Boudreaux v. Optimum Ins. Co., 87-4525

• Citation: 854 F.2d 88
• Decision Date: 02 September 1988
• Docket Number: No. 87-4525,87-4525
• Parties: Harry BOUDREAUX, Plaintiff-Appellee, Cross-Appellant, v. OPTIMUM INSURANCE COMPANY et al., Continental Insurance Companies and Safeco Insurance Company, Defendants- Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

Page 88

854 F.2d 88

Harry BOUDREAUX, Plaintiff-Appellee, Cross-Appellant, v. OPTIMUM INSURANCE COMPANY et al.,

Continental Insurance Companies and Safeco Insurance

Company, Defendants- Appellants.

No. 87-4525.

United States Court of Appeals,

Fifth Circuit.

Sept. 2, 1988.

Rehearing Denied Oct. 11, 1988.

John A. Bivins, Lafayette, La., for Continental Ins. Co.

James R. Shelton, Lafayette, La., for Safeco Ins. Co.

Gordon Hackman, Boutte, La., Leslie Schiff, Opelousas, La., for Harry Boudreaux.

Appeals from the United States District Court for the Western District of Louisiana.

Before RUBIN, GARZA and JONES, Circuit Judges.

GARZA, Circuit Judge:

Boudreaux brings this uninsured motorist claim following a collision on November 22, 1983 with Michael J. Kimble who had limits of $5000 per person and $10,000 per accident. It is undisputed Kimble was responsible for the collision. All issues were tried to the court except for damages on which the jury awarded $200,000.

The collision occurred at the intersection of Interstate 10 and U.S. Highway 167 where Boudreaux was rearended. Boudreaux did not sue Kimble nor his insurer American Southern Insurance Company. He did however sue three insurance companies--Optimum Insurance Company of Illinois, Continental Insurance Companies and Safeco Insurance Company of America.

Optimum carried the insurance for LeBlanc & Broussard Ford Inc. and Iberia Car Rental, Inc. LeBlanc and Iberia are related corporations. LeBlanc sold Boudreaux his new vehicle and arranged with Iberia to provide Boudreaux an automobile while his vehicle was being serviced. Boudreaux was in the Iberia vehicle when the collision occurred.

Early in this lawsuit Optimum was dismissed as a party because it filed for rehabilitation in a Cook County Circuit Court in Illinois. The Illinois Court entered an order enjoining the institution of suit against Optimum. Thus, on October 29, 1985 Optimum was dismissed as a party. The Optimum policy carried uninsured motorist limits of $300,000.

The second company involved in this suit is Continental which provided Boudreaux's employer Johnson Screens Universal Oil Products, Inc., a subsidiary of the Signal Companies, with insurance coverage. The Signal Companies are based in California. Johnson Screens does business in Louisiana. Continental is a party because Boudreaux was in the scope of his employment when the collision occurred. The Continental policy provided $250,000 limits for bodily injury liability without specifically providing for or waiving uninsured motorist coverage in the policy itself or in any supplemental document.

Finally, Safeco insured Boudreaux's personal vehicle which, as previously stated, was being serviced by LeBlanc on the day of the collision. The Safeco policy contained uninsured limits of $100,000.

The district court held Optimum, Continental and Safeco were each primary carriers, however the exclusion language in the Optimum policy would relieve it of liability. Thus, the district court apportioned the $200,000 award between Continental and Safeco in solido based on their respective coverages. After receiving credit for Kimble's $5000 liability policy, Continental was liable for 71% or $138,450 and Safeco was liable for 29% or $56,550. The district court additionally held neither Continental nor Safeco acted arbitrarily, capriciously or without probable cause in handling Boudreaux's claim, thus denying Boudreaux's claim for penalties and attorney's fees pursuant to La.Rev.Stat.Ann. Sec. 22:658 (West 1978).

We are reversing the district court's holding that the exclusion language in Optimum's policy allowed Optimum to avoid its liability. We also reverse the holding that Safeco's policy provided primary coverage. We are upholding the Court's finding that Continental's policy provided primary coverage as well as the application of Louisiana law to that policy. We are also upholding the $150,000 jury award for general damages to Boudreaux and reducing the $50,000 award for future medical to $19,800. Finally, we are upholding the district court's denial of penalties and attorney's fees for Boudreaux.

I

The Louisiana uninsured motorist statute embodies a strong public policy. ¹ Roger v. Estate of Moulton, 513 So.2d 1126, 1130 (La.1987) (citing A.I.U. Ins. Co. v. Roberts, 404 So.2d 948 (La.1981); Breaux v. Government Employees Ins. Co., 369 So.2d 1335 (La.1979)). "The object of the statute is to promote the recovery of damages for innocent automobile accident victims by making uninsured motorist coverage available for their benefit as primary protection when the tortfeasor is without insurance, and as additional or excess coverage where he is inadequately insured." Id. (citing Block v. Reliance Ins. Co., 433 So.2d 1040 (La.1983); Johnson v. Fireman's Fund Ins. Co., 425 So.2d 224 (La.1982); Hoefly v. Government Employees Ins. Co., 418 So.2d 575 (La.1982)). This statute is to be liberally construed to carry out its objective, Hoefly, at 578, and mandates uninsured motorists protection. Niemann v. Travelers Ins. Co., 368 So.2d 1003, 1006 (La.1979).

