location and $27,071.07 for its
Metairie location; (2) Statutory penalties under La. R.S. 22:658 of twenty-five
percent (25%) of the above amounts of business income loss; and (3) Statutory
penalties under La. R.S. 22:1220 of $5,000.00 for each location.    On November
15, Audubon filed a ―Motion for New Trial and/or Amendment of Judgment,‖
limited to two issues: (1) the trial court’s failure to award appropriate
damages/penalties under La. R.S. 22:1220; and (2) the trial court’s failure to award
attorney fees; Audubon  attached as an exhibit to the motion its own proposed
judgment.    On November 21, Lafayette tendered payment of the October 31
1Pursuant to La. Acts 2008, No. 413, effective January 1, 2009, which amended and reenacted the Louisiana
Insurance Code, these two statutes were renumbered, to wit: R.S. 22:1220 became R.S. 22: 1973, and R.S. 22:658
became R.S. 22: 1892.   For the sake of clarity, however, throughout this opinion we will refer to these statutes using
the numbers they bore at the time the conduct in question occurred, which was prior to the effective date of the
reenactment.
2 Lafayette received a credit against this award for the amount it had previously paid, which was $133,974.90.
2




judgment including judicial interest through November 23, which Audubon
accepted subject to its right to appeal.
The hearing on Audubon’s motion for new trial and/or amendment of
judgment took place as scheduled on December 7, 2007, 3  and the trial court took
the matter under advisement. Approximately nine months later, without ever ruling
on the motion for new trial, the trial court on September 30, 2008, issued a
―Judgment Vacating Previous Judgment and Entering New Judgment.‖    In that
judgment, rendered without written reasons, the trial court stated that it had been
―presented with and mistakenly [had] signed a previous judgment.‖  The
September 30 judgment [hereinafter referred to as the ―second‖ judgment] vacated
the original judgment in its entirety.  In the second judgment, the court awarded
Audubon the same amounts of business income loss as in the original judgment but
completely changed the penalties assessed against Lafayette.  The second judgment
eliminated the penalties assessed under R.S. 22:658; eliminated the penalty of
$5,000.00 per location assessed under R.S. 22:1220; and instead awarded damages
under R.S. 22:1220 in the amounts of $175,000.00 for the uptown location and
$20,000.00 for the Metairie location.  In addition, although the original judgment
did not include an award of attorney’s fees, the second judgment awarded
Audubon ―reasonable attorney’s fees in the amount of $5,000.00.‖
3 The record does not contain a transcript of this hearing and neither party can confirm whether the hearing was ever
transcribed.   During oral arguments before this court, the parties agreed that to their knowledge, no transcript of this
hearing exists.
3




On October 7, 2008, Audubon filed a motion for new trial seeking an
increase in the amount of attorney’s fees awarded by the second judgment.  Prior to
the hearing on Audubon’s motion, Lafayette filed a suspensive appeal of the
second judgment in this court.      After hearing Audubon’s motion, the trial court
took the matter under advisement.  On April 20, 2009, the trial court signed a
judgment [hereinafter referred to as the ―third‖ judgment] increasing the award of
attorney’s fees from $5,000.00 to $75,000.00.  Lafayette suspensively appealed the
third judgment, and this court subsequently consolidated the two appeals.
Audubon filed answers in both appeals, which are now consolidated.
ISSUES
Lafayette contends that the trial court had no authority to issue the second or
the third judgment, arguing that these should be vacated and the original judgment
reinstated.  Alternatively, Lafayette argues that the trial court committed legal error
because the second judgment does not accurately reflect the jury’s verdict and
improperly awards statutory damages/penalties that are not consistent with the law.
Finally, Lafayette argues that both the second and third judgments are erroneous
because there is no legal basis for an award of attorney’s fees in this matter.
Besides refuting Lafayette’s contentions, Audubon answers the appeal and asserts
three arguments of its own, namely: (1) that the business income loss awarded in
the second judgment should be increased; (2) that the $75,000.00 in attorney’s fees
awarded in the third judgment should be increased; and (3) that Lafayette should
be ordered to pay all costs of the trial and appeal.
4




DISCUSSION
Trial Court’s Authority to Render Second Judgment
As a threshold issue, we first address Lafayette’s contention that, under the
circumstances presented in this case, the trial court lacked authority to render the
second, or ―amended,‖ judgment.      La. C.C.P. art. 1951 sets forth the
circumstances under which a trial court may amend a final judgment.  It states:
A final judgment may be amended by the trial court at any time, with or
without notice, on its own motion or the motion of any party:
(1) To alter the phraseology of the judgment, but not the substance; or
(2) To correct errors of calculation.
As this court has recognized, any amendment that adds to, subtracts from, or in any
way affects the substance of a judgment, is considered a substantive amendment.
Palmer v. LeClerq, 07-0604, p.6 (La. App. 4 Cir. 9/24/08), 996 So.2d 21, 24.  It is
well established that Article 1951 does not authorize substantive amendments to
final judgments.  Denton v. State Farm, 08-0483, p.7 (La. 12/12/08), 998 So.2d 48,
52 (citing Bourgeois v. Kost, 02-2785 (La. 5/20/03), 846 So.2d 892).      To alter the
substance of a judgment, the proper recourse is a timely motion for new trial, an
action for nullity, or a timely appeal.  Palmer v. LeClerq, supra. 4
In the instant case, there is no question that the second judgment, which
vacated the first judgment in its entirety and awarded completely different
penalties as well as attorney’s fees, altered the substance of the original judgment.
Audubon does not dispute this fact.  Instead, it argues that under the peculiar
4 Alternatively, if the judgment has been based upon a jury verdict, the aggrieved party may seek alteration of the
judgment by asserting a timely motion for judgment notwithstanding the verdict [JNOV] pursuant to the La. C.C.P.
art. 1811.    However, none of the parties in the instant case has asserted such a motion.   Unlike La. C.C.P. art. 1971,
which governs motions for new trial, article 1811 does not permit the trial court to enter a JNOV on its own motion.
Therefore, when no party has moved for a JNOV, it is error for the trial court to sua sponte enter a JNOV.   Parmelee
v. Kline, 579 So.2d 1008, 1012 (5th Cir. 1991), writ denied 586 So.2d 564 (La. 1991).
5




