Reconsidering Position on Covered Property Damage During Appraisal to Further Claim Resolution Does Not Warrant Bad Faith Damages

Case:  Cooper v. Farmers Insurance Exchange
            Louisiana Second Circuit Court of Appeal
            2016 La. App. LEXIS 2142, 50,978-CA (11/23/16)

After a hailstorm, Insureds sought recovery for damage from their property carrier. The initial adjuster estimated the covered damage at less than the deductible, finding the balance of the damage resulted from wear and tear and improper installation of the roof. The Insured obtained an estimate from a public adjuster in the amount of $25,705.27. The carrier agreed to have a second adjuster look at the property, resulting in a finding that covered damage exceeded the $1000 deductible by $91.45. The carrier cut a check in that amount to the Insured.

The Insured and carrier then agreed to invoke appraisal and the respective appraisers agreed on a value of covered damage of $17,500. The carrier paid this, but the Insured nevertheless filed suit alleging bad faith and noting this should have been paid from the outset, but in light of the expenses and litigation costs incurred to obtain this recovery, they only netted $9,625, which was insufficient to repair the damage.

At trial, rather than call their public adjuster, the Insured questioned the appraiser appointed by the carrier, who explained the carrier wanted to resolve the litigation, so he made certain concessions in the appraisal process to facilitate this. The carrier’s appraiser testified he nevertheless believed the covered damage did not exceed the deductible, as the balance of the damage resulted from improper installation of the roof shingles with insufficient nails poorly positioned, the lack of a diverter over a skylight and the tendency of water to accumulate on the patio of the Insureds’ home during heavy rain, resulting in damage to the wood floors.

Noting the bad faith statutes are to be strictly construed, the Louisiana Second Circuit found no error in the trial court’s determination of the reasonableness of the carrier’s conduct given it had sent two adjusters to the Insureds’ property and conceded some storm damage, despite believing it was not related, in order to get the matter resolved. There was no arbitrary, capricious or without probable cause conduct, thus no bad faith and the claims were dismissed.