Bayard v. Traders & General Ins. Co.

Decision Date18 August 1951
Docket NumberCiv. A. No. 3177.
Citation99 F. Supp. 343
CourtU.S. District Court — Western District of Louisiana

Minos H. Armentor, New Iberia, La., Patin & Patin, Lake Charles, La., for plaintiffs.

Davidson & Meaux, Lafayette, La., for defendant.

Helm & Simon, New Iberia, La., for intervenor.

DAWKINS, Chief Judge.

Plaintiffs' action is in tort for the death of the husband and father alleged to have been an independent contractor for the welding work on an oil well drilling rig, which defendant's insured, another independent contractor, was drilling on a lease of the Texas Company.

Defendant, Traders & General Insurance Company (called Traders) moved to dismiss for failure to state a claim for relief and, in the alternative, for a summary judgment in its favor. The motions to dismiss and for summary judgment are based upon substantially the same grounds, as follows: (1) the policy of liability insurance sued on was issued by defendant at its home office in Dallas, Texas, and delivered to Otis W. Dyer, Jr. (called insured) in the City of Houston, same state, and is therefore governed by the law of Texas; (2) the said contract or policy of insurance contains a "no action" provision (the insurer shall not be sued until the claim is reduced to judgment, etc., against the insured), valid under Texas law, and for this reason, the law of Louisiana which purports to permit suing the insurer in the first instance has no application to this case; and (3) if construed to apply, would violate provisions of Section 1, Article 4 (full faith and credit), Section 10, Article 1 (impair the obligations of a contract), Section 1 of the Fourteenth Amendment (due process and equal protection of the laws) of the Federal Constitution, and Section 15 of Article 4 of the State Constitution.

A copy of the policy sued upon is before the court, and it appears conceded that it was issued and delivered in the State of Texas, as alleged by the defendant. The provision involved here is as follows:

"Action against Company — No action shall lie against the Company unless, as a condition precedent thereto, the Insured shall have fully complied with all of the terms of this policy, nor until the amount of the Insured's obligation to pay shall have been finally determined either by judgment against the Insured after actual trial, or by written agreement of the Insured, the claimant, and the Company.

"Any person or his legal representative who has secured such judgment or written agreement shall thereafter be entitled to recover under the terms of this policy in the same manner and to the same extent as the Insured. Nothing contained in this policy shall give any person or organization any right to join the Company as a co-defendant in any action against the Insured to determine the Insured's liability.

"Bankruptcy or insolvency of the Insured or of the Insured's estate shall not relieve the Company of any of its obligations hereunder.

"Statutory Provisions — Any and all provisions of this policy which are in conflict with the statutes of the State wherein this policy is issued are understood, declared and acknowledged by this Company to be amended to conform to such statutes." (Emphasis by the writer.)

Counsel have again raised and argued the questions which were decided in other cases in this court, later herein considered, including, first, the inapplicability of the state law to these cases, and, alternatively, the unconstitutionality of Act No. 55 of the Louisiana Legislature of 1930, as amended, LSA-RS 22:655, on the grounds stated, at least as to policies issued or delivered outside of Louisiana, and have asked that the court reverse its holdings in those cases. In the latest of these, the present judge had held that since the state statutes in their final form dealt only with the question of procedure, they might be changed from time to time as applying to policies written and delivered either within or outside the state, according to the meaning and intent of the Legislature, so as to apply even retroactively to actions pending and undecided when the changes were made.