circumstances of this case, the trial court had the authority to issue the amended
judgment because the original judgment was signed in error.
The pertinent facts are not in dispute and are confirmed by the record.  On
October 26, Lafayette submitted a proposed judgment based upon the jury verdict,
along with a ―Motion to Make Attached Proposed Judgment the Judgment of the
Court.‖    On October 31, the trial judge signed Lafayette’s proposed judgment and
also signed an order attached to the proposed judgment ordering the plaintiff to
show cause on December 7 as to why Lafayette’s motion should not be granted.
On November 6, the clerk of the district court issued a ―Notice of Signing of
Judgment.‖  On November 8, Audubon filed ―Plaintiff’s Memorandum in
Opposition to Defendant’s Motion to Make Attached Proposed Judgment the
Judgment of the Court,‖ attaching its own proposed judgment as an exhibit.    In
addition, on November 15, Audubon timely filed a ―Motion for New Trial and/or
Amendment of Judgment‖ from the October 31 judgment, again attaching its own
proposed judgment as an exhibit.5  The parties’ motions were heard by the trial
court on December 7, 2007, but the record contains no transcript of that hearing.
At the conclusion of the hearing, the trial court took the matter under advisement.
Approximately nine months later, without expressly granting the plaintiff’s motion
for new trial, the trial court rendered the second judgment, indicating that the court
had been ―presented with and mistakenly [had] signed‖ the prior judgment.
Except for the existence of a timely-filed motion for new trial, the facts
pertinent to determining the validity of the second judgment in the instant case are
5   La. C.C.P. art. 1974 provides that the delay for applying for a new trial is seven days, exclusive of legal holidays,
commencing to run on the day after the clerk has mailed the notice of signing of judgment.   In this case, the record
reflects that the clerk of court mailed the notice of judgment on November 6, 2007, and that the plaintiff’s motion
6




indistinguishable from those in Bourgeois v. Kost, supra.  In Bourgeois, a personal
injury suit arising out of an automobile accident, the trial court invited both parties
to submit proposed judgments at the conclusion of the bench trial.  On November
2, 2001, the trial court signed a document entitled ―Defendants’ Proposed Final
Judgment,‖ which dismissed the plaintiffs’ claims, and the clerk of court issued
notice of judgment shortly thereafter.  Approximately two months later, in January,
the trial court signed a second judgment ruling in favor of the plaintiffs and
awarding them damages; at the same time, the court issued an order stating it had
inadvertently signed defendants’ proposed judgment, vacating the original
judgment, and replacing it with the second judgment.  On appeal, defendants
argued the trial court had no authority to substantively change the original, final
judgment.  The Supreme Court agreed, noting that, even if a judgment has been
signed in error, once signed, it cannot be altered, amended or revised by the judge
who rendered it except in the manner provided by law.   02-2785, p. 7, 846 So.2d at
696.  Therefore, the Supreme Court found the second judgment to be an absolute
nullity, and reinstated the original judgment.  Id., p.8, 846 So.2d at 696.
Nevertheless, we find that the plaintiffs’ assertion of a timely-filed motion
for new trial triggers a different result in the instant case.  In Lousteau v. K-Mart
Corp., 03-1182 (La. App. 5 Cir. 3/30/04), 871 So.2d 618, writ denied, 876 So.2d
835 (La. 6/25/04), a slip and fall case, the trial court initially entered judgment in
favor of K-Mart, dismissing the plaintiff’s case.  Then, a few days later, the court
vacated that judgment, noting it had been signed in error, and subsequently
rendered a new judgment finding K-Mart liable and awarding the plaintiff
for new trial was filed November 15, 2007.    Considering that November 10 and 11(Saturday and Sunday) were
legal holidays, the motion was timely filed.
7




damages.    On appeal, the Fifth Circuit upheld the second judgment, distinguishing
Bourgeios on the basis that in Lousteau, the trial court had vacated its initial
judgment within the time period designated for filing an application for new trial.
Noting that La. C.C.P. art. 1971 allows the trial court to grant a new trial on its
own motion, the Fifth Circuit inferred that the trial court had done so and therefore
had properly vacated the original judgment, concluding: ―The recordation of the
trial court that it signed the first judgment in error, within the time frame permitted
for granting a new trial, persuades us that the [second] judgment is not invalid as
an impermissible amended judgment.‖   03-1182, p.3, 871 So.2d at 620.
The facts of the instant case present an even stronger basis for distinction
from Bourgeois than those of Lousteau.  Whereas there was no motion for new
trial ever filed in Lousteau, in the instant case the trial court had heard and taken
under advisement the plaintiffs’ timely-filed motion for new trial at the time the
court rendered a new judgment that expressly vacated its original judgment.
Moreover, the second judgment altered the original only with respect to the two
legal issues (damages/penalties under La. R.S. 22:1220, and attorney’s fees) that
were raised by the plaintiffs in their motion for new trial.  Although the trial court
did not expressly grant the motion for new trial, we find that, under these
circumstances, the court impliedly granted the motion when it issued a
substantively different judgment that expressly vacated the original judgment.6
Accordingly, we conclude that the second judgment did not constitute an
6 Had we found otherwise, our conclusion would have necessitated not only the reinstatement of the original
judgment (the result Lafayette seeks), but also a remand to the trial court for determination of the still pending
motion for new trial.   The delay for appealing a judgment does not commence, and appellate jurisdiction does not
attach, until all timely-filed motions for new trial have been decided.   See La. C.C.P. arts.   2087, 2088.    Under the
circumstances of the instant case, we believe that such a remand would be a waste of judicial time and resources.
8




