Accidents

Third Circuit Affirms Dismissal of Product Liability and Contract Breach from Truck Fire

Published on: September 15, 2013 | By Berniard Law Firm

The case of American Zurich Insurance v. Caterpillar arose from a truck fire that took place in Natchitoches Parish on April 7, 2010. American Zurich insured the truck and Caterpillar manufactured the truck’s engine. American Zurich opened up a loss file on the truck the day of the fire. American Zurich paid out almost $77,000 dollars to the insured.

On April 26, 2010, Zurich was informed of a possible defect in the engine by an inspection agency they hired to look into the claim. A year later, on April 26, 2011, American Zurich filed suit against Caterpillar in West Baton Rouge Parish seeking reimbursement for the costs they incurred, but the case was subsequently moved to Natchitoches Parish in June 2011. On November 10, 2011, the trial court granted Caterpillar’s peremptory exception of prescription and their motion for summary judgment and dismissed American Zurich’s claims. American Zurich appealed the trial court’s decision and the case made its way to the Third Circuit Court of Appeal. While you read the rest of this case summary, keep the dates mentioned above in mind.

So why does keeping these dates straight in our minds matter, and what is a peremptory exception of prescription? Actions brought under the Louisiana Products Liability Act, or LPLA, must be filed within one year “from the day injury or damage is sustained.” This one year time period is known as a prescriptive period. A peremptory exception of prescription is a defense motion arguing that the plaintiff has no case because they failed to file their case in the required prescriptive period of time. So one of the major issues in this case became on what date did that prescriptive period begin? Caterpillar claimed it started on April 7, 2010, the day of the fire. American Zurich claimed it began on April 26, 2010, which was the day their investigators told them about the engine defect.

The court noted that “prescription begins to run when the defect manifests itself, not on the date the underlying cause of the defect is found.” In other words, the court said that the one year prescriptive period began on the day of the fire, April 7, 2010. The court points out that American Zurich knew about the fire the day it occurred, and therefore, American Zurich had no basis for arguing that the prescriptive date should have started on April 26, 2010. Thus the court holds that American Zurich did not file their case within the one year prescriptive period required under the LPLA which ran out on April 7, 2011.

The court also quickly dispatched a breach of contract claim by American Zurich. American Zurich claimed that by building a defective engine, Caterpillar had failed to perform under their service contract. In Louisiana, the LPLA is the sole remedy against a manufacturer of a defective product. There is one exception to this rule, and that applies when the damage, or part of the damage, is caused exclusively by a breach of contract, and not the defective product itself. So it was important for American Zurich to argue this exception applied in this case because a breach of contract claim has a prescriptive period of ten years in Louisiana.

The court found American Zurich’s argument unpersuasive since the damage was solely attributable to the defective engine, and their claims were not related to the service contract itself. The exception mentioned above was not applicable, and therefore the LPLA was controlled this case. As mentioned above, the prescriptive period had run out before American Zurich filed their case against Caterpillar, and the court affirmed the trial court’s dismissal of American Zurich’s claims.
This case shows the vital importance of taking timely action when engaged in legal matters.

Insurance Dispute With Steel Company Exposes Liability Apportionment, Terms

Published on: September 12, 2013 | By Berniard Law Firm

In a recent case, the Fifth Circuit Court of Appeals reviewed the lower court’s application of the “law-of-the-case” and “waiver” doctrines. Both of these doctrines are important rules that express the ultimate power of an appellate court in reviewing issues of law. Generally, an issue of law is a question regarding the application of law to a case. Therefore, in pursuing any civil suit, it is imperative to understand the implications and ramifications of an appellate court’s power to change the ruling in your case.

In Bayou Steel Corp. v. National Union Fire Insurance Company of Pittsburgh, Pennsylvania, the Fifth Circuit Court reviewed an insurance dispute that concerned the apportionment of liability for a severe leg injury that was suffered by a worker who was unloading steel bundles. In a complicated fact scenario, Ryan Campbell was injured, in 2002, while unloading steel bundles owned by Bayou Steel Corp. on a barge that was owned by Memco Barge Lines, Inc. Shortly before this incident occurred, Bayou Steel Corp. had contracted with Memco to transport the steel from LaPlace, Louisiana, to Chicago, Illinois. At the time of his injury, Ryan Campbell was working for Kindra Marine Terminal, a stevedoring company that was assigned to unload the steel bundles in Chicago. After the suit involving Ryan Campbell was settled, Bayou Steel Corp. brought suit seeking a declaration of coverage and reimbursement from National Union Fire Insurance.

