Primary insurance policies include the duty to defend an insured in connection with a covered loss. The insurer is sometimes presented with the question of whether a defense is owed when many of the allegations are not apparently covered by a particular policy. In this circumstance, how does an insurer determine its obligation? The law provides the answer: the "eight corners" rule—do the four corners of the policy unambiguously exclude coverage in all respects when viewed within the context of the four corners of the petition? If the answer is "no," the duty to defend arises. Mossy Motors, Inc. v. Cameras America, 2004-0726 (La. App. 4 Cir. 3/2/05), 898 So.2d 602, 606.
Courts generally hold that the duty to defend the case extends to ALL claims, not just the covered claims. This duty can often prove quite costly, especially when non-covered claims are high-value or involve extensive factual development or testimony to defend. In some instances, the answer under the eight corners analysis is not so clear. The safe choice for the insurer is to provide a defense and hire separate counsel to handle the coverage side of the case.
In this scenario, where an insurer has serious coverage defenses, but agrees to provide the defense, when does the duty to defend terminate? The Louisiana First Circuit Court of Appeal recently ruled on this issue again in Ponchartrain Natural Gas System, K/D/S Promix, L.L.C. and Acadian Gas Pipeline System v. Texas Brine Company, L.L.C., No. 2018 CA 0254 (La. App. 12/12/19), stating:
"Our previous decisions in the related sinkhole appeals clearly set out the well-established rule of law that an insurer' s duty to defend terminates once the undisputed facts establish, or a judicial determination is made, that the claims asserted are not covered under the policy. See Florida Gas, 272 So. 3d at 551; Pontchartrain, 264 So.3d at 553- 54; Crosstex, 240 So.3d at 1032."
So, the duty to defend ends when undisputed facts establish OR a judicial determination is made that the asserted claims are not covered. Of course, who is to say that the facts are "undisputed" without a judicial determination that confirms this conclusion. An insurer could unilaterally determine that facts are undisputed and terminate the defense before a judicial determination, but if the court does not agree, the insurer may have issues. Accordingly, the safe course is to await a judicial determination before an insurer terminates the defense.
It is important to distinguish the duty of an excess carrier because such policies generally do not provide an obligation to defend. Instead, the excess carrier may exercise its "right to defend."
Tags: Defend, insurance claims, insurance policy
Past Mistakes: Waiver of Coverage Defenses
What does it mean to "waive" something? To an insurer in Louisiana, the meaning is clear; a waiver can mean thousands or even millions of dollars in insurance coverage that may otherwise be excluded. Recently, the Louisiana Supreme Court in Forvendel v. State Farm Mutual Automobile Insurance Company, 2017-C-2074 (June 27, 2018) clarified when an insurer will be found to have waived coverage defenses.
Waiver is generally understood as the "intentional relinquishment of a known right, power, or privilege." Waiver occurs when there is: 1) a right; 2) that is known; and, 3) an actual intention to forego the right or conduct so inconsistent with an intent to enforce the right so as to induce a reasonable belief that it has been relinquished. The waiver rule is generally applied to an insurer who defends itself and its insured without having obtained a nonwaiver agreement to preserve its coverage defense. The joint defense of the insured and the insurer, without asserting a known defense, is deemed to be conduct inconsistent with the enforcement of the coverage defense and therefore a waiver.
In Forvendel, the Louisiana Supreme Court considered whether an insurer's waiver of a coverage defense in a prior claim served to waive the coverage defense in a subsequent claim involving the same insured and similar circumstances. The key issue in the case was whether the insurer's conduct in allowing the same insured to "stack" two UM coverages contrary to Louisiana's "anti-stacking" law (La. R.S. 22:1295 (1)(c)) when adjusting an accident claim in 2007 served as a waiver of the right to assert the anti-stacking law when adjusting a 2013 accident claim.
Luckily for insurers, who could be forever bound by past mistakes in their handling of claims, the Louisiana Supreme Court reversed the two lower courts and found the right was not waived. In so ruling, the Court distinguished prior case law in which a coverage defense was found to have been waived because the insurer's conduct took place while handing the same claim, not a prior claim. The Louisiana Supreme Court also drew on a line of cases that allowed insurers to recover previously made payments under well-established principles of Louisiana law allowing for the recoupment of payments not due.
