Taylor v. U.S. Fidelity & Guar. Ins. Co.

• Court: Louisiana Supreme Court
• Writing for the Court: LEMMON; ORTIQUE; CALOGERO; ORTIQUE; CALOGERO; PER CURIAM; WATSON
• Citation: Taylor v. U.S. Fidelity & Guar. Ins. Co., 630 So.2d 237 (La. 1993)
• Decision Date: 18 October 1993
• Docket Number: No. 93-C-0019,93-C-0019
• Parties: Lawrence Paul TAYLOR, et al. v. UNITED STATES FIDELITY & GUARANTY INSURANCE COMPANY, et al.

Page 237

630 So.2d 237

Lawrence Paul TAYLOR, et al. v. UNITED STATES FIDELITY & GUARANTY INSURANCE COMPANY, et al.

No. 93-C-0019.

Supreme Court of Louisiana.

Oct. 18, 1993.

Concurring and Dissenting Opinion

of Chief Justice Calogero

Oct. 22, 1993.

Opinion Clarifying Judgment,

but Otherwise Denying Rehearing

Nov. 18, 1993.

Ronald J. Fiorenza, Joseph J. Bailey, Provosty, Sadler & deLaunay, Alexandria, for applicants.

Samuel N. Poole, Jr., Gold, Weems, Bruser, Sues & Rundell, John G. McLure, McLure & Pickles, Camille J. Giordano, Giordano & Giordano, Alexandria, Harry D. Simmons, Amos H. Davis, David A. Szwak, Bodenheimer, Jones, Klotz & Simmons, Shreveport, for respondents.

LEMMON, Justice. ^*

In this personal injury action, we granted plaintiff's application for certiorari primarily to review the decision of the court of appeal which granted the two defendants found to be joint tortfeasors a dollar-for-dollar credit, against plaintiff's total damages, for the entire amount plaintiff received in a pretrial compromise from a settlement fund contributed to by numerous parties. We hold that the court of appeal erred in allowing credit for any settlement funds received by plaintiff other than the proportionate amounts of the settlement funds contributed by the defendants found to be joint tortfeasors in this case or by insurers on behalf of either of the joint tortfeasors.

Facts

The October, 1986 collision which gave rise to plaintiff's injury involved three vehicles: (1) a tractor owned and operated by Calvin Rollins, which was pulling a trailer owned by Tommy Walker and loaded with lumber being shipped by McGehee-Burkley Lumber Co. (MB Lumber); (2) a truck owned by Borden, Inc. and operated by Hillary Turner; and (3) a car owned and operated by plaintiff, in which his brother was a passenger. Turner and plaintiff's brother were killed in the accident.

Plaintiff filed the instant action in state court, while the survivors of Turner and of plaintiff's brother filed separate actions in the federal court. Named as defendants in the several actions were:

(1) Rollins and his insurer, General Agents Insurance Co.;

(2) Walker and his insurer, Canal Insurance Co.;

(3) MB Lumber and its insurer; United States Fidelity and Guaranty Insurance Co. (USF & G), along with its excess insurer, Northfield Insurance Co.;

(4) Borden and its insurer, the Insurance Co. of North America; and

(5) Department of Transportation and Development (DOTD). ¹

All parties entered into a settlement agreement under which the following parties contributed the listed sums to the settlement fund:

(1)  General Agents (Rollins)       $   25,000  2
                (2)  Canal (Walker)                     25,000  3
                (3)  USF & G (MB Lumber-primary)       326,407
                (4)  Northfield (MB Lumber-excess)     437,759
                (5)  Borden                            185,000
                (6)  Plaintiff's insurer                25,000
                                                    ----------
                         Total                      $1,024,166
                

Pursuant to the agreement, the federal court plaintiffs released all defendants and dismissed the federal action. Plaintiff received $50,000 as his share of the settlement fund, releasing all defendants except Rollins, Walker, General Agents, Canal and DOTD.

The present action proceeded to trial against the unreleased defendants. The trial judge apportioned fault seventy-five percent to Rollins, five percent to Walker, and twenty percent to plaintiff. ⁴ The judge fixed damages at $61,817, reduced on account of plaintiff's fault to $49,454. ⁵ Because the judge ruled that Rollins and Walker were entitled to a dollar-for-dollar credit against $49,454 for the $50,000 plaintiff received from the fund, the judge dismissed plaintiff's demand.

On plaintiff's appeal, the court of appeal affirmed. In an unpublished opinion, the court quoted from a federal admiralty decision and stated the general rule that "an injured person may partially settle a negligence claim with one of two alleged tortfeasors, sue and obtain a verdict for total damages against the nonsettling alleged tortfeasor, and receive judgment for the difference between the total damages and the settlement." ⁶ Because this is an incorrect statement of the law of this state, we granted certiorari. 613 So.2d 960.

