     Case: 18-31008      Document: 00515009397         Page: 1    Date Filed: 06/25/2019




            IN THE UNITED STATES COURT OF APPEALS
                     FOR THE FIFTH CIRCUIT
                                                                         United States Court of Appeals
                                                                                  Fifth Circuit

                                                                                FILED
                                      No. 18-31008                          June 25, 2019
                                                                           Lyle W. Cayce
NAZ, L.L.C.,                                                                    Clerk


              Plaintiff - Appellant

v.

UNITED NATIONAL INSURANCE COMPANY,

              Defendant - Appellee




                   Appeal from the United States District Court
                      for the Eastern District of Louisiana
                             USDC No. 2:17-CV-5697


Before SMITH, WIENER, and ELROD, Circuit Judges.
PER CURIAM:*
       Plaintiff-Appellant NAZ, L.L.C. (“NAZ”) is the owner of a medical facility
and is itself owned by Dr. Morteza Shamsnia (“Dr. Shamsnia”) and Simin
Mirtaheri. In December 2014, Defendant-Appellee United National Insurance
Company (“UNIC”) issued an insurance policy to NAZ covering its medical
facility.




       * Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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                                      No. 18-31008

                             I. FACTS AND PROCEEDINGS
       On January 15, 2015, NAZ’s medical facility sustained water damage
during a thunderstorm. NAZ filed an insurance claim with UNIC on December
17, 2015 for the water damage. NAZ had made repairs to the medical facility
before filing that claim. UNIC’s local adjuster first met with Dr. Shamsnia in
January 2016. On February 3, 2016, UNIC sent the first of several Reservation
of Rights (“ROR”) letters to NAZ and requested complete records of the damage
and repairs. 1 On March 25, 2016, after meeting with Dr. Shamsnia, the local
adjuster recommended denial of the claim because the damage to the roof,
which caused the water damage to the facility, was not covered by the policy.
He also recommended as a precaution that an engineer inspect the facility in
case litigation should ensue.
       UNIC sent several letters to NAZ requesting records of the repairs,
photos of the damage, and any documentation supporting NAZ’s claim. 2 The
local adjuster attempted to schedule an inspection with an engineer but was
unable to do so. On June 5, 2016, more than four months after UNIC’s first
letter, and again on August 11, 2016, Dr. Shamsnia sent UNIC some photos of
the damage.
       UNIC sent a second ROR letter to NAZ on August 30, 2016. UNIC sent
a third ROR letter to NAZ on September 23, 2016, and included a proof of loss
claim form. The local adjuster met with Dr. Shamsnia on November 28, 2016
to complete the proof of loss claim form. UNIC sent a final ROR letter to NAZ
on December 7, 2016, and rejected NAZ’s proof of loss “because [Dr. Shamsnia]



       1 A reservation of rights letter notifies the insured that the policy may not cover a
stated claim.
       2 UNIC sent letters on February 3, 2016, March 3, 2016, April 7, 2016, May 3, 2016,

May 6, 2016, June 15, 2016, July 21, 2016, August 30, 2016, September 23, 2016, October 21,
2016, and November 18, 2016.

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                                       No. 18-31008

ha[d] not provided documentation to support [the] damages and because [the]
investigation of this claim [wa]s ongoing.” NAZ wrote to UNIC on December
28, 2016, acknowledging receipt of the letter denying the proof of loss form but
stating that it was “looking forward to an amicable resolution” of the claim.
       NAZ filed suit against UNIC on April 20, 2017. 3 NAZ alleged that UNIC
had breached (1) the insurance contract and (2) its duty of good faith and fair
dealing. In August 2018, the district court granted UNIC’s summary judgment
motion and dismissed NAZ’s claims. 4 The district court ruled that NAZ’s
breach of contract claim had (1) prescribed and (2) did “not create[] a material
issue of fact as to the waiver of the limitation period of its policy with UNIC”
because “[n]o reasonable insured would be lulled into inaction by [UNIC’s]
communications.” 5 On NAZ’s breach of duty claim, the district court ruled that
UNIC did not breach its duty because (1) it had no duty to inform NAZ about
the limitation period contained in the policy and (2) “no reasonable juror could
find that [UNIC] acted arbitrarily, capriciously, or without probable cause in
refusing payment” of the claim. 6 NAZ now appeals the grant of summary
judgment.
                                II. STANDARD OF REVIEW
       We review a summary judgment de novo and apply the same standard
as the district court. 7 Summary judgment is proper under Federal Rule of Civil
Procedure 56, “if the movant shows that there is no genuine dispute as to any




       3 Many of the dates alleged in the complaint are different from the dates alleged in
NAZ’s brief.
       4 NAZ, L.L.C. v. United Nat’l Ins. Co., No. 17-5697, 2018 WL 3997299, at *5 (E.D. La.

