Thomas v. Gallant Ins. Co.
| Decision Date | 23 May 2001 |
| Docket Number | No. 2001-C-0411.,2001-C-0411. |
| Citation | 789 So.2d 74 |
| Parties | Dlaine THOMAS, et al. v. GALLANT INSURANCE COMPANY, et al. |
| Court | Court of Appeal of Louisiana — District of US |
Marshall M. Redmon, Evan T. Caffrey, Phelps Dunbar, L. L.P., New Orleans, Counsel for Relator (St. Paul Reinsurance Company, Ltd., et al.).
Sidney W. Degan, III, James A. Rowell, Degan, Blanchard & Nash, New Orleans, Counsel for Respondent (Board of Commissioners of the Orleans Parish Levee District).
Court composed of Chief Judge WILLIAM H. BYRNES, III, Judge PATRICIA RIVET MURRAY, Judge MICHAEL E. KIRBY.
St. Paul Reinsurance Co., Ltd. and its related insurers (hereafter referred to collectively as Underwriters) assert that the trial court erred in denying their motion for summary judgment against the insured, the Orleans Levee District (the District), for payment of a $50,000 deductible. For the reasons that follow, we grant the writ of review, reverse the judgment in part, and remand for further proceedings.
The underlying litigation originated on August 22, 1996, when an individual the District was trying to subdue broke away, stole a District police vehicle, and crashed head-on into a car driven by Ms. Dlaine Thomas. As a result, Ms. Thomas filed CDC # 97-14787 against the District and its insurers, including Underwriters, who had issued a law enforcement professional liability policy. Underwriters denied coverage, in part because the policy contained a motor vehicle exclusion, so the District filed a third-party demand against Underwriters for coverage and a defense. Underwriters moved for a summary judgment declaring there was no coverage under the policy, but the motion was denied, and this court declined to review that denial on a supervisory writ.1
On September 15, 1999, counsel for the District wrote to Underwriters' counsel stating that the District It was further asserted that the denial of coverage "constitutes unreasonable and bad faith behavior" that would be pursued by separate litigation if necessary.
By written response the next day, Underwriters' attorney agreed to attend the mediation "in the good-faith attempt to settle the plaintiffs' claims and extract the Levee District as well as Underwriters from this lawsuit." Underwriters' counsel noted that there was a $50,000 deductible in the policy, including claims expenses, and asked for "the total amount of expenses incurred in defending the claims of the plaintiffs ... as opposed to litigating coverage issues."
A mediation conference was apparently held September 27, 1999, after which, on September 28th, the District's counsel wrote a letter to Underwriters' attorney that has not been included in the materials submitted to this court. Underwriters' response, a letter dated September 29th, states that it appeared the Thomas family would be accepting a settlement offered on behalf of the District, but the District's "refusal to pay any amount towards its deductible and its refusal to assist in effecting settlement" constituted a breach of the District's duties under the policy and jeopardized settlement of the case. The District was again asked to furnish the amount expended to defend the claim but not to dispute the coverage issue.
Subsequently, Underwriters filed CDC suit # 2000-6986 against the District, asserting that because Underwriters had paid $85,000 to obtain the District's dismissal from the Thomas' litigation, the District owed its $50,000 deductible under the policy. The District asserted in response that although it had been dismissed from the underlying suit, it had neither participated in, nor been informed of, the alleged settlement, and that because Underwriters had acted in bad faith by denying coverage, they were precluded from enforcing any policy provision regarding a deductible. In early December 2000, after the two suits had been consolidated, Underwriters moved for summary judgment and the District opposed. After a hearing on January 12, 2001, the motion was denied by the trial court without written reasons. This writ application followed.
Underwriters argue that there are no disputed issues of material fact and, because they complied with the District's demand that they settle the underlying suit, they are entitled as a matter of law to recover the $50,000 deductible from their insured. In support, they rely on the principle that where the insurer settles a claim under a policy granting it the discretion to do so, then the insured is obligated to comply with the deductible provisions of the policy, as in Employers' Surplus Line Ins. Co. v. City of Baton Rouge, 362 So.2d 561 (La.1978). Underwriters assert that while the result in Surplus Line was the denial of the insurer's motion for summary judgment based upon a factual dispute regarding the insured's consent to the settlement, there is no such issue here in view of the evidence that the District demanded that the claim be settled. Therefore, Underwriters claim denial of the motion for summary judgment was erroneous.
The District responds that just like in Surplus Line, there is a material factual dispute in this case as to whether it consented to the settlement of the claims against it, as evidenced by its attorney's affidavit to that effect. The District further contends that under Thomas W. Hooley & Sons v. Zurich Gen. Accident & Liab. Co., 235 La. 289, 103 So.2d 449 (1958), and subsequent cases, Underwriters' wrongful denial of coverage results in the forfeiture of any right to enforce policy provisions against its insured. Finally, the District maintains that because the policy at issue contains conflicting provisions regarding the deductible, it cannot be said that Underwriters is entitled to judgment as a matter of law on the ambiguous policy language.2 Therefore, the District argues, the motion for summary judgment was properly denied.
The policy at issue provides in pertinent part as follows:
I. INSURING AGREEMENT AND CLAIMS MADE CLAUSE
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The Underwriters have the right but not the duty to defend any such CLAIM or suit arising out of the perils enumerated above brought against the INSURED,... even if a suit is groundless, false or fraudulent. The Underwriters shall have the right to make such investigation and settlement of any CLAIM or suit as may be deemed expedient by the Underwriters....
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IX. CONDITIONS
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E. Subrogation —.... The Underwriters shall be entitled to take over and conduct in the name of the INSURED, the defense of any CLAIM or action and to prosecute in the INSURED'S name for their own benefit any CLAIM to which they are subrogated hereby against any third party. The Underwriters may settle any CLAIM at their own discretion and without the consent of the INSURED.
[Emphasis added.] These policy provisions, as did the policy at issue in Surplus Line, 362 So.2d at 564, explicitly grant to Underwriters the unilateral authority to litigate or to settle a claim asserted against the District. However, the Underwriters' policy does not contain an endorsement similar to the one contained in the policy considered by the Surplus Line court, which was held to require the insured's consent to settlement in order for the deductible to be owed. 362 So.2d at 564-65. To the contrary, the entire deductible provision of this policy provides that:
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