After a series of appeals, the district court used the law-of-the-case doctrine to determine that Kindra was not a sub-contractor of Bayou Steel. Therefore, Campbell’s injuries fell within the language of the insurance policy that Bayou Steel held. Thus, the lower court entered summary judgment for National Union Fire Insurance Company of Pittsburgh, Pennsylvania.

According to the law-of-the-case doctrine, “when a court decides upon a rule of law, that decision should continue to govern the same issue in subsequent stages in the same case.” Thus, an issue of law “decided on appeal may not be reexamined by the district court on remand or by the appellate court on a subsequent appeal.” Accordingly, the Fifth Circuit agreed with the district court that that fact that Campbell did not fall within the exclusion in the policy held by Bayou Steel was part of the law of the case and subsequently held that this issue had been resolved on an earlier appeal.

The waiver doctrine “holds that an issue that could have been raised on appeal but is forfeited and may not be revisited by the district court on remand.” Id. Like the law-of-the-case doctrine, the waiver doctrine “serves judicial economy by forcing parties to raise issues whose resolution might spare the court and parties later rounds of remands and appeals.” However, the waiver doctrine “arises as a consequence of a party’s inaction, [and] not as a consequence of a decision on [the part of the Court of Appeals].” Thus, the Court of Appeals agreed that Bayou had waived their argument about the language of the policy by failing to raise it on remand after the first appeal or during the second appeal … “[b]ecause they failed to raise it during that period, the issue could not [have been] revisited by the district court on remand.”

In its decision, the Fifth Circuit ruled that the lower court had properly applied the law-of-the-case and waiver doctrines and that summary judgment in favor of National Union Fire Insurance Company of Pittsburgh, Pennsylvania, was appropriate.

All of these matters are inherently complicated and show that knowledge of the exact law is necessary to reach a successful outcome. While questions and issues of law must be decided by the court, your legal representative should be aware of the foregoing doctrines and should be able to adequately present your case.

Fall Accident Leads to Failing Res Ipsa Loquitor Suit in Ouchaita

Published on: September 10, 2013 | By Berniard Law Firm

An insurance company found itself on the defending side of a civil claim but not for the reason one might expect. Larry Modicue, a Louisiana man weighing 404 pounds, filed a claim against State Farm Casualty & Fire Insurance and its representative Rose Kennedy when the chair Ms. Kennedy offered him collapsed under his weight. The Fourth Judicial District Court granted the defendants’ motions for summary judgment and the Court of Appeal for the Second Circuit affirmed.

Mr. Modicue alleged that the incident in which his chair collapsed was an example of res ipsa loquitor. This common law phenomenon is found when a court deems that a particular incident or accident is the type that does not occur without negligence on behalf of some actor. Res ipsa loquitor means “the thing speaks for itself” in Latin and is a way for a plaintiff to prove the duty and breach prongs of a negligence case. As a review, a prima facie negligence case requires four essential elements: duty, breach, causation and harm. A plaintiff must prove each of these elements in order for a case to proceed to the trier of fact, whether judge or jury.

The appellate court reviewed the granting of a summary judgment de novo meaning that the appellate court could consider all things that the trial court could have considered in rendering its decision. The appellate court reviewed Louisiana C.C. art. 2317.1 in determining the outcome of this case. This statute places liability on the owner or custodian of a thing when that person knew or should have known through the exercise of reasonable care that a particular condition existed when it is determined that the condition caused damage to a plaintiff and the custodian or owner could have remedied the condition with reasonable care. Liability attaches if that care was not exercised. This statute is a reflection of traditional negligence principles. If a party has exclusive control over an object it is responsible for conditions in that object that cause harm to others. It is interesting to note that this statute goes on to specifically note that nothing in it should be construed to prevent a court from applying res ipsa loquitor. The appellate court found that Ms. Kennedy had no reason to know that this particular chair would give out under Mr. Modicue’s weight since it had held him without incident on a previous occasion.

