Statutory Penalties Must be Based on Evidence
Without Sufficient Evidence Penalty Assessment was Wrongful
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When an appeal involved issues concerning the statutory penalties that apply to an insurer who knowingly or arbitrarily fails to pay a settlement to a third-party claimant within 30 days after a settlement agreement is reduced to writing The plaintiff, James Bridges, Sr., settled his claims arising from an automobile accident for $450,000. The trial court found that the settlement amount was not paid timely and applied La. R.S. 22:1892 to the penalty claim, imposing a penalty of $225,000 on one of the insurance company defendants. The insurers appealed.
In James Bridges, SS. v. Chubb Indemnity Insurance Company, Ace American Insurance Company, Southeast Louisiana Flood Protection Authority-East, East Jefferson Levee District, Deidrick Green, And Government Employees Insurance (In Its Capacity As Uninsured/Underinsured Motorist Carrier, No. 24-CA-593, Court of Appeals of Louisiana, Fifth Circuit (July 2, 2025) dealt with, what appeared to be an excessive penalty for failing to deliver payment within 30 days of settlement.
Defendants’ Appeal
The defendants appealed the judgment, raising five assignments of error concerning the amount of the penalty and the sufficiency of the plaintiff’s proof.
Factual and Procedural Background
James Bridges alleged that he was injured in an automobile accident caused by Deidrick Green’s negligence. Bridges settled his claims with Green, Green’s employer, and their alleged liability insurers for $450,000. The settlement agreement required payment within 30 days of defendants’ receipt of signed release and final payment letter from CMS. He did not assert a claim for any damages sustained as a result of the late payment of the settlement funds.
Trial Court Ruling
The trial court found that Plaintiff had met that burden for several reasons, all of which are clearly based on “facts” presented solely in the supporting and opposing memoranda or in argument of counsel. The trial court found that the failure to pay the settlement timely was arbitrary, capricious, or without probable cause and imposed a penalty of $225,000. The “facts,” which were not presented in the form of competent evidence caused the trial court to conclude that the delay could easily have been avoided, therefore it was not justified or reasonable and issued a judgment against Chubb for penalties of $225,000, or half of the total settlement amount, and $1,500 in attorney fees.
Trial Court Findings on Burden and Elements of Proof
The only evidence that was submitted at the penalty hearing was Bridges’ evidence proving that the conditions of the Settlement Agreement were met. Bridges did not introduce any evidence proving that the settlement payment was untimely or that the delay was arbitrary, capricious, or without probable cause.
Lack of Evidence in this Record
Here, the trial court found that Bridges met his burden of proving that the settlement payment was untimely because “there was no dispute that there was no payment made within thirty days” after it became due. However, the record did not support the trial court’s conclusions that Bridges met his burden of proving facts establishing his entitlement to a penalty under § 1892.
Scope of Insurer’s Duty under § 1892(A)(2)
When the settlement includes property damage and medical expense claims along with other types of damage claims, as it did here, the amount of a penalty awarded under § 1892 may not exceed fifty percent of the amount of the settlement attributable to the property damage and reasonable medical expense claims, or $1,000, whichever is greater.
Analysis and Conclusion
The appellate court concluded that the trial court’s broader interpretation of the statute was contrary to the statute and the Louisiana Supreme Court’s directives.
Therefore, the trial court was ordered to render its decision based on the evidence properly before it for consideration and the interpretation of the penalty provisions in § 1892 set forth in the appellate decision.
ZALMA OPINION
There is usually no logical reason for an insurer to fail to pay an agreed upon settlement in more than 30 days from the settlement. For reasons never brought to the trial court or the appellate court, Chubb failed and by statute must be penalized for that failure. The trial court assessed an excessive penalty based on a lack of evidence from the parties so the trial court must reconsider based on actual evidence.
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Death by Self-Administered Dialysis is Excluded
Post 5173
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Clear & Unambiguous Exclusion Effective
Dana Kleinsteuber died while administering her own dialysis at home. MetLife now agrees that tragedy was an accident but refused to pay because of an exclusion for losses caused or contributed to by the treatment of a physical illness.
In Charles M. Kleinsteuber v. Metropolitan Life Insurance Company, CIVIL No. 23-3494 (JRT/DTS), United States District Court, D. Minnesota (August 19, 2025) the USDC was faced with the interpretation of an exclusion in an ERISA plan.
