Fakouri v. Insurance Co. of North America

• Decision Date: 19 December 1979
• Docket Number: No. 7321,7321
• Citation: 378 So.2d 1083
• Parties: Nicholas E. FAKOURI, Plaintiff-Appellee, v. INSURANCE COMPANY OF NORTH AMERICA, Defendant-Appellant.
• Court: Court of Appeal of Louisiana — District of US

Page 1083

378 So.2d 1083

Nicholas E. FAKOURI, Plaintiff-Appellee, v.INSURANCE COMPANY OF NORTH AMERICA, Defendant-Appellant.

No. 7321.

Court of Appeal of Louisiana, Third Circuit.

Dec. 19, 1979.

Onebane, Donohoe, Bernard, Torian, Diaz, McNamara & Abell, Edward C. Abell, Jr., Lafayette, for defendant-appellant.

Andrus & Doherty, James P. Doherty, Jr., and Sandoz, Sandoz & Schiff, Leslie J. Schiff, Opelousas, for plaintiff-appellee.

Frederick J. Gisevius, Jr., and Robert Shearman, New Orleans, for plaintiff-in reconvention-appellee.

Nicholas Gachassin, Jr., Lafayette, Robert M. Johnston, New Orleans, Lewis & Lewis, James T. Guglielmo, Boagni & Boagni, Charles F. Boagni, III, Opelousas, for defendant-appellee.

Before DOMENGEAUX, FORET and SWIFT, JJ.

DOMENGEAUX, Judge.

We must decide whether an excess insurer of the type described hereafter, can be held liable for a District Court judgment when the insurer was not a party to the original suit and claims it did not receive its first notice of the claim until after the District Court judgment had become executory.The Twenty-seventh Judicial District Court declared that the insurer can be liable and so held.We affirm.

I.THE JEFFERSON PARISH TRIAL

This protracted litigation had its inception on April 20, 1971, in Metairie, Louisiana, when a milk truck owned by Nicholas E. Fakouri, and driven by one of his employees, rear-ended a stopped school bus operated by Francis Folse.Mr. Folse sued Mr. Fakouri and other defendants, including the Hartford Insurance Company, Mr. Fakouri's primary automobile insurer in the Twenty-fourth Judicial District Court in and for Jefferson Parish.All parties believed at the trial that the Hartford policy was the only one which provided coverage.With that understanding, the case was tried and the defendants were allowed to present evidence to the jury of their inability to pay a judgment much in excess of the $100,000.00 limits of the Hartford policy.The jury found all defendants were liable in solido to Mr. Folse in the amount of $327,926.81.The trial judge adopted the verdict and the judgment was signed on December 18, 1975.

On February 12, 1976, before the case was appealed, Mr. Fakouri located a $1,000,000.00 excess policy issued to him by the Insurance Company of North America (INA).¹He felt that the policy, which was in effect at the time of the accident, provided coverage for this accident.INA was immediately notified of the claim and subsequent judgment against Mr. Fakouri, but in a letter dated April 7, 1976, denied coverage on the basis that the policy was a personal catastrophe policy and did not cover the accident in question, which INA concluded was a business loss.

After the judgment was signed on December 18, 1975, Hartford deposited the limits of its policy into the registry of the court.The defense attorney then appealed the judgment on behalf of all defendants except Hartford.When discovery of the INA policy was made, Hartford demanded that INA take over the appeal.INA obliged by hiring the Hartford attorney who had handled the trial for the defendant.

On appeal, the Fourth Circuit reduced the primary judgment by $61,000.00.Folse v. Fakouri, 361 So.2d 887(La.App. 4th Cir.1978).However, the Supreme Court reinstated the judgment of the District Court.Folse v. Fakouri, 371 So.2d 1120(La.1979).On appeal, Mr. Folse had attempted to get INA substituted as a partydefendant because its insured, Mr. Fakouri, had been discharged from the debt to Mr. Folse through bankruptcy proceedings.The Court of Appeal and later the Supreme Court quashed the attempt, with the latter court stating, 371 So.2d at 1122:

"It was contended on behalf of plaintiff Folse in the application to this Court for writs that it was error for the Court of Appeal to deny plaintiff's motion to dismiss the appeal as to the named defendants and to fail to substitute INA as a partydefendant.However, it is apparent from the final brief filed for plaintiff that only the reduction of the awards is now urged.We take this position to be influenced by the statement in defendants' brief that liability insurers are not indispensable or even necessary parties to a suit.In the event that it is ultimately determined that the policy of INA did provide coverage to the defendant Fakouri, defendants assert, the decision of this Court would control the obligations of the insurer under the terms of its policy, and the plaintiff will suffer no detriment.A separate suit filed in St. Landry Parish is in progress to determine whether INA's policy covered Fakouri."(Emphasis added).

