Judgment rendered June 26, 2024 Application for rehearing may be filed within the delay allowed by Art. 2166, La. C.C.P.
No. 55,656-CA
COURT OF APPEAL SECOND CIRCUIT STATE OF LOUISIANA
*****
BILLY RAY HODGE Plaintiff-Appellee
versus
LOUISIANA FARM BUREAU Defendants MUTUAL INSURANCE COMPANY, XYZ INSURANCE COMPANY, NICOLAS HOPKINS
Appealed from the Sixth Judicial District Court for the Parish of Madison, Louisiana Trial Court No. 201948
Honorable Laurie Reis Brister, Judge
PETTIETTE, ARMAND, DUNKELMAN, Counsel for Defendant- WOODLEY, BYRD & CROMWELL, LLP Appellant, Louisiana By: S. Michael Cooper Farm Bureau Casualty Insurance Company
HUDSON, POTTS & BERNSTEIN, LLP Counsel for Appellee By: Morgan Livingston Brian P. Bowes *****
Before PITMAN, STONE, THOMPSON, HUNTER, and MARCOTTE, JJ.
STONE J., concurs and dissents in part for reasons assigned by J. HUNTER
HUNTER, J., concurring in part and dissenting in part with written reasons. MARCOTTE, J.
This appeal arises from the Sixth Judicial District Court, Parish of
Madison, the Honorable Laurie R. Brister presiding. Appellant-Defendant,
Louisiana Farm Bureau Mutual Insurance Company, appeals the trial court’s
ruling awarding $76,366.36 to plaintiff-appellee, Billy Ray Hodge, for
damages to farm irrigation equipment caused by Hodge’s employee. For the
following reasons, we reverse in part and affirm in part.
FACTS
On March 20, 2019, Billy Ray Hodge (“Hodge”) filed a petition for
damages naming as defendants Louisiana Farm Bureau Mutual Insurance
Company (“Farm Bureau”), Nicholas Hopkins (“Hopkins”), a Farm Bureau
adjuster, and XYZ Insurance Company, thought to be the errors and
omissions insurer for Hopkins. The petition alleged that Hodge was covered
by a liability insurance policy issued by Farm Bureau and that on August 25,
2018, Hodge’s employee Don Davis negligently drove one of Hodge’s
tractors1 into a pivot irrigation system2 owned by Sherman Shaw on Shaw’s
1,200-acre agricultural property in Madison Parish known as Tamarak Farm
(“Tamarak”).
The petition alleged that Hodge leased Tamarak from Shaw, but there
was no lease agreement between Hodge and Shaw with respect to the pivot
system. Hodge and Shaw had a business relationship whereby Hodge
farmed Shaw’s land under a verbal lease and paid Shaw a percentage of
1 Farm Bureau paid for damage to the tractor under a separate policy, and the parties stipulated that it was not at issue in this case. 2 A pivot irrigation system is a rotating machine that waters crops using sprinklers. The irrigation method is highly efficient and irrigates crops in a circular area around the system’s pivot point. revenue from crop yields. Hodge would, with Shaw’s permission, utilize the
pivot irrigation system in order to increase crop yield and, in turn, the
amount paid to Shaw.
The petition stated that the irrigation system was extensively damaged
in the accident and had to be replaced. Even though Shaw owned the pivot
system, he did not assert a first-party insurance claim with his own insurer,
nor did he assert a third-party claim against Hodge or Farm Bureau. After
the accident, the petition alleged that Hodge immediately informed Farm
Bureau, who then sent adjuster Hopkins to assess the damage. Present at the
inspection were Hopkins, Hodge, and Dennis Buza, a sales representative for
Chicot Irrigation, Inc., which repairs and sells pivot irrigation systems.
Hopkins assessed the damage at $76,000 to repair the pivot system and
$160,000 to replace it.
Hodge then asserted that on a subsequent visit to Tamarak, Hopkins
told him that he would be covered for the entire cost to repair the system
plus “as much as you need.” Hodge claimed that only after he ordered and
had installed the replacement pivot irrigation system did Farm Bureau
inform him that coverage was being denied due to an exclusion for damaged
property rented, occupied, and/or loaned to him. This resulted in Hodge
paying $35,750 to Shaw and $83,525.59 to Chicot Irrigation, Inc. for a new
pivot irrigation system, with Shaw covering the balance.
