Case: 09-30034 Document: 00511086765 Page: 1 Date Filed: 04/20/2010
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
April 20, 2010
No. 09-30034 Lyle W. Cayce
Clerk
CHET NUNEZ; WENDY NUNEZ
Plaintiffs-Appellants
v.
ALLSTATE INSURANCE COMPANY
Defendant-Appellee
Appeal from the United States District Court
for the Eastern District of Louisiana
Before HIGGINBOTHAM and STEWART, Circuit Judges, and FELDMAN,
District Judge.*
CARL E. STEWART, Circuit Judge:
Chet and Wendy Nunez had flood and all-risk homeowner’s policies with
Allstate Insurance Co. when Hurricane Katrina destroyed their home. They
made a claim under the policies and Allstate disbursed a payment. The Nunezes
claim that Allstate paid them less than they were entitled to under the policies.
The Nunezes were among 28 plaintiffs who filed suit against Allstate in St.
Bernard Parish on September 24, 2007, seeking to recover for Hurricane
Katrina-related damage to their homes. Allstate removed the case, and the
*
District Judge, Eastern District of Louisiana, sitting by designation.
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district court ordered the cases severed. The district court later granted
Allstate’s motion for summary judgment. We AFFIRM.
I. FACTUAL AND PROCEDURAL BACKGROUND
A. Factual Background
Prior to Hurricane Katrina, the Nunezes owned and occupied a home at
46 Packenham Avenue in Chalmette, St. Bernard Parish, Louisiana. Allstate
insured the Nunezes’ property through a flood policy and an all-risk homeowners
insurance policy.
The Nunezes evacuated before Hurricane Katrina made landfall in
Louisiana on August 29, 2005. Thus, they were not present during the storm and
did not witness the damage to their home as it occurred. According to the
Nunezes, their home was destroyed by rain, fire, and flood. The Nunezes believe
that their home took at least eight feet of floodwater, reaching their ceilings.
The Nunezes received their flood policy limits of $75,000 for structure
damage and $30,000 for contents. Under the homeowner’s policy, Allstate
additionally paid the Nunezes $19,856.08 for wind-related structural damage to
the house, $1,135.69 for wind damage to other structures, $3,103.72 for wind
damage to personal property, and $4,960 in additional living expenses.1
After the hurricane, the Nunezes moved to Houston and used the money
they received from Allstate to buy a house for $172,000. The Nunezes gutted the
Chalmette house and, much later, elevated it and did work to patch the roof. No
further repair work has been done on the Chalmette property, but the Nunezes
stated in their deposition testimony that they intend to someday repair and
return to the property. Additionally, they received funding from the Road Home
program and, in their application for that grant, attested that they planned to
1
The Nunezes’ homeowners policy limits were: $115,166 for Dwelling Protection,
$11,517 for Other Structures Protection, and $80,617 for the Personal Property Protection -
Reimbursement Provision.
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keep their Chalmette home. On February 9, 2007, the Road Home program
explained to the Nunezes that by verifying their intention to “keep the home,”
they committed themselves to “keep[ing] the damaged home and property [they]
own (rather than selling it)” and “ensuring that the home remains
owner-occupied for a specific period of time.” Further, the Nunezes filed a
successful appeal resisting the Parish’s decision to demolish the home.
B. Procedural History
On September 24, 2007, the Nunezes joined 26 other plaintiffs who filed
suit against Allstate in St. Bernard Parish to recover unpaid Hurricane
Katrina-related damages to their homes. After the case had been removed and
the individual cases severed, the Nunezes filed their First Amended Complaint
on March 18, 2008. The First Amended Complaint alleged that Allstate had only
made partial payment for the damage caused by wind and wind-driven rain, and
therefore still owed additional policy benefits for damage caused by wind. It
further claimed that the Nunezes were entitled to additional recovery for the loss
of the contents of their home and additional living expenses,2 as well as for
statutory penalties pursuant to Louisiana Revised Statutes §§ 22:658 and
22:1220.
