Johnson v. Quad Drilling Corp.

• Citation: 86 So.2d 622
• Decision Date: 23 March 1956
• Docket Number: No. 8493,8493
• Parties: William F. JOHNSON, Jr., Plaintiff-Appellee, v. QUAD DRILLING CORPORATION, Defendant-Appellant.
• Court: Court of Appeal of Louisiana (US)

Page 622

86 So.2d 622

William F. JOHNSON, Jr., Plaintiff-Appellee, v. QUAD DRILLING CORPORATION, Defendant-Appellant.

No. 8493.

Court of Appeal of Louisiana, Second Circuit.

March 23, 1956.

Rehearing Denied April 19, 1956.

Writ of Certiorari Denied June 11, 1956.

Cook, Clark, Egan, Yancey & King, Shreveport, for appellant.

Love & Rigby, Shreveport, for appellee.

HARDY, Judge.

This is a suit in which plaintiff seeks judgment against defendant in the principal sum of $1,223,93, representing the balance due on premiums on insurance policies issued by plaintiff. After an amendment of plaintiff's petition, pursuant to the filing of an exception, defendant answered, denying the allegations of plaintiff's petition. In the course of trial defendant tendered in open court the sum of $710, representing the sum of $661.71, which it admitted to be due, together with accrued court costs and interest, which tender was refused. After trial there was judgment in favor of plaintiff for the amount prayed, from which defendant has appealed.

Quad Drilling Corporation was organized in or about the year 1946, the officers being four brothers, Malcolm H. Sneed, President; S. T. Sneed, Vice-President; W. J. Sneed, Secretary; and Hugh Sneed, Treasurer. The corporation is actively engaged in the principal business of oil and gas well drilling operations, and, in the usual course of its business, carries customary insurance protection, particularly automobile and workman's compensation liability. Plaintiff has handled the insurance account of the corporation since its organization until some time during the year 1953, when he found it necessary to cancel defendant's insurance policies. Upon the basis of a final audit made in September, 1953, a corrected audit made in June, 1954, and a reformation of defendant's account upon the basis of charges and credits ascertained by these audits, plaintiff claims the balance set forth in the sum of $1,223.93, representing unpaid premiums for insurance protection, which premiums he alleges he has paid to the insuring companies which he represents as an agent.

Defendant disputes the corporectness of plaintiff's account, first, on the ground of an alleged overcharge to the extent of $588 in premiums claimed on a workman's compensation insurance policy issued by Traders & General Insurance Company covering the officers of the corporation, and, second, defendant denies liability to the extent of $279.35 charged as premium for an insurance binder issued by Lloyd's of London for excess insurance, which binder, according to defendant's contention, was not issued until a date subsequent to cancellation of the insurance.

Plaintiff urges that defendant is without right to seek judicial relief inasmuch as it has failed to exhaust administrative remedies before the Louisiana Insurance Commission. This position was sustained by our learned brother of the district court in his written opinion on the ground expressed as follows:

'It is a fundamental rule of law that an administrative remedy provided by the Legislature must be exhausted before relief can be sought in the courts.'

Cited in support of this holding was the case of O'Meara v. Union Oil Co. of California, 212 La. 745, 33 So.2d 506, 507, 509, from the opinion in which the district judge cited, with approval, the following language of the Supreme Court 'We also called attention to the fact that administrative officers with fact finding powers relieved the Legislature and the judiciary from a great deal of detail work and imposed these duties on an officer as agent of the State for determination because of his peculiar knowledge of such matters. We pointed out also that courts will not place their judgment above such administrative officers because of this fact. On account of the development and growing progress of our country, it would be practically, if not impossible, for the Legislature and courts to expeditiously dispose of these matters, if it were not for the fact that these administrative officers relieve the Legislature of all this detail work and the courts from being congested with many matters that can be thrashed out by those familiar with them.'

We concede the soundness of the well recognized doctrine that administrative remedies must be exhausted before relief can be sought from the courts; O'Meara v. Union Oil Co. of California, supra; Shreveport Laundries, Inc., v. Southern Cities Distributing Co., 176 La. 994, 147 So. 56; Porter v. O'Neal, 205 La. 445, 17 So.2d 622; State ex rel. Johnson v. Higgins, La.App., 47 So.2d 56; Richardson v. Parish Council of Parish of East Baton Rouge, La.App., 53 So.2d 458; Marino v. City of Baton Rouge, La.App., 61 So.2d 586.