The Court of Appeal went on to dismiss the plaintiff’s allegation that res ipsa loquitor applied to this situation. The court noted that Harper v. Advantage Gaming, 880 So. 2d 948 clarifies the situations in which res ipsa loquitor applies. That case required a court to find unusual circumstances such that, in the absence of other evidence, there was an inference of negligence on the part of the defendant. In conjunction with this the defendant must have had exclusive control over the object that caused the injury. These circumstances must lead to the finding that the only reasonable conclusion is that the defendant breached a duty to the plaintiff and that this was the cause of the plaintiff’s injuries.

The court in this case found that due to Mr. Modicue’s weight, there was more than one potential explanation for the chair’s failure. The court went on to explain that Mr. Modicue had not provided enough evidence to get the issue of the defendants’ negligence to the jury. As such, the defendants were entitled to a summary judgment as a matter of law. Mr. Modicue’s reliance on res ipsa loquitor caused his negligence claim to fail. Had he offered evidence of all four elements of negligence, it is possible that he would have succeeded, though it is unclear if this evidence existed.

Boat Injury Case Highlights Watercraft and Coverage Exclusions (Pt 2)

Published on: September 7, 2013 | By Berniard Law Firm

In 2008, three men were passengers on a chartered fishing boat that collided with a utility boat. The fishing boat’s insurance company was St. Paul Fire and the utility boat’s insurance company was Steadfast. Harvest Oil owned the utility boat. Normally, the insurance companies would fight about who was at fault and may eventually make it to court. However, this case was more complicated because the men in the fishing boat did not own the boat, and the owner of the utility boat filed for bankruptcy shortly after the passengers drug them into the lawsuit as a third party. The issue of waiver of a coverage defense while the insured is in a bankruptcy proceeding is one that has not been considered in Louisiana previously.

Harvest filed for bankruptcy in 2009 and the passengers in the accident filed in its bankruptcy proceeding as a creditor for “an amount to be determined.” Where an insured filed for bankruptcy, it was very smart of the injured party to file as a creditor because that helps protect their interest if the insurance company refuses to pay Harvest’s liability coverage.

When an individual or company files for bankruptcy, federal law provides an automatic stay on any other litigation proceedings. That means that all other litigation involving the debtor must be paused until the bankruptcy proceeding is closed. Therefore, Harvest dropped out of the insurance lawsuit, and the passengers had to sue the insurance company alone.

As a result, when Steadfast asserted the watercraft exclusion, that meant that the passengers could no longer sue the insurance company and had to sue the insured himself. Since the insured was in bankruptcy proceedings, there was not only a delay in the litigation because of the stay, but there was also a very real chance that the injured parties may not get any money.

When an individual goes into a bankruptcy proceeding, they have to pay off their creditors in a certain order. First, the secured creditors will receive payment. A secured creditor has something that they use as collateral for the loan or credit that they extended to the debtor. For example, if you have an automotive loan, your car is likely your collateral or security. If you file bankruptcy and cannot pay for your car loan, then, with a few exceptions, they will likely come take your car. When a creditor is unsecured, however, they cannot take anything and must share with all of your other unsecured creditors. That likely means that they will not get paid the entire debt that they are owed, and will usually only receive a small portion of their money back.

A judgment is an unsecured debt, and because the passengers filed so late, they are likely at the back end of the line of creditors in the bankruptcy proceeding. Louisiana law allows those with liability coverage to sue the insurer directly when the insured has been removed for bankruptcy proceedings under the Louisiana Direct Action statute. So, if the insurance company would have covered the accident, then the insurance company would have paid them directly instead of going through the insured. This is because liability coverage in Louisiana is not the property of the insured; it is the property of whoever the injured party was. Other types of insurance coverage, such as collision, for example, would still be the property of the insured and would be included in the bankruptcy proceedings. Where the insurance coverage would be a property of the estate, then the stay that applies to the insured would also apply to the insurer. However, that is not the case here because the liability coverage is not property of the insured.

Once the court decided the reservation of rights and waiver issues, then it questioned how those decisions were affect the bankruptcy proceeding. The court considered claim and issue preclusion. Preclusion in civil cases is a lot like the rule against double jeopardy in criminal cases; the idea is that you cannot keep taking someone back to court for the same offenses over and over again.