impermissible amendment of the first one.  We therefore reject Lafayette’s
argument in this regard.
Statutory Penalties
Lafayette next argues that the second judgment fails to comply with the law
insofar as the award of statutory damages and penalties is concerned; in addition,
appellant contends that the amounts awarded do not accurately reflect the jury’s
verdict and are not supported by the evidence in the record.    As previously stated,
the second judgment eliminated the $10,000.00 penalty ($5,000.00 per location)
that had been awarded under R.S. 22:1220 and instead awarded damages under
that statute in the amounts of $175,000.00 for the uptown location $20,000.00 for
the Metairie location; the second judgment also eliminated the original judgment’s
assessment under R.S. 22:658 of a penalty of twenty-five percent (25%) of the
business income loss found to be due under the insurance policy.
The interplay between these two statutes penalizing insurer conduct has been
the subject of extensive jurisprudence, particularly in the aftermath of Hurricane
Katrina.  In general, R.S. 22:658, part of a section of the Insurance Code dealing
with the payment of claims, sets forth specific rules regarding an insurer’s payment
of various types of claims; whereas R.S. 22:1220 appears in the section of the
Code concerning insurer fraud and unfair trade practices.  When, as in the instant
case, an insurer is found to have arbitrarily and capriciously failed to pay timely
the amount it owes under a policy covering damage to property, the insurer’s
failure is, in many cases, covered by both statutes.
For several years prior to August 15, 2006, R.S. 22:658 provided, in
pertinent part:
9




A. (1) All insurers issuing any type of contract…shall pay the amount of any
claim due any insured within thirty days after receipt of satisfactory
proofs of loss from the insured or any party in interest.
*   *
(3)  Except in the case of catastrophic loss, the insurer shall initiate loss
adjustment of a property damage claim…within fourteen days after
notification of loss by the claimant.  In the case of catastrophic loss, the
insurer shall initiate loss adjustment of a property damage claim within
thirty days after notification of loss by the claimant.  Failure to comply
with the provisions of this Paragraph shall subject the insurer to the
penalties provided in R.S. 22:1220.
*   *
B. (1) Failure to make such payment within thirty days after receipt of such
satisfactory written proofs and demand therefor… when such failure is
found to be arbitrary, capricious, or without probable cause, shall subject
the insurer to a penalty, in addition to the amount of the loss, of twenty-
five percent damages on the amount found to be due from the insurer to
the insured, or one thousand dollars, whichever is greater, payable to the
insured…or in the event a partial payment or tender has been made,
twenty-five percent of the difference between the amount paid or
tendered and the amount found to be due.
Pursuant to La. Acts 2006, No. 813, effective August 15, 2006, section B(1), as
quoted above, was amended to increase the twenty-five percent (25%) penalty to
fifty percent (50%) of the amount found to be due plus ―reasonable attorney fees
and costs.‖
The other potentially applicable penalty statute, R.S. 22:1220, provided, in
pertinent part:
A. An insurer, including but not limited to a foreign line and surplus line
insurer, owes to his insured a duty of good faith and fair dealing.  The
insurer has an affirmative duty to adjust claims fairly and promptly and to
make a reasonable effort to settle claims with the insured or the claimant,
or both.  Any insurer who breaches these duties shall be liable for any
damages sustained as a result of the breach.
B. Any one of the following acts, if knowingly committed or performed by
an insurer, constitutes a breach of the insurer’s duties imposed in
Subsection A:
10




* *
(4)  Failing to pay the amount of any claim due any person insured by
the contract within sixty days after receipt of satisfactory proof of
loss from the claimant when such failure is arbitrary, capricious, or
without probable cause.
C. In addition to any general or special damages to which a claimant is
entitled for breach of the imposed duty, the claimant may be awarded
penalties assessed against the insurer in an amount not to exceed two
times the damages sustained or five thousand dollars, whichever is
greater….
A plain reading of the two statutes reveals that an insurer who arbitrarily,
capriciously, or without probable cause fails to pay the amount due its insured
within sixty days of receiving satisfactory proof of loss has violated both R.S. 22:
658 B (1) and R.S. 22:1220 B (4).  Recognizing that, except for the time period
within which the insurer must pay, the conduct prohibited by the two statutes is
―virtually identical,‖ the Louisiana Supreme Court has held that the offending
insurer cannot be penalized under both statutes; therefore, whichever statute
imposes the greater penalty supercedes the other statute such that the greater
penalty is applied.  Calogero v. Safeway Ins. Co. of Louisiana, 99-1625, pp. 6-7
(La. 1/19/00), 753 So2d 170,174; see also Neal Auction Co. v. Lafayette Ins. Co.,
08-0574, p. 14 (La. App. 4 Cir. 4/29/09), 13 So. 3d 1135, 1144-45.  This rule
obviously compels the trial court to first determine the amount of the penalty that
would be assessed under each statute given the facts of the individual case.
Once the finder of fact has determined that the insurer has arbitrarily and
capriciously failed to pay the amount due under the insurance policy within thirty
days of receiving satisfactory proof of loss, and further has determined what
amount was due that was not so paid, the assessment of the percentage penalty set
forth in R.S. 22:658 is mandatory.  Steadman v. Pearl Assur. Co., 134 So.2d 884,
11




