Southern American Ins. Co. v. Dobson

• Decision Date: 23 February 1983
• Docket Number: No. 82-C-1583,82-C-1583
• Citation: 441 So.2d 1185
• Parties: SOUTHERN AMERICAN INSURANCE COMPANY v. Ronald DOBSON. NORTHEASTERN FIRE INSURANCE COMPANY OF PENNSYLVANIA v. Ronald DOBSON.
• Court: Louisiana Supreme Court

Page 1185

441 So.2d 1185

SOUTHERN AMERICAN INSURANCE COMPANY v. Ronald DOBSON.

NORTHEASTERN FIRE INSURANCE COMPANY OF PENNSYLVANIA v. Ronald DOBSON.

No. 82-C-1583.

Supreme Court of Louisiana.

Feb. 23, 1983.

On Rehearing Nov. 4, 1983.

Rehearing Denied Jan. 6, 1984.

Edwin Dunahoe, Thomas Dunahoe and Gregory, Natchitoches, for applicant.

Mark A. Goodwin, Mayer, Smith & Roberts, Shreveport, Russell L. Potter, Stafford, Stewart & Potter, Alexandria, for respondent.

Shirley Nassif, Robert E. Winn, Sessions, Fishman, Rosenson, Boisfontaine & Nathan, New Orleans, amicus curiae, for Godfrey Jasmin.

BLANCHE, Justice.

We are called upon in this case to determine whether a commercial umbrella liability insurance policy is a policy of "automobile liability insurance" which under our uninsured motorist statute, specifically La.R.S. 22:1406(D)(1)(a), must provide uninsured motorist coverage. This question is res nova in Louisiana.

The facts are not in dispute. On April 9, 1978, Ronald Dobson was driving a truck owned by Dobson Pulpwood Company, Inc., when he was struck by a car owned and operated by an underinsured motorist. Ronald Dobson was severely injured as a result of the accident and sought to recover uninsured motorist insurance proceeds under three policies issued to Dobson Pulpwood. One of the policies was issued by Aetna Casualty and Surety Company (Aetna), another by Southern American Insurance Company (Southern), and the third by Northeastern Fire Insurance Company of Pennsylvania (Northeastern). All three policies were in effect on the date of the accident.

The policy issued by Aetna to Dobson Pulpwood is termed as an "Automobile Liability and Physical Damage Policy." It offers the insured coverage for bodily injury liability, automobile medical payments, property damage liability, uninsured motorists as well as comprehensive, theft and collision insurance. The policy shows that Dobson Pulpwood had expressly elected to provide uninsured motorist coverage on the truck driven by Ronald Dobson at the time of the accident.

Southern's policy is a "Commercial Umbrella Liability Insurance Policy." By the provisions of this policy, Southern agrees to indemnify Dobson Pulpwood up to a limit of $1,000,000 when Dobson Pulpwood is exposed to either personal injury liability, property damage liability or advertising liability in excess of the limits of the underlying insurance policy or policies. In relation to automobile accidents for example, Southern would indemnify Dobson Pulpwood if its personal injury or property damage liability exceeds the relevant insurance limits provided for in Aetna's underlying policy. Southern's policy does not expressly offer any uninsured motorists coverage to the insured.

Northeastern's policy is a commercial excess umbrella liability insurance policy and contains provisions very similar to those included in Southern's policy. Northeastern contracts to indemnify Dobson Pulpwood up to a limit of $2,000,000 if Dobson Pulpwood is exposed to liability in excess of the limits of the underlying policies. The policy issued by Northeastern, however, is an "excess umbrella" policy which means that the insurer will pay only when the insured's liability exceeds that of the underlying umbrella policy limits (here, Southern's $1,000,000 limit) and any other relevant underlying policy or policies (such as Aetna's policy). As in the policy issued by Southern, Northeastern's policy offers no uninsured motorists protection.

Ronald Dobson instituted a tort suit on September 13, 1978 and named Aetna, Southern, and Northeastern as defendants in order to recover uninsured motorists insurance proceeds. Dobson alleged that Aetna provided uninsured motorists protection by the express terms of its policy. He further alleged that both policies issued by Southern and Northeastern are "automobile liability insurance" policies within the meaning of La.R.S. 22:1406(D)(1)(a), and, thus, the policies statutorily provide uninsured motorist coverage up to their limits for bodily injury liability.