Claim preclusion does not allow the same parties or parities that are in privity, or connected in some way, to try the same claim or cause of action after a court of competent jurisdiction has rendered a final verdict. If the claim was litigated to completion, then it cannot be litigated again. It is sometimes difficult to determine if parties are in privity, however. Usually these relationships are based on a connection so strong that liability of one would normally be the liability of another such as in employee and employer relationships. An insurance company sued under the Louisiana Direct Action statute could be an example, but only if the insured’s and the insurer’s interests are aligned. In this case, because the insurer is asserting a coverage defense, then their interests are not aligned and they are not in privity. Therefore, claim preclusion does not affect the bankruptcy suit.

Issue preclusion is virtually the same as claim preclusion except that it applies to only one issue in the lawsuit instead of the entire case. The issue still needs to be completely decided by a court of competent jurisdiction, however. It also requires that the parties be the same, but there is no privity exception. Since the parties will not be the same in the bankruptcy proceeding, issue preclusion has no effect on the bankruptcy proceeding either.

The law overlaps occasionally and can result in some confusing and interesting results. You need an experienced attorney to help you navigate the legal waters.

Boat Injury Case Highlights Watercraft and Coverage Exclusions (Pt 1)

Published on: September 5, 2013 | By Berniard Law Firm

In 2008, three men were passengers on a chartered fishing boat that collided with a utility boat. The fishing boat’s insurance company was St. Paul Fire and the utility boat’s insurance company was Steadfast. Harvest Oil owned the utility boat. Normally, the insurance companies would fight about who was at fault and may eventually make it to court. However, this case was more complicated because the men in the fishing boat did not own the boat, and the owner of the utility boat filed for bankruptcy shortly after the passengers drug them into the lawsuit as a third party. The issue of waiver of a coverage defense while the insured is in a bankruptcy proceeding is one that has not been considered in Louisiana previously.

Harvest received a letter from their insurance company shortly the parties filed suit. The letter explained that the insurance company was “reserving their rights,” but it was signed by Zurich American Insurance Company, Harvest’s automotive insurance provider. Zurich North America owned both Steadfast and Zurich American Insurance Company, and Harvest had insurance policies with both of these carriers. Despite the fact that Zurich American Insurance Company signed the letter, the Steadfast policy was mentioned by name and policy number in the letter. In fact, the letter quoted a portion of the Steadfast policy that excluded watercrafts such as the one that was involved in the accident in 2008. The letter explained that the insurance company would be investigating the case, but reserved all of its rights in action. Essentially, when an insurance company reserves its rights, it means that wants the option of asserting a defense that may not be in the insured interests.

When the passengers sued the insurance company their initial answer did not mention that Steadfast had a watercraft exclusion. When the passengers asked to review the relevant insurance policies, Steadfast gave them copies of their standard primary and umbrella policies. Three separate insurance claims agents thought that Harvest’s claim would be covered because they overlooked the watercraft exclusion. Finally, in 2011, an insurance adjustor finally noticed the exclusion. As a result, Steadfast changed their defenses and asserted that they would not cover Harvest’s claim because of the watercraft exclusion. Steadfast also, understandably, changed their attorneys shortly after this discovery.

The passengers argued that Steadfast could not assert this defense so late in the litigation. They argued that Steadfast waived their coverage defense by proceeding with the lawsuit, and even if they did not waive the defense, they did not assert that right to begin with. The court in this case explained that the insurance company needed to have reserved their right to use this defense at the beginning of the litigation, so they analyzed the initial letter that Harvest received at the beginning of the lawsuit.

The passengers argued that Steadfast did not reserve its rights through the letter because the letter was very confusing. It was signed by another insurance company and confused the insured. The insured thought that Zurich, their automotive insurance company, was asserting its rights; not that Steadfast was asserting its rights. In addition, the letter only referred to investigation and did not mention anything relating to a defense.

Generally, if the insurance company assumes a defense of the insured without first reserving its rights, that constitutes a waiver. However, the court found that Steadfast did reserve its rights in the letter sent to Harvest. The court points out that the letter specifically referred to the policy with Steadfast and quotes language from it. The fact that the insured did not read the letter carefully, the court concluded, should not inhibit Steadfast from reserving its rights. Since Louisiana does not require technical language to reserve its rights to a defense, the insurance company was not required to describe which rights in particular they were reserving.

However, the insurance company can still waive their rights even where they have reserved their rights. The court pointed out that under Louisiana law, an insurance company can waive any provision of an insurance contract, even if that waiver has the effect of extending coverage. Waiver requires misleading conduct on the part of the insurer and a prejudice to the insured.

