Great Southwest Fire Ins. Co. v. CNA Ins. Companies

• Decision Date: 12 July 1989
• Docket Number: No. W88-715,W88-715
• Citation: 547 So.2d 1339
• Parties: GREAT SOUTHWEST FIRE INSURANCE COMPANY, Plaintiff-Respondent, v. CNA INSURANCE COMPANIES and Transportation Insurance Company, Defendants-Relators. 547 So.2d 1339
• Court: Court of Appeal of Louisiana — District of US

Page 1339

547 So.2d 1339

GREAT SOUTHWEST FIRE INSURANCE COMPANY Plaintiff-Respondent, v. CNA INSURANCE COMPANIES and Transportation Insurance Company, Defendants-Relators.

No. W88-715.

547 So.2d 1339

Court of Appeal of Louisiana Third Circuit.

July 12, 1989.

Landry, Watkin & Bonin, Alfred S. Landry, New Iberia, for defendants-relators.

Hurlburt, Privat & Monrose, David A. Hurlburt, Lafayette, for plaintiff-respondent.

Before GUIDRY, LABORDE and KING, Judges.

KING, Judge.

The issue presented by this appeal is whether or not an excess insurer has a right or cause of action for damages against a primary insurer for the latter's bad faith failure to properly defend and/or settle a liability claim on behalf of their mutual insured.

Great Southwest Fire Insurance Company (hereinafter plaintiff) filed suit for damages, attorney's fees, and costs, as the excess insurer of its insured, Contract Cleaners, Inc., against CNA Insurance Companies and Transportation Insurance Company (hereinafter defendants), as the primary insurers of Contract Cleaners, Inc. Plaintiff's suit was based on defendants' bad faith failure to properly defend and settle a claim against Contract Cleaners, Inc. which resulted in a judgment, exceeding the primary insurance coverage limit, that plaintiff had to pay as the excess insurer. Defendants filed peremptory exceptions of no right of action and no cause of action which were denied by the trial court. A formal written judgment was signed denying the exceptions and denying defendants' motion for a new trial. Defendants sought supervisory relief from this court from the denial of their exceptions and this relief was denied. Great Southwest Fire Ins. Co. v. CNA Ins. Companies, etc., an unreported decision bearing Number 88-715 on the Docket of this court dated July 19, 1989. Defendants then sought supervisory relief from the Louisiana Supreme Court. The Louisiana Supreme Court granted defendants' writ and remanded the case to this court for briefing, argument, and rendition of a written opinion. Great Southwest Fire Ins. Co. v. CNA Ins. Companies, 533 So.2d 3 (La.1988). In compliance with the order of the Louisiana Supreme Court, the matter was docketed in this court for briefing and oral argument. We now issue a written opinion affirming the decision of the trial court and remanding the matter to the trial court for further proceedings.

FACTS

An accident occurred on or about January 25, 1983 which resulted in a lawsuit entitled, "John C. Youngblood v. Contract Cleaners, Inc., et al.", bearing Number 83-7266-J on the Docket of the Fifteenth Judicial District Court for Lafayette Parish, Louisiana (hereinafter the Youngblood suit). At the time of the accident, Contract Cleaners, Inc. (hereinafter the insured) had a policy of primary liability insurance in full force and effect which was issued by the defendants, CNA Insurance Companies and Transportation Insurance Company. The insured also had in full force and effect at the time of the accident a policy of excess liability insurance issued by the plaintiff, Great Southwest Fire Insurance Company. Plaintiff and defendant, Transportation Insurance Company, were not made defendants in the Youngblood suit and were not ever sued as parties in the suit. However, Transportation Insurance Company undertook the defense of the Youngblood suit. Plaintiff alleges that upon receiving notice of the Youngblood suit, it contacted defendants and asked to be kept informed about the progress of that litigation. Plaintiff further claims that no reports were received from defendants and that the only information given them by defendants concerned a pre-trial offer of settlement from Youngblood for an amount which was less than the defendants' primary policy limit. At that time, plaintiff alleges that it made demand, for both the insured and itself, upon defendants to settle the Youngblood suit within their policy limit. The offer of settlement in the Youngblood suit was never accepted by defendants and the suit then proceeded to trial. After trial on the merits, judgment was rendered in favor of Youngblood and against the insured and defendants for $396,137.43, together with legal interest from date of judicial demand, until paid, and all costs of the proceeding. The policy limit on the primary policy of defendants was only $300,000.00. Defendants suspensively appealed $300,000.00 of the judgment in the Youngblood suit, representing the amount of the judgment covered by defendants' policy limit. Defendants devolutively appealed the balance of the judgment in the Youngblood suit, representing the amount of the judgment against the insured which would be payable by it, and which would also be payable by plaintiff as the excess insurer of the insured, if the judgment in the Youngblood suit was affirmed on appeal. The appealed judgment in the Youngblood suit was settled. Defendants paid their policy limits and accrued legal interest on behalf of the insured. Plaintiff paid on behalf of the insured an amount for settlement of the balance of the judgment, in excess of defendant's primary policy limit, and then filed this suit to recover that sum. Plaintiff actually paid $110,043.81 and defendants actually paid $323,560.00 toward settlement of the appealed judgment in the Youngblood suit.