The Nunezes furnished their expert report, from Mr. Steve Hitchcock, on
October 8, 2008. Allstate filed motions to exclude the proposed expert testimony
and for summary judgment on November 25, 2008.
In their motion for summary judgment, Allstate argued that the Nunezes
had failed to meet their burden of producing evidence of segregable wind
damages. Allstate further claimed that because the Nunezes did not repair or
2
The Nunezes have waived their claims for loss of contents and additional living
expenses because they failed to adequately brief the issues on appeal. See Procter & Gamble
Co. v. Amway Corp., 376 F.3d 496, 499 n. 1 (5th Cir. 2004) (citing FED . R. APP . P. 29(a)(9)(A)).
3
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replace their property, their recovery was limited to the actual cash value of the
property. Assuming an actual cash value of $113,914 (the highest estimate)
minus an offset of $94,856.08 for the Nunezes’ recovery under the flood policies,
Allstate claimed that it could not owe more than $19,057.92 for structural
damages—and they had already paid the Nunezes more than that amount.
On December 17, 2008, both Allstate’s motions were granted in an order
stating in full:
Before the Court is Defendant’s Motion for summary Judgment and
Motion to Exclude Proposed Expert Testimony of Plaintiffs’ Expert,
both of which came on for hearing on December 10, 2008, with oral
argument. After consideration of the motions, the briefs from both
sides and the applicable law, the Court GRANTS both motions. See
Bayle v. Allstate (2:08-cv-01319)[3] and Williams v. Allstate
(2:08-cv-00062).[4]
3
See Bayle v. Allstate Ins. Co., No. 08-1319, 2008 WL 5054572 (E.D. La. Nov. 21, 2008).
The facts of Bayle are similar to those of the present case—Hurricane Katrina victims sought
to recover additional money under their Allstate homeowner’s policy. Id. at *1. The Bayle court
granted Allstate’s Motion to Exclude Proposed Expert Testimony of Steve Hitchcock and
granted summary judgment in favor of Allstate. Id. at *3. The court initially noted that the
plaintiffs never repaired their home, therefore they could recover only the actual cash value
of the property. Id. at 1. The court then concluded that because plaintiffs had offered no
evidence to segregate covered from non-covered losses, their claims for additional structural
damages, additional living expenses, and contents claims all failed. Id. at *2. Additionally, the
court summarily held that plaintiffs were not entitled to damages for mental anguish or
emotional distress under the homeowner’s policy. Id.
4
See Williams v. Allstate Ins. Co., No. 08-0062, 2008 WL 5110604 (E.D. La. Nov. 26,
2008). The facts, holdings, and language of the opinion are virtually identical to Bayle. It
appears that the Nunez court relies on Williams for its ruling to strike the testimony of
plaintiff’s expert. The court held, under Federal Rule of Evidence 702, that the plaintiff’s
expert’s opinion (in support of segregating claims) regarding wind damage was unreliable
because it was not based upon sufficient facts or data and was not the product of reliable
principles and methods. Id. at *3.
The court opined:
[The expert] rendered his two reports based solely on his visit to the dwelling
(more than three years after the hurricane and after the damage had been
repaired) and his interview of the dwelling owners (Plaintiffs). . . . There is
simply no other paperwork to corroborate the accuracy of the dwelling owners’
claim as described by them to the “expert”.
Id. After striking the plaintiff’s expert, the court then granted Allstate’s motion for summary
4
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The Nunezes timely filed a Notice of Appeal.
II. STANDARD OF REVIEW
A summary judgment determination is reviewed de novo, viewing all
evidence in the light most favorable to the non-moving party and drawing all
reasonable inferences in that party’s favor. In re Katrina Canal Breaches Litig.,
495 F.3d 191, 205-06 (5th Cir. 2007). Summary judgment is appropriate when
“the discovery and disclosure materials on file, and any affidavits show that
there is no genuine issue as to any material fact and that the movant is entitled
to a judgment as a matter of law.” F ED. R. C IV. P. 56(c).