Louisiana law requires that the insurance company induce their insured to belief that they were waiving their rights. In this case, although Steadfast mistakenly thought that Harvest was covered, they did not communicate that mistake to Harvest. Steadfast did not act with the intention of misleading their insured; they acted because of a mistake regarding coverage, so Steadfast did not deliberately mislead Harvest.

Waiver also requires that the insured be harmed because of the misleading conduct. Due to the bankruptcy proceedings, Harvest was not harmed by the delay and confusion because they were not actually a party in the case involving the passengers. The court explained that they could not have been harmed in a case where they were not a party.

As a result, the court concluded that Steadfast asserted and reserved their rights properly and did not waive their coverage defense. But, how does that affect the bankruptcy proceeding? Look for part two to find out.

Prescription Important in Lawsuit Tied to Truck Fire

Published on: September 2, 2013 | By Berniard Law Firm

The case of American Zurich Insurance v. Caterpillar arose from a truck fire that took place in Natchitoches Parish on April 7, 2010. American Zurich insured the truck and Caterpillar manufactured the truck’s engine. American Zurich opened up a loss file on the truck the day of the fire. American Zurich paid out almost $77,000 dollars to the insured. On April 26, 2010, Zurich was informed of a possible defect in the engine by an inspection agency they hired to look into the claim. A year later, on April 26, 2011 American Zurich filed suit against Caterpillar in West Baton Rouge Parish seeking reimbursement for the costs they incurred, but the case was subsequently moved to Natchitoches Parish in June 2011. On November 10, 2011, the trial court granted Caterpillar’s peremptory exception of prescription and their motion for summary judgment and dismissed American Zurich’s claims. American Zurich appealed the trial court’s decision and the case made its way to the Third Circuit Court of Appeal. While you read the rest of this case summary keep the dates mentioned above in mind.

So why does keeping these dates straight in our minds matter, and what is a peremptory exception of prescription? Actions brought under the Louisiana Products Liability Act, or LPLA, must be filed within one year “from the day injury or damage is sustained.” This one year time period is known as a prescriptive period. A peremptory exception of prescription is a defense motion arguing that the plaintiff has no case because they failed to file their case in the required prescriptive period of time. So one of the major issues in this case became on what date did that prescriptive period begin? Caterpillar claimed it started on April 7, 2010, the day of the fire. American Zurich claimed it began on April 26, 2010, which was the day their investigators told them about the engine defect.

The court noted that “prescription begins to run when the defect manifests itself, not on the date the underlying cause of the defect is found.” In other words, the court said that the one year prescriptive period began on the day of the fire, April 7, 2010. The court points out that American Zurich knew about the fire the day it occurred, and therefore, American Zurich had no basis for arguing that the prescriptive date should have started on April 26, 2010. Thus the court holds that American Zurich did not file their case within the one year prescriptive period required under the LPLA which ran out on April 7, 2011.

Man Who Fell Through Chair Loses Case Due to Summary Judgment

Published on: August 31, 2013 | By Berniard Law Firm

Injuries can happen anywhere but do not always lead to successful legal suits. Larry Modicue was directed by Rose Kennedy, an insurance agent for State Farm Fire & Casualty Co. in West Monroe, Louisiana, to have a seat in her office, which resulted in the chair collapsing. Modicue is a 404-pound man who has sat in this same chair with no prior injuries or incidents but suffered a shoulder injury in the fall, requiring medical assistance.

Modicue sought relief for his injuries and brought suit against Kennedy and State Farm. Kennedy and State Farm’s, in turn, filed a motion for summary judgment. Summary judgment is a maneuver used by one party to have the court make a decision on part or the whole dispute without going to trial. For a motion for summary judgment to be granted there must be no disputes on material fact, showing that one party is entitled to judgment. The summary judgment procedure is designed to secure the just, speedy, and inexpensive determination of every action and is favored by the courts and construed to accomplish these ends. In this case, Kennedy and State Farm’s motion for summary judgment was granted due to the fact that the court found no genuine issue of material fact.

Modicue appealed this decision arguing that the court erred in granting summary judgment. His reasoning was that 1) a Louisiana business owner has a duty to provide seating which is adequate for the general public, and 2) the facts of the case permit the application of res ipsa loquitor.

The court disagreed with Modicue. According to the Louisiana C.C. art. 2317.1, an owner is only responsible for damage of the object is if 1) he knew about a ruin, vice, or defect which caused the damage, or 2) he should have known of the ruin, vice, or defect, 3) the damage could have been prevented if he exercised reasonable care, and 4) that he failed to exercise reasonable care.

