McGuire v. Davis Truck Services, Inc.

• Court: Court of Appeal of Louisiana
• Writing for the Court: DUFRESNE
• Citation: McGuire v. Davis Truck Services, Inc., 518 So.2d 1171 (La. App. 1988)
• Decision Date: 11 January 1988
• Docket Number: No. 87-CA-429,87-CA-429
• Parties: Susan McGuire, Wife of/and Robin McGUIRE v. DAVIS TRUCK SERVICES, INC. and American Druggist Insurance Company. 518 So.2d 1171

Page 1171

518 So.2d 1171

Susan McGuire, Wife of/and Robin McGUIRE v. DAVIS TRUCK SERVICES, INC. and American Druggist Insurance Company.

No. 87-CA-429.

518 So.2d 1171

Court of Appeal of Louisiana Fifth Circuit.

Jan. 11, 1988.

Rehearing Denied Feb. 17, 1988.

James F. Willeford, John Ryan, Pamela M. West, New Orleans, for plaintiff-appellant.

John E. McAuliffe, Jr., New Orleans, for defendant-appellant and defendants-appellees.

Owen A. Neff, New Orleans, for defendant-appellee.

Before CHEHARDY, KLIEBERT and DUFRESNE, JJ.

DUFRESNE, Judge.

This appeal arises from pretrial motions in a personal injury suit, in which there is a dispute over the extent of the excess insurer's liability as a result of the primary insurer's insolvency. The Louisiana Insurance Guaranty Association and the plaintiffs have appealed from summary judgment that held the excess carrier liable only for damages between $500,000.01 and $1,500,000.00.

BACKGROUND

Dr. Susan McGuire and her husband, Robin McGuire, filed suit to recover for personal injuries sustained by Dr. McGuire, who is a dentist, in a collision between her automobile and a truck owned by Davis Truck Service, Inc. Among the original defendants was Davis' automobile insurer, American Druggists' Insurance Company (ADI), under a policy with liability limits of $500,000.

Two years after suit was filed, the district court granted a stay of the proceedings against ADI because ADI was undergoing court-ordered rehabilitation in the state of Ohio. Plaintiffs amended their petition, adding as a defendant the Louisiana Insurance Guaranty Association (LIGA), pursuant to LSA-R.S. 22:1382. Plaintiffs later amended again to name as a defendant Angelina Casualty Company, which carried a million-dollar umbrella liability insurance policy on Davis Truck Service. ¹

Subsequently plaintiffs, LIGA and Angelina all filed motions for summary judgment.

Plaintiffs sought a ruling that "Angelina Casualty Company, as umbrella insurer for Davis Trucking, provides liability coverage for all amounts above that recoverable from the primary insurers up to $1,000,000.00." Because no monies are coverable from the primary insurer here, such a ruling would make Angelina liable for all amounts up to $1,000,000.

Similarly, LIGA contended in its motion for summary judgment that under the terms of the Angelina policy, Angelina provides coverage to Davis from "dollar one" upon liquidation of ADI. LIGA based this contention on LSA-R.S. 22:1386(1), which LIGA contends requires a claimant to exhaust all rights under all other policies available to him before he can recover from LIGA. Further, because the Angelina policy limits are $1,000,000 and LIGA would receive a credit for payments made under that policy, LIGA asserted there can be no liability on behalf of LIGA and it should be dismissed from this matter.

Angelina sought summary judgment that its policy provides coverage only for liability between $500,000 and $1,000,000 or, in the alternative, that the policy provides coverage between $150,000 (the maximum that LIGA can pay, under R.S. 22:1382) and $1,000,000.

The district court rendered judgment denying the plaintiffs' and LIGA's motions for summary judgment, but granting Angelina's motion. Specifically, the court ruled that Angelina's policy provides coverage "to Davis Trucking Service, Inc. for liability assessed against Davis Trucking Service, Inc. of the kind covered by said policy and in amounts between $500,000.01 and $1,500,000.00."

The judgment was rendered on January 9, 1987, but contained a mathematical error that was corrected by an amended judgment rendered on January 22, 1987. Both judgments were appealed by plaintiffs and LIGA.

