GeoVera Specialty Ins Co. v. Ebert Joachin ( 2020 )

Case: 19-30604 Document: 00515478133 Page: 1 Date Filed: 07/06/2020
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
No. 19-30604 FILED
July 6, 2020
Lyle W. Cayce
GEOVERA SPECIALTY INSURANCE COMPANY, Clerk
Plaintiff-Counter Defendant - Appellee
v.
EBERT JOACHIN; MARIETTE D. JOACHIN,
Defendants-Counter Claimants - Appellants
-----------------------------------------------------------
Consolidated with 19-30672
GEOVERA SPECIALTY INSURANCE COMPANY,
Plaintiff - Appellee
v.
EBERT JOACHIN; MARIETTE D. JOACHIN,
Defendants - Appellants
Appeals from the United States District Court
for the Eastern District of Louisiana
Before DENNIS, ELROD, and COSTA, Circuit Judges.
GREGG COSTA, Circuit Judge:
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One fire led to two cases of buyers’ remorse for Mariette and Ebert
Joachin. The fire burned down a house they had bought just a month earlier.
And when they filed an insurance claim, the insurer told them that their policy
did not apply because they were not residing in the home. After learning that
they may have purchased the wrong policy, the Joachins sued the agent who
sold it to them. But in this case they seek to recover under the policy even
though they did not meet the residency requirement. That the law does not
allow.
I.
The Joachins purchased the home at a foreclosure sale for $55,500. The
home was located at 5809 Bienvenue Avenue in Marrero, Louisiana. The
Joachins intended to make it their primary residence.
After closing on the home, they decided to buy homeowners’ insurance.
So the Joachins went to a local insurance agency. An agent asked them a series
of questions. She used the Joachins’ answers to populate a self-made “quote
sheet,” which she entered into the company’s system to select an insurer. The
agent’s quote sheet indicated that the Bienvenue home was a “new purchase”
where the Joachins were not “currently living.”
This was true. The Joachins had not moved in because they needed to
do repairs first, like fixing termite damage and replacing some sheetrock. Yet
the agent sold the Joachins a GeoVera Specialty homeowners’ policy for people
already residing in the property. But the Joachins had not moved in by the
policy’s inception date.
In fact, they never moved in because a fire destroyed the home a month
later. The Joachins’ policy covered fire damage, so they submitted a claim to
GeoVera seeking the policy limit of $170,000. GeoVera invoked its right to
investigate the claim. The Joachins responded that they had lived at a
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different address since 2006, but intended to move into the Bienvenue home
after they finished the repairs.
Largely because of this lack of residence, GeoVera denied the Joachins’
claim. GeoVera then filed a complaint for a declaratory judgment in federal
court. It sought a declaration that the Bienvenue home “d[id] not qualify as a
‘residence premises’” and that it “owe[d] no duty to indemnify [the Joachins]
for any loss arising out of” the fire under the policy. The Joachins
counterclaimed that the policy did cover their home and sought contractual
and bad faith damages.
GeoVera moved to dismiss the Joachins’ counterclaims. It argued that
the Joachins’ nonresidence precluded coverage, which in turn precluded the
bad faith claims. GeoVera also moved for summary judgment on its claim for
declaratory relief. 1
The district court granted GeoVera’s motion to dismiss, agreeing that the
policy provided coverage only to residents. The court also concluded that the
Joachins could not prove coverage through vacancy exclusions, which provide
grace periods “to prevent coverage from being suspended.” Nor could they
assert bad faith claims without establishing coverage. The court later granted
GeoVera’s motion for summary judgment for the same reasons. The Joachins
appeal both rulings.
1 GeoVera also sought to rescind the policy. It alleged that the Joachins lied in their
application by indicating that they were occupying the Bienvenue house and that the house
did not need repairs. After winning on the coverage question, GeoVera withdrew its motion
for summary judgment on this issue.
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II.
A.
Louisiana law tasks the Joachins with “prov[ing] coverage under the
policy” before they may recover. Bayle v. Allstate Ins. Co., 615 F.3d 350, 357–
59 (5th Cir. 2010). Their ability to do so boils down to one question: Was the
Bienvenue home a covered “residence premises” under the insurance policy?
