insurance

exam

1. Does the policy provide coverage for this event? If so, under what circumstances? 20, 5 point questions on the exam. You need to have the sample policies at your disposal for the exam (highlighted parts are okay, but it cannot be annotated). Read the exam before you start answering any of the questions. It helps you budget your time because some answers require more time than others. Stay within the world limit (500 words per question). a. Exam Soft: Do the tutorial to find out how to get the exam.

1. Exam: short answer; names of cases don't help; more interested in your understanding of the what the rules are and what the law is; you can use the policies (highlighted but not annotated) for reference; close book. Life Insurance Policies:

1. We have talked about preexisting conditions, incontestability clauses, etc. We are focusing on the unique aspects of life insurance policies: issuance, suicide, community property, assignment of ownership of policies, and change of beneficiary. a. Trigger for Payment: is the death of the insurer.

Purpose of "Other Insurance" Clause

If two policies cover an accident, it is not intended to be an enrichment for the insured or the plaintiff, so it is not left up to the court but to the language of the policy.

1. Solidary Obligors:

Some policies have an exclusion that states it will not pay when the plaintiff's benefits rise from workers compensation. Is the workers' compensation carrier solidary obligated with the UM carrier?

Penalties and Attorneys Fees:

The attorneys fees are based on seeking the penalties, not the underlying case.

Automobile Liability

The chances are that the tortfeasor is probably judgment proof, so finding insurance coverage is the only mechanism for the plaintiff to recover. The coverage analysis fro the plaintiff's lawyers in this circumstances are as important as it is for the lawyers who deal with insurance policies

UM Carrier's Subrogation:

The statute gives the uninsured motorist carrier a right to proceed against the tortfeasor, who is liable to the insured under the UM carrier's insurance policy. It has a right to recover from anyone its payee has a right to recover from. The statute creates a form of legal subrogation, and the insurance policy between the insured and the insurer creates a conventional obligation.

Time Period of Fire Policy Payment:

There is a difference in the time period for payment of claims: 60 days from proof of loss and an agreement about the value of the loss. This means there has to be some type of negotiation on the agreed amount. Under UM, there is no negotiation about the value of the claim, and there is a burden on the insurer to figure it out within 60 days of proof of loss.

La RS 22:1313:

These fire policy provisions are mandatory and must be incorporated into the policies, unless the policy the insurer offers creates equivalent or greater benefits to the insured than the standard policy provisions

Homeowners' Policy Exclusions:

Think of the rationale for the exclusions. Think of the nature of the liability and why the insurer might want to exclude the use of automobiles from the homeowner policy. Think of the types of exclusions and the reasons for them. Generally speaking, if there is insurance available to cover a risk, and it is a specific or unique risk, the general policies don't cover them, so these are usually excluded.

Omnibus Clause:

This is an extension of coverage under the policy. Any other person operating a covered vehicle with the permission of the insured is covered under this clause. Who has to give permission? When is it reasonably foreseeable that a second permittee can be covered under the policy?

Anti-Stacking Provision

This provision says that you cannot stack coverages from the same policy in this way. This is because the insurer's expectation is that the limits they are selling you in a policy are not cumulative. You get more coverage by providing excess or umbrella coverage.

Liability Insurance

Up until now we have talked about liability insurance, the insurer covering liability of the insured to pay some third party usually. It has basically been third party insurance (plaintiff sues insured for harm caused to the plaintiff at the fault of the insured, and the insurer pays to the benefit of the insured).

Obligations of the Insurer under Liability Policies:

When you buy a policy, you buy two things: defense and indemnity. These are two separate and distinct obligations that the insurer owes, contractually, to its insured.

[Intentional Battery] ••• Yount v. Maisano:

a. "Where an insured sets out to commit a battery on another individual and repeatedly strikes him in the face with both fists and kicks him repeatedly in the face, the resulting broken facial bones and other facial injuries are either intended by the insured or the insured must know that such injuries are substantially certain to result."

Safeway Ins Co. of La v. State Farm Mutual Auto Ins.:

a. Baines borrowed her friend, Halloway's car. Safeway insures Halloway's car, and State Farm insures Baines' car. The question is which policy provides primary insurance coverage for the accident Baines got into in Halloway's car. "The court held that La. R.S. 22:1406(F), requiring insurers to provide coverage for temporary substitute motor vehicles and rental private passenger automobiles, required State Farm to provide the primary coverage. The statutory provision overrides State Farm's 'other insurance' provision." i. Baines' Insurance Primary: Her insurance is required to provide coverage for Baines' temporary vehicles, and it makes sense to make her insurer liable when she is the one who borrows the car and ends up being negligent in causing an accident (tortfeasor). ii. Look at Statute: The statute imposes restrictions on the insurer's ability to contract away liability through its provisions.

1. Parties to the Policy: ordinarily does not count the beneficiary. The parties are the insurer, the insured, and the owner of the policy. The insured and owner of the policy can be separate parties or the same party. It may be a secured creditor. Even the mortgage loss payees are not considered parties to the contract.

a. Beneficiary: The beneficiary gets the benefit of the contract upon the occurrence of the event that triggers the payment (death of the insured). b. Changes in Beneficiaries: Ordinarily, the owner of the policy has the right to name the beneficiary, but there may be clauses that change this general rule, there rights get vested only on the death of the insured. Owner can change without permission. Complying with the rules or policy language. i. Morein v. North American: The issue is that the insured is alleged to try to change the beneficiary under the policy from his ex-wife to his mother before his death. 1. Attempt to Change Beneficiary: It is alleged that Morein wrote a letter to his insurance agent, Gellar, regarding changing the beneficiary of his life insurance policy from his ex-wife to his mother. 2. Requirements for Change: The change in beneficiary is an amendment to the contract. "Every request for change of beneficiary must be in written form satisfactory to the company and shall take effect as of the date of such request, but only upon receipt of the request at the home office of the company whether or not the insured is then living; provided that the liability of the company shall be discharged to the extent of any payment made prior to such receipt and shall not be increased by reason of such change." a. Question of Contract: To change the beneficiary, the requirements are that the change is in writing and approved by the company, and that it is received at the insurance company's home office. This is not a donation. The contract is the only thing that applies. 3. What Happened: Morein called his agent, Gellar, about wanting to change the beneficiary, and Gellar contacted the home office about the change. The company mailed change of beneficiary forms to Gellar, which he then sent to Morein, but these forms were never filled out and sent into the home office. a. Purported Letter: The trial judge believed the testimonies of the children that Morein had written a letter about the change to Gellar. The issue of the letter arose after the payment was made to the ex-wife, and the children and the mother are now trying to get the proceeds of the policy. b. Trial Judge: Since the letter never got delivered to the company, even though there was a letter, they have no claim in contract, but they may have a claim in tort because of unreasonable delay. c. Court of Appeal: believes the trial judge got it wrong. There was no evidence showing that Morein ever wrote a letter. 4. Holding: There was no change in beneficiary to the policy. There was no strict compliance with the terms of the policy, and there was no evidence showing that the agent failed to do something that the insured requested he do. If the insurance agent had received a written request, or the insured had come in and filled out the change forms, and the agent failed to send them to the company, there could have been imputed liability on the company, but that didn't happen here. The agent was not at fault because he had no duty that he breached to the insured. 5. Payment Discharges the Insurer: If you pay the beneficiary of the policy, the payment discharges the insurer, unless the insurer had notice of a defect in the policy prior to payment. The letter from the children's attorney was not received by the company until after it made payment to the ex-wife. "Such payment shall fully discharge the insurer from all claims under the policy or contract unless, before payment is made, the insurer has received at its home office, written notice by or on behalf of some other person that such other person claims to be entitled to such payment or some interest in the policy or contract." c. Receipt at Home Office: Look at the policy language to see what it says about the change of beneficiary and what is required for receipt at the home office. This can be an issue like delivery for the issuance of a policy. The insured who sends in a form for change, and where receipt is required, you use certified mail in order to have proof of sending the form.

1. Miguez v. Platinum Underwriters Reinsurance, Inc. [2006]: The daughter borrowed her mother's company car when hers would not start. Her mother had signed a written agreement stating that only company employees on company business could use the vehicle. This is an instance where the form of the policy might make a different.

a. Business Automobile Policy: It may provide exclusions on coverage that are not provided in family automobile policies. The exclusions in this policy were about who could provide permission to drive a company car.

1. Double Indemnity Provision: The policy generally says it will pay a certain amount on the death of the insured. As a component of life insurance, many policies offer the opportunity to buy double indemnity coverage. Under some circumstances, the insurance company will pay double the amount of the death benefit to the beneficiary. If the decedent is the aggressor, then there won't be an accidental death. View the shooting from the prospective of the insured. Wouldn't pay double indemnity if the insured was the aggressor. Death is going to trigger the death benefit. Might pay more depending on the method of death, so that is where double indemnity comes in.

a. Conditions: It has to be a specific set of circumstances that trigger the double indemnity. provision and require the insurance company to pay double the benefits. b. Common Provision: "The Double Indemnity provided on this first page hereof shall be payable upon receipt of due proof that the death of the Insured resulted directly and independently of all other causes from bodily injury effected solely through external, violent and accidental means and occurred within ninety days after such injury. Double Indemnity shall not be payable if the Insured's death resulted, directly or indirectly, from infirmity of mind or body, from illness or diseases..." c. Accident ••• External, Violent, and Accidental Means: i. Schonberg v. New York Life Insurance Company: The decedent's death during surgery resulted from anaphylactic shock produced by a very rare blood transfusion reaction. 1. External, Violent, and Accidental Means: a. External: "It is only necessary that the cause of death or injury be external to the person, though it acts internally." The causation was a blood transfusion, which is an external event. b. Violent: "Refers to some act not occurring in the ordinary run of things and may be fulfilled by any force whatsoever, however slight." The court finds that force is the only requirement for violence, and force was used to insert the needle for the blood transfusion. c. "Accidental Means": "The test is whether the average man, under the existing facts and circumstances, would regard the loss so unforeseen, unexpected, and extraordinary that he would say it was an accident." They rely on the average reasonable man test. ii. External Examples: 1. Internal Means: "The insured died of asphyxiation due to aspiration of mucous caused by tonsillitis. The court denied recovery of accidental death benefits on the ground that the cause was internal, not external means as required by policy." 2. External Means: "The insured died of asphyxiation due to regurgitation and aspiration of gastric contents. Testimony indicated that, although the insured liked beer, it frequently made him ill. Treating beer as a noxious substance in its effect on the insured, the court found that his death was caused by external means." d. Accident ••• Other Contributing Conditions: i. Moore v. The Prudential Insurance Company of America: He fractures his leg three times, and by the time he breaks it a third time, he has developed a disease, and the surgeons suggests amputation. 1. Cause of the Disability: Was it the result of the three accidents, or was it caused by the osteomyelitis, which is a disease? If the disease caused the amputation, then the double indemnity is excluded. a. Indemnity Exclusion: "The policy's limitations clause excluded coverage for any loss resulting from or caused 'directly or indirectly, by...disease or bodily...infirmity, or medical or surgical treatment thereof...or bacterial infection." 2. Accident as Proximate Cause: "If the accident is the proximate cause of the death (or disability) and sets in motion or starts a latent or dormant disease, and such disease merely contributes to the death (or dismemberment) after being so precipitated by the accident, it (the disease) is not a proximate cause of the death (or dismemberment) nor a contributing cause within the meaning of the terms of the policy." a. Precipitating Cause: What was the precipitating cause? In this case, although he had a dormant disease, the precipitating cause of the amputation was the accident, or the three separate accidents. 3. Rule: Look to the original precipitating cause of the death or injury. It is a proximate cause analysis. ii. Martin v. American Benefit Life Insurance Company: Martin was in a taxi that got into an accident, and he was rushed to the hospital in an ambulance. The accident caused his knee to swell up, and he was unable to perform his job anymore, so he wanted to cover double indemnity. 1. Aggravated Preexisting Condition: "The only medical testimony concludes that it was reasonable to say that the trauma of the accident aggravated the arthritis condition in such a manner that the disability claimed resulted. From this we conclude that although Martin did have an underlying arthritic condition, left to itself it would have remained non-disabling in such a way that he could have continued with his bus business. Only because of the trauma did the arthritis manifest itself to such an extent that it became disabling, a source of pain and trouble." iii. "At the Time of the Occurrence": "It is clear that even though the insured might not have died from the trauma received in the accident by itself, nevertheless, the trauma precipitated the preexisting but asymptomatic arteriosclerotic condition, thus making the trauma the proximate cause of death at the time of its occurrence." e. Accident ••• Intentional Injury: i. Cutitto v. Metropolitan Life Insurance Company: The insured, Paul Petta, was shot and killed at his residence by Mrs. Ella Landry Simoneaux. The wife wants double indemnity benefits so we are doing the external, violent, and accidental means analysis. 1. Accident? Clearly, the shooter had some intent to inflict harm or death on the insured. From the insured or beneficiary's perspective, is that an accident? 2. Rule Seems to Be: that if the insured didn't do something to precipitate the injury or death, or provoke it like being an aggressor in a fight, even though a shooting causes a death, it is accidental because it is only intentional on the part of the shooter. 3. Question: Did the insured do something to precipitate the shooting? Did he do something, where the result would not have been unforeseen? a. Court's Conclusion: is that it was an accident, even though the facts suggested that he kind of scorned her. It was not enough for a reasonable person to conclude that her shooting him was foreseeable, and therefore not an accident. b. From the Insured's Standpoint: was the shooting unforeseen or unexpected? ii. Bowman v. Inter-Ocean Insurance Company: The two men were in a dispute over the fact that the shooter was having an affair with the victim's common law wife. 1. Victim was Aggressor: so he precipitated the reaction and made it reasonably foreseeable. Therefore, it was not accidental from the standpoint of the insured. iii. Chambers v. First National Life Insurance Company of New Orleans: The insured was sitting at the bar, in a barroom, and the shooter walked in the bar, walked up behind him, and shot him several times in the back, killing the insured. The killer's wife is in the bar, and she wasn't sitting with the insured when he got shot. 1. Question: Did the shooter intend to kill the insured, or did he intend to shoot someone else? Does the insurance company have a burden of proving that it was intentional, and the shooter intended to shoot the insured? 2. Insurer's Burden of Proof: Where the insurance company asserts some coverage defense, or reason not to pay, as they are doing in this intentional act exclusion, the insurance company has the burden of proof. a. Didn't Carry Burden: to show that it was both an intentional act, and the shooter meant to shoot the insured. The insured who got shot didn't expect to be shot in the bar that day. The shooter intended to kill anyone sitting on the bar stool, and it wasn't because of who that person was. b. The Opposite: When the shooter intends to shoot the insured, it is intentional, not accidental. You view it from the perception of the insured who gets shot. c. Tornabene v. Atlas Life Insurance: "A taxi driver was found dead in the front seat of his taxi with two bullet wounds in the head...the court held that the insurer could not carry its burden of proof of showing either that the killing was intentional or that the insured was the intended victim." d. Culotta v. Security Industrial Insurance: "Even though the plaintiff had not resisted, the robber turned and shot him as he exited the store. The court held that the exclusion was applicable because the robber intended to shoot the plaintiff." iv. No Coverage: of indemnity when the result of the death is intentional, or when the insured is the aggressor in the situation.

1. Subrogation: This subrogation right is no different from conventional subrogation. The subrogation clause will ordinarily say that if the insurance carrier pays, it is subrogated to the rights of the insured to cover from tortfeasors. The insured will execute whatever documents are necessary.

a. Corollary: Corollary to this is what happens when the insured does something that negatively impacts the insurance company's subrogation rights. b. Invested Rights: Subrogation invests the rights of the insured against tortfeasors/third parties to the insurance carrier when it pays damages to the insured. c. Washington v. Dairyland Insurance Company: These plaintiffs are suing their own insurance company for medical expenses after they have settled with the tortfeasor, his employer, and the insurer. They released these parties from any claims for damages. i. Release of Tortfeasor by Settlement: If the insured releases the tortfeasor, it extinguishes any rights the insured had against the tortfeasor, and thereby extinguishes any rights that could have been subrogated to the insurance company. The insured extinguishes the insurance company's rights of subrogation. ii. Defeated Claim Against Insurer: As the insured extinguished the insurer's rights of subrogation, it breached the subrogation clause of the insurance policy, so it has defeated its own claims against the insurance company. iii. Structure Settlement? Can you structure the settlement with the tortfeasor in a way that allows you to settle with the tortfeasor and go against your own insured? If you are the lawyer representing the tortfeasor/insurance company, you wouldn't be a fan of this trap, so you don't want a release from only direct claims by the plaintiff instead of all claims by plaintiff and subrogation rights of its insurer. d. Home Insurance Co. of Illinois v. National Tea Co.: i. Owner/Lessor: The owner of the shopping center said it would handle the insurance for fire loss. It held National Tea immune from liability of fire loss. This shifted liability for fire loss from the tenant to the lessor. By lease, conventional obligation, the owner assumed liability for the fault of National Tea in so far as a fire loss is concerned. National Tea was successful in fending off the subrogation claims of the owner's insurance company. ii. Other Tenants: The lease did not hold National Tea immune from liability for fire from the other shopping mall tenants. This means that the tenants had rights against National Tea for liability of damages caused to it by the fire, and because the tenants had rights, its insurance carriers had subrogation rights against National Tea. e. Waiver of Rights of Subrogation: Ordinarily, it is okay for an insurance company as long as they know and assume the additional risk. When you see a waiver of subrogation, you say to another party that in the event I am liable and pay, I don't have subrogation rights and neither do you.

1. Insurance as Personal Contract:

a. Daum v. Lehde: The plaintiffs had a purchase agreement to buy the defendant's piece of property, but the parties never closed on the contract because the house was burned. As between the purchaser and the seller, what rights, if any, does the purchaser have in the seller/owner's insurance on his property? The plaintiffs ask for alternative claims: the restoration of the property to the condition before the fire, the rights to the insurance proceeds the defendant has available to him, etc. i. Insurance as Contractual Obligation: Insurance isn't a general indemnity obligation. It is a specific, contractual obligation governed by the terms of the policy. If the insurance was attached to the land, whoever owns the land owns the insurance as well. If this was the case, the court could make the seller convey the insurance with the land to the purchaser, but this is not the case because the insurance is attached the person with the insurable interest, not the property. ii. Personal to Insured: The insurance is personal to the insured and doesn't run with the thing, so the subsequent owner of the thing is not necessarily entitled to the proceeds, but this can be altered by the contractual language. b. Eagle Star Insurance v General Accident Fire and Life Assurance: Segura sold his plane to Fournet. After the purchase, the aircraft got into an accident. i. Claim of Appellant: Appellant contends that when Fournet purchased the plane from Segura, Fournet automatically became the insured under Seguar's policy. The trial court rejected the claim and dismissed the suit. We affirm. ii. Policies: Segura had a policy with the appellee, General Accident Fire and Life, from April 4, 1970 to April 4, 1971. The appellant, Fournet, had a policy with Eagle Star from December 18, 1970 to December 18, 1971. The accident happened after Fournet purchased the aircraft on April 1, 1971. iii. Insurable Interest: Segura couldn't make the claim under his policy to recover for the loss because he no longer has an insurable interest, and Fournet cannot claim under Segura's policy because he was not have an insurable interest at the time the policy was issued, even though he did have it at the time of the loss. 1. Reasoning: "The first is that a policy of insurance is a personal contract between the parties and does not run with the property in the absence of a stipulation to the contrary. The second is that in order to enforce an insurance policy there must be an insurable interest at the time of the issuance of the policy and also at the time of the loss." c. Bonadona v. Guccione: "An insurance policy covered liability for injuries arising out of operation of a motel. The policy was originally issued with the owners and then-operators of the motel as named insureds. When the motel was leased to tenant-operators, the policy was renewed, with the tenants paying the premiums, but no formal change or addition to the named insured (although the policy covered the same premise and risks). A motel guest was injured during the tenant's operation of the motel, and he sues the insurer to recover damages thereby sustained. i. Different Situation: The insurance agent knows that the tenants are operating the motel, and they renew the insurance policy without changing the name of the insured. The tenants are the ones paying the premiums on the insurance policy. ii. Reformation of Insurance Policy to Meet Intent of Parties: "Where an insurance policy is issued to cover certain risks of a named insured, if these risks are transferred to or assumed by another person who continues to pay the insurance premiums for their coverage, the insurer is bound by the knowledge of its agent and is estopped to deny its liability or the reformation of its policy to cover such risks incurred by the other person, when it has accepted the payment of premiums from or for him knowing of the change or addition of insured expressly or impliedly intended - at least in the absence of proof that the risks thus insured would be different in nature or substantially greater that those initially covered by the policy." iii. Important Facts: The course of dealing was consistent. The tenant went to the agent, annually renewed the policy, and annually paid the premium. The agent is the agent for who? To who does the agent stand in a fiduciary relationship in this situation, the insurance company, the insured, or both? The agent is given the authority to bind the insurance carrier. The court is saying that the insurance company is bound by the knowledge of the agent, who knew what was going on. Between the innocent insured and the insurer, we are going to bind the insurance company. The risk here was not increased but the same. d. Samuels v. State Farm: The insured gets a State Farm policy that provides primary auto and umbrella. The agent goes to Evanston and places an excess policy, but the agent says that the excess policy is excess over a homeowner policy, not the automobile policy, so he got it wrong. This is important only because there was a loss covered by the automobile and the plaintiff and insured are looking for the most coverage they can get. Evanston says they don't provide excess because they were told they provided excess over homeowner's policy not the auto policy, and these are two different risks. The court allowed reformation in this case because the way the insurance policies were layered. Evanston's coverage wouldn't have been triggered until the third layer anyway, so the other insurance provisions of the two insurance providers were not mutually repugnant. "Since the State Farm umbrella and the Evanston policy provided separate layers of excess insurance, their 'other insurance' provisions were not mutually repugnant." i. Trigger: The trigger is a loss sustained by someone with an insurable interest.

Flood Insurance: A homeowners' policy generally provides coverage for fire, wind, and other perils, but it doesn't provide coverage for flood. It is another industry reaction to a natural disaster (Camille, Andrew, or other hurricane).

a. Defining "Flood": The argument during Katrina was that the flood had to be some natural occurrence, rather than the manmade flood in Katrina. "The general prevailing meaning of 'flood' in property insurance exclusions was not ambiguous and included both natural and non-natural (manmade) causes." b. Flood Hard to Buy Insurance For: It is almost impossible to underwrite the risk of flood. The commercial market did away with the coverage. c. Federal Government FEMA: If you want to buy flood insurance, this is where you go for it. The local insurance company can place it for the insured, but it is a federal program. Lenders will often require not only property insurance, but also a flood policy under FEMA. The federal government sets the premium for the coverage based on the flood elevation. Flood insurance is pretty cheap because the federal government is underwriting it. There is a distinction between flood insurance and fire or other peril property insurance. There is nothing that prohibits the insurance companies from not providing flood insurance.

1. Cancellation or Termination of Health and Accident Policies: A policy is usually for a term of one year. Policies that provide coverage for a longer period of time may be a builder's risk policy that covers it from the beginning of construction to complete construction.

a. Distinction: between Cancellation and Termination. i. Cancellation: The insurance company needs the right to terminate or cancel the policy because of default on premium, no longer member of group for group insurance, no longer meets the requirements of an insured, other disqualifying events, etc. ii. Termination: The insurance code allows termination of the policy by the carrier if the insured commits fraud in the application process. Depending on the type of policy, it says what the carrier must do to terminate. 1. Has to be Done Correctly: 2. Contrast with Nonrenewal: The automobile policy runs year to year. If the carrier calls and gives a reason for doing so, it doesn't have an obligation to renew the policy each year. Not renewing is different from cancellation. The rules are different. The insurer simply decides not to renew. b. Prohibited from Cancelling/Terminating? c. Mass Mutual Life Insurance Company v. Nails: The question to the court became important for the court to answer for he underwriting of the industry. Nails no longer met the requirements of an insured under the group policy. i. Background: The employee of Exxon was injured in a car accident, not work related, and became totally disabled (quadriplegic). Exxon terminated his job. Even if he is terminated from his job, the group policy under Mass Mutual extends coverage for twelve months if the injury occurred during coverage. ii. Nails Sues on Theory of Abuse of Right: He says that he knows what the contract says, but the carrier's denying him coverage for the very problem for which it underwrote insurance for Exxon is an abuse of right. The policy says that there is a lifetime cap of $500,000 benefits, so it should provide coverage to this cap. 1. Insurance Company Argues: that they are doing what the contract allows them to do. There is no statute that says it cannot terminate the policy after the twelve-month extension it has already given to the injured plaintiff. iii. Abuse of Rights Doctrine has Draconian Result: so it is very rarely applied. iv. Abuse of Right Analysis: 1. Predominate Motive to Cause Harm: The policy not only provided Nails with extended coverage for a year after he was no longer employed by Exxon, it also included a conversion option which would have allowed him to maintain eligibility for benefits. Under these facts, we do not find the terms of the policy oppressive and agree with the court of appeal that enforcement of the termination clause was not motivated by intent to harm defendant. 2. Serious or Legitimate Motive for Refusal: Coverage is not being terminated due to cancellation, nor due to change in coverage or in rates after the contract was entered into. Instead, coverage is expiring due to ordinary policy limitations incorporated into a bargained for insurance contract. We believe Mass Mutual sought to invoke the policy limitations for serious and legitimate reasons. 3. Considerations of Moral Rules, Good Faith, or Elementary Fairness: 4. Exercise of Right for Purpose Other than that for Which It was Granted:

1. Intentional Injury of the Insured by the Beneficiary: The statute limits the ability of the beneficiary to recover benefits where the beneficiary has some hand in the activity that leads to the demise of the insured. You don't want to benefit someone who has performed an unlawful act. This theme is carried into the insurance code. A pardon does not restore status. If the shooter is not a beneficiary.

a. Doesn't Void the Policy: We don't say that the policy is void because it has nothing to do with a premium issue or a misrepresentation. Instead, the statute simply disqualifies the beneficiary. It isn't an exclusion of coverage either because that would say the insurer doesn't have to pay. The insurer still has to pay. b. Two Statutory Standards: The statute provides two different sorts of standards by which the beneficiary can be disqualified: criminal responsibility or intent. c. In re Hamilton: The beneficiary of the deceased's policy, Joann Hamilton, the man's common law wife, cut the deceased in his leg several times, which caused his death. It happened when the two were arguing, and the deceased was intoxicated. i. Disqualification: Disqualification does not mean an exclusion because the insurer still has to pay. There is a prosecution for manslaughter, and the beneficiary tries to get the judge to clarify that it was not intentional, in order for her to still be qualified as the beneficiary. The judge does clarify that it was not intentional. 1. Concursus: Mrs. Hamilton sends off the death certificate and claims form to the insurance company. The children say they have a claim too because they believe the wife wasn't eligible as a beneficiary. The insurance company provokes the concursus because they know they have to pay, but they give the money to the court because they don't know who should get it. ii. Intention Not Required: Although the rule used to require intent on the part of the beneficiary, the statute has changed the law to require only criminal responsibility. 1. Disqualification Statute Applies: Even though intent was required in previous editions of the law, this statute only requires that Mrs. Hamilton was criminally responsible for the death of the insured. 2. Joann Hamilton Disqualified: because she was found guilty of manslaughter by the court's judgment, so this easily meets the criminal responsibility. d. Criminally Responsible: Calfornia-Western States Life Insurance Company v. Sanford: "Sanford shot and killed his estranged wife. He was charged with murder and acquitted on the grounds of insanity. The court observed that the statute does not base disqualification on a criminal conviction but on a finding by final judgment, so the acquittal was not conclusive on the issue of criminal responsibility, and the children of the deceased were entitled to litigate the issue in the civil action." i. Conduct: Does the conduct equate to criminal responsibility? e. Self Defense: "The court held that the intentional killing by the beneficiary of the person insured, if committed in lawful self-defense, does not disqualify the beneficiary from receiving the insurance proceeds." f. Community or Separate Property: "In such event, the wife having forfeited her right, the husband's separate estate becomes the beneficiary, because his death dissolved the community. Any property acquired by his estate after death belongs to his separate estate, not the community."

1. Commercial Liability Policies: This is, next to auto, the most common type of insurance encountered in day-to-day practice. Commercial liability policies are designed to insure risks that commonly arise out of business activities. You will see, in the policy language, different coverages and tons of exclusions.

a. Exclusions: The exclusions have arisen over time as claims were made for various kinds of risks. Instead of writing unique policies, exclusions started to evolve. We are talking about where coverage is found and when it's excluded. b. Policy Language: The insurer will pay all amounts that the insured is liable to pay for injury or property damage caused by accident or occurrence reported during the policy period. There are three situations that trigger the insurer's liability to pay coverage. c. Triggers of Coverage: There are three different ways coverage gets triggered: accident, occurrence, or claims-made. i. Accident Based: The policy language is couched in terms of an accident that occurs within the policy period. What is an accident for the purpose of triggering coverage? If there is no accident, there is no coverage. This is not an exclusion but the absence of a trigger. 1. Audubon Coin and Stamp Co v Alford Safe and Lock Co: The coin company sues Alford asking for them to pay the coin company's loss. Alford sold the coin company a safe, which was supposed to have a tear gas that was operated when the safe was burglarized. Alford failed to install the tear gas; therefore, the safe was burglarized. a. Stand Point of Injured Person: We look at it from the standpoint of the injured person and when the accident occurred. The accident occurs when the tort was committed. The tort in this situation was committed when the safe was being manufactured, when the negligence of Alford took place. 2. Trigger: It triggers upon the happening of the event that gives rise to the loss. The coverage is triggered at the time of the tort/event, not when the loss is discovered. 3. Court's Analysis: "In determining whether the loss was caused by accident the loss must be examined from the viewpoint of the person injured and if the injury was unforeseen, unexpected and extraordinary it must be held to have been caused by accident within the meaning of the policy term." ii. Occurrence: This can be broader than an accident. The damage can occur during the policy but doesn't have to. When you look to see whether or not there is coverage under the policy, you must decide whether or not there is an occurrence, as defined in the policy. This occurrence is the trigger. 1. Importance: finding an occurrence means that there is coverage under the policy, even if the occurrence occurs during the policy period but the claim is brought outside the policy period. The occurrence triggers the coverage under the policy, so the injured person can bring a claim against the insurer several years after the occurrence if the occurrence happened during the policy period. 2. Occurrence Defined: "Occurrence means an accident, including continuous or repeated exposure to substantially the same general harmful conditions." 3. Different from Claims Made Policy: The claims-made policy requires the claim to be brought during the policy period, regardless of when the event happened. 4. Oceanonics: The insurers changed the policy language to change the result under the "accident" policy because the "accident" policy was problematic in discovering what happened. iii. Claims-Made Policy: The claims=made policy requires that the claim be brought during the policy period, irrespective of when the event happened that led to the liability. It is not always easy to determine what the occurrence was that caused the damage, or when that occurrence happened. 1. Professional Liability: Think about what engineers, lawyers, and doctors do. It is a continuous relationship, or their work can expand a long period of time. To define exactly when the offending conduct occurs can be extremely difficult. The industry developed a different kind of trigger for these kinds of situations. 2. Trigger: The coverage is triggered when the claimant makes a claim for damages, irrespective of when the coverage occurred. The reason is that it is easy to mark the timing of the claim, and it is independent of finding what occurrence happened and when.

