Auster Oil & Gas, Inc. v. Stream, 89-4336

Decision Date10 January 1990
Docket NumberNo. 89-4336,89-4336
Citation891 F.2d 570
PartiesAUSTER OIL & GAS, INC., Plaintiff-Appellant, Cross-Appellee, v. Matilda Gray STREAM, et al., Defendants. AETNA CASUALTY & SURETY CO., Defendant-Third Party Plaintiff-Appellee, Cross-Appellant, v. Edward M. CARMOUCHE, Third Party Defendant-Appellant, Cross-Appellee.
CourtU.S. Court of Appeals — Fifth Circuit

William B. Monk, Wm. E. Shaddock, Stockwell, Sievert, Viccellio, Clements & Shaddock, Lake Charles, LA., for Auster.

Ledoux R. Provosty, Jr., F. Rae Swent, Alexandria, LA., Richard A. Curry, Shannan Sweeney Rieger, Rubin, Curry, Colvin & Joseph, Baton Rouge, LA., Michael G. Lemoine, John A. Bivins, Roy, Carmouche, Bivins, Judice, Henke & Breaud, Lafayette, LA., for Carmouche.

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

Before JOHNSON, WILLIAMS and GARWOOD, Circuit Judges.

JERRE S. WILLIAMS, Circuit Judge:

Appellants Edward M. Carmouche and Auster Oil & Gas, Inc. ("Auster") each brought a third-party claim against appellee Aetna Casualty & Surety Co. ("Aetna") as insurer for Auster's claims against Carmouche. Carmouche and Auster appeal from the district court's summary judgment in favor of Aetna dismissing their claims. Aetna appeals the district court's denial of its motion for summary judgment on the issue of whether the subject Aetna insurance policies provide coverage for the damages to be awarded in this case. We affirm in part and reverse and remand in part.

I. Facts and Prior Proceedings

This appeal considers the latest development in the protracted litigation of appellant Auster Oil and Gas, Inc.'s civil rights claims under 42 U.S.C. § 1983 against various parties, including appellant Carmouche.

In 1971, Auster obtained an oil, gas, and mineral lease from Matilda Gray Stream and M.G.S. Lake Charles Inc., who retained royalty interests in the lease.

In the early 1980's the Louisiana state police began a criminal investigation, conducted by Trooper Al Martin, into allegations of oil theft from the lease. In July 1983, the police closed its investigation without bringing charges. Carmouche, the attorney for the Streams and M.G.S., continued his own investigation. Joined by Trooper Martin, Carmouche devised a plan to place microdots in Auster's oilfield pipeline in order to track the movement of the oil. On September 25, 1983, several of Carmouche's agents inserted the microdots while Martin and other Louisiana state police officers kept watch. No search warrant had been sought or obtained.

The plan, however, failed. The microdots stuck in the wellheads and pipelines, damaging Auster's equipment. They caused leaks in several barrels of oil, and allegedly damaged the underground formations to such an extent that all production from one well was lost.

In December 1983, Auster filed suit under § 1983, alleging that Mrs. Stream, M.G.S. and Trooper Martin had conspired to conduct an unlawful search and seizure in violation of the Fourth Amendment.

The district court denied Auster's motions to amend and dismissed Auster's suit for failure to state a claim under § 1983. On appeal, we held that Auster's allegations that Mrs. Stream and M.G.S. had acted "in concert" with state officers were sufficient to support a claim of state action under § 1983. We also held that Auster should have been granted leave to amend. We then remanded the case for trial. 1 See Auster Oil & Gas, Inc. v. Stream, 764 F.2d 381 (5th Cir.1985) ("Auster I ").

In March 1986, a jury found Carmouche and most of the other defendants liable, and awarded Auster compensatory and punitive damages. Last year, this Court affirmed the liability of Carmouche and the others. See Auster Oil & Gas, Inc. v. Stream, 835 F.2d 597 (5th Cir.1988) ("Auster II "). Due to several flaws in the jury damages award, 2 we remanded for a new trial on the issue of damages. With the exception of Carmouche, all defendants subsequently either settled with Auster or were dismissed on remand.

In this latest go-round, appellant Carmouche filed a third party complaint against Aetna, asserting that he was a named insured under two liability insurance policies taken out by his employer, Matilda Gray Stream. One policy was a primary Comprehensive General Liability Policy. The other was an Excess Indemnity ("umbrella") policy.