Modicue failed to show that there was prior knowledge on the part of Kennedy and State Farm of the chair being defected. There was also no reasonable belief that the chair was defected and could not support Modicue because he had sat in the same chair before without any injury or incident. The chair also did not contain any warning about the capacity at which it could hold.

Res ipsa loquitor, a rule of circumstantial evidence that applies when the facts suggest that the negligence of the defendant is the most plausible explanation of the injury, did not apply either. According to Harper v. Advantage Gaming, it is applicable when 1) the circumstances of the accident are so unusual that, in the absence of other evidence, there is an inference of negligence by defendant; 2) defendant had exclusive control over the thing causing injury; and, 3) the only reasonable conclusion is that defendant’s breach of duty caused the accident.

The original ruling in favor of Rose Kennedy and State Farm Fire & Casualty Co. was upheld due to Modicue’s failure to produce sufficient evidence showing the negligence of Kennedy and State Farm.

Legal Complications Arise in Homer Claim Against Auto Insurers

Published on: August 29, 2013 | By Berniard Law Firm

A case appealed from the Parish of Claiborne, arising from an incident in Homer, Louisiana, raises a couple of important issues regarding lawsuits against insurance providers.

In this case, the plaintiff was a passenger in a car that met the defendant, driving her own car, at an intersection. The plaintiff and the defendant were already at odds with each other, and the plaintiff claimed in trial that the defendant had tried earlier that day to strike the plaintiff with her car. Nonetheless, the plaintiff got out of the passenger side and walked to the side of the defendant’s car, where the plaintiff struck or attempted to strike the defendant with her hands. As the plaintiff returned to her own car, the defendant performed a U-turn, drove back towards the plaintiff and struck her with the vehicle, causing the plaintiff’s injuries.

The plaintiff sued the defendant’s liability insurer, as well as the agency providing underinsured motorist (UM) coverage for the vehicle in which the plaintiff was a passenger. An appeal of the first trial led to a retrial. In the retrial, the court held in favor of the defendant insurance companies, and the plaintiff appealed.

The first issue regards lawsuits against automobile insurance companies in general. The insurance policy itself is essential to establishing a case against an insurance provider. A plaintiff against an insurance company must enter the insurance policy into the record in order to prevail. As this case demonstrates, record of a court acknowledging an insurance policy and discussing the relevant parts of it in an earlier trial can sometimes serve as record of the policy in a subsequent trial.

In this case, the trial court held that the plaintiff had not entered the insurance policies into the record and so could not prove that the insurers were responsible for any payments. The appellate court decided that the defendant’s pleadings and stipulations, as well as records from the earlier trial and appeal served to prove the existence and contents of the insurance policies, even though the plaintiff did not re-enter the insurance policies during the second trial.

The second issue regards lawsuits to recover damages based on UM clauses. Uninsured motorist insurance, or underinsured motorist insurance, typically provides coverage to the policy-holder in the event that he is injured in an accident caused by a motorist with no insurance, or with insurance that does not cover all of the damage done.

Typically an “accident” must occur for the recovery of UM insurance benefits. When evaluating claims for UM insurance, courts examine incidents from the viewpoint of the injured party. If a vehicular assault is unprovoked or unexpected from the injured party’s perspective then it is “accidental” even if the aggressor acted intentionally.

In this case, the court found that the plaintiff provoked the incident when she struck or attempted to strike the defendant with her hands, so her injuries were not “accidental” and the provider of UM insurance was not liable.

Procedural details such as the need to file certain documents in order to make cases can destroy otherwise valid lawsuits. Further, the exact meaning and relevance of language in complex insurance contracts may be difficult to understand unless one knows how courts have interpreted the issues.

Insurance Policy Interpretation Pivotal to Car Accident Appeal

Published on: August 25, 2013 | By Berniard Law Firm

In its earlier opinion, the Court of Appeals held that Lawrence E. Metz’s 2003 Chevrolet Avalanche was in fact covered by the Safeway Insurance Company during an accident that happened in Bossier City, Louisiana. The Court of Appeals looked to the language of the policy that stated “when two or more automobiles are insured hereunder, the terms of the policy shall apply separately to each” to conclude that the paying of premiums applied separately to each of Metz’s vehicles.