The Forvendel case provides a common-sense result by relieving insurers from unintended consequences from past omissions in the handling of an insured's new claim.
Nancy B. Gilbert is a partner with Keogh Cox. She is a puzzle-solver by nature and uses these skills to provide clear and in-depth analysis of complex litigation issues. Nancy is a devoted grandmother, an avid camper and gardener, and enjoys renovating her 80-year-old home.
Tags: anti-stacking law, claim, coverage, coverage defense, waiver
Distracted Driving: More, and More Severe, Accidents
**If you're reading this article while driving, stop reading or driving – your choice**
Distracted driving is dangerous and can lead to an accident. Everyone knows this now. But one factor that appears to have gone unnoticed by the public at large is that distracted driving not only results in more automobile accidents, but often causes accidents which are more severe. The reasons why are becoming clear to insurance carriers who write automobile liability policies.
In a January 2017 "earnings call," Travelers Insurance observed that it was detecting a higher percentage of car crashes at higher speeds. Simple physics shows that higher speeds bring higher forces, and increase the risks involved. Research has shown that sending or reading a text takes your eyes off of the road an average of 5 seconds. If correct, at 55 mph, you will travel 403 feet while not looking at the road. Often times, a driver, even if they cannot avoid an accident, can do something to minimize the consequences, such as braking or taking a better angle to protect the driver or the passengers.
The fact that an insurance company is able to detect an increase in the severity of accidents, in an age where cars are safer than ever before, is something we should all consider.
Brian Butler is a partner with Keogh Cox. With over 30 years of experience, Brian has handled all types of defense matters. In recent years, his practice has been focused on cases involving complex cases with serious injuries and damages, which has led to extensive work with experts in complex cases, fire cases, and cases involving extensive forensic investigation. In his free time, Brian enjoys traveling with his wife.
Tags: accidents, automobile liability policies, distracted driving, insurance carriers
Leave Different: Gasquet Agreements and What Insurers Need to Know
As part of its travel pitch, Louisiana tourism once used the slogan: "Louisiana. Come as you are. Leave different." If an out-of-state insurer writes in Louisiana and does not understand the ramifications of "Gasquet," then they may leave different, very different.
The term "Gasquet" comes from the case of Gasquet v. Commercial Union Ins. Co., 391 So. 2d 466 (La. App. 4th Cir. 1980). The case considered how a settlement of the plaintiff's claims against the primary carrier and a partial settlement of claims against the tortfeasor/insured impacted the excess carrier.
In Gasquet, the plaintiff alleged serious personal injury. Prior to trial, he settled with the primary insurer, Commercial Union, for $200,000, even though it had a $300,000 policy limit. In the deal, the plaintiff fully released Commercial Union. He also released the tortfeasor/insured from all liability not insured by the excess carrier, Stonewall Insurance. The insured therefore remained in the lawsuit as a "nominal defendant" to allow the plaintiff to pursue the excess carrier.
After settlement, the excess carrier denied the claim and asserted that payment by the primary carrier of less than policy limits did not trigger its policy, which required that the primary policy be "exhausted." Without exhaustion, the excess carrier argued that it could not be called upon to respond under its policy language. The court rejected this argument and held that the plaintiff was entitled to a direct action against the excess carrier who would, in turn, receive a credit for the full limits of the primary policy. The "Gasquet release" has since become a staple of Louisiana litigation.
In Louisiana, unlike many states, a primary insurer owes no general duty to the excess carrier under Great Southwest Fire Ins. Co. v. CNA Insurance Companies, 557 So. 2d 966 (La. 1990). This creates a dynamic not present in states where the primary carrier is duty bound to consider the interests of the excess carrier. This lack of duty magnifies the vulnerability of the excess carrier's position in Gasquet-friendly Louisiana.
An excess carrier in Louisiana should measure its reliance upon a primary carrier who can independently settle out with the plaintiff, sometimes on the eve of trial. If the excess carrier relied upon the primary carrier to defend the case, the excess carrier could be placed in the unenviable position of scrambling to defend a case where the insured (protected by Gasquet) may be suddenly disinterested in the outcome. Excess carriers with real potential exposure need to stay involved in the litigation and be prepared.
Following Gasquet, permutations have developed such as a "reverse-Gasquet," where the excess carrier settles with the plaintiff and then pursues the primary insurer to recoup its payment. So, come to Louisiana, but know that we are sometimes different.