1. Standard Fire Policy Insurance: Second to the automobile personal liability policies, this is the most important casualty type of property policy encountered. Fire losses are often coupled with other types of policies. A homeowners policy will cover damage by fire, and additionally, personal liability. This is a unique loss by fire. The concepts are statutorily required or by endorsement.

a. Fire Losses in Top Ten: The insured can set a claim by setting fire to the insured property. Liability kinds of things are ordinarily not created by the insured, and if they do, coverage may be excluded by the intentional acts exclusion, so fire is a unique loss. b. Fire Policy Regulation: Louisiana statutorily mandated provisions of a standard fire policy that either must be in the policy sold by the company, provider a greater benefit than that sold by the company, or incorporated into the policy. c. Actual Cash Value Limit: Say you buy a house for $400,000 and get it insured. The house is destroyed by fire two years after you buy it, and the value of the property has diminished to $300,000, and it is a total loss. The insurance company pays actual cash value, not what it was insured for at the time the insurance was placed. They pay actual cash value at the time of the loss, as opposed to replacement value. i. Opposed to Replacement Value: This would be the value of the house at the time it was built, what it would cost the insured to build the same house, regardless of the actual cash value of the money. Cost of materials and such can make the cost to replace something higher than the actual value of the property. d. Peril Insured is Direct Loss by Fire: Under a standard fire policy, the perils covered are those that are the direct loss by fire. Defining this peril is very important. i. Perils NOT Included: 1. Uninsurable and Excepted Property: The policy shall not cover accounts, bills, currency, deeds, evidence of debt, money or securities; nor, unless specifically named hereon in writing, bullion or manuscripts. 2. Perils NOT Included: This company shall not be liable for loss by fire or other perils insured against in this policy caused directly or indirectly, by: (a) enemy attack by armed forces, including action taken by military, naval or air forces in resisting an actual or an immediately impending enemy attack"; (b) invasion; (c) insurrection; (d) rebellion; (e) revolution; (f) civil war; (g) usurped power; (h) order of any civil authority except acts of destruction at the time of and for the purpose of preventing the spread of fire, provided that such fire did not originate from any of the perils excluded by this policy; (i) neglect of the insured to use all reasonable means to save and preserve the property at and after a loss, or when the property is endangered by fire in neighboring premises; (j) nor shall this company be liable for loss by theft. a. Terrorist Attack? Is this an exclusion to the peril covered by fire policy? 3. Conditions Suspending or Restricting Insurance: a. Increased Hazard within Control/Knowledge of Insured: 4. Prohibits Additional Insurance: You can buy many different policies on the same property and layer/stack the coverage with the anticipation that you would recover from all of these policies if a loss occurs. ii. Moral Hazard: It is something that would cause someone to do something immoral that would put a risk on the insurer. e. Assignment NOT Permitted without Consent: In most other insurance policies (non-fire), the insured can do a post-loss assignment of the policy if the policy language permits it. A tenant can insure property, and when the property is damaged, the tenant can assign his rights under the policy to the landlord after the loss has occurred. Fire policies rarely allow amendments, and it is even rarer for the insured to be able to assign to another person without consent of the insurance company. f. Mortgagees: The mortgage company lends money to the homebuyer, but it requires that the property be insured, so that the insurance company would pay the lender in the event the property, which secures the loan made by the lender, suffers a loss. In the standard policies, we allow for protection to someone who holds a secured credit interest in the property, and they are treated differently from the mortgagor/owner of the property. g. Suits: Statutorily, the suit must be filed within two years from the date of the loss.

1. Suicide Statute: The statute addresses death by virtue of the status of the insured, or some condition by which the death occurs. It says that a policy cannot contain a provision that retains a condition like that unless it is more favorable to the insured than the language in the statute. Suicide provisions are found to favor the insured. This is because the risk is difficult to underwrite.

a. Increased Moral Hazard: of someone who is mindful of eventually committing suicide and letting the beneficiary collect upon his death. b. Valid: unless they are longer than two years. There is a two-year period between issuance of the policy and the death during which the insurance company will not pay. This allows the insurance company to mitigate the risk of suicide. c. Eliminates/Omits: other circumstances where the same rule applies. One example is getting killed in war action within two years of the policy. It is a different kind of risk that is difficult to underwrite. d. Rome v. Life and Casualty Insurance Company: We have a defense by the insurance company to coverage under the policy on the strength of a suicide clause, so a suicide is alleged within two years of the issuance of the policy. i. Burden of Proof: is on the insurer anytime it raises a defense. He must prove that the death was caused by suicide, not accident. The insurance company says it looks like suicide, so it doesn't want to pay the benefits. ii. Suicide? First, do the physical facts surrounding the death of the insured exclude with reasonable certainty any possibility of accident? Second, does the evidence show tha the insured had a motive for taking his own life sufficient to overcome the presumption against suicide and make it reasonably certain that the death was not the result of an accident, but of the deliberate intention to take one's own life? 1. No Direct Evidence: Does the circumstantial evidence, taken as a whole, do away with every other reasonable hypothesis? The shooting occurred at the end of the street, after he ran into the house, grabbed a gun from under the wife's pillow, has been drinking, says to take care of the kids. HE is found with his foot still holding the clutch, the glove compartment open, a cigarette in his hand, and a shot in his head. a. Accidental Hypothesis: The hypothesis is that maybe he was going to put the gun into the glove compartment, and it accidentally fired and shot him. b. But Two Shots? He probably shot first making sure that the gun worked, and then shot himself. 2. Motive: Suicide needs intent because it is self-destruction. If the death was accidental, it is not suicide. The court found no motive in this case because there was indication that parts of his life were good, he and his wife were separated but doing well, etc. iii. Test: You are looking at a set of facts and want to know where there is coverage. You first to look I there is a statute that regulates the particular provision or type of insurance. Here there is one. You then look at the policy and question where it conflicts with the statute. if it does not, you use the policy and connect it to the facts. 1. Direct Evidence: If someone had seen him park, take out the gun, and shoot himself, we wouldn't have to worry about how it occurred but would skip to the motive. 2. Circumstantial Evidence: Does the physical evidence exclude every reasonable hypothesis? The court says no in this case. 3. Motive: There must be a motive for the suicide.

1. Insurable Interest and Consent:

a. Insurable Interest: Under public policy, we require that there be a connection between the beneficiary and the insured. Because life insurance is a personal contract, provisions in the law had to be made to extend this concept. A person has an interest in his own life, his wife and children's life, and other people, who would allow him to insure their lives, even though they are not related, in the business context. The value of the company might be tied to an individual, and the loss of that person by death would be insured because of the company's economic interest in that person being alive. This would be in a close business context. Another circumstance would be when you have an insurable interest in the person making a transaction with you. The ability of that person to pay me depends on him staying alive, so I will get an insurance policy on that person's life to insure him for his debt in the event that person dies. Substantial interest by blood or affection. Insurable interest in the life of the person you want to insure. b. Consent: You can buy insurance on the life of a stranger, but you at least have to have their consent. This makes sure, from the insurer's perspective, that the information being provided in the policy application is correct. c. Adam Miguez Funeral Home v. First National Life Insurance Company: The father wants to insure the life of his son, who is in prison. This is not a contract with a funeral home. That would be a contract with a suspensive condition. Mr. Trahan knows his son is going to get killed in jail at some point, and he wants to insure his son's life in order to have money to bury him with. i. Problem: John Trahan, Jr., is 22, so he is not a minor by law, so Mr. Trahan doesn't have an insurable interest in the life of his son because he is not a minor. ii. Application and Issuance: "The insured, John N. Trahan, Jr., did not in writing apply or consent to the issuance of the policy on his life. Hence there was no compliance with LSA-R.S. 22:616. However, the application was filled in by defendant's agent, pursuant to questions asked to the insured's father. Then the agent requested Mr. Trahan to sign his son's name. the agent represented that this procedure was proper and actually signed as a witness..." 1. Agent's Fault: "The acts of an insurance agent in filling out an application form are the acts of his principal, the insurer, and do not bind the innocent insured or beneficiary. The insurer is estopped to urge a defense based on errors or misstatements in the application made by its agent." 2. Mr. Trahan Relied to his Detriment: "...on the representation by the agent that the application was being properly drawn. Otherwise, he would have secured the insurance elsewhere." 3. Purpose of Statute: "is to protect the right of the insured and the beneficiary and not to preserve public order or good morals, the beneficiary may waive this statutory right established in his favor and urge the doctrine of estoppel." iii. Disqualify both the contingent and the principal beneficiaries, there's someone in the contract to give the benefit for. 1. Have to prove incontestable unjustified killing d. Nora v Unity Life Insurance Company: i. Background: "Three men were sitting in a bar, and Balthazar volunteered an offer to take out a policy if Nora would pay the premium, asserting that he would 'will' the policy to Nora. The offer was taken up and acted upon by all parties; the application was filled out, signed by Balthazar, certified by Joseph and the initial premium paid by plaintiff, Nora. Nora continued to pay the premiums on the policy until the death of Balthazar, which occurred something less than four months later." ii. Insurer's Defense Rejected: "Defense of lack of insurable interest is unsound for it appears that the use of this phrase is interpreted as having application only in those instances where the insurance is procured by a party who is designated as beneficiary, without the application or the knowledge and consent of the insured. iii. Conclusion: "In the instant case there is no showing of any fraud, conspiracy, nor any act in contravention of public policy nor of good morals on the part of this plaintiff. It is obvious under the facts that the insured at any time was at liberty to make a change of beneficiary without notice to plaintiff."

1. Conditions, Warranties, or Representations:

a. La RS 22:1314: When an insurer wants to say that the insured has breached a warranty provided or in the insurance contract, the insurer has to prove: i. Breach Existed at Time of Loss: The insurance company is not obligated until at the time the loss occurs. The first criteria ii. Material/Substantial Effect on Risk: Whatever the breach is that existed at the time of the loss, it had to do something to increase the insurer's risk (moral or physical hazard). iii. Knowledge of the Insured: The insured has to have knowledge of the breach either at the time the policy was entered into or the time of the loss. It cannot be an accidental breach. b. Anti-Technical Statutes: They are called anti-technical statutes because they are designed to prevent an insurance company from declaring a breach of warranty to defend coverage. The insurer would be able to overreach and deny coverage without these kinds of statutes. The insurer has an ability, by incorporating and endorsement or warranty into the policy, to set up a circumstance for violation of the warranty to preclude coverage. c. Rodriguez v. Northwestern: i. Warranty: This is a special kind of equipment. The insurer says it will insure this skidder provided that the insured does the following things. All four conditions were designed to reduce the risk of fire, so the insurer insists on these conditions. The insurer is presumed to know that they were in the policy. The premium is based upon the warranty endorsements containing these conditions. ii. Insurance Company Argument: There is no coverage for the loss of the skidder by fire because the insured failed to comply with the warranties set forth in the endorsement. The failure to comply means no coverage because the satisfaction of the warranties was a condition. iii. Court Unimpressed by Evidence: While the case is instructive for the application of the anti-technical statute, it is equally important for the notion that you must prove your case. 1. Extinguisher Rating: There is no evidence showing that the one on the skidder was deficient because of the rating. It didn't prove why the rating didn't satisfy the warranty. 2. Maintenance of Extinguisher: The ambiguous warranty was held to only require that the insured reasonably maintain the working condition. 3. Shut Down and Inspect: 4. Remove Trash at Night: The fact that the employee removed the trash in the morning rather than at night was not an increased hazard for the insurance company. iv. Burden of Proof NOT Met: The case is good for the requirements for meeting the anti-technical statutes, and it is equally instructive on how not to put on your case if you have a violation of warranty. The lawyers for the insurer did not analyze the elements they needed to prove. d. Notes: i. Undisclosed Mortgages: Ordinarily, the policy will identify the financing organization as the mortgagee under the policy because the mortgagee has rights to the proceeds in the event of a loss. In the Lee case, the plaintiff had a truck, and the policy provided that the insured could not place any mortgages or encumbrances on the vehicle, nonetheless the insured did place mortgages on the vehicle. He went and borrowed money and gave mortgage on his truck for security. The truck suffers a fire loss, and the insurance company says it won't pay anyone because of the undisclosed mortgages. 1. Concern for Moral Hazard: What incentive would the insured truck owner have to create mortgages no the truck? How does this disadvantage the insurance company with the insured wouldn't get any money out of it? The moral hazard is when the insured does something wrong and will benefit from it. There is no indication of bad faith, and there was no benefit to the insured, so the court refused to find that mortgages, even though undisclosed, had increased the moral hazard to the company, resulting in no coverage. ii. Additional Insurance: The moral hazard might be increased when the insured might get money from layering insurance coverage. This is an increase in the moral hazard that results in a profit by the insured, so ordinarily, the policy will say no additional insurance. 1. Frazier: The insurance carrier argued that the additional insurance created a per se increase in moral hazard. The court said there was no per se rule, so the insurer needed to prove that the moral hazard was actually increased. It is not a per se, strict liability of the other insurance clause. iii. Vacancy: This is a good thing to talk to clients about. if you have property that is vacant for some period time, set forth in the policy from 30-60 days, coverage can be reduced or denied, not per se, but because of increase in moral hazard. 1. American Indemnity: A local ordinance banned sale of alcohol, so the bar couldn't operate the premises. The premises was vacant for more than 60 days, but the court looked at the evidence of actual increase in moral hazard, which was not presented. There is no presumption of increase in moral hazard simply because of a violation of the warranty, so the insurance carrier maintains the burden of proof. e. McCoy v. Pacific Coast Fire Insurance Co.: The plaintiffs, the McCoys, bought a building and insured it with a policy described as "apartments." The premium of the insurance policy is based on the classification as "apartments." After the insurance policy was executed, the McCoys began operating the restaurant in the building. Even though the policy described it as apartments, the rate card on file with Montaldo described it as "tenements." i. Imputation of Knowledge: The insurance agent writes the policies. It also gets rate cards about the uses of buildings within the city. After the rate cards are delivered, the fire causes loss to the insured building. The insurance company says that the plaintiff failed to disclose that they were operating the restaurant, which would mean an increase in moral hazard. The court imputed the knowledge of the rate cards delivered to the agency to the insurance agency itself. The court says that the agency had knowledge, when rate card was delivered, in its files that the property of the plaintiffs was being operated partly as a restaurant. ii. Principle/Agency Relationship: We impute the knowledge of the agent to the insurance carrier. It wasn't a breach of the warranty that the insured made. It was a negligent act by the insurance company that caused the loss. iii. Lack of Knowledge of Plaintiffs: We say the plaintiffs didn't do anything wrong because they had no knowledge of breach of warranty or misrepresentation at the time the policy was issued or a the time of the loss. iv. Anti Technical Statutes: To prohibit insurance carriers from getting overly technical in denying coverage for breach of certain warranties, the legislatures adopted these anti-technical statutes. 1. Requirements: (1) breach existing at time of loss; (2) increase in moral/physical hazard; and (3) knowledge of the insured.

1. Disability: insurance is given to a person who is unable to continue his employment because of injury or illness. They provide different levels of coverage depending on the nature and scope of the disability. When you read the policy, you have to read the whole policy to see if there is a coverage, exclusion, and exception.

a. Laborde v. Employers Life Insurance Company: The nature of the work the insured does (carpentry) is important in these cases. What was the nature of the insured's work before the injury? What are the disabilities that arise from the injury? What is he able to do after the injury? i. Issue: The Supreme Court is trying to find which of the three coverage provisions under the plan Laborde falls under. 1. Coverage A: lifetime benefits for total disability caused by injury 2. Coverage B: six months of benefits for partial disability 3. Coverage C: twenty-four months of benefits for total disability caused by sickness ii. Defenese: of insurance company is that he was not disabled until after the 90-day period of time after the injury/accident. iii. Court Concluded: that he was disabled but he could only get coverage under Coverage C because the 90-day requirement wasn't met under Coverage A. He was disabled within 24 months for Coverage C. iv. Abject Helplessness is Not the Standard. You will see cases where the carrier defends the disability because the person was able to get a minimum-wage job. v. Disability Defined: "Total disability means the complete inability of the insured due to sickness or injury to perform every duty pertaining to his occupation." Income replacement insurance that is not worker's comp. Trying to read the policy in a way that will preclude coverage, courts generally reject a very broad reading of the policy. The language of the policy and the nature of the work is important. If you're a surgeon and you can't hold a knife, will be disabled even if you can do other things.

1. Mortgage Clause: This is a clause in the standard fire policy that purports to pay the mortgagee if it is a loss payee under the policy. A good example is found in the homeowners policy. It says that if the insurance company knows that there is a mortgage on the property, it will ordinarily be addressed on the declarations page of the policy itself, and the mortgagee becomes a payee on the insurance policy.

a. Loss Payee: A lender usually requires insurance to protect the lender's rights to the amount of debt on the property, and he will always wanted to be listed as a loss payee under the policy (as their interest may appear). There is a mortgagee who is entitled to be paid in the event of a loss to the extent the mortgagee suffers a loss. Some of the money usually goes to the lender, and the balance goes to the owner. i. Interest in Benefits: The lender is not considered an actual party to the insurance contract, but he is a third party who benefits. ii. Mortgagee Not Subject to Personal Defenses: It is not subject to the personal defenses the insurance company may have against the insured. The mortgagee still gets paid if the insured acts wrongly. If the insured increases the moral/physical hazard on the property, and knows about his breach, he may not have coverage anymore under the policy, but this personal defense of the insurer against the insured does not affect the interest of the mortgagee, who will still get paid. iii. As Their Interest May Appear: This is the balance due on the note to the mortgagee. The insurance company will make a check payable to the insured and mortgage company, and let them figure it out, which triggers UCC, negotiable paper, kind of transactions. b. Federal Union Insurance Company v. Griffin: Griffin borrowed money from Monroe Building and Loan, who is a loss payee under the policy. Griffin gets the property insured by Federal Union, and this subsequently, he gets a second insurance policy by Royal Exchange. i. "Other Insurance" Provision: This was a warranty in the original insurance policy with Federal Union, by which the insured agreed to not get any other insurance on the property without consent of the insurance company. This is because it would increase the moral hazard on the property. The stacking of policies might cause the insured to cause damage to the property so that he can collect multiple times. 1. Violation: Griffin got a second insurance policy on the property without the consent of Federal Union, which violated the warranty. ii. Mortgage Clause Remained in Force: The insurance companies ended with an agreement on who would pay what. Federal Union paid $1,000 to the mortgagee, Monroe Building and Loan. iii. Federal Union's Subrogation: When Federal Union made payment to Monroe Building and Loan, it became subrogated to its rights against Griffin, and it does that because the debt got paid in full, and now Federal Union is the holder of the promissory note. As the holder of the note, Federal Union has the right to sue the debtor, and this is what it does by foreclosing on the property. 1. Griffin Argues Credit: He believes that he should be able to get credit for the amount of money paid. 2. Court Denies Argument: The court says that the circumstances under which this situation arose is by Griffin, insured, violating his insurance policy warranty. If they were to allow him credit for the amounts paid, the court would be denying the insurance company, Federal Union, recourse on the insured, who violated his warranty at his own fault. iv. Take Out Loss Payee: Suppose Monroe Building and Loan is not in the picture. Griffin violates the same provision in the policy requiring that he get consent by insurer before getting "other insurance." Federal Union is able to deny the claim of the insured. c. Miller v. Hartford Fire Insurance Company: At the time of the fire loss, the owner of the property was John McGrew. John Miller, the named insured in the Hartford policy covering the property, owned a promissory note in the amount of $4,000 secured by a mortgage on the premises signed by John McGrew. i. Confusion of Right; Extinguishes Debt: Following the fire loss, by written act of assignment, John Miller assigned his $4,000 promissory note, secured by a mortgage on the insured property, to the agent of John McGrew. The assignment curiously transferred the note to its maker. Thus, Miller's assignment of the note to McGrew united the qualities of debtor and creditor in the person of McGrew, causing a confusion of right, which extinguished the debt. ii. Subrogation: In a previous case, when the insured settled with the tortfeasor and tried to cover under his own policy, the court said that his settlement with the tortfeasor denied the insurer of his subrogation rights to the rights the insured had against the tortfeasor, so he couldn't recover from his insurer. iii. Effects on Hartford: The extinguishment of the obligation on the note destroyed Miller's ability to comply with his express obligation under the insurance policy to subrogate Hartford to his rights on the mortgage and the note it secures. When the insured releases his debtor and thereby deprives the insurer of its subrogation right, the insurer is discharged to the degree of this impairment from its liability under the policy. iv. Acts of Insured: You look at the acts of the insured to see what effects it has on the insurance company. If it violates the rights of the insurer, it may either release or limit the payment the insurer is obligated to pay to the insured. d. Regulation Provisions: They are provisions under the policy that regulate when the insured can assign rights to third parties. They are ordinarily restrictions on the right of the insured to assign benefits under the insurance policy to third persons. This is because of the risk the insurance company assumes. Transferring benefit to someone who is not the insured may increase the risk of the insurance company. i. Assignment After the Occurrence of Loss: There is no additional risk to the insurer potentially when the assignment is made after the loss. ii. Hurricane Katrina: It elevated the discussion of post-assignment losses. You had tons of homeowners property policies issued to people in Nola, Lake Charles, etc. by All State, State Farm, and Geico. 1. Road Home: If you were a property owner affected by Katrina or Rita you could apply for a grant to get money from the Road Home Program by the CDBG (Community Development Block Grants). As a condition of receiving money from the program, the recipient was required to assign to the state any rights the recipient had in any property insurance policies. Road Home could then assert any rights the insured had against his insurance company. 2. State's Right of Action: They sued all the insurance companies because of its right to recover money the companies owned its insureds for property damages from the hurricanes. a. Insurance Company Defenses: They argued that it had to be against public policy. Do we want to allow insureds to make post-loss assignments to anyone, and if so, under what circumstances should it be restricted to? b. Supreme Court Says NOT Against Public Policy: The court says there is no statutory prohibition against a post-loss assignment that is governed by what the insurance policy says. The Supreme Court said that under Louisiana law, there is no public policy that prohibits a post-loss assignment of a property insurance policy to some third person. You can do it, but if you do it, there has to be language in the policy that either makes it assignable, or unambiguously un-assignable. Reaction: In reaction to this holding, the industry might amend policies, as it did for "an" insured, "the" insured, etc.A future policy may come out with a provision that unambiguously prohibits the insured from making a post-loss assignment.Pre-loss assignments are generally prohibited by insurance companies.

1. Assignment: The owner of a policy can make an assignment of the rights under the policy. In liability policies we don't grant a plenary right of the insured to transfer that policy because the risk is unique to the insured. If you buy a personal liability policy, and a premium is based on the underwriting analysis, the company doesn't assume the risk that you transfer this coverage to another person without consent. For life insurance policies, the risk is the debt of the insured, and the owner of the policy is not as crucial to the underwriting of the policy as it is in other insurance policies.

a. Louisiana Law: gives the owner of the policy the write to assign the policy (collateral assignment to secure repayment of debt or transferring the rights). i. Scope of the Assignment: You have to look at the policy language to see what it takes. If I want to transfer ownership by assignment, this is a complete assignment transferring title of the policy. If I want to make a collateral assignment to my bank, this is a different assignment because I am not giving up my policy. I'm retaining ownership of the policy and assigning it to pay a debt. Give the death benefit to the bank to pay off the debt. If you give the full ownership to the bank, the bank could get the full ownership benefit. Most life insurance policies are assignable. ii. Ordinarily: the assignment is not effective unless it is also delivered to the insurance company. What is the form of the assignment, the intent of the assignment, and the action by the insurance company that recognizes the assignment was made? b. Succession of Goudeau: The insured obtained a life insurance policy on his life and named his three daughters as beneficiaries. However, the insured then assigned the life insurance policy to Union Bank as collateral for his and Lay's Games and Music's debt. i. Parties to the Policy: The beneficiaries are not parties to the insurance contract, and the insured/owner has the right to assign the rights of the insurance policy as collateral. Since the owner has the right to change the beneficiary, the bank becomes a type of beneficiary as a collateral assignee. The beneficiaries have no vested interests in the proceeds of the policy until the insured dies, and only if he hasn't change the beneficiary before his death. Does the policy give the owner the right to change the beneficiary? If it does, state law says you can make an assignment of the policy if the policy permits it. 1. Different in Collateral Assignment and Transfer of Ownership: If the ownership is transferred completely, as owner, the person can change the beneficiary, make a loan against the policy, surrender the policy for cash value, etc. He exercise ownership rights. If it is a collateral assignment, the bank cannot change the beneficiary but can get paid prior to the beneficiaries to the extent of the debt. ii. Upon His Death: the insurance company makes a checks made out to both the bank and the beneficiaries. The bank paid off the debt of the deceased and then gave the remaining balance of the proceeds to the beneficiaries. iii. Conclusion: "It was certainly within Goudeau's legal right and power to assign this insurance policy to Union Bank. The Goudeaus, as beneficiaries, were powerless to prevent this assignment. Under the terms of the Assignment, Union Bank acquired the sole right to collect the proceeds with the only duty being to pay any remaining balance of the proceeds, after satisfaction of the secured debts, to the named beneficiaries under the insurance policy. This in fact is what was done."

Mandatory UM Coverage: Vehicle liability insurance coverage policies are required to have uninsured/underinsured motorist coverage, unless the insured does something, sign a waiver form prescribed by the commissioner of insurance, to reduce limits of UM coverage, rejecting coverage, or choosing economic-only coverage

a. Ongoing Tension: UM carriers try to limit their liability for UM coverage. When there is a question of whether or not there is coverage, the court goes towards finding coverage.

1. First Party Claims under §1882 and §1973. Both statutes require timely payment of undisputed first party claims.

a. Payment Period: After receipt of satisfactory proof of loss, §1892 requires the insurer must make payment within 30 days and §1973 requires payment within 60 days. i. Satisfactory Proof of Loss: The insured is required to give the insurance company information, upon which they can make a decision about the claim. What satisfactory proof of loss is or is not is a question of fact. It is the amount of information and reasonable insurer needs to act on a claim. 1. Defined: "Satisfactory proof of loss is only that which is sufficient to fully apprise the insurer of the insured's claims...may be based on information furnished by insured, received in discovery or obtained by insurer in its own investigation." ii. Arbitrary, Capricious, or Without Probable Cause: is the legal standard that we measure the conduct of the insurer by. b. Elements of Cause of Action: A penalty is imposed if the failure to pay timely is "arbitrary, capricious, or without probable cause." i. The insurer has received "satisfactory proof of loss," ii. The insurer failed to tender payment within 30 (or 60) days of receipt thereof, and iii. The insurer's failure to pay was "arbitrary, capricious, or without probable cause." c. Penalty Standard: i. "Arbitrary, Capricious, or Without Probable Cause": means "unjustified, without reasonable or probable cause or excuse." Such conduct describes "an insurer whose willful refusal of a claim is not based on a good-faith defense." ii. Insured's Burden of Proof: The "vexatious character of the insurer's refusal to pay can reasonably be found from a general survey of all facts and evidence...direct and positive evidence of vexatious refusal is not necessary to impose the statutory penalty." 1. Articulable Basis: of insurer in defense. The insurer has to have a good faith claim to its conduct. Is there some legal dispute over the terms of the contract? This is best done by articulating facts. iii. Strict Construction: Since the states are penal in nature, they are "to be strictly construed." Sanctions should be imposed "only in those instances in which the facts negate probable cause for non-payment." d. Insurer Must Timely Tender Undisputed Amount: i. Rule: You can avoid penalties and attorneys fees by tendering the amount of money that is not in dispute. When only a portion of the claim is reasonably disputed, the insurer must timely tender unconditionally the undisputed amount. ii. Rule Restated: "An insurer has a recognized right to withhold payment of disputed amounts in a claim for which there are substantial, reasonable and legitimate questions as to the extent of its insurer's liability or of the insured's loss...However, an insurer also has a recognized duty to pay any undisputed amount over which reasonable minds could not differ. Moreover, an insurer who fails to pay said undisputed amounts has acted in a manner that is, by definition, arbitrary, capricious or without probable cause." iii. McDill Tenders: 1. Satisfactory Proof of Loss for UM Coverage: iv. Effects of Unconditional Tender: 1. Interruption of Prescription ••• Conflicting Decisions: A tender in a first party insurance claim did not interrupt prescription, distinguishing third party claims and classifying UM coverage as a tort claim. 2. Does Not Waiver Coverage Defense: State Farm could assert defense based on information later gained through discovery. 3. Over Tender: An insurer who tendered more than the jury ultimately awarded the insured could not recover the excess from the insured. The risk is on the insurance company to tender the correct amount. This seems against equity. 4. No Duty to Tender to Third Parties: the insurer has no duty to tender to third party claimants asserting claims under the Direct Action Statute. 5. Payment is unconditional. If you don't do this, you subject yourself to penalties and attorney's fees. Have thirty days to determine how much the UM has sustained and make a tender.

