Bonin v. Westport Ins. Corp.

• Decision Date: 17 May 2006
• Docket Number: No. 2005-CC-0886.,2005-CC-0886.
• Citation: 930 So.2d 906
• Parties: Mildred Fay Jones Sanders BONIN, et al. v. WESTPORT INSURANCE CORPORATION, et al.
• Court: Louisiana Supreme Court

930 So.2d 906

Mildred Fay Jones Sanders BONIN, et al. v. WESTPORT INSURANCE CORPORATION, et al.

No. 2005-CC-0886.

Supreme Court of Louisiana.

May 17, 2006.

COPYRIGHT MATERIAL OMITTED

Preis, Kraft & Roy, L. Lane Roy, Lafayette; Bollinger, Ruberry & Garvey, Jeffrey A. Goldwater, Robert A. Chaney, for applicant.

The Cocheran Firm New Orleans, Richard J. Guidry; Rastanis Law Firm, L. Stephen Rastanis; Allen & Gooch, James H. Gibson, Lafayette, for respondent.

KIMBALL, Justice.

The issue presented in this case is whether the intentional act exclusions contained in a professional liability policy barring coverage for the dishonest or fraudulent acts committed by the insured also bars coverage for the attendant act of the employee. For the reasons that follow, we find that the claim against the employee is based upon, arises out of or is the indirect result of an insured's dishonesty and fraud and is barred under the terms of the policy. Therefore, we reverse the district court's ruling denying summary judgment and grant summary judgment in favor of defendant.

FACTS AND PROCEDURAL HISTORY

On July 17, 1998, Bobbie Sanders, Sr. was killed in an accident while working on an offshore oil rig. Thereafter, Bobbie Sanders, Sr.'s wife, Mildred Sanders Bonin, and three children, Mary Sanders, Bobbie Sanders, Jr. and Michael Sanders, ("plaintiffs") hired attorney Allen J. Borne to represent their interests in claims arising out of the death of Bobbie Sanders, Sr. In October 1998, Borne negotiated a settlement of plaintiffs' claims against certain defendants without plaintiffs' knowledge or consent. Pursuant to the Receipt, Release, and Indemnification Agreement, the $450,000 settlement was to be split equally among the three children.

On November 1, 1998, Borne had his employee, Fonda Doucet, sign the Sanders' agreement and the corresponding acknowledgment as a witness to the signatures of Michael Sanders and Mildred Sanders Bonin. Doucet was unaware that Borne had forged the signatures. She could not recall, however, whether the forged signatures were present on the agreement when she signed as a witness. Doucet further identified the purported signature of the other witness, Lisa LaBauve, a former employee of Borne, as a forgery in Borne's handwriting. Borne then forged Mildred Sanders Bonin and Michael Bonin's names on the settlement checks and deposited them into his account at MC Bank. Borne never forwarded the settlement proceeds to the plaintiffs, nor did he inform them that he had settled their claims.

Borne had a Lawyers Professional Liability Policy issued by Westport Insurance Corp. ("Westport") effective October 1, 1998 to October 1, 1999 on a claims-made basis. The policy, according to its terms, covered all claims against the insured first made and reported to Westport in writing during the policy period or sixty days thereafter. The policy was not renewed.

Plaintiffs first learned that Borne had settled their claims in April 2000. On July 18, 2000, plaintiffs filed a petition for damages against MC Bank and Borne's heirs.¹ On April 11, 2001, plaintiffs filed a petition against Westport, alleging Westport was liable to plaintiffs for damages under the policy. Plaintiffs added Fonda Doucet as a defendant September 15, 2004.

Westport moved for summary judgment on April 23, 2003 contending that the policy did not provide coverage for plaintiffs' claim because the claim was first made after the expiration of the policy and therefore did not fall within the claims-made provisions or, alternatively, that coverage is precluded by Exclusions H² and A³ of the policy. Plaintiffs asserted that the policy language requiring claims to be made during the policy period, as applied to the facts of this case, violates La. R.S. 22:629⁴ and that genuine issues of material fact exist concerning the application of Exclusions H and A. Plaintiffs averred that, although Borne's fraudulent actions are excluded from coverage under the policy, Doucet's witnessing of the document constituted negligence that was covered under the terms of the policy. Plaintiffs contended that Doucet's negligence was then imputed back to Borne, under the doctrine of respondeat superior.

The district court denied Westport's motion for summary judgment. Westport applied for supervisory writs to the Court of Appeal, First Circuit, and the court of appeal denied the request. We granted certiorari to review the correctness of the district court's ruling denying summary judgment.

DISCUSSION

A motion for summary judgment will be granted "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to material fact and that mover is entitled to judgment as a matter of law." La. C.C.P. art. 966(B). This court reviews a grant or denial of a motion for summary judgment de novo. Schroeder v. Board of Supervisors of Louisiana State University, 591 So.2d 342, 345 (La.1991). Thus, this court asks the same questions as does the trial court in determining whether summary judgment is appropriate: whether there is any genuine issue of material fact, and whether the mover is entitled to judgment as a matter of law. Robinson v. Heard, 01-1697, pp. 3-4 (La.2/26/02), 809 So.2d 943, 945.

