Progressive Sec. Ins. Co. v. Foster

• Decision Date: 23 April 1998
• Parties: 97-2985 La
• Court: Louisiana Supreme Court

711 So.2d 675

97-2985 La. 4/23/98

PROGRESSIVE SECURITY INSURANCE COMPANY v. Honorable Murphy J. FOSTER, in his capacity as Governor of

Louisiana, Honorable James H. "Jim" Brown, in his capacity

as Commissioner of Insurance, and the Louisiana Insurance

Rating Commission, through its Chairman, James H. "Jim" Brown.

LAFAC, INC. v. Honorable Richard J. IEYOUB, in his capacity as Louisiana

Attorney General, Honorable Murphy J. Foster, in his

capacity as Governor of Louisiana, Honorable James H. "Jim"

Brown, in his capacity as Commissioner of Insurance, and the

Louisiana Insurance Rating Commission, through its Chairman,

James H. "Jim" Brown,

National Association of Independent Insurers, Intervenor.

No. 97-CD-2985.

Supreme Court of Louisiana.

April 23, 1998.

Lewis O. Unglesby, Aidan C. Reynolds, Unglesby & Koch, Baton Rouge; Cheney C. Joseph, Jr., Kimberly Wooten, James H. Brown, Patricia T. Riddick, James Hrdlicka, Keith D. Jones, R. Vaughn Cimini, Cimini & Associates, Metairie; Donald T. W. Phelps, Brace B. Godfrey, Jr., Baton Rouge, for Applicants.

H. Alston Johnson, III, Phelps Dunbar, L.L.P., Baton Rouge, for Intervenor.

Wayne J. Lee, John P. Cerise, Anne V. Winter, New Orleans, for State Farm Auto Insurance, Amicus Curiae.

[97-2985 La. 1] KNOLL, Justice. ¹

Progressive Security Insurance Company and LAFAC, Inc. separately petitioned for declaratory judgment against the Governor, the Attorney General, ² the [97-2985 La. 2] Commissioner of Insurance, and the Louisiana Insurance Rating Commission (LIRC), challenging the constitutionality of the Omnibus Premium Reduction Act of 1997 (Act 1476), known as the "no pay, no play" statute. The National Association of Independent Insurers (NAII), a representative of 560 property and casualty insurers, intervened, taking neither side in these proceedings. After consolidation of the cases, the district court rendered judgment, finding that Act 1476 did not violate any provision of the United States or Louisiana Constitutions. Although the plaintiffs filed a motion for an appeal to the Court of Appeal, First Circuit, on joint motion of all parties supervisory writs were filed with this court, seeking review of the trial court ruling. Exercising our supervisory jurisdiction under La. Const. Art. V, Section 5(A), we granted the joint application for supervisory writs of certiorari to consider the constitutionality of the trial court's ruling. No. 97-CD-2985 (La.12/10/97), 704 So.2d 1177. ³

FACTS AND PROCEDURAL HISTORY

In 1996, Governor Murphy J. Foster appointed the Louisiana Task Force for Reduction of Automobile Insurance Rates (Task Force) which was staffed by the LIRC. Pursuant to its mandate, the Task Force appointed the Actuarial Subcommittee to analyze the cost of various automobile insurance reform proposals generated from the Task Force. The Actuarial Subcommittee was comprised of the Chairman of the Department of Insurance, together with representatives from CNA Insurance [97-2985 La. 3] Companies, Allstate Insurance Companies, State Farm Insurance Companies, Louisiana Farm Bureau Insurance Companies, and LAFAC.

Operating with a deadline of March 5, 1997, the Task Force instructed the Actuarial Subcommittee to review the various proposals submitted, select and prioritize the five proposals which provided the greatest estimated actuarial savings, and issue a report on its findings. Although the Task Force referred approximately 43 proposals to the subcommittee for actuarial assessment, the Actuarial Subcommittee analyzed ten proposals. "No pay, no play" was one of the proposals analyzed and was legislatively implemented in Act 1476, the Omnibus Premium Reduction Act of 1997.

Two provisions of Act 1476 are pertinent herein. The first is La.R.S. 32:866, a newly enacted statute, which provides, in pertinent part:

(A)(1) There shall be no recovery for the first ten thousand dollars of bodily injury and no recovery for the first ten thousand dollars of property damage based on any cause or right of action arising out of a motor vehicle accident, for such injury or damages occasioned by an owner or operator of a motor vehicle involved in such accident who fails to own or maintain compulsory motor vehicle liability security.