1. Magnon v. Collins: Magnon was rear-ended by Collins, and during the accident, Magnon was working for Phelps Dunbar. Magnon sued Collins, LIGA, State Farm (his own insurer), and Vigilant (third party by State Farm and Insurance of Phelps).

a. Parties: i. LIGA: LIGA is an insurance guarantee association that deals with automobile liability insurers. LIGA is essentially an insurer of last resort. Automobile liability carriers are required to pay assessments, and these funds are used by LIGA to pay for a insurer's insolvency. It steps in the shoes of the insolvent insurer, but only if there is not another insurer with coverage. If you get a case when the insurer is insolvent, look for insurance guarantee associations, which can be a source of recovery for a plaintiff. ii. Collins's Insurer Insolvent: Magnon says that Collins is now underinsured or uninsured, so he has a claim against State Farm for UM coverage. This is first party insurance that Magnon is seeking from his own insurance carrier. The policy limits under this policy would be $100,000. State Farm pays this $100,000, but it says that it has a right to recover from someone else who provides coverage, so State Farm joins Magnon in a suit against Vigilance. iii. Vigilant: It is the general liability policy carrier for Phelps Dunbar, and there is UM coverage under the policy. The limit that Magnon could receive under this policy is $1,000,000. b. Question: Is Magnon an insured under the Vigilant policy? The overarching rule is that if you aren't an insured, you can't recover UM coverage. This is first party insurance that protects the insured for its own damages. As to State Farm, there is no question that he has UM coverage because he is the named insured under the policy. Magnon is damaged to an extent that is more than the $100,000 limit of State Farm's UM coverage, so he hopes to receive more coverage from the UM coverage under his employer, Phelps Dunbar's, general liability insurer Vigilant. c. Analysis: The court interprets the Vigilant policy to exclude Magnon as an insured. At the end of the day, because he was operating his own vehicle, he is not deemed to be an insured under the policy. As a result, if he is not an insured for this activity under the general liability policy of Phelps Dunbar, he gets no UM/UIM coverage from the policy. Vigilant is off the hook. i. First Argument: Magnon's first argument was that he was an insured because he was in the scope of his employment when he was injured, and he gets the benefit of insurance that Vigilant provides to employees. The court says that the policy excludes coverage for employees who are using their own automobiles. The general language includes employees in the "scope and course of their employment," but there is an exclusion. The coverage doesn't apply if you are using your own vehicle and injured in that circumstance. Phelps Dunbar doesn't want to provide coverage for personal liability insurance of an employee because you then get into a "course and scope" debate. So far, Magnon is not an insured. ii. Second Argument: Magnon's second argument is that the definition of an insured in sections 2(a)-2(e) are mutually exclusive. He is moving property to or from a covered automobile, this is designed to mean loading and unloading in the context of automobile liability policies. He was using his own car, which is not a car covered under the policy. The court says that the sections Magnon's argument stands on are meant to be read together, so he is not an insured under these either. d. Main Question: For Magnon to be covered by Vigilant's UM coverage, he must be found to be an insured under the policy. The intent of the general liability policy's automobile coverage was not to cover the personal automobiles of all of its employees.

1. Community Property: The premise is that all assets and such acquired during the marriage is community property. Life insurance is a different species of contract, and it is not treated the same as co-ownership and indivision for things like real estate and automobiles.

a. Policy and Benefits Separate Items: The policy itself is part of the community, but the death benefits are not. The death benefit is not part of the community. The death benefit, which is exempt from seizure by creditors, is the separate property of the beneficiary. While the value of the policy might be community property for partitions, for successions, the death benefit is not. A surviving spouse, at the moment of death, does not have a claim for one half of the death benefit. It is a part of the contract between the owner and the company. i. Death Benefit: does not comprise part of the estate of the decedent, and it is not paid out with the last will and testament. It makes sense that it is not considered, by operation of law, as part of the community property. It is outside the succession and the community. b. Concursus: Assume that the insurer was put on notice of a competing claim to the proceeds. The insurance company can do something under Louisiana and Federal law to relieve itself of the obligation to pay twice. You take the policy limits and deposit them in the registry of the court (deliver to clerk of court), and then you serve the people who say they have competing interests. c. Standard Life Insurance v. Franks:

1. ERISA: is a federal law that covers employee benefit claims. Congress did this to give a preemptive federal law treatment to benefit and retirement claims. An employer develops a benefits plan for its employees that include various components, and the employer gets an insurer to cover those risks. It protects the employer from the risk of having to pay those benefits out of pocket. We talk about insurance in the context of ERISA. It is very common to see a disability insurance policy, or other types of policies issued pursuant to ERISA qualified plans. Employee Retirement Income Security Act. It doesn't replace state insurance. State regulated industry. It just might give you a federal forum to have the case adjudicated.

a. Provisions Preempt State Law: ERISA is not designed to regulate the business of insurance. b. Soniat v. Travelers Insurance Company: i. State Law Preemption: State laws, which relate to employee benefit plans are pre-empted by ERISA except for those state laws that regulate insurance. Moreover, a state law that purports to regulate insurance cannot deem an employee benefit plan to be an insurance company. ii. Deemer Clause: An employee benefits plan does not become an insurance company. c. Concurrent State and Federal Jurisdiction:

1. Penalties and Attorneys Fees:

a. Punitive Damages: Louisiana is a state that does not allow the award of punitive damages (penalties) unless they are specifically authorized. The only time someone gets penalized is because a statute authorizes this. in the absence of either a contractual provision or statutory provision, the attorneys fees are not switched to the loser. Claimants look to see if something occurred during the administration of the claim, something about the insurance carrier's conduct, or if something happened after settlement, to find if attorneys fees are available. Not part of the plaintiff's claim or the insureds claim. Insurance companies don't like extra-contractual liability. i. Extra Contractual Liability: for the insurance company. ii. Unconditional Tenders: Penalties and attorneys fees are extra-contractual liability. It is not the kind of payment that is built into their risk assessment. iii. Regulating Insurance: The legislature is trying to rigidly enforce the obligations of the insurer by imposing sanctions when the conduct of the insurer doesn't meet the statutory requirements. When they breach their duty to their insured. b. Three Prong Analysis: for damages, what's recoverable, and fees. i. What Kind of Policy? Different statutes deal with different policies. ii. Who's Making the Claim? The insurer and insured have a contractual relationship with contract terms like good faith and fair dealing. 1. First Party? The party making a claim is the insured under the insurance policy. 2. Third Party? The party making a claim is a third person injured by the acts of an insured under the insurance policy. This could be a beneficiary under the life policy, but it is someone other than the insured. a. Make the payment within 30 days or they have breached their duties. iii. Conduct of Time Limitations: What is it that the insurer supposed to do, and when is it supposed to do it? Damages and Fees: Depending on the statute, the damages might be capped, include pecuniary and non-pecuniary without a cap, etc

a. Slocum v. American Casualty Insurance Company: There were two insurance policies: New York Fire and Marine Underwriters covered the automobile loaned to the plaintiff; and GEICO covered the automobile non-owned vehicles driven by the insured.

a. Purpose of "Other Insurance" Clause: If two policies cover an accident, it is not intended to be an enrichment for the insured or the plaintiff, so it is not left up to the court but to the language of the policy. b. Slocum v. American Casualty Insurance Company: There were two insurance policies: New York Fire and Marine Underwriters covered the automobile loaned to the plaintiff; and GEICO covered the automobile non-owned vehicles driven by the insured. i. Excess: The GEICO policy provides coverage to the insured, but only if it exceeds the limits provided by the primary insurance policy. The primary insurance policy is that which covers the driven automobile, which would be New York Fire and Marine. ii. Pro Rata, Other Insurance Clause: This is where the other insurance clause says that if there are two policies that provide equal coverage (two primary policies or no exclusion to the non-primary policy that would limit its liability) the insurers bear liability in proportion to the total amount of liability coverage against their limits. It is just a ratio. This is the way to apportion who pays what. In a primary insurance policy, where the other insurance clause provides for this pro rata apportionment between two equally liable policies, it is a pro rata other insurance clause. 1. Example: More than one policy provides coverage. One policy provides a liability limit of $10,000, and the other policy provides a liability limit of $20,000. The total coverage has a liability limit of $30,000. The first insurer is liable for 1/3 of the judgment, and the second insurer is liable for 2/3. iii. Excess: The insurance carrier says that it will not provide coverage for a non-owned automobile that is otherwise covered under another insurance policy. It provides only excess coverage for the non-owned vehicle that has a primary insurance policy covering it. The primary coverage is for the owned vehicle operated and involved in the accident.

1. Incontestability Clause: Life policies have many unique clauses in them. By statute, the legislature has required that every policy of life insurance has a provision of incontestability in it. If the company wants to challenge the validity of a policy, it must do so within the first two years of the policy. The only thing that can be brought up as a defense after the first two years is default on payment of premium. Issued on the date it was delivered. Contestability has to do with the suicide provision or incontestability provisions.

a. Purpose: It puts the insurer on notice that it must make sure the factual representations and such are valid within the first two years. It makes the insurance company investigate its risks further if it chooses to, but to limit this to the first two years. b. Jackson v. Continental Casualty Company: Philip Jackson was a LSU employee, who had life insurance through the group policy provided by LSU, as the employer, and Beulah had life insurance under the policy as his "spouse." i. Defendant's Defense: It says that it doesn't have to pay proceeds upon the death of Beulah because she doesn't apply to the definition of "spouse" because she was never legally married to Jackson. ii. Individual Life Policies: insure one person's life. iii. Group Policies: require that you fall within the group to be insured by the policy. Group policies insure the member of the group, as well as "spouses and minor children." This is what the statute says, and this is what the group policy itself said. iv. Question for the Court: Jackson and Beulah were not legaly married, but they had lived together, and she was dependent on Jackson, for 35 years. Therefore, this insurance policy has covered Jackson and Beulah for 35 years. 1. "Spouse" Irrelevant: Is the insurance company, under Watson's reading under the meaning of incontestability, able to challenge Beulah as an insured after two years? No. 2. Validity v. Incontestability: Is Justice Watson saying this was a validity over the coverage issue? Or was it simply the insurance company being barred because of the incontestability clause? 3. Technical Problem: The fact that the couple wasn't legally married was a technical problem, and the incontestability clause should apply because the risk of the insurance company was not increased, and the two years had elapsed. v. Justice Calagero's Concurring Opinion: He says that he wouldn't go as far to say that not being legally married is only a technical problem, but he would say the incontestability applies here, so the two years have elapsed, and the insurance company cannot defend on validity. vi. Justice Dennis Concurring: You can't challenge coverage after the contestability time period has expired, so this insurance company was prohibited from defending itself on invalidity. 1. Coverage Instead of Validity: He says that the company was challenging the coverage of the policy, not the validity, and coverage is estopped by the incontestability clause. vii. Justice Blanche Dissenting: "Spouse" means "spouse." The statute and the policy contain language that, in order to extend life coverage beyond the employee who is a member of the group, requires the person to be a spouse or minor child. These words must have some sort of specific meaning. He makes an obvious statement that "hard facts make bad law." The fairness aspect says that Beulah should be considered a "spouse" since she has lived with Jackson for 35 years, so the equities weight in favor of allowing it and saying no difference really exists, but what about the statute and the language in the policy? He says the words mean something different from what the majority defined "spouse" as. 1. Hard Facts Made Bad Law: He says the majority made the wrong decision on equity because of the hard facts of the case. He would abide by the actual language in the statute and the policy, which is a different meaning that that which the majority applies.

1. Issuance of the Policy:

a. Requirements for Policy to become Effective: b. Coci v. New York Life Insurance Company: The deceased took two life insurance policies on his life. The second one is at issue in this case. The requirements for the insurance to be effective are the payment of the first premium and the delivery of the policy. i. Premium: Ordinarily, you give the agent the check for the first premium, which goes to the home office of the insurer. This case was different. The insured paid the premium by giving a promissory note to the agent, who then paid the premium to the insurer. The court said that the insured is only connected to the agent through the promissory note, and then for the premium, the insurer is connected to the agent. ii. First Policy: is not in dispute. iii. Second Policy: The agent suggested that the insured apply for a second policy now so that he doesn't have to do a new medical exam. Between the time the policy was delivered to the home office and the time it was personally delivered to the insured, the insured passed away. The idea was to make the second policy retroactively effective on the same date as the first policy. 1. New York Life: They had no argument in regard to the first policy. On the second policy, there was no issue about the method of payment of the first premium, but there was discrepancy of the delivery. 2. Delivery: New York Life mailed the policy on December 11 to the agent, who was then to deliver the policy to the insured. The day before the policy was personally delivered to the insured, the insured passed away. 3. Question: Which date of delivery was the date on which the policy went into effect? At the time of delivery, the insured must be in good health for coverage to apply. Does delivery mean mailing it to the agent, or does it mean actual delivery to the insured? If it is mailing to the agent, the insured wasn't in the hospital yet, so he was in good health. If it was personal delivery to the insured, he was in the hospital and no longer in good health. iv. Delivery Analysis: The court looks at the insurance policy/contract and the application, which do not say the same thing. Is there a statute that governs this? No, but the general rule is that the policy becomes effective when the first premium is paid and delivery is made. The policy was mailed to the agent, and there was no language in the policy saying that physical delivery to the insured was required, or that the good health of the insured was required. 1. Application: If the application applies, the policy would not have been delivered because it says, "received by me during my lifetime and good health..." 2. Insurance Policy: The policy itself says something different. The court looks to the insurance policy as the contract between the insurer and the insured, and the contract says that the policy is effective as of the 14th day of delivery. It says nothing about effective delivery or the insured being in good faith. 3. Contractual Interpretation: Physical delivery of the contract is not essential unless the contract requires it, so mailing to the agent is the "issuance of the policy," as long as the first premium has been paid. 4. Inconsistent Language: in the policy and application is interpreted by looking at what the contract itself says. v. Question of Issuance: can be governed by what the policy/contract says. You look to the policy language to see what the requirement is. How the policy is issued, and what the delivery is, is part of the contract. c. Pruitt v Great Southern Life Insurance: "That the insurance hereby applied for shall not take effect until a written or printed policy shall have been actually delivered to and accepted by me, while I am in good health..." The Pruit application required actual delivery to and acceptance by the applicant. d. Mauroner v. Massachusetts Indemnity and Life Insurance Company: The application for the policy was filed on November 6, 1981. The policy wasn't issued until February 4, 1982. The agent messed up the policy type on the application, so MILICO called back inquiring into this. There was a long delay in MILICO's issuing the policy. It took 92 days for the delivery of the policy to take place. In January of 1983, the insured committed suicide. If the insurer had properly processed the policy application and issued it with 56 days, the issuance date would have been more than two years before the suicide of the insured. There is usually a two-year suicide clause in the life insurance policy. Can't be less than two years. Suicide is almost always circumstantial. Need to exclude all other reasonable hypotheses for the cause of death is a pretty significant burden. Direct evidence: statements of despair, notes. i. Trial Judge: The trial judge used the application date as the issuance date, which was very arbitrary. He basically made the issuance date retroactive to the application date, which made more than two years lapse before the suicide, which did away with the two-year suicide clause. ii. Court of Appeal: doesn't agree with the trial judge about retroactively setting the issuance date on the date of application. iii. Tort: The court of appeal doesn't allow the application date to be the date of issuance, so there is no contract claim. The court of appeal finds a claim in tort for negligence of the insurance company for its unreasonable delay in issuing the policy. 1. Unreasonable Delay: The court goes through an analysis of the duty of the insurer to not unreasonably delay an action. When you look at the facts, there was no good explanation for why the company did not issue the policy sooner. They had a standard of 56 days for issuance, and the agent may have submitted the form with the wrong policy type on it, but besides that, the company had the information it needed to issue the correct policy. MILICO's delay in issuing the policy was the company's own fault because it breached a duty to the insured to issue the policy is a reasonable time. a. Obligation of Insurer: to the insured is to reasonably process the application of the insured. 2. But For: the unreasonable delay, the policy would have been issued earlier, and the suicide would have been outside the two-year suicide clause of the policy, and the insured's beneficiary would have gotten the policy proceeds. e. Tort Action for Unreasonable Delay: Thomas v. Life Insurance Company of Georgia: There is a remedy in tort against the insurer if a breach, causation, and damages are established. "There is a remedy in the form of an action in tort for unnecessary and negligent delay in performing the duty of acting on the application within a reasonable time if, by such delay, an insurable application is prevented from procuring insurance, thus causing a loss." "It is necessary for the plaintiff to prove both (1) that there was unreasonable delay in the processing of the application, and (2) that the applicant was insurable."

1. Arson: It is important for whether the insured has coverage under a policy either directly or over the loss payee coverage. Either the insured makes a direct claim to the insurance company with no mortgage creditors, or the insurer pays the mortgagee and is subrogated to the rights of the mortgagee to get payment back from the insured.

a. Rist v. Commercial Union Insurance Company: Rist institute this action to recover under a ten thousand dollar fire insurance policy issued by Commercial Union after his vacant home was totally destroyed by fire. Even if the policy doesn't say it does not pay for arson, it says that the insured promises to not do intentionally, or have knowledge of a circumstance, that increase the hazards on the policy. i. Commercial Union Denies Coverage for Arson: The insurer asserted the affirmative defense of arson (has to be specifically pled) and says no coverage exists under the policy. ii. Burden of Proof: The standard of proof is preponderance of the evidence. The two things they must prove are (1) the fire was of incendiary origin and (2) that Rist was responsible for the fire. Circumstantial evidence is fine, but the definition of such evidence involves excluding any other reasonable hypothesis. iii. Circumstantial Evidence: 1. Incendiary Origin: The gas and electricity were off at the time of the fire, the windows were blown out, the fire started from inside the house, and the fire marshal says that the investigation showed there had to be some type of accelerant to start the fire. The notion that there was incendiary origin was proven by circumstantial evidence. 2. Rist's Resonspibility: "We reach this conclusion finding first that Rist had a motive for destroying the house. His poor financial condition, inability to sell his house at a time when he no longer used it as a residence, and recent purchase of a fire insurance policy that equaled the value of his home are certainly indicative of a motive to commit arson. Additionally, the replacement of Rist's new furniture and appliances with older items a few days before the fire, combined with the attempts to disguise those acts in order to obtain a greater sum from the insurer, is most incriminating." b. Osbon v. National Union Fire Insurance Company: Pauline and James Osbon were married. They got divorced in 1968. Mrs. Osbon goes and buys this house and gets it insured in 1971. They get remarried in 1978. The house burns in 1990. Originally, both Pauline and James Osbon were plaintiffs in the suit, but they removed James from the litigation. i. National Union Fire Claims Arson: The policy uses the term "an insured." Under the warranty of increasing physical/moral hazard to the property, since James was "the insured," and he set the fire, Pauline is denied coverage. This doesn't work for the court. ii. Issue: whether Pauline Osbon is barred from recovering under the policy issued by National Union because her home and its contents were destroyed by a fire intentionally set by her husband, James Osbon, Sr. iii. Court's Analysis: The standard fire policy uses "the" insured in the increase moral/physical hazard warranty, which limits the insured to "the" insured who set the fire. The provision of National Union runs contrary to the standard fire policy because "an" insured is broader in coverage than "the" insured, so it is not equivalent to or exceeds the standard fire policy. 1. "The" Insured Applies: The insured is Pauline, who did nothing to cause the fire, so she is not denied coverage. The court ultimately says that the policy language violates the statutory standards of the standard fire policy, so the standard fire policy must be used. The court refuses to enforce National's policy language, denies defense by insurance company, and judges in favor of the wife. 2. Policy Language: The one worded modifier of "insured" means coverage or no coverage. You look for a statute that provides the coverage, and if it controls, you look at it first, and then compare it to the policy. If the policy controls, you look at the policy itself and find it either ambiguous or not.

Insurable Interest:

a. Rube v. Pacific Insurance Company of New York: Rube is working for a finance company, and her brother is in the navy. She arranges the loan for her brother from the finance company, and he signs the loan and buys the car in his name. The finance company wants to be insured against loss. If the brother doesn't pay, they want to be protected. Rube calls the insurance company to get insurance for her brother. She initially calls during the weekend and the provider "binds" her. She gets in touch with the insurance carrier the next week, and they say that they cannot insure the brother because he is in the navy. It is suggested that Rube convey the vehicle to herself and then become the named insured. i. Rube's Oral Promise: Rube promised the employer that if her brother didn't pay, she will pay in his place to induce the employer to loan the money. Even if, by confirming this oral promise in court under oath, it occurred after the loss occurred. 1. Insurable Interest as Surety? Could she make an argument that as the surety on her brother's debt, she had an insurable interest in the property? The court said they only had parol evidence of the suretyship agreement because it was never reduced to writing. The fact that she made the oral commitment did not give her an insurable interest in the automobile. ii. Timing of Insurable Interest: Insurable interest has to be in place at the time the policy is issue, as well as at the time the loss occurs. iii. Lesson from Case: You have to have an insurable interest in the property at the time the policy is issued and at the time the loss occurs. Being a surety does not give the person an insurable interest. iv. Claim of Estoppel: The legislature says you have to have an insurable interest. If you don't, even if it may be because of the acts of the insurance carrier, you still don't have an insurable interest. Therefore, the estoppel is overridden by the fact that you did not have an insurable interest. b. Note Cases: i. Knighten v. N British and Merc. Ins. Co: The plaintiff built a house on jointly owned land, and after partition, the plaintiff did not own the lot upon which the house was situated. "The transfer did not contemplate a change in ownership of the improvements which the plaintiff had erected on the jointly owned land but only a division in kind of the undivided ownership of the land inherited from the father. Hence, under these circumstances, it cannot fairly be said that the plaintiff did not retain an insurable interest in the house built by him with his own money and from which he always collected the rentals." ii. Rigdon v. Marquette Casualty Company: The son built the house on his father's property. The insurance agent suggested that he policy be issued in the father's name. iii. Brewster v Michigan Millers Insurance Company: The plaintiff conveyed the house to his sons, but he retained possession and control of the house, living in the nature of the usufructuary. The court found that he had "substantial economic interest in the preservation of the house, which he had built on the property and over which he retained the right of occupancy and the right of control, including collection of rents. Further, there is a complete lack of evidence that [plaintiff] was attempting to circumvent any law or that there were any elements of a wagering contract in the policy." iv. Givens v Southern Farm: The plaintiff bought a tractor, which he insured. He sold the tractor to another person in a credit sale secured by a chattel mortgage. "While in the possession of the buyer, the tractor was destroyed by fire...The court held that the plaintiff, as a secured creditor, had an insurable interest at the time of loss." 1. Secured Creditor v. General Creditor: Givens was a secured creditor because he had a mortgage on the tractor. The promissory note evidenced the debt, and the mortgage was in the tractor itself. He has a security interest in the specific piece of property. v. State Farm v. Price: The court found that the insured had an insurable interest in the automobile, even though he had stolen it. c. Agency Management Corporation v. Green Acres Realty: i. Issue: The four insurance agencies are questioning whether or not they have the duty to pay because Lawless was paying the premiums on the policy, and the owner of the building was Green Acres. There were a couple of mortgage holders who were jumping in and saying they owned the building because of their security interest in the property by virtue of mortgage, so they should be paid. ii. Lawless's Insurable Interest: The policy is issued to Lawless, and the building is owned by Green Acres, so who has the insurable interest? Lawless has insurable interest in the property because he paid the premiums personally, was the principal and controlling stockholder in Green Acres Realty, the owner, with 64% of its stock and having a substantial investment in both time and money in the insured property. iii. Third Party Interest: The insurance contract is a "personal contract." 1. Personal Contract: People who hold a mortgage on the real estate do not necessarily stand to benefit from payments made under the policy because the policy does not attach to the thing/property. 2. Mortgage Status: If you go and buy a home and finance it, there will be a mortgage pledged by you to secure the debt. The people who loan the money want to be protected in the event of a casualty loss. They can't foreclose on the property because it has been destroyed, so they typically insist on a mortgage clause or loss of payee provision in the insurance policy that gives the mortgage holder a contractual right to some of the insurance proceeds. In order to get some right in the car or land, the contract has to have a provision that gives the mortgage holder that right. This is why Givens had an insurance right in the tractor.

Yagel v. Sanders:

a. Sanders owns a pickup truck, which he is using to pick up lumber to repair his trailer/flatbed. His testimony is that he was using the truck as a substitute for the flatbed, and there is language in the flatbed insurance coverage policy that provides coverage for the substitute or loaner vehicle. The truck was a substitute for the trailer, so there is coverage under the trailer policy for damage caused by the operator of the truck. This is important because either (1) there is no insurance coverage for the truck; or (2) the policy limits under the insurance policy for the flatbed are higher than the policy limits on the insurance coverage of the truck. "The court held that SAD did not own the pick-up and that it was 'used for a limited time and in the same capacity as the vehicles insured under the policy in question.'"

1. First Party Remedies Under §1973: Generally speaking, the damages are tied to the amount in dispute, but §1973 is much broader in scope.

a. Statutory Duties, Damages and Penalties: i. Duties: Duty of good faith and fair dealings. ii. Damages: "Insurer who breaches these duties shall be liable for any damages sustained as a result of the breach." iii. Penalties: "In addition to any general or special damages to which a claimant is entitled for breach of the imposed duty, the claimant may be awarded penalties assessed against the insurer in an amount not to exceed two times the damages sustained or five thousand dollars, whoever is greater...' iv. If the company cannot articulate a reason to not settle, insured may have a cause of action for breach of the duty. Always gonna be a thought of bad faith claim when there is an excess judgement. Prescriptive period for bad faith claim is 10 years because it is technically a contract claim. b. What Damages are Recoverable Under §1973? It is not an equitable remedy at the discretion of he court. i. Pecuniary Damages: ii. Non-Pecuniary Damages: The limits on these damages depends on the nature of the case. c. Do the "Damages Sustained" Include the Insurance Claim? i. §1973 Penalties in Absence of Other Damages: ii. No Penalties on Insurance Claim:

1. Insurance on Property: We now will be talking about insurance that provides for coverage on claims arising out of the ownership of property. This is first party insurance. This insurance is bought to protect the property against certain kinds of losses. If you have collision insurance on your automobile, it is designed to pay you, the insured, on damages to your vehicle.

a. Statutory: La RS 22:614: (a) b. Insurable Interest: This term applies to certain coverages on persons. An insurable interest is required so that the person cannot buy a insurance policy that covers another person's house, wait for that house to burn down, and then cover damages for it. We don't want society to be able to go around betting on insurance when they have no economic interest in the property. The policy of insurance cannot be valid unless the insured has an insurable interest in the things insured. (a) No contract of insurance on property or nay interest therein or arising therefrom shall be enforceable except for the benefit of persons having an insurable interest in the things insured. (b) "Insurable Interest" as used in this section means any lawful and substantial economic interest in the safety and preservation of the subject of the insurance free from loss, destruction, or pecuniary damage. i. Examples: Owner; usufructuary; tenant. The tenant has to have a specific economic interest in the specific property in order to have an insurable interest. A general creditor is usually not a person with an insurable interest.

1. Sound Health and Preexisting Conditions: The medical information, demographic information, etc. all play into the underwriting decision and the amount of premium the insurance company will charge. The life insurance companies are attuned to the sound health and preexisting conditions of insureds.

a. Swain v. Life Insurance Company of Louisiana: i. Credit Life Insurance: is life insurance of which the beneficiary is the holder of some debt for which you are liable. It will pay someone you owe money to in the event that you die. If you die while there is still a balance due on the debt, the insurance company will pay that balance off. You can debate with people over whether the cost of this insurance is reasonable in light of the risk. The insurance company's risk diminishes over time, while you make payments on the debt. The insurance company says it will insure your life to the extent you owe money to a certain debtor. ii. Application for Policy: When the couple went to fill out a life insurance application, the man was on crutches, and he was not asked any medical questions, nor was he asked to take a medical examination. Mr. Swain was not instructed or requested to read the credit life application form, and he did not read it. He merely signed the application when it was presented to him with the other papers that required his signature. iii. Misrepresentations: For an insurer to avoid liability on the grounds of misrepresentation in a life insurance application, it must establish that false statements were made with an actual intent to deceive and that the misstatements materially affected the risk assumed by the insurer. 1. Didn't Meet Burden of Proof: The agent filled out the entire form, and the insured only signed it, so this cannot meet the burden of proof. You cannot say that the insured knew of the misstatements. "The insured cannot avoid liability on grounds that the information contained in the application was not correct." The insurer presented no evidence showing an actual intent to deceive. iv. Sound Health: "The evidence necessarily supports a conclusion that this clause was waived by the agent's actions." 1. Burden on Agent: to make the right inquiries, instead of making the insured voluntarily express his health issues without being asked about it. "The insurer cannot deny coverage on the basis of a 'sound health' provision when its agent had reason to suspect that the insured's health was dubious, yet accepted the premiums and issued the policy without requiring the insured to read and fill out the application form and without initiating inquiry or investigation into the insured's condition." 2. Inquiry Notice: The crutches should have at least put the agent on notice that Mr. Swain had a noticeable health problem. He stayed in the office when the wife and the agent went to look at the car. This underpins the decision. 3. Clear and Convincing Evidence: "The courts in this state require clear and convincing evidence that the insured was not in sound health on the effective date of the policy before rendering a life insurance policy ineffective on the basis of a 'sound health' clause." "There was no medical expert testimony in the record that would classify Mr. Swain's health on the day the policy was issued...The only evidence of Mr. Swain's condition on the day the policy was issued was Mrs. Swain's testimony that he was doing very well." v. Preexisting Condition: "There is no doubt that Mr. Swain had been diagnosed with heart disease prior to purchasing the policy; however, this was not the cause of death...There was no evidence, either by medical records or testimony, showing that Mr. Swain had contracted lung cancer before the credit life insurance policy was issued." The defendant did not meet its burden. vi. Underpinnings: 1. Burden of Proof: of the insurance company was not met. 2. Agent: didn't do what the agent should have done. If he would have asked the right questions, the premiums would have been higher or the policy would have been denied. b. May Company, Inc v Riverside Life Insurance Company: May Company wants security on the debt of Shirley, so Shirley gets credit life insurance to pay off her debt upon the event of her death. i. Insurer Met Burden of Proof: She died of her preexisting condition within the first two years of the insurance policy. ii. Preexisting Condition Clause: "PRE-EXISTING CONDITION: any sickness the Debtor had during the one year period before the certificate went into effect is not covered during the first two years of coverage. These are conditions for which medical advice or treatment was given or distinct symptoms evident." 1. Two Time Periods in Play: The first is "one year before the insurance went into effect." There must have been a sickness (in this case the lady was treated for kidney and liver disease) that the insured was treated for within one year before the policy going into effect. The condition has to exist within a year prior to the policy, and she has to die within two years of the policy being issued. If both of these are met, the insurance company doesn't have to pay. 2. No Public Policy Against: the preexisting condition clause. 3. Policy Language: drove this decision. It was not ambiguous, so the court did not have to interpret or find coverage. iii. Question of Contract Interpretation: "The so-called preexisting condition defense, unlike the misrepresentation defense is a question of contract interpretation. The availability of the defense is not dependent upon statements made by the insured in the application; the question is whether the policy excludes coverage for preexisting conditions."