The district court’s determination of the admissibility of expert evidence
is reviewed for abuse of discretion. Knight v. Kirby Inland Marine, Inc., 482 F.3d
347, 351 (5th Cir. 2007). A district court abuses its discretion when its ruling is
based on an erroneous view of the law or a clearly erroneous assessment of the
evidence. Id. If the district court abused its discretion, the harmless error
doctrine applies, and the ruling will be reversed only if it affected the substantial
rights of the complaining party. Id.
III. DISCUSSION
Under Louisiana law, an insurance policy is a contract between the parties
and should be interpreted according to the general rules of interpretation of
contracts prescribed in the Louisiana Civil Code. Smith v. Am. Family Life
Assur. Co. of Columbus, 584 F.3d 212, 215 (5th Cir. 2009). An insurance contract
must be construed according to the entirety of its terms and conditions as set
forth in the policy. Id. (citing L A. R EV. S TAT. A NN. § 22:881 (2009)). “The words
of a contract must be given their generally prevailing meaning.” L A. C IV. C ODE
A NN. art. 2047 (2008). When the words of a contract are clear and explicit and
judgement because the plaintiffs had failed to segregate damages. Id.
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lead to no absurd consequences, no further interpretation may be made in search
of the parties’ intent. L A. C IV. C ODE A NN. art. 2046 (2008).
The Nunezes’ homeowners policy provides:
5. How We Pay For A Loss
Under Coverage A—Dwelling Protection, Coverage B—Other
Structures Protection and Coverage C—Personal Property
Protection, payment for covered loss will be by one or more of
the following methods:
...
b) Actual Cash Value. If you do not repair or replace the damaged,
destroyed or stolen property, payment will be on an actual cash
value basis . . . You may make a claim for additional payment
. . . if you repair or replace the damaged, destroyed or stolen
property within 180 days of the actual cash value payment.
c) Building Structure Reimbursement. . . . we will make additional
payment to reimburse you for cost in excess of actual cash value
if you repair, rebuild or replace damaged, destroyed or stolen
covered property within 180 days of the actual cash value
payment. . . .
Building Structure Reimbursement will not exceed the smallest
of the following amounts:
1) the replacement cost of the part(s) of the building structure(s)
for equivalent construction for similar use on the same premises;
2) the amount actually and necessarily spent to repair or replace
the damaged building structure(s) with equivalent construction
for similar use on the same residence premises; or
3) the limit of liability applicable to the building structure(s) as
shown on the Policy Declarations for Coverage
A—Dwelling Protection or Coverage
B—Other Structures Protection,
regardless of the number of building structures and structures
other than building structures involved in the loss.
If you replace the damaged building structure(s) at an address
other than shown on the Policy Declarations through
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construction of a new structure or purchase of an existing
structure, such replacement will not increase the amount
payable under Building Structure Reimbursement described
above. The amount payable under Building Structure
Reimbursement described above does not include the value of
any land associated with the replacement structure(s).
A. Cost of Replacement
The Nunezes assert that they are entitled to recover replacement costs
under their homeowner’s policy because the policy expressly provides for
replacing the damaged building through purchase of an existing structure. They
claim that their purchase of the Houston home replaced the insured property,
and that it is irrelevant that they intend to someday return to their Louisiana
house.5
Allstate claims that the Nunezes did not replace their Chalmette property
because they have gutted it, elevated it, and patched the roof. Although the
Nunezes bought a new home after Hurricane Katrina, Allstate asserts that it is
not a replacement of their damaged property because they accepted Road Home
funds, they intend to someday repair and return to their original home, and they
resisted the Parish’s decision to demolish their home by filing an appeal.