The Louisiana Supreme Court has also stated "No insurance contract can include any provision inconsistent with or contradictory to any standard provision used or required to be used by the applicable sections of the Insurance Code. [La.Rev.Stat.Ann. Sec. 22:623]. Any policy provision which narrows the coverage mandated by the statute will not be considered." Block supra at 1044. See also, Bond v. Commercial Union Assurance Co., 407 So.2d 401, 409 (La.1981); Breaux, supra at 1337-1338; Seaton v. Kelly, 339 So.2d 731, 733-734 (La.1976); Deane v. McGee, 261 La. 686, 260 So.2d 669, 673 (1972).

A second section pertinent to this appeal is La.Rev.Stat.Ann. Sec. 22:1406(D)(1)(c) (West 1978). ² Louisiana Courts have held the purpose of this section is to prevent stacking of uninsured/underinsured motorist policies. E.g. Duhe v. Maryland Casualty Co., 434 So.2d 1193, 1196 (La.App. 1st Cir.1983). However, there is a limited exception to the anti-stacking rule. The exception occurs when:

(1) the injured party is occupying an automobile not owned by him;

(2) the [uninsured motorist] coverage on the vehicle on which the injured party was an occupant is primary; and

(3) should that primary [uninsured motorist] coverage be exhausted due to the extent of damages, then the injured occupant may recover as excess from other [uninsured motorist] coverage available to him.

Id. at 1197 (citing Courville v. State Farm Mut. Auto. Ins. Co., 393 So.2d 703, 705 (La.1981); Nall v. State Farm Mut. Auto. Ins. Co., 398 So.2d 201 (La.App. 3d Cir.), aff'd, 406 So.2d 216, 218 (La.1981)).

Applying both sections to the present situation leads us to conclude Optimum is a primary carrier. The exclusion language in the Optimum policy narrowed the uninsured motorist coverage as mandated by La.Rev.Stat.Ann. Sec. 22:1406(D)(1)(a) when read in conjunction with La.Rev.Stat.Ann. Sec. 22:1406(D)(1)(c). We read 22:1406(D)(1)(c) as requiring the uninsured motorist carrier on the vehicle in which the non-owner occupant was injured to be primary. See generally McKenzie, Louisiana Uninsured Motorist Coverage-After Twenty Years, 43 La.L.Rev. 691 (1983). Thus, the same uninsured motorist carrier may not write into its policy exclusion language to relieve itself of liability. Therefore, the exclusion language contained in the Optimum policy will not be given effect. ³

The second insurance carrier, Continental, insured Boudreaux's employer. ⁴ Since Boudreaux was in the scope of his employment at the time of his collision, we conclude his employers' insurance carrier is also a primary carrier. Capone v. King, 467 So.2d 574, 580 (La.App. 5th Cir.) cert. denied, 468 So.2d 1203, 1205 (La.1985). ⁵ The plaintiff, Capone, was an occupant in a non-owned automobile which was involved in a collision with an uninsured motorist. The owner of the vehicle was Mr. Coffer. At the time of the collision, Mrs. Coffer was operating the vehicle in the scope of her employment. The court held the insurance carriers for Mrs. Coffer's employer were primarily liable. Id. at 580.

Continental argues, if they are held to a primary insurer then the California Insurance Code should apply to setting the limits of uninsured motorist protection. Applying California law would place a $30,000 cap on the uninsured motorist policy. Continental contends the policy was issued and delivered in California, thus to apply Louisiana law would be incorrect. Each state has a great interest in the matters that occur within its boundaries and to its citizens. Louisiana is no exception in adopting a strong uninsured motorist statute which has certain methods of waiving or limiting an insured's coverage. Continental's insured, Johnson Screens, does business in Louisiana and the district court found, contrary to Continental's position, that "the policy was issued for delivery in Louisiana with respect to a motor vehicle registered and principally garaged in Louisiana." Following Roger v. Estate of Moulton, 513 So.2d 1126 (La.1987), we conclude Louisiana law should apply. In Roger, the supreme court held a vehicle registered, garaged and licensed in the State of Louisiana would be subject to the Louisiana uninsured motorist statute despite the policies not being delivered or issued for delivery in Louisiana. Id. at 1130-1131. Therefore, in accordance with 22:1406(D)(1)(a), Continental is held to have provided uninsured motorist protection equal to the liability coverage in the amount of $250,000.

The final company, Safeco, wrote the insurance coverage for Boudreaux's personal vehicle. The policy contained a provision for coverage of a temporary substitute vehicle. ⁶ It is argued by Continental pursuant to the temporary substitute vehicle clause that Safeco's policy should be primary. We disagree. It appears under Louisiana law the personal policy of an insured operating a...