Co-Insurance: We are talking about the insured having responsibility for some of the payment. If you have a medical insurance policy with a copayment provision, this is considered co-insurance. Louisiana law prohibits co-insurance under a fire policy. The insurance company cannot make the insured pay part of the damages unless the policy clearly tells the insured how the value will be divided

a. Typical Co Insurance Clause: "This Company shall not be liable for a greater proportion of any loss to the property covered than the amount of insurance under this policy for such property bears to the amount produced by multiplying the actual cash value of such property at the time of the loss by the co-insurance percentage applicable." b. Computation: For example, lets say that the Actual Cash Value of the property is $1,000,000, the insurance limit is $400,000, and an 80% co-insurance clause. This means the computation would be ($400,000/(80% x ACV)) x Amount of Loss. c. What to Know: The standard fire policy says no co-insurance is allowed unless it is spelled out in the policy and explains how it will be calculated.

1. Personal Life Insurance: The nature is a personal contract between the insured and the insurance company, under which the insurance company undertakes the obligation to make a payment, upon the death of the insured, to a beneficiary, who has the right to get the proceeds of the policy. The beneficiary is not ordinarily a party to the contract.

a. Warranties: This is primarily property insurance. It includes conditions that the insured must do after the policy is executed. b. Representations: This is usually based on representations in the application for the policy, so it happens prior to the execution of the policy. A factual misrepresentation can invalidate the insurance.

3. Judicial Interests and Costs: Judicial interest is the interest the law requires a defendant to pay, under Title 13, for tort related damages, rendered from the date of judicial demand (date a lawsuit is filed) until paid. The rate of that interest is fixed by statute, and it is tied to the rule promulgated by the commissioner each year. The rate is based on a specific calculation. It has been running at about 4% lately.

a. What's the Liability of Insurance Carrier to Pay Interest? You must read the policy language first. In general, the insurance carrier is required to pay interest on the amount of judgment that is within its policy limits from judicial demand. What do we do when the judgment is in excess of the policy limits? b. Soprano v. State Farm: "The court then proceeded to hold that when a policy of insurance provides for interest at a lesser rate, or for a shorter term, than the law fixes, it is in contravention of the law providing that interest shall run from date of judicial demand (Act 206 of 1916, now LSA-R.S. 13:4203). That law, the court held, should prevail over policy provisions to the contrary. This has been the law of Louisiana for more than twenty years." i. Obligation of Insurer: He must pay legal interest on the policy limits from the date of judicial demand because that is a sum that the insured is legally obligated to pay. They are obligated to pay this interest until they pay the policy limits plus interest to the plaintiff. The insurer and insured are solidarily obligated to pay the same thing. It would be a contravention of law to let the insurer say the policy limits includes the interest it must pay because, in the view of the court, this takes away policy limits, which are supposed to be in favor of the insured. c. Doty v. Central Mutual Insurance Company: i. Reason for Requiring Insurer to Pay Interest on ENTIRE Judgment: "The reason for the provision is to prevent the insured from being prejudiced by the delay in payment of the judgment, which delay is solely within the control of the insurer...the insured might desire to pay the excess judgment and thus prevent the running of interest, but the insurer's control of the litigation would prevent him from doing so." ii. Analysis: Look at the policy language, which may say the duty to pay interest runs from the date of judgment, instead of judicial demand. This is allowed when it is in the policy dealing with the supplemental payments, which requires interest to be paid on the entire judgment, including interest on the excess amount above policy limits. iii. General Rule: The insurance carrier is liable for the interest on its policy limits from the date of judicial demand, until the policy limits and interest (over and above policy limits) are paid by the insurer. As to amounts in excess of the policy limits, the supplemental payment provisions of the policy ordinarily require the insurer to pay interest either from judicial demand or date of judgment (depending on the policy language) on the ENTIRE judgment amount until it pays its policy limits and interest.

1. First Party Recovery Under Both §1892 and §1973:

a. §1892 Penalties and Attorney Fees are Mandatory: The unreasonable failure to pay timely "shall subject the insurer" to the 50% penalty and reasonable attorney fees. 6. §1892 ••• Other Requirements and Penalties: a. Pay Written Settlements ••• 3rd Parties Only: Insurers shall pay the amount of any third party property damage claim and any reasonable medical expenses claim due any bona fide third party claimant within 30 days after written agreement of settlement. Unreasonable failure to pay subjects insurers to penalties and attorney fees. b. Initiate Loss Adjustment ••• 1st and 3rd Parties: The insurer can't simply sit on claims information and not do anything for 11 months and take action right before prescription. They must initiate loss adjustment within a reasonable amount of time. c. Offer to Settle Property Damage Claim ••• 1st and 3rd Parties: d. Arson ••• 1st Parties Only: e. Vehicle Loss of Use ••• Third Parties Only: f. Payment by Check or Draft ••• 1st and 3rd Parties: g. Auto Repairs ••• 1st and 3rd Parties: h. Duties Owed Third Party Claimants: 7. §1973(B) ••• Breaches of Insurer's Duties of Good Faith and Fair Dealing: a. Misrepresentation. b. Settlement. c. Application. d. Prescription. e. Failing to Pay Timely. f. Immovable Property Claims.

a. Warranty: The warranty imposed some duty on the insured in order for him to cover, which occurs post-policy issuance. Whether or not the insured was going to do the duties didn't affect the issuance of the policy, but they affect the coverage at the time of the event.

i. Anti-Technical Statutes: Anti-technical statutes were used in this sense for property insurance policies. The anti-technical statutes do not apply to representations, only warranties. b. Estate of Borer v. Louisiana Health Service & Indemnity Company: i. "Preexisting Condition": It is in the nature of an exclusion of coverage, as opposed to a representation. Is this a representation of some kind, made by Mr. Borer at the time the policy was taken out? Or was it something else? ii. Exclusion: Contract Interpretation: The preexisting condition was a question of contract interpretation and not a misrepresentation defense. Representations are statements made by the insured to induce the insurer to insure him. This is not what the insurance company was trying to use as a defense. The only time the misrepresentation argument would apply is if the insurance company had attached the application to the policy and could then use the application as evidence of a false statement. iii. Conclusion: "The defendant has not invoked the defense of misrepresentation...The defendant seeks to prove that, because of an exclusionary clause in the contract, the instant claim is not covered by the contract. Presentation of this defense is not dependent upon statements by the insured in the application, and failure of the insurer to attach the application to the policy does not preclude assertion of this defense." c. Knight v. Jefferson Standard Life Insurance Company: i. Misrepresentation: There is an application attached to the policy, and therefore, the insurance company can raise the defense of misrepresentation because the application can be used in evidence. This means that the policy lacks consideration or was reduced by fraud, so it is void if there was an actual misrepresentation. ii. Insurance's Argument: They say the policy is void because Knight made misrepresentations on the policy application. iii. Standard for Misrepresentation Defense: "In order to invalidate a life insurance policy due to false representations in the application such representations must have been made with an intent to deceive and the facts misstated must be material to the risk and hazard involved." 1. Question: Did Knight make the misrepresentations in the policy application with actual malice? And did it increase the hazard, or materially alter, the risk of the insurance company? 2. The Application Itself: The only thing on the application in Knight's handwriting was his signature. The court is suggesting that the agent has the duty to ask the right questions and get the right answers. Maybe the agent didn't ask the right questions and explore what he needed to. 3. Knowledge at Time of Application: The increase in the risk was the diagnosis of Hodgkin's Disease, but he didn't get diagnosed until after the application was filled out. The court focused son what was known, and should have been disclosed prior to the application and not afterwards. a. Timing: "The court must make a determination as to the knowledge of the patient at the time he applied for the policy and not based on other evidence that came to light subsequent to the day." 4. Materiality: If someone answers yes to a question, the insurance company investigates to make sure the risk is not material. iv. Knight Did Not Misrepresent with Intent: The statute requires both falsity and materiality, and the court finds that the misrepresentations in this case did not alter the materiality of the risk. d. Topps v. Universal Life Insurance Company: The wife wants the proceeds of an insurance policy, as the beneficiary, and the insurance company denied the claim. i. Knowledge of the Insured: Topps lies. He answers in the negative to many questions on the application that he should have answered yes to. Even his own physician says that Topps knew he had high blood pressure and had been treated for it constantly for many years. He lied to the insurance policy in order to get a lower premium, and to get coverage in general. ii. Importance of Application: After Topps dies, and his wife files a proof of claim for the benefit, the insurance company does some investigation and gets more medical records. They notice that certain things were never disclosed to the company. With the application being part of the policy, and now admissible by statute, this is the basis for saying that this misrepresentation should make the policy null and void. iii. Burden of Proof on Insurance Company: It has to prove that he lied, and he knew it, and that it affects the insurance company's risk materially. "The burden of proof is on the insurer to prove, in addition to the falsity of the statement made, the following two elements: (1) materiality and (2) intent to deceive." 1. Company Put on Notice: If he had answered the questions correctly, the company would have had the opportunity to investigate the risks. It made the likelihood that the company would have to pay a death benefit greater. "The trial judge found that the misrepresentations made by Mr. Topps were material in affecting the insurer's decision to enter into the insurance contract; they materially affected the acceptance of the risk or hazard assumed by the insurer." e. Carlisle v. Washington National Insurance Company: The insurance agent filled out the entire application, and Mr. Carlisle only signed it. Witnesses to the application process said that they heard Carlisle tell the agent that he had been hospitalized, and that the agent was the one who put no on the application. i. Shift of Burden of Proof: "Although the responses in the application for insurance were in fact inaccurate, once the plaintiff had produced evidence placing the blame for the misstatements upon the agent for the insurance company who transcribed all answers to questions contained in the application form, then the burden rests on the insurer to prove the false statements were made by the insured with intent to deceive and the information not included was material and would have affected the issuance of the policy." 1. Agent of Insurer: "When the agent of an insurer, acting within the scope of his authority, proceeds to fill out the blanks in an application for a policy of insurance, the acts, representations and mistakes of that agent are considered to be those of the insurance company." ii. Credibility Issue: The agent of the insurer gave inconsistent testimonies at trial. The agent's testimony is not worth of belief, so the insurer did not carry its burden of proof of falsity and malice.

a. Graves v. Traders & General Insurance Company: Bell was driving a school bus for his employer Collins, who owns a bus that is under repair. Traders provides coverage for Collins' bus. At the time of the accident, Bell was driving a vehicle that was a temporary substitute borrowed from Superior Coach Sales, Inc. Travelers provides coverage to Superior Coach.

i. Background: Bell, Collins' employee, is driving a temporary vehicle borrowed by Collins from Superior Coach and gets in an accident with the plaintiff. ii. Mutually Repugnant: The court found that the other insurance clauses in the two policies are "mutually repugnant." As a result, the court found that both policies provided primary coverage, so it was a pro rata apportionment of liability. 1. Traders' Policy: "provided, coverage with respect to temporary substitute automobiles shall be excess insurance over any other valid and collectible insurance." The policy is saying that if you are driving a temporary substitute vehicle, its policy is excess coverage for the accident. 2. Travelers' Policy: The policy had a broader other insurance clause. "Only if no other valid and collectible automobile liability insurance, either primary or excess, with limits of liability at least equal to the minimum limits specified by the financial responsibility law of the state in which the automobile is principally garaged, is available to such person." It says that its policy will only apply if there is no other valid insurance coverage. This is an escape clause that is designed to allow Travelers', in a situation like this, to get out of liability where there is other valid and collectible insurance provided to the driver of the vehicle. 3. Repugnant: The Traders' policy says it is only excess to the insurance covering the vehicle, but the Travelers' policy, which covers the vehicle driven, says it only applies if there is no other insurance coverage. The court says they are repugnant because if you allowed both other insurance clauses to be given effect, no insurance policy would cover the plaintiff's injuries. The clauses were mutually repugnant, because they both have a pro rata provision in the other insurance clause, the court applied this pro rata provision. 4. Difference: There is a difference between the excess provision (Traders), the escape provision (Travelers), and pro rata provision. Almost all other insurance clauses in a policy will have a pro rata provision. An excess clause will say that they apply pro rata for other insurance situations unless it involves a temporary, non-owed vehicle, in which case their coverage becomes excess, not primary. An escape clause tries to take away all liability of the insurance carrier when another insurance provider is available to the plaintiff. 1. La RS 22:1291: This reverses the primary, excess relationship in Slocum. No matter what the policy provisions say, the insurance covering the driver of the vehicle is the primary insurance provider. "Notwithstanding any provision of the policy, the primary liability, physical damage, or collision coverage fro a loaner vehicle shall be the policy of the driver, not the policy of the vehicle sales or service dealer who provided the loaner vehicle." 2. La RS 22:1296: "Every approved insurance company, reciprocal or exchange, writing automobile liability, physical damage, or collision insurance, shall extend to temporary substitute motor vehicles as defined in the applicable insurance policy and rental motor vehicles any and all such insurance coverage in effect in the original policy or policies..."

a. Excess: Just because there is a potential for excess judgment does not mean that the same lawyer cannot represent both the insured and the insurer. The insurance carrier will write a letter to its insured saying it is defending the case but its policy limits are [$100,000]. The plaintiff's claims may exceed this amount, and you may wish, at your own cost, to hire counsel to represent you on the excess judgment. The same lawyer represents the insurer and the insured for the most part.

i. Bad Faith Insurer: The insurance carrier may be subjected to a claim of bad faith if it puts its insurance ahead of the interest of the insured. This can become somewhat acute if the plaintiff demands settlement in its policy limits that will release the insured. The insurer must decide whether it wants to settle on the basis provided by the plaintiff or continue the litigation, which may cause an excess judgment against the insured. The insured may say to the insurance company that it likes the idea of the settlement, so he wants the carrier to pay policy limits so that the insured is not liable for excess limits. 1. Question: The question is whether it is reasonable for the insurer to reject the settlement and try the case under all the facts and circumstances. ii. Situation of Attorney: The insured wants the lawyer to demand settlement on the insurer. The lawyer is being asked to make a demand on its other client in the case, which gives rise to the same kind of conflict of interest that the lawyer and insurance carrier are faced with when the carrier wants to reserve its right to challenge coverage. 1. Conflict of Interest: Now, whose interest does the lawyer put ahead of the other? How does he protect the interest of the insured, who is his client, while at the same time protecting the interest of the insurer, the other client? The courts have not found this to be a per se conflict of interest, but it definitely presents a problem for the attorney. You need to be sensitive to the situations these parties are taking when you represent both the insured and the insurer. 2. Example: The plaintiff is badly injured in an automobile accident and sues four different defendants in a suit. Two defends settle, leaving the insured and insurer in suit. The insured has a policy, which admittedly has insufficient limits for the kind of business risks it is involved in ($1,000,000). The insured is a 100 year old family business that is anything but insolvent with lots of assets. If the insured gets hit with a judgment over $1,000,000, which is the policy limits of the insurer, the insured will be liable. They are going to have to worry about posting a bond, as well as an excess judgment. The insured launches into a campaign to get the insurer to settle for $1,000,000. The attorney, representing both the insurer and insured, is in a bad situation. The insured was unhappy, the insurer didn't know what to do, and the insurer hired another lawyer to be a liaison for the insured, which ended up being worthless. The problem went away after litigation of the suit because the judgment was for less than $1,000,000. a. What If: What if the judgment at the end of the litigation was for $10,000,000? Think about the position the insured is in at this point. Also, think about the position the lawyer is in, having to protect the interests of both parties. 3. Roberie: The insured was not advised of what was going on in the suit.

Failure to Perform Exclusion

i. Cute-Togs of New Orleans: "The court held that the liability insurer owed blue Cross no obligation because the claim sought recovery for damage resulting from its failure to perform a contractual obligation timely, for which coverage is excluded under the 'failure to perform' exclusion." ii. D & D Pipe and Rentals, Inc.: b. Sistership Exclusion: c. Watercraft Exclusion:

1. Duty to Defend ••• Legal Representation: a. Breitenbach v. Green: The insurance company recognized it had a duty to defend because of the tort claim, but it didn't pay to defend beyond that tort claim. The court decides for the insurance company.

i. Duty to Defend Contract Claim: The insurance company did not have a duty to defend the contract claim against itself. ii. Duty to Defend Tort Claims: If the plaintiff had dismissed the tort claims, then maybe all claims would have been unambiguously excluded, but as long as the duty to defend did extend to one claim, the duty to defend extended to the entire suit. iii. Conflict of Interest for Lawyer: You can't have the same lawyer representing the insurer and insured when there is a potential conflict between them. b. Termination of Duty to Defend: c. Steptore v. Masco Construction Co.: Steptore was injured when a steel cable affixed to the defendant's barge struck him, causing him to fall nine feet to the deck of the defendant's barged. Masco, the defendant, and its insurers were sued by the plaintiff. i. Ocean Marine's Waiver: The insurer hired an attorney to represent Masco, its insured, and itself. ii. Insurer's Waiver of Rights to Contest Coverage: An insurer can waive its policy defenses, including its liability for defense costs, if it undertakes certain conduct by having knowledge of a possible defense to coverage and failing to hire a separate attorney or to reserve rights to defend itself. When the insurer gains facts that make it adverse to its insured, it is at that point that the insurer must maintain separate counsel for the insured and reserve rights for itself. "When an insurer, with knowledge of facts indicating noncoverage under the insurance policy, assumes or continues the insured's defense without obtaining a nonwaiver agreement to reserve its coverage defense, the insurer waives such policy defense." iii. Jurisprudence Interpretation: The insurance company, if it has a duty to defend, can elect and retain counsel for the insured. What if the insurer tells you it is going to give you a lawyer to defend you, who is on its payroll, and reserve its right to deny coverage? This would bother the insured because the suggestion would come to mind that the insurer is taking advantage of this situation for its own benefit by providing you with a lawyer who has the insurer's interest in mind, not yours. d. Belanger v. Gabriel Chemicals, Inc.: The insured went out and hired its own lawyer because it was concerned with the panel lawyers (list of approved lawyers that regularly defends the company's insureds) because they have the insurance company's interests in mind, not necessarily the insured's. "The court held that Gabriel was entitled to select independent counsel; but under the Cumis endorsement fees 'are limited to the rates we actually pay to counsel we retain in the ordinary course of our business in the defense of similar claims.'" i. Language of Policy: You can probably hired your own independent attorney in certain circumstances, but the language of the policy will restrict the applicability of this general rule.

a. Keatley v. State Farm: The defendant punches the plaintiff during a pickup basketball game. Plaintiff sues Keatley, and the court finds that the defendant, Mahfouz, is liable but his insurance company is not.

i. Exclusion: "The policy provides that personal liability coverage and medical payments to others do not apply to bodily injury or property damage (1) which is either expected or intended by an insured; or (2) to any person or property which si the result of willful and malicious acts of any insured." 1. Broader? The insurance company extended the exclusions for coverage of personal liability under its policy beyond that of the Gaspard case by adding the second clause to the exclusion. 2. Trial Court Only Looked at 1st Clause: The trial court found that the exclusion did not apply, therefore there was coverage, because the defendant may have intended to hit the plaintiff, but there was no evidence that he intended that level of damages to the plaintiff. The defendant did not intend such a severe injury as suffered by the plaintiff 3. 2nd Clause: The court draws on the factual findings of the trial court. This was simply a question of law for the court on whether the exclusion applied to the facts. Intent is irrelevant to this exclusion. Instead, the court looks to whether the conduct constitutes a malicious or willful act. ii. Conclusion: "When a person strikes another from behind without warning or notice, he must have intended for harm to follow. This conduct shows indifference to the consequences that may flow from his actions as well as acting wrongfully and without just cause." iii. Example Of: This is an example of personal liability insurance following the person. The defendant is an insured under his mother's homeowner's policy, and the coverage follows him to the basketball court. iv. Notes: 1. Subjective Intent: a. Material Issue: When coach swung at him with clipboard, the father struck coach in the face, causing severe injuries. The court reversed summary judgment in favor of the insurer, finding that the father's subjective intent was a material issue of fact. b. Substantial Certainty: The court found multiple shots to the body of an unarmed woman from a relatively short distance, couples with the decision to remove her from the car and not to summon police or medical care, showed that the insured "must have expected that severe injuries, including death, were substantially certain to result." 2. Willful and Malicious: The defendant/insured, a customer complaining about foam on his beer, hit the plaintiff/witness at Godfather's Pizza on the side of the head with a crock pot of salad dressing. The court found that the facts alleged, if accepted as true, "clearly established that her injuries were the result of 'willful or malicious acts' committed" by the insured. 3. Different Kind of Degree: "This exclusion applies even if the bodily injury is of a different kind or degree, or is sustained by a different person or property, than that intend or expected." The court held this policy unambiguously excluded coverage.

a. Representation: A representation is usually made in the front end, on the application, and it induces the insurer to do something. Which is the legal standard by which the insurer can deny coverage?

i. Life Insurance Policy Application: The application is usually attached to the policy and made a part of the policy. Unless the application is made a part of the policy, it is not admissible in court. The life insurance company will most always attach the application to individual life insurance policies on delivery to set up the ability to use the application as evidence. ii. Standard:

1. Insurance of the Person: Life insurance, health insurance, disability insurance, etc. are all subject to regulation by the insurance commissioner. 2. Nature of the Contract:

i. Son's Argument: The life insurance policy is a donation mortis causa, which rises at death, and because it is no more than a donation between the father and his concubine, it is null and void. Therefore, the proceeds of the insurance should go to the son's, who are the legatees of their father. ii. Not a Donation: This is an onerous, commutative contract, where someone with the interest in the insured buys a policy and designates a beneficiary, which is the second wife. The court doesn't have to decide whether or not the marriage is legal between the deceased and his niece because this is not a donation. The husband can designate anyone he wants as a beneficiary, and under the terms of the policy, the insurance company should pay the beneficiary. iii. Not a Probate Asset: Life insurance does not pass through the succession of the decedent. "A policy of insurance is not a piece of property, it is the evidence of a contract, the contract being that a certain sum of money will be paid upon the happening of a certain event, to a particular person, who is named in the policy, or who may be the legal holder thereof." 1. Retirement Plan: It requires the designation of a beneficiary as a matter of federal law, and this is controlled just like in the life insurance setting. 2. Public Retirement Systems: The contracts say "pay to beneficiary." 3. IRAs: Things that you might think are part of the decedent's estate may not be part of the estate if they are governed by a specific law, like life insurance, that requires the thing to be given to the beneficiary, not to the estate. b. Failure to Designate Beneficiary: The insurance company wants to know who they are supposed to pay because they have a limited amount of days to pay without incurring a penalty. Ordinarily, the contract of insurance will say that if you designate a beneficiary, and the beneficiary predeceases the insured, the payments will be given out in a certain order. Therefore, the contract provides for such situations. c. Exemption: Life, Health, Disability, and Annuity Contracts: The legislature has weighed in to exempt the proceeds of the insurance policies from the creditors of both the insured and the beneficiary. The proceeds are exempt from seizure. i. Hypo: Dad dies, leaves a life insurance policy with $100,000, and he leaves some property but the estate is insolvent because he owes more than eh is worth. The heirs can accept the succession and may have to pay debts, but the life insurance policy will not be susceptible to seizure by the creditors on the estate. Ordinarily, the life insurance proceeds are exempt from seizure to satisfy the debts of either the insured or the beneficiary. ii. Segregate: Lawyers tell beneficiaries to segregate the money from life insurance policies from the estate to make sure that you have a defense claim that the life insurance proceeds have not been comingled with the money of the estate, so that creditors cannot seize the insurance proceeds. iii. Succession of Romero: "Husband's negligence allegedly causes an auto accident. His wife is killed instantly, and the husband dies en route to the hospital. The husband is the beneficiary under his wife's life insurance policy, which is the only significant asset of his succession. The wife's children from a prior marriage file suit for wrongful death against the husband's succession. Under La. R.S. 22:647, the life insurance proceeds are exempt from any claim against the husband's succession." 1. Sons' Argument: The money from the mother's insurance policy passes to the husband, who is at fault for causing the accident, and the children of the mother want to seize the money from the proceeds to satisfy the debt of the husband to the children in a wrongful death action. 2. Proceeds Exempt: The insurance proceeds are exempt from seizure because they are from an insurance policy, not part of the estate. You must be able to demonstrate that the funds are from an insurance policy, so you must keep the identity separate from the estate.

Bodily Injury Damages

1. Bodily injury is sometimes defined by the policy, and you must start with the policy and compare it to what the statute requires for coverage. If the policy language is more restrictive than the statute, the court says that the statute applies because whatever it says is mandatory, and if the insurer tries to restrict these damages, it is not legal. General and special damages, anything compensatory, rise under bodily injury damages. a. LeJeune Claims: For UM coverage, unless you do something with the waiver, you have the same personal liability and accident limits as the liability policy. Court says that a wife who witnesses an accident, who is entitled to her own damages under LeJeune, is entitled to a separate per person limit under the policy. b. Consortium Claims: The consortium claim is generally part of the per person limit applicable to the injured person. It is a derivative claim, and not an independent claim to damages like LeJeune, so it is included in the single per person limit for the injured person.

Direct Action Statute

1. Only two states have adopted a direct action statute, Louisiana and Wisconsin. It allows the injured person, or the plaintiff, to sue the insured's insurance company directly, in a lawsuit with the defendant insured, without first obtaining a judgment against the insured. a. Importance: The plaintiff, injured person, wants to get money from the tortfeasor/insured, but he has no relationship to the insurance company. It is presumed by public policy that the insurance company provides damages to the injured plaintiff. The direct actions statute shortcuts the process of other states. The injured plaintiff is able to get a judgment directly against the defendant and its insurance company. b. Problems: Which lawyer represents the defendant and the insurance company? What about policy limits? An evidentiary issue arises in every case dealing with how much about the insurance policy can go to the jury. The most problems occur on the defense side. i. Other States like Indemnity: The plaintiff must sue the insured and cannot sue the insurance company. As an injured plaintiff, how do I get to the insurance company with the money? The plaintiff must first obtain a judgment against the insured, saying he is at fault, and then you expect the insurance company to step up and say they are liable for these damages of their insured. This process is clean. The types of things that create evidentiary issues in Louisiana trials, don't exist here. The insurance company provides the defendant a lawyer, but the insurance company is not a party to the case, so no judgment will be issued against it.

Direct Action:

This is the notion of the direct action of a third person, injured by the insured, against the insurer of the insured.

1. Carrier v. Reliance Insurance Company: The plaintiff was involved in an accident with a third party tortfeasor while in the scope of his employment. The plaintiff sued the tortfeasor and got its policy limits, which were insufficient to compensate him for damages, so his own UM coverage carrier pays him to its limits. The plaintiff is against saying he is not fully compensated for his damages, so he is now filing a claim against the UM carrier of his employer because he is in the course and scope of his employment, so maybe he is an insured under his employer's UM policy.

a. Covered Automobiles: The plaintiff tried to argue that he was covered under Section b(5) because the covered auto includes "any auto." If it means any automobile, it means the plaintiff's car because that is what he was driving when he got in an accident during the course and scope of his employment. The court looked at the policy and determined that the covered autos in that section mean specifically designated automobiles defined as covered autos, not any auto. It only covers those automobiles listed on the designation page of the policy. If the plaintiff was operating one of those vehicles, with the permission of his employer, he would be an insured and may be entitled to UM coverage, absent an exclusion, but permission doesn't matter here. But his car is not an insured car, so he is not brought within the ambit of the insured under the policy, so he does not get UM coverage under his employer's policy. b. Business Automobile Policy: Does the employer intend to insure the employee's automobiles for UM coverage? Probably not because that would be literally "any automobile" operated by an employee at any time, not under your watch. It is not a reasonable interpretation of the policy to say that "any auto" has no limitation. The limitations intended by the insured and insurer was to limit the automobiles to designated "covered autos." The analysis is the same, and the first seminal question is whether or not the person seeking coverage is an insured under the policy.

1. Duty to Appeal: Does the insurer's duty to defend end at termination of the case in the trial court? No. The duty extends to appeal. When the only thing at stake is the insurer's money, there is no harm to the insured, but if there is an excess judgment for more than the policy limits of the insurance policy, the insured can be obligated to pay. The excess judgment is a different judgment.

a. Duty: "Duty to defend includes duty to appeal when there are reasonable grounds for an appeal." b. Suspensive Appeal Bond: "Insurer has no duty to post a suspensive appeal bond in excess of its policy limit." i. Hypo: Let's say we get a judgment against the insured and insurer in solido for $100,000. Let's also say that the limits of the insurance policy are $50,000. This means that if the judgment is maintained on appeal, the insurance carrier's liability is for $50,000, plus interest from date of judicial demand, and the other $50,000 will be the responsibility of the insured. The insurance carrier decides it has a duty to appeal the judgment. You get a judgment against the judgment debtor (defendant), and then the plaintiff goes out trying to collect property to satisfy the judgment. How does the insurance company stop the plaintiff from taking money from someone? ii. Posting Appeal Bond: You post a bond, which the code of civil procedure calls an appeal bond. What's the obligation of the insurance company to post the bond? iii. Duty of Insurer: The insurance company only has to post a bond up to the policy limit. If the insurance company gives $50,000 worth of security, the plaintiff can't come against the insurance company, but what happens to the insured? If you require the insurance company to post a bond for the full amount, you have increased the policy limits from $50,000 to $100,000 because the bond provides more than the policy limits. This is why we do this. It is unfair, but it is equally unfair to the insurance company to say that it wrote the policy for a certain limit, but we are going to make you post a bond beyond those limits. iv. Suspensive Appeal Bond: The insured then has to post a suspensive appeal bond for the $50,000 owed from the trial court judgment.

1. Homeowner's Coverage: Property coverage deals with a thing, but for personal liability coverage, one of the types of coverage found in a homeowner's policy or personal liability insurance, the coverage is transportable from the thing to the person.

a. Focus on Person: The insured is the named insured and residents of the household who are your relatives, or other persons under the age of 21 who are under the care of someone in your household. This is a broad definition of "insured." This could be a relative living with you, as well as his children. It might include students, in a full time status, away from home. b. Follows the Person: If you were a resident of your parents' household, and you moved away from home for college, you probably have personal liability insurance under your parents' homeowner's policy. The insurance follows the individual beyond the household. It is not where you are. The questions are who you are, whether you are an insured, and if an exclusion applies.

