96-297 La.App. 3 Cir. 11/6/96, Murray v. City of Bunkie

• Decision Date: 06 November 1996
• Citation: 686 So.2d 45
• Parties: 96-297 La.App. 3 Cir
• Court: Court of Appeal of Louisiana — District of US

Page 45

686 So.2d 45

96-297 La.App. 3 Cir. 11/6/96

Sims MURRAY, Plaintiff--Respondent, v. CITY OF BUNKIE, et al., Defendants--Respondents International Surplus Lines Insurance Company, Defendant--Relator.

No. W96-297.

Court of Appeal of Louisiana Third Circuit.

Nov. 6, 1996.

Rehearing Denied Jan. 28, 1997.

Alfred Octave Pavy, Garett R. Duplechain, Opelousas, for Sims Murray.

James Thompson Lee, Bunkie, for City of Bunkie.

Laura K. Austin, Lafayette, for International Surplus Lines Insurance Company.

Before WOODARD, DECUIR and PETERS, JJ.

[96-297 La.App. 3 Cir. 1] PETERS, Judge.

This case is before us on application for supervisory writs filed by International Surplus Lines Insurance Company in connection with the denial of its motion for summary judgment on the issue of insurance coverage under a "claims made" policy.

DISCUSSION OF THE RECORD

Sims Murray filed a suit for damages against the City of Bunkie (City); Joseph Timothy Stracener, a Bunkie police officer; United Community Insurance Company (UCIC); and International Surplus Lines Insurance Company (ISLIC). ¹ In his suit, Murray alleges that he suffered physical and mental damages during two incarcerations in the Bunkie City Jail, which occurred in August and September of [96-297 La.App. 3 Cir. 2] 1993. ² Murray contends that on both occasions he was wrongfully denied his ulcer and heart medication. Additionally, he contends that the second incarceration constituted false imprisonment in that he was taken into custody for the failure to pay a court-imposed fine that was not yet due. The City and Stracener answered Murray's suit and filed a cross-claim against ISLIC, claiming coverage under a policy issued by ISLIC.

It is not disputed that ISLIC provided a Law Enforcement Officers Professional Liability Insurance Policy to the City for the period from May 1, 1993 to May 1, 1994, and that this policy was in effect at the time Murray's claim arose. However, in its motion for summary judgment, ISLIC relies on the notification language of the policy. According to the terms of the insurance policy, ISLIC agreed "[t]o pay on the behalf of the Insured all sums which the Insured shall become legally obligated to pay as compensatory money damages as a result of claims first made against the Insured and reported to the Company during the policy period ...." (Emphasis added). The Declarations Page contains the following notice: "THIS IS A CLAIMS MADE POLICY. EXCEPT AS MAY BE OTHERWISE PROVIDED HEREIN, THIS COVERAGE IS LIMITED TO LIABILITY FOR ONLY THOSE CLAIMS WHICH ARE FIRST MADE AGAINST THE INSURED AND REPORTED TO THE COMPANY WHILE THE POLICY IS IN FORCE." In support of its motion, ISLIC filed the affidavit of Greg Jankowski, a claims specialist for Coregis Insurance Company, the handling agency for ISLIC. According to Jankowski's affidavit, ISLIC did not receive notice of Murray's claim until August 17, 1994, after the expiration of the policy period.

In opposition to the motion, the City and Stracener presented the affidavit of [96-297 La.App. 3 Cir. 3] Cynthia M. Dauzat, the Bunkie City Clerk. In her affidavit, Ms. Dauzat asserted that she received a demand letter from Murray dated September 27, 1993, and forwarded it to Southwest Louisiana Lumpkin Agency (Southwest), the insurance agent for the City. According to the affidavit, Ms. Dauzat received a letter dated November 1, 1993, from UCIC, through Southwest, notifying the City that there was no coverage under its policy for Murray's claim. She stated that as a result of the City's belief that Southwest had not provided coverage for such a claim, it was terminated as the insurance company for the City. Further, Dauzat asserted that by letter dated December 20, 1993, Southwest provided the City with notice that the claim of Murray had been closed. The next notice the City received, according to Ms. Dauzat, was by way of Murray's suit, which was served on August 15, 1994. Ms. Dauzat stated that after further investigation, it was determined that insurance had been provided by ISLIC. Ms. Dauzat admitted that the suit was then forwarded to ISLIC and that it was received by ISLIC on August 17, 1994.

The trial court denied ISLIC's motion for summary judgment, and ISLIC applied for supervisory writs to this appellate court. This case is now before us on that writ application.