In its origin, as we know, an action in tort arises solely from Article 2315 of the Louisiana Civil Code, which is but the revised version of a similar provision running back to the Code Napoleon. As between the injured party and the tortfeasor, the basis is a wrong committed against the former's person or property which has to be repaired. In the beginning, and for a long period of time, such actions grew out of the ordinary relations between people in a more or less simple form of life; but with the rapid changes within the past century to a more complicated, industrial and mechanical existence, especially with the invention of steam and other self-powered machines and vehicles, these action have multiplied manifold. The result has been that the courts, both of the states and nation, have had to deal with an ever-increasing volume of litigation. This, in the very nature of things, compelled the creation of some means of dealing with the condition. The logical course was to institute a system similar to those already in use for protecting owners against loss to their property by fire, theft, storms, etc. This required spreading the risks over a large number of owners of motor-driven machines so that the cost in the form of premiums might be held to a minimum, and thereby avoiding the disaster to individuals of modest means resulting from large recoveries of damages. The policies, like other contracts, were based upon agreements between the insured and the insurer, the chief undertaking being one to indemnify the holders against liability for negligence or faults of themselves, their agents and employees. The person injured both then and now is a stranger to such agreements, and his rights still stem solely from Article 2315 of the Louisiana Civil Code. They are confined to those against the tortfeasor, until and unless through valid legislative power, they are extended or are imposed upon the insurer, whose obligation up to that stage is purely one of contractual indemnity.

With these fundamental and indisputable principles applying to the relations of the three sides to such disputes, we shall undertake an analysis of the law, both statutory and jurisprudential, of the state.

Until Act No. 253 of 1918, complainants or injured persons had to look to the tortfeasor for redress, and the latter, in turn, if he had a policy of indemnity, could require reimbursement from his insurer. This act made it impossible for the indemnitor to plead the bankruptcy or insolvency of its insured in defense of an action or judgment when obtained against the tortfeasor, by requiring the inclusion of a stipulation in the policy that "in case of such insolvency, or bankruptcy, an action may be maintained within the terms and limits of the policy by the injured person, or his or her heirs, against the insurance company." This necessarily had the effect of creating a right or cause of action for the tort, against a new and distinct third person.

Some twelve years later, the Legislature went much further and created a right of action, in the first instance, against the indemnitor, independent of that against the tortfeasor, thus permitting the injured party to abandon or ignore his claim against the latter, which has become the uniform practice. This cause of action was based solely upon the contractual relations between the insured and the insurer, for no one would contend, it is believed, that the latter, which had nothing to do with the tortious act, could be declared a tortfeasor by mere legislative fiat.

The matter comes down at last to the proposition as to whether the Act of 1930 in reality created a substantive right or cause of action, or merely provided additional procedure for enforcing the statutory obligation of the actual tortfeasor under Article 2315. It must be remembered at all times that the only obligation voluntarily assumed by the indemnitor in the contract was the one to indemnify its principal against his own faults, and in which the injured person could have no part because his existence was unknown and he could have no interest therein until he had been injured. Even if the obligation of indemnity should be treated as a stipulation for his benefit under Articles 1890 and 1902, although unknown, here again the question still persists as to whether it was or was not the creation of a new cause of action in the sense hereafter discussed.

The state decisions will be taken up somewhat in the order of their dates, following the passage of Act No. 55 of 1930. (Note: All italics, unless otherwise noted, those of the writer.)

In Bougon v. Volunteers of America, 1934, 151 So. 797, 801, one of the earliest cases after the passage of this act, the Court of Appeals for the Parish of Orleans, one of the courts of last resort of the state (subject to review by the State Supreme Court at the latter's discretion), whose jurisdiction includes torts, with the late William W. Westerfield, an able judge, as its organ, in reviewing the history and purpose of Act No. 55 of 1930, said: "The foundation of the action of the insured is in contract, to which the injured party is a stranger, except in so far as the statutory provisions may be incorporated in the policy. The basis of the action by the injured party is negligence, or tort; that of the insured a contract of indemnity." After pointing out the changes wrought by the Act of 1930 over that of 1918, it was held:

"It will thus be seen that, whether intentional or otherwise, the act of 1930, far from destroying or qualifying the effect of the decision in the Edwards Case Edwards v. Fidelity & Casualty Co., 11 La. App. 176, 123 So. 162, enlarged upon it by making certain of the conclusion we had reached upon the subject of insolvency in giving it the status...

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