One River Place Condominium Association, Inc. v. Axis Surplus Insurance Company
(June 2009)

Sid Hardy and McCranie Sistrunk obtained a favorable jury verdict for Axis Surplus Insurance Company following a seven day trial in federal court in New Orleans. Axis insured One River Place, a luxury condominium high-rise building in downtown New Orleans on the Mississippi River, under a property insurance policy issued to its condo association. The property suffered damage during Hurricane Katrina. Axis adjusted the claim and made payments for damages that it found to be caused by the high winds of Hurricane Katrina.

One River Place filed suit against Axis, alleging that the property suffered additional damage that should have been covered under the policy. One River Place also alleged that Axis failed to pay for “business interruption” damages for two months of condominium assessments which the Board of Directors had waived following Hurricane Katrina. One River Place further alleged that Axis had acted in bad faith during the adjustment of its claim, entitling it to penalties under Louisiana law. Finally, One River Place alleged that Axis violated Emergency Rule 23 for failing to renew the insurance policy beyond June 1, 2006, entitling it to additional penalties.

One River Place presented testimony from members of its Board and from its insurance agent regarding the issues of coverage under the policy, claims handling, and the decision of the Board to seek replacement coverage from a different insurer. Regarding the extent and cause of property damage, One River Place presented testimony from its general contractor, its roofing contractor, and the architect who designed and managed an extensive renovation project following Hurricane Katrina.

Axis argued that the extensive renovations to the building were not related to Hurricane Katrina, but rather were improvements to the property that made it better able to withstand future hurricanes and corrected fundamental problems present since the construction of the building. In support of this argument, Axis presented testimony from the engineers who inspected the property following Hurricane Katrina, contractors who performed the renovations to the property, and an expert architect who called into question the opinions of One River Place’s expert architect.

Regarding the issues of “business interruption” damages, Axis presented testimony and evidence which showed that the collection of two months of condominium fees was waived by a voluntary act of the Board, and also that the property was habitable and that unit owners had returned to the property during that two month period. Finally, regarding the issue of the alleged Rule 23 violation, Axis presented evidence to show that One River Place was actively shopping the market for alternative replacement coverage in 2006, that Axis extended coverage under the existing policy every time that One River Place requested it do so, and that One River Place chose to purchase replacement coverage from a different insurer in June 2006.

At the close of trial, One River Place asked the jury to award it over $8 million in damages, including payment for its renovation project, payment for additional planned renovation, payment for two months of business interruption damages, bad faith penalties, and damages under Emergency Rule 23. Axis asked the jury to find that it had paid for all covered damages under the policy and to award no additional monies.

After over six hours of deliberation, the jury returned a verdict finding that Axis had not acted in bad faith, had not violated Emergency Rule 23, and did not owe penalties to One River Place. The jury awarded a minimal amount in comparison to the demand for business expenses and property damages. After the Court subtracted the deductible on the policy, the net Judgment awarded One River Place under $200,000 in total damages.