The Joachins’ policy covered “[t]he dwelling on the ‘residence premises’
shown in the Declarations.” It further defined “residence premises” as: “[t]he
one-family dwelling where you reside . . . on the inception date of the policy
period shown in the Declarations and which is shown as the ‘residence
premises’ in the Declarations.” The Joachins meet the second requirement
because the Declarations page lists the Bienvenue house as the covered
property.
But the “and” in the policy’s definition of residence premises requires
more than that—it also requires residence. See Kennett v. USAA Gen. Indem.
Co., -- F. App’x --, 2020 WL 1933950, at *3 (5th Cir. Apr. 21, 2020). That
residence requirement is “clear and explicit.” LA. CIV. CODE art. 2046. And
the “plain, ordinary and generally prevailing meaning” of the word “reside”
requires more than purchasing a home or intending to move into it. Korbel v.
Lexington Ins. Co., 308 F. App’x 800, 805–06 (5th Cir. 2009) (quoting
Cadwallader v. Allstate Ins. Co., 848 So. 2d 577, 580 (La. 2003)). The Joachins
recognize this, as they repeatedly admitted that they never “resided” at the
Bienvenue property.
The Joachins’ Bienvenue home thus did not satisfy the policy’s
“residence” requirement and was not a covered “residence premises.” There is
no coverage.
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B.
The Joachins make two arguments in response. First, they contend that
vacancy exclusions in the policy and in Louisiana statutes governing fire
policies created coverage. To state this argument is to expose its faulty
premise—that an exclusion can create coverage.
The policy’s vacancy exclusion allows GeoVera to refuse payment for
“[c]overed property losses” if the dwelling is vacant for more than 30 days. The
statutory exclusion “suspend[s] or restrict[s] insurance” after more than 60
days of vacancy. 2 See LA. R.S. § 22:1311. The vacancy exclusions do not
convert uncovered properties into covered ones. See Columbia Cas. Co. v. Ga.
& Fla. RailNet, Inc., 542 F.3d 106, 112 (5th Cir. 2008) (explaining that under
Texas law an insured cannot use an exclusion to “create coverage that would
not otherwise exist under a policy”). They instead give GeoVera an out if the
Joachins increase the risk of property damage through sustained vacancy. See
6A STEVEN PLITT ET AL., COUCH ON INSURANCE § 94:102 (3d ed. 2020) (“The
purpose of an occupancy clause is to avoid liability where the risk has been
increased by vacancy.”). 3
The Joachins’ view of the exclusions would flip the parties’ burdens for
insurance claims. Consistent with general insurance principles, Louisiana
requires the insured to first prove coverage, after which the insurer can show
that an exclusion applies. Bayle, 615 F.3d at 358–59; see also Jones v. Estate
of Santiago, 870 So. 2d 1002, 1010 (La. 2004). That order is key: coverage must
2 Because we find no coverage in the first place, we need not address whether this
statutory exclusion for fire policies applies to the GeoVera homeowners’ policy or how the
statutory vacancy exclusion would interact with the one in the policy.
3 Indeed, vacancy clauses are often considered “conditions subsequent” that “suspend
the insurance,” rather than “exclusions” that “declare that there never was insurance with
respect to the excluded risk.” Id. § 94:102 n.1; 6 id. § 81:19. Louisiana caselaw does not make
that technical distinction. E.g., Doucette v. La. Citizens Coastal Plan, 96 So. 3d 1236, 1239
(La. Ct. App. 5th Cir. 2012) (describing vacancy clause as “exclud[ing]” coverage).
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exist before it can be excluded. See Kennett, 2020 WL 1933950, at *1–2, 4
(considering a vacancy argument irrelevant when the plaintiff failed to
establish that a property was his “residence premises”). The Joachins’ primary
case, Thomas v. Industrial Fire & Casualty Co., 255 So. 2d 486 (La. Ct. App.
1st Cir. 1971), supports that principle. It involved an insurer invoking a
vacancy exclusion to deny payment for otherwise covered property losses. Id.
at 488. Vacancy exclusions do not help insureds like the Joachins.