Aug. 21, 2018).
       5 Id. at *3.
       6 Id. at *4.
       7 McCoy v. City of Shreveport, 492 F.3d 551, 556 (5th Cir. 2007) (citing Willis v. Coca

Cola Enters., Inc., 445 F.3d 413, 416 (5th Cir. 2006)).

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material fact and the movant is entitled to judgment as a matter of law.” 8 If
the moving party meets that burden, the non-moving party must show the
existence of a genuine issue for trial, 9 and the evidence and the inferences must
be viewed in the light most favorable to the               non-movant. 10 Conclusional
allegations, unsubstantiated assertions, or a mere “scintilla” of evidence is not
sufficient to defeat summary judgment. 11
                                      III. ANALYSIS
           A. Breach of Contract
       The UNIC insurance policy issued to NAZ includes the following
limitation provision: “No one may bring a legal action against us . . . unless . .
. [t]he action is brought within 2 years after the date on which the direct
physical loss or damage occurred.” “[T]he contents of the policy constitute the
law between the parties, which will be enforced as written if the terms are clear
and express the intent of the parties.” 12
       The property damage occurred on January 15, 2015; but NAZ did not file
suit until April 20, 2017, so NAZ’s claim is facially prescribed. The burden thus
shifts to NAZ to demonstrate that the claim is not prescribed. 13 NAZ asserts
that UNIC waived the limitation period.
       An insurer waives a limitation period if its “overall actions” lead the
insured “to reasonably believe the insurer w[ill] not require compliance with
the policy provision that suit must be filed within [the limitation period].” 14
“The insurer cannot hold out the hope of an amicable adjustment of the loss,


       8 Fed. R. Civ. P. 56(a).
       9 Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 585–87 (1986).
       10 FDIC v. Dawson, 4 F.3d 1303, 1306 (5th Cir. 1993).
       11 Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc).
       12 Estate of DeGraauw v. Travelers Ins. Co., 06-547, p.6 (La. App. 3 Cir. 9/27/06); 940

So.2d 858, 863.
       13 Estate of DeGraauw, 06-547, p.6; 940 So.2d at 863.
       14 Blum v. Cherokee Ins. Co., 336 So.2d 894, 897 (La. App. 4 Cir. 1976).



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and thus delay the action of the insured, and then plead the delay, caused by
his own conduct, as a defense to the action when brought.” 15 Using fact-
intensive analyses, courts have found no evidence of waiver when
       there was no admission or recognition of liability, no assurance of
       payment, no late request for additional information or for time to
       investigate the claim further, no intentional delay of adjustment
       beyond the limitation period, and no prolonged or continuous
       negotiations, lasting through most of the limitation period, which
       might tend to hold out a reasonable hope of amicable adjustment. 16

       Louisiana law states that “[m]ere investigation of a claim or loss does not
constitute conduct which may be taken as a waiver of a policy provision.” 17
Rather, “[u]nless the insurer . . . leads the insured to reasonably believe the
time limitation has been waived while the claim is under consideration . . . the
suit must be filed within the prescribed period even if the claim is pending.” 18
       NAZ contends that a jury could conclude that UNIC deceived NAZ
regarding the limitation period. NAZ asserts that UNIC (1) communicated
continuously with NAZ throughout the limitation period, (2) made late
requests for additional information, (3) withheld information about the
limitation period, and (4) intentionally delayed adjustment of the claim. 19 NAZ
maintains that these actions induced it to “hold out a reasonable hope of
amicable adjustment” of its claim. 20




       15 Brocato v. Sun Underwriters Ins. Co. of N.Y., 53 So.2d 246, 249 (La. 1951).
       16 Washington v. Allstate Ins. Co., 901 F.2d 1281, 1288 (5th Cir. 1990) (citing Blum,
366 So.2d at 898, 900).
       17 Id. at 1287; La. R.S. § 22:879.
       18 Maurice v. Prudential Ins. Co., 02-993, p.4–5 (La. App. 4 Cir. 10/23/02); 831 So.2d

381, 385.
       19 See Washington, 901 F.2d at 1288.
       20 Blum, 336 So.2d at 898.