The petition stated a claim against Farm Bureau and Hopkins under a
theory of detrimental reliance. In support of his detrimental reliance claim,
Hodge argued that he justifiably relied on Farm Bureau’s statements
(through Hopkins) that he was covered and that these statements induced
2 him to order the replacement pivot irrigation system, ultimately to his
detriment.
The petition also stated a claim against Farm Bureau for a breach of
its duty of good faith. Hodge claimed that because he did not rent or occupy
the pivot irrigation system, nor was it loaned to him, Farm Bureau’s denial
of coverage was an act of arbitrary and capricious bad faith in violation of
La. R.S. 22:1973 and 1892. The petition sought reimbursement of the
purchase price of the new irrigation system, penalties, and attorney fees, due
to the wrongful denial of coverage, and damages for Hodge’s detrimental
reliance on Farm Bureau’s representations.
Farm Bureau filed an answer to Hodge’s petition on May 2, 2019.
Farm Bureau generally denied the allegations in Hodge’s petition and
asserted several affirmative defenses, including a claim that no coverage was
available to Hodge for the damaged irrigation system because it was
property that was rented, occupied, and/or loaned to him. Farm Bureau also
asserted that no coverage was available to Hodge because of the policy’s
voluntary payments exclusion, which stated that no coverage was available
to any insured for payments made or obligations incurred without Farm
Bureau’s consent.
On March 9, 2020, Farm Bureau filed a motion for summary
judgment, arguing that the damage to property exclusion was enforceable
and that the alleged statements by Hopkins did not create coverage. Farm
Bureau also argued that the pivot system was a component part of Tamarak,
thus Hodge’s lease of Tamarak included the pivot. Farm Bureau noted that
the center tower of the pivot was bolted to a concrete pad and that the system
3 did not work unless bolted to the ground. Farm Bureau also argued that the
system was connected to a well by pipes, further evidencing that the system
was a component part of an immovable.
Hodge opposed the motion, arguing that Farm Bureau relied on a
flawed interpretation of the coverage exclusions in the policy and that, in
any event, he never owned, rented, or occupied the pivot system, nor was it
ever loaned to him. Hodge also argued that the concrete slab and well were
separate structures that did not make up the pivot system and should not
have been considered when determining if the pivot system was movable or
immovable. Hodge asserted that at the very least there remained genuine
issues of material fact.
The trial court agreed, and it denied Farm Bureau’s motion for
summary judgment after a hearing on December 1, 2020. The trial court
found that there were genuine issues of material fact with respect to whether
Hodge owned, leased, rented, or operated the pivot system and whether the
pivot system was a component part of the land that Hodge leased.
On July 19, 2022, Hodge dismissed Hopkins and XYZ Insurance
Company from the lawsuit. On May 23, 2023, a bench trial was held against
Farm Bureau. On May 30, 2023, the trial court provided its reasons for
ruling in favor of Hodge. The trial court held that Hodge did not own, rent,
or lease the pivot irrigation system, nor did he have care, custody, or control
of it. The trial court also held that the policy’s exclusions could not
unambiguously be applied to Hodge’s claim and that there was insurance
coverage. The trial court also found that the pivot system was not a
component part of the land, noting that the well and concrete slab were
4 separate from the pivot system, which was designed to move. Finally, the
trial court denied Hodge’s claims for detrimental reliance and bad faith
penalties.
On June 14, 2023, the trial court signed a judgment in favor of Hodge
and against Farm Bureau for damages to the pivot system in the amount of
$76,366.36, plus costs and interest. Farm Bureau appeals, and Hodge
answered the appeal.
DISCUSSION
Farm Bureau argues that this court should apply a de novo standard of
review since the case involves competing interpretations of an insurance
contract. As to the merits, Farm Bureau asserts that the trial court erred by
not enforcing the policy’s “damages to property” exclusion. In support of
this assertion, Farm Bureau notes that the purpose of the owned, rented,
leased, or occupied exclusion is to effectuate the intent that liability
insurance is designed to provide compensation for damages to property not
owned or controlled by the insured. Farm Bureau further notes that the
exclusion is applicable because there may be some advantage to the insured
in falsifying or exaggerating a loss to its own property – a moral hazard not
contemplated or contracted for in a commercial general liability policy.