KEY FACTS:
Dana Kleinsteuber’s Death:
Dana Kleinsteuber, diagnosed with end-stage renal disease (ESRD), was self-administering dialysis at home when she suffered acute blood loss and died. The cause of death was listed as ESRD and natural causes.
Insurance Claims:
Charles Kleinsteuber, Dana’s husband, filed claims for both ...
Not Wise to Attempt Rescission Without Evidence
Post 5173
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Desiree Durga and Justin Durga v. Memberselect Insurance Company, No. 371891, Court of Appeals of Michigan (August 13, 2025) Desiree Durga and Justin Durga (plaintiffs) claimed the insurer wrongfully attempted to rescind an auto policy.
THE ALLEGATIONS
MemberSelect claimed that Desiree Durga’s application for insurance contained a material misrepresentation, it did not produce a copy of the application. In fact defendant admitted the application for insurance no longer exists.
Trial Court Decision
The trial court granted the plaintiffs’ motion for summary disposition on their breach of contract claim and denied the defendant’s cross-motion for summary disposition, which argued that it was entitled to rescind the policy. The court found that the defendant failed to provide clear and convincing evidence of fraud
The court ...
Improper Joinder of Multiple Party Criminal Fraud Case With Co-Defendants Charged with Murder
Post 5172
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Murder Defendants Must be Tried Separately from Fraud Defendants
A case that involved allegations of a years-long scheme by over a dozen individuals to stage fake automobile collisions in the New Orleans metropolitan area and file fraudulent insurance claims and lawsuits based on the staged collisions. The key individuals involved included Cornelius Garrison, who began cooperating with the federal government in 2019 and was subsequently murdered on September 22, 2020.
FACTS
In United States Of America v. Ryan Harris, et al., CRIMINAL ACTION No. 24-105, United States District Court, E.D. Louisiana (July 25, 2025) the USCA dealt with motions to sever some defendants from the massive and admittedly complex case. There are 11 defendants charged with a multi-year conspiracy involving ...
Is Injury in the Course of Self-Defense an Occurrence?
Post 5171
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When There is no Accident the Intentional Acts Exclusion is Irrelevant
The case involves a tragic incident where Kimberly Mollicone was killed during a gunfight between her husband, Matthew Mollicone, and Daniele Giannone. The central issue is whether Giannone’s actions, taken in self-defense, are covered under his State Farm homeowner’s insurance policy.
In State Farm Fire And Casualty Company v. Daniele Giuseppe Giannone; Heidi C. Aull, personal representative for the estate of Kimberly Ann Mollicone, Nos. 24-1264, 24-1265, United States Court of Appeals, Sixth Circuit (August 5, 2025) resolved the dispute.
THE INSURANCE COVERAGE
Although rare in insurance contracts the policy in question provides coverage for the insured’s liability to third parties who are injured ...
Rulings on Motions Reduced the Issues to be Presented at Trial
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CASE OVERVIEW
In Richard Bernier v. State Farm Mutual Automobile Insurance Company, No. 4:24-cv-00002-GMS, USDC, D. Alaska (May 28, 2025) Richard Bernier made claim under the underinsured motorist (UIM) coverage provided in his State Farm policy, was not satisfied with State Farm's offer and sued. Both parties tried to win by filing motions for summary judgment.
FACTS
Bernier was involved in an auto accident on November 18, 2020, and sought the maximum available UIM coverage under his policy, which was $50,000. State Farm initially offered him $31,342.36, which did not include prejudgment interest or attorney fees.
Prior to trial Bernier had three remaining claims against State Farm:
1. negligent and reckless claims handling;
2. violation of covenant of good faith and fair dealing; and
3. award of punitive damages.
Both Bernier and State Farm dispositive motions before ...
ZIFL Volume 29, Issue 10
The Source for the Insurance Fraud Professional
See the full video at https://lnkd.in/gK_P4-BK and at https://lnkd.in/g2Q7BHBu, and at https://zalma.com/blog and at https://lnkd.in/gjyMWHff.
Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/ You can read the full issue of the May 15, 2025 issue at http://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-05-15-2025.pdf
This issue contains the following articles about insurance fraud:
Health Care Fraud Trial Results in Murder for Hire of Witness
To Avoid Conviction for Insurance Fraud Defendants Murder Witness
In United States of America v. Louis Age, Jr.; Stanton Guillory; Louis Age, III; Ronald Wilson, Jr., No. 22-30656, United States Court of Appeals, Fifth Circuit (April 25, 2025) the Fifth Circuit dealt with the ...