Neither the homeowner’s policy itself, nor Louisiana case law define the
term “replace.” Therefore, “[t]he words of [the] contract must be given their
generally prevailing meaning.” L A. C IV. C ODE A NN. art. 2047. Replace means “to
place again: restore to a former place, position, or condition” or “to take the place
of: serve as a substitute for or successor of.” W EBSTER’S T HIRD N EW
I NTERNATIONAL D ICTIONARY (Merriam-Webster, Inc. 1993). Presently, the
5
Contrary to Allstate’s claim, the Nunezes have not waived this issue. Their response
to Allstate’s motion for summary judgment clearly asserts that they are claiming replacement
costs, and Wendy Nunez’s affidavit attached to the response states that “We spent all the
money that we received from Allstate through our homeowner’s policy towards purchasing our
new home in Houston, for which we paid $172,000.”
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Houston house serves the same function as the Nunezes’ Chalmette house once
did—as their primary residence. However, the Nunezes have attested that they
intend to someday repair and return to the Chalmette house. Therefore,
according to the plain meaning of the term “replace,” the Nunezes’ purchase of
their Houston home does not constitute a substitute or replacement under the
policy. The district court correctly concluded, as a matter of law, that the
Nunezes could not recover under the replacement provision of the homeowner’s
policy.
B. Burden of Proof on Covered v. Excluded Losses
The Nunezes argue that under Louisiana law, the insured must initially
make a prima facie case of coverage, and the insurer then bears the burden of
proving the applicability of an exclusionary clause within a policy by a
preponderance of the evidence. The Nunezes claim that the district court’s
treatment of their case directly conflicts with this court’s holding in Dickerson
v. Lexington Ins. Co., 556 F.3d 290 (5th Cir. 2009).
However, the Nunezes have waived this issue on appeal because they
never raised it before the district court. “An argument not raised before the
district court cannot be asserted for the first time on appeal.” XL Specialty Ins.
Co. v. Kiewit Offshore Servs., Ltd., 513 F.3d 146, 153 (5th Cir. 2008) (citing
Stokes v. Emerson Elec. Co., 217 F.3d 353, 358 n.19 (5th Cir. 2000)).
In their response to Allstate’s motion for summary judgment, the Nunezes
in fact conceded that Allstate met its burden merely by showing that the home
flooded, and that the burden then shifted to them to segregate covered and
excluded damages.6 The Nunezes argue that their concession was appropriate
6
The Nunezes’ response to Allstate’s motion for summary judgment, filed December
5, 2008, states:
It is settled law that the burden of proving an exclusion is on the insurer.
Allstate’s position regarding wind and rain damage is that so long as an
exclusion is shown to be implicated, the burden of proof shifts back to the
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because placing the burden to segregate on the plaintiff was the settled law in
the Eastern District of Louisiana at that time. But in their briefing before this
court, the Nunezes discuss in-depth two Eastern District cases from 2007 that
they assert correctly placed the burden to segregate on the insurer.
The Nunezes also argue that they did not waive the right to appeal
because they stated the correct allocation of proof in their supplemental initial
disclosures, in which they stated that:
. . . it is defendant’s burden to prove that any part of plaintiff’s
damage is caused by a peril excluded by the policy, e.g., flood.
Therefore, at trial, plaintiffs intend to request the Court to reverse
the order of proof and require defendant to prove if an excluded peril
caused any damage to plaintiff’s property. Plaintiffs will then be in
a position to rebut this evidence by showing the specific details of
roof and window damage, the amount of wind driven rain, the
length of time before any flood waters reached plaintiff’s property,
etc.
As a general matter, however, supplemental initial disclosures are not filed with
the court. And in fact, the district court’s docket sheet does not reflect that the
Nunezes’ supplemental initial disclosures were ever filed with the court.
We therefore conclude that the Nunezes waived their right to argue on
appeal that the district court erred with respect to the burden of proof to
segregate covered from excluded losses.7
insured to prove damage caused by a non-excluded peril. This is simple enough
in the context of flood versus wind/rain because it is conceded that there was
flooding. However, vis-a-vis fire, Allstate has not met its burden of proof to show
that the flood was implicated in the fire. Therefore, regarding fire damage, the
burden has not shifted back to Plaintiffs; it has remained with Allstate and it
would be impossible for Allstate to obtain summary judgment on its own burden
of proof since Allstate has not introduced any evidence to do so.