896 (La. 1961); Ibrahim v. Hawkins, 02-0350, p.4 (La. App. 1 Cir. 2/14/03), 845
So.2d 471, 476.    Because the legislature amended R.S. 22:658 in 2006 to increase
the penalty from twenty-five percent to fifty percent of the amount due plus
reasonable attorney fees, the finder of fact may also have to determine whether the
plaintiff’s cause of action arose before or after the effective date of the amendment
in order for the trial court to apply the correct penalty.    In Sher v. Lafayette Ins.
Co., 07-2441, pp. 15-16 (La. 4/8/08), 988 So.2d 186, 199, the Louisiana Supreme
Court held that the plaintiff’s cause of action for penalties under R.S. 22:658 arises
when the insurer’s obligation to pay occurs, which is thirty days after receipt of
satisfactory proof of loss.7    However, in a jury trial, once the jury has made these
factual findings, it is the role of the judge to apply the law as set forth in R.S.
22:658 to determine the amount of the penalty that would be assessed under that
statute.
The trial court’s determination of the amount that would be assessed under
R.S. 22:1220 is somewhat more complex.  R.S. 22:1220 provides for the
mandatory assessment against the insurer of any ―damages sustained as a result of
the breach,‖ as well as the discretionary assessment of penalties ―in an amount not
to exceed two times the damages sustained or five thousand dollars, whichever is
greater.‖  See Calogero v. Safeway Ins. Co. of Louisiana, 99-1625, pp.6-7 (La.
1/19/00), 753 So.2d 170, 174; Sultana Corp. v. Jeweler Mut. Ins. Co., 03-0360, pp.
5-6 (La. 12/3/03), 860 So.2d 1112, 1117; Kozina v. Zeagler, 94-413, p. 7 (La. App.
5 Cir. 11/29/94), 646 So.2d 1217, 1221; Ibrahim v. Hawkins, 02-0350, p. 6 (La.
7 The Court in Sher expressly rejected the insured’s argument that the amended version of the statute
should be applied because the insurer’s duty to pay was a continuing duty that extended past the effective date of the
amendment.   07-2441, pp. 14-15, 988 So.2d at 199.  The Court also held that the amendment cannot be applied
retroactively.   Id., pp. 15-18, 988 So.2d at 199-201.
12




App. 1 Cir. 2/14/03, 845 so.2d 471, 477-78.  The amount of penalties that can be
awarded under this statute is based upon the damages sustained by the breach, not
the damages claimed or awarded; therefore, if there are no damages proven as a
result of the insurer’s breach of its duties, the maximum penalty that the trial court
can award under R.S. 22:1220 is $5,000.00.  Sultana Corp. v. Jeweler Mut. Ins.
Co., 03-0360, p.9 (La. 12/3/03), 860 So.2d 1112, 1119; Brinson v. Automotive Cas.
Ins. Co., 96-1982, p.7 (La. App. 4 Cir. 12/3/97), 703 So.2d 813, 817; Hollier v.
State Farm Mut. Auto. Ins. Co., 01-0592, pp. 5-6 (La. App. 3 Cir. 10/31/01), 799
So.2d 793, 797; Hall v. State Farm Mut. Auto. Ins. Co., 94-867, pp. 7-8 (La. App.
3 Cir. 5/31/95), 658 So.2d 204, 206.
Thus, for the trial court to properly apply R.S. 22:1220, the following factual
issues must first be determined:
(1)                                                                                      Did the insurer arbitrarily, capriciously, or without probable cause
fail to pay any amount due the insured under the policy within
sixty days of the insurer’s receipt of satisfactory proof of loss?
(2)                                                                                      If the answer to the preceding question is yes, did the insurer’s
failure to pay this amount within sixty days result in damages to
the insured?
(3)                                                                                      If the answer to the preceding question is yes, what amount of
damages resulted from the insurer’s breach of its duty to pay, and
therefore should be assessed against the insurer?
(4)                                                                                      If an amount of damages has been listed in response to the
previous question, what percentage of this amount, from zero
percent (0%) to two hundred percent (200%), should be assessed
13




against the insurer as a penalty for its breach considering the facts
of this particular case?
Once the finder of fact has decided these issues, the trial court must award
the plaintiff, in addition to the amount found to be due under the policy, any
damages found to have resulted from the insurer’s breach.  If no damages are
found to have resulted from the breach, the trial court may, in its discretion, assess
against the insurer any amount up to $5,000 as a penalty; conversely, if damages as
a result of the breach have been awarded, the trial court may, in its discretion, also
award a penalty of up to twice the amount (200%) of those damages.  Finally, the
trial court must compare the amount of penalties (not including attorney fees) 8
that would be assessed under R.S. 22:658 with the amount of penalties that would
be assessed under R.S. 22:1220, and then award the higher of the two amounts.
Lafayette contends that the trial court failed to correctly apply the law as
discussed above when it awarded damages pursuant to R.S. 22:1220 in the
amounts of $175,000 and $20,000, respectively, in the second judgment.  We
agree.
In the instant case, the jury found that Lafayette arbitrarily, capriciously or
without probable cause failed to pay Audubon the amount of business income loss
sustained at both locations and due under the Lafayette policy within thirty days
after receipt of satisfactory proof of loss.9  The jury also determined the amounts
that should have been paid under the policy were $240,819.58 for the uptown
8 When attorney fees are provided for, as they are under R.S. 22:658 B(4) (relating to property damage claims on
vehicles) or presumably, in R.S. 22:658 B (1) for several years prior to its 2006 amendment, the insured is entitled to
recover attorney fees under R.S. 22:658 and penalties under R.S. 22:1220, where it provides for a greater penalty
than does R.S. 22:658.   Ibrahim v. Hawkins, supra, 02-0350, p.6, 845 So.2d at 478 (citing Calogero v. Safeway Ins.
Co. of Louisiana, 99-1625, p.7 (La. 1/19/00), 753 So.2d 170, 174.
9 The jury also found that Lafayette initiated loss adjustment for both locations within thirty days of notification of
loss, and therefore the trial court did not consider any penalties pursuant to R.S. 22:658 A (3).   The plaintiffs do not
challenge this finding on appeal.
14