Collin LeBlanc is a Keogh Cox partner and experienced litigator who concentrates in injury, commercial, and legal malpractice disputes. He lives in nearby Zachary, Louisiana with his wife Melissa and three all-too-active children. He is an outdoorsman, a tennis player, a cook, and a hobbyist writer.
Tags: excess carrier, gasquet, primary carrier
Uninsured Motorist Coverage: Making Smart People Feel Dumb
I have met smart, sophisticated "business" people whose eyes glass over when they try to explain their understanding of "UM" coverage. The picture becomes murkier when discussing "economic-only UM," a form of UM coverage many people purchase without even knowing it. Through many years and conversations, I have come to conclude that there is a general fogginess that obscures this entire subject with many, if not most, people. This blog is an effort to improve understanding on the subject.
What is "UM" Coverage?
"UM" signifies "uninsured motorist" insurance coverage, but is more properly described as "uninsured/underinsured" motorist coverage. A person, family, business, or group purchases UM coverage to respond to damages caused in an accident by someone who has either no insurance or not enough to cover the loss. You purchase UM insurance to protect yourself or those connected to you. Without UM, you are gambling that the person who caused the accident (the "tortfeasor") will have insurance coverage, and enough coverage, to respond to the injuries and damages they have caused.
This question is simply answered in a two-part response:
#1- The roads are dangerous–
Unless you are a crop duster or an undercover agent, the most dangerous thing you will likely do on any given day is to drive on a public road, even more so in the age of "smartphones" and distracted-driving.
#2- Many drivers lack sufficient liability coverage-
An unhealthy portion of drivers have either no insurance on insufficient insurance coverage to address an accident involving severe injuries or damages. The State of Louisiana requires motorists to obtain at least the minimum insurance of $15,000 "per person," $30,000 "per accident," and $25,000 to address property damage. If you do not purchase UM, you are trusting that these limits will be enough, as they might be in a minor accident. But what if the injuries are severe or you have multiple passengers in your car, van, or suburban?
Often, the same people who reject UM, will buy "collision" coverage on their car to make sure they are not left paying for a car note after the car is destroyed in an accident. In this limited way, you can think of UM insurance as collision coverage on you, your family, passengers, or employees.
While perfect statistics are not available, many drivers on the road have no insurance. Frequently, drivers will obtain minimum limits insurance through a "premium finance" arrangement, but will have stopped paying the premiums (thereby losing coverage) by the time of an accident.
What is "Economic-Only" UM?
In Louisiana, UM coverage will be afforded to you unless you "waive" the coverage under La. R.S. 22:1295. Louisiana residents are presented with a form that allows them to waive or select UM coverage. They are also allowed to select "economic-only" UM. People often choose this option because it is cheaper, but economic-only UM coverage will only pay for economic damages such as lost wages, medical bills, funeral costs, and other monetary damages. Economic-only UM will not pay money to compensate for pain and suffering/mental anguish, scarring and disfigurement, or other non-economic damages.
Can UM protect me from a hit-and-run driver? Yes.
What if another driver's negligence caused the accident, but there was no physical contact with that driver's vehicle and they fled? In this scenario, UM may be available under La. R.S. 22:1295(1)(f); however, you will need to identify an "independent and disinterested witness" to establish the actions of the unidentified driver.
Will UM protect me if I am at fault in an accident? No. The law would consider that a "moral hazard" and invite unscrupulous individuals to cause an accident in hopes of recovering under the policy they purchased.
Will UM protect me if I am a pedestrian? It may, depending upon the terms of your insurance policy.
What if an object falls from a vehicle and causes an accident? UM may be available in this circumstance. The ultimate answer may depend upon whether the "falling object" had come to rest before the accident. Rener v. State Farm Mut. Auto. Ins. Co., 99-1703 (La.App. 3 Cir. 4/05/2000), 759 So.2d 214, 215.
Rational people may decide to reject UM to save money; and this decision may be the right one if they have health insurance, short-term disability, long-term disability, or others such protections. However, people often make such decisions with less than full information. Hopefully, you will make the smart choice.