Although Metz had not paid the additional premium on his second vehicle, he had paid for coverage on his Avalanche in full prior to the accident. Therefore, the Court of Appeals initially held that Safeway was still responsible for the damages Metz incurred in the accident, although they had canceled the policy prior. It seems, however, that the Court of Appeals overlooked some relevant language within Safeway’s Insurance Policy, which led them to grant a rehearing for the case. The Court of Appeals ultimately reversed their initial holding in favor of Safeway Insurance Company.

In the rehearing, the Court looked carefully at what exactly “when two or more automobiles are insured hereunder (emphasis added), the terms of the policy shall apply separately to each” referred to. That statement was under the following heading: “4. Two or More Automobiles—Parts I, III, and IV.” Parts I, III, and IV of the insurance policy were about “Liability, Expenses for Medical Services, and Physical Damage” respectively. Parts I, III, and IV of Safeway’s insurance policy had nothing to do with the payment of premiums.

On rehearing, this court decided that Safeway’s terms applied separately to each vehicle only with regards to “liability, expenses for medical services, and physical damage” and not with regards to the payment of premiums. Therefore, since Metz did not pay the premium on his additional vehicle, his entire policy had been effectively canceled two days prior to his accident, leaving him with no coverage.

Interpreting language is a complex matter that even courts get wrong. That is why it is crucial to get representation from lawyers who are skilled at language interpretation and application, and who will get it right the first time around.

Intent of a Contract’s Language Explored in Insurance Dispute

Published on: August 21, 2013 | By Berniard Law Firm

The method by which a contract’s ambiguous language is interpreted can decide who wins the case. A slight difference in statutory interpretation can acquit or convict a person charged with a serious felony or a petty misdemeanor. There are two main theories of interpretation: textualism and purposivism. Proponents of the textualism theory, or textualists, look to the precise language of the code, statute, contract, etc., in order to apply it to the facts. Pure textualists look solely to the four corners of the
document to aid them in interpretation.

Proponents of the purposivism theory, or purposivists, look to understand the legislative history and intent of the parties who drafted the language, to decide how to apply the law. Purposivists believe that this method of interpretation is the most effective way to ensure that the law is applied the way the lawmakers (legislative branch) would have wanted it. Usually, however, interpretation of language comes about through utilizing a combination of texualist and purposivist approaches.

In this case, the proper application of an insurance contract hinges on the language of the contract drafted by Safeway Insurance Company. Safeway issued a policy of automobile liability insurance to Lawrence E. Metz effective November 16, 2008, through May 16, 2009, which only listed his 2003 Chevrolet Avalanche as an insured vehicle. Although Metz paid in full for his policy covering auto insurance for his Avalanche, he attempted to add another vehicle, his 2008 Chevrolet Uplander, on the
same day he made his final payment for the Avalanche.

In response, Safeway sent a bill to Metz for the additional premium owed for coverage on the additional vehicle, which Metz denies ever receiving. After issuing a notice of cancellation to Metz when Safeway did not receive the additional premium, Safeway canceled Metz’s entire policy ten days after.

Just two days after Safeway had canceled Metz’s policy, Metz got into an accident in Bossier City, Louisiana, while driving his Avalanche. The question in this case: is Safeway responsible for covering Metz’s payments from the accident? Safeway argues that since Metz did not pay the additional premium for the Uplander, the entire policy was canceled, which meant Safeway was no longer Metz’s automobile insurance company. Metz argues that he had paid in full to have his Avalanche (the vehicle involved in the accident) covered, so Safeway should therefore cover the damages.

The Court of Appeals states that ambiguous policy provisions are generally construed against the insurer in favor of coverage. The court looks to a paragraph under the “CONDITIONS” portion of the Safeway policy to conclude that the terms of the policy apply separately to each of Metz’s vehicles. The policy states “when two or more automobiles are insured hereunder, the terms of the policy shall apply separately to each.” Therefore, the Court of Appeals held that the trial court was not manifestly erroneous in finding there was coverage on Metz’s Avalanche at the time of the accident.

There is, however, a dissent, arguing that when it comes to the paying of premiums, the terms of the Safeway policy does not apply separately to each vehicle. The dissenter argues that parsing of the premium coverage is “logically untenable.” His argument is further explored in the rehearing given to reconsider the majority opinion in this case, which is detailed in the next entry.