Auster consequently amended its complaint to name Aetna as a defendant pursuant to Louisiana's Direct Action statute, L.S.A. R.S. 22:655. Aetna answered the complaints, denying that the policies covered Auster's claims against Carmouche, and asserting a defense of late notice.

In a memorandum ruling, the district court granted summary judgment in favor of Aetna, dismissing both Carmouche and Auster's claims because of the failure of Carmouche to give Aetna timely notice of the original civil rights suit against him as required under the insurance policies. Carmouche and Auster appeal. Aetna appeals the district court's denial of its motion for summary judgment on the issue of coverage.

II. Dismissal of Carmouche's and Auster's Claims

Carmouche and Auster offer two arguments urging that the summary judgment in favor of Aetna was in error: (A) a genuine issue of fact exists as to whether Aetna's alleged failure to deliver the policies, or alternatively Carmouche's lack of knowledge of the policies, excused his delay in giving Aetna notice; and (B) Aetna is required by law to demonstrate prejudice from the delayed notice to avoid liability under the policies.

A. Delivery of the Insurance Policies

Summary judgment is proper when the pleadings and other evidence before the court show that no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986).

Carmouche and Auster contend that they raised a genuine fact issue as to whether Aetna failed to deliver the subject insurance policies to the Stream estate and/or Carmouche as required by Louisiana law. The critical statute provides that "every policy shall be delivered to the insured or to the person entitled thereto ...". L.S.A. R.S. 22:634(A). Appellants argue that Aetna's alleged failure to deliver the policies excused Carmouche from complying with the notice requirements in the policies.

On the record we must conclude that appellants fail to show that any substantial factual issue exists as to the delivery of one of the policies. Louisiana case law establishes that delivery of an insurance policy may be actual or constructive. Fenasci v. Travelers Ins. Co., 642 F.2d 986 (5th Cir.1981); Pruitt v. Great Southern Life Ins. Co., 202 La. 527, 12 So.2d 261, 262 (1942). Whether delivery has occurred depends upon the intention of the parties as manifested by their acts or words. Pruitt, 12 So.2d at 262. See also Mistich v. United Benefit Life Insurance Co., 199 So.2d 14, 16 (La.App.1967).

The evidence before the court incontrovertibly establishes that Aetna "delivered" the policy 3 to "the person entitled thereto", the Stream estate. Although it is disputed whether the Stream estate or its agent, office manager Mariella Welch, actually received the liability policy, 4 the evidence nonetheless shows conclusively that Aetna constructively delivered the policy.

The Stream estate's insurance processor, Mrs. Gammage from Southpoint Insurance Agency, testified that she received the policy from Aetna on January 17, 1983, along with Aetna's invoice to the agent. She prepared Southpoint's invoice to the Streams the next day along with a transmittal letter for the policy dated January 19, 1983. This letter was found in the Stream estate's insurance file. In the same file were the policies for the previous year (1982) and the years subsequent (1984 and 1985) to the policy year at issue. Stapled to the letter was an invoice from the Agency reflecting the premiums due by the Stream estate for various policies delivered with the cover letter, including the liability policy in question.

The letter stated in part: "We are presently reviewing the schedule of properties under the Comprehensive General Liability policy to conform to the list of properties prepared by your office. In the meantime, we are forwarding the renewal as prepared, and any subsequent changes necessary can be handled separately." Appellants point to this language and the absence of the subject policy from the files as evidence that the policy never was delivered.

This language, however, together with the presence in the Streams' files of the virtually identical policies for the year prior and subsequent to the subject policy, leads to the opposite conclusion. It shows indisputably the agent's (and Aetna's) intention to complete the renewal of the insurance contract and constructively "deliver" the subject policy. If they did not send the actual policy, they only retained it to update the list of properties covered, as stated in the letter. Appellants offer no evidence to the contrary.

Furthermore, as recognized by the court in Ryan v. Security Indus. Ins. Co., 386 So.2d 939 (La.App.1980), the delivery of an insurance policy by the insurance company to an agent can amount to constructive delivery in satisfaction of the statute. Id. at 942. In that case, it was the insurance company's policy to give the insured's copy of the policy, after issuance, to the agent for delivery to the insured. The agent failed to deliver to the plaintiff-insured. The court nonetheless found constructive delivery since no restrictions or conditions were placed on the agent concerning delivery of the policy after its issuance. 5

When Aetna issued the subject insurance policy, it is uncontroverted that it sent the Streams' copy, as well as the agent's copy, to the agent at the Southpoint Insurance Agency for delivery to the Stream estate. Absent evidence of restriction or conditions on the delivery of the policy, delivery...

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