Tags: accident, Collision, collision coverage, economic-only UM, hit-and-run, Louisiana, UM, uninsured motorist coverage
The Duty to Defend Continues to Evolve in Louisiana
Louisiana is a "direct action" state that continues to present new challenges for insurers. Over the years, Louisiana courts have expanded the duty to defend. This expansion created pitfalls for the insurer and forced the provision of a complete defense, even when all or a majority of the claim was not covered by the insurance policy. However, some of this expansion has been drawn back by the Louisiana Supreme Court which recently ruled that, in latent, long-term exposure cases, the duty to defend is to be spread across a number of years­­­–as opposed to the arbitrary selection of a single insurer to defend the entirety of the case. This change presents opportunities for immediate risk transfer and reimbursement to recoup what can be significant dollars invested in the defense of legacy and environmental actions.
A General Overview: Like many other states, an insurer's duty to defend suits against its insured is broader than its liability for damage claims. The duty to defend is determined by the factual allegations contained in the plaintiff's petition, which are to be broadly construed. American Home Assurance Co. v. Czarniecki, 230 So.2d 253 (La. 1969). The court examines the duty under the "eight corners" rule which means that the duty attaches if a review of the four corners of the policy and the petition raises the potential for coverage and coverage is not unambiguously excluded. Once a complaint states one claim within the policy's coverage, the insurer has the duty to defend the entire claim, even though other claims in the complaint fall outside the policy's coverage. Treadway v. Vaughn, 633 So.2d 626 (La. App. 1 Cir. 1993), writ denied, 635 So.2d 233 (La. 1994).
Execution of the defense duty can present big challenges given that Louisiana is a direct action state where the attorney is often called upon to represent both the insured and the insurer. If the insurer does not properly handle the assignment, coverage positions can be waived. See Steptore v. Masco Const. Co., 643 So. 2d 1213 (La. 8/18/94); Sosebee v. Steadfast Ins. Co., 701 F.3d 1012, 1020 (5th Cir. 2012). Additionally, insurers must recognize that Louisiana has recognized Cumis (insured selected) counsel in situations when coverage positions issue. Belanger v. Gabriel Chemicals, Inc., 00-0747 (La.App. 1 Cir. 5/23/01); 787 So.2d 559, writ denied, 01-2289 802 (La. 2001); So.2d 612 (citing 46 C.J.S.§ 1157 (1993). In such a situation, independent counsel must be separately retained to represent the diverging interests.
When is the duty to defend discharged: The court will determine whether exhaustion of policy limits will terminate an insurer's obligation to defend the insured on a case-by-case basis, taking into consideration whether the settlement was made in good faith. Holtzclaw v. Falco, 355 So.2d 1279 (La. 1977). An insurer that "hastily enters a questionable settlement simply to avoid further defense obligations under the policy" does not act in good faith and may be held liable for damages caused to its insured. Pareti v. Sentry Indemnity Co., 536 So.2d 417, 423 (La. 1988). The timing of its withdrawal from the suit is critical to a determination of the insurer's good faith. A tender of policy limits into the registry of the court may terminate the duty to defend; however, the tender must comply with all of the statutory requirements (to include the admission of liability). In this connection, an insurer who wishes to tender its limits and admit liability may well face a challenge from the insured that such action is a breach of its good faith obligations. Pareti, supra.
Long-Tail Exposure Cases: For some time now, Louisiana courts have recognized the concept of "horizontal spreading" over a number of years based on the "trigger" of coverage each year a policy was in place. See Cole v. Celotex Corp., 599 So. 2d 1058 (La. 1992) and Norfolk Southern Corp. v. Cal. Union Ins. Co., 859 So. 2d 167, 192 (La. App. 2003),writ denied, 861 So. 2d 578 (2003). The practical effect is to hold each insurer liable to indemnify only for its pro-rata time on the risk and, if the insured was not covered for a period of time, it bore its own pro-rata portion of the risk.
Until recently, the courts held that the duty to defend in such actions was a solidary (joint and several) obligation, meaning that the insured could select any carrier and require it to defend the entire claim. Simply, the courts held that the duty to defend was not subject to proration such that an insurer who was on the risk for a very short time could be compelled to pay all of the fees and costs and must then file a reimbursement action to collect from other insurers. But, the Louisiana Supreme Court recently ruled that defense costs are now subject to proration in the same manner as with indemnity. Arceneaux v. Amstar Corp., 15-0588 (La. 9/7/16); 200 So 3d 277.