OPINION

The trial court denied the motion for summary judgment, finding that a factual dispute and a legal issue existed as to whether the terms of the policy were complied with concerning whether notice was given as soon as practicable. In addition to the previously quoted policy provisions, Section IV of the policy provides in part If during the policy period or extended reporting period:

(a) The Insured shall receive written or oral notice from any party that it is the intention of the party to hold one or more of the Insureds responsible for the results of an act, error or omission alleged to have been done by the Insureds while acting in their insured capacity, or the Insured shall become aware of any incident which may subsequently [96-297 La.App. 3 Cir. 4] give rise to a claim being made against an Insured for an alleged act, error or omission: Then the Insured shall, as soon as practicable and within the policy period, give written notice to the Company of the receipt of notice or the incident.

(Emphasis added).

The trial court stated:

The policy is a contract between the parties. That policy was drawn up not by the City of Bunkie but by your company. In that policy they got language saying as soon as practical [sic]. But nobody typed that and held a gun to them and made them put it in there. If they didn't want to live by that language they shouldn't have put it in there. They should have said if it's not reported during the period of coverage there is no coverage, period. But they used the language as soon as practical [sic]. And first of all, coverage is to be presumed or in favor, [sic] second summary judgments are not favored. So for that reason I'm going to deny the Motion For Summary Judgment....

An insurance policy is a contract between the parties, and it should be construed by using the general rules of contract interpretation set forth in the Louisiana Civil Code. Lewis v. Hamilton, 94-2204 (La.4/10/95); 652 So.2d 1327. "The words of a contract must be given their generally prevailing meaning." La.Civ.Code art. 2047. "When the words of a contract are clear and explicit and lead to no absurd consequences, no further interpretation may be made in search of the parties' intent." La.Civ.Code art. 2046. The trial court apparently interpreted this policy provision to mean that the insured had the option of giving written notice either as soon as practicable or within the policy period. However, the policy does not so state. The use of the word "and" means that both conditions must be met. This policy provision is not ambiguous or unclear. Thus, the trial court erred in its interpretation of the policy.

When a policy clearly limits coverage to acts discovered and reported during the policy's effective term, this limitation of liability is not per se invalid. Livingston Parish Sch. Bd. v. Fireman's Fund American Ins. Co., 282 So.2d 478 (La.1973). Absent a conflict with a statute or public policy, insurers may limit their liability and [96-297 La.App. 3 Cir. 5] impose such reasonable conditions as they wish upon the obligations they assume by contract, if they do so by unambiguous and clearly noticeable provisions. Id. In Livingston Parish School Board, a school board sued to recover damages for the collapse of a roof on a building and named as a defendant a civil engineer employed in the construction of the building. The engineer filed a third-party demand against his professional liability insurer. The roof collapsed three days after the engineer's policy coverage had expired, but all of the services were performed prior to the policy's termination date. However, the policy provided coverage only for negligent acts occurring during the policy period if a claim was first made against the insured during the policy period. The supreme court rejected the contention that the limitation of liability was invalid as contrary to public policy. The court stated: "No reasonable expectation of coverage by the insured was defeated by the unambiguous provisions clearly limited [sic] coverage to those claims discovered and reported during the policy period." Id. at 482.

Livingston Parish School Board involved the issue of coverage as between the insured and the insurer. As to the cross-claim filed in the instant case by the insureds against ISLIC, we find that Livingston Parish School Board controls to defeat that claim under the terms of the insurance contract. However, Livingston Parish School Board did not address the issue of coverage in the context of a claim by an injured third party against the insurer.

In Williams v. Lemaire, 94-1465 (La.App. 4 Cir. 5/16/95); 655 So.2d 765, writ denied 95-1514 (La.9/22/95); 660 So.2d 481, the plaintiffs asserted a claim against their insurance agent and the agent's insurer for alleged negligence in connection with the lapse of their uninsured motorist coverage. This claim arose in the context of an automobile accident that occurred on August 29, 1989. A claim was also asserted against the uninsured motorist carrier, who alleged it had issued a policy but that the [96-297 La.App. 3 Cir. 6] policy had lapsed for nonpayment of premiums. The agent-insured was not served with the suit until January 20, 1992. The policy was in effect from September 15, 1985 to September 15, 1991. The policy unambiguously required that the insurer be notified of the potential claim by its insured during the policy period. The insurer relied on Livingston Parish School Board, but the fourth circuit found that the case did not support the insurer's argument as between the insurer and the third-party...