location and $27,071.07 for the Metairie location.  Then, the jury was asked, with
respect to each location, a series of four questions that obviously related to the
determination of damages and penalties pursuant to R.S. 22:1220. These
interrogatories, and the jury’s responses, were as follows:
8. Did Lafayette Insurance Company fail to pay Audubon any amounts owed
for loss at the uptown location within 60 days of satisfactory proof of loss?
Response: YES
9. Do you find by a preponderance of the evidence that Lafayette Insurance
Company was arbitrary, capricious or without probable cause in failing to
pay any amount owed for loss at the uptown location within 60 days of
satisfactory proof of loss?  Response: YES
10. Do you find by a preponderance of the evidence that Audubon
Orthopedic suffered actual damages as a result of Lafayette Insurance
Company acting in an arbitrary or capricious manner or without probable
cause in its failure to pay losses sustained at the uptown location?  Response:
NO
11. If you answered ―YES‖ on any of the Questions numbered 8, 9 or 10,
then what amount of damages do you find Audubon Orthopedic suffered as
a result of Lafayette Insurance Company acting in an arbitrary or capricious
manner or without cause in its failure to pay losses sustained at the uptown
location? Response: $ 175,000.00
The identical questions were repeated in Interrogatory Nos. 19, 20, 21 and
22 with respect to the Metairie location, and the jury gave exactly the same
answers, except that its response to the final Interrogatory, No. 22, was
―$20,000.00.‖
According to the express language of R.S. 22:1220 and the jurisprudence
interpreting it, the jury’s finding (in response to Interrogatory Nos. 10 and 21) that
there were no actual damages caused by Lafayette’s breach meant that the
maximum penalty the trial court, in its discretion, could have assessed under that
statute was $5,000.00.  However, the interrogatory that immediately followed No.
10 and No. 21, respectively, contained a clear error of law in its instruction to the
15




jury.    Indisputably, the awarding of any amount of damages sustained by the
breach under R.S. 22:1220 would require the jury to have responded ―YES‖ to all
of the first three questions in the above-quoted series, and the jury’s having
responded ―NO‖ to the third question should have ended the inquiry.  However,
because the jury was improperly instructed to respond to the fourth question if it
had answered ―YES‖ to any of the preceding three, it is probable that the jury
believed it was compelled to place an amount on the line provided for its
response.10
Citing our decision in Vaughan Contactors, Inc. v. Cahn, 629 So.2d 1225
(La. App. 4th Cir. 1993), Audubon argues that Lafayette waived its right to raise
this error on appeal because Lafayette did not preserve any objections to the jury
interrogatories at the trial or at the charge conference.  The record does not contain
a transcript of the charge conference, nor any other evidence that Lafayette did so
object; moreover, Lafayette does not contend in its reply brief that it did object.
Instead, Lafayette asserts that its argument on appeal is not, as was the contention
in Vaughan, that the error in the jury interrogatories caused the jury to produce
inconsistent responses.  Rather, Lafayette contends that, considering the jury’s
finding that Audubon suffered no actual damages as a result of Lafayette’s breach,
it was legal error for the trial court to award any damages under R.S. 22:1220
because Audubon, as a juridical person, legally cannot sustain general damages,
such as pain and suffering, aggravation, or inconvenience.
We find that the instant case is distinguishable from Vaughan.  In that case,
the defendants asserted that the jury’s response to two initial interrogatories was
10 We note that both Interrogatory Nos. 11 and 22 had a dollar sign preceding the blank line provided for the jury’s
response, a further indication that the jury was expected to provide an amount in response.
16




inconsistent.  The first interrogatory asked whether the defendants were justified in
believing their contract with the plaintiff/contractor was terminated and in
obtaining another contractor to complete the job, to which the jury answered
―Yes.‖    The second interrogatory asked whether the defendants had breached their
contract with the plaintiff in such a way as to make the defendants responsible to
the plaintiff for damages and/or labor and materials, to which the jury also
answered ―Yes.‖                                                                          629 So.2d at 1227-1228.  The jury proceeded, in response to
subsequent interrogatories, to find an amount of damages, which amount the trial
court awarded to the plaintiff, and this court affirmed on appeal.  In his
concurrence, Judge Ciaccio pointed out why, considering the facts of the case, the
jury’s responses to the first two interrogatories were not inconsistent.  Id. at 1229.
Moreover, in denying a motion for rehearing in Vaughan, Judge Plotkin, who
authored this court’s opinion, stated:
Certainly the language of the interrogatories in this case was not
confusing.    Further, there is no reason to believe that the jury did not
understand the questions.
Id. at 1233.
Finally, the court in Vaughan noted that the record contained sufficient evidence to
support the jury’s factual determination that the contract had been breached.  Id. at
1228.
In the instant case, unlike in Vaughan, the instructions contained in the jury
interrogatories were not only confusing, but they also contained an incorrect
statement of the law.  Concerning special jury verdicts, La. C.C.P. art. 1812
provides:
A. The court may require a jury to return only a special verdict in the form
of a special written finding upon each issue of fact. In that event, the court
17