Farm Bureau argues that the trial court should have found applicable
the coverage exclusion for property rented, occupied, or loaned to Hodge.
Farm Bureau notes that under Hodge’s deal with Shaw, Shaw agreed to erect
the pivot, which was used by Hodge in his farming operation, and Hodge
agreed to pay Shaw a percentage of crop revenue. Both Hodge and Shaw
testified that this arrangement made them more money. Farm Bureau argues
5 that since Hodge got to use the pivot, and in turn paid Shaw more money
than he had previously, Hodge was effectively “renting” the pivot from
Shaw, or at the very least, the pivot was loaned to Hodge.
Farm Bureau further argues that Hodge’s lease of the Tamarack
farmland necessarily included the pivot since it was a component part of the
farm and, under Louisiana law, tracts of land and their component parts are
immovable property. Farm Bureau notes that the pivot was fixed to the land
with bolts for over ten years, that it spanned 1,930 feet with tires four feet
high, and that it was connected to a well by pipes. Farm Bureau also
supports its arguments with cases from jurisdictions outside Louisiana which
hold that pivot irrigation systems are fixtures to the land. Farm Bureau
further argues that even if the court considers the pivot system to be a
movable, it was still “loaned” to Hodge in the sense that it was a
nonconsumable thing delivered by Shaw to Hodge to use and return.
Assuming the pivot is movable property, Farm Bureau further argues
that coverage is excluded because the pivot was under the care, custody, or
control of Hodge, and the policy excludes coverage for “personal property in
the care, custody or control of any ‘insured’ other than your employee.”
Farm Bureau notes that during the pivot’s entire lifespan (2007-2018),
Hodge was the only one who turned it on or off, put air in its tires and diesel
and oil in its engine, winterized it, and built bridges for its wheels. In other
words, Farm Bureau asserts that Hodge treated the pivot system as if it were
his own; therefore, coverage should be excluded.
Farm Bureau also argues that Hodge’s actions thwarted its right to
defend Hodge against a claim for the damaged pivot. Farm Bureau asserts
6 that when Hodge unilaterally purchased a brand new pivot system, he never
gave Farm Bureau the opportunity to investigate a potential defense that
Shaw could have been partially at fault. Accordingly, Farm Bureau argues
that the trial court was wrong to assume that Hodge triggered the insuring
agreement.
Finally, Farm Bureau argues that coverage should be excluded due to
the voluntary payments provision in the policy, which states that “no
‘insured’ will, except at that ‘insured’s’ own cost, voluntarily make any
payment, assume any obligation, or incur any expense, other than for first
aid, without our consent.” Since Farm Bureau did not consent to Hodge’s
voluntary payments for a new pivot system, it argues that coverage should
be excluded for this additional reason.
Hodge argues that since this case involves the interpretation of facts to
determine if Farm Bureau’s policy exclusion applies, a de novo review is not
warranted and the standard of manifest error should be applied.
As to the merits, Hodge argues that the trial court was not erroneous
in ruling that the policy’s exclusions do not apply. Hodge asserts that the
trial court correctly determined that the pivot irrigation system was not
property rented or occupied by Hodge, nor was it loaned to Hodge. Hodge
notes that he had no authority, right, or permission to turn on the pivot,
unless specifically told to do so by Shaw.
Hodge also argues that the trial court correctly ruled that the pivot
irrigation system was not personal property in his care, custody, or control.
Hodge points out that Farm Bureau did not base its coverage denial on the
“care, custody or control” subpart of the policy’s exclusion but rather on the
7 “rent, occupy, or loaned” subpart. Hodge asserts that Farm Bureau waived
this argument because it did not plead the “care, custody, or control” subpart
of the exclusion as an affirmative defense. Hodge further argues that even if
Farm Bureau did not waive this argument by failing to specifically plead it,
it, nevertheless, lacks merit because the facts at trial showed that Hodge had
to seek permission from Shaw before he did anything with the pivot system.
