Creech v. Aetna Cas. & Sur. Co.
| Decision Date | 02 December 1987 |
| Docket Number | No. 19065-CA,19065-CA |
| Citation | 516 So.2d 1168 |
| Parties | John H. CREECH & Denice S. Creech, Plaintiffs, v. AETNA CASUALTY & SURETY COMPANY, Curtis R. Hawkins, Hawkins Painters & Decorators, Inc., Martha H. Young & Allstate Insurance Company, Defendants. |
| Court | Court of Appeal of Louisiana — District of US |
Peters, Ward, Bright & Hennessy by J. Patrick Hennessy, Michael G. Latimer, Shreveport, for John H. Creech and Denice S. Creech.
Lunn, Irion, Johnson, Salley & Carlisle by Charles W. Salley, Shreveport, for Martha H. Young.
Burnett, Sutton & Walker by Bobby D. Sutton, Jr., Shreveport, for Curtis Ray Hawkins & Hawkins Painters & Decorators, Inc.
Nelson & Achee, Ltd. by James S. Denhollem, Shreveport, for Aetna Cas. & Sur. Co.
Before HALL, C.J., and JASPER E. JONES and SEXTON, JJ.
In this personal injury action seeking both compensatory and exemplary damages, the plaintiffs John H. and Denice S. Creech and defendants Curtis Ray Hawkins and Hawkins Painters & Decorators, Inc. appealed the trial court's granting of a motion for partial summary judgment in favor of Aetna Casualty & Surety Company denying insurance coverage for exemplary damages.
Plaintiffs filed suit against Martha H. Young; Curtis Ray Hawkins (Hawkins); Hawkins Painters & Decorators, Inc. (Hawkins Painters); Aetna Casualty & Surety Co. (Aetna), Hawkins Painters' liability insurer; and Allstate Insurance Company, plaintiffs' uninsured motorist carrier. Plaintiffs allege that John H. Creech was seriously injured and permanently disabled when Martha H. Young, daughter of Curtis Ray Hawkins, drove her vehicle while intoxicated in a wanton and reckless manner head-on into the vehicle driven by him. Plaintiffs seek to recover, among other damages, exemplary damages based upon LSA-C.C. Art. 2315.4. Plaintiffs allege that Mr. Hawkins and Hawkins Painters are vicariously liable since Martha Young was driving the vehicle owned by Hawkins Painters in the course and scope of employment with Hawkins Painters and with the permission of Mr. Hawkins. The plaintiffs also allege that Mr. Hawkins was individually negligent and is liable since he provided the automobile to Ms. Young and knew of her abuse of alcohol and drugs.
Aetna provided liability insurance coverage on the vehicle involved in the accident driven by Ms. Young under two insurance policies, a business automobile policy and an excess indemnity umbrella policy issued to Hawkins Painters as named insured.
Aetna filed a motion for partial summary judgment in the trial court contending that plaintiffs were not entitled to recover exemplary damages from the insurer under its policies of insurance issued and in effect on the date of the accident. The court sustained Aetna's motion for partial summary judgment, concluding that Aetna's policies did not provide coverage for exemplary damages. The court stated:
The plaintiffs' demands against the insurance company for exemplary damages were rejected.
Plaintiffs and also defendants Hawkins and Hawkins Painters appealed, contending that the trial court erred in granting a partial summary judgment to Aetna and in concluding that exemplary damages were not covered under the provisions of the insured's liability policy. 1 Finding this specification of error to have merit, we reverse.
LSA-C.C. Art. 2315.4 was enacted by Act 511 of 1984 as Article 2315.1, was redesignated as Article 2315.2, and was redesignated in 1986 as Article 2315.4. 2 The article provides:
"In addition to general and special damages, exemplary damages may be awarded upon proof that the injuries on which the action is based were caused by a wanton or reckless disregard for the rights and safety of others by a defendant whose intoxication while operating a motor vehicle was a cause in fact of the resulting injuries."
Aetna contends that the language of the policies does not cover "exemplary damages" and that insurance coverage for exemplary damages would violate the public policy of Louisiana. 3 Appellants argue that the policies provide for payment of all damages, whether compensatory or exemplary, and that there is no public policy which precludes insurance coverage for exemplary damages.
