This newsletter discussed several recent coverage cases dealing with automobile liability and UM insurance—the flood of the UM cases doesn’t stop. Also, there are a few non-coverage cases of particular note that are discussed.
Employers’ Liability Exclusion
Ducote and Exide entered into a maintenance-services contract. The contract contained an indemnity provision under which Ducote was to indemnify Exide for damages caused by Exide employees. A Ducote employee was injured during a job Ducote was performing under the contract. And Exide sought defense and indemnity from Ducote.
Ducote’s insurer denied coverage for the indemnity claim, in part under a broadly-worded employer’s liability exclusion. The exclusion applied to bodily injury to an employee of any insured and regardless of “[w]hether the insured may be liable as an employer or in any other capacity.” Affirming summary judgment to Ducote’s insurer, the Louisiana First Circuit Court of Appeal finds that the exclusion clearly precludes damage for indemnity against Ducote and that the exclusion was not made ambiguous by wording in the policy’s contractual-liability exclusion that makes an exception for indemnity. The court noted the case law that an exception to an exclusion cannot create coverage. Kirby v. Ashford, 2015-1852 (12/22/16).
The Louisiana Third Circuit Court of Appeal affirms that self-insured political subdivisions are exempt from the requirements of the Louisiana Motor Vehicle Safety Responsibility Law to provide omnibus insurance coverage to third-party drivers. Tatney v. City of DeRidder, 16-395.
Auto Liability Coverage – Permitted Use
Norwood driving Smith’s Camry caused an accident. The plaintiff alleged that Norwood had permission to drive the Camry and thus was an insured under Smith’s Progressive policy. Norwood lived at times with Smith, the mother of his girlfriend Gustave. Norwood, who did not have a driver’s license, did not have the permission of Smith to drive the Camry. Gustave had permission to drive the Camry for certain purposes, but had to ask for her mother’s permission for other purposes. Norwood claimed that Gustave gave him permission to drive the Camry. Gustave denied giving permission to Norwood.
However, when deposed, Norwood admitted that he knew that he did not have Smith’s permission to drive the Camry and further that Gustave did not have authority, without asking her mother, to give permission to anyone to drive the car. Based on Norwood’s actual knowledge that he lacked permission, the Louisiana First Circuit Court of Appeal finds Norwood had no permission to drive the Camry and affirms summary judgment to Progressive. Pray v. USAgencies Casualty Ins. Co., (12/22/16).
Automobile Liability Insurance—Temporary Substitute Vehicle
Recently decided by the Louisiana Third Circuit Court of Appeal, State Farm Mutual Automobile Insurance Company v. Safeway Insurance Company, (16-357), raises the question of how many times must an insurer lose on a questionable coverage defense before it says enough is enough. LeGros’s Honda became inoperable. The next day LeGros borrowed Istre’s Mercury, and a day later LeGros driving the Mercury caused an accident. Safeway insured LeGros and his Honda; State Farm insured the Istre Mercury.
State Farm paid the plaintiff hit by LeGros and sought reimbursement in subrogation from Safeway. Safeway denied primary coverage based on its policy’s definition of a “temporary substitute automobile.” Under the policy definition, a vehicle could qualify as a temporary substitute vehicle only “when the owned automobile is being serviced or repaired by a person engaged in the business of selling, repairing, or servicing motor vehicles.” Here, LeGros himself was repairing his Honda, not a professional service person.
Like other courts, the court correctly found that the policy definition with its requirement that the owned vehicle at the time of the accident be in the service of a professional mechanic was contrary to Louisiana public policy and La. R.S. 22:1296, which mandates coverage for temporary substitute automobiles.
UM—Proving Uninsured Motorist
At trial, plaintiff introduced an affidavit from an Avis representative that the tortfeasor driver, who was driving an Avis rental vehicle, did not purchase optional liability coverage and that “no valid personal automobile liability insurance [has been] found” for that driver. Over objection, the trial court admitted the affidavit, found the affidavit established that the driver was uninsured, and awarded damages against UM insurer Safeway.
On appeal, the Louisiana Third Circuit Court of Appeal reverses, finding that the affidavit was hearsay and that plaintiff failed to show that the tortfeasor driver was uninsured. The court noted that La. R.S. 22:1296(6) provides three ways for a claimant to make a prima facie showing that a driver was uninsured using affidavit evidence, which include affidavits from the vehicle owner and operator, and from the Louisiana Department of Public Safety and Corrections; and that the statute did not provide for the type of affidavit offered by plaintiff. Stephens v. King, 16-76.
UM – Rejection Form
In a Louisiana car-accident case, the issue was whether UM waivers signed by the injured driver and the owner of the car being driven were valid. Under Texas law, the waivers were valid. Under Louisiana law, the waivers were not valid. Would Texas or Louisiana law apply?
The accident happened in Louisiana, and suit was filed in Louisiana. The commercial auto policies were issued in Texas. There were contentions in the case that the insureds were Florida residents and that the vehicles insured were then garaged in Texas. Noting that “Texas has a real and substantial interest in regulating its insurance industry and insurance contracts,” the Louisiana Fifth Circuit Court of Appeal finds that Texas has a stronger interest in the application of its law and that under Texas law the UM waivers were valid. Garces-Rodriguez v. Geico Insurance Company, 16-196 (12/21/16).
Collateral Source Rule
Emphasizing tort deterrence, the Louisiana Third Circuit Court of Appeal rules that, under the collateral source rule, a tortfeasor cannot claim credit for expenses paid by the workers’ compensation insurer. Royer v. State of La., DOTD (1/11/17)
New Home Warranty Act—Claims Outside the Act
In a well-written opinion, the Louisiana First Circuit reverses the trial court’s dismissal of all claims against the home builders under the New Home Warranty Act because the homeowners asserted claims falling outside the scope of the NHWA. In addition to claims for defective workmanship, which clearly fell under the NHWA, the homeowners asserted claims for breach of contract, fraud, and negligent misrepresentation that concerned the builder’s failure to complete the house construction. The court noted that claims arising out of the formation of the contract were different from claims for performance of the contract for which the NHWA provides the exclusive remedy against the builder. Robinson v. Papania, 2015-1354 (10/31/16).
Duty – Economic Damages Only
The defendants’ tractor-trailer crashed into a ditch and spilled its acrylic-acid cargo near plaintiffs’ businesses. Plaintiffs alleged that as a result of the spill, they sustained loss. However, the plaintiffs’ property was not damaged in the spill. Under the economic-loss rule, a tortfeasor’s liability for property damage extends only to the owners of the damaged property. Using the economic-loss rule, the trial court granted the defendants’ summary judgment. However, the Louisiana First Circuit Court of Appeal reverses, finding that the economic-loss rule is not Louisiana law and that the trial court should have used a duty-risk analysis, asking whether the duty breached by defendants encompassed the particular risk of injury that plaintiffs sustained. Cedarholley Investment, LLC v. Pitre, 2016-0641 (12/22/16).