Plaintiff alleged in its petition that defendants were arbitrary and capricious in their intentional bad faith refusal to properly defend and to settle the Youngblood suit within the primary policy limit.

Defendants filed peremptory exceptions of no right of action and no cause of action to plaintiff's suit. Defendants contend that a primary insurer owes no legal duty to the excess insurer in either the defense or settlement of a suit against their mutual insured for which the breach would permit an excess insurer to directly seek damages for a bad faith failure to defend or settle the suit within the primary policy limits. Defendants further contend that plaintiff cannot be subrogated to the insured's bad faith claim against them. The defendants' exceptions of no right of action and no cause of action were denied by the trial court. A judgment denying the exceptions was signed and defendants' motion for a new trial was denied. Defendants sought supervisory relief from this court, from the denial of their exceptions, which was denied on July 19, 1988. Defendants then applied to the Louisiana Supreme Court for supervisory relief and a writ was granted on November 18, 1988, remanding the case to this court for briefing, argument, and rendition of a written opinion.

LAW

A combined peremptory exception of no right and/or no cause of action is to be treated as an exception of no right of action and as an exception of no cause of action. Robinson v. North American Royalties, Inc., 463 So.2d 1384 (La.App. 3 Cir.1985), amended on other grounds, 470 So.2d 112 (La.1985), appeal after remand 509 So.2d 679 (La.App. 3 Cir.1987).

The essential function of the peremptory exception of no right of action is to raise the question whether a remedy afforded by law can be invoked by a particular plaintiff; it relates specifically to the person of the plaintiff. Henry v. State through Dept. of Health, 435 So.2d 565 (La.App. 3 Cir.1983), writ denied, 441 So.2d 750 (La.1983). On the trial of the peremptory exception of no right of action, pleaded at or prior to the trial of the case, evidence may be introduced to support or controvert the exception when the grounds thereof do not appear from the petition. La.C.C.P. Art. 931.

The exception of no cause of action is a procedural device used to test whether, under the allegations of the petition, the law affords any remedy for the grievance asserted. LSA-C.C.P. Art. 931; Bellah v. State Farm Fire and Cas. Ins. Co., et al, 546 So.2d 601 (La.App. 3 Cir.1989), an unreported decision bearing Docket Number 88-448 rendered on June 27, 1989; Ward v. Pennington, 434 So.2d 1131 (La.App. 1 Cir.1983), writ den., 438 So.2d 572, 576 (La.1983); McIntyre v. McIntyre, 519 So.2d 317 (La.App. 2 Cir.1988). For purposes of ruling on an exception of no cause of action, the court must accept all allegations of the petition as true and sustain the exception only if the law affords no remedy under any evidence admissible under the pleadings. Darville v. Texaco, Inc., 447 So.2d 473 (La.1984); Stock v. East Baton Rouge City-Parish, 525 So.2d 675 (La.App. 1 Cir.1988). If the petition states a cause of action as to any ground or portion of the demand, the exception of no cause of action must be overruled. Pitre v. Opelousas General Hosp., 530 So.2d 1151 (La.1988); Stock, supra; C.O.S.T. v. St. Landry Parish School Bd., 528 So.2d 1048 (La.App. 3 Cir.1988). As we stated in Ford Motor Credit Company v. Soileau, 357 So.2d 563 (La.App. 3 Cir.1978).

" 'The purpose of the exception of no cause of action is to test the legal sufficiency of the pleadings. Well pleaded facts alleged in the petition are taken as true. If any reasonable construction of the alleged facts could lead to possible legal recovery, the exception must be overruled. Normally, evidence may not be considered for the purposes of sustaining an exception of no cause of action. The exception can be sustained only when the allegations, as stated in the petition, affirmatively establish that no relief can be granted under the law.' (Citations and Footnotes omitted.)" Ford Motor Credit Company v. Soileau, 357 So.2d 563, at page 565 (La.App. 3rd Cir.1978).

See also Peloquin v. Calcasieu Parish Police Jury, 367 So.2d 1246 (La.App. 3 Cir.1979), after remand, 378 So.2d 560 (La.App. 3 Cir.1979).

No evidence may be introduced at any time to support or controvert the objection that the petition fails to state a cause of action. La.C.C.P. Art. 931. The court will try the exception of no cause of action on the face of the petition. Darville v. Texaco, Inc., supra.

The pleadings in this case specifically allege that plaintiff...