Thus, the issues are: (1) Do the liability policies provide coverage for exemplary damages awarded under LSA-C.C. Art. 2315.4, and (2) If so, does Louisiana public policy preclude such coverage. These issues have never been decided by a state court in Louisiana where exemplary or punitive damages have not historically been available, but the issues have been presented to and decided by the courts of many other states. Most courts have rejected the contention that the usual language of liability insurance policies does not provide coverage for exemplary or punitive damages. The majority of courts of other states have also rejected the contention that such insurance coverage violates public policy, although there is substantial authority to the contrary. See Annot., 16 A.L.R. 4th 11 (1982); Bolin, Enter Exemplary Damages, 32 La.Bar Journal 216 (1984). We are in accord with the majority view on both issues and hold that (1) the policies provide coverage of exemplary damages, and (2) public policy does not prohibit insurance coverage for exemplary damages.
THE INSURANCE POLICIES ISSUED BY AETNA PROVIDE COVERAGE FOR EXEMPLARY DAMAGES.
The business automobile policy provides in pertinent part:
"Part IV--Liability Insurance.
A. WE WILL PAY.
1. We will pay all sums the insured legally must pay as damages because of bodily injury or property damage to which this insurance applies, caused by an accident and resulting from the ownership, maintenance or use of a covered auto." (emphasis added)
The excess indemnity (umbrella) policy provides in pertinent part:
B. Property Damage, or
C. Advertising Offense
to which this policy applies, caused by an occurrence anywhere in the world, provided that: ..." (Emphasis added)
In the policies the insurer promises to pay all sums or indemnify for ultimate net loss which the insured legally must pay or shall become legally obligated to pay as damages because of bodily injury or property damage. There is no doubt that the exemplary damages contemplated by LSA-C.C. Art. 2315.4 are awarded because of injuries. "Injuries" is a predicate for the article to become applicable. If there is no injury then no exemplary damages may be awarded. If exemplary damages are due because of injury caused by the conduct described in the Article, then the insured is legally obligated to pay them.
There is no language in the policies distinguishing between compensatory and exemplary damages. Neither of Aetna's policies contains an exclusion of exemplary or punitive damages (see Part IV, Section C, Exclusions of the Business Automobile Policy and Section 2, Part 2.2, Exclusions of the Excess Indemnity (Umbrella) Policy).
A majority of the courts of other states which have considered the issue hold that insurance policies with similar language afford coverage for exemplary damages. 4 Most policies contain such language as the obligation to pay "all sums ... the insured shall become legally obligated to pay" or to pay "damages for bodily injury or property damage for which the law holds you responsible" without specifically excluding exemplary damages. The courts reason that such language is broad enough to include exemplary damages and further that the average premium paying insured contemplates protection against claims of any character not intentionally inflicted. The insurer designed the policy in question. As stated in Insurance Company of North America v. Solari Parking, Inc., 370 So.2d 503 (La.1979), Even if the language was ambiguous it should be construed toward coverage. Aetna could have changed the policy language. The company could easily have provided for exclusion. Since Aetna specified the terms of the contract it is bound by them.
Some recent decisions of federal district courts in Louisiana have held that liability insurance policies do not provide coverage for punitive damages awarded under maritime law. Daughdrill v. Ocean Drilling and Exploration Co., 665 F.Supp. 477 (E.D.La.1987); Dubois v. Arkansas Valley Dredging, Inc., 651 F.Supp. 299 (W.D.La.1987); Smith v. Front Lawn Enterprises, Inc., No. 83-5147 (E.D.La. September 29, 1986). But see and compare Fagot v. Ciravola, 445 F.Supp. 342 (E.D.La.1978). While authoritative, we do not regard those decisions as controlling under Louisiana law, and we reach a contrary result.
We hold that the provisions of the liability insurance policies issued by Aetna provide coverage for exemplary damages awarded under LSA-C.C. Art. 2315.4.
INSURANCE COVERAGE OF EXEMPLARY DAMAGES IS NOT AGAINST PUBLIC POLICY.
The contract of insurance, like any other agreement, is the law between the parties. Wiley v. Louisiana & Southern Life Insurance Co., 302 So.2d 704 (La.App.3d Cir.1974) writ denied 305 So.2d 540 and 305 So.2d 541 (La.1975). The provisions of the insurance policy should be given effect except to the extent they conflict with law or public...
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