may submit to the jury written questions susceptible of categorical or other
brief answer, or may submit written forms of the several special findings
which might properly be made under the pleadings and evidence, or may use
any other appropriate method of submitting the issues and requiring the
written findings thereon. The court shall give to the jury such explanation
and instruction concerning the matter submitted as may be necessary to
enable the jury to make its findings upon each issue. If the court omits any
issue of fact raised by the pleadings or by the evidence, each party waives
his right to a trial by jury of the issue omitted unless, before the jury retires,
he demands its submission to the jury. As to an issue omitted without such
demand the court may make a finding, or if it fails to do so, it shall be
presumed to have made a finding in accord with the judgment on the special
verdict.
B. The court shall inform the parties within a reasonable time prior to their
argument to the jury of the special verdict form and instructions it intends to
submit to the jury and the parties shall be given a reasonable opportunity to
make objections.
*   *
D. The court shall enter judgment in conformity with the jury’s answers to
these special questions and in accordance with applicable law.
LSA-R.S. C.C.P. art. 1812 (emphasis added).
This article places an affirmative duty upon the trial court to give the jury proper
instructions as are necessary for it to make its findings pursuant to the special
verdict form; it also places upon the trial court the duty to enter judgment not only
in accordance with the jury’s answers, but also in accordance with the applicable
law.  The article contains no provision indicating that the trial court’s failure to
perform these duties cannot be reviewed on appeal in the absence of a
contemporaneous objection by a party.
In the instant case, the applicable law, R.S. 22:1220, requires a finding that
the insured sustained damages as a result of the insurer’s breach in order for the
trial court to award those damages and, in its discretion, a penalty of up to two
times the amount of those damages.  The jury found that Audubon did not sustain
any actual damages as a result of Lafayette’s breach; then, in an attempt to follow
18




an incorrect instruction contained in the special verdict form, listed an amount of
damages sustained by Audubon at each location ($175,000.00 at the uptown
location and $20,000 at the Metairie location).
Considering these facts, we find that the trial court committed legal error by
permitting the jury to use a verdict form that did not comply with the applicable
law, by ignoring the jury’s factual finding that no damages were sustained by
Audubon as a result of Lafayette’s breach, and finally, by awarding damages in the
second judgment that were not in accordance with the applicable law.  We also
find that Audubon’s failure to object to the jury interrogatories does not bar this
court from correcting the trial court’s legal error on appeal.
Although we have reviewed this issue de novo, which is the appropriate
standard for review of legal errors,11 we also note that we would have arrived at the
same conclusion using the manifest error standard used to review factual findings.
The record in the instant case does not support the amounts of damages that were
listed by the jury in response to Interrogatory Nos. 11 and 22, and awarded by the
trial court in the second judgment.
There was very little evidence relating to damages Audubon allegedly
sustained as a result of Lafayette’s failure to timely pay the amounts due under the
business interruption policy.  Janene Gloebel, Audubon’s office manager, testified
that Audubon did not take out any loans or even access its existing credit line in
order to keep its business in operation during the aftermath of Hurricane Katrina.
Dr. Warren Bourgeois, managing partner of Audubon, testified that during the last
two of the four months that Audubon had to operate out of only its Metairie
11 Bell v. Glaser, 08-0279, p.4 (La. App. 4 Cir. 7/1/09), 16 So.3d 514, 516; Edwards v. Pierre, 08-0177, p.9 (La.
App. 4 Cir. 9/17/08), 994 So.2d 648, 656
19




location, patients were typically waiting three to four weeks for an appointment.
Dr. Bourgeois testified that if Audubon had possessed more cash flow during that
time, it ―might‖ have been able to rent other available office space and thereby
increase its capacity to see patients.  He also testified that he and the other
physician partners of Audubon had scaled back their pay after Katrina until ―we
could afford to start paying ourselves‖ again. 12  However, there was no evidence
introduced suggesting or tying any monetary figures to Dr. Bourgeois’s testimony.
There was no evidence showing that Audubon suffered any specific amount of
damages as a result of Lafayette’s failure to timely pay the insurance proceeds.
Therefore, even in the absence of the improper jury instruction, we would have
found the jury’s determination that Audubon sustained a total of $195,000.00 in
damages as a result of Lafayette’s breach to be manifestly erroneous.
Accordingly, we reverse the trial court’s award of $175,000.00 and
$20,000.00 in damages pursuant to R.S. 22:1220.  When there are no damages
sustained by the breach, the trial court may award a maximum of $5,000.00 in
penalties under R.S. 22:1220.  However, in the instant case the greater penalty
would be that assessed pursuant to R.S. 22:658.  To determine which version of
R.S. 22:658 to apply, we must determine when the plaintiff’s cause of action arose.
See Sher v. Lafayette Ins. Co., 07-2441, pp. 15-16(La. 4/8/08), 988 So.2d 186, 199.
As stated previously, in Sher the Louisiana Supreme Court held that the plaintiff’s
cause of action for penalties under R.S. 22:658 arises when the insurer’s obligation
to pay occurs, which is thirty days after receipt of satisfactory proof of loss.  Id.
Audubon argues that the testimony of Lafayette’s corporate representative and
12 Dr. Bourgeois’ suggestion that the departure of one of Audubon’s physicians, who left the practice after Katrina,
might be attributable to Lafayette’s conduct was objected to as speculative and was excluded by the trial court.
This evidentiary ruling has not been raised as an error on appeal.
20




expert CPA indicated that Lafayette did not have satisfactory proof of loss prior to
August 15, 2006, the effective date of the amendment to R.S. 22:658 that increased
the mandatory penalty from twenty-five to fifty percent of the amount found to be
due under the policy.  However, the jury found (in response to Interrogatory Nos. 6
and 17) that Lafayette’s failure to pay the entire amount of the loss at each location
occurred prior to August 15, 2006, which finding is not manifestly erroneous in
light of the entirety of the evidence.  Therefore, according to the law as expressed
by the Supreme Court in Sher, the appropriate amount of the penalty is twenty-five
percent of the unreimbursed business income loss sustained at each location.    We
therefore amend the second judgment to include that penalty.
Attorney Fees
Lafayette contends that the award of attorney’s fees in the second and third
judgments constitutes legal error.  Audubon disputes this contention and
additionally argues that the award of attorney’s fees, which the trial court increased
to $75,000.00 in the third judgment, is so low as to be an abuse of discretion and
therefore should be further increased.    We agree with Lafayette that it was legal
error for the trial court to award any amount of attorney’s fees in the absence of
contractual or statutory authority providing for such an award.
Louisiana courts have long held that attorney’s fees may not be awarded
except where authorized by statute or contract.  Sher v. Lafayette Ins. Co, supra,
07-2441, p.18, 988 So.2d at 201 (citing Rivet v. State, 96-0145 (La. 9/5/96), 680
So.2d 1154; DOTD v. Williamson, 597 So.2d 439, 441 (La. 1992).  Also, as we
have previously stated, in Sher, supra, the Louisiana Supreme Court held that the
2006 amendment to La. R.S. 22:658 cannot be applied retroactively.   07-2441, pp.
21




