Provost v. Unger, Civ. A. No. 88-0034

• Decision Date: 04 February 1991
• Docket Number: Civ. A. No. 88-0034,87-1471.
• Parties: David PROVOST v. Martin F. UNGER, et al.
• Court: U.S. District Court — Eastern District of Louisiana

752 F. Supp. 716

David PROVOST v. Martin F. UNGER, et al.

Civ. A. Nos. 88-0034, 87-1471.

United States District Court, E.D. Louisiana.

November 21, 1990.

Reconsideration Denied February 4, 1991.

ROBERT F. COLLINS, District Judge.

I. INTRODUCTION

The Court is called upon to resolve a conundrum concerning the insurance coverages contracted for by several competing parties. In order to resolve the problem, the Court will first describe the parties in this matter. The Court will then describe the accident that triggered this matter and the procedural history of this action. Next, the Court will examine the law applicable to this case. Finally, the Court will provide a solution to these complex and novel issues.

II. THE PARTIES

A. Martin F. Unger ("Unger"):

Defendant/third party plaintiff; employee of Charles Lewis Pump Company; lessee of vehicle from Budget Rent-A-Car of New Orleans, Inc.

B. Charles Lewis Pump Company ("Lewis"):

Defendant/third party plaintiff; employer of Martin F. Unger; wholly owned subsidiary of Baker International.

C. Aetna Life & Casualty Company ("Aetna"):

Defendant/third party plaintiff; issued a policy of insurance to Baker International, parent company of Charles Lewis Pump Company.

D. Budget Rent-A-Car Of New Orleans, Inc. ("Budget-New Orleans"):

Third party defendant/cross-claimant; owner/lessor of vehicle driven by Martin F. Unger; subsidiary of Diversified Services, Inc.

E. Farmers Insurance Company ("Farmers"):

Third party defendant/cross-claim defendant; issued policy of insurance to Martin F. Unger.

F. Columbia Casualty Company ("Columbia"):

Third party defendant/cross-claim defendant; issued policy of insurance to Diversified Services, Inc., d/b/a Budget Rent-A-Car of New Orleans, Inc.

G. Baker International ("Baker"):

Parent company of Charles Lewis Pump Company; entered "Corp-Rate Agreement" with Budget Rent-A-Car Corporation.

H. Budget Rent-A-Car Corporation ("Budget"):

Franchisor in agreement with Diversified Services, Inc., d/b/a Budget Rent-A-Car of New Orleans, Inc.; entered "Corp-Rate Agreement" with Baker International.

I. Diversified Services, Inc. ("Diversified"):

Parent company of Budget Rent-A-Car of New Orleans, Inc.; franchisee in agreement with Budget Rent-A-Car Corporation; entered "Corp-Rate Participation Agreement" with Budget Rent-A-Car Corporation.

III. PROCEDURAL HISTORY

On December 12, 1986, a 1980 International tractor trailer rig, owned by Rex Milling Company, was involved in an accident with a 1960 Dodge, owned by Budget-New Orleans. Isaac Stevens, the driver of the tractor trailer, was employed by Rex Milling Company. Stevens' son, Rodney Stevens, and David Provost, a Rex Milling employee, were passengers in the tractor trailer at the time of the accident. The Dodge was driven by Martin F. Unger, an employee of Lewis. This ostensibly simple accident triggered three lawsuits.

First, Isaac Stevens and Rex Milling Company filed suit against Unger, Lewis, and Aetna on June 22, 1987 ("Case # 1"). On July 16, 1987, the defendants in Case # 1 filed a third party demand against Budget-New Orleans. On July 12, 1988, an order of dismissal was entered in Case # 1 because Budget-New Orleans and the plaintiffs had reached a settlement agreement. In August of 1988, Isaac Stevens and Rex Milling Company executed Receipt, Release and Hold Harmless Agreements.

Second, Rodney Stevens filed suit against Unger, Lewis, and Aetna on December 10, 1987 ("Case # 2"). The Case # 2 defendants filed third party demands against Budget-New Orleans on January 6, 1988. An order of dismissal was issued in Case # 2 on July 12, 1988 because Budget-New Orleans and the plaintiff had reached a settlement agreement. Rodney Stevens executed a Receipt, Release and Hold Harmless Agreement in August of 1988.

Finally, on December 11, 1987, David Provost filed suit against Unger, Lewis, and Aetna ("Case # 3"). The defendants predictably filed third party demands against Budget-New Orleans on January 6, 1988. American Motorist Insurance Company, Rex Milling Company's compensation carrier, intervened in Case # 3. In September of 1988, Unger, Lewis, and Aetna filed a third party demand against Farmers (Unger's personal automobile insurance carrier). On January 4, 1989, Unger, Lewis, and Aetna filed yet another third party demand—this time against Columbia, the insurance carrier for Budget-New Orleans' parent company, Diversified.