Their second argument fares no better. The Joachins assert that the
policy language requiring residence on the policy’s inception date is “absurd”
and thus unenforceable. See Doerr v. Mobil Oil Corp., 774 So. 2d 119, 124–25
(La. 2000) (noting that when “a literal reading of” a contract’s term leads to
absurd results, the court must “attempt to determine the [term’s] true meaning
and interpretation”), reh’g granted on other grounds, 782 So. 2d 573 (La. 2001);
cf. LA. CIV. CODE art. 2046 (implying that “further interpretation” may be
appropriate when a contract’s terms “lead to . . . absurd consequences”). At
first blush, this stringent requirement seems troubling. Residency
requirements are nothing new in homeowners’ policies. 5 JEFFREY E. THOMAS,
NEW APPLEMAN ON INSURANCE LAW LIBRARY EDITION § 53.02[1][a] (2020); see
Kennett, 2020 WL 1933950, at *1, 3–4 (affirming judgment in insurer’s favor
because insured did not reside in home at time of fire); Korbel, 308 F. App’x at
805–06 (rejecting claim for certain living expenses because insured did not
reside in home). But we are aware of no reported case, nor could GeoVera
identify one, involving a policy that requires residence on the inception date
(as opposed to the day the covered event occurs). This reside-at-inception
requirement means that if the insured moves in on Day 2 of the policy, there
is no coverage for a fire occurring on Day 365.
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Of course, that does not describe the Joachins’ situation—they never
resided at the home. That means even the commonplace residency
requirement would have barred coverage.
In any event, despite our concerns with the hypothetical posed above, the
more restrictive inception-date requirement does not rise to the level of
absurdity. Absurdity requires a result “that no reasonable person could
approve.” See Absurdity doctrine, BLACK’S LAW DICTIONARY (11th ed. 2019).
An insurance policy is thus absurd if it “exclude[s] all coverage” from the
outset. Rider v. Ambeau, 100 So. 3d 849, 857 (La. Ct. App. 1st Cir. 2012)
(concluding that a liability policy that excluded coverage “for the insured’s
liability” was absurd). So is one that broadly excludes coverage without
reasonable limitations. Doerr, 774 So. 2d at 124–25, 127 (characterizing a
clause that was intended to exclude coverage for “environmental pollution” as
absurd when it, by its “literal” terms, could extend to someone who slips on
Drano or has a bad reaction to “chlorine in a public pool” (quotation omitted)).
But the GeoVera policy is not absurd on its face. The policy makes perfect
sense for a homeowner who purchases it while already living in the home.
Such an insured would receive robust coverage.
The problem, then, is not that GeoVera’s policy is “absurd.” It is that the
Joachins purchased the wrong policy. Just as a policy requiring ownership
would not become absurd if a renter mistakenly purchased it, the reside-at-
inception policy is not absurd because insureds who had yet to move in
purchased it.
Purchasing the wrong insurance policy is not unheard of, and the law
provides a remedy when the fault lies with the agent who procured it. See 3
COUCH ON INSURANCE § 46:59 (“A party who has engaged a person to act as his
or her agent in procuring adequate insurance is entitled to recover damages
from the agent if the policy obtained does not cover a loss for which the agent
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contracted to provide insurance, and the insurer refuses to cover the insured’s
loss . . . .”). That brings us back to where we started: The Joachins did sue
their agent. And if the agent was liable, that was the place to look for blame
in this case of the wrong policy.
The insurer is not liable for coverage it did not agree to provide. 4 And
because it lawfully denied the claim, it is not on the hook for any bad faith
claims. Bradley v. Allstate Ins. Co., 620 F.3d 509, 525–26 (5th Cir. 2010) (citing
Clausen v. Fid. & Deposit Co. of Md., 660 So. 2d 83, 85 (La. Ct. App. 1st Cir.
1995)).
***
The judgment is AFFIRMED.
4 Because GeoVera never agreed to insure the unoccupied, in-repair Bienvenue home,
the policy may be subject to rescission. In fact, GeoVera sought rescission and conceded at
oral argument that it was not entitled to retain the premiums for a policy that never went
into effect. See 2 COUCH ON INSURANCE § 32:63; see also Vest v. Richardson, 253 So. 2d 97,
101 (La. Ct. App. 4th Cir. 1971).
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