17-18, 988 So. 2d at 201. 13    Because the pre-amendment version of R.S. 22:658 B
(1) did not provide for an award of attorney’s fees, according to Sher, such an
award may be made only if the plaintiff’s claim arose after the effective date of the
amendment.  Id., pp. 15-16, 988 So.2d at 199.      In the instant case, the jury found
that Lafayette’s breach, its arbitrary and capricious failure to pay the amounts due
under its policy within thirty and/or sixty days of receipt of satisfactory proof of
loss, occurred prior to the August 15, 2006 effective date of the amendment to R.S.
22:658.  Therefore, because Audubon’s claim arose prior to that date, there was no
statutory provision in effect at that time which authorized an award of attorney’s
fees.
Nevertheless, Audubon argues that because the jury also found, in separate
interrogatories, that Lafayette’s failure to pay occurred after August 15, 2006,
Lafayette’s breach was continuing, which should trigger the application of the
amended version of the statute.  Precisely the same argument was rejected by the
Louisiana Supreme Court in Sher.  Addressing the issue of continuing breach, the
Sher Court stated:
Here, although an insurer has a continuing duty of good faith and
fair dealing which extends throughout the litigation period, the claim
first arose prior to the amendment of R.S. 22:658. Because the duty is
a continuing one, had plaintiff not first made satisfactory proof of loss
prior to the amendment of R.S.  22:658, his petition for damages
served after the amendment became effective could have served as
satisfactory proof, thereby triggering the time period set forth in the
statute and could have subjected Lafayette to the penalties contained
in the amendment because the claim would have first arisen after the
amendment. Further, again because the duty is a continuing one, had
plaintiff made satisfactory proof of loss prior to the amendment and
had  Lafayette  paid  that  claim,  and  had  plaintiff  discovered  new
damage and made satisfactory proof which Lafayette failed to pay
within  the  time  period  contained  in  the  statute,  but  after  the
amendment became effective, Lafayette could have been subject to
13 Sher v. Lafayette Ins. Co., supra, 07-2441, pp. 14-19, 988 So.2d at 199-201. See also: footnote 7, supra.
22




the penalties contained in the amendment because the claim would
have arisen after the effective date of the amendment. Neither of those
situations is the case here-the claim for the penalties contained within
the  statute  arose  prior  to  the  effective  date  of  the  amendment.
Plaintiff's argument that Lafayette's continuing breach of the duty of
good faith and fair dealing made it subject to the increased penalties
contained in the amended version of R.S. 22:658 is without merit.
Id., pp. 14-15, 988 So.2d at 199.
Relying on the above-quoted language, this court also has rejected exactly the
same  argument  made  by  Lafayette  herein.    See  Chalmette  Retail  Center  v.
Lafayette Ins. Co., 09-0217, pp. 29-30 (La. App. 4 Cir. 10/16/09), 21 So.3d 485,
504-505, writ denied, 09-2685, 09-2692 (La. 4/9/10), 2010 WL _____, __ So.3d
__.    Just as in the instant case, in Chalmette the jury had answered  ―yes‖ to
separate interrogatories, one asking whether Lafayette’s failure to pay had occurred
before August 15, 2006, and the other asking whether Lafayette’s failure to pay
had occurred after August 15, 2006.   Based on Sher, we held that only the pre-
amendment version of R.S. 658 could be applied.   09-0217, p. 30, 21 So.3d at 505.
Audubon next argues that because Lafayette’s accountant, Mr. Cremers,
opined that in September, 2006, Lafayette had not yet received enough information
from Audubon to adequately analyze Audubon’s claim, Lafayette has admitted that
it did not receive satisfactory proof of loss until after the effective date of the
amendment, thereby transforming the instant fact situation into one of the two
exceptions cited by the Supreme Court in the above-quoted language from Sher.
We disagree.    Lafayette presented Mr. Cremers testimony as part of its defense to
Audubon’s allegation that Lafayette had failed to pay its claim within thirty days of
receipt of satisfactory proof of loss.  Mr. Cremers’ testimony was designed to show
that Lafayette had not received satisfactory proof of loss by September, 2006.
However, the jury obviously rejected Mr. Cremers’ assertion because it found that
23




prior to August 15, 2006, Lafayette arbitrarily and capriciously failed to pay
Audubon’s loss within thirty days of having received satisfactory proof of such
loss.    After prevailing on that factual issue with the jury, Audubon ironically now
argues the opposite—that we should ignore the jury’s finding-- in order to affirm
the award of attorney’s fees.  Audubon cannot have it both ways.
According to the above-quoted language from Sher, if the insurer has
received satisfactory proof of loss and has failed to pay timely, and if both these
events have occurred before the effective date of the amendment to R.S. 22:658,
the insured’s claim arises under the pre-amended version of the statute.  The first
exception noted by the Supreme Court, in which the plaintiff’s petition may serve
as satisfactory proof of loss, expressly applies only ―had [the] plaintiff not first
made satisfactory proof of loss prior to the amendment of R.S. 22:658.‖    Sher,
supra, p.14, 988 So.2d at 199.    The second exception noted in Sher applies when
the insurer has paid the claim, but the plaintiff then discovers new damages for
which the satisfactory proof of loss is received and/or the failure to pay timely
occurs after August 15, 2006.  Neither exception applies under the facts of the
instant case.  Therefore, we find conclude that because Audubon’s claim arose
prior to the effective date of the 2006 amendment to R.S. 22:658, the trial court
erred by awarding attorney’s fees in this case.
Our conclusion moots Audubon’s argument that the increased amount of
attorney’s fees awarded in the third judgment should be further increased on
appeal.  Accordingly, we reverse the award of attorney’s fees in second judgment
and reverse the third judgment (entitled ―Judgment on Motion for New Trial
Regarding Attorney’s Fees‖) in its entirety.
24