Aetna admitted coverage and paid the uninsured motorists policy limit a $100,000 to Ronald Dobson. Southern and Northeastern denied that their respective policies are required by statute to provide uninsured motorists coverage and filed separate actions for declaratory judgment. These actions were consolidated for trial and comprise the present case which we now consider. Northeastern and Southern seek a declaration that commercial umbrella liability policies, whether they be commercial excess umbrella policies or commercial umbrella policies, are not policies of "automobile liability insurance" and, accordingly, they are not subject to La.R.S. 22:1406(D)(1)(a). The trial court held in favor of the defendant, Ronald Dobson. The court of appeal reversed. We granted writs to determine the correctness of the appellate court's ruling.

The issue before us does not involve interpretation of the provisions of the policies issued by Southern and Northeastern. Each policy affords coverage to the insured in excess of the limits of the underlying policies for liability to third persons arising out of the ownership, maintenance or use of any motor vehicle by or on behalf of the insured. Neither policy expressly provides for uninsured motorist protection.

The question, rather, is one of interpretation of La.R.S. 22:1406(D)(1)(a). That statute provides in pertinent part:

"No automobile liability insurance covering liability arising out of the ownership, maintenance, or use of any motor vehicle shall be delivered or issued for delivery in this state with respect to any motor vehicle registered or principally garaged in this state unless coverage is provided therein or supplemental thereto, in not less than the limits of bodily injury liability provided by the policy, under provisions filed with and approved by the commissioner of insurance, for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured or underinsured motor vehicles because of bodily injury, sickness, or disease, including death, resulting therefrom; provided, however, that the coverage required under this Subsection shall not be applicable where any insured named in the policy shall reject in writing the coverage or selects lower limits ..."

We must determine whether the above statute requires commercial umbrella liability insurers to provide uninsured motorist coverage to the insured.

At the outset, we note that La.R.S. 22:1406(D)(1)(a) does not specify the types of policies which are required to provide uninsured motorist coverage. The provision simply states, "No automobile liability insurance covering liability arising out of the ownership, maintenance, or use of any motor vehicle ..." shall be delivered or issued for delivery in this state without affording UM protection to the insured. However, when this provision is read with reference to the other subsections of the same statute, it is obvious that La.R.S. 22:1406(D)(1)(a) was intended only to apply to automobile liability insurance policies. ¹ La.R.S. 22:1406(D)(1)(b) and (D)(1)(c), for example, refer solely to automobile liability insurance policies with regard to increasing uninsured motorist coverage. La.R.S. 22:1406(D)(1)(b) provides:

"Any insurer delivering or issuing an automobile liability insurance policy referred to herein shall also permit the insured, at his written request, to increase the coverage applicable to uninsured motor vehicles provided for herein to any amount." (emphasis ours)

Similarly, in relation to admissible evidence in enforcing a claim under the UM provisions of a policy, La.R.S. 22:1406(D)(6) mentions only automobile liability insurance policies. ²

Our inquiry, therefore, focuses upon whether a commercial umbrella liability policy is an automobile liability insurance policy within the meaning of La.R.S. 22:1406(D)(1)(a). Although we have yet to address this question, other states have considered it in construing uninsured motorist statutes similar to our own.

The Alabama Supreme Court has held that an umbrella policy is not an automobile liability insurance policy within the meaning of the uninsured motorist law. (Trinity Universal Ins. Co. v. Metzger, 360 So.2d 960 (Ala.1978)). ³ In reaching its decision, the Alabama court drew a sharp distinction between automobile liability policies contemplated by the statute and umbrella policies:

"Automobile liability policies and motor vehicle liability policies insure against the risk of loss through the operation of specific automobiles. An umbrella policy, on the other hand, is fundamentally excess insurance designed to protect against catastrophic loss. Before an umbrella policy is issued, a primary policy (the "underlying policy") must be in existence and this primary policy must by law provide uninsured motorist coverage. The umbrella policy assumes a risk of much less frequent occurrence, i.e., the risk of judgments in excess of primary policy limits, and accordingly carries premiums which reflect the lesser magnitude of this risk. The umbrella policy issued by Trinity Universal is an inherently different type of insurance from an automobile or motor vehicle liability policy, and consequently does not come within the scope of the uninsured motorist statute."

In O'Hanlon v. Hartford Acc. and Indem. Co., 639 F.2d 1019 (3rd Cir.1981), the Delaware uninsured motorist statute was found not to apply to umbrella policies. ⁴ As in Trinity, the court examined the nature of the umbrella policy. It noted that such a policy is designed as supplementary insurance and would not exist but for the underlying (primary) automobile policy. That underlying auto policy, the court determined, provided the insured with all the benefits accorded under the uninsured motorist statute. The court concluded that it could not read the statute as to require uninsured...