93 2177 La.App. 1 Cir. 11/18/94, Manuel v. Louisiana Sheriff's Risk Management Fund
| Decision Date | 18 November 1994 |
| Citation | 647 So.2d 363 |
| Parties | 93 2177 La.App. 1 Cir |
| Court | Court of Appeal of Louisiana — District of US |
Victor L. Marcello, Gonzales, Patrick W. Pendley, Plaquemine, for plaintiffs-appellants John and Patricia Manuel.
J. Randall Trahan, Darrell J. Loup, Baton Rouge, for defendant Anglo American Ins. Co., et al.
Before SHORTESS, CARTER, CRAIN, FOIL and WHIPPLE, JJ.
[93 2177 La.App. 1 Cir. 2] CRAIN, Judge.
BACKGROUND
John Manuel was injured when the automobile he was driving collided with a vehicle driven by an Iberville Parish Sheriff's Deputy. It is uncontroverted that the deputy was at fault in causing the collision, and that at the time of the accident, the deputy was within the course and scope of his employment with the sheriff's department. The accident occurred on March 11, 1988. John and Patricia Manuel subsequently filed suit against several defendants, including the Sheriff, the Sheriff's primary and excess liability insurers, the Louisiana Sheriff's Risk Management Fund together with the Fund's excess insurers. The excess insurers were part of a syndicate of British insurers. Plaintiffs subsequently settled with all defendants but the excess insurers. Subsequent to the filing of the personal injury suit several of the individual insurers of the syndicate became insolvent and were placed in receivership by the British government. By letter dated November 18, 1991, the excess insurers agreed to settle the case for the sum of $350,000. Approximately $320,000 of that sum was to be paid in cash; the balance was to be by an assignment of claims by the Louisiana Sheriff's Risk Management Program against the insolvent carriers. Apparently the $320,000 was not paid to plaintiffs until January 24, 1992 and the assignment of claims was not forwarded to plaintiffs until March 5, 1992.
In June, 1992 plaintiffs filed an action for statutory penalties and damages pursuant to La.R.S. 22:1220(B)(2) () against the Sheriff, the Sheriff's Risk Management Fund, the participants in the program, the Louisiana Sheriff's Association and the individual excess insurers. Anglo American Insurance Company, one of the individual excess insurers in this action, filed the peremptory exception raising the objection of no cause of action. After a hearing on the matter, the trial court maintained the exception on the grounds that La.R.S. 22:1220 is a substantive law and its application in this case would be [93 2177 La.App. 1 Cir. 3] retroactive, resulting in alteration of substantive rights and obligations. Plaintiffs have appealed alleging the trial court erred in maintaining the exception. Anglo American answered contending the appeal is frivolous and seeking damages including attorney fees and court costs.
STATEMENT OF THE CASE
La.R.S. 22:1220 provides in part as follows:
"A. An insurer, including but not limited to a foreign line and surplus line insurer, owes to his insured a duty of good faith and fair dealing. The insurer has an affirmative duty to adjust claims fairly and promptly and to make a reasonable effort to settle claims with the insured or the claimant, or both. Any insurer who breaches these duties shall be liable for any damages sustained as a result of the breach.
B. Any one of the following acts, if knowingly committed or performed by an insurer, constitutes a breach of the insurer's duties imposed in Subsection A:
(1) Misrepresenting pertinent facts or insurance policy provisions relating to any coverages at issue.
(2) Failing to pay a settlement within thirty days after an agreement is reduced to writing.
(3) Denying coverage or attempting to settle a claim on the basis of an application which the insurer knows was altered without notice to, or knowledge or consent of, the insured.
(4) Misleading a claimant as to the applicable prescriptive period.
(5) Failing to pay the amount of any claim due any person insured by the contract within sixty days after receipt of satisfactory proof of loss from the claimant when such failure is arbitrary, capricious, or without probable cause.
C. In addition to any general or special damages to which a claimant is entitled for breach of the imposed duty, the claimant may be awarded penalties assessed against the insurer in an amount not to exceed two times the damages sustained or five thousand dollars, whichever is greater. Such penalties, if awarded, shall not be used by the insurer in computing either past or prospective loss experience for the purpose of setting rates or making rate filings.