Amount of Business Income Loss
Answering the appeal, Audubon contends the amount of business income
loss found by the jury and awarded by the trial court is so deficient as to constitute
an abuse of discretion.    The standard for appellate review of an award of damages
for breach of contract is whether the trial court abused its discretion in making the
award.  Taaffe v. Factory Direct Installations, Ltd., 08-0175, p.14 (La. App. 4 Cir.
4/15/09), 13 So.3d 562.  Under this standard, the question is not whether a
different award might be more appropriate, but whether the award of the trial court
can be reasonably supported by the evidence and justifiable inferences from that
evidence; the fact that the evidence might also support a greater or smaller award
does not justify a change in amount by the appellate court.  Bitoun v. Landry, 302
So.2d 278, 279 (La. 1974).
In the instant case, Audubon contends that the jury’s finding of $267,890.65
in total loss of business income for both locations is an abuse of discretion because
that amount is lower than the amounts resulting from the calculations of both the
plaintiff’s expert and the defendant’s expert.14  We note, however, that the jury’s
handwritten notes on the verdict form in the record indicate that its determination
was based upon the testimony of Lafayette’s expert, Dale Cremers, with certain
amounts deducted for each location.15  The most logical inference from these
handwritten notes is that the amounts deducted by the jury were based upon its
determination of the length of the ―period of restoration‖ as defined in the policy
14 Audubon’s expert, Brenda Harris, calculated the amount to be $542, 887.00; Lafayette’s expert, Dale Cremers,
calculated the amount to be $412, 341.45.
15 Next to its response to Interrogatory No. 3, regarding the amount of business income loss for the uptown location,
the jury wrote: ―Cremers’ calculations (Oct.--Jan. N.O. + Phys. Therapy minus Aug. & Sept.).‖   Next to its response
25




for each location.  Because the coverage under the policy is based upon the amount
of business income lost during the ―period of restoration,‖ the length of this period
for each location was an additional factual finding the jury had to consider to
properly determine the amount of Audubon’s loss.    In determining the applicable
period of restoration for each location, the jury reasonably could have made
deductions from the expert’s amount to account for the policy exclusions,
specifically, the flood/ water damage exclusion and/or the delay exclusion (the
evidence that Audubon’s reopening at the uptown location may have been delayed
by the refusal of a third party to let building tenants return earlier).  Neither expert
testified that he had considered the potential impact of those exclusions in making
his calculations.    Also, it is not inherently unreasonable for the jury to reject the
testimony of one expert and accept that of another.  See Asbestos v. Bordelon, 96-
0525, p.82 (La. App. 4 Cir.10/21/98), 726 So.2d 926, 973.
Therefore, because we conclude that the amount of business income loss
found by the jury is reasonably supported by the evidence, we decline to disturb
the trial court’s award of this amount.
Costs
Citing La. C.C.P. article 2164, Audubon argues that we should exercise our
discretion to award the plaintiff costs both at the trial court level and in connection
with this appeal.  Article 2164 allows the appellate court to render any judgment
―which is just, legal, and proper upon the record,‖ specifically including awarding
damages for frivolous appeal and/or taxing either party with trial and/or appeal
costs to achieve equity.    We do not find the trial court’s failure to award costs to
to Interrogatory No. 14, regarding the amount of business income loss for the Metairie location, the jury wrote:
―Aug. + 1st 2 wks of Sept—temp. loc.‖
26




be an abuse of discretion, nor has Audubon demonstrated that equity demands we
award costs in the instant case.  We therefore reject this argument as specious.
CONCLUSION
For the reasons stated, we:
(1)                                                                                                                  Affirm the trial court’s September 30, 2008 judgment insofar as it
vacates the prior judgment; finds in favor of the plaintiff; awards
the plaintiff business income in the amount of $240,819.58, less
amounts previously paid, for losses sustained at plaintiff’s 2820
Napolean Ave., New Orleans location and in the amount of
$27,071.07 for losses sustained at plaintiff’s 3939 Houma Blvd.,
Metairie location; and assesses judicial interest, from the date of
judicial demand until paid, on the aforementioned award of
business income.
(2)                                                                                                                  Amend the September 30, 2008 judgment to award the plaintiff
penalties under La. R.S. 22:658 in the amount of $66,972.66,
which is twenty-five percent (25%) of the total business income
found to be due under the policy and not paid timely pursuant to
the statute, and judicial interest on this amount.16
(3)                                                                                                                  Reverse the September 30, 2008 judgment insofar as it awards
damages under La. R.S. 22:1220 in the amounts of $175,000.00
for the plaintiff’s New Orleans location and $20,000.00 for the
Metairie location, attorney fees in the amount of $5,000.00, and
judicial interest on these amounts.
16 We have calculated this penalty based upon the entire amount due by Lafayette as found by the jury, as did the
trial court in its first, now vacated judgment.   This calculation assumes that none of the amounts that have been
27




(4)                                                                                                                       Reverse the trial court’s April 20, 2009 judgment in its entirety.
AFFIRMED IN PART, AMENDED IN PART AND REVERSED IN PART
already  paid by Lafayette were paid within thirty days of Lafayette’s receipt of satisfactory proof of loss, which the
jury found to have occurred prior to Aug. 15, 2006.
28

Download 252372.pdf

Louisiana Law