Laper v. Board of Com'rs of Port of New Orleans

• Decision Date: 12 April 1988
• Docket Number: No. CA,CA
• Citation: 523 So.2d 926
• Parties: Police Officer and Mrs. John R. LAPER, v. BOARD OF COMMISSIONERS OF the PORT OF NEW ORLEANS, Peter Spurney, Floyd Lewis, L.C. Brown, d/b/a Brown's Auto Ranch, United States Fidelity and Guaranty Company, National Union Fire Insurance Company of Pittsburgh, Pa., Federal Insurance Company, and Western World Insurance Company, Inc. 8955. 523 So.2d 926
• Court: Court of Appeal of Louisiana — District of US

Page 926

523 So.2d 926

Police Officer and Mrs. John R. LAPER, v. BOARD OF COMMISSIONERS OF the PORT OF NEW ORLEANS, Peter Spurney, Floyd Lewis, L.C. Brown, d/b/a Brown's Auto Ranch United States Fidelity and Guaranty Company, National Union Fire Insurance Company of Pittsburgh, Pa., Federal Insurance Company, and Western World Insurance Company, Inc.

No. CA 8955.

523 So.2d 926

Court of Appeal of Louisiana Fourth Circuit.

April 12, 1988.

Rehearing Denied May 11, 1988.

John Baus, Jr., Blue, Williams & Buckley, New Orleans, for appellants.

Shelly Hammond Provosty, Sally I. Gaden, Montgomery, Barnett, Brown, Read, Hammond & Mintz, New Orleans, for appellees.

Before BYRNES, CIACCIO and PLOTKIN, JJ.

CIACCIO, Judge.

First State Insurance Company, (hereinafter referred to as First State) the excess insurer of the various named defendants to this suit, appeals from a judgment of the district court which sustained an exception of no cause of action filed against it by the defendant's primary insurer, United States Fidelity and Guaranty Company (hereinafter referred to as U.S.F. & G.). We affirm the judgment of the district court.

Subsequent to the filing of this appeal, U.S.F. & G. filed a motion to dismiss the appeal. In their motion U.S.F. & G. argues that the appeal is moot because First State has settled the plaintiff's claim against it. We deny the motion to dismiss and consider the merits of the appeal because we find the issue on appeal has not been settled and hence, is not moot.

The sole issue to be resolved in this appeal is whether the primary insurer owed a duty to the excess insurer with regard to the manner in which the primary insurer handled its defense of the claim.

On August 1, 1985 plaintiffs filed suit to recover damages for personal injuries sustained by John Laper while he was engaged in a routine patrol at the site of the Louisiana Worlds Fair.

In January, 1987 U.S.F. & G. settled the plaintiffs' claims for one million dollars which was the limits of its policy. The named defendants: Board of Commissioners of the Port of New Orleans, Peter Spurney, Floyd Lewis and LWE Management Company were dismissed without prejudice but remained third party defendants on the demand of L.C. Brown, who had been a fellow co-defendant in the suit by the Lapers. They were thereafter dismissed as third party defendants in September 1987.

On March 3, 1987 First State filed a third party demand against U.S.F. & G wherein it alleged the negligence and bad faith of the primary insurer in the following respects:

a. Failed and refused to actively defend its various insureds, with full knowledge that this inactivity prejudices the ability of those insureds and the excess carriers to present a defense at trial on the merits;

b. Failed and refused to inform the insureds or the excess carrier of the pendency, developments or the substance of settlement negotiations, including but not limited to a continuing refusal to provide copies of limited releases obtained from plaintiffs and even divulging the amount paid in settlement, and further, actively conspired with the plaintiffs to settle the primary exposure and intentionally leave the insureds and the excess carrier without benefit of a primary defense;

c. Precipitously withdrawn from active defense of the insureds, with knowledge that this would prejudice the excess carrier;

d. Failed and refused to cooperate with and inform the excess carrier of the status of the action, including discovery regarding both medical and liability aspects;

e. Failed and refused to defend the insured on third party demands which remain pending in the litigation;

f. Failed and refused to provide the excess carrier with requested documentation, including but not limited to copies of the primary policy which outlines the extent of coverage provided;

g. Failed and refused to communicate to the excess carrier its knowledge as to the extent of the insured's exposure and other relevant circumstances;

h. Failed to investigate, file and/or prosecute third party demands against culpable and responsible parties;

i. Prejudiced the defense of the insureds and the excess carrier by seeking to leave the plaintiffs responsible for the defense and indemnification of third party demands filed against the insureds, which conflict of interest materially impairs the defense.

j. Placed its own interests above those of the insureds or the excess carrier by, ie., obtaining a full release of its own exposure on better and more conclusive terms than those obtained for the insureds;

k. And, any other actions or omissions taken negligently or in bad faith which may be shown at the time of trial on the merits.

U.S.F. & G. filed an exception of no cause of action on the basis that the insureds had been dismissed from the litigation and no duty was owed by U.S.F. & G. towards First State.