7
The Nunezes’ claims for penalties pursuant to Louisiana Revised Statutes §§ 22:658
and 22:1220 must also fail because they have not established a valid, underlying breach of
contract claim. Clausen v. Fidelity & Deposit Co. of Md., 660 So.2d 83, 85 (La. Ct. App. 1995)
(“a plaintiff attempting to base her theory of recovery against an insurer on these statutes
must first have a valid, underlying, substantive claim upon which insurance coverage is
based.”).
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C. Expert Testimony
Federal Rule of Evidence 702 states as follows:
Testimony by Experts
If scientific, technical, or other specialized knowledge will assist the
trier of fact to understand the evidence or to determine a fact in
issue, a witness qualified as an expert by knowledge, skill,
experience, training, or education, may testify thereto in the form
of an opinion or otherwise, if (1) the testimony is based upon
sufficient facts or data, (2) the testimony is the product of reliable
principles and methods, and (3) the witness has applied the
principles and methods reliably to the facts of the case.
Allstate raises the following grounds for excluding the testimony of Steve
Hitchcock, the Nunezes’ expert witness:
• His education and training as an adjuster consist of a seven day training
course through State Farm and a forty-hour online, self-study course to
obtain an adjuster’s license in Texas.
• He admits to a lack of training in the pricing software employed by
Allstate (Integra) and therefore lacks a reliable basis for his assertion
that Integra understates damage estimates.
• He did not utilize any recognizable methodology in formulating his
opinion that Allstate failed to determine the correct cause of damage and
mishandled the Nunezes’ claims. Rather, his opinions relied on hearsay
and Mr. Nunez’s speculations as to the causes of damage.
Four other judges in the Eastern District of Louisiana have excluded Mr.
Hitchcock’s testimony under Rule 702, upon finding that: (1) he lacks the
requisite qualifications to testify about claims handling; (2) he is unqualified to
opine on Allstate’s pricing, and he bases his opinions on Allstate’s pricing on
unreliable methodology; (3) he bases his claims handling and causation opinions
on flawed methodology; (4) his opinions regarding the cause and extent of the
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Nunezes’ damages are unreliable and speculative; and (5) his replacement cost
estimate does not assist the trier of fact.8
Under Rule 702, the district court did not abuse its discretion by excluding
Mr. Hitchcock’s testimony. Even without the benefit of an explanation as to its
reasoning from the district court, rulings of other judges in the Eastern District
of Louisiana and the facts propounded by Allstate demonstrate that a
determination to exclude Mr. Hitchcock’s testimony as an expert witness under
Rule 702 does not amount to an abuse of discretion.
IV. CONCLUSION
For the foregoing reasons, the exclusion of the Nunezes’ expert is
AFFIRMED, and the grant of summary judgment is AFFIRMED.
8
See Phoenix v. Allstate Ins. Co., No. 07-8546 (E.D. La. Mar. 11, 2009) (Minute Entry)
(Engelhardt, J.) (excluding Hitchcock’s opinions on claims handling, the accuracy of Allstate’s
pricing software, and causation); Bayle, 2008 WL 5054572 (same); Davis v. Am. Sec. Ins. Co.,
No. 07-4158, 2008 WL 5120688 (E.D. La. June 18, 2008) (Lemmon, J.) (precluding Hitchcock
from testifying because he provided an insufficient expert report); see also Lambert v. State
Farm Fire & Cas. Co., 568 F. Supp. 2d 698, 712-13 (E.D. La. 2008) (Africk, J.) (holding that
because Hitchcock “fail[ed] to provide sufficient information . . . that he is qualified to offer
expert testimony concerning the cause of structure damage to Lambert’s property[,] Hitchcock
will not be permitted to testify at trial as to the cause of structure damage detailed in his
report . . .”).
11