1. Permission: Hughes v Southeastern fidelity Insurance Company:

a. Hughes v Southeastern fidelity Insurance Company: These two guys regularly loan each other each other's car. On the day of the incident, Andrews borrowed Cates truck to go fishing, so Cates was left with authority over Andrews's vehicle. Cates gives permission to Coleman to drive Andrews's trucks, and Coleman gets into an accident with Hughes. i. Cates's Permission: If Cates was the person driving the car, Cates would fall under the omnibus clause as a covered person because he was left with general authority and use over Andrews's car. Cates was the initial permittee, who grants permission to Coleman to drive it. He allows Coleman to drive the car, after the two had been drinking, because Cates wanted to get in the back with his date. Hughes is the plaintiff who is injured by the driving of Coleman, so he goes against Andrews's insurance policy. ii. Court's Conclusion: Because of the regular loaning of cars between Andrews and Cates, it is reasonably foreseeable that Cates, who has general authority and use of Andrews's car, will give permission to a third party to drive the car. This type of situation is just like that involved in Czarniecki, but unlike Hans in that case, Cates had more general authority over the vehicle. iii. Fact Intensive Inquiry: Southeastern's policy is implicated, so it must pay. In the Czarniecki case, the plaintiff did not recover because the court found that there was no permissive use of the vehicle by Charley. 1. Circumstances: The circumstances matter in every single case. It matters when considering whether the permission is reasonably foreseeable. 2. Pivotal Fact Issue: What did the insured (vehicle owner - Andrews) know? Czarniecki's use of the car was not foreseeable because Randy didn't even know that Hans had brought Charley with him on the date. If he had known Charley was on the date, it would be more likely that Randy would have knowledge of the possibility that Charley would be granted permission by Hans to drive. Could you conclude from the regular dealings between Andrews and Cates that it was reasonably foreseeable that Cates would let a drunk drive the car? The case pivots on the facts. 3. Drunk Drivers: We do not exclude drunk drivers from being covered under the omnibus clause because it is exactly what the insurance is supposed to cover under the public policy of Louisiana. 4. Test: Initial Permission? Reasonably foreseeable that the initial permittee would grant permission to a third person?

Slain v. Thomas [2006]: Two guys go to New Orleans for a Halloween party. While there, White, the driver, gets shot twice by a friend of Thomas. When White is unable to drive the car, so Thomas drives him to the hospital. After this, Thomas keeps the car for himself.

a. Hypothetical: If Thomas had deposited White at the hospital and then driven back to Baton Rouge and left it at White's house, he may have been covered. b. Disregard to Return Vehicle: Thomas takes the car and gets in a wreck three weeks later. The Third Circuit held that the initial permission rule did not apply to such deviation "displaying utter disregard for the return or safekeeping of the vehicle." c. Line of Permissive Use: When does the permittee usurp the control of the car and end the granting of initial permission? This is a fact intensive question that depends on what it is reasonably foreseeable to believe the insured would have given permission to the third person to use the car for. i. Limiting the Risks: The insurance company should not be held liable for the actions of the permittee, who goes far outside the reach of the initial permission give by the insured. This is one of the ways to limit the risks the insurer assumes.

1. Norton v. Lewis [1993]: An employee at a car dealership is in charge of doing the maintenance for cars and washing them. At some point during his employment, he has to drive the cars on the lot. On the day in question, he was not working, but used a company car to run personal errands and gets in an accident. It is harder to argue that he is in the course and scope of his job when it was his day off of work.

a. Plaintiff's Argument: Why should the employee be an omnibus clause insured under the coverage? i. Implied Consent: Because the employee had permission to use the car for his employment, he had implied permission to use it when he needed it. This is a more general implied consent because his employment involves driving the cars. ii. Express Consent: There was a specific supervisor that supposedly gave the employee permission to use the vehicle. b. Initial Permission: Unless you have a theft or extreme deviation, misuse of the vehicle, or disregard for returning it, the initial permission is enough to make the driver fall under the omnibus clause. c. No Consent: The court did not agree with the plaintiff that implied consent for this particular use flowed from the employer allowing the employee to use the car during his employment. The Court also found that the supervisor never gave express permission to the employee to use the car for personal errands. i. Trial Court Finding: Lewis did not perform any work for the dealer on the day of the accident, did not ask for and obtain permission to use the car from his supervisor, and therefore did not receive implied or express consent to use the vehicle before the accident. ii. Plaintiff's Burden: The plaintiff has the burden of proving initial permission to bring the driver within the ambit of coverage. In this case, the plaintiff did not meet this burden.

1. Duties to Settle and Keep Insured Informed: These arise in the context of a potential excess judgment against the insured. Think about when you, as an insured, would want your insurance company to settle a case. When a potential excess judgment is known, the insured has an interest in the insurer settling the case. This situation happens most when the policy limits are lower than the potential judgment. Does the insurer have an obligation to settle within the policy limits, as opposed to the right to settle or litigate if it so chooses?

a. Smith v. Audubon Insurance Company: This is the only Supreme Court case speaking to this issue. The grandfather (insured) and his grandson were replacing a motor in the grandfather's lawn mower. The grandson got badly injured when a fire erupted. There were conflicting statements about what happened. i. Grandson's Lawyer: He makes a demand on the grandfather's insurance company to settle within the policy limits. ii. Grandfather's Insurance Company (Audubon): The insurance company rejected the option to settle within the policy limits because they evaluated the case and didn't find that it was worth $20,000. There was an excess judgment at trial, $25,000 against insured and insurer, $30,000 against insured. 1. Communication between Insured and Insurer: It was very minimal. The offer came in to settle and didn't get communicated to the insurer. The insurance company made a unilateral decision to reject the settlement. This is okay if it is a good faith decision, and is in the interest of the insured. iii. Conclusion: An insurer is not obligated to settle just because they get the offer of a settlement. There can be circumstances when an insured or claimant makes demand to settle, and because the insurance carrier refuses when it is unreasonable to do so, it exposes the insurance carrier to payment of the excess judgment. The theory is that by making an unreasonable decision not to settle, the insurance carrier places its insured at additional risks, akin to bad faith. The penalty for the insurer when it engages in bad faith conduct is to make it liable for the excess judgment. 1. When in Bad Faith? When is the insurer in bad faith when refusing to settle a demand for settlement? Start with the insurance policy language to find the obligation of the insurer. The insurer will usually have the discretion to settle or not to settle. If the claimant or insured makes a demand for settlement, the insurance carrier refuses, the case goes to trial, and an excess judgment is held against the insured, there is a bad faith presumption on the side of the insurer. This is a fact intensive decision. "The determination of good or bad faith in an insurer's deciding to proceed to trial involves the weighing of such factors, among others, as the probability of the insured's liability, the extent of the damages incurred by the claimant, the amount of the policy limits, the adequacy of the insurer's investigation, and the openness of communications between the insurer and the insured."

When Direct Action State Applies:

a. There are two conditions that have to be met under the statute in order for the plaintiff to have a direct action: (1) the accident occurred in Louisiana, or (2) the policy was issued or delivered in Louisiana. (Webb and Esteve cases) i. Accident Occurs in Louisiana: You can ordinarily file a suit against the defendant in a Louisiana court. Jurisdiction allows suit to be brought in the parish where the accident occurs, and the court has power over the defendant who caused an injury in the state of Louisiana. You can sue the named defendant and their insurance policy if the accident occurred here. 1. Policy Delivered or Issued in Louisiana: Delivery deals with foreign insurers. If the policy is delivered to the insured, issued to the insured, in the state, then that gives an injured plaintiff a given right to sue the insurance company directly. This is allowed because the insurance company has delivered their policy into the state, and is receiving a benefit of a premium on that policy. In most cases, we don't fight much about delivered or issued in Louisiana because most of the cases involve accidents that occur in Louisiana. ii. Problems: What if you get in an accident out of state and want to sue a defendant who was issued their insurance in Louisiana before they moved to a different state? Would they have an opportunity in the other state, say Texas, to bring a direct action? Just because Louisiana would give you the right to do that doesn't mean Texas will allow it. The direct action statute is procedural rather than substantive, so by choice of law, Texas courts will typically not allow a direct action case in Texas. iii. Generally: If the accident occurs outside of Louisiana and the policy is issued to a Louisiana resident, you will most probably only be able to bring the direct action case in Louisiana, not in the other state, because of the choice of law theory.

1. Scope of Initial Permission: Malmay v. Sizemore:

a. There was a young man who borrowed his mother's car to move his things into his apartment, but he gave him permission only to use the vehicle to move, to not allow any one else to drive the vehicle, and to not use it to go to a bar. i. Limiting Scope of Permission: She limited the permission in so far as use of the vehicle and not letting anyone else drive the vehicle. The mother was unaware that her son had allowed other people to drive her vehicle on prior instances on which she had loaned him her car, so this couldn't be counted against her. For these reasons, it was not reasonably foreseeable that her son would give permission to a third person to drive the car. 1. Specific Instructions: The specific instructions given to the son by the mother is the most important factor for this case. There was no permission for the third person to drive the car.

Subsequent Invalid Waiver:

a. UM coverage was effectively rejected by the original waiver, and the rejection remained effective after renewal even though the renewal waiver was invalid. a. Policy Changes: The court held that the waiver remained valid through the policy changes. b. Proof: The policy number had been changed slightly to reflect the insured's qualifications for a group discount. The court held that the waiver remained in effect at the time of the accident. c. Reformation: "Permitting corrections of alleged typographical error in UM coverage rejections to reflect the parties' intent, after the occurrence of injuries to persons insured under the policy, would be inconsistent with the strict requirements that this court previously has imposed upon rejections of UM coverage, as well as the purpose of UM coverage to provide for protection of persons insured under the policy."

a. Picou v. Ferrara: The plaintiff was driving a motorcycle, and an employee of Ferrara hit him. The court has to find out whether the general liability insurer or the automobile liability insurer will provide coverage.

i. Allegations: It was more than negligent operation of the vehicle. They said that the insurer had hired an incompetent driver, which may trigger the general liability insurer. ii. General Liability Exclusions: It excludes coverage for the operation and use of vehicles. Under the general liability policy, what's the analysis that the court applies to decide if there is coverage? 1. Essential Element to Liability Theories? If the use of the vehicle, operation of the vehicle, is an essential element of the plaintiff's theories of liability, then ordinarily there is going to be coverage. In this case, the use of the vehicle was an essential part of the plaintiff's theory of liability: negligent operation or incompetent driving. 2. Exclusion Applies: There is no coverage under the general liability policy.

1. Scope of Initial Permission: Perkins v. McDow

i. Expanding on Sizemore: The parents give their child general admonitions (not let others drive the car), but the child in this case had a more general extent of control over the automobile than the son in Sizemore, who was only permitted to use the car under specific conditions and instructions. ii. General Exclusive Use: This was a determining fact in this case. The court was looking here to say that this was different from Sizemore. We have talked about reasonable foreseeability as under the control and general, exclusive use of the vehicle. The son in this case has exclusive use and control over the automobile owned by his parent, so the general admonition to drive safely and not to let others drive the car had to be taken in the context of the child's exclusive authority over the vehicle. iii. General Admonition: This is a precatory request (nice to do, but not legally binding on anyone). From the parents' point of view, this is not a precatory request, but the court found that it was such a precatory request. b. Second Permittee: Who is an insured (is it just a member of the household)? Who is a second permittee? Where there is any doubt, as a matter of public policy, the court will find coverage. This is why we have plaintiffs have a direct action against the insurance company. Any insured should expect that the omnibus clause will apply in any given situation.

a. Carter v. The City Parish Government of East Baton Rouge:

i. Facts: A man was driving his 10-year-old niece home one night, and he bypassed a barricade blocking the exit off the interstate. It was a heavy rainstorm that had flooded the area. We know that the man bypassed the barricade because the vehicle was found in the floodwaters. They found the two bodies a couple hundred feet away. They assumed that he drove around the barricade and the two tried to get out of the car but ended up dying. ii. Use of the Vehicle? The automobile liability insurer is trying to say that the use of the vehicle was not essential to the negligence of the driver. iii. Analysis: Does insurer of driver's car provide coverage to niece's family for niece's death because the injury arose out of driver's negligence and the ownership, maintenance, or use of vehicle? No direct evidence here; only circumstantial Court says yes there is coverage under the policy because injury arose from use of vehicle Doors are locked, however, so maybe they got out and walked away and died some other way...Not clear there was maintenance or use; prof says court is making a stretch here b/c pity for pltf

1. CGL Exclusion ••• "Care, Custody, and Control": a. Ron Reynolds v Select and Guaranty: Reynolds leased storage space from Guaranty to store his personal items. After several months, the plaintiff went back to find that his personal items had been stolen from his storage space, so he sued the owner and manager of the storage space from which he leased.

i. Transcontinental (Guaranty's Insurer): They say that the property damage was in the insured's "care, custody, and control," and under the terms of the policy, there is an exclusion that defeats coverage. ii. Lower Courts: The lower courts read the exclusion liberally saying that since Guaranty had the personal items of the plaintiff, they had "care, custody and control" of those items, and therefore the exclusion applies. iii. Supreme Court of Louisiana: 1. Two Instances when Exclusion Applies: a. Contractor/Subcontractor Repairs: "Where the insured is either a contractor or subcontractor who has been sued by the owner of the property upon which work was being performed, or is a party with whom property had been placed for use or repair." The reason is that this is not intended to be a performance bond or guarantee of the workmanship of the insured. If you want to make sure that the contractor finishes the job and does it properly, you need to get a surety policy under another form of insurance. This is not what a general liability policy is supposed to do. b. Proprietary Interest or Monetary Benefit: "Where the insured has a proprietary interest in or derives monetary benefit from the property." CGL policy is not designed to provide first person coverage for loss of property. The reasoning is that there might be some advantage to the insured in falsifying or exaggerating a loss, a moral hazard not contemplated or contracted for in a commercial general liability insurance agreement. 2. Transcontinental: Guaranty had a proprietary interest in the lease but not the personal contents of the plaintiff, so this is not a circumstance of the insured having "care, custody and control" of the property. Unless you have the proprietary interest, the exclusion is not designed to apply. This means that the court finds there is coverage for the plaintiff's claim of loss of property.

1. Attempts to Reduce UM Coverage/Exclusions: a. Workers Compensation Claims: One of the places where this regular came up is when there was a workers' compensation claim. The injured employee's first recourse is almost always to the workers' compensation carrier, unless the employer doesn't have workers' compensation coverage. It is the easiest recovery for the plaintiff/employee.

i. Workers Comp Insurer Seeks Reimbursement: What happens when the workers' compensation insurer pays benefits to an employee, and then seeks to recover, under its policy, from the tortfeasor? Yes. The insurance company can intervene in the case between the plaintiff and the tortfeasor. What if the tortfeasor is uninsured or underinsured? Does the workers compensation carrier have a right to seek reimbursement from the UM carrier of the employer or the employee? ii. Johnson v. Fireman's Fund: You have an employer who has workers comp insurance and UM coverage. The workers comp carrier pays money to the plaintiff but wants reimbursement because the tortfeasor is uninsured/underinsured. 1. Previous Courts: Previous courts had held no cause of action because uninsured motorist carriers are not third persons under the statute. UM coverage is first party coverage benefitting the insured who is injured, as opposed to the liability coverage that is for the benefit of third parties. 2. Is UM Carrier Third Person? If yes, the workers compensation statute does not preclude the workers compensation insurer from seeking recovery/reimbursement. The workers compensation includes certain persons, first persons, in the definition of the statute. If you are not included as a first person, you are therefore a third person, and the workers compensation carrier can seek reimbursement from that third person. a. UM Carrier is Third Person: The next question is whether there is a distinction between the UM carrier for the employer and the UM carrier for the employee. The workers compensation statute also says that if you pay benefits, you cannot recover those benefits from the employee because it defeats the purpose of workers compensation. This would be directly covering from the employee, benefits paid to him under the statute, so this is not allowed. b. Employer's Policy: The workers compensation carrier cannot seek reimbursement from the employee's personal UM policy, but the carrier can seek reimbursement from the employer's policy. 3. Conclusion: UM carriers are third persons for the workers compensation statute, and the workers compensation carrier has a right to seek reimbursement from these UM carriers, unless it is the policy of the employee. 4. Response of Insurer of Employers: They put an exclusion in their policy. The UM coverage is excluded when workers compensation claims are a remedy. Another remedy is for the employer to buy workers compensation coverage but not UM coverage, which would create a circumstance in which the employer pays twice. The employers routinely reject UM coverage for their policies. Now we have a circumstance where the employee has recovery against the workers compensation carrier but not the UM carrier if the policy excludes it or the employer has rejected such coverage. iii. WC Exclusions in the Policy: "The Supreme Court held that a UM insurance policy may validly exclude coverage for reimbursement of worker's compensation benefits. Although the worker's compensation insurer may subrogate against the UM insurer as a 'third person,' the Court concluded that there was no statutory or public policy barrier which precluded exclusion of coverage for such subrogation claim." 1. Applicability: The applicability of the exclusion depends on whose policy it is, as well as the language of the policy. iv. Solidary Obligors: Kutsinger Case? It says that the W/C and UM carriers are solidary obligors because they are required to pay the plaintiff the same kind of damages. What if the W/C carrier makes a payment? Whatever payment one carrier pays to the obligee of the two solidary obligors will benefit the other obligor. The Court says that they are solidary obligors, which will be later talked about within the topic of reduction of benefits.

Contract Interpretation:

1. Insurance contracts are different animals. We all carry insurance cards with us, but have we ever actually read our insurance policies? The contract terms in the policy can give the insurance company the right to decide if they will pay money or not. Policies are different. a. Read the Whole Policy: Policies have basic insuring language from the ISO policy, and then because the client and the company have modified it to get to a certain price and coverage, some coverage may be excluded. There are coverage paragraphs, exclusions, and exception to exclusions. The interpretation of insurance policies is a big part of what lawyers do every day. b. Direct Action and Personal Injury: how much insurance is available to the injured plaintiff is controlling in these cases. Insurance permeates almost everything lawyers do.

a. UM/UIM Statute: It has evolved from 1962 to the present, but generally speaking, the requirements haven't changed. It requires an automobile liability insurer, who issues a policy on a vehicle in this state, to provide UM coverage to the people covered under the policy in the same limits that the policy provides for third party liability insurance.

1. Insured's Options: The options that you have are to: a. Reject Coverage: The insured can reject the coverage all together (insured is willing to assume the risk of someone injuring them who is uninsured) b. Lower Limit: The insured can opt for a lower limit (if you don't want UM coverage in the same limits as third party coverage, you tell your insurer you only want the limits to be a certain amount, and in turn you pay a lower premium) c. Economic Damages Only: The insured can choose to cover economic damages only (economic damages are special damages, not pain and suffering or general or punitive damages, but the easily quantifiable, out of pocket, economic damages - medical benefits, loss wages, etc.). By providing coverage for only economic damages, you are lessening the scope of the coverage and reducing your premium. 2. If You Don't do Anything: If the insured does nothing but buy the policy, UM/UIM coverage is built in, and it is usually the same limits as the automobile liability for third person coverage. 3. Required Alterations Form: As a consequence of the ability to alter this mandatory coverage, the statute and insurance commissioner's regulations require that these alterations be done on a form proscribed by the commissioner. We waive things all the time, but the rules don't require a specific form. When talking about UM coverage, and waivers or rejections of coverage, it must be done on a specific form. This is where litigation has ensued, dealing with how the form is filled out. a. Issue of Waiver: The issue of a waiver arises because the insured, or someone who is covered under the policy, got clobbered and the clobberer doesn't have insurance or sufficient insurance to compensate the injured insured for his damages. A permissive user of a vehicle is entitled to UM coverage under your policy because it is an insured under the omnibus clause. The insured might argue that he waived the UM coverage, and this will then be argued about for several reasons. b. Analysis of Waiver: Public policy would be for the court to say that they are going to strictly construe the form, and if there is any ambiguity in the way the form was filled out or the intent in the form, the court will go towards the side of providing coverage. The form in which you waive or reject UM coverage is very important, and it applies to any accident that happens in the state of Louisiana. c. Hypo: You are driving to school and get clobbered by a person who is not covered. You go to your insurer and say you want coverage under your UM policy. The insurer tells you that your limit, as you are alone in the car, is $250,000. If all four of your insured cars were in an accident, the limits for third person coverage together would be $1,000,000 per individual. Can you stack the four automobiles covered by the policy? No.

Canal Indemnity:

You have a employee of Top Patch, Inc., who is driving a customer's vehicle to the shop for upholstery work and gets in an accident. The plaintiff is trying to find coverage under the customer's policy. Is the employee of Top Hat an "insured" under the customer's policy? Probably yes, because under the omnibus clause, the employee was using the vehicle with the permission of the insured. The key here is what the purpose of the employee driving the car. The lower courts focused on the fact that the operator of the car was taking the customer's car to the shop for upholstery repair, which wasn't an automobile business. The higher court felt that this was to narrow of an interpretation. Looking at the nature of the business in a broader context, and not looking at just the task at hand, Top Hat, Inc. is an automobile business.

a. Bellard v. American Central Ins. Co.: Bellard gets rear ended, while driving his work truck on the job, by Gayle. Trinity provides workers compensation insurance to Bellard's employer. Gayle is insured by American Central, who settles with Bellard for $50,000.

i. Trinity's Right to Credit: Bellard was in the course and scope of his employment, which makes it an easy workers compensation claim. Trinity says he is retired to get the benefit of the settlement with the tortfeasor. Workers compensation is a statutory requirement of the employer. Bellard has a claim against Gayle, individually. What is the harm in letting Bellard keep both the workers compensation benefits and the recovery from Gayle's insurer? ii. Solidarily Obligated? If they are not, Bellard gets the double recovery he wants, but if they are solidary obligors, Trinity gets credit for the settlement with American Central. 1. Elements of Solidarity: This court has held that a solidary obligation exists when the obligors (1) are obliged to the same thing, (2) so that each may be compelled for the whole, and (3) when payment by one exonerates the other from liability toward the creditor. a. Owe the Same Obligation: The central purpose of both the worker compensation act and the uninsured motorist statute is the protection of the injured person. The amounts may be different, the source of the obligation may be different, but they both owe damages to the plaintiff, arising from the same conduct. b. Both Compelled to Pay the Whole: Can the workers compensation carrier be obligated to pay general damages? No. To the extent that they owe money, each has to pay the whole of what they owe the plaintiff. Liability for the whole "means simply that the debtor who has been sued cannot plead the benefit of division." "While one item of damages may be recoverable against one debtor and not the other, the parties are liable in solido as to every item for which plaintiff can compel payment from either." c. Payment by One Exonerates the Other: "As to the debt to which the employer's uninsured motorist carrier and the employer and/or its workers' compensation insurer are solidarily obliged, i.e., the payment of lost wages and medical expenses, payment of the debt by one exonerates the other from liability to the creditor." 2. Court Concludes Solidary Obligors: In the context of being solidarily obligated with another person who pays benefits, the UM carrier gets to benefit from the other obligors payment. iii. Collateral Source Doctrine: "The rule provides that 'a tortfeasor may not benefit, and an injured plaintiff's tort recovery may not be reduced, because of monies received by the plaintiff from sources independent of the tortfeasor's procuration or contribution...The tortfeasor is not allowed to benefit from the victim's foresight in purchasing insurance and other benefits." 1. Allows Plaintiff Double Recovery: The court says that if the defendant hasn't contributed to the benefits obtained by the plaintiff, he doesn't benefit from that and must pay the plaintiff. The defendant doesn't get a credit for stuff he didn't help procure. 2. Policy of Tort Deterrence: "The major policy reason for applying the collateral source rule to damages has been, and continues to be, tort deterrence." 3. Court Finds Collateral Source Does NOT apply: "Whether the collateral source rule applies depends to a certain extent upon whether the victim has procured the collateral benefit for himself or has in some manner sustained a diminution in his or her patrimony in order to secure the collateral benefits such that he or she is not merely reaping a windfall or double recovery." a. Medicaid Case: Medicaid paid the medical benefits to the plaintiff, and collateral source didn't apply because the plaintiff didn't pay indirectly or directly for the Medicaid coverage, so the tortfeasor got a credit for the Medicaid.

Insurance Policies:

1. The commissioner of insurance has to approve policy forms. How do these policies get written, and does every company have a separate policy from other companies? a. Manuscript Policies: Overtime, these company policies became known as manuscript policies. These policies were subject to different interpretations from other policies because they contain specific terms. Overtime, these policies became standardized. b. ISO Standardized Policies: ISO (the insurance services office) writes insurance policy forms for insurance companies to purchase, so most of the policies today are ISO policies, which is at the bottom of the policy's page with the ISO number. This has created a basis for consistency in interpretation. A lot of what we deal with these policies is to interpret the terms, so these standardized forms help.

1. Duty to Defend:

a. 8 Corners Rule: Look at the four corners of the petition and the policy, and if the petition does no unambiguously exclude coverage, the insurer has the duty to defend. How do you get the insurer engaged? b. Plaintiff's Pleading: The allegations that the plaintiff puts in his pleading are what triggers or denies coverage of an insurance policy. It is important for both sides of the bar, whether you are representing the plaintiff or the insured/insurer, the way the pleadings are drafted is important. The language of the policy, and small changes in wording, can change the result of coverage dramatically. c. Broad Duty to Defend: The duty to defend is broader than the duty to indemnify. d. Insurer's Options: i. Defend, No Reservation of Right: If the insurer believes that there is no exclusion in the policy, he may elect to defend and provide an attorney to represent both the insurer and the insured. ii. Defend, Reservation of Right: If the insurer elects to defend, but wants to retain the right to challenge coverage, it must hire separate counsel for both the insurer and the insured. 1. Suit for Coverage: The insurer hires an attorney to represent the insured in the tort action, but the contractual obligation of the insurer does not extend to provide a lawyer for the insured to sue for coverage. The attorney hired by the insurer to represent the insured cannot assert coverage for the insured against the insurer. This would be a conflict of interest. 2. Key: Where you have a defense under a reservation of rights, the lawyer hired to defend the insured on the merits of the tort claim does not have the right to allege coverage for the insured against the insurer. iii. No Defense: A third option is to simply deny coverage, and no defense is provided. e. Waiver of Right to Challenge Coverage: If you have a coverage defense, and you waive it, this eviscerates the terms of the policy that might otherwise provide that the insurer doesn't have to pay. Waiver is an issue that insurance carriers are particularly careful about.

1. Automobile Liability Exclusions: Up until now, we have been talking about who is an "insured" under the policy, what some of the risks are that are covered by the policy, and who is covered under the omnibus clause. We now are talking about those people excluded under the policy from coverage. The coverage will not be applicable to a certain number of factual circumstances.

a. Fact Intensive Inquiries: The court looks at the facts of the case to decide whether or not the policy covers the circumstances of the case. We are looking to the insurance policy first, interpreting it strictly. Any ambiguity is interpreted in favor of the insured. b. Employer's Liability Exclusions: What is the public policy issue here? Why would the insurance company want to exclude liability to employees under the general liability coverage? An employer, generally, is not liable to employees in tort because employees have workers compensation. If an employee is injured in the use of an automobile, the coverage shouldn't apply because the employee has the remedy of workers compensation.

1. Multiple Claimants: The UM coverage under a policy, unless you limit or reduce it by waiver, has the same limits as the liability policy limits.

a. Hypo: Let's say that 100 (per person)/300 (per accident) are the liability limits of the policy. If you have three people who are each injured up to $100,000, you are okay because the limits are not botched. What if you have 4 people, each injured to $100,000, so the total damages is $400,000. What is the obligation of the insurance company? i. Pro Rata? For liability purposes, the insurer is not obligated to pro rate insurance coverage among the claimants. The insurer does not have the obligation to pro rate or allocate its damages under policy limits. ii. First Come/First Served? If the first lawyer is first claimant #1, he can get $100,000, leaving $200,000 for the last three claimants. Whichever claimant gets his case to trial first gets the money he asks for, and the other claimants don't have a claim against the insurance carrier for not having enough under the policy limits after the first claimant has taken away a larger share of the insurance coverage. iii. No Punitive Damages.

1. Burden of Proof:

a. Insurance in General: Insurance policies are generally competent evidence. In Louisiana we allow the admission of insurance policies, but not policy limits, in claims by third parties. If you have a jury trial and are defending the insured and the insurance carrier, the fact of insurance is admissible but not the policy limits of the insurance policy because you don't want the jury to know there is $1 million policy out there. b. UM Coverage: When you end up with an insurance claim for UM coverage, the policy remains relevant, so you have to establish that you are entitled to recover under the policy. A policy can be an important piece of evidence, and you must keep this in mind, because the burden of proof is on the party contesting to the terms of the policy in order to assert an exclusion. The policy that governs the claim is competent evidence.

1. Types of Insurance:

a. Insurance that Protects the Person: These policies cover a risk to the individual. i. Life Insurance: ii. Health Insurance: This provides coverage to a named individual for certain kinds of risk. iii. Disability Insurance b. Property Insurance: It is designed to protect damage or loss to movable or immovable property, or tangible personal or real property. c. Liability Insurance: It protects you against your obligation to pay damages. It is one of the more common kinds of insurance that is implemented in day-to-day practice.