II.THE ST. LANDRY PARISH TRIAL

At about the same time defendants appealed the judgment of the Twenty-fourth Judicial District Court, Mr. Fakouri and William C. Sandoz, his receiver in bankruptcy, filed suit for declaratory judgment against INA in the 27th Judicial District Court in St. Landry Parish to determine whether coverage existed.The suit for declaratory judgment was later converted to an ordinary action when INA filed third party claims against the Kurtz-Casanova-Godchaux Agency, Inc.(K-C-G), and the individuals who comprised K-C-G.²

After extensive proceedings at this trial, judgment was rendered and signed on October 25, 1978, against INA and in favor of Francis Folse on all amounts still due and owing from the December 18, 1975, judgment of the Twenty-fourth Judicial District Court.INA has perfected this appeal from the judgment of the Twenty-seventh Judicial District Court.

INA contends that (1) the policy issued by INA to Mr. Fakouri was voided because INA received no notification of the claim, suit, trial, or judgment until the judgment had become executory; (2) notice to K-C-G did not constitute notice to INA; (3) alternatively, if INA is liable to the Folse heirs ³ then K-C-G and the owners of that corporation, Kurtz, Casanova, and Godchaux, and their insurers, are liable to INA.For the following reasons we reject all of INA's contentions on appeal and affirm the District Court judgment.

A. INA RECEIVED SUFFICIENT NOTICE

We first decide that notice to K-C-G constituted notice to INA.The evidence reflects that in 1967 Mr. Fakouri was issued a personal catastrophe policy written by INA.This policy was sold and delivered to Mr. Fakouri by K-C-G, which was an INA agent at that time.The premium was collected by K-C-G.On April 1, 1968, the general agency agreement between K-C-G and INA was terminated and replaced with a limited agency agreement.Under this revised agreement K-C-G was not authorized to renew INA policies.Mr. Fakouri's excess policy with INA was due to expire on June 30, 1968.

However, before the policy expired (but after the general agency agreement was replaced with a limited one)Herbert Deslatte, Jr., then an INA marketing representative, arranged for K-C-G to broker Mr. Fakouri's excess policy through Howard Johnson, an INA agent.INA did this because it did not want to lose K-C-G's personal catastrophe policyholders.Therefore, on June 6, 1968, INA issued to Mr. Fakouri a renewal policy effective through June 6, 1971.This policy was identical to the original policy.Again, the policy was sold and delivered to Mr. Fakouri by K-C-G, which collected the premiums.With respect to the INA policies, K-C-G was the only insurance agency with whom Mr. Fakouri dealt.Not surprisingly, when the April 20, 1971, accident occurred, K-C-G was the insurance agency that Mr. Fakouri notified.

Section II, Condition B of the excess policy provides:

"Upon the happening of an occurrence reasonably likely to involve the Company under this policy section written notice shall be given as soon as practicable to the Company Or any of its authorized agents."(Emphasis added).

INA stresses that K-C-G was not an authorized agent when notice of the accident and subsequent suit was given to K-C-G by Mr. Fakouri.However, Mr. Fakouri was never notified that K-C-G was no longer an authorized agent of INA.INA would have us disregard the basic principle of Civil Code Article 3029 which provides that the revocation of an agent's authority does not become effective against a third party until the third party is notified of the revocation.Since Mr. Fakouri, a third party to the agency agreement between K-C-G and INA, was never notified of the revocation, and since he never communicated or dealt with INA or any of its other agents, his conduct in notifying only K-C-G was entirely reasonable, and fulfilled the requirement of Condition B.

Even if we assume that notice of K-C-G ineffectively served as a notice to INA, the excess insurer's contention that the policy is void because of lack of notice is still without merit because the evidence shows that INA did receive notice of the claim when Mr. Casanova notified it on April 7, 1976.INA argues that notice first received after trial and after the judgment has become executory is untimely as a matter of law.However, the jurisprudence has liberally construed notice provisions in insurance policies in favor of the insured who gives late notice.Thus, the rule has developed in this state that an insurer must prove actual prejudice in order to be able to deny a claim on the basis of not receiving notification as stipulated in the policy contract.Barnes v. Lumbermen's Mutual Casualty Company, 308 So.2d 326(La.App. 1st Cir.1975);Miller v. Marcantel, 221 So.2d 557(La.App. 3rd Cir.19...