Arceneaux v. Amstar Corp.

• Citation: 200 So.3d 277
• Decision Date: 07 September 2016
• Docket Number: NO. 2015-C-0588,2015-C-0588
• Parties: Daniel Arceneaux, Louis Daverede, Jr., Vives Lemmon and Jules Menesses, et al. v. Amstar Corp., Amstar Sugar Corp., Tate and Lyle North American Sugars, Inc., and Domino Sugar Company, et al.
• Court: Supreme Court of Louisiana

200 So.3d 277

Daniel Arceneaux, Louis Daverede, Jr., Vives Lemmon and Jules Menesses, et al.

v.Amstar Corp., Amstar Sugar Corp., Tate and Lyle North American Sugars, Inc., and Domino Sugar Company, et al.

NO. 2015-C-0588

Supreme Court of Louisiana.

September 7, 2016

Jones Walker, LLP, Glenn Gill Goodier, New Orleans, for Applicant

Tabary & Borne, LLC, Paul A. Tabary, III, Chalmette, Lee M. Epstein (Pro Hac Vice), for Respondent

HUGHES

, J.

This case concerns whether the duty to defend in long latency disease cases may be prorated between insurer and insured when occurrence-based policies provide coverage for only a portion of the time during which exposure occurred. Continental Casualty Company (“Continental”) asserts that defense costs are to be prorated among insurers and the insured if there are periods of non-coverage. American Sugar Refining, Inc. (“American Sugar”) asserts that the duty to defend as agreed upon in the policy provides for a complete defense so long as the duty to defend attaches, even if some claims fall outside of coverage. For the reasons set forth below, we hold that the duty to defend should be prorated in this case based upon policy language.

Facts and Procedural History

In the underlying Arceneaux suit, plaintiffs allege that they suffered hearing loss from exposure to unreasonably loud noise in the course of their work at American Sugar's refinery in Arabi, Louisiana. Two sets of plaintiffs, the Barbe plaintiffs and the Waguespack plaintiffs, filed suit against American Sugar in 2006. These suits were consolidated with the Arceneaux action, which was filed in 1999 against American Sugar's predecessor, Tate & Lyle North American Sugars, Inc. The case at bar concerns only the Barbe and Waguespack plaintiffs, and not the Arceneaux plaintiffs whose claims have been litigated extensively in the trial court, the court of appeal, and the Louisiana Supreme Court. See Arceneaux v. Amstar Corp. , 2005–0177 (La.App. 4 Cir. 12/14/05), 921 So.2d 189

(“Arceneaux I ”); Arceneaux v. Amstar Corp. , 2006–1592 (La.App. 4 Cir. 10/31/07), 969 So.2d 755, writs denied, 07–2486, 08–0053 (La. 3/24/08), 977 So.2d 953, 953 (“Arceneaux II ”); and Arceneaux v. Amstar Corp. , 2010–2329 (La. 7/1/11), 66 So.3d 438

(“Arceneaux III ”).¹

The plaintiffs, approximately 100 in number, allege that they worked at the refinery during various years ranging from 1941 to 2006.² Continental issued eight general liability policies in effect from March 1, 1963 to March 1, 1978. Each of the policies contained exclusions for bodily injury to employees of the insured arising out of the course and scope of employment. However, in the last policy, the exclusion was deleted by special endorsement effective December 31, 1975. Thus, there was coverage for bodily injury that occurred from December 31, 1975 through March 1, 1978, a period of twenty-six months. The parties agree that the Barbe and Waguespack actions trigger coverage. The relevant policy language provides:

The company will pay on behalf of the insured all sums which the insured ... shall become legally obligated to pay as damages because of

Y. bodily injury

Z. property damage

to which this insurance applies, caused by an occurrence, and the company shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury or property damage, even if any of the allegations of the suit are groundless, false or fraudulent ....

The policy defines bodily injury as “bodily injury, sickness or disease sustained by any person which occurs during the policy period , including death at any time resulting therefrom.” (Emphasis added.) The policy defines occurrence as “an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured.”

American Sugar brought a third party demand against Continental on September 19, 2007, alleging that Continental had issued policies that provide coverage for the Barbe and Waguespack claims. Furthermore, American Sugar alleged that Continental had been put on notice of the litigation in June 2006 and that Continental breached its policy provisions by failing to provide a defense. American Sugar sought past defense costs, a complete defense going forward, and penalties and attorney fees. Continental agreed to pay 25% of the past and future defense costs, subject to a full reservation of rights.

