This issue covers a few recent coverage decisions of note, and highlights an excellent court of appeal decision dealing with the definition of “insured location” in a homeowners’ policy and the ongoing battle between an excess insurer and a primary insurer when the primary insurer did little in a major case and settled for its policy limit in a Gasquet settlement shortly before trial. Also, an unusual number of spoliation cases have been released and warrant discussion.
Also, two seminar opportunities. On Saturday, May 21, the Lafayette Bar Association is presenting a CLE and concealed handgun course, which will feature a panel discussion on the legal consequences of gun ownership. I will be giving a presentation on civil liability concerns in Louisiana for gun owners.
And on June 28, I will be speaking at the annual meeting of the Louisiana Claims Association in Biloxi on how the Supreme Court’s 2015 decision in Kelly v. State Farm has affected insurer bad faith law in Louisiana. This presentation has been offered to selected clients and friends of the firm as an in-house program, and a summary of the seminar can be found at https://www.onebane.com/louisiana-insurer-bad-faith-kelly-v-state-farm/. For information about either program, please contact me.
UM – Rejection
In Drayer v. Allen, 2015-1150 (4/15/16), the Louisiana First Circuit Court of Appeal in a prior decision reversed summary judgment to State Farm that its insured had validly waived UM coverage under a 2009 UM rejection form, finding issues of fact as to whether the insured made an informed rejection. State Farm then moved for summary judgment under a 2004 UM rejection form; and the trial court granted the motion. However, the First Circuit again reverses summary judgment, finding that the 2009 UM rejection form superseded the 2004 UM rejection form because State Farm had required the insured to execute the 2009 form and for that reason the 2004 form could not be considered.
Note that the First Circuit distinguished Hughes v. Zurich American Insurance Company, 153 So.2d 477 (La. App. 1 Cir. 2014), and McElroy v. Continental Cas. Co., 15 So.3d 377 (La. App. 2 Cir. 2009), where courts had considered a prior UM rejection because in those cases new rejection forms were not required for policy renewal.
Resident and Insured Premises
In Schelmety v. Yamaha Motor Corp. USA, 50,586 (4/13/16), James was visiting and staying briefly at the home of the parents of his law school roommate, Michael. Operating a Rhino four-wheel off-road vehicle owned by the parents, James overturned the vehicle, badly injuring the plaintiff, who was riding as a passenger. The accident happened on a public street about a half mile from the parents’ premises. In addition to suing James for negligent operation and the Rhino manufacturer under the Louisiana products’ liability act, plaintiff sued Michael and his parents for negligent entrustment of the Rhino; and sued the homeowners’ insurer of the parents, alleging the insurer covered not only Michael and his parents, but also James as an insured.
In an excellent opinion, the Louisiana Second Circuit Court of Appeal finds as follows:
(1) James was not an insured under the parents’ policy because he was not a resident of the household. The court readily rejected plaintiff’s argument that the term “resident,” without definition, is ambiguous. Noting that the term “resident” should be given its general popular meaning and requires an intent to continue living in the household, the court found that James as a weekend houseguest was not a resident of the parents’ household and thus was not an insured under the policy.
(2) The homeowners’ policy contained an exclusion for bodily injury or property damage arising out of the ownership or use of motorized land vehicles. But an exception to the exclusion was a motorized land vehicle designed for recreational use off public roads “owned by any insured, while on an insured location.” The policy then defined the term “insured location” as follows:
(h) “Insured location” means:
(1) the residence premises;
(2) that part of any other premises, other structures and grounds, used by you as a residence and which is shown in your Policy Declarations. This includes any premises, structures and grounds which are acquired by you during the policy period for your use as a residence;
(3) any premises not owned by you which you have the right or privilege to use arising out of (h)(1) or (h)(2) above[.]
The court found that the exclusion’s exception did not apply because the accident did not occur on an “insured location.” The court rejected the argument, based on the overturned Florida decision of Meister v. Utica Mutual Ins. Co., 573 So.2d 128 (1991), that the term “insured location” was ambiguous and included the accident location because a contrary result would mean coverage for the ATV was “illusory.” Under the definition of “insured location,” the court found that the accident, a half mile from the premises of the named-insured parents, did not occur on an insured location.
(3) Plaintiff argued that the motor-vehicle exclusion did not apply to Michael and his parents, who had been sued for negligent entrustment, because her injuries arose not from use of the vehicle, as required by the exclusion, but from negligent entrustment. The court readily disagreed, finding that, regardless of the allegations made, the use of a motor vehicle was essential to plaintiff’s theory of liability.
Occurrence – How Many
Plaintiff sued Aggreko, a company that provided emergency generator services to Touro Hospital in New Orleans, when Touro lost power to its cooling system after Hurricane Katrina. American Home was Aggreko’s liability insurer. The American Home policy provided for $2,000,000 in coverage per occurrence with a $2,000,000 aggregate limit, and a self-insured retention with a $50,000 deductible per occurrence. Some 41 separate lawsuits were pending against Touro because of the power outage. Here, Aggreko argued that all claims asserted for loss of power would be a single occurrence, and that Aggreko had already met its self-retention limit. However, American Home argued that each claim was a separate occurrence, and that Aggreko had not incurred $50,000 in expenses defending plaintiff’s claim.