1. CGL Policy

a. Triggers: Before you get into whether or not it means the insuring agreement, or whether or not exclusion applies, there must be an event that triggers the policy coverage for the insured. i. Accident: When the accident occurs, during the policy period, is what is important to the trigger. ii. Occurrence: Accidence plus exposure. iii. Claims Made: A claim made during the policy period is the trigger for coverage. It makes it easier to define when coverage is triggered. It is often very difficult to define when an accident or occurrence actually happens. The industry has decided, and the courts have approved, the use of a claims made policy for the use of defining when coverage is triggered. Policies covering professionals tend to be on the calendar year. b. Exclusions: i. Expected or Intended from Standpoint of the Insured: One word can change the result of a policy provision. It is extremely important to read the policy language carefully. ii. Total Pollution Exclusion: It is hard to imagine a circumstance the insured is not trying to deny coverage from. The insurer has made a policy decision, for underwriting purposes, that pollution should not be covered under this policy. Pollution is a higher risk that can be covered in a different policy. iii. Employer Related Liability: The employee, in his scope and course of employment, is not covered under this policy. iv. Contractual Liability: Suppose your client is a contractor/subcontractor, and in the contract he enters, the general contractor says that he requires the subcontractor to indemnify the general contractor for any liability he sustains because of the subcontractor's fault. Under most circumstances, this is covered under the CGL policy. This is an indemnity agreement arising out of the business itself, so it can be covered by the CGL policy. The general contractor is the indemnitee, and the subcontractor is the indemnitor. v. Liquor Liability: You are a business owner, and you have a party. Injuries that occur because of alcohol consumption during the party are not covered.

a. McMath Construction Co v. Dupuy: McMath is a general conractor who hired Dupuy as a subcontractor. Dupuy is installing the stucco on the condominiums, and he didn't install it correctly. There was defective work. This results in water leaking through the doors and windows during each rain storm. McMath tried to get Dupuy to fix it, but he was unable to, so McMath hired someone else and sustained damages. McMath wants to be reimbursed for the cost he incurred for having to replace the work of Colony's insured, Dupuy. The question is whether Colony provides coverage.

i. Colony (Dupuy's Insurer): First, Colony says there was no occurrence under the policy, so the coverage was never triggered. Second, Colony says that even if there is an occurrence found to trigger coverage, there are a bunch of exclusions that apply to this claim. 1. Possible Exclusions: Is a defective product covered? Is defective work covered? Or, are they excluded? 2. Generally: It generally excludes coverage for damage to the insured's work, or for generating and inserting into commerce a defective product. In other words, a policy is not designed to provide remediation of defective work or replacement of defective product. The insurance carrier did not underwrite the policy to insure against shoddy workmanship. It is not a performance bond or warranty against defects. ii. Court's Analysis: 1. Occurrence: "Regardless of the cause of the leaks, this was 'continuous or repeated exposure to substantially the same general harmful conditions.' 'If the roof leaks..., the resulting property damage triggers coverage under an occurrence basis policy, even if the sole cause is improper construction and the only damage is to the work performed by the contractor.'" 2. Products-Completed Operations Hazard: "Dupuy also purchased products-completed operations hazard coverage, which refers to the insured's exposure to liability for property damage arising out of completed work performed away from his premises. McMath's claims fell within the products-completed operations hazard coverage." 3. Policy Coverage and Exclusions: It doesn't cover the defective work, but might it cover damage to property that results from defective product or work? This is the liability part of this. The policy is designed to say it is not going to cover the insured for the replacement or recall costs, or the replacement or redo of shoddy work, but if that shoddy work, or that defect, causes damages to other property or causes bodily injury, the exclusion doesn't apply. That is the whole purpose of this policy, to provide liability insurance. a. Exclusions Apply: McMath is not entitled to recover repair costs from Colony. There is no coverage while the work is ongoing because this is a different kind of risk. Once the work is finished though, if it causes damage to someone else (property damage or bodily injury), then there is coverage. b. "Work" and "Product" Exclusions: "These exclusions reflect the intent of the insurance industry to avoid the possibility that coverage under a commercial general liability policy will be used to repair and replace the insured's defective products and faulty workmanship." c. Reasoning for Exclusion: "The evidence in this case shows there was no physical damage to the condominium units, only to Dupuy's work and product. Therefore, the 'work' and 'product' exceptions would eliminate the coverage that would otherwise be provided under the policy." 4. Analysis Process: Was there an occurrence? If there was, which exclusion applies? If any exclusion applies, you only need that one and don't have to worry about whether the other exclusions apply.

a. No Pay, No Play Amendment:

i. Economic Only" Option: The policy defines economic loss differently from the way the statute defines it, which one prevails? Although insurance policies are contracts that create a law between the parties, but when you have a mandatory provision in the law, the statute's definition of economic loss prevails. ii. Form: iii. Renewals: A new waiver is not necessary for a policy renewal. A new waiver is only required when you are adjusting the amount of the limits or making a change in the UM coverage in some way.

Structure of Insurance Policies

1. A personal automobile policy is probably the simplest insurance policy you will encounter. The more complex the type of coverage, the more complex the language in the policy. A college athlete can buy athletic insurance against any injuries you may incur, covering you if you are injured and unable to make it past college sports. Insurance policies are all structured in more or less the same way. a. Declarations Page: It will generally say who the insured is (named insured), what automobiles it covers (if an automobile policy), policy limits, coverage, exclusions or endorsements to the policy; what perils are covered; endorsements that are part of business arrangement. i. Policy Limits: This tells you how much the insurance company is going to pay (maximum amount). Can be per accident, or in the aggregate. "50/100/25" shows three different types of coverage and three different limits. The first number is per person automobile policy coverage ($50,000). The second number is the maximum per accident ($100,000). If two people were injured, this exhausts the per accident policy limit. The third number is the property limit. The property limit is what the insurance company will pay to fix the other person's vehicle ($25,000). Collision insurance protects you for repair to your own vehicle. None of the liability coverage protects you. If the policy is per accident and the damages exceed that amount, the insured will be personally liable for the excess. 1. Uninsured Motorist Coverage: This is ordinarily part of your automobile liability policy that protects you in the situation where a person who has insufficient limits in their insurance policy to give you the damages you deserve at their fault. This would be a claim you present against your own insurance company. ii. Endorsements: These are appendixes. Some policies might say that in order to recover under the policy, you must bring suit within six months of the date of the accident. The insurance commissioner in Louisiana would probably require an insurance company wanting to provide this provision to include an endorsement that says that the paragraph dealing with this provision is amended to read "x". You get the form policy for the coverage that you want, with exclusions and endorsements that are unique to Louisiana or the type of coverage you want to buy. 1. #1 Rule: Read the Whole Policy: You must read the entire policy because until you get to the end, you won't have an answer. You may read the whole policy and be thinking one thing, until you get to the bottom and see the exclusions that exclude the acts of a certain individual. The structure of the policy, and your attacking the whole policy, is the most important. iii. Policy Period: It is usually a year. Did the accident, giving rise to the damages, occur in the policy period? Is the automobile driven covered?

i. Pullen v. Employers' Liability Assurance Corporation: Pullen was a truck driver employed by Southern, and Mitchell was an independent contractor buying the dragline from Southern. The two were loading the crane, and the bomb of the crane comes in contact with a power line while Pullen has a hold of it. He is electrocuted and killed as an effect of this reaction.

1. Employers' Liability Assurance: Pullen's wife sues Southern's insurance company under the omnibus clause. The policy limits are $100,000. 2. Maryland Casualty Company: Sometimes these decisions are driven by whether there is coverage, how much coverage is applicable, and who pays. This insurer's policy limit is $10,000. 3. Employers' Omnibus Clause: They look at the coverage under the Employers' Liability Assurance policy for Southern and question whether he is insured under the omnibus clause. If he is not an insured under the omnibus clause, he is not covered under the policy. There is no fight against Mitchell being an insured under the omnibus clause, but Employers' believes that Mitchell falls under the exclusion of the omnibus clause in the policy. a. Exclusion: "This policy does not apply: (c) under Coverages A and B to any obligation for which the insured or any company as his insurer may be held liable under any workmen's compensation law; (d) under Coverage A, to bodily injury to or sickness, disease, or death of any employee of the insured while engaged in the employment of the insured." i. Named Insured: The named insured under the policy is Southern. If there was another Southern employee driving the crane, instead of Mitchell, onto the truck, the exclusion would apply because it would be the employer/employee relationship. ii. Literal Language of the Exclusion: 1. Covered Under Policy? The first question is whether Mitchell was an "insured" under the policy. 2. The "Insured" Under Exclusion? The second question is whether Mitchell is the "insured" mentioned in the exclusion. 3. Court's Conclusion: The court saw no contest that Mitchell was an insured under the omnibus clause. The exclusion talks about the obligation of the insured to the plaintiff, arising under workers compensation. Even though Southern would have no liability other than workers compensation because that would be an employer/employee relationship, it is not the same for Mitchell, who is simply an insured under the policy. iii. Employee/Employer Relationship: The relationship between Mitchell and Pullen is not employee/employer, so the exclusion does not apply to Mitchell. He is not liable to Pullen under workers compensation; therefore, he does not fall under the exclusion. 4. Exclusion Does NOT Apply: The exclusion does not apply, so the policy covers Pullen's injuries, which means the policy limit is $100,000 instead of $10,000.

a. Automobile Business Exclusion: i. Howard v. Ponthieux: The plaintiffs were hit by a pickup truck, which broke loose from a tow truck driven by Ponthieux. The plaintiffs want recovery from whoever they can recover from, so the plaintiffs sue the wrecker, the wrecker's insurer, the owner of the pickup truck, the owner's insurer, and Howard's (plaintiff) insurer (Allstate based on negligence of Howard). Allstate is not at issue because they settled out of the case. It is not at issue that the wrecker company and its insurer were sued because it was the pickup truck breaking lose from the wrecker's tow truck that caused the accident.

1. Hartford Insurance Policy: The owner of the pickup truck gets sued, along with his insurance, Hartford, because it was his pickup truck that caused the damage, which is a covered vehicle being used with the permission of its owner. a. Coverage: There is coverage under the policy under the omnibus clause because Ponthieux was using the pickup truck with the permission of the owner/insured. "(c) Any person while using an owned vehicle automobile with the permission of the named insured, provided his actual operation or if he is not operating, his other actual use thereof is within the scope of such permission." b. Hartford Exclusion: "None of the following is an insured: (v) any person while employed in or otherwise engaged in duties in connection with an automobile business..." The wrecker was taking the pickup truck to be stored at an automobile salvage business, and this falls in the definition of an automobile business. To get to coverage under i. The Insured and His "Use": is the defendant "insured" within the meaning of the policy? If so, is the activity that caused the accident a "use" of the vehicle covered by the policy? If the answer to these two questions is yes, then the question is whether the activity falls under an exclusion to the coverage. ii. Activity: The activity of Ponthieux falls under the exclusion to the omnibus clause of the policy.

What is Insurance?

1. Insurance is a way of managing risks. We can control the risks by our actions, or we can mitigate the countering effect by purchasing insurance. The insurance company assumes risks that are specified in the insurance policy. If you encounter the risk, and whatever happens is a risk covered by the policy, the insurance company has an obligation to pay some benefit (damages, medical bills, etc.). It is the assuming of risks in return for the payment of the premium (consideration). a. Transfer of Risk: b. Premium: When we talk about premiums, we are talking about the consideration you give to the insurance company for their assuming your risks. c. Insurance Companies: The insurance carrier is in the business of buying risks (assuming risks) for the return of the premium, and then distributing that risk among a pool of similarly situated people. i. Distributing the Risk: The risk is distributed among people that are similarly situated. It wants to sell policies to people similarly situated. What is the cost of writing one insurance policy? Spreading the risk among a group of people can lower the cost. The insurance company assumes the risk, and then it turns around and shares everyone's risks among the pool of people similarly situated. The more policies the company sells, the more premiums you get paid. Statistically, the company figures out that if you buy the risk for one homeowner at a certain premium, you can make money if you sell "x" number of policies. ii. Risk Factors: The insurance company needs to know certain risk factors about you before they can guarantee a price of the premium. For homeowner's insurance, the location of the home is a risk factor. These are factors used by the company to decide on the premium price. iii. Other Way of Pricing: The insurance company can change the price of the premium by changing the terms, conditions, and exclusions of the insurance policy. These are modifications to a basic insurance contract that can tailor it to the risk and price the client wants to pay for. The question on the buyer-seller end is how much risk do I need to be protected against? The carriers sometimes have built in limits on how much money they will pay and how much risk they will assume from the client.

Evolving the Language of Policies:

1. The language in the policies will evolve based on certain holdings of the court. It is like legislation in response to a judicial holding that changes the legislation. It also evolves with societal needs. Insurance companies modify their policies to accommodate certain new risks that give them a greater opportunity to sell coverage to more people. There is not only an evolution in the interpretation of cases, but also the policy language. The courts understand that the starting point for any insurance policy question is the policy itself. a. Start with The Policy: The policy is the contract between the parties. The risks covered needs to be compared to the facts of the particular case. There is either insurance or no recovery to the plaintiff. b. Public Policies: These hover over these policy questions and are talked about by the courts. The public policy is to provide an injured person a chance to get recovery from an insured's insurance company. It is about financial protection to an innocent, injured person. c. Fact Intensive: When you read these cases, it makes you think about factual situations you may encounter later on in practice. When people do certain kinds of things, the answer is yes they have caused damage, but the question is: who will pay. We will talk about waivers and excessive insurance.

a. Exclusion of Other Business Use: i. Pontico v. Roussel: The plaintiff sues the named insured's insurance company for liability arising out of an accident caused by the named insured's minor son, operating a non-owned vehicle (as to the named insured's insurance company) one time, in conjunction with minor son's summer job.

1. Why Plaintiff is Suing this Insurer: The employer's insurer is insolvent, the employer has no insurance for this liability, or the policy limit is too low. The insurance carrier does not always pick the fight; rather, it is picked by a plaintiff seeking to find recovery. The public policy consideration for liability insurance is consistent throughout these cases. It is about finding a way to compensate the injured person, who is injured at the fault of another person. 2. Coverage: There is going to be coverage under dad's policy if: a. Insured? The son is a relative and resident of the same household, so the son is an insured under his father's policy. b. Use of Vehicle: He was using a non-owned vehicle, within the terms of the policy coverage. c. Purpose? This is where the exclusion may apply. Is the errand being run by the son, for his employer on a one time basis, within the meaning of the exclusion? 3. Possible Exclusion: This activity would be excluded if the use of the vehicle arises out of "any other business." "This policy does not apply: (h) to a non-owned automobile while maintained or used by any person while such person is employed or otherwise engaged in (1) the automobile business of the insured or of any other person or organization, (2) any other business or occupation of the insured, but this exclusion (h)(2) does not apply to a private passenger automobile operated or occupied by the named insured or by his private chauffeur or domestic servant or a trailer used therewith or with an owned automobile." a. Not Applicable: The court looks to the expectation of the insured. If you buy a family automobile liability with non-owned vehicle coverage. The court is making a policy determination that a reasonable purchaser of this automobile policy would not believe that non-owned coverage would be excluded for the one-time use of a non-owned, employer's vehicle by his son. The reasonable person would believe this exclusion to apply for use of a vehicle as part of regular employment.

Permission and Use: These go to the heart of the insuring agreement. The named insured under the policy is the person to whom the insurance policy is written. Automobile coverage is the insuring of a vehicle, a thing.

a. Automobile Insurance: i. The Insured: The policies are practical by naming the spouses the insured as well. In the event that the owners are married, you end up with coverage as the named insured because the spouse is considered such. ii. Members of a Household: The policy takes care of the reality that the children and others that live in the household are going to drive the insured's cars. 1. Household: Is the person domiciled in the household? A resident of the household? This matters when finding whether a certain person is a member of the household under the insurance policy. iii. Omnibus Clause: This covers those people that are not the insured or the members of the household that are covered under the insurance policy if they are driving the car with the permission of the insured. b. Omnibus Clause = Permission: This clause basically says that everybody who drives the car, under certain circumstances, will be covered by the policy. It is not without conditions. If it was unlimited, the insurance covered would be expanding the risks assumed by the insurance policy a little too far. i. Who Falls Under the Clause? It is a non-named insured, who is not a member of the household, who has permission or authority to drive the insured's vehicle.

1. Parks v. Hall [1938]: In 1938, we have a situation where we have a person who is not the named insured or a member of the household who was driving the insured's car and got in an accident.

a. Background: The man driving the car is the employee of the insured. M.L. Gans is the chauffeur of Harvey Hall. On the day of the accident, he was given permission to have the car to drop his boss off, clean the car, and bring it back to his boss's house. There would be no question of whether or not he was insured with permission if he got in the accident while doing what his employer told him he could do. b. The Accident: He was doing things in the car that he was not given permission to do, doing things off task. The plaintiff sued Gans, his employer, and the employer's automobile insurance. i. Insurance Company's Argument: The insurance company argues that although Gans had permission to use the car, it was permission to use it for certain things in the scope of his employment. Because the driver was involved in the accident when he was outside the scope of the permission given, he didn't have permission to be using the car and doesn't fall under the omnibus clause. ii. Initial Permission: The court says that if the owner, who is the insured, gives permission (express permission in this case) to the person to drive the car, you are covered under the omnibus clause. The court says initial permission, without any restrictions on deviation from the tasks given permission for, is all that is necessary. c. Premise: If the named insured under the policy gives initial permission to some third party, then that third party becomes covered under the policy as an omnibus insured. Deviation from Permission: How much deviation are we going to allow to say the permission holds? Permission comes with exceptions. Extremely fact-intensive

1. Stacking: Stacking refers most of the time to uninsured motorist coverage. It means cumulating benefits payable under multiple policies. Philips has four insurance policies with State Farm, each with liability and UM coverage of $100,000/$300,000. Is there coverage under my UM policy when I am operating a non-owned vehicle? I want to be an insured as to third party liability if I am operating a non-owned vehicle with permission, and if I am an insured for that purpose, I am an insured for UM coverage.

a. Before the Amendment: Philips gets involved in an accident with an uninsured/underinsured. Before the amendment, the plaintiffs were going to the court saying the defendant was uninsured and only gave recovery of 1/10 of my damages, so if I add up the four limits under my policy, I will be made full. There was no prohibition against stacking. b. Anti Stacking Clause: The policies are designed to provide coverage in one instance, for one claim. You might be able to recover from under a UM provision in your own policy, but you cannot stack multiple policies issued to the same insured. This did not fix the problem all together. i. Nall v. State Farm: Nall was a guest passenger in the automobile and was injured. He recovers under both the liability and UM coverage under the host driver's policy. He was still not made whole, so he turned to his dad's two State Farm policies providing UM coverage, attempting to seek recovery under those provisions. 1. Analysis: It analyzed the coverage question and concluded that State Farm did not provide coverage for the vehicle occupied by Nall. On this basis, the court determined that stacking was not available. ii. Courville v. State Farm: The court said the policy provisions allowed stacking because the son was not the owner of the vehicle, the father was. You have to look at the elements in the statute. 1. Exception to Anti Stacking Provision: As originally enacted in 1977, the exception was applicable when the injured party was occupying an automobile "not owned by said injured party." The 1988 amendment narrowed the scope of the exception by providing the injured party also could not be occupying an auto owned by a "resident spouse or resident relative." The amendment overruled Courville legislatively.

1. Reduction Clauses: There are specific provisions about when and where the carrier will not make payments, or will reduce payments made under other provisions under the policy. Many carriers reduce the amount available to the plaintiff under the UM provision according to the amount the plaintiff recovers from the liability provision of the same policy.

a. Breaux and Nall Cases: You had a claimant who was entitled to recover under the liability clauses of the policy, and maybe the UM clause, but the court discussed when it was possible to recover under both coverages. b. Johnson v. Jackson: Johnson was driving a car owned by Logan, and he got clobbered/rear ended by Jackson. There is a question of the negligence of Logan, who was only the owner of the car, but it seems to be an important aspect of the decision. i. Insurance Companies: Johnson was insured by Fireman's Fund with liability and UM limits of $100,000. Jackson was insured by State Farm with liability and UM limits of $10,000. Logan was insured by Fireman's Fund for liability and UM. State Farm pays $10,000 under its liability, and Logan's Fireman's Fund pays under its liability, covering the vehicle owned by Logan. ii. Johnson's Argument: As an omnibus insured, Johnson argues he can recover under both the liability and UM policies of the Fireman's Fund coverage for Logan's vehicle. iii. Whether or Not Reduction Permitted: 1. Breaux Analysis: This was a single vehicle accident where the plaintiff tried to recover both the liability and UM coverages of the policy. The court said no because the driver of the vehicle was the sole person at fault. 2. Nall: It was different from Breaux because there was joint liability between the host driver and a third party, so the plaintiff was able to recover under both liability and UM. 3. Court's Analysis: It is starting to look at the public policy reasons for UM coverage, and it is looking to see whether or not this plaintiff has been fully compensated for his damages. It compares the public policy to the reduction provisions of the Fireman's Fund policy. If the public policy contradicts with the reduction provisions, the public policy wins and the reduction falls. The acceptance of UM payment should not preclude the plaintiff from recovering under other coverages under the same policy. a. Johnson's Recovery: Because Logan, the named insured, was at fault, Johnson can recover from the liability clause of the insurance policy. Also, because he was an insured under the omnibus clause, he was entitled to the UM coverage. He was able to recover both because the public policy seeks to fully compensate the plaintiff, and full compensation made it necessary to recover under both provisions/policies. iv. Conclusion: Reduction provisions are viewed with criticism by the court because they tend to run contrary to the public policy behind mandatory UM coverage.

1. Policy Issues: We are talking about the interpretation of a personal automobile policy, and generally, the question is whether or not coverage exists. When you look at the language of the policy, all policies contain some type of language that is susceptible to interpretation.

a. Coverage: The policy is almost always extended to a person operating a covered auto, but there are also other persons added to the policy that are covered. The language of the policy is incredibly important in the analysis. The cases talk about whether someone is covered when operating a non-owned vehicle. The courts in the cases we will discuss are consistent in interpreting the language of the policy and applying existing law to reach a coverage conclusion, but the facts are very important. It is possible to conclude that courts will always decide in favor of coverage. This is a proper outcome when the language is ambiguous because ambiguous contracts are to be construed in favor of the insured, and against the insurance company, who drafted the contract. The court interprets the policy as written, and if it is ambiguous, it is interpreted against the drafter/insurance company. i. Family Member: ii. Extended Coverage: b. Non-Owned Vehicle Coverage: Some of the decisions that decide the person resides with their parents seem a little out of the box. The language of the policy in many cases deals with the members of households, residences of the driver, non-owned vehicles, etc. Why have these restrictions that say if the vehicle is not owned by the insured, the insurance is limited to people connected to the household of the insured? The insurance company is saying they will cover you while driving any vehicle, at any time, and the limitations limit the risk of the insurance company. i. Why Provide It? There is a reason for the insurance company to want to add non-owned vehicle coverage to the insured because he is probably going to be driving another car. This is a market reason, to sell policies to as many people as possible. ii. Restrictions: What the insurance company doesn't want to do is to say that they insure the daughter for driving any vehicle. It is not personal liability insurance; it is personal automobile insurance that covers certain vehicles and persons, under certain circumstances. There has to be restrictions in order for it to not be general liability insurance. iii. Limitation of Actions/Notice: The Louisiana court came down on notice of a claim and how it impacts coverage. Late notice is not ordinarily an absolute defense unless it is prejudicial to the insurance company. Ordinarily, late notice is not a problem, and other times, late notice just happens because it is a mistake, untimely given notice by the agent, etc. The question becomes whether or not there was prejudice to the insurance company. It can be a defense, but it is not an absolute defense. 1. Miller v. Marcantel: c. Futch v. Fidelity and Casualty Company: 2. Permission:

1. Duty to Defend ••• Determination of Duty: This is in most primary insurance policies but not in most excess policies. In Louisiana, an excess insurer does not have the duty to defend and insured unless it contractually assumes the duty. The first level of coverage, almost always, includes language that talks about the duty of the insured to defend.

a. Czarniecki Case: The owner of the car was Jessie, but Randy, Jessie's son, had control of the car because it was mainly his. Charlie's question was when he was owed a defense by Jessie's State Farm policy or Charlie's father's Aetna policy. i. Language of Policy: "We have the right and duty to defend suits against the insured." State Farm and Aetna both said that it wasn't clear that Charlie was an insured under the policies. The courts had to go through a significant analysis to see if Charlie was an omnibus insured with the permission of the owner. ii. Filing Claims with Insurers: Charlie's father immediately sent claims to State Farm and Aetna. At this point, the insurer needs to make a decision about whether it has a duty to defend, at the moment in which the suit is tendered and before response is filed. iii. Insurer's Duty to Engage Counsel: How does the insurance carrier make this determination? You have the allegations of the lawsuit, the insurance policy, and maybe some investigative reports. The insurance carrier is mainly relying on what the plaintiff has claimed in the suit and what the policy says is covered or not. This is how the insurance company has to make a decision on whether it has a duty to defend the insured. 1. "Duty to Defend Broader than Duty to Indemnify": The obligation of an insured to provide a defense to its insured is broader than the obligation it may have at he end of the day to pay on behalf of its insured. The obligation to defend applies unless the allegations of the petition, taken as true, in comparison with the language of the policy, unambiguously exclude coverage. a. Exception ••• Unambiguously Exclude Coverage: The key word is unambiguously. It is not "arguably." The question is whether it is unambiguously clear that the plaintiff's claims are not covered by the insurance policy. b. 8 Corners Rule: Look at four corners of petition and four corners of policy, 8 corners rule. 2. Duty to Defend WHOLE Suit: As long as there is a claim asserted against the insured that is arguably covered under the policy, the duty to defend extends to all of those claims. iv. Conclusion: It was not unambiguously clear that the plaintiff's claims were excluded by the insurance policies, so both insurance companies had a duty to defend. 1. Plaintiff's Control: The court is telling us that the plaintiff, to some effect, controls whether or not coverage is triggered. If you are representing a plaintiff and are worried about insurance coverage, what you say in the petition has a big impact on this. As a lawyer, who represents the plaintiff, how you plead the case has an impact on whether or not the insurance carrier has a duty to defend the case and whether there is coverage or not. b. Challenging Defense Issues: When the insurance carrier gets a lawsuit in, it has to make some decisions. One decision it can make is that it is going to defend the case. They don't see any reason that there isn't coverage for the insured under the claim. It will provide a defense lawyer for the lawsuit. i. Direct Action Statute Gloss: In every other state except Louisiana and Wisconsin, you have plaintiff v. defendant, who puts the insurance carrier on notice and is provided with a lawyer by the insurance carrier. In most states, the insurer is not the direct party of a suit. In Louisiana, you have both the insured and the insurer as defendants. Can an insurance company hire one lawyer to represent both it and its insured in the suit? The insurance company is saying that they have the insured covered, without reservation. ii. Insurer's Options: 1. Generally No Conflict of Interest: As long as the insurance carrier says the insured is covered, and they see no defenses to coverage, it is not a conflict of interest for one lawyer to represent both the insurer and the insured. 2. Conflict of Interest ••• Reservation of Rights: The insurance company sends a letter to its insured saying that it has read the petition and policy, and it has a duty to defend, but the insurer thinks there is something in the policy that may exclude coverage, so it reserves the right to defend or challenge coverage in the future. The insurance company is not throwing in the towel because it has legitimate concerns of coverage. a. Divergent Interests: Can you have one lawyer represent both under this circumstance? No. b. Implied Waiver of Right to Challenge Coverage: If the insurance company, with knowledge of information that may provide a defense to coverage, hires one lawyer for both it and the insured, and fails to reserve its rights to challenge coverage, it waives this right. 3. Deny Defense because Unambiguous Exclusion: In this circumstance, the insurer isn't obligated to provide defense for the insured. iii. Defense Issues: 1. Rule 1.7: 2. Rule 1.8: 3. Rule 1.9: 4. Conflict Arises During Discovery: Suppose one lawyer is hired to defend both the insurer and the insured because the insurer doesn't believe there is any problem with coverage. During discovery, facts come to surface showing that an exclusion might apply to coverage. What happens? If you are the defense lawyer, you must ask whom you are being hired to represent.

1. Legal Interest: You file a lawsuit and make a claim for money against the defendant. The accident occurred on 9/20/12, and the case is settled on 9/20/14. The theory is that the defendant pays money because the plaintiff is owed money from the moment damages were caused, or the date of the accident. When you file a lawsuit, you typically ask for interest from the date of judicial demand, which is the date you filed suit.

a. Date of Judicial Demand: We don't allow you to collect interest from the date of the accident, but you can collect interests from the date you filed suit. The interest is on past and future damages. The rules of judicial interest have been applied by the courts to ALL damages, including both past and present. b. Date of Judgment: This is the date on which the court determines the amount in damages, and this can be another date from which the interest is owed by the defendant. This is not what the UM carrier gets. The obligation of the UM carrier is the same as the tortfeasor, and that is to pay interest on the amount sought from the date of judicial demand. c. Interest Rate by Statute: The judicial interest rate in Louisiana can change every year if the legislature decides it to be so.

1. Uninsured/Underinsured Motor Vehicle: What is an uninsured/underinsured motor vehicle? If this not an element of your case, you aren't required to recover. The legislature dealt with this question in its amendments of the statute, so it didn't leave it to the courts. [Look at page 128 at the statute]

a. Definition: For purposes of this coverage the term uninsured or underinsured motor vehicles means (1) if the operator cannot meet his liability because of insolvency (either the tortfeasor or his insurer is insolvent, so that person's vehicle will be a UMV); (2) tortfeasor's policy's limits are less than the damages sustained by the plaintiff (damages exceed underlying primary coverage, so tortfeasor's vehicle is a UMV); (3) a vehicle that is self-insured (owner/operator provides a certificate of self-insurance as required by law, and the statute provides that a self-insured is not required to prove UM coverage). You can arbitrate these kinds of claims, and the UM carrier who makes payment has the right to reimbursement. b. Proof: How do you prove that the vehicle with which you collided is uninsured or underinsured? The burden of proof, to prove uninsured or underinsured vehicle status, is on the person claiming coverage under some UM policy. Proof may be made by: i. Sworn Affidavits: You can use sworn affidavits from the owner/operator of the vehicle saying they had no insurance (you can get this information from the department of public safety now) ii. Other Substantial Evidence. iii. After Established Prima Facie Case: The burden of proof is shifted to the insurance company.

1. Permission from Insured but Not Named Insured: Why do we let someone, who may be an insured under the policy, but not the named insured, give permission to a third person to drive the car?

a. Emergencies: The third party, or second permittee, may be found to be an insured under the policy. b. Rogillio v. Cazedessus [1961]: Two teenage boys were going to a party. Will Oliver asked to borrow his dad's car to bring his friend to a party, and the father gives him permission. William is a member of the household, so he is an insured under the policy. William goes to pick up Lad, but the two decide to take a different car, not William Oliver's. Lad's little brother gets Will to leave his keys in case the brother has to move the car. There was no discussion or permission given to the young brother to drive anywhere, but Lad's little brother waits until the two leave, and takes the car and gets into an accident. i. Coverage Under Mr. Oliver's Policy? We now have Will abandoning his parents' car at Lad's house, and he doesn't give permission to the little brother but leaves his keys for convenience. There is now a fight about who pays for the injury to the plaintiff. 1. Question: Is Mr. Oliver's automobile liability insurer liable because Will, a member of dad's household, and thus an insured under the policy, left the insured vehicle at a friend's house, and the friend's little brother drove it and got into an accident? 2. Will's Consent: The only type of permission given to the little brother was Will leaving his keys at the house. 3. Plaintiff's Argument: Will, having permission from the insured, had the authority to grant permission to the little brother, and he did so by implied permission. ii. Insurance Policy Language: Permissive Use: The permission, as in the Parks case, has to come from the "named insured," and in this case, the named insured would be Mr. or Mrs. Oliver, not Will Oliver. 1. Strictly Construing the Policy: Even if Will had given consent to Lad's little brother, this court would probably not have extended coverage because the policy says that only the named insured can give permission. iii. No Coverage.

