Bayle v. Allstate Insurance Co.
(United States Court of Appeals, Fifth Circuit, August 11, 2010)
This property insurance coverage matter addressed a recurring question encountered in Hurricane-related property insurance disputes: i.e., where the parties agree that both covered risks and non-covered risks caused some of the damage, which party must bear the burden of identifying the discrete items of property that were damaged and proving what portion of the damage was caused by the excluded risk? Specifically, the parties disagreed whether it is the insurer or the insured who must bear the burden of proving that the damage to the policyholder’s home from Hurricane Katrina was caused by an insured risk (wind) or by an non-insured risk (flood) when both wind and flood contributed to the overall damage to the property.
The policyholder sued Allstate alleging that the insurer failed to indemnify them adequately for wind caused structural damage to their property and that the insurer wrongly employed the “actual cash value” of the property rather than the “building structure reimbursement” standard to calculate the dollar amount of damage caused by wind. The district court granted summary judgment to the insurer and the Court of Appeals affirmed, noting that prior case precedent controlled the burden-shifting arguments.
Specifically, the court held that Dickerson v. Lexington Insurance Company, 556 F3d 290 (5th Cir. 2009)does not stand for the proposition advanced by the policyholder that the insurer alone must bear the burden of producing evidence to segregate covered losses from excluded losses, at least not at the summary judgment stage. The court also noted that both the policyholder and Allstate appeared to confuse the burden of persuasion with the burden of production, stating:
As the Louisiana Supreme Court made clear in Jones, 870 So.2d 1002 (La. 2004), and as our reasoning in Dickerson reflects, the insured must carry the burden of persuasion to establish that any uncompensated (or under-compensated) damage was caused by a covered peril. Simply put, this is what is meant by the rule that the insured must prove coverage under the policy. Then, if the defendant-insurer wishes to avoid liability by relying on a policy exclusion from coverage, it has the burden of persuasion to establish that the uncompensated or under-compensated damage is subject to an exclusion.
The court held that contrary to Allstate's contention, there is nothing in Louisiana law to suggest that these respective burdens of persuasion shift between the parties. What does shift–but only during the summary judgment stage–is the burden of production. Because at trial the defendant-insurer has the ultimate burden of persuasion that the exclusion is applicable, a defendant-insurer that moves for summary judgment must bear the burden of producing evidence to make out a "prima facie" case that the cause of the uncompensated or under-compensated damage was excluded from coverage. If the defendant-insurer does so, "the burden shift[s] to the [insured] to present evidence demonstrating there remain[s] a material issue of fact."
The court again reiterated that “as Jones makes clear, this simple, burden-shifting minuet arises from the effect of summary judgment on the burdens of production and not any shift between the parties' respective burdens of persuasion.” Because Dickerson addressed the sufficiency of the evidence adduced at trial, it was not concerned with the shifting of the burdens of production that characterizes summary judgment.
In applying the foregoing to the subject case, the court noted that because the insurer moved for summary judgment, and because Allstate would have had the burden of proving at trial that flood, not wind, caused the uncompensated or under-compensated damage claimed by the policyholder, Allstate had the burden of producing evidence in support of its motion to establish that there existed no issue of material fact regarding the cause of the uncompensated or under-compensated damage for which the policyholder sought indemnification. Unlike the insurer-defendant in Jones, however, Allstate did not contest that a covered peril (wind) caused some of the damage to some of the policyholder’s property; the question was which particular items of property were damaged by wind. The court further noted that complicating Allstate’s task, however, was the fact that at no point did the policyholder identify which particular damaged items had gone uncompensated or under-compensated under their homeowners policy's coverage for structural damage. They simply presented the court with a line-item cost estimate to repair all the damage to their property, without even attempting to explain which portion or portions of those costs are attributable to wind-caused damage.
Consequently the court held that as the movant for summary judgment, Allstate had the burden of proving the applicability of any exclusion from coverage and that Allstate properly supported its motion for summary judgment with specific evidence (its adjusters' and expert's reports, and the policyholder’s deposition testimony) that addressed the various items of damage incurred by the policyholder’s property and the cause of each item's damage, as well as the particular amounts it paid to the policyholder for wind-damage to those items. At that juncture, the burden of production shifted to the policyholder to put forward evidence of specific facts sufficient to demonstrate the existence of uncompensated items of damage that were caused by wind, or of any deficiency in its quantum of the damages paid by Allstate to indemnify the policyholder for wind-caused damage. They failed to do so, and therefore, the district court's grant of Allstate’s motion for summary judgment was affirmed.
For a copy of the decision click here
Paul Steck and Daniel Gerber