At issue on appeal is the interpretation of the following provisions in the Angelina policy. The first is under the "Coverage Agreements" section:

II. LIMIT OF LIABILITY. The Company shall only be liable for the ultimate net loss the excess of either

(a) the amount recoverable under the underlying insurances as set out in Item 7 of the Declarations, or

(b) the amount of the retained limit stated in Item 4 of the Declarations in respect of each occurrence not covered by said underlying insurances.

(hereinafter called the "underlying limits"): and then only up to a further limit as stated in Item 5 of the Declarations in respect of each occurrence * * *. [Emphasis added.]

The second is under the "Conditions" section:

L. OTHER INSURANCE. If other valid and collectible insurance, whether or not scheduled hereunder, which is written by another insurer is available to the Insured covering a loss also covered by this policy, other than insurance that is in excess of this policy, the insurance afforded by this policy shall be in excess of and shall not contribute with such other insurance. * * * [Emphasis added.]

LIABILITY OF LIGA

The issues of whether the Angelina policy "drops down" and of what portion, if any, LIGA must pay are closely intertwined. We start our analysis by discussing the extent of LIGA's statutory liability.

The Insurance Guaranty Fund was established by Acts 1970, No. 81, which enacted LSA-R.S. 22:1375-1394. R.S. 22:1380 created the Insurance Guaranty Association to administer the fund. The purpose of the fund is "to provide a mechanism for the payment of covered claims under certain insurance policies to avoid excessive delay in payment and to avoid financial loss to claimants or policyholders because of the insolvency of an insurer * * *." R.S. 22:1376. These statutes are to be liberally construed to effect the stated purpose. R.S. 22:1378.

"Covered claims" refers to claims covered by the policy of an insolvent insurer. R.S. 22:1379(3). R.S. 22:1382(1)(a) states the association shall be obligated for that amount of each covered claim that is in excess of $100 and is less than $150,000. Under R.S. 22:1382(1)(b), the association shall "[b]e deemed the insurer to the extent of its obligation on the covered claims and to such extent shall have all rights, duties and obligations of the insolvent insurer as if the insurer had not become insolvent."

Regarding the latter provision, our Supreme Court has held, "The only statutory interpretation which will effect the purposes of the Insurance Guaranty Association Law is to deem LIGA the insurer with all the obligations of the insolvent insurer. To the extent of that coverage, the individual defendants were insured." Hickerson v. Protective Nat. Ins. Co., 383 So.2d 377, 379 (La.1980).

R.S. 22:1386, titled "Nonduplication of recovery," provides,

"Any person having a claim against an insurer under any provision in an insurance policy other than a policy of an insolvent insurer which is also a covered claim, shall be required to exhaust first his right under such policy. Any amount payable on a covered claim under this Part shall be reduced by the amount of any recovery under such insurance policy. * * * "

This is the provision upon which LIGA relies to escape liability. LIGA argues that R.S. 22:1386 requires the McGuires to exhaust the Angelina policy limits before they can recover against LIGA. Thus, LIGA contends, the plaintiffs' damages would have to exceed $1,000,000 for LIGA to be liable.

We find no merit to that argument in this situation, because the other insurance policy here is an excess policy. LIGA stands in place of the insolvent insurer here (see Hickerson, supra); consequently, LIGA is liable as the primary insurer to the extent of LIGA's obligation--i.e., for that amount of plaintiffs' damages that exceed $100 and are less than $150,000. R.S. 22:1382. See also, Billeaudeau v. Lemoine, 386 So.2d 1359 (La.1980); Hickerson, supra.

"DROP DOWN" OF EXCESS POLICY

Angelina asserts that an excess insurance policy does not "drop down" upon the insolvency of its underlying insurers. It argues that an umbrella policy is designed and purchased to cover only catastrophic losses in excess of any primary coverages, that such limited coverage is reflected in the policy's modest premium, and that requiring the excess carrier to "drop down" its coverage forces the excess insurer, in effect, to guarantee the solvency of the underlying insurers.

In support of its position, Angelina cites several cases that appear to agree with its contention....