However, in the instant case we are called upon to determine, not the validity of the general principle above expressed, but the question as to whether statutory provisions require the determination of the factual issue here involved by an administrative body as a condition precedent to judicial review.

Zealous counsel for plaintiff urges the applicability of the statutory provisions set forth in that part of the Insurance Code designated as LSA-R.S. 22:1351-22:1365 under the heading 'Administrative Orders, Hearings and Appeals'.

Reference to the sections noted discloses that they provide for the procedure and conduct of hearings 'for any purpose within the scope of this code' as the Secretary of State may deem necessary.

Unquestionably, these statutory provisions would apply in and to any questions involving the rules and regulations of the Louisiana Insurance Commission regarding the establishment of rates and classifications under policies of workman's compensation insurance. But that is not the question which is presented in the instant case. Defendant does not take issue with the premium rates and the classification of operations which have been fixed by the Commission. The defendant does object, and consequently contests, the correctness of the action of the insurance company in placing one of defendant's officers in the classification of driller instead of what defendant insists is the proper classification of a public relations official. The materiality of this issue is demonstrated by the fact that the premium rate for the classification of driller is fixed at approximately $7 per hundred dollars salary compensation, while the premium rate for a public relations officer of the corporation is fixed at eight cents per hundred dollars salary compensation, which difference in rate in the instant case amounts to a total sum of $588.

This question does not involve, nor does it have bearing upon, the correctness or reasonableness of the rate fixing and classification rules and regulations of the Louisiana Insurance Commission, and, therefore, it does not concern the authority nor does it fall within the jurisdiction of the Commission as fixed, established and provided by the Insurance Code. On the contrary, the issue here presented concerns a simple dispute between the insurance company and its policy holder with respect to the resolution of a question of fact.

Under the circumstances we do not regard any of the above mentioned authorities as being appropriate to the instant case. The O'Meara case involved a matter over which the Conservation Commissioner had been vested with jurisdiction by legislative act, which act contained a provision requiring the exhaustion of administrative remedies before relief might be sought from the courts. The Shreveport Laundries and the Porter cases involved matters under the jurisdiction of the Public Service Commission bearing upon the rate fixed and the regulatory authority of that body. The Johnson case presented a purely administrative question within the express jurisdiction of the Department of Public Welfare. The Richardson and Marino cases concerned the right to the issuance of beer and liquor permits, respectively, which authority had been delegated to the Board of Tax Appeals.

As we have attempted to point out in this opinion, the subject matter of this litigation does not involve nor concern any of the powers, duties nor authority conferred upon and delegated to the Louisiana Insurance Commission by the Legislature under the provisions of the Insurance Code. The issue is limited to the determination of a factual question as between the insurer and the insured, and we have failed to find any authority which requires the submission of such a factual proposition to determination by an administrative authority not specifically vested with jurisdiction thereof. As was observed in Delta Life Ins. Co. v. Martin, La.App., 59 So.2d 465, 470:

'* * * this Court knows of no law and none has been cited which authorizes our Insurance Commissioner to determine the individual rights between a policy holder and his insurer. This is a right reserved to the courts.'

With this pronouncement we are in complete and firm accord.

The distinction between an insurance commission's rate making and classification power and the appropriate classification of a particular risk was well considered by the United States Court of Appeals, Fifth Circuit, in Rice v. Continental Casualty Co., 153 F.2d 964. The same distinction was carefully emphasized in the opinion of Judge Hamiter in Sibley L. B. & S. Ry. Co. v. Braswell Sand & Gravel Co., La.App., 199 So. 427, 429, certiorari denied, in the following language:

'It was held in the case of Pine Tree Lumber Company v. Chicago R. I. & P. Railroad Company, 123 La. 583, 49 So. 202, as the syllabus thereof shows, that: 'Where an interstate carrier represents to a shipper that a certain freight rate has been established between given points, and such rate has, in fact, been published, and the shipper sends his goods upon the faith of such representation and publication, and is thereafter coerced into paying a higher rate, a state court has jurisdiction to hear and determine his suit for the recovery of the...