It is this proviso which has been dubbed as "no pay, no play." Succinctly stated, if a motorist fails to pay for liability coverage to protect others, he cannot "play" in the legal system, at least to the collection of his first $10,000 damages. ⁴

[97-2985 La. 4] The second aspect of Act 1476 that is relative to the constitutional challenge before us involves the 10% rate reduction found in Section 5(A) which states:

Every motor vehicle insurer authorized to transact business in the state of Louisiana shall make an automobile policy rate filing with the Louisiana Insurance Rating Commission to reduce its combined rates for bodily injury liability and property damage liability by a minimum of ten percent in each of its respective territorial service areas, based upon the average rate in such area on the day prior to "rate reduction day", unless the motor vehicle insurer can demonstrate at a rate hearing that such a decrease will result in inadequate rates, or would result in the continuation of inadequate existing rates, for the motor vehicle insurer in accordance with R.S. 22:1404 or the provisions of Section 7(B) of this Act become applicable.

We observe that two groupings emerge which are affected by the legislation challenged in plaintiffs' petition. Through La.R.S. 32:866(A) the rights of persons who do not have liability insurance, the uninsured, are affected. Likewise, by virtue of Section 5 of Act 1476 insurers who provide automobile liability insurance in Louisiana are mandated to file a plan to reduce the rates they charge their customers.

The two plaintiffs we have before us are Progressive, a domestic insurance company which issues casualty insurance, including automobile liability coverage, and LAFAC, a trade association of domestic insurers. ⁵ In their petition for declaratory judgment, these plaintiffs contended in the trial court that Act 1476 was unconstitutional for the following reasons: (1) the language used in the Act is unconstitutionally vague; (2) the Act inflicts cruel and unusual punishment; (3) the Act violates equal protection of the laws; (4) the Act violates separation of powers; (5) the Act provides for the taking of property without due process; (6) the Act denies [97-2985 La. 5] access to the Courts; (7) the Act impairs obligations of contracts; and (8) the Act impairs subrogation rights.

The NAII, a non-profit property and casualty insurance trade commission, intervened for the purpose of urging a judicial determination of the constitutionality of Act 1476. In its petition, NAII emphasized that the legislature crafted a declaratory action into Act 1476 which was specially designed to test the constitutionality of the Act and to expeditiously resolve such challenge. ⁶

Keeping in mind the need for a uniform pronouncement on the constitutionality of Act 1476, the trial court consolidated these cases for hearing on October 28, 1997. After conducting an evidentiary hearing, the trial court upheld the constitutionality of Act 1476 and signed a judgment to that effect on November 4, 1997. To definitively address the merits of the litigation, we granted the joint writ application of all parties to this litigation, and agreed to consider the constitutional issues raised.

In their argument before us, Progressive and LAFAC have honed their contentions down to five constitutional challenges. Plaintiffs contend that Act 1476: [97-2985 La. 6] 1) excessively punishes an uninsured motorist; (2) effectively allows the legislature to set insurance premium rates; (3) is impermissibly vague, impairs the rights of subrogation, and fails to provide adequate notice of the depth of the statute; (4) violates the equal protection clauses of the United States and Louisiana constitutions; and (5) denies access to the courts, and constitutes a taking without due process. ⁷

EXCESSIVE PUNISHMENT

Progressive and LAFAC argue that Act 1476 excessively punishes an uninsured motorist. They point out that La.R.S. 32:863, 864, and 865 already exist which exact punishment for failing to obtain auto liability insurance. In addition to these penalties, which include suspensions, revocation of license, fines, and community service, the plaintiffs assert that Act 1476 unnecessarily expands the punishments by barring the recovery of the first $10,000 of property damage or bodily injury regardless of fault. As such, it is argued that the punishment which La.R.S. 32:866 metes out is excessive, cruel and unusual as contemplated by La. Const. Art. I, § 20. We disagree.

Louisiana's requirement for compulsory automobile liability insurance is sketched out in La.R.S. 32:861(A)(1) and La. R.S. 32:900. La. R.S. 32:861(A)(1) provides:

Every self-propelled motor vehicle registered in this state except those motor vehicles used as agricultural or forest vehicles during seasons when they are not used on the highway, those used primarily for exhibit or kept primarily [97-2985 La. 7] for use in parades, exhibits, or shows, and lease-bound mobile rig haulers as defined in Subsection D of this Section, shall be covered by an automobile liability policy with liability limits as defined by R.S. 32:900(B)(2) or 900(M), or a binder for same, or by a motor vehicle liability bond as defined by Subsection B of this Section, or by a certificate of the state treasurer stating that cash or securities have been deposited with said treasurer as provided by Subsection C of this Section, or by a certificate of self-insurance as provided by R.S. 32:1042.

La. R.S. 32:900 provides in pertinent part:

(A) A "Motor Vehicle Liability Policy" as said term is used in this Chapter, shall mean an owner's or an operator's policy of liability insurance, certified as provided in ...