Hodge also argues that he had a legal obligation to pay for the damage
to the pivot system caused by his employee; and, therefore, Farm Bureau is
obligated to pay those sums that Hodge was obligated to pay. In response to
Farm Bureau’s “voluntary payments” argument, Hodge points out that Farm
Bureau not only consented to the payments but instructed Hodge to move
forward with the purchase of the pivot system, which is the basis of his
detrimental reliance claim.
Hodge answered Farm Bureau’s appeal with his own assignments of
error, arguing that: (1) the trial court erred by not holding that Hodge
detrimentally relied on the representations made by Farm Bureau to
purchase the new pivot system; and (2) the trial court erred by not awarding
Hodge the entire amount of replacing the damaged pivot system and
In support of his first assignment of error, Hodge notes that it wasn’t
until Farm Bureau’s letter of September 10, 2018, that he had any indication
that there may be a possible exclusion associated with his claim. Hodge also
points out that he got mixed messages from Farm Bureau. For instance,
Hopkins contacted Hodge’s wife on September 21, 2018, stating that the
claim had been denied, only to contact Hodge three days later to state that
8 the claim had in fact not been denied. Hodge claims that those conflicting
phone calls were a direct example of Farm Bureau’s lack of knowledge if an
exclusion did or did not apply.
To further bolster his detrimental reliance argument, Hodge notes that
Farm Bureau’s employee and representative, Hopkins, stated multiple times
during their August 31, 2018, conversation that the damage was “covered,”
and that the only question was the amount of the coverage. Hodge argues
that, for all appearances, Hopkins had the authority to make that decision
and confirm coverage. Hodge asserts that he justifiably relied on Hopkins’s
representations to his detriment.
In support of his second assignment of error, Hodge argues that Farm
Bureau breached its fiduciary duty to Hodge by misrepresenting pertinent
facts relating to the coverage at issue and by failing to pay claims pursuant
to La. R.S. 22:1893. Hodge asserts that there was obviously confusion “in
house” at Farm Bureau as to whether there was coverage and that Farm
Bureau arbitrarily and capriciously came to its decision to deny coverage.
Because of this, Hodge argues that he is entitled to any general or special
damages in addition to two times the amount of the new pivot system.
Hodge calculates these amounts as follows: $155,025.59 (damages) +
$310,051.18 (penalty of damages x 2) + $112,360.64 (judicial interest) =
$577,437.41 (total claim value).
Hodge asserts that the fact that he paid for most of the new system out
of his own pocket and Shaw contributed the rest is of no moment since the
entire pivot system needed to be replaced. Hodge argues that the trial court
erred when it found that Hodge was only entitled to repair costs. Finally,
9 Hodge argues in the alternative that if he is only entitled to damages and
additional penalties for the amount that he paid out-of-pocket for the new
pivot system, then he would be entitled to the following amounts:
$119,275.59 (damages) + $238,551.18 (penalty of damages x 2) +
$86,449.48 (judicial interest) = $444,276.25 (total claim value).
Hodge requests that this court affirm the trial court’s ruling that
coverage applied and further that the entire replacement price of the new
pivot system be awarded as damages, including any general or special
damages, in addition to penalties.
In response to Hodge’s answer to its appeal, Farm Bureau asserts that
there is no basis for increasing the compensatory damages awarded to
Hodge. Farm Bureau asserts that the trial court had three options when
calculating damages: (1) the cost of restoration if the damaged item can be
adequately repaired; (2) the difference in value prior to and after the
damage; or (3) the cost of replacement, less reasonable depreciation, if the
value before and after the damage cannot be reasonably determined. And
Farm Bureau claims that the trial court correctly determined that the amount
in controversy was the amount to repair the pivot, which was estimated to be
$76,366.36. Farm Bureau asserts that Hodge was not entitled to a brand new
pivot, which did not take into account depreciation.
Farm Bureau also argues that Hodge is not entitled to statutory
penalties because Hodge cannot prove that the denial of coverage was
arbitrary, capricious, or without probable cause. Farm Bureau also notes
that the trial court did not find that Farm Bureau acted in bad faith, and that
finding may not be set aside in absence of clear error.