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       This case “must be decided on its own facts and circumstances.” 21 First,
UNIC did communicate with Dr. Shamsnia throughout the limitation period.
That communication, however, demonstrates that it was not reasonable for
NAZ to believe its claim would be resolved without a lawsuit because (1) UNIC
repeatedly reserved its rights in the ROR letters, (2) UNIC rejected NAZ’s proof
of loss, and (3) the parties discussed the possibility of litigation. Additionally,
at no time did UNIC admit liability or assure payment.
       Second, UNIC continued the investigation and repeatedly requested
documentation because NAZ failed to provide consistent information sufficient
to adjust the claim. Third, UNIC was under no obligation to advise NAZ of the
limitation provision contained in the insurance policy. Louisiana courts have
repeatedly held that insurers do not have a responsibility to inform their
insureds of time limitations contained in their policies because “insured[s] [are]
presumed to know the contents of [their] polic[ies].” 22 “An insured cannot . . .
avoid a limitations provision on the grounds of not having been advised of its
existence by the insurer.” 23
       Finally, UNIC did not intentionally delay adjustment of the claim
because it was waiting for NAZ to submit necessary documentation regarding
the damage and repairs. Neither was Dr. Shamsnia’s alleged subjective belief
that the claim could be amicably resolved reasonable because, by December
2016, UNIC had denied NAZ’s proof of loss and discussed potential litigation.




       21Id. at 897.
       22Orleans Par. Sch. Bd. v. Lexington Ins. Co., 12-1686, p. 27 (La. App. 4 Cir. 6/5/13);
118 So.3d 1203, 1222.
       23 Id. (quoting Allan Windt, Insurance Claims & Disputes, Representation of

Insurance Companies and Insureds, § 9.5 (5th ed. 2007)); see also Bennett v. State Farm Ins.
Co., 03-1195, p.11–12 (La. App. 3 Cir. 3/24/04); 869 So.2d 321, 329 (holding that the insurer
did not mislead the insured about the prescriptive period by failing to discuss it).

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       In summary, at no time during the pendency of the claim did UNIC (1)
admit or recognize liability or debt or (2) provide assurance of payment or make
an unconditional offer of payment. Neither were there prolonged or continuous
negotiations. 24 UNIC made no acts of reparation or indemnity, 25 and the
parties discussed the possibility of litigating the claim. On these facts, UNIC
did not waive the limitation period, and it was not reasonable for NAZ to
believe that UNIC would not require compliance with the policy limitations.
            B. Breach of Duty
       Under Louisiana law, “[a]n insurer . . . owes to his insured a duty of good
faith and fair dealing.” 26 Louisiana Revised Statute § 22:1973(A) states that
“[t]he insurer has an affirmative duty to adjust claims fairly and promptly and
to make a reasonable effort to settle claims with the insured or the claimant,
or both. Any insurer who breaches these duties shall be liable for any damages
sustained as a result of the breach.” 27 Subsection B states that an insurer
breaches its duties if it knowingly:
             (1) Misrepresent[s] pertinent facts or insurance policy
       provisions relating to any coverages at issue.

       ....



       24 Washington, 901 F.2d at 1288 (citing Blum, 336 So.2d at 898, 900). In fact, there is
no evidence of any negotiations or settlement offers. Louisiana courts and this court have
emphasized that negotiations and settlement offers are important factors when evaluating
waiver of a limitation period. Compare Brocato, 53 So.2d at 506 (finding that the insurer
waived the limitation period and emphasizing “prolonged negotiations . . . and offers of
settlement”), and Richardson v. La. Farm Bureau Mut. Ins. Co., 393 So.2d 200, 203 (La. App.
1 Cir. 1980) (finding that prescription was interrupted by compromise agreement between
the insurer and the insured), with Washington, 901 F.2d at 1288 (finding that insurer did not
waive the limitation period and emphasizing that “the parties reached neither a settlement
nor a compromise; indeed, the parties never even negotiated”).
       25 Bennett, 03-1195, p.11; 869 So.2d at 329 (citing Lima v. Schmidt, 595 So.2d 624, 634

(La. 1992)).
       26 La. R.S. § 22:1973(A).
       27 Id.