D. The provisions of this Section shall not be applicable to claims made under health and accident insurance policies."
(Emphasis added)
[93 2177 La.App. 1 Cir. 4] The effective date of this statute is July 6, 1990, which is subsequent to the date of the accident and the date of issuance of the insurance contract. However, the statute was effective before the settlement was reduced to writing and the insurers' subsequent delay in payment of the settlement. Prior to the enactment of La.R.S. 22:1220 an insurer had no duty to a third party claimant. A duty was owed only to the insured. However, prior to the enactment of La.R.S. 22:1220, an insurer was liable to the insured for statutory penalties and attorney fees pursuant to La.R.S. 22:658 for arbitrary and capricious failure to timely pay a valid claim after receipt of adequate proof of loss from the insured.
RETROACTIVITY IN GENERAL
There is a codal and statutory prohibition against the retroactive application of substantive laws. La.C.C. art. 6; La.R.S. 1:2; St. Paul Fire & Marine Insurance Co. v. Smith, 609 So.2d 809 (La.1992). Thus, laws affecting substantive rights generally do not apply retroactively. Petroleum Helicopters, Inc. v. Avco Corp., 513 So.2d 1188 (La.1987). Generally, the rights and obligations of an insurer arise on the date the policy is issued. Thus, where a statute is not in effect at the time of issuance of the policy the statute is generally not retroactively applied. Segura v. Frank, 93-1271, 93-1401 (La. 1/14/94); 630 So.2d 714 (La.) cert. denied sub nom Allstate Insurance Co. v. Louisiana Insurance Guar. Ass'n., 511 U.S. 1142, 114 S.Ct. 2165, 128 L.Ed.2d 887 (1994). Block v. Reliance Ins. Co., 433 So.2d 1040 (La.1983). The legislature has the power, however, to enact laws, even substantive laws, and give them retroactive application. Its power to enact such laws is tempered by the due process and contract clauses of the state and federal constitutions. Article 1, section 2 of the Louisiana Constitution of 1974 (Due Process Clause) provides: "No person shall be deprived of life, liberty, or property, except by due process of law." The contract clauses of the state and federal constitutions have been described by the supreme court to be "virtually identical" and "substantially equivalent." Board of Commissioners of Orleans Levee District v. [93 2177 La.App. 1 Cir. 5] Department of Natural Resources, 496 So.2d 281, 291 (La.1986). Section 23 of Article 1 of the Louisiana Constitution of 1974 provides: "No bill of attainder, ex post facto law, or law impairing the obligation of contracts shall be enacted." However, the constitutional prohibition against impairing the obligations of contracts "must be accommodated to the inherent police power of the state to safeguard the vital interests of its people." Segura v. Frank, 630 So.2d at 728.
RETROACTIVITY OF LA. R.S. 22:1220
In order to determine whether a legislative enactment is to be applied retroactively or prospectively the court must look to the act to determine whether the legislature expressed its intent regarding retrospective or prospective application. If there is no such legislative expression, the court must then classify the enactment as substantive, procedural or interpretative. Cole v. Celotex Corp., 599 So.2d 1058 (La.1992).
Section 2 of Act 308 of 1990 provides that the Act is to become effective upon signature of the governor or if not signed by the governor, upon expiration of the time provided in the state constitution. This is not sufficient evidence of legislative intent to require only prospective application. Jackson v. Dendy, 93-0905 (La.App. 1st Cir. 6/24/94) 638 So.2d 1182. The following step in the analysis is to proceed to classify the act as substantive, procedural or interpretive.
Segura v. Frank, 93-1271, 93-1401 (La. 1/14/94); 630 So.2d at 723 (citations omitted).
Treatment of La.R.S. 22:1220
by this Court
This court has refused to apply La.R.S. 22:1220 in situations where the insurance policy was issued prior to the effective date of the statute and the occurrence triggering payment of an insurance claim also occurred before the effective date. Rusch v. [93 2177 La.App. 1 Cir. 6] Cook, 619 So.2d 122 (La.App. 1st Cir.), writ denied, 625 So.2d 1043 (La.1993); Champagne v. Hartford Casualty Insurance Group, 607 So.2d 752 (La.App. 1st Cir.1992); Francis v. Travelers Ins. Co., 581 So.2d 1036 (La.App. 1st Cir.), writs denied, 588 So.2d 1114, 1121 (La.1991). In the cases in which application of the statute was denied, it was done for the stated reason that application of the statute would result in the retroactive application of a substantive law, thereby impairing the obligations of contracts.
In Francis v. Travelers Insurance Co., 581 So.2d at 1036, this court refused to apply La.R.S. 22:1220 to a case in which the alleged statutory violations occurred, judgment was rendered and...
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