Gaffney v. State Farm Fire and Casualty Co.,
E.D. of LA (July 2, 2009)
The policyholder filed a claim against their insurer asserting that the insurer did not adequately adjust their claim after their home was damaged by Hurricane Katrina and sued the insurer for damages and bad-faith penalties. The policyholders then instituted another action on behalf of their children, asserting they are additional insureds and are entitled to bad-faith penalties for the insurer’s mishandling of the parents’ claim.
The District Court held that although the children’s claim is unique, it is not implausible. After a review of existing law and the briefs, the District Court held that the children could not recover under Louisiana Law. The children argued that they can recover under Louisiana’s Bad Faith Statute because their parents’ policy defines insureds to include live-in relatives. However, the District Court found that argument to be irrelevant because the children did not make a claim under the policy.
Louisiana’s Bad Faith Statute does not apply to any insured but only to those insureds that are due an amount of a claim. Since the parents are the only ones making a first-party property damage claim under the policy, they are the only ones entitled to recover under the Bad Faith Statute. In considering the parents’ emotional distress claim, the court can take into consideration any strain on the parents’ relationship with their children as a result of the insurer’s alleged bad faith.
For a copy of the decision click here
By Sarah X. Fang