In his application for certiorari and in brief to this court, plaintiff makes only two assignments of error: (1) the lower courts erred in allowing a dollar-for-dollar credit for sums received by plaintiff from other defendants whom plaintiff released prior to trial, and (2) although General Agents and Canal have paid their policy limits into the settlement fund, the "out of state" insurance clause in their policies increases the limits on the face of the policy to the minimum amount required for a common carrier hauling regulated commodities in Louisiana.

Credit for Settlement Funds Received by Plaintiff

La.Civ.Code arts. 1803-04, which regulate a compromise between an obligee and one of several obligors as well as the relative liability of solidary obligors among themselves, provide in part as follows:

Article 1803.

Remission of debt by the obligee in favor of one obligor, or a transaction or compromise between the obligee and one obligor, benefits the other solidary obligors in the amount of the portion of that obligor. (emphasis added).

Article 1804.

Among solidary obligors, each is liable for his virile portion. If the obligation arises from a contract or quasi-contract, virile portions are equal in the absence of agreement or judgment to the contrary. If the obligation arises from an offense or quasi-offense, a virile portion is proportionate to the fault of each obligor. (emphasis added). ⁷

Although Articles 1803 and 1804 were enacted in 1985 (before the accident at issue in this action), Louisiana courts have long recognized that when a plaintiff settles with and releases one of several joint tortfeasors, he thereby deprives the remaining obligors of the right to contribution against the released obligor. Accordingly, prior to the advent of comparative fault, proof by the remaining obligors of fault on the part of the released obligor gave rise to a reduction in the plaintiff's recovery against the remaining obligors in proportion to the total number of obligors found to be solidarily liable. Harvey v. Travelers Ins. Co., 163 So.2d 915 (La.App. 3d Cir.1964). And when the adoption of comparative fault introduced the concept of apportioning fault among joint tortfeasors who are solidary obligors, the rule emerged that a plaintiff's settlement with one solidary obligor reduces his recovery against the remaining obligors by the percentage of the proportionate fault of the released obligor. ⁸ Dill v. State of La., Dept. of Transp. and Dev., 545 So.2d 994 (La.1989); Buckbee v. Aweco, Inc., 614 So.2d 1233 (La.1993). The amount received by the plaintiff in settlement is irrelevant to the calculation of the amount of the reduction. ⁹ Joseph v. Ford Motor Co., 509 So.2d 1 (La.1987). Of course, the reduction applies only when the remaining defendants prove at trial that the released party was a joint tortfeasor and therefore solidarily liable. Raley v. Carter, 412 So.2d 1045 (La.1982).

In the present case, Rollins and Walker, the unreleased tortfeasors, failed to prove any fault on the part of Borden or MB Lumber. ¹⁰ Rollins and Walker are therefore not entitled to any credit for sums contributed to the settlement fund on behalf of these released defendants. Accordingly, there were no tortfeasors solidarily liable with Rollins and Walker, and reduction of plaintiff's recovery on account of his release of other defendants is not appropriate in this case.

Nevertheless, Rollins and Walker are each entitled to a credit against their obligation for any proportionate amount received by plaintiff from the settlement fund as a result of contributions to the settlement fund (1) by an insurer of Rollins or Walker or (2) by an insurer who made contributions to the fund on behalf of Rollins or Walker because Rollins or Walker qualified as an insured under the policy issued to another party.

It is undisputed that General Agents contributed $25,000 to the fund on behalf of Rollins and that Canal contributed $25,000 on behalf of Walker. To receive credit for contributions made by USF & G and Northfield, Rollins and Walker had the burden to prove that they qualified as insureds under MB Lumber's insurer's respective policies and that those insurers therefore made contributions to the fund on behalf of Rollins and Walker. ¹¹

The liability coverage of USF & G's Business Auto Policy issued to MB Lumber defined an insured as follows:

PART IV--LIABILITY INSURANCE

D. Who is Insured.

1. You are an insured for any covered auto.

2. Anyone else is an insured while using with your permission a covered auto you own, hire ¹² or borrow except:

a. The owner of a covered auto you hire or borrow from one of your employees or a member of his or her household.

b. Someone using a covered auto while he or she is working in a business of selling, servicing, repairing or parking autos unless that business is yours.

c. Anyone other than your employees, a lessee or borrower or any of their employees, while moving property to or from a covered auto.

3. Anyone liable for the conduct of an insured described above is an insured but only to the extent of that liability. However, the owner or anyone else from whom you hire or borrow a covered auto is an insured only if that auto is a trailer connected to a covered auto you own. (emphasis added).

Inasmuch as Rollins was using an "auto" ¹³ hired by and with the permission of the named insured, he was an insured for liability coverage under Section D2 of the policy if the vehicle was a "covered auto." None of the exclusions under Section D2 apply to Rollins.

Part II of the policy, providing which autos are "covered autos," states that the numerical symbols in Item Three describe which...