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             (4) Mislead[s] a claimant as to the applicable prescriptive
        period.
             (5) Fail[s] to pay the amount of any claim due any person
       insured by the contract within sixty days after receipt of
       satisfactory proof of loss from the claimant when such failure is
       arbitrary, capricious, or without probable cause.
             (6) Fail[s] to pay claims pursuant to R.S. 22:1983 when such
       failure is arbitrary, capricious, or without probable cause. 28


       This list is not exhaustive, and Subsection A provides an independent
cause of action. 29 Additionally, under Revised Statute § 22:1892, an insured
has a cause of action for penalties if it can “show that (1) an insurer has
received satisfactory proof of loss, (2) the insurer failed to tender payment
within thirty days of receipt thereof, and (3) the insurer’s failure to pay is
arbitrary, capricious or without probable cause.” 30
       The Louisiana Supreme Court has held that “‘arbitrary, capricious, or
without probable cause’ . . . means ‘unjustified, without reasonable or probable
cause or excuse.’” 31 A finding of bad faith is based on the facts known to the
insurer at the time. The court
       has declined to assess [statutory] penalties “when the insurer has
       a reasonable basis to defend the claim and acts in good-faith
       reliance on that defense.” . . . [E]specially when there is a
       reasonable and legitimate question as to the extent and causation
       of a claim, bad faith should not be inferred from an insurer’s failure
       to pay within the statutory time limits when such reasonable
       doubt exists. 32




       28  Id. § 22:1973(B).
       29  Kelly v. State Farm Fire & Cas. Co., 14-921, p. 16 (La. 5/5/15); 169 So.3d 328, 338.
        30 Guillory v. Lee, 09-75, p. 30 (La. 6/26/09); 16 So.3d 1104, 1126.
        31 Id. at p.31; 16 So.3d at 1127.
        32 Id. at p.32; 16 So.3d at 1127 (quoting La. Bag Co. v. Audubon Indem. Co., 08-453,

p. 14 (La. 12/2/08); 999 So.2d 1104, 1114); Maurice, 02-993, at p.10; 831 So.2d at 388.

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“[T]he question of arbitrary and capricious behavior is essentially a factual
issue, and the trial court’s finding should not be disturbed on appeal absent
manifest error.” 33
       UNIC’s failure to mention the limitation period contained in the policy
does not constitute a breach of its duty. As stated above, insurers do not have
a duty to inform insureds of limitation provisions set forth in insurance
policies. 34
       NAZ alleges that UNIC breached its duties under Revised Statutes §§
22:1973(A), (B), and 1892 because it failed to (1) conduct a thorough
investigation and (2) fairly and promptly adjust and pay NAZ’s claim. The
standard for failure to pay a claim under both §§ 22:1973(B) and 1892 is
arbitrary, capricious, or without probable cause. An insurer’s failure to pay
does not meet this standard when the insurer has a reasonable basis to defend
against the claim. 35
       The district court did not commit manifest error by concluding that
UNIC did not act in bad faith because, based on the cause of the damages,
UNIC had legitimate concerns about whether NAZ’s claim was covered. It is
particularly relevant that on several occasions Dr. Shamsnia altered his report
of the cause of the damage, at first stating that the damage was caused by a
thunderstorm and later claiming that it was caused either by faulty
installation or by repair of an MRI machine.


       33  Guillory, 09-75, at p.32; 16 So.3d at 1127.
       34  See Bennett, 03-1195, p.11–12; 869 So.2d at 329 (holding that the insurer did not
mislead the insured about the prescriptive period by failing to discuss it).
        35 Section 1973(A), which establishes the cause of action for the breach of the duty of

good faith and fair dealing, does not explicitly state a separate standard, and the district
court and parties operated under the assumption that the arbitrary and capricious standard
applies. NAZ, 2018 WL 3997299, at *4. Any possibility that the factors used by the Louisiana
Supreme Court in Kelly v. State Farm Fire & Casualty Co. should be applied instead of the
arbitrary and capricious standard was not addressed by the parties or the district court. 14-
921, p. 16 (La. 5/5/15); 169 So.3d 328. Therefore, such an argument was waived on appeal.

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                               III. CONCLUSION
      NAZ’s breach of contract claim is facially prescribed, and UNIC did not
waive the contractual limitation period. The district court did not err by
granting summary judgment and dismissing NAZ’s breach of contract claim.
      UNIC did not act in bad faith because it had a reasonable basis to defend
against NAZ’s claim, particularly as to causation. The district court did not err
by granting summary judgment and dismissing NAZ’s breach of duty claim.
AFFIRMED.




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