Louisiana Insurance Defense: Corporations/LLCs Can Recover Loss of Use Damages
A recent Court of Appeals decision in New Orleans held that Louisiana limited liability companies and by extension, Louisiana corporations can sue for and be awarded loss of use damages with respect to real property. See FIE, LLC v. New Jax Condo Association, Inc., Case No. 2016-CA-0843 (consl w/ No. 2017-CA-0423) (La. App. 4th Cir. February 21, 2018). For the insurance defense bar, Fie supports the exclusion of non-economic general damages such as emotional distress, loss of enjoyment, inconvenience, mental anguish, etc., from a corporate plaintiff. However, that type of argument may now be unavailing with respect to loss of use damages that can be equated to lost rents, profits, and revenue.
Facts of the Case
The case involved a condominium unit purchased and owned by a limited liability company. The unit was on the top floor of the New Jax Brewery building on Decatur Street. The condominium was purchased in 2007 as an investment property and for use of the company’s owners’ clients, family and friends during visits to New Orleans. After the purchase, for a period of seven or eight years, the roof suffered various leakages that made the unit unlivable and unusable as a place of entertainment and lodging. As an example, in July 2009, the condo association made attempts to discover the source of the water leaks by cutting holes in the ceiling and walls of the unit, taping off much of the unit with plastic sheeting. The roof was not confirmed to be fully repaired until September 2015.
Litigation was started in 2012. The owners of the unit sought damages for the loss of use of the condo, subsequent rental value, the cost of reconstruction, and the loss of personal enjoyment.
Among many other defenses, the condominium association and other defendants argued that loss-of-use damages were not recoverable since, according to its argument, Louisiana law does not permit corporate entities — such as an LLC — to recover non-pecuniary, non-economic damages. According to the defendants, loss of use is a type of non-pecuniary, non-economic damage. As noted, the condominium unit at issue was owned by an LLC.
The defendants primarily relied on several Louisiana federal cases such as Kelly v. Porter., Inc., 687 F.Supp.2d 632 (US Dist. E.D. La. 2010) which dismissed an LLC’s claims for loss of use of a recreational boat holding that a corporate entity can suffer only economic damage and cannot recover non-pecuniary damages like loss of use. The Defendants also relied on a Louisiana Court of Appeals case, Whitehead v. American Coachworks, Inc., 837 So.2d 678 (La. App. 1st Cir. 2002), in which the court reversed a trial court verdict in favor of a corporation for loss of enjoyment and use of a vehicle, mental anguish, and inconvenience. The court held that “… State Farm, a corporation, is incapable of experiencing loss of enjoyment, mental anguish, and inconvenience.”
At the trial level in the New Jax Condominium case, the judge rejected the defendants’ arguments in pre-trial summary judgment motions. Ultimately, after a jury trial, the unit owner was awarded nearly $1.2 million for loss of use. The trial court believed the case was controlled by the holding in Chriss v. Manchester Ins. & Indem. Co., 308 So.2d 803 (La. App. 4th Cir. 1975), where loss of use damages was upheld. The Chriss court distinguished types of damages that can be suffered by both corporations and natural persons — such as loss of use damages (both) — from those which only natural persons can suffer — such as damages flowing from mental anguish (only natural persons).
The FIE, LLC court followed the reasoning of Chriss. The FIE court held that loss of use damages were, in fact, economic loss damages. As the court noted, the normal measure of damages for loss of use is the rental value of a similar property. Lost rents, lost revenue and lost profits are well within the concept of “economic losses” for which corporate entities can recover. Such are not the type of damages only suffered by natural persons. Furthermore, the court held loss of use FIE, LLC to be compensatory and special in nature. Under Louisiana law, compensatory damages can be divided into two broad categories – general or special. Special damages are those which have a ready market value providing a relative certainty to their calculation. General damages, on the other hand, are more speculative in their measurement. Given that the loss of use damages could be calculated with a measure of exactitude, the Court of Appeals held there to be no error in allowing such to be recovered by the condominium unit owner. The trial court and jury verdict were affirmed.
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Kristin M. Lausten
This article is provided as an educational service for general informational purposes only. The material does not constitute legal advice or rendering of professional services.