10 Finally, Farm Bureau asserts that Hodge’s calculations on bad faith
penalties are wrong because, under La. R.S. 22:1973, the penalty is not a
doubling of the contractual liability of the insurer under the policy. Instead,
La. R.S. 22:1973 refers to the additional damages authorized by La. R.S.
22:1973(A).
Farm Bureau requests that the judgment of the trial court be reversed,
and judgment be entered in favor of Farm Bureau declaring no coverage
under the policy.
Standard of Review
The district court’s findings of fact are subject to the manifest error
standard of review: the court of appeal may not set these aside unless they
are manifestly erroneous or plainly wrong. Broussard v. State, 12-1238 (La.
4/5/13), 113 So. 3d 175; Rosell v. ESCO, 549 So. 2d 840 (La. 1989). The
appellate court must decide only whether the factfinder’s conclusion was
reasonable, not whether it was right or wrong. Broussard v. State, supra;
Rosell v. ESCO, supra; Smith v. City of Monroe, 52,605 (La. App. 2 Cir.
4/10/19), 267 So. 3d 1218. Reversal is warranted only when the record,
viewed in its entirety, (1) contains no reasonable factual basis for the district
court’s finding and (2) establishes that the finding is clearly wrong.
Broussard v. State, supra; Rosell v. ESCO, supra; Smith v. City of Monroe,
supra. Without such a showing, the appellate court may not reverse, even if
convinced that had it been sitting as the trier of fact, it would have weighed
the evidence differently. Criswell v. Kelley, 54,188 (La. App. 2 Cir. 3/9/22),
335 So. 3d 483.
11 We are unconvinced by Farm Bureau’s argument that a de novo
standard of review should apply since this case involves the interpretation of
an insurance contract. Rather, we find that the issues of this case involve the
interpretation of the facts to determine whether insurance applies.
Accordingly, a de novo standard of review is not warranted, and we will
apply the standard of manifest error.
The Insuring Agreement
An insurance policy is a conventional obligation that constitutes the
law between the insured and the insurer, and the agreement governs the
nature of their relationship. La. C.C. art. 1983. An insurance policy is a
contract, which must be construed employing the general rules of
interpretation of contracts. Reynolds v. Select Properties, Ltd., 634 So. 2d
1180 (La. 1994); La. C.C. arts. 2045-2057. If the insurance policy’s
language clearly expresses the parties’ intent and does not violate a statute or
public policy, the policy must be enforced as written. However, if the
insurance policy is susceptible to two or more reasonable interpretations,
then it is considered ambiguous and must be liberally interpreted in favor of
coverage. Reynolds, supra; Litton v. White, 49,958 (La. App. 2 Cir. 7/1/15),
169 So. 3d 819, writ denied, 15-1653 (La. 1/15/16), 184 So. 3d 705.
Liability insurance policies should be interpreted to effect, rather than
to deny coverage. Yount v. Maisano, 627 So. 2d 148 (La. 1993). However,
it is well-settled that unless a statute or public policy dictates otherwise, the
insurers may limit liability and impose such reasonable conditions or
limitations upon their insureds. Reynolds, 634 So. 2d at 1183; Livingston
Parish School Bd. v. Fireman’s Fund Amer. Ins. Co., 282 So. 2d 478 (La.
12 1973); Oceanonics, Inc. v. Petroleum Distrib. Co., 292 So. 2d 190 (La.
1974). In these circumstances, unambiguous provisions limiting liability
must be given effect. Supreme Servs. & Specialty Co. v. Sonny Greer, Inc.,
06-1827 (La. 5/22/07), 958 So. 2d 634.
This case involves a third-party liability policy rather than a first-party
property policy.3 Like most liability policies, the policy at issue here had an
“insuring agreement” that consisted of a duty to defend and a duty to
indemnify.
The insuring agreement provided as follows:
We will pay those sums that any ‘insured’ becomes legally obligated to pay as damages, except punitive or exemplary damages, because of ‘bodily injury’ or ‘property damage’ to which this insurance applies. We will have the right and duty to defend any ‘insured’ against any ‘suit’ seeking those damages.