Interpretation of an insurance policy usually involves a legal question which can be resolved properly in the framework of a motion for summary judgment. Robinson, 01-1697 at p. 4, 809 So.2d at 945. An insurance policy is a contract between the parties and should be construed using the general rules of interpretation of contracts set forth in the Civil Code. Cadwallader v. Allstate Ins. Co., 02-1637, p. 3 (La.6/27/03), 848 So.2d 577, 580; Louisiana Ins. Guar. Ass'n v. Interstate Fire & Casualty Co., 93-0911, p. 5 (La.1/14/94), 630 So.2d 759, 763. The judicial responsibility in interpreting insurance contracts is to determine the parties' common intent. La. C.C. art. 2045; Louisiana Ins. Guar. Ass'n, 93-0911 at p. 5, 630 So.2d at 763; Garcia v. St. Bernard Parish School Board, 576 So.2d 975, 976 (La.1991). Words and phrases used in an insurance policy are to be construed using their plain, ordinary and generally prevailing meaning, unless the words have acquired a technical meaning. La. C.C. art. 2047; Cadwallader, 02-1637 at p. 3, 848 So.2d at 580; Carbon v. Allstate Ins. Co., 97-3085, p. 4 (La.10/20/98), 719 So.2d 437, 439.

An insurance policy should not be interpreted in an unreasonable or a strained manner so as to enlarge or to restrict its provisions beyond what is reasonably contemplated by its terms or so as to achieve an absurd conclusion. Carrier v. Reliance Ins. Co., 99-2573, pp. 11-12 (La.4/11/00), 759 So.2d 37, 43 (quoting Louisiana Ins. Guar. Ass'n, 93-0911 at p. 5, 630 So.2d at 763). Unless a policy conflicts with statutory provisions or public policy, it may limit an insurer's liability and impose and enforce reasonable conditions upon the policy obligations the insurer contractually assumes. Carbon, 97-3085 at p. 5, 719 So.2d at 440; Louisiana Ins. Guar. Ass'n, 93-0911 at p. 6, 630 So.2d at 763.

If after applying the other general rules of construction an ambiguity remains, the ambiguous contractual provision is to be construed against the insurer and in favor of coverage. Cadwallader, 02-1637 at p. 3, 848 So.2d at 580; Carrier, 99-2573 at p. 12, 759 So.2d at 43-44. Under this rule of strict construction, equivocal provisions seeking to narrow an insurer's obligation are strictly construed against the insurer. Louisiana Ins. Guar. Ass'n, 93-0911 at p. 6, 630 So.2d at 764; Garcia, 576 So.2d at 976. That strict construction principle, however, is subject to exceptions. Cadwallader, 02-1637 at p. 3, 848 So.2d at 580; Carrier, 99-2573 at p. 12, 759 So.2d at 43-44. One of these exceptions is that the strict construction rule applies only if the ambiguous policy provision is susceptible to two or more reasonable interpretations. Cadwallader, 02-1637 at p. 3, 848 So.2d at 580; Carrier, 99-2573 at p. 12, 759 So.2d at 43-44. For the rule of strict construction to apply, the insurance policy must be not only susceptible to two or more interpretations, but each of the alternative interpretations must be reasonable. Cadwallader, 02-1637 at p. 3, 848 So.2d at 580; Carrier, 99-2573 at p. 12, 759 So.2d at 43-44.

In the instant case, Westport asserts that the district court erred in denying Westport's motion for summary judgment because the policy exclusions unambiguously bar coverage. Westport relies on language in the policy that excludes coverage for fraudulent acts. Specifically, the policy provides:

XIV. EXCLUSIONS

This POLICY shall not apply to any CLAIM based upon, arising out of, attributable to, or directly or indirectly resulting from:

A. any criminal, dishonest, malicious or fraudulent act, error, omission or PERSONAL INJURY committed by an INSURED. This exclusion does not apply to any INSURED who is not so adjudged;

Thus, the language of this exclusion states that the policy does not provide coverage for claims based upon, or at a minimum indirectly resulting from, any criminal, dishonest, malicious, or fraudulent act committed by an insured. Moreover, the exclusion does not apply to any insured who is not so adjudged.

Here, Borne's acts constitute "any criminal, dishonest, malicious or fraudulent act, error, omission or injury" under the terms of the policy. Plaintiffs and Westport agree that Borne entered into the Receipt, Release, and Indemnification Agreement without plaintiffs' knowledge or consent and then proceeded to misappropriate plaintiffs' funds. By settling plaintiffs' claim without their knowledge or consent and then misappropriating the resulting funds, Borne committed a dishonest and fraudulent act.

However, plaintiffs do not contend that the dishonest and fraudulent acts of Borne are covered under the policy. Instead, plaintiffs argue that they...