Material Issues of Fact Preclude Summary Judgment that Insurer Waived or was Estopped from Asserting Coverage Defenses

The United States District Court for the Western District of Louisiana, applying Louisiana law, has held that material issues of fact precluded summary judgment that an insurer waived or was equitably estopped from raising coverage defenses. Landmark Am. Ins. Co. v. Esters, No. 20-1263, 2022 WL 1720381 (W.D. La. April 29, 2022).

The insurer issued a liability policy to the insured, an insurance agency. After a hurricane caused significant property damage, many customers of the insured reported losses and sought to recover under their respective insurance policies. The insured subsequently learned that many customers did not have adequate insurance coverage in place to cover the claimed losses on account of certain acts and omissions undertaken by its employee and provided notice to its liability insurer.

The liability insurer denied coverage based on several policy exclusions. In the ensuing coverage litigation, the insured moved for partial summary judgment that the insurer had waived or was estopped from raising coverage defenses by its actions during its investigation of the claims. Specifically, prior to denying coverage, the insurer’s claims representative had contacted an attorney on behalf of the insured, who discussed the claims with the insured and reported back to the insurer. The insured argued that the insurer’s reservation of rights (which expressly indicated that the insurer was not waiving any rights) was insufficient because the insurer failed to adequately advise of a potential conflict between the insurer and insured and assigned an attorney to confer with the insured and report back to the insurer without advising the insured that the attorney was not retained to represent its interests. For its part, the insurer argued that it appropriately reserved all rights and that it never appointed the attorney to represent the insured; rather, the attorney was merely doing the insurer “a favor” by meeting with the insured and was not paid for his time.

The court denied the insured’s motion. The court concluded that the insurer sent both a “bare bones” and a sufficiently detailed reservation of rights letter, but material issues of fact remained as to whether the insurer adequately advised the insured of a potential conflict created by its reservation of rights correspondence, including its assignment of an attorney to discuss the loss with the insured without adequately informing the insured of the attorney’s role.