Rivett v. State Farm Fire and Cas. Co.
Decision Date | 22 June 1987 |
Docket Number | No. 86-C-1205,86-C-1205 |
Citation | 508 So.2d 1356 |
Parties | Mr. and Mrs. Wallace P. RIVETT, Jr. v. STATE FARM FIRE AND CASUALTY COMPANY. |
Court | Louisiana Supreme Court |
J.J. McKernan, Julia Taylor, McKernan & Taylor, Baton Rouge, for applicants.
William Janney, Lane, Fertitta, Lane & Tullos, Baton Rouge, for respondent.
The principal issue in this case is whether plaintiffs' acceptance of a payment from their homeowner's insurer of an amount admittedly due by the insurer for fire damage to their residence and their unilateral execution of a "Property Claim Agreement", when the amount paid was less than the policy limits of the dwelling coverage and there was no mutual agreement in writing that the payment was made and accepted in full settlement of the claim, constituted a compromise which formed a valid basis for the insurer's plea of res judicata.
On June 15, 1983, the residence owned by plaintiffs and insured by defendant was struck by lightning and was damaged by the resulting fire. The homeowner's policy issued by defendant provided coverage against loss caused by fire in the amount of $185,000 for the dwelling and $138,750 for the contents.
On June 30, 1983, a contractor appraised the damage at plaintiffs' request and estimated that the building could be repaired at a cost of $125,188.39. When plaintiffs persisted in questioning whether the damage could be repaired as estimated, defendant agreed to consider any other damage estimate obtained by plaintiffs.
On August 2, 1983, defendant mailed to plaintiffs' attorney a proof of loss form, requesting a list of the contents and stating a desire to reach agreement on the damage to the building. Plaintiffs' attorney, however, had already informed defendant's adjuster that plaintiffs expected to receive the total policy limits for dwelling coverage. 1
On August 8, 1983, plaintiffs' attorney authorized defendant to negotiate directly with plaintiffs. The following week, plaintiffs executed the proof of loss form showing dwelling damage of $129,651.19 and contents loss of $247,650.34. 2
On November 1, 1983, plaintiffs signed a "Property Claim Agreement" which contained the following language:
Plaintiff signed both sections of the document, but defendant did not sign the document at all. Neither the document nor the check contained any words indicating a settlement of the claim or a release of the insurer.
In December, 1983, defendant cancelled the policy, stating that the building was no longer in a condition which required insurance coverage.
In February, 1984, plaintiffs secured two additional appraisals which concluded that the building was a total loss. Plaintiff, who was formerly a building contractor, began tearing down the building for safety purposes. When he quickly confirmed his previous belief that the building was damaged beyond repair, he completed the demolition and salvaged some of the materials.
Plaintiffs filed this action on May 1, 1984. Defendant filed a peremptory exception of res judicata, relying on the Property Claim Agreement. Defendant did not introduce any testimony to dispute plaintiff's deposition testimony.
The trial judge sustained State Farm's exception without assigning reasons. In an unpublished per curiam opinion, 488 So.2d 1341, the court of appeal affirmed, holding that "an accord and satisfaction of the claim took place when Rivett endorsed and negotiated the check". 3 We granted certiorari. 493 So.2d 1207.
A compromise, as between the interested parties, has a force equal to the authority of the thing adjudged. 4 La.C.C. art. 3078. Thus, a valid compromise may form the basis of a plea of res judicata. 5 Bielkiewicz v. Rudisill, 201 So.2d 136 (La.App. 3rd Cir.1967); S. Litvioff, 6 Louisiana Civil Law Treatise--Obligations, Book 1 § 391.5 (1984 supp.). The present case turns on whether the parties entered into a valid contract of compromise.
Compromise is defined by La.C.C. art. 3071 as follows:
The purpose of a compromise, therefore, is to prevent or to put an end to litigation. The essential elements of a compromise are (1) mutual intention of putting an end to the litigation and (2) reciprocal concessions of the parties in adjustment of their differences. 6 The Code also specifically requires a contract in writing. 7 The party urging an exception of res judicata based on a contract of compromise has the burden of proving each of the essential requirements by a preponderance of the evidence.
The critical issue in determining the validity of the alleged compromise in this case is whether defendant proved that the parties mutually intended to put an end to the litigation. Contrary to the intermediate court's conclusion, proof of plaintiffs' endorsement and negotiation of the $98,399.99 check from defendant did not in itself establish a compromise. Defendant was plaintiffs' own insurer. La.R.S. 22:658 requires an insurer to pay any claim due to its insured within sixty days after receipt of satisfactory proofs of loss and authorizes the imposition of penalties and attorney's fees in the event of the insurer's failure to do so. When there is a dispute over the amount due by the insurer to its insured under a valid claim, the insurer, in order to fulfill its statutory obligation, must make an unconditional payment of the minimum amount "over which reasonable minds could not differ", leaving the insured completely free to file an action to recover the balance of the claim which is in dispute. McDill v. Utica Mutual Insurance Co., 475 So.2d 1085, 1092 (La.1985); S. McKenzie and H. Johnson, 15 Louisiana Civil Law Treatise--Insurance Law and Practice § 131 (1987 supp.).
Here, defendant made the payment under the dwelling coverage without any language on the check or on the Property Claim Agreement indicating a mutual intent of the parties to put an end to the litigation. One might reasonably infer that the payment was made by defendant and accepted by plaintiffs in full settlement of the claim and with the intention of putting an end to the potential litigation. However it is equally plausible for one to infer that defendant conceded that at least $98,399.99 was due to plaintiffs on their claim under dwelling coverage and that the payment was made to fulfill defendant's statutory obligation to make an unconditional payment of the minimum amount reasonably due so as to avoid penalties and attorney's fees. 8 When an insurer desires for a payment to its insured to constitute a valid contract of compromise, it is up to the insurer to make clear and unequivocal the mutual intention of the parties. No language in the check or the Property Claim Agreement indicated any intent by either party that the payment was anything other than the amount reasonably necessary to satisfy defendant's statutory obligation. Therefore, the payment was equivocal, and on the evidence in this record it is at least equally probable that defendant unconditionally tendered, and plaintiffs accepted, the sum of $98,399.99 in discharge of defendant's statutory obligation, without any intention to settle the claim in its entirety. 9
Defendant argues, however, that the endorsement and negotiation of...
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