Richard v. Southern Farm Bureau Cas. Ins. Co.

• Court: Louisiana Supreme Court
• Writing for the Court: McCALEB; SANDERS
• Citation: Richard v. Southern Farm Bureau Cas. Ins. Co., 223 So.2d 858, 254 La. 429 (La. 1969)
• Decision Date: 09 June 1969
• Docket Number: No. 49475,49475
• Parties: Francis RICHARD et al. v. SOUTHERN FARM BUREAU CASUALTY INSURANCE COMPANY et al.

Page 858

223 So.2d 858

254 La. 429

Francis RICHARD et al. v. SOUTHERN FARM BUREAU CASUALTY INSURANCE COMPANY et al.

No. 49475.

Supreme Court of Louisiana.

June 9, 1969.

Rehearing Denied June 27, 1969.

Andrus & Pavy, Opelousas, for plaintiff-appellant-applicant.

Davidson, Meaux, Onebane & Donohoe, Richard C. Meaux, Lafayette, for respondent.

McCALEB, Justice.

Limited certiorari was granted herein to consider the correctness of the holding of the Court of Appeal, Third Circuit, that 'Where there are multiple claims arising out of one accident, the liability insurer, in good faith, may enter into reasonable compromise settlements with any may pay some of the claimants, even though such payments may reduce or completely exhaust the insurance fund originally available to pay all claims, so that the remaining claimants have little or no recourse against the insurer.' 212 So.2d 471, 480.

The facts surrounding this automobile accident and the suits which followed are fully detailed in the Court of Appeal opinion. Those facts essential to our determination of the issue presented herein are as follows:

On August 18, 1965, a car owned by Ernest Richard and driven by his wife, Mrs. Felicia Arnaud Richard, was struck by a car driven by Richard H. Boehmer, who received personal injuries in the collision. The Boehmer car was insured by American Insurance Company and the Richard car was insured by Southern Farm Bureau Casualty Insurance Company. Mrs. Richard had as guest passengers Sandra Ann Zeringue (a minor) and Earline Richard, the minor daughter of Mrs. Richard, both of whom sustained injuries in the accident.

On July 5, 1966 this suit was filed by Francis Richard, the undertutor of the minor Earline, ¹ and in the alternative by Ernest Richard, her father, against Southern Farm Bureau Casualty Ins. Co., Richard H. Boehmer, C. H. Boehmer Sales Agency and its insurer, American Insurance Company, claiming damages in the sum of $21,362.69 for which judgment, in solido, is sought against the named defendants. Since all defendants except Southern Farm have been exonerated from liability, both in the district court and the Court of Appeal, and the writ is of a limited nature, we are only concerned with that portion of the original suit which seeks an additional award against Southern Farm.

Southern Farm, after denying negligence on the part of Mrs. Richard, alleged in its answer that the limits of liability under its policy are $5,000 for injury to or death of any one person as the result of any one accident, and $10,000 for injury to any two or more persons as a result of any one accident. It further pleaded that pursuant to the provisions of this policy of insurance, which permitted the settlement of any claim or suit as Southern Farm deemed expedient, it compromised the claims of Sandra Zeringue and her father, Euel Zeringue, for the sum of $2,682, and the claim of Richard Boehmer for his personal injuries, as well as the claim of Boehmer's employer and its workmen's compensation carrier, for the sum of $3,545.39. It averred that these settlements were made in good faith and, therefore, the limits of its liability policy of insurance have been reduced to $3,772.61.

The trial judge found that the sole proximate cause of the accident was the negligence of Mrs. Felicia Arnaud Richard and that Boehmer was free from fault. He further concluded that the settlements made by Southern Farm with Boehmer and Sandra Zeringue and her father were in good faith and reasonable and, therefore, Southern Farm was entitled to deduct these sums from the total insurance fund available. Accordingly, judgment was rendered in favor of plaintiff for the sum of $3,772.61. The judge stated, however, in his reasons for judgment that a review of the injuries and disability sustained by Earline Richard Robin indicates that she ordinarily would be entitled to an award of $5,500 or more.

Plaintiff and Southern Farm appealed to the Court of Appeal where the judgment was affirmed. See 212 So.2d 471. Upon application of plaintiff ² we granted certiorari restricted to a consideration of Assignment of Error No. 1 dealing with the limiting of the award to the sum available under Southern Farm's policy after payment of the compromise settlements.

The primary contention of plaintiff is that under the Louisiana Direct Action Statute, R.S. 22:655, and the decisions in West v. Monroe Bakery, 217 La. 189, 46 So.2d 122, and Futch v. Fidelity & Casualty Company, 246 La. 688, 166 So.2d 274, the insurer herein became unconditionally bound to plaintiff for a certain proportionate amount of the proceeds of the policy upon the happening of the accident and that this right could not be lost or diminished, except by the action of the claimant herself. It is argued that the right of an injury party to recover damages against the insurer of the tortfeasor under the Direct Action Statute is substantive and so unconditional that it cannot be affected in any way by the action of the insurer, the insured or anyone other than the claimant; that the test of 'reasonableness' of the settlements with other injured parties is in effect no test at all and cannot be used for the purpose of reducing the liability of the insurer, and that the claimant, therefore, is entitled to recover the policy limit of $5,000, applicable to injuries to one person as the result of a single accident.

The Court of Appeal rejected plaintiff's contention reasoning that the policy of the law of Louisiana is to favor compromise and settlement of disputes and that, since the settlements herein were made in good faith and are reasonable, it would follow the general rule as stated in 29A Am.Jur., Insurance, Section 1589, that '* * * a liability insurer can settle with some claimants although to do so may exhaust the insurance fund or so deplete it that a subsequent judgment creditor is unable to collect his judgment in full from the remaining proceeds.' See also 8 Appleman, Insurance Law and Practice, Section 4892; 8 Blashfield Automobile Law and Practice, Section 343.8; 70 A.L.R.2d 416, 423, Section 5.

In the Court of Appeal, counsel for plaintiff urged that the insurer should have instituted an interpleader or concursus proceeding where, as here, there are nultiple claimants whose demands may exceed the limits of liability under the policy. Counsel has made the same contention in this Court but, in a supplemental brief filed here, it is conceded that there is a 'dilemma' presented because the provisions of Article...