It is undisputed that Shaw never sued Hodge nor did he enter into a
settlement agreement with Hodge. Thus, the question before this court is
whether Hodge was “legally obligated to pay” damages to a third party.
While this court has been unable to find any cases which define that phrase,
Rollins v. Richardson, 35,171 (La. App. 2 Cir. 12/7/01), 803 So. 2d 1028,
rev’d on other grounds, 02-0556 (La. 12/4/02), 833 So. 2d 921, is
instructive. There, the plaintiff brought a tort suit against her neighbors and
the neighbors’ insurer, Allstate, stemming from waste on the property that
led to the plaintiff’s child’s illness. The neighbors settled with the plaintiff,
and the plaintiff reserved her rights to pursue a judgment against Allstate.
3 Property insurance is considered “first-party” insurance, in the sense that it covers a loss sustained by the insured, the first party to the insurance contract, as opposed to liability or “third-party” insurance, which covers the insured’s liability to a third party (a nonparty to the insurance contract) for that loss.
13 The settlement agreement specified that the neighbors assigned to the
plaintiff any claims or rights they had vis-a-vis Allstate and they transferred
any rights they had to the third-party demand against Allstate.
Nonetheless, the district court dismissed the plaintiff’s claims against
Allstate on summary judgment, finding that the plaintiff’s settlement with
the neighbors extinguished Allstate’s obligation to the plaintiff, as Allstate
provided coverage only to the extent that its insured became legally
obligated to pay damages. Thus, by virtue of the settlement, the neighbors
were no longer legally obligated to the plaintiff and the plaintiff’s claims
against the neighbors were dismissed; thus, Allstate’s indemnification
obligation likewise ended. On appeal, we affirmed, explaining that:
Allstate’s policy expressly provides that its obligation of indemnification results from the Richardsons becoming “legally obligated to pay” for bodily injury. A trial solely against Allstate could result in an abstract determination that the Richardsons were negligent, but not in a judgment causing the Richardsons to “become legally obligated to pay” Rollins. Accordingly, we agree with the trial court that Allstate has shown that the Richardsons were released from the entirety of the claim against them as tortfeasors, and that the condition giving rise to Allstate’s obligation for indemnity under the policy cannot occur.
Id. at 1033-1034.
The legal inquiry in this case is similar to that of Rollins, supra. Just
as the neighbors were not legally obligated to pay damages to the plaintiff
and therefore there was no concomitant obligation owed by Allstate, Hodge
was not legally obligated to pay damages to a third party and, therefore,
there is no concomitant obligation owed by Farm Bureau. See Eagle Water,
LLC v. Arch Ins. Co., 360 F. Supp. 3d 426 (W.D. La. 2018), aff’d sub nom.
Eagle Water, L.L.C. v. Ash, 778 F. App’x 304 (5th Cir. 2019). The feature
14 that ultimately saved the Rollins plaintiff on appeal to the Louisiana
Supreme Court – a fact question about the intent of the parties – is notably
absent here.
In essence, Hodge decided on his own that he was 100 percent at fault
and that Farm Bureau should fund a brand-new pivot irrigation system.
However, under the explicit terms of the insuring agreement, Farm Bureau is
not compelled to fund anything absent a legal obligation on the part of
Hodge to pay a third party for damages. Further complicating this matter is
that Hodge is essentially asking Farm Bureau to pay himself,
notwithstanding the fact that the policy at issue is a third-party liability
policy rather than a first-party property one.
The terms of the insurance contract are not ambiguous, nor are they
subject to more than one interpretation. The parties are bound by the terms
of the policy to which they agreed. That policy renders Farm Bureau liable
only when Hodge becomes legally obligated to pay a third party for damages
– a situation that never arose in this case. Since this prerequisite event never
came to pass, Farm Bureau’s obligation never began.
Accordingly, we hold that it was manifest error for the trial court to
assume that Hodge triggered the insuring agreement.
The Exclusion
Because we hold that there was no coverage due to Hodge’s failure to
trigger the insuring agreement, an analysis of the various exclusions is not
critical to our holding. However, the “personal property in the care, custody
or control” exclusion provides an additional basis for our ruling.