At the outset, almost every long-tail exposure claim is a complex action that can take years to resolve. It is nearly always a very expensive proposition in terms of defense costs. The Arceneaux decision has meaningful, real-world impact upon both the insurer and the insured.
From the insurer's perspective, it can easily calculate its percentage of time on the risk and thereby readily ascertain what it owes in the defense of the action. Insurers can applaud the fact that they no longer pay for uninsured time on the risk or the portion of recalcitrant insurers who do not wish to "participate" in a joint defense.
From the insured's perspective, new incentive exists to scour all avenues to find older policies that may have been on the risk to avoid having direct participation in defense costs. In this regard, the insured will now have strong monetary incentive to keep all policies on file (or to take depositions of agents and brokers to identify coverage that may have been in place). Of course, insurers who otherwise might have remained unknown might now have an active role in long-tail exposure cases.
John Wolff is a member of the management committee and a senior partner at Keogh Cox with more than thirty years of experience. John has made his mark in a practice that has included complex litigation, commercial disputes, serious injury, bad-faith and insurance coverage, legacy/long-term exposure, and other matters. He has litigated numerous significant cases in state and federal courts and regularly appears before the courts of appeals in and out of the state. John has devoted attention to non-profit boards dedicated to assisting at-risk children. In his spare time, he enjoys spending time with wife, his three children, and grandchildren, playing tennis, and hiking.
Tags: coverage, duty to defend, insurance policy, liability, long-tail exposure cases, long-term exposure cases, Louisiana Supreme Court
Umm, Should I Buy UM?
It's a question you will have to answer if you purchase automobile liability insurance in Louisiana. While the question may appear simple, many people, even sophisticated people, do not fully understand the purpose of uninsured motorist coverage.
Uninsured motorist coverage (or "UM") is a form of insurance that can be purchased to protect you, your family, your passengers and/or your workers in the event they are injured in an automobile accident when the at-fault driver is uninsured. Your auto liability policy will not cover your bodily injuries, lost wages and other damages caused by the fault of another.
Claims for Negligent Spoliation of Evidence Not Supported by Louisiana Law
In Reynolds v. Bordelon, 2014-2362 (La. 6/30/15), — So.3d—, 2015 WL 3972370, the Louisiana Supreme Court definitively ruled that Louisiana law does not recognize a cause of action for negligent spoliation of evidence. This resolved a disputed issue of Louisiana law.
The Reynolds plaintiff was involved in a multi-car accident in which his airbag failed to deploy. His insurance company paid what was owed for the totaled vehicle under its policy and, in the normal course of business, disposed of the vehicle by auctioning it to a salvage yard. Plaintiff's petition included a claim against the auto manufacturer for the airbag failure. It also included a claim against his insurance company and the salvage yard for failure to preserve the vehicle as evidence likely to be used in litigation.
A More "Direct Action"
The Louisiana Supreme Court recently announced a decision that could alter the impact of Louisiana's "Direct Action Statute." See Soileau v. Smith True Value and Rental, et. al., 2012-1711, — So. 3d —.
In Soileau, the injured plaintiff initiated suit after a John Deere front-end loader malfunctioned. She settled with a number of parties but proceeded to trial against the store from which the machinery was rented, the store's owners (collectively, the Smiths) and the Smiths' insurer, Hartford Insurance Company.
Louisiana Supreme Court Rejects Mental Anguish Claim
The Louisiana Supreme Court recently held that an insurance agent's negligent handling of a claim did not justify an award for mental anguish in Prest v. Louisiana Citizens Property Corp., 2012-0513 (La. 12/4/12). In Prest, it was alleged that the agent negligently failed to process a request for increased insurance sent more than 10 days prior to Hurricane Katrina.
Sudden Shifts – Burden Shifting under Louisiana Law
Winning or losing in court often comes down to who possesses the burden of proof. Like a driver at a four-way stop, a litigant has to know when it is their turn.
Civil Procedure Article 966, the "Summary Judgment Article," provides that the mover bears the burden of proof. The Louisiana Supreme Court recently addressed this burden in Dan Veuleman & Jody Veuleman v. Mustang Homes, LLC, 2013-C-190 (La. 4/5/13), – So. 3d – in the context of insurance coverage.
Tags: burden of proof, summary judgment article