Reversing the trial court’s summary judgment to the insurer, the Louisiana Fourth Circuit Court of Appeal finds that all of the claims arising out of the power loss are one occurrence and that Aggreko is responsible for only one retained limit of $50,000. The court distinguished the Louisiana Supreme Court’s decision in Lombard v. Sewerage and Water Board of New Orleans, 284 So.2d 905 (La. 1973), which used an “effect” test rather than the “cause” test to find that damage to each landowner during a canal construction project was a separate occurrence. The court noted that Lombard involved damages caused by a series of events over an extended period of time.
Further, the court noted that the insurer could have stated in the policy that there was a $50,000 retained limit per claim rather than per occurrence, and failed to do so.
Excess Insurers – Rights Against Primary Insurers
In an ongoing case involving terrible facts, the primary insurer did little to defend a major personal injury lawsuit in a challenging venue and, six weeks before trial, settled with the plaintiff for its $1,000,000 policy limit in a Gasquet settlement. In that type of settlement, the plaintiff releases the settling insurer, and agrees to release the insured except to the extent that the insured has other liability coverage and under no circumstances to pursue an excess judgment against the insured. However, the insured remains in the case as a “nominal defendant.”
The excess insurer, which was never sued, was given notice of the lawsuit on December 28, 2011, two weeks before the January 11, 2012 discovery deadline. On January 12, 2012, the trial judge denied the primary insurer’s motion to extend the discovery deadline and set the case for trial on March 27, 2012. On February 19, 2012, the primary insurer settled with the plaintiff in the Gasquet settlement for its policy limit. On February 24, 2012 the excess insurer, with a $4,000,000 policy limit, settled with the plaintiff for $2,000,000. However, after the settlement, the excess insurer sued the primary insurer to recover its $2,000,000 payment, alleging that the primary insurer had breached its duty to defend the insured and that the excess insurer was subrogated to the rights of its insured.
In a well-reasoned opinion, the federal district court after a bench trial ruled in favor of the primary insurer, finding that because the insured paid nothing to settle the case, it had no rights to subrogate to the excess insurer. Also, the court rejected the excess insurer’s argument that because the insured paid premiums for excess insurance, the collateral source rule applied. Given the excess insurer’s settlement, an issue that was not litigated was, whether under the circumstances of this case, the late notice to the excess insurer was prejudicial, defeating coverage under the excess policy.
Note that the excess insurer has appealed the federal district court judgment. Argument in the United States Fifth Circuit Court of Appeals is scheduled for July. RSUI Indemnity Company v. American States Insurance Company, 12-2820 (S.D. La. 2015).
Spoliation of Evidence
Three recent cases address spoliation claims.
First, in a slip-and-fall lawsuit, plaintiff, alleging that the defendant restaurant failed to keep video showing the accident, made a claim for spoliation of evidence. In Tomlinson v. Landmark American Ins. Co.., 2012-02853 (3/23/16), the Louisiana Fourth Circuit Court of Appeal affirms summary judgment, dismissing the spoliation claim. Citing the Louisiana Supreme Court’s decision in Reynolds v. Bordelon, 172 So.3d 589 (2015), the court notes that Louisiana does not have a claim for negligent spoliation of evidence, and that the defendant’s erasing of video pursuant to routine business procedures was not intentional spoliation.
However, in a defamation and false-arrest lawsuit involving a shoplifting accusation, the Louisiana Third Circuit Court of Appeal affirms the trial court’s finding of spoliation of evidence, resulting in the imposition of an adverse presumption that the evidence destroyed must have been unfavorable to the defendant store. The day after the arrest, the plaintiff sent the store a letter requesting surveillance video. The defendant produced video taken on the date of the incident, but the video did not show the pertinent events. Six weeks after the incident, the store’s video was automatically recorded over. Because of plaintiff’s letter request and the failure of a key store employee to testify at trial, the court of appeal affirmed the trial court’s spoliation finding. Dauzat v. Dolgan Corp., 15-1096.
And finally, in Sayne v. PNKK (Lake Charles), LLC, 15-859, the Louisiana Third Circuit found spoliation of evidence by the defendant casino, raising the question of whether Sayne is just a casino-specific decision that courts will not apply to other types of merchants. There, plaintiff tripped and fell at the L’Aubarge Casino in Lake Charles. Plaintiff claimed that she tripped because of a clear sticky substance on the floor. The casino’s accident report, which was eventually produced during discovery, showed there was no substance on the floor. The casino produced four minutes of surveillance video showing the fall. But contrary to the casino’s policies, the casino did not retain video showing the area of the accident for some time before the fall and the inspection of the floor after the accident, and did not obtain statements from witnesses at the scene. Also, in accordance with industry practices, the casino had strict policies against guests taking photographs, interviewing witnesses, and obtaining copies of the accident report and video surveillance.
At trial, plaintiff requested a jury charge that if any party had the opportunity to preserve or produce evidence, but failed to do so without reasonable explanation, the jury could presume that the evidence would have been unfavorable to that party. The trial judge refused to give the jury charge, and the jury found that the defendant casino was not at fault.
On appeal, the Louisiana Third Circuit Court of Appeal reverses, finding that the special jury charge should have been given and, in a de novo review of the record, that the casino was at fault. The court found that because the casino had both complete control of the evidence and the intent to maintain control to the exclusion of all others, the adverse presumption charge should have been given.