Prior to trial in Case # 3, on January 30, 1989, Provost and American Motorist Insurance Company compromised their claims. Provost's claims were settled for a total sum of $125,000.00. Aetna contributed $50,000.00; Columbia contributed $50,000.00; and Budget-New Orleans contributed $25,000.00. All parties reserved their rights to seek recovery of those sums contributed in the Provost settlement. All parties, except Farmers, participated in this settlement.

On February 1, 1989, Budget-New Orleans filed cross claims against all parties then remaining in Case # 3—that is, against Unger, Lewis, Aetna, Columbia, and Farmers. On September 29, 1989, the Court found that Budget-New Orleans was equitably estopped from seeking reimbursement of the settlement amounts paid in Case # 1 and Case # 2.

IV. BACKGROUND

Although the procedural history of this matter is complex, the disputes are quite simple. Budget-New Orleans is attempting to trigger the insurance coverages provided by Aetna to Lewis, Farmers to Unger, and/or its own excess coverage provided by Columbia. Thus, the legal issue presented is the order of payment by Budget-New Orleans and the insurers for the Provost claim.

Budget entered a licensing agreement with Budget-New Orleans in 1962, whereby the franchisee, Budget-New Orleans, was licensed to use the Budget Rent-A-Car name. In an effort to obtain business, Budget offers a special "Corp-Rate Program" to national accounts. This is a discount program for car rental nationwide for corporations. A corporate client tries to meet a certain volume level of business and, upon meeting that volume, receives a discount on the rental. In addition to the discount rate, "Corp-Rate" clients are also provided with greater liability insurance limits, specifically $100,000/person, $300,000/occurrence, $25,000/property damage (hereinafter "100/300/25") instead of the minimum statutory limits.

According to Budget, this liability insurance in the amount of 100/300/25 is primary coverage. It was the intent of Budget that this 100/300/25 primary coverage be honored at all franchised locations.

As part of the sales pitch to a prospective corporate client, the Budget sales person represents that the "Corp-Rate Agreement" will be honored at all participating locations. There is no dispute that Diversified's subsidiary, Budget-New Orleans, was and is a "participating location."

Baker entered the "Budget Corp-Rate Agreement" on August 29, 1985. Although the 1985 "Corp-Rate Agreement" does not address the provision of 100/300/25 coverage, such coverage is addressed in the proposal at page 19 and was in fact "part and parcel of a particular rental in that given year."

The 1985 Agreement between Budget and Baker was never terminated. In August of 1986, Budget again approached Baker with a new proposal through its representative Doug Myers. This new proposal was virtually identical to the earlier one with the only changes being in the daily rate and surcharge locations. In December of 1988, Baker again signed a "Corp-Rate Agreement" with Budget. This Agreement specifically provides that the 100/300/25 liability insurance provided is primary. During the negotiation process on this latest Agreement in 1988, there were no discussions, comments or indications that this coverage was in any way different or better than that which had been previously provided.

Mr. Myers' testimony demonstrates that there was an ongoing business relationship between Baker, Budget, and Budget-New Orleans. Neither Budget nor Budget-New Orleans indicated to Baker that the coverage provided was not primary. What was offered by Budget was liability insurance coverage of "not less than $100,000/$300,000/$25,000." Mr. Myers was never advised that this coverage was not primary.

The Court finds that the foregoing demonstrates the course of dealings between Budget and its franchisees, the dealings of Budget with its Corp-Rate clients, and Budget's intent that Corp-Rate clients, such as Baker and its wholly owned subsidiary, Lewis, be provided with primary liability insurance coverage of not less than $100,000/person, $300,000/occurrence and $25,000/property damage.

As stated previously, this accident occurred in December of 1986. James Perry, Director of Insurance and Risk Management for Baker, was notified about the accident on January 19, 1987, days after the incident took place. Mr. Perry was advised by telephone that Unger (an employee of Lewis) was told that Budget provided only the state minimum required financial responsibility limits. Mr. Perry spoke with Ms. Paula Beck, the Budget sales account representative with whom Doug Myers, on behalf of Baker, had dealt. This conversation was followed with correspondence dated February 6, 1987.

Ms. Beck, in turn, consulted with Budget and was informed that corporate clients, such as Baker and their wholly owned subsidiaries, "received the full coverage of 100/300/25 rather than only the state minimum requirement." Ms. Beck then spoke with Marty Hernandez, Corporate Director of Diversified, d/b/a Budget-New Orleans, requesting that the franchise honor the "Corp-Rate Agreement." Ms. Beck followed this with correspondence to Mr. Hernandez dated February 13, 1987.

Mr. Hernandez subsequently wrote on the bottom of Ms. Beck's letter:

2/24/87 I spoke to Paula Beck and informed her that we would honor the 100/300/25 corporate agreement.

This handwritten note was made after Mr. Hernandez obtained the proper authorization from Paul Silicato, then Executive...