On May 22, 2013, American Sugar filed a Motion for Partial Summary Judgment seeking a declaration that Continental owes a duty to defend, including a duty to provide American Sugar a complete defense, reimbursement of defense costs expended plus interest, statutory bad faith penalties, and attorney fees. Without offering reasons, on October 3, 2013 the trial court granted American Sugar's request for a complete defense going forward, but denied the motion in all other respects, including the request for past defense costs. The trial court also designated the judgment as final for purposes of immediate appeal pursuant to Louisiana Code of Civil Procedure article 1915(B)

.

Continental took a suspensive appeal and argued that it should not be ordered to provide a complete defense given that its policies covered but twenty-six months of the approximately sixty-year exposure period alleged by the plaintiffs. The Fourth Circuit affirmed the trial court's ruling holding that an insurer's duty to defend is not subject to proration. Arceneaux v. Amstar Corp. , 2014–0271 (La.App. 4 Cir. 2/25/15), 161 So.3d 115, 124

. The court of appeal opined that an insurer's duty to defend arises when the pleadings disclose even a possibility of liability under the policy, even if some of the claims fall outside the policy's coverage. Id . at pp. 6–7, 119–20. The court of appeal determined that the jurisprudence did not support a deviation from the rule that the duty to defend is not divisible, even in long latency disease cases. Id . at p. 14, 123–24. The court of appeal did note, however, that other jurisdictions have adopted the “more equitable system” of defense cost proration, that the state's jurisprudence is “moving in the direction of proration,” and that this case presents an opportunity for the supreme court to “extend and/or clarify the law on this issue.” Id. at pp. 13–14, 123–24. Continental sought review with this court, which was granted. Arceneaux v. Amstar Corp. , 2015–0588 (La. 8/28/15), 174 So.3d 1157.³

Standard of Review

Appellate courts apply a de novo standard of review in considering lower court rulings on summary judgment motions. Thus, we use the same criteria that govern the district court's consideration of whether summary judgment is appropriate. A court must grant a motion for summary judgment if the pleadings, depositions, answers to interrogatories, and admissions, 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, pursuant to LSA–C.C.P. art. 966(B)

. Here, there are no genuine issues of material fact. This case thus presents a question of law.

Law and Analysis

At the outset, we must note that an insurer's duty to defend is distinct from its duty to indemnify. Generally, an insurer's obligation to defend suits filed against an insured is broader than its obligation to provide coverage for damage claims. Elliott v. Cont'l Cas. Co. , 2006–1505 (La. 2/22/07), 949 So.2d 1247, 1250

(citing Steptore v. Masco Const. Co., 93–2064 (La. 8/18/94), 643 So.2d 1213, 1218 ). The insurer's duty to defend is determined by the allegations of the plaintiff's petition, and the insurer is obligated to furnish a defense unless the petition unambiguously excludes coverage. Steptore, p. 8, 643 So.2d at 1218

. If, assuming all allegations of the petition to be true, there would be both coverage under the policy and liability of the insured to the plaintiff, the insurer must defend regardless of the outcome of the suit. Id . In short, the duty to defend arises whenever the pleadings against the insured disclose even a possibility of liability under the policy. Id . at pp. 8–9, 1218.

As to an insurer's duty to indemnify, liability is to be prorated among insurance carriers that were on the risk during periods of exposure to injurious conditions. Norfolk S. Corp. v. California Union Ins. Co. , 2002–0369, pp. 42–43 La. App. 1 Cir. 9/12/03), 859 So.2d 167, 197–98

, writ denied , 2003–2742 (La. 12/19/03), 861 So.2d 579 ; see also

Arceneaux , p. 22, 66 So.3d at 453 (“Arceneaux III ”). That indemnification is allocated pro rata is based in large part on Louisiana's adoption of the exposure theory in long latency disease cases. Id . at pp. 40–41, 197 ; see also

S. Silica of Louisiana, Inc. v. Louisiana Ins. Guar. Ass'n , 2007–1680 (La. 4/8/08), 979 So.2d 460, 466. Long latency occupational disease cases are sui generis in that a distinct body of jurisprudential law has been developed which applies solely to them. See

Cole v. Celotex Corp. , 599 So.2d 1058 (La.1992). Under the exposure theory, the “occurrence” that triggers coverage under an insurance policy is the plaintiff's exposure to harmful conditions within the policy period. Id . at 1076. Such a theory was adopted to establish when coverage was triggered in cases that involved diseases when there is a “lengthy temporal separation between the alleged tortious conduct and the appearance of injury.” S. Silica , p. 6, 979 So.2d at 465. This approach is based on the concept that insurers may limit their liability to discrete and finite periods. Norfolk S. , p. 42–43, 859 So.2d at 198. As the Norfolk Southern court explained:

The exposure theory, upon which the Louisiana allocation approach is based, relies on the principle that an insurer will only be responsible within the terms of its policy for those damages arising out of the period the policy is in effect. In short, each insurer is

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