Judge dismisses Louisiana protective coating company's lawsuit against insurers

By Karen Kidd | Feb 18, 2019

NEW ORLEANS – The U.S. District Court for the Eastern District of Louisiana recently dismissed a now defunct Louisiana protective coating company's bad faith claims adjustment and legal malpractice lawsuit against two insurers for not clearly stating their case.

In his 13-page order and reasons issued Feb. 5, U.S. District Judge Martin L. C. Feldman dismissed without prejudice plaintiffs Rhino Shield Gulf South and James M. Redmond's lawsuit against RSUI Group Inc. and Landmark American Insurance Company. Feldman also granted the plaintiffs 30 days to file an amended complaint and "remedy the pleading deficiencies" in the now dismissed case.

The plaintiffs' original lawsuit failed to name individuals who made the alleged misrepresentations during a four year period, Feldman said in his order. Among the deficiencies were what "statements were made, where they were made, or the specific substance of the fraudulent representations," the order said. "Because the plaintiffs have failed to set forth the 'who, what, when, and where' of the alleged fraud, their petition falls short of reaching Rule 9(b)'s heightened pleading standard." t

Rhino Shield Gulf South and  Redmond claimed that the insurers and counsel "extracted significant settlement contributions" from members by misrepresenting what protections would be provided under liability insurance policies, the background portion of the order said.

The allegations stem from liability insurance policies obtained by Rhino Shield of Louisiana, a defunct limited liability company that dissolved in 2015, from RSUI Group and Landmark American Insurance Company.

Nine lawsuits were filed by Rhino Shield of Louisiana customers between 2013 and 2017 against the company and Redmond, claiming liability covered by policies issued by RSUI and Landmark. In negotiating settlements in the cases, the defendant insurance companies allegedly used liability counsel or adjusters to extract settlement contributions from Redmond and Rhino Shield, claiming they otherwise might face personal liability.

In their lawsuit filed in October in Orleans Parish Civil District Court, the plaintiffs alleged bad faith claims adjusting practices or fraud against the defendant insurance company. Plaintiffs alleged that RSUI and Landmark violated their duties of good faith and fair dealing under Louisiana law when they allegedly misrepresented policy terms, failed to fully pay claims with third parties until plaintiffs made contributions and didn't appoint counsel to adequately defend the lawsuit.

Plaintiffs sought damages that included more than $115,000 allegedly extracted from them.

RSUI and Landmark removed the case to federal court in November claiming diversity jurisdiction. The defendants then asked the court to dismiss the case, claiming the plaintiffs failed to plausibly allege their entitlement to relief under the state's bad faith insurance statutes.

"The court agrees," Feldman said in his order. "Although the plaintiffs clearly allege in their petition that Rhino Shield of Louisiana, as the entity to which the RSUI/Landmark policies were issued, is an insured under those policies, Rhino Shield of Louisiana is not a party to this lawsuit. Moreover, the plaintiffs have pleaded no facts regarding their right to assert claims against RSUI and Landmark on behalf of Rhino Shield LA. To the contrary, the plaintiffs appear to concede in their opposition papers that their right to recover from Landmark and RSUI stems from their status as insured by virtue of their association with Rhino Shield of Louisiana."

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