On May 19, 1987 the district court maintained the exception of no cause of action and dismissed the third party demand by First State against U.S.F. & G. First State appealed this decision on July 2, 1987.

First State contends that the well pled allegations of its third party demand, when taken as true, establish a cause of action against U.S.F. & G. in negligence and bad faith which is recognized under Louisiana Law.

The exception of no cause of action is a peremptory exception. La.C.C.P. Art. 927. At the trial of this exception "[N]o evidence may be introduced at any time to support or controvert the objection." La.C.C.P. Art. 931. The court will try the exception on the face of the petition. Darville v. Texaco, Inc., 447 So.2d 473 (La., 1984). The exception will be overruled unless there exists no cause of action under any evidence admissible under the pleadings. Darville v. Texaco, Inc., supra.

A duty to defend flows from the insurer to the insured and no such duty is owed to the excess insurer. See: Cousins v. State Farm Mutual Automobile Insurance Co., 294 So.2d 272 (La.App., 1st Cir., 1974); Petrol Industries Inc. v. Gearhart-Owen Industries, Inc., 424 So.2d 1059 (La.App., 2nd Cir., 1982). The Louisiana Civil Law Treatise: Insurance Law and Practice, McKenzie & Johnson, Section 214 pp. 382-383, states: "The Louisiana cases are unanimous in the conclusion that the primary insurer has no duty to defend the excess insurer." Fusilier v. Dixie Automobile Insurance Co., 238 So.2d 223 (La.App., 3rd Cir., 1970) writ den. 256 La. 897, 240 So.2d 233 (1970); Cooper v. Christensen, 212 So.2d 154 (La.App., 4th Cir., 1968) writ ref. 252 La. 899, 214 So.2d 720 (1968); Lumbermens Mutual Casualty Co. v. Connecticut Fire Insurance Company, 239 So.2d 472 (La.App., 4th Cir., 1970), writ ref. 256 La. 1157, 241 So.2d 255; Petrol Industries v. Gearhart-Owen Industries, supra. As to the possibility of an obligation being owed by a primary insurer to an excess insurer in the settlement of its claim, the Louisiana Civil Law Treatise: Insurance Law and Practice, supra at Section 221, pp. 405-407, states the general rule that:

In keeping with its conclusion that a primary insurer has no obligation to defend an excess insurer, Louisiana jurisprudence has not recognized any obligation owed by a primary insurer to an excess insurer in the settlement of claims. Futch v. Fidelity & Casualty Co., 246 La. 688, 166 So.2d 274 (1964). See also: American Home Assurance Company v. Commercial Union Assurance Co., 379 So.2d 757 (La.App., 4th Cir., 1979) writ den. 383 So.2d 23 (1980), cert. den. 449 U.S. 871, 101 S.Ct. 211, 66 L.Ed.2d 92 (1980); Gasquet v. Commercial Union Ins. Co., 391 So.2d 466 (La.App., 4th Cir., 1980) writ den. 396 So.2d 921 (1981).

Although appellant relies upon two federal district court decisions in support of its position that the primary insurer owes a duty to the excess insurer, we find these decisions to be contrary to the established jurisprudence of this state and for this reason, we refuse to follow them. Insurance Company of North America v. Home Insurance Co., 644 F.Supp. 359 (E.D.La.1986); Utica Mutual Insurance Co. v. Coastal Marine, Inc., 578 F.Supp. 1376 (E.D.La.1984).

The allegations of the third party petition, taken as true, fail to state a cause of action recognizable under the laws of this state.

For these reasons the trial court correctly maintained the exception of no cause of action filed by third party defendant, U.S.F. & G.

Accordingly, the judgment of the trial court maintaining the peremptory exception of no cause of action is affirmed.

AFFIRMED.

PLOTKIN, J., dissents with reasons.

PLOTKIN, Judge, dissents with reasons.

I respectfully dissent and would reverse the granting of the exception of no cause of action dismissing First State Insurance Co.'s third party claim against U.S.F. & G.

The majority posits the question restrictively, as whether the primary insurer owed a duty to the excess insurer concerning the manner in which the primary insurer handled the defense of the claim. It answers the question simplistically by concluding that the primary insurer owes the insured the duty to defend the claim, but that no duty to defend or settle the claim is owed by the primary to the excess insurer.

The question of the various duties and rights owed by primary and excess insurer carriers to one other has never been addressed by our Supreme Court.

Appellant First State alleges specifically that the primary carrier's obligations are more extensive than a narrow duty to defend or settle the claim. It avers that the primary carrier in this case acted negligently and with intentional bad faith by conspiring with the plaintiff, actively suppressing information and documents that the excess carrier should have received, and engaging in self dealing and conflict of interest violations, causing it excessive, unreasonable damages and costs.

An analysis of the Louisiana jurisprudence and commentaries relied upon by the majority reveals...