15 The policy excludes coverage for “personal property in the care,
custody or control of any ‘insured’ other than your employee.” During the
pivot’s entire life span, Hodge exercised exclusive control over it. He was
the only one who turned it on or off. He winterized it, put fuel in it, changed
its oil, aired its tires, and built bridges for its wheels.
In 2017, Hodge paid for upgrades to the pivot, installing several “back
booms”4 on the pivot. Hodge paid $13,273.37 out of his own pocket for
these upgrades. Hodge also paid to have the system winterized every year.
In short, Hodge treated the pivot as if it were his own. He was the
only one that used it, maintained it, turned it on, and kept it running.
Louisiana jurisprudence recognizes two distinct circumstances under
which this type of exclusion is applied: (1) the insured has actual physical
possession of or control over the property; and (2) the insured has a
proprietary interest in and derives a monetary benefit from the property.
Reynolds, 634 So. 2d at 1184.
Here, both situations are present. Hodge clearly had physical
possession of the pivot. He also derived a monetary benefit from the pivot
in that he used it to irrigate his crops, which in turn created a larger yield.
Accordingly, we hold that the trial court was manifestly erroneous in
holding that Hodge did not have care, custody, or control over the pivot
system such that the policy’s exclusion did not apply.
4 Back booms on a pivot irrigation system are intended to keep its wheels from getting stuck.
16 Detrimental Reliance
The doctrine of detrimental reliance is designed to prevent injustice by
barring a party from taking a position contrary to his prior acts, admissions,
representations, or silence. John Bailey Contractor, Inc. v. State, Dept. of
Transp. & Dev., 439 So. 2d 1055 (La. 1983); Orr v. Bancroft Bag, Inc.,
29,046 (La. App. 2 Cir. 1/22/97), 687 So. 2d 1068; Knight v. State, 30,902
(La. App. 2 Cir. 9/28/98), 718 So. 2d 646. To recover under a theory of
detrimental reliance, the plaintiff must prove three elements: a representation
by conduct or work; justifiable reliance thereon; and a change of position to
one’s detriment because of the reliance. Jackson v. Lare, 34,124 (La. App. 2
Cir. 11/1/00), 779 So. 2d 808. “Claims of detrimental reliance must be
examined strictly and carefully” and are not favored under Louisiana law.
First Louisiana Bank v. Morris & Dickson, Co., LLC, 45,668, p. 16 (La.
App. 2 Cir. 11/3/10), 55 So. 3d 815, 825.
The facts of this case do not support a detrimental reliance claim. On
September 5, 2018, Hopkins told Buza, the representative from Chicot
Irrigation, Inc., that there may be a “technicality” with coverage. Buza
relayed that information to Hodge on the same day. By letter dated
September 6, 2018, Farm Bureau advised that the policy’s “Damage to
Property” exclusion may prohibit coverage.
On September 7, 2018, Buza proceeded to order the new pivot system.
On September 10, 2018, Hodge knew for sure that Farm Bureau was
asserting a coverage defense. According to Buza, Hodge could have
cancelled the order of the brand-new pivot system at any time up until the
17 new pivot was loaded onto a truck for transport to Tamarak. That event
occurred on September 17, 2018. Hodge did not cancel the order.
Essentially, five to ten days after the Hopkins visit, Hodge knew that
Farm Bureau might deny coverage. Nevertheless, Hodge moved forward
with buying a brand-new pivot system.
We agree with the trial court’s assessment that Hodge should have
known that there was no guarantee the claim would be paid and that any
reliance by Hodge on the Hopkins statements was not justifiable.
Accordingly, we find no manifest error in the trial court’s ruling denying
Hodge’s detrimental reliance claim.
Bad Faith Penalties
Hodge also seeks extracontractual damages under La. R.S. 22:1892
and 22:1973. The Louisiana Supreme Court has held that these two statutes
proscribe “virtually identical” conduct and that “the primary difference is the
time periods allowed for payment.” Reed v. State Farm Mut. Auto. Ins., 03-
0107 (La. 10/21/03), 857 So. 2d 1012. To succeed under either statute, the
plaintiff must prove by a preponderance of evidence that the denial of
coverage was “arbitrary, capricious, or without probable cause.” Guillory v.
