Metoyer v. Auto Club Family Insurance Co.

United States District Court for the Eastern District of Louisiana · Contracts

ContractsInsurance contract damagesCollateral source rulecollateral source rulebreach of contractinsuranceLRA proceedsRoad Home

Facts

Carlos Metoyer's New Orleans home was damaged by Hurricane Katrina, and he sued his insurer, Auto Club Family Insurance Company, for sums allegedly due under the insurance contract. He had already recovered $57,907.62 from ACFIC for covered wind losses, $128,000 from flood insurer Allstate for structural damages, a $150,000 Louisiana Recovery Authority grant to rebuild his home, and a $10,000 grant from the U.S. Small Business Association. Metoyer sought to exclude evidence of the LRA and flood proceeds as collateral sources. The court noted that the LRA program required subrogation to the homeowner's rights regarding insurance payments when a grant was awarded.

Issue

Does the collateral source rule apply in this insurance contract action so as to exclude evidence of Louisiana Recovery Authority grant proceeds, and should flood insurance proceeds also be excluded as a collateral source at this stage? A related issue was whether the defendant could amend its witness and exhibit list.

Rule

There is no blanket prohibition on applying the collateral source rule in contract actions. In this context, where the source is independent of the defendant and subrogation rights eliminate the risk of double recovery, Louisiana Recovery Authority proceeds should be treated as a collateral source and excluded; but flood insurance proceeds cannot be excluded without a factual determination whether the plaintiff seeks duplicate recovery for the same loss.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Nina Alvarez sued Bayou Crest Property Insurance in federal court in New Orleans, alleging the insurer underpaid her homeowner's claim after a severe coastal storm. Before trial, the insurer argued that any collateral-source doctrine is categorically unavailable because Nina's suit is for breach of contract rather than tort.

How should the court rule on the insurer's categorical argument?

Explanation. The majority opinion held that there is no blanket prohibition against applying the collateral source rule in contract actions. The court rejected the insurer's argument that the rule can never apply in a breach-of-contract case. It did not hold the rule always applies in contract, only that a categorical bar is incorrect. (Derived from Metoyer v. Auto Club Family Insurance Co. (n.d.).)