1. Penalties and Attorneys Fee Statutes: When does the obligation of the insurer to make a payment arise? In some instances, it is the date of final judgment or settlement, but there is a different twist for UM coverage.

a. Extra Contractual Liabilities: They are not covered by policy limits and are not part of the insuring agreement. It is a liability against the company, which cannot be built in to the premium base. b. McDill: The UM carrier must be more proactive than other carriers, making a good faith effort in determining if it owes the claimant money under its policy. i. The Trigger is "Proof of Loss": The information that is sufficient for the carrier to adjudicate the claim is the trigger for the obligation of the carrier. The submission of a satisfactory "proof of loss" is what triggers the UM carrier's obligation to make an unconditional payment to the plaintiff in 30 days. If it doesn't do that, the court can award penalties and attorney fees to the claimant against the carrier. 1. Satisfactory Proof of Loss Defined: "To establish a 'satisfactory proof of loss' of an uninsured/underinsured motorist's claim, the insured must establish that the insurer received sufficient facts which fully apprise the insurer that (1) the owner or operator of the other vehicle involved in the accident was uninsured or underinsured; (2) that he was at fault; (3) that such fault gave rise to damages; and (4) establish the extent of those damages." ii. Encourage Tender: The theory is that it encourages the UM carriers, which is first person insurance, to tender payment to the insured. 1. Called McDill Tender.

1. Prescription for UM Claim: Against the UM carrier, a plaintiff has two years to bring a claim. To the extent that a policy might say you have a shorter time period, the court will say that the two year period cannot be reduced, only extended, and such a reduction is against the statute.

a. Impact of Two Years on Solidary Obligors: If either the tortfeasor or the UM carrier (solidary obligors) is sued, it interrupts the prescription against the other, unsued obligor. One of the reasons we have prescription is to bar recovery, and in this situation, the UM carrier has no reason to know there is a potential claim out there against it. The case against the tortfeasor may stay alive for three years, and the plaintiff can still amend, even after prescription has run against the UM carrier, to bring in the UM carrier. b. Who and When: Does it matter the order in which certain parties are sued? The UM carrier is solidarily obligated with the tortfeasor, not the tortfeasor's liability insurer. If there is no solidary obligation, there is no interruption of prescription against one when suit against the other is active. i. Rizer v. American: "Plaintiff sued liability insurer within one year of accident. More than two years after accident, plaintiff joined the tortfeasor and his own UM insurer. The Supreme Court held that the two-year prescription on the UM claim had run because the liability insurer and the UM insurer are not solidary obligors. They are not liable for the same damages."

1. Multiple Claimants and Inadequate Limits: There is an excess judgment problem because lack of money within policy limits to satisfy the judgment. Let's suppose that the insurance carrier is inclined to settle, but there is not enough money in the policy. The policy limits, even if paid out, will not fully/adequately compensate each one of the plaintiffs.

a. Insurer's Obligation: What is the obligation of the insurance carrier? What latitude does the carrier have? Does he have to apportion the policy limits among all claimants, and get them to release the insured, or should they try the case? If he doesn't settle, the insured might get a judgment against him for excess damages over the policy. b. Holtzclaw v. Falco: The insurer is worried about his duty to the insured because he has the duty to act in good faith and protect the interest of the insured. i. Question: If the insurance company wants to settle multiple claims, and can't get release from all the plaintiffs, can it do that and be in good faith? Does the insurer have a duty to apportion the policy limits to the multiple claimants? ii. Duty of the Insurer: The insurer has a duty to act in good faith to protect the interest of the insured, but they are not going to impose a duty to apportion damages to multiple plaintiffs in an effort to settle within the policy limits. For the insured, this means that one plaintiff may not get payment, and may not release the insured's liability to him. "The requirement of a more stringent standard of care by the insurer towards claimants would necessarily tend to diminish the degree of the company's responsibility owed its insureds. Accordingly, we have determined that we erred in our first opinion in overruling Richard v. Southern Farm, supra, and that our holding in that case should be fully reinstated...We also reaffirm our decision in that case to reject the argument that the direct action statute grants to each person injured in an accident ownership of or a privilege upon a pro-rate share in the insurance proceeds which become available after liability of the insured tortfeasor is established." iii. Proposition: Where there are multiple claimant and insufficient policy limits to satisfy claims of all claimants, the insurer has the right to settle with the claimants and no obligation to apportion the policy limits among the claimants. c. Oliver v Imperial Fire and Casualty Insurance Co.: "After insurer was unable to settle with all claimants for $20,000, it settled with the occupants of one car for $16,000. Absent a showing of bad faith, the court held that the occupants of the other car were limited to the remaining policy limits of $4,000." d. Cancellation, Expiration, Non Renewal and Rescission: The trigger of the coverage has to be made within the policy period for coverage. Be sensitive to the fact that there are many rules with respect to cancellations, expirations, etc.

1. Insurance Contracts:

a. Interpretation: Although insurance contracts are different and part of regulated industry, the rules of interpretation are the same that we apply to every other contract, any contract between two parties that the court is called upon to interpret based upon the facts. The policy language controls when it is clear and unambiguous. b. Coverage Analysis: i. #1 Read the Whole Policy. ii. #2 Statutes: Is there anything in legislation that makes this against public policy or excludes something covered? iii. #3 Cases: With the volume of the insurance cases and reported decisions, generally you will find at least one case that talks to the direct point and facts that your case does. This is a jurisprudential gloss on the policy. c. Insurance Contracts are Different: Regular contracts have terms and conditions, but they aren't structured like insurance contracts. Although we apply the general rules of interpretation to insurance contracts, we have to do that keeping the nature of the insurance contract in mind. d. Cases: Does the insurance policy insured to the insured provide coverage o the insured in this event or set of facts? We have 150 cases, more or less, from our courts of appeals dealing with insurance. This tells us that almost every fact pattern has been covered, and at the end of the day, in most of these cases, if there is no insurance, there is no recovery to the plaintiff. If you are representing the plaintiff, the mechanism by which you interpret the defendant's insurance contract is important to whether you take the case, whether you will be okay with settling for less than the plaintiff wants, etc. If you are representing the defendant, the insured, you want to know what the policy says about the coverage provided for that individual. Insurance permeates the practice of law because this is the way the client either mitigates the risk of business or personal activities and recovers for damages. e. Public Policy: Most insurance contracts, like automobile insurance, is a public policy that protects the public that is injured by reckless drivers. You can be a physician or lawyer in this state without being insured for professional liability. The only place where insurance is compulsory right now is automobile insurance. This is because the general risk to the general public calls for all drivers to be covered by insurance, as a public policy.

1. Intentional Injury Exclusion: The insurance company is saying that it is ordinarily going to insure for acts of negligence that are risks covered by the policy. The insurance company does not want to encourage intentional, willful conduct by an insured. When we have misconduct on the part of the insured that appears to be intentional, appears to be malicious or willful, we shouldn't let the insured benefit from that misconduct by having the insurer stand in his shoes and pay damages to the victim. The courts wrestle with the language of the policy, starting with the exclusions, and they do the same analysis as we did for automobile policies.

a. Interpretation: The exclusion is interpreted narrowly, and any ambiguity is read in favor of coverage for the insured. b. Expected or Intended Injury: Coverages E and F do not apply to the following: (1) Expected or Intended Injury: "Bodily injury" or "property damage" which is expected or intended by an "insured" even if the resulting "bodily injury" or "property damage": (A) is of a different kind, quality or degree than initially expected or intended; or (b) c. Great American Insurance Company v. Gaspard: Gaspard sets fire to his business, using an accelerant, and causes damages to his property, as well as the surrounding shops in the shopping center. i. State Farm Denies Coverage: The setting of the fire by Gaspard was an intentional act. It was not an accident because there was too much accelerant used, and the two experts agree that the accelerant shows intention to cause damage to both his own shop and the other shops surrounding his. ii. Great American's Argument: Great American wants to find coverage. It says that the acts were not intentional. iii. Court Excludes Coverage: Maybe he didn't intend to burn down the entire shopping center, but he must have had a subjective belief that if he used the accelerant to cause the fire, he should have known that it was substantially certain that the act would cause damage to everyone else. 1. Two Things: Was the damage expected by the standpoint of the insured? This is a subjective standpoint. Was the result reasonably certain to follow from the standpoint of the insured? 2. Test: The test in Gaspard has both an objective and a subjective aspect to it. a. Objective Question: Did the insured intend to damage the property of the other tenants? If Gaspard had sprayed the accelerant across the entire front of the shopping center, this would be evidence of intent. b. Subjective Question: Or, did he hold a subjective belief that, from using the accelerant, significant damage to the other shops was substantially certain to follow?

Arising Out of the Ownership, Maintenance or Use of the Uninsured Highway Vehicle: This is a again a component of UM coverage

a. Kessler v. AMICA: We want to figure out if there is UM coverage for the vehicle Kessler is in arising out of this shooting. i. Facts: Kessler (Tulane law student) stopped at a stop sign at an intersection, and he proceeded, but another car didn't stop and almost hit Kessler. Kessler leans on his horn, and the other driver fires a shot back at Kessler, which hits him in the head. Kessler doesn't know who the shooter was because there was no physical contact, and it was a phantom vehicle whose driver was never identified. His injury arises from a gunshot womb. ii. Question: Whether or not the gunshot arises out of the maintenance, ownership, or use of the vehicle. If it does, there will be UM coverage, but if it doesn't, there will be no coverage. 1. Policy: Three prerequisites must be proven: (1) plaintiff must prove that the damages which he is entitled to recover from the unidentified motorist were caused by an accident; (2) he must prove that the unidentified motorist's liability arose out of the ownership, maintenance or use of an uninsured motor vehicle; and (3) plaintiff must prove that the unidentified automobile was an uninsured motor vehicle. iii. Duty Risk Analysis: The gunshot breached a duty independent of the use of the vehicle. For a common sense analysis, was the vehicle necessary? "The unidentified motorist's conduct in running the stop sign was not a legal cause of the plaintiff's injury. Therefore, that conduct is insufficient to meet the two-part test of Carter. The conduct of the motorist in shooting a gun toward the plaintiff was the legal cause of plaintiff's injuries, but it was not a use of the vehicle. Therefore, that conduct, likewise, fails to meet the Carter case." b. Common Sense Test Applies: i. Gaudin v. Leblanc and Dairyland insurance Company: A horse does not qualify as an automobile for coverage under the policy. ii. Duvigneaud v. GEICO: The animal was being transported, which is one thing that a vehicle can be used for, so the accident arose from the use of the automobile. iii. Topole v. Eidson: The boy shooting the gun from the bed of the truck had nothing to do with the use of the vehicle, so UM coverage was not applicable.

1. Automobile Liability Insurance: It provides coverage for bodily injury or property damage caused by an insured under the policy of insurance. We are insuring and providing coverage for a particular automobile. There may be a person who is covered by the policy who is not a named insured under the policy but fits in the omnibus clause. The next question is whether there is an exclusion of coverage to the situation.

a. Louisiana Compulsory Insurance: Someone has to have insurance in the minimum limits to protect third parties from these kinds of claims. b. Personal Automobile Policy: It is divided into three sections: (1) liability to others; (2) medical payments, which is a third party benefit; and (3) uninsured/underinsured motorist coverage. c. Third Party Coverage: This protects the damages sustained by the injured in an automobile accident caused by the insured under the coverage.

1. Uninsured/Underinsured Motorist Coverage:

a. Mandatory Compulsory Liability Insurance: The idea is to provide protection to people injured in automobile accidents. The difference with UM coverage is that liability coverage protects people that you, as an insured, injure, while UM coverage covers you when you are injured by an uninsured or underinsured driver (first party insured). b. Mandatory UM Coverage: If you don't elect lower limits, no coverage, or economic damages only, the limits of UM coverage are the same as the limits for your liability coverage. i. Proscribed Waiver Form: The form of waivers has been the question in many lawsuits dealing with UM coverage.

1. Compulsory Motor Vehicle Liability Security Law: Law requires every automobile in this state,, to be insured within certain minimum limits. Our insurance cards are evidence that the owner of the vehicle is maintaining minimal liability insurance for that automobile.

a. Minimum Limits: 15/30/25 (bodily injury per person/bodily injury per accident/property damage): Do you think it takes a whole lot of injury for an individual to incur $15,000 worth of damages? This includes both economic and non-economic damages (lost wages, medical expenses, pain and suffering, etc.). It doesn't take long to get to $15,000. If there is a car full of people, in the aggregate it doesn't take long to get to $30,000 worth of damages. These limits are not very high. The point is that we are required by law to maintain minimum liability coverage in these amounts, or to have a self-insured certificate on file. b. Exceptions: i. Unlicensed Driver: The insured is required to cover unlicensed drivers in the household. The plaintiff has no control over who drives the car and causes the accident. The policy is to have the car covered. ii. Business Use of Vehicle: Business use of a vehicle is covered under the policy because to exclude coverage when the vehicle is used for business use would contravene the public policy. iii. Non-Owned Auto: The statute is not broad enough to require that the policy cover non-owned vehicles. The policy is not reformed to make a person covered under the policy when they are not covered by the policy anyway. There is no statutory obligation to provide coverage for non-owned autos. c. "No Pay, No Play" Amendment: This involves those instances when the uninsured plaintiff seeks damages from the defendant with insurance, at least to compulsory limits. The penalty is, if you are not an insured, and the defendant causes an accident, you do not receive compensation until your damages are over the compulsory minimum ($15,000 for bodily injury per person, $30,000 for bodily injury per vehicle, and $25,000 property damage). i. Defendant's Plea: The defendant's insurer wants to plead this as an exclusion because the courts have said that exclusions in insurance policies are affirmative defenses. ii. Affirmative Defense: If the defendant's insurer does not plead the exclusion as a defense at the beginning of trial, he will not be entitled to raise this defense later on in trial. d. Named Driver Exclusion: The named insured, or a representative, can exclude a named driver from the insurance policy. Where the statute authorizes it, and the named insured, or an insured, executes a document saying to exclude the driver from the policy, this is enforceable. Even though you are required to have automobile liability insurance on a vehicle with minimum policy limits, you can exclude a named driver. This policy will not extend coverage to this person. You are taking a named insured out of coverage, such as an exclusion does in the omnibus clause.

Automobile Liability Coverage: 1. The automobile liability coverage will apply if the accident arises out of the use of the vehicle. It is good to compare the family automobile liability coverage to the business automobile liability coverage. When you buy a homeowners' policy and a automobile policy, they do not provide coverage for the same risks. Homeowners' insurers are smart enough to know that they should exclude liability for automobile use. It is the same way for general liability coverage for businesses.

a. Ownership, Use, or Maintenance of Automobile: Generally, these disputes are between the general liability carrier, the homeowner liability carrier, and the automobile liability carrier. b. Fertitta v. Palmer: By this point, we have a covered auto, and insured under the policy, etc. We are now asking if the accident arose out of the maintenance, use, or ownership of the vehicle. i. Facts: A company that makes neon signs is driving a car that is covered by automobile liability, and they are going to the plaintiffs' business to hang a neon sign. Inside the store, while trying to put the neon sign up, the workers knock a glass off of a shelf that falls and injures the plaintiff. ii. Unloading? The court has to find whether or not there is coverage for this accident under the automobile liability insurance of the neon sign company. 1. Completed Operation Theory: It is one theory for analyzing coverage for use of a vehicle. This theory is that the unloading continues until the sign is hanging in the business. 2. Coming to Rest Theory: As they are unloading the sign, when it officially comes to rest, it is no longer part of the unloading of the vehicle (use of the vehicle). iii. Common Sense Approach of the Court: The test to determine whether a vehicle is used in conjunction with an accident or covered event is sufficient causal connection between the negligent acts and the use of the vehicle. Did the act that caused the injury constitute unloading process as that term is commonly understood. 1. Installing NOT Unloading: The unloading process has been completed by the time the workers were installing the neon sign, which is the act that cause the accident.

1. UM Coverage is Waivable: Because the mandate benefits the insured has four options. (1) The insured can do nothing, with respect to waiver and alteration, and the limits of UM coverage will be the same as the limits for the automobile liability coverage. (2) The insured can select a lower limit. He can say he wants UM coverage but wants the limit to be lower than the bodily injury limits for automobile liability. (3) The insured can reject the UM coverage. He is going to underwrite his own risk here. (4) The insured can elect for economic-only UM coverage, which means special damages, excluding pain and suffering, etc. Economic-only damages are those inside the realm of bodily injury damages.

a. Required Waiver Form: The legislature has delegated to the commissioner of insurance the authority to develop a form, by which an insured can modify the UM coverage under his automobile policy. If you want the full load of UM coverage that equates to the policies under your liability coverage, you don't have to do anything because this is what the mandatory UM coverage does, but if you want to pick another choice, you must do so on the prescribed waiver form. b. Whether Form is Valid or Not: You would think if it is just a form, you could figure it out easily, but that is not the case. This is a big deal because we are talking about exclusion from coverage. i. Change of Form: The waiver form in the materials at page 152 is the original form promulgated by the commissioner. If you look at page 167, the current form is different. It doesn't mention the full coverage; it only operates for the other options beyond the mandatorily provided UM coverage. The forms changed as a result of the insurance of commissioner's bulletin in 2008 and in response to some of the litigation we will discuss.

1. Hit and Run Cases: The same analysis applies in this situation. First, look to the policy provisions under the UM coverage dealing with these kinds of accidents. It will usually talk about things like "physical contact," or what kind of conduct on behalf of the phantom is required to trigger UM coverage. This evidence has to be more than the testimony of the injured plaintiff.

a. Springer v. GEICO: Springer was driving his vehicle, in which Oltmann was a passenger. They were driving one way down Highway 90 in in the inside lane. Traylor and the unknown vehicle were heading the other direction on Highway 90. Traylor is in the inside lane, and the Phantom driver cut across him, causing him to go up on to the median and ultimately hit Springer head on. Ordinarily, in this situation, Springer would say that Traylor was at fault, but the policy's limits didn't provide enough damages, so Springer wants to get damages from the UM coverage. i. Independent Witnesses: It is unclear whether or not there was actual physical contact between the phantom vehicle and Traylor's vehicle. In the policy, "Hit-and-run vehicle means a highway vehicle which causes bodily injury to the insured arising out of physical contact of such vehicle with the insured or with an automobile which the insured is occupying at the time of the accident..." ii. Physical Contact: The insurance company argues that the physical contact for a hit-and-run must be between the insured's vehicle, Springer's vehicle, and the hit-and-run, Phanton vehicle. The court starts with the policy language, and then it looks to whether or not it is ambiguous and whether there should be policy considerations by the court. iii. Court's Holding: Physical contact includes contact with an intermediate vehicle. "We hold that the physical contact of such vehicle includes the physical contact of that vehicle with an intermediate vehicle or other object which, in the same mechanism of the accident, strikes the assured's vehicle." iv. Dissent: The clear language of the statute means that the physical contact involves contact between the phantom driver and the insured. v. Not a Miss-and-Run Accident: There was contact, within the unbroken chain of events, in the accident, so it was a not a miss-and-run accident, which the policy tries to take out of the possibilities of the language with "physical contact."

1. Termination of Duty to Defend: Think about a situation where there are multiple claims in a lawsuit, and arguably only one is covered. The insurer still has the obligation to defend the entire case, spending more on defense costs than on liability costs. This is why the duty to defend is so important. When does the duty to continue to defend a claim terminate?

a. Start with Policy: There are differences in language that dictates the length of time the insurer has the duty to defend. The question for the court is when the duty to defend terminates. b. Pareti v. Sentry Indemnity Company: "The liability policy promises that the insurer 'will settle or defend...any claim or suit; brought against its insured for damages covered by the policy. However the policy also states that the insurer's 'duty to settle or defend ends when our limit of liability for this coverage has been exhausted.'" i. Analysis of the Court: The court read the policy language and asked if it was ambiguous or not. If it is ambiguous, it would be interpreted in favor of the insured. The policy language was not found to be ambiguous. The second step was whether the commissioner of insurance had said something, or something was said jurisprudentially, that restricts or expands it in a certain way. If both questions are no, is there a public policy that voids, limits, or restricts the applicability of the provision? ii. Good Faith: The provision is not ambiguous or against public policy, but the insurer must act in good faith, with the interest of the insured in mind. If the decision to settle the case is reasonable, and the policy language allows for such an action, the question becomes whether, under those facts, would the insurer being acting reasonably, keeping the interest of the insured in mind. If the answer is yes, and you were acting in good faith, the duty to defend ends upon tendering payment. If the answer is no, you are probably in bad faith, and you will owe, at a minimum, the costs of defense. 1. Insurer's Interest: For the insurer, it is simply an economic decision because the longer the trial, the higher the cost of defense the insurer must pay. 2. Concern for Insured: The court has the concern that the insurer pays early, cuts, and runs, leaving the insured in the lawsuit, having to provide his own defense, and maybe be left with judgment in excess of policy limits. iii. Get Release of Insured: You get a release of the insured. If the plaintiffs release the insured, he/she has no duty to defend the case anymore. This is a good way to demonstrate good faith because the insured is not prejudiced, at least not in the terms of that particular policy.

1. Westerfield v. Lafleur: The child got hit by a car when crossing the street to get to the school bus. The question for the court is whether the child was "occupying" the bus, and therefore an insured under the insurance policy covering the bus.

a. Steps: (1) Who is an insured under the policy? (2) Does the plaintiff fit as an insured? b. Occupying the Bus: The starting place for the analysis is the policy. The term and definition are ambiguous. For the court, physical contact with the vehicle is not necessary for determining if the person is "occupying" the vehicle. The test has become..."It is not physical contact with the vehicle that serves as a basis to determine whether a person is injured while alighting from a vehicle but it is the relationship between the person and the vehicle, obviously of time and in distance with regard to the risk of alighting that determines specific coverage." c. Conclusion: A child who crosses a typical two lane roadway while entering into a immobile signalized school bus is guarded from harm by a legal cordon during the entire time she is traversing the roadway. She and her parents are entitled to rely on her safe passage.

1. Automobile Insurance: The accident arises out of the use of a vehicle. You started with the premise that the insurance covered the thing.

a. Transportable: Who benefits from coverage when using the automobile? The focus was on the automobile.

1. Personal Liability v. Automobile Liability:

a. Trigger of Coverage: What implicates whether coverage exists in a certain policy? For an automobile policy it was the use of a vehicle that triggered the coverage. For personal liability coverage, the triggering event is very different. You must look at each specific triggering event in relation to the policy to see if there is coverage. b. Personal Liability: You consider who the claim is against, who is an insured, what the damages arise out of, and what exclusions apply. When you look at the structure of the broad form of the homeowners' policy, it looks like the automobile policy in structure. i. An Occurrence: Our analysis starts with the policy language, and insurance companies tend to modify their policy language in response to the holding of a court that broadly interprets language. ii. Operation of a Motor Vehicle: When talking about automobile policies, the risk covered was the operation of the motor vehicle by some insured. If there is coverage under the automobile policy, the general rule is that there is no coverage under other types of insurance. Ordinary use of a typical motor vehicle on a highway where an accident occurs is typically not provided by personal liability policies and homeowners' policies. c. Difference: We are focusing on the individual in the personal liability policy, what was the conduct triggering coverage, and are there any exclusions.

1. Whether or Not UM Coverage Applies to Excess Policies: Primary/underlying policies are the policies that provides the first dollar, payment, or recovery to the third party, or you as the first party. You may also have an excess policy or umbrella policy, which are policies that provide different layers of insurance. You can buy insurance coverage at different layers and different amounts. You might buy a certain level of primary coverage (maybe the mandatory liability coverage required for your automobile at 15/30/25).

a. Umbrella Policy: The umbrella policy provides coverage over primary policies and can cover different kinds of policies. For example, he has an umbrella policy that gives him policy limits over the limits of his primary policy. b. Excess Policy: Excess insurance policies can be excess automobile or home owner liability insurance or a stop gap, so that when your primary policy hits a certain amount, the excess insurance comes in. c. Southern American Insurance Company v. Dobson: i. Importance: Someone is injured, the tortfeasor is either uninsured or underinsured, the primary UM coverage you purchased remains insufficient to compensate you for your loses (non-property, bodily injury damages), and so you, as the insured, want to look at an excess or umbrella policy to get more coverage. 1. Common Thread: Where is the money for the injured to get for recovery? There is an effort by the individual plaintiff to gain recovery or damages from an insurance policy. ii. Question: Whether or not the UM statute mandates coverage in an excess or umbrella policy situation. You have a commercial umbrella policy. The trial court said that no mandatory UM coverage applies to an excess or umbrella policy because it focuses on just the automobile liability policy, the primary liability policy that applies. When is UM coverage applicable to an excess or umbrella policy when an accident occurs? iii. Conclusion: Does every umbrella or excess policy in the state have to contain UM coverage? No, not necessarily because it depends on the primary policy. The UM mandate will attach to an excess or umbrella policy when the policy provides automobile liability coverage. If you cover automobile liability under the policy, be it an excess, umbrella, or primary policy, you are required to have UM coverage. 1. Hypo: Suppose that I have an automobile liability policy and homeowner's policy from State Farm, and I have an umbrella policy that covers only the homeowners. Because the umbrella policy doesn't provide automobile liability, the umbrella policy doesn't have to provide UM coverage. 2. Test/Analysis: When you want to figure out whether or not the excess or umbrella policy should have UM coverage, you look to the language of the policy and decide whether or not it provides automobile liability coverage. If it does, the UM mandate applies to the policy.

1. Uninsured/Underinsured Motorist Coverage: The difference between the third party liability coverage and uninsured/underinsured motorist coverage is that the policy in this section provides coverage to an insured under the policy, in the event that the insured is involved in an accident with someone who does not have the ability to satisfy the compensatory damages of the insured as a result of the accident. The insured looks to his own insurer and says that the negligent person was uninsured or underinsured, and the insured wants to be compensated for his damages from his insurer.

a. mportance: In the context of what we do as lawyers, UM/UIM coverage is dealt with in just as many cases as third party coverage is. This tells us that we have many people in this state that are either uninsured or underinsured, so it is great to pass a law that requires that drivers in Louisiana must have automobile insurance. Uninsured motorist litigation is as fertile a field for lawyers as third party coverage litigation is. b. Mandatory Under Louisiana Law: Not only has the state mandated compulsory automobile insurance to protect third parties, but the same protection must be given to protect the insured from uninsured/underinsured motorists, who cause an accident and from which the insured sustains damages. i. Third Party Coverage/Auto Insurance: You can't say to the state that you don't want to have automobile insurance. ii. UM/UIM Coverage: Because it is a benefit that protects the insured and not third persons, it is possible for the insured to waive the mandatory UM/UIM coverage under state law. When State Farm looks to write the policy, and I want UM coverage, they underwrite that coverage and my premium goes up. They want to know about my driving record, claims experience, how many automobiles, what kind of automobiles, etc. If I don't want the UM coverage, I can reduce my premium by doing so. 1. Notion of Waiver: This has given rise to a lot of the UM litigation. Because we are dealing with a regulated industry and mandated coverage, when it comes to waiver, there are narrow and specific rules.

a. Note Cases: What happens if the UM waiver form gets initialed signed in ____________ by the insured, and someone else makes the elections? The plaintiff, or someone trying to find coverage, has the insurer trying to assert coverage, but the initials don't look like the named insured's signature, and the lower limits aren't properly elected, so you get into a fight over when it was signed and who signed it. Someone else dating it or getting the insurer's name wrong aren't as important.

i. Blanks Filled in by Others: 1. After Insured Signs: Proper completion of the UM selection form does not permit a person other than the insured to complete the form after it has been initial and signed. The insured has to be the one to initial changes. 2. Before Insured Signs: A form, which is pre-filled by the agent leaving the insured with no choice other than to reject UM coverage is defective. 3. Dated by Another: The waiver was not invalid because the date had been filled in by the insured's secretary or because the insurer was shown as "Progress Security Insurance Company" rather than its actual name "Progressive Paloverde Insurance Company." i. Legal Representative: For a business auto policy, "Halliburton Energy Services, Inc." was typed in the blank for the named insured with the signature of James Ferguson in the blank for the signature of the insured. Affidavit evidence showed that Ferguson was the authorized representative. Court held that the waiver was valid.

a. Common Sense Analysis: You must treat the question of causation independent from the question of coverage when talking about use.

i. Causation: You must find what the legal cause of the event was (driver's negligence, something else, etc.). If there is no cause, the analysis stops. If yes, you must then turn to whether the vehicle was an essential element. If you find there was legal cause, and you know what the cause was, you must determine whether the vehicle was used. The common sense analysis tells us whether the vehicle was an essential element of the plaintiff's liability theory. ii. Vehicle as Essential Element: Was the vehicle used? Was the vehicle essential to the plaintiff's liability theory?

a. Change from Duncan: The decision of Duncan was finalized in 2007. The Carter decision was a little different because the commissioner's regulations, as they evolved, didn't require the policy number.

i. Commissioner's Bulletins: The commissioner reacted to the decisions of the court in order to provide clarity to the insured, its attorneys, and the courts. The important form change in regard to Duncan was that the insured had four tasks: (1) his/her signature, (2) his/her printed name to identify his/her signature, (3) the date the form is completed, and (4) initials to select/reject UMBI coverage prior to signing the form. The policy number may be important when the waiver is in regard to only one of many policies, but the absence of the policy number did not make the form defective after the commissioner's bulletin. If you do what the commissioner now says you should do to complete and sign the form, you have completed and signed the form as required for a valid waiver. ii. Rule: The rule became that the policy number was not required unless it was germane to a decision whether the waiver would apply or not. The information about the policy is for information purposes only. There is certain items of information the commissioner needs on there, and the most important items are the initials of the insured and the insured's selection of lower limits.

1. CGL ••• Other Exclusions: Scope of Pollution Exclusion: This is referring to industrial operations, people who are industrial polluters.The idea is that we are not going to encourage this type of behavior.

i. Ducote: "The plain language of the insurance contract precludes coverage for bodily injury or property damage arusing out of a polluting discharge. This means that it applies regardless fo whether the release was intentional or accidental, a one-time event or part of an on-going pattern of pollution." ii. Overrule Ducote ••• Doerr v. Mobile Oil Corp.: We now find that the total pollution exclusion was neither designed nor intended to be read strictly to exclude coverage for all interactions with irritants or contaminants of any kind. 1. Considerations: (1) whether the insured is a "polluter" within the meaning of the exclusion; (2) whether the injury-causing substance is a "pollutant" within the meaning of the exclusion; and (3) whether there was "discharge, dispersal, seepage, migration, release or escape" of a pollutant by the insured within the meaning of the policy.