Lee, 09-0075 (La. 6/26/09), 16 So. 3d 1104.
A refusal to pay coverage is “arbitrary, capricious, or without
probable cause,” when the denial of payment is “vexatious, meaning
unjustified, without reasonable or probable cause or excuse.” Guillory,
supra at 1126-27. If the insurer has a reasonable basis to defend the claim
and acts in good-faith reliance on that defense, then the denial of coverage is
not arbitrary, capricious, or without probable cause. Id. at 1127. Put another
18 way, “where the insurer has legitimate doubts about coverage, the insurer
has the right to litigate these questionable claims without being subjected to
damages and penalties.” Calogero v. Safeway Ins. Co. of La., 99-1625 (La.
1/19/00), 753 So. 2d 170.
Here, there is no evidence that Farm Bureau’s conduct in denying
coverage was arbitrary and capricious. Farm Bureau did not refuse to
defend Hodge against a lawsuit, nor did it fail to pay sums that Hodge was
legally obligated to pay. Accordingly, we find no manifest error in the trial
court’s determination that Hodge is not entitled to bad-faith penalties
pursuant to La. R.S. 22:1892 and 22:1973.
CONCLUSION
For the foregoing reasons, we REVERSE the trial court’s ruling that
Farm Bureau’s insurance policy provided coverage to Hodge for the
damaged pivot system, and Hodge’s answer to Farm Bureau’s appeal is
denied. We AFFIRM the trial court’s ruling in favor of Farm Bureau and
against Hodge on the issues of detrimental reliance and bad-faith penalties.
Costs are assessed to Hodge.
REVERSED IN PART, AFFIRMED IN PART.
19 HUNTER, J., concurring in part and dissenting in part.
I concur in the majority’s decision to affirm the trial court’s ruling in
favor of Farm Bureau and against plaintiff on the issues of detrimental
reliance and bad faith penalties. However, I dissent from the majority’s
reversal of the trial court’s ruling with regard to insurance coverage.
An insurance policy is a contract between the parties and should be
construed using the general rules for the interpretation of contracts set forth
in our Civil Code. Kazan v. Red Lion Hotels Corp., 21-01820 (La. 6/29/22),
346 So. 3d 267; Sims v. Mulhearn Funeral Home, Inc., 07-0054 (La.
5/22/07), 956 So. 2d 583. Interpretation of an insurance policy is the
determination of the common intent of the parties – this analysis starts by
examining the words of the policy itself. Id. Words and phrases in an
insurance policy must be given their generally prevailing meaning unless
they are words of art or have acquired a technical meaning. Id. When the
words of an insurance policy are clear and explicit and do not lead to absurd
consequences, courts must enforce the language as written. Id.
The liability policy at issue states, “We will pay those sums that any
‘insured’ becomes legally obligated to pay as damages[.]” The policy also
contains a “Damage to Property” exclusion (Section I, Coverage H,
Paragraph (2)), which provides coverage is excluded for:
(1) Property you own; (2) Property you rent or occupy; [and] *** (4) Property loaned to you[.] ***
In the instant case, Hodge’s employee damaged the pivot system,
which was not in use at the time of the incident. As a result, Hodge, as the
1 employer, became “answerable for the damage caused by its employee in the
exercise of the functions in which the worker is employed.” La. C.C. art.
2320; Lowe v. Old Am. Indem. Co., 54,656 (La. App. 2 Cir. 8/10/22), 345
So. 3d 1171. Therefore, Hodge, as the employer/insured, became legally
obligated to pay, and, as Hodge’s insurer, Farm Bureau (under the explicit
terms of the policy) became obligated to pay. Consequently, I believe
Hodge had a right of action.
Additionally, under the facts of this case, I believe the trial court did
not err in finding the rent/loan exclusion does not apply. It is clear from the
testimony Hodge did not own the pivot system, and he was not using,
renting or borrowing the system at the time of the incident. Further, I
believe Farm Bureau had a reasonable basis to defend the claim and Hodge
is not entitled to penalties or attorney fees.