1. Duty to Defend: a. Circumstances of Defense:

i. Duty to Defend, Without Reservation of Rights: If the policy does not unambiguously exclude coverage for the insured, the insurer is obligated to defend its insured. ii. Duty to Defend + Reservation of Rights: The insurer says that it has the duty to defend because coverage is not unambiguously excluded, but it wants to reserve its right to exclude coverage because it believes something might arise that excludes its liability of coverage. 1. Conflict of Interest: It is a practical consideration for the insurer, and it is a ethical consideration for the lawyer. The insurer is required to provide two different lawyers for it and its insured, but if it fails to provide two lawyers, it waives its right to challenge coverage. iii. Deny Coverage: The insurance carrier is making a decision that the claims asserted in the petition are unambiguously excluded by the insurance policy coverage. In this case, the insurer has no duty to defend and is liable to the cost of the insured for defending the case if its decision that coverage was excluded ends up to be wrong. In this situation, the insured will get its own lawyer because the insurer doesn't have the duty to defend and provide a lawyer.

a. McBride v. Lyles: There was history between the plaintiffs friend and the group of defendants, and they decided to settle a fight under the bleaches, which didn't take long. McBride, as a friend, went below the bleachers to see what was going on and was clobbered by the defendants. The eyewitness accounts are fairly consistent: serious injuries, butt kicked by the defendants, etc.

i. Exclusion for Vicarious Liability? The exclusion for expected or intended injuries would apply to the defendants who inflicted the injury, but what about the parents of the defendants, on the theory of vicarious liability? 1. Question: Does the exclusion apply to the defendant casting judgment on the basis of vicarious liability? 2. Analysis: You look to the intent or action of the insured. The fathers are insureds under the policy, and the plaintiff's injuries were not intended from the standpoint of that insured, the father. Who is an insured? Both the father and the defendants who committed the act are insureds under the policy. The parents are covered for the vicarious liability of the acts of their children. 3. Conclusion: The court says that even though the exclusion applies to the children, it doesn't apply to the other named insureds because they didn't expect or intend these injuries at all. The policy was ambiguous, not addressing vicarious liability, so it was interpreted in a way to find coverage. ii. Evolution of Exclusion Cases: There is a consistent focus on the policy language and its interpretation.

Lejeune v. Allstate Insurance Company: We end up with competing insurance carriers trying to decide which, if either, has to be held liable

i. Facts: There was a funeral procession going on. The deputy leading the procession went through a blinking light intersection, and instead of getting out to stop oncoming traffic to allow the procession through, he slows looks both ways and continues. The deputy goes through the intersection, and the procession follows. The deceased person was the passenger in the hurse, and he was hit by an oncoming car in the intersection. The person who hit the hurse in this case had the right of way. ii. Deputy's Actions: The deputy did nothing to stop the oncoming traffic, which had the right of way, to allow the entire funeral procession through. In addition to not stopping and blocking the intersection, the deputy had never done this before, so he was not trained. The deputy did what he thought made sense, but it was not enough. 1. Negligence: The deceased's family says that the deputy was negligent in his actions, and this was found to be the facts. 2. Negligent Act Cause of Accident: This was the second question, after whether or not the deputy was negligent, that the court decided. 3. Arise out of Use, Maintenance, or Ownership of Vehicle? iii. Which Policy Provides Coverage? The court discusses whether or not his failure to stop the traffic constitutes use of a vehicle. 1. Western World: This was the general liability carrier for the business, and it had an exclusion in its policy for certain automobile risks (excludes coverage for accidents arising out of the use of vehicles). The court looks at this case and asks whether the deputy was negligent, and whether this was the cause in fact of the accident. Both are affirmatively answered. The negligence was the failure to stop the traffic and his lack of training, but these negligent acts were found to not constitute the use of the vehicle. a. Use of the Vehicle: If the vehicle were not in the picture, the same theories of liabilities would be there. The deputy would still be insufficiently trained, and he still would not have stopped traffic. The mere fact that a vehicle was being operated at the time is not dispositive of the coverage question. The use of the vehicle was not integral to the causes of action arising out of the deputy's negligent acts.

a. Roberie v. Southern Farm Bureau Casualty Insurance Company: The insurer is a public liability insurance carrier covering the insured's Ford truck employed in his farming business. The insured's employee was driving the truck, and was negligent, when he caused an accident, which killed one and injured others.

i. Insurer's Failure: They never communicated the settlement issues to the insured. This is important because the insured interest's must be kept in mind by the insurer. Roberie is trying to get his $7,000 of excess judgment back from the insurer because they failed to settle within the policy limits. ii. Court's Conclusion: They say the actions of the insurer were in bad faith. The insurance company preferred to litigate over compromising, and the insured was kept in the dark (ignored), never told about the settlement or potential liability. The insured never had a chance to do anything to protect himself from the excess liability. 1. Ethical Responsibility: "We agree with the Court of appeal that there was no bad faith on the part of the Insurance Company in not compromising the claims filed against it in the Pitre case. It acted within the terms of its insurance contract in proceedings to trial, and, under the facts supra, its actions could not be considered arbitrary, i.e., it preferred litigation to compromise. However, the insured, Roberie, was kept in the dark; he was never apprised of the offers of compromise, nor warned of his potential liability; he was ignored...The insurer failed to discharge its duty towards its insured, thereby precluding any decisive action on his part. We find that the actions of Southern Farm Bureau Casualty Insurance Company towards Roberie were more than negligent; they were in bad faith and in utter disregard of Roberie's natural desire to protect himself from financial loss." iii. Plaintiff CANNOT Seize Right of Bad Faith: Roberie (aggrieved by excess judgment) can say to his insurance company that they should've settled within the policy limits and owe him the excess judgment he had to pay in damages. What if Roberie assigns his bad faith claim against Southern Farm Bureau to the plaintiff as a settlement to discharge his debt? The one thing you cant do is seize Roberie's right to assert a bad faith claim against his insurer. Roberie can insure it himself, a bankruptcy trustee can assert it, and Roberie can voluntarily convey his right, but the plaintiff cannot seize Roberie's right of bad faith.

1. Excluded Vehicles: Within UM, certain policies write in exclusions for certain kinds or categories of vehicles, or vehicles under certain circumstances.

i. Insurers: Somebody is trying to find insurance coverage here: Geico is the insurer of Ruby (medical payments, liability, and UM) and State Farm has UM coverage. Nall wants UM coverage under both policies. ii. GEICO: GEICO says that Ruby is at fault in the accident, and Nall is a third party to Ruby's policy, so GEICO owes medical pay and liability, but it believes that it doesn't owe UM coverage. 1. Question of UM Coverage: The GEICO policy says that an uninsured vehicle is not THIS vehicle. The policy says that for purposes of defining an uninsured motor vehicle, the policy excludes, from that definition, any vehicle insured for liability under the policy. In other words, GEICO is providing liability coverage for this automobile, but it isn't providing UM coverage for that vehicle in circumstances where the insured is at fault. Can GEICO exclude coverage in this circumstance? 2. Court's Conclusion: The policy provision is valid. Does the mandatory UM statute require GEICO to provide UM coverage for a vehicle that its insured is at fault, when it is liable to damages under the liability policy to a third person? No. 3. Risk Insured by GEICO: It is saying that it is providing coverage to third parties for a certain amount, but by doing this it doesn't want a simultaneous circumstance making its insured underinsured under the UM statute. iii. Change of Circumstances: The exclusion wouldn't apply if Nall was going for UM coverage under his own insurer because it would defeat the purposes of the compulsory UM coverage. The insurer doesn't want to create that circumstance when it provides a limit under liability and then creates a claim as an underinsured under its UM coverage. iv. Where to Draw the Line for Public Policy? The court is put in a hard position when the plaintiff is severely injured and they must make a decision like this. They have to draw the line for public policy. b. Joint Tort-Feasors: Two cars are at fault in the accident. If this was the situation, Nall could get damages from both UM coverages. When you have joint tortfeasors, the claim is that you are seeking recovery under the insured's UM policy because of the joint tortfeasors uninsured/underinsured nature (Casson v. Dairyland Insurance Company). Nall's claim for UM coverage from Ruby's insurer would be for the other tortfeasors lack of insurance. The exclusion extends only to the insured's negligence, not to the joint tortfeasor's negligence.

a. Expanding Coverage: b. American Home Assurance Company v. Czarniecki:

i. Jesse and Randy Waters: The car driven by Charley is owned and under the insurance policy of Jesse Waters. Randy Waters bought the car with his own money, but he is an unemancipated minor, so Jesse is the title owner and is the "named insured" for the car. Here we are focusing on not who owns it or the named insured is, but who paid for it and maintenances it. ii. Randy Grants Permission to Hans: Jesse is the owner and the named insured, but Randy bought the car and has exclusive use of the car, so he would be the owner and insured on the car if he was old enough. Randy has the car at work, and his friend Hans, who helps him work on the car, asks for his permission to run some errands and then go on a date, and Randy grants him permission to use his car. 1. Bring it Back by Midnight: Randy grants permission but asks that he bring it back by midnight, and Hans agrees. iii. Hans Uses the Car: He does what he said he wanted to use the car for, which was bringing his mom somewhere, running errands, and going on a date to the races. Hans didn't tell Randy that he was picking up Charley and his date, so Randy didn't know Charley was in the car. The races are cancelled due to rain, so the four take the car to a party. iv. Charley Uses the Car: Charley asks Hans if he can bring his date home early, and Hans grants him permission. On his way to his date's house, Charley gets in an accident. The injured plaintiff now says some insurance company owes her coverage: State Farm that insures the car or American Home that provides auto liability coverage to Charley's dad. v. Which Insurance Company? Randy's car is insured by State Farm, and Charley's father, Mr. Czarniecki, has auto liability insurance from American Home, which covers non-owned vehicles. 1. No Coverage Under State Farm: Randy has exclusive use and control, and Hans has initial permission, so he falls under the omnibus clause, but Hans did not have the authority to give Charley permission to use the car. a. Beyond Hans's Authority: Hans would be an insured under the omnibus clause because Randy paid for the car and has exclusive use of the car, and he is a member of the household, so he is an insured under this father's policy. When Randy gave permission to Hans, he didn't know Hans was bringing Charley in the car, and there was no implied permission to give Charley permission to use the car. Hans giving Charley permission was not reasonably foreseeable. b. Hypothetical: If Hans had told Randy that Charley was coming with him on the date, it could be reasonably foreseeable that Hans would have given permission to Charley to drive the car. c. Fact Intensive: Where is the line going to be drawn? 2. No Coverage Under American Home: The problem with this non-owned vehicle coverage is that the clause still requires consent/permission from the insured of the vehicle. For the same reasons that permission was not found and coverage was not found under State Farm, permission and coverage are not found under American Home.

a. What's Covered by UM Coverage?

i. No Property Damage Insurance: If you buy a new car, changes are that the bank or credit union will require you to have collision insurance, which pays you to have your car repaired, even if the other party doesn't have insurance. 1. Collision Insurance: UM coverage does not apply to property damage. If you want coverage for property damage, you get it by buying collision insurance and not from UM coverage. ii. Phantom Accident: The phantom accident occurs when a car comes at your in your lane, and you have to drive into the ditch to avoid an accident. Your car is damaged, and you might be injured. The third party tortfeasor is a phantom. Does your UM coverage kick in because the phantom can't be found, ergo doesn't have insurance? 1. Evidentiary Requirement: You MIGHT be able to cover under UM coverage but there is an evidentiary requirement: you must prove that the accident occurred in the way that you described it. There must be a disinterested witness that proves your story. This provides some certainty that the accident did in fact occur. 2. Credibility Issue: We don't want to expose insurer's to provide coverage under UM claims for phantom accidents unless there is actual evidence of the accident. b. Arbitration and Subrogation: These are possible clauses in the UM coverage. c. Under General Liability Policy: This is less common and not mandated under the policy, but there are other places that you can find UM coverage. Often finding who has the coverage is the real issue. Who is supposed to provide the coverage? Or, who has the higher limits? (mandatory, limits, modification of limits, anti-stacking, waiver, mandatory form, etc.)

a. Miss-and-Run Accident: Recovery without contact is permissible if the insured can prove by a disinterested witness that the accident was a result of another vehicle's driver, whose identity is unknown. The disinterested witness must corroborate the accident.

i. Phantom Vehicle Cases: The plaintiff is looking for coverage, and the owner/operator of the phantom vehicle is unknown, so you can't recover from their insurance company, so the plaintiff wants his UM coverage to apply. 1. Daughter of Plaintiff: "A person who is dependent, either wholly or partially, upon one who stands to recover cannot be an independent and disinterested witness. Nor can a person who lives with and has a close relationship with one who stands to recover be considered a disinterested witness." 2. Settled Tortfeasor Witness: After settlement, the police officer no longer has a stake in the outcome of the case, so he qualifies as an independent and disinterested witness. 3. Expert Witness: An accident reconstruction expert cannot be the independent and disinterested witness for a phantom vehicle case. Expert witness might be able to be presented, even without an independent lay witness, in other situations. 4. Hearsay: Overhearing the accident on the cell phone wasn't good enough. A hearsay witness because the original witness was unavailable is also not goo enough for an independent and disinterested witness. 5. Stationary Objects: The plaintiffs collided with several large bags of phosphate obstructing a lane of the interstate Highway. The court held that there was no physical contact. The collision was not the result of an unbroken chain. 6. Falling Objects: Physical contact was extended to the objects falling out of a motor vehicle.

a. Duncan v. USAA Insurance Company: This case is all about the validity of the UM waiver. The fact issue is whether the policy number not being filled in on the form makes the waiver invalid.

i. Policy Number's Importance: The court first talks about the history of what UM coverage was like before the prescribed form of the commissioner. It then goes on to the form prescribed by the commissioner. The statute only requires the name of the policyholder, their choice, and their signature. ii. Analysis: The statute talks about a "properly completed and signed form." The question for the court is what it means to be properly completed and signed. The court identifies the six requirements. The insurance form has six requirements: (1) initialing the selection or rejection of coverage chosen; (2) if limits lower than the policy limits are chosen, then filling in the amount of coverage selected for each person and each accident; (3) printing the name of the named insured or legal representative; (4) signing the name of the named insured or legal representative; (5) filling in the policy number and (6) filling in the date. These are the six tasks the insured must complete to have a valid waiver. 1. Conclusion: The court says that because one of the requirements is the policy number, the present form and waiver is invalid because the policy number was not provided. 2. Dissent: The policy number has nothing to do with this case because it is a single policy, not multiple policies. iii. 6 Tasks Became Law: When other courts were looking at whether the waiver was properly signed and completed, the courts looked at the six tasks promulgated by the Duncan court. If there is no waiver, there is UM coverage, and if there is a waiver, there is no UM coverage. This is a place where trying to find coverage becomes the focus of the court.

a. Eligibility to Stack: What's the rule going to be about who pays first, and then which UM policy you can recover from? The statute doesn't talk about this.

i. Primary Coverage: The statute does say that the UM coverage on the vehicle occupied by the plaintiff is going to be primary, so in a fight between insurance carriers over who will pay the first dollar, whoever covers the occupied vehicle will have primary coverage. ii. Further Recovery: Once all of the other eligible policies for recovery are determined as to the limits of those policies, how will the court determine which of the policies is in play? iii. Wyatt v. Robin: 1. Right to Selection: The court says that it is the right of the claimant to select the UM coverage that he/she thinks he is entitled to. It is either going to be the plaintiff finding out which one of the policies has the highest coverage or a squabble among the insurers about who should pay first. Many courts say the claimant has the right to select the policy he wants to recover from, without requiring reason. Even in a case where the plaintiff has conditionally settled with other carriers, including the UM carrier, she still has the right to litigate with one more UM carrier. She can't get more damages than she is entitled to, and she can't stack, but the right to select which carrier she wants to sue even extends to conditional settlement cases. The plaintiff was litigating to try to find the highest available dollar amount of coverage, and this was allowed. 2. Multiple Policies: First you look for reduction clauses. Is there something in the UM coverage that is a limitation of liability, or an exclusion, in part, of available recovery, where other benefits are paid (workers comp, payment under other liability provisions)? Is there a stacking issue? Can I recover from multiple policies? When is stacking available to me? The statute says that there should be at least one more policy available for recovery to the plaintiff beyond the policy covering the occupied vehicle. iv. La RS 22:1295(1)(e): "The uninsured motorist coverage does not apply to bodily injury, sickness, or disease, including death of an insured resulting therefrom, while occupying a motor vehicle owned by the insured if such motor vehicle is not described in the policy under which a claim is made, or is not a newly acquired or replacement motor vehicle covered under the terms of the policy." "This provision shall not apply to uninsured motorist coverage provided in a policy that does not describe specific motor vehicles." 1. Mayo v. State Farm: The wife and husband own separate vehicles, bought as separate property before the marriage. The spouse is not a named insured to separate property, so the wife was not excluded from UM coverage under her own UM coverage. You must look at the policy language. (1) Read the entire policies, several times. (2) Look at the UM coverage statute.

1. Mandatory Insurance Issues with Multi-State Cases: a. Champagne v. Ward: A driver, who is a residence of Mississippi, with insurance negotiated and issued in Mississippi, got into an accident in New Orleans, Louisiana with a resident of Louisiana.

i. Problem: The UM laws under Mississippi and Louisiana laws are different. The plaintiff sues a Louisiana defendant, and the status of the Louisiana defendant is as an uninsured/underinsured motorist. The Mississippi plaintiff is looking at the UM laws in Louisiana and Mississippi to see if the applicability of one law or the other will make a different to him. 1. Mississippi: Here, the difference is that Mississippi allows, and the policy delivered to the plaintiff allows, the reduction of UM limits for his policy depending on the recovery from the defendant. Let's say his policy provides $20,000 in UM coverage. The policy says the limits of the coverage are reduced based on what he recovers from the defendant. If he gets $10,000 from the defendant, the Mississippi plaintiff is eligible to recover $10,000 from his UM coverage. 2. Louisiana: In Louisiana, the result would be different. The Louisiana rule would say that the $10,000 deduction from recovery doesn't apply to the limits of the insurance policy, so the plaintiff would still have his $20,000 in UM coverage. This has nothing to do with what the plaintiff's damages are, except that it limits his ability to cover from his UM coverage from his insurer in half. ii. Question: The question is which state law should apply, Mississippi or Louisiana. This is important for the plaintiff. The defendant wants to get Louisiana law. The lower court said that we should automatically apply Louisiana UM law because the accident occurred in Louisiana and involved a Louisiana insured driver. The trial court says that Louisiana law should apply because there is a strong public policy in Louisiana to provide coverage and conflict-of-law analysis isn't necessary. The court of appeal affirmed the decision. iii. Analysis: The Supreme Court found that a choice-of-law analysis is required. 1. No Automatic Application: There is no absolute rule, so the rule is not that because there is a Louisiana accident involving an Louisiana insured tortfeasor, Louisiana law applies to insurance issued in another case. 2. Choice-of-Law Analysis: The case is governed by the law of that state whose policies would be most seriously impaired if not applied. The factors include: (1) the relationship of each state to the parties and the dispute; and (2) the policies and needs of the interstate and international systems, including the policies of upholding the justified expectations of parties and of minimizing the adverse consequences that might follow from subjecting a party to the law of more than one state. 3. Conclusion: The court found that the Mississippi policies would be most seriously impaired if Louisiana law applied. Mississippi has the right to draft policies, approved by the commissioner, that provide for this reduction, and we are not going to impose Louisiana law on a Mississippi insured under this situation. iv. Not Automatic Coverage: UM coverage is not mandatory for automobiles registered or insured in another state, nor is it mandatory for accidents occurring in this state. The choice-of-law analysis is necessary in multi-state cases. Louisiana UM law CAN apply, but need NOT MUST apply because choice-of-law must be analyzed.

1. CGL ••• Claims Made Policies: a. Hood v. Cotter: The coverage trigger is the making of the plan during the policy period, even if the conduct occurred before.

i. Public Policy Considerations: Is there something in the statute that says you can't limit the plaintiff's time to file a claim under a policy by less than year make a claims made policy violative of public policy? No. We are not limiting the time period within which the plaintiff can file a claim. We are talking about when they can assert a claim in respect to the policy period. ii. Reasoning: "The policy unambiguously states that the insured has no right to coverage under these facts, and the Direct Action Statute does not extend any greater right to third party tort victims who were damaged by the insured." "Upon the expiration of the policy, there was no coverage for any claim that had not yet been made and reported. Such a claims-made coverage provision does not violate the applicable provisions of La RS 22:629 and is not against public policy. The LAMMICO claims-made policy does not provide coverage for plaintiff's claim. Consequently, summary judgment should have been granted in favor of LAMMICO." b. Direct Action: c. What is a "Claim"? Suit was brought against the insured on February 19, 1986, and the insured was served on March 13, 1986. Service was the insured's first notice of the claim. His liability policy expired February 28, 1986. The policy covered "claims first made against the insured during the policy period," defining a "claim" as "a demand received by the Insured for money or services, including service of suit or institution or arbitration proceedings against the insured." Finding that the policy was not ambiguous or against public policy, the court held that the policy did not provide coverage because no claim was made within the policy period. d. Coverage for Prior Acts:

a. Lamkin v. Brooks: Brooks is a police officer, slightly outside of his jurisdiction. He has a couple encounters with the drunk father, the son, and the son's date. The plaintiff and defendant have different stories of how the police officer ended up punching the plaintiff. The defendant says that the plaintiff made a comment to him, and he reacted in self-defense, but the plaintiff, and his son, say that the plaintiff never said anything.

i. Question: Was the officer, outside of his jurisdiction, in the course and scope of his employment? ii. Policy Language Analysis: The exclusion is broader. The exclusion intends to any insured. The court has to ask if the act was malicious and willful, which it finds that it was. Does the exclusion extend to the vicarious liability of the town? Under the language "any insured," the vicarious liability of the town was excluded under the policy coverage. 1. Employer's Liability Analysis: "The test for an employer's liability is whether 'the tortious conduct of the employee is so closely connected in time, place, and causation to his employment - duties as to be regarded a risk of harm fairly attributable to the employer's business, as compared with conduct instituted by purely personal considerations entirely extraneous to the employer's interests.'" 2. No Coverage for Vicarious Liability: "The town is afforded no coverage due to the exclusion of claims 'arising out of the willful, intentional, or malicious conduct of any Insured.' Officer Brooks is an insured under the policy. The record fully spports that his unprovoked attack on Lamkin was a willful and intentional act on his iii. Illustration: It illustrates how important the words in the policy are. If the policy's exclusion didn't say "any" insured, the same result in McBride, the vicarious liability not being excluded, would result.

a. Public or Livery Conveyance Exclusion: The pit fall is not to assume that the exclusion reads at face value without doing the analysis of the court.

i. RPM Pizza, Inc. v Automotive Casualty Insurance Company: Schmidt and Daigle were hired as delivery persons for RPM Pizza. They are required, as a condition of the employment, to provide their own transportation and have their own automobile insurance. On two separate occasions, each of the two delivery guys got into automobile accidents and were at fault. The claim in this case is by RPM's insurance against the personal automobile insurer of Schmidt and Daigle. 1. Exclusion: "We do not provide liability coverage for any person covered under the policy (5) for that person's liability arising out of the ownership or operation of a vehicle while it is being used to carry persons or property for a fee." The insurance company covers the everyday risks that arise out of the use of the vehicle, but the risk being assumed and premium charged does not extend to the business uses of the vehicle (carrying people or property for a fee) because this encounters different risks. 2. Defining "Fee": If the delivery guys were paid $2 per trip, there may be a different conclusion in this case, but instead; these guys were given an hourly wage. The court goes through a discussion of different interpretations, so the policy is ambiguous because it is susceptible of more than one "reasonable" meaning. The ambiguity had to be interpreted in favor of coverage, so if the exclusion is denied, coverage would apply. a. Fees: Examples would be people charged per trip, independent taxi operators, and a station wagon used as an ambulance.

1. Legally Entitled to Recover: a. Gremillion v. State Farm: Mr. and Mrs. Gremillion are on a motorcycle, which is owned by the wife's father, and there was an accident in which Mrs. Gremillion gets hurt. The father's motorcycle is not insured, so the plaintiffs are after Mr. Gremillion's insurance company. He has two policies with State Farm, one for medical payments, and both have UM coverage.

i. Recovery: Mr. Gremillion has to establish that he was an insured under the policy for this accident. He was operating a non-owned vehicle. The policy provides coverage, not only for the covered auto specifically identified, but a non-owned vehicle being operated with the permission of the vehicle's owner. Mrs. Gremillion's argument is that her husband was operating a non-owned vehicle with her father's permission, and there was no underlying primary coverage on the vehicle, so she wants UM coverage under the policy. ii. Legal Issue: 1. Med Pay Claim ••• Motorcycle: For medical payment purposes, the motorcycle is not a covered automobile. 2. UM ••• Interspousal Immunity: The motorcycle is a covered automobile under the UM policy, but State Farm says that the wife is not legally entitled to recover damages from her husband due to the doctrine of interspousal immunity. The husband is not legally obligated to pay his wife, so the insurer doesn't have to pay under this policy. iii. Court's Conclusion: The husband's right to not paying is wife is a personal defense that only Mr. Gremillion can assert. State Farm cannot assert a personal defense of its insured, and it cannot assert interspousal immunity. Therefore, Mrs. Gremillion is entitled to recover from State Farm. iv. State Farm Seeks Reimbursement: State Farm's lawyer says that if this is true, under the reimbursement provision, State Farm stands in the shoes of Mr. Gremillion and wants to seek reimbursement from Mr. Gremillion. 1. Nature of Subrogation: State Farm was subrogated to the rights of Mrs. Gremillion and is entitled to get the money back from Mr. Gremillion. 2. No Right of Contribution: State Farm has no right of contribution from Mr. Gremillion as a solidary obligor, but it does have the right of subrogation. Subrogation doesn't work because Mrs. Gremillion cannot claim reimbursement from her husband because the doctrine of spousal immunity applies. State Farm cannot have more rights that its subrogee, Mrs. Gremillion. 3. Two Aspects: First, the personal defense of spousal immunity to Mr. Gremillion cannot be a defense of the insurer. Second, State Farm cannot have greater rights than its subrogee, Mrs. Gremillion, and she is barred from reimbursement from her husband because of spousal immunity. v. Lesson: If there is a personal defense that would bar the claim and not make it a legal obligation, it cannot be asserted by the insurer. The UM carrier is only obligated to pay for the plaintiff it is legally obligated to cover. On the other side, the insurer can only have the rights that the payee/subrogee has the right to recover. b. Employers and Employees: These are typically barred by Workers' Compensation.

1. Nature of UM Carrier's Right to Recover: a. Bosch v. Cummings: Bosch was struck by Cummings. Sentry is the UM carrier of Bosch, and it makes a cross claim against Cummings because it has a right to recover from the tortfeasor that Bosch can recover from.

i. Settlement with Defendant: Bosch settled with Cummings and her automobile liability insurer, releasing Cummings and State Farm. The obligation was extinguished against them. There was no longer a claim. ii. Implication for Sentry: What implication does the settlement with Cummings and her liability insurer have on Sentry's right of recovery? 1. If Subrogation: If it is subrogation, the effect of the settlement with Cummings and the liability insurer is that the right of Sentry is extinguished because Bosch's right was also extinguished. Through subrogation, Sentry only has those rights that Bosch has, and his right or claim against Cummings was extinguished by the statute. 2. Independent Right Under the Statute? If it is an independent right, Sentry's right to recovery is not affected by Bosch's settlement with Cummings and the liability insurer. iii. Court Concludes NO Independent Right: The Court concludes that the right is by subrogation. 1. Debate in Lower Courts: There was a debate over this in the lower courts, who said that the statute doesn't use the word subrogation as the right created in favor of the UM carrier, so it is an independent right, and under the laws of obligation, Sentry still has a right against Cummings. 2. Subrogation: To the extent that Sentry's rights are by subrogation, it only has the right to claims that are still present, so the fact that the settlement extinguished the right of the insured means that Sentry's right was also extinguished. Whther it is in the policy, or derived from the statute, the UM carrier only has the rights that the claimant has against the tortfeasor, so the rules of subrogation apply. iv. Recovery from Other Responsible Parties (non-motorist tortfeasors): The UM carrier is not limited the automobile tortfeasor. If there is some other defendant, who is not a motorist, the UM carrier still has a right to recover from anyone that the claimant has a right to recover against. The law of subrogation applies. UM insurer is subrogated to insured's rights against all parties liable for insured's injuries. Subrogation is not limited to claim against uninsured motorist. Subrogated UM insurer may recover from non-motorist joint tortfeasor. v. UM Carrier Settles with Bosch Before Cummings: UM insurer may pursue subrogation against tortfeasor even though insured subsequently released the tortfeasor. Bosch applies only when UM insured releases tortfeasor before the UM insurer is subrogated to the insured's right. It matters who settles first. 1. Timing of Payment (Tendering Payment): Sometimes the tendering of payment will trigger the early right of subrogation. This is usually an unconditional tender of payment by the insurer, and when this happen, the insurer is immediately subrogated to the rights of the claimant, and the rights to reimbursement are fixed at that time.

Use of a Vehicle

i. Spurlock: The driver of the vehicle is injured during the loading process, and the court finds that there was coverage. Loading and unloading was included in the coverage of the policy. ii. Ramsey: Did the discharge of the shotgun arise out of the use of the vehicle? The defendant took the shotgun to school with him because he forgot to take it out of the car. He left it in the front seat, with the car unlocked and his keys in the ignition. When he is in the process of moving the shotgun to the backseat, it discharges and injures his friends in the car next to him. 1. Not out of Use of Car: The driver was not operating the vehicle when this happened. It was the negligence of having the shot gun in the car, loaded, and moving it in an unsafe manner, that was the cause of the accident. The vehicle was not essential to the plaintiff's theory of recovery. iii. Young: They were offloading bundles, but during the last bundles removal, a strap breaks, and a person is injured. The court says that it was the way in which the bundles were configured, the negligence of the strapping, that was the main cause of the accident, so the presence of the truck was not essential to the plaintiff's theory of liability.