Articles Posted in Insurance Law

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In Marcus v. Hanover Ins. Co., Inc., 740 So.2d 603 (La.1999), the Louisiana Supreme Court held that a “business use exclusion” in a personal automobile liability policy which excludes coverage for damages resulting from the operation of “your insured car, in any business other than an auto business,” is against public policy and is unenforceable because it contravenes Louisiana’s compulsory liability insurance law and the public policy of Louisiana, which is to provide compensation to injured third parties. Because there was previously a split in the law on this issue, the Supreme Court further held that because the insurer issuing the policy with the unenforceable exclusion, “had no intent to thwart such law and the public policy behind it,” that the policy would be construed to provide the statutorily required minimum limits of coverage, rather than the higher limits of coverage otherwise provided by the policy.

Based on the rationale of the Supreme Court, insurers maintaining policies after the Marcus decision with an unenforceable “business use exclusion” that excludes coverage for “your insured car” should be presumed to intend to thwart the compulsory liability insurance law of Louisiana and the public policy behind it, and the actual policy limits should apply to any covered loss under the policy.

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Using the duty/risk analysis, it must be determined whether the insured’s conduct of which the plaintiff complains is a legal cause of the accident. If so, then it must be determined whether the insured’s conduct arose out of the “use” of an automobile. In order for the insured’s conduct to arise out of “use,” the automobile must be essential to the theory of liability being asserted against the insured. The specific duty breached by the insured must flow from “use” of the automobile. If the specific duty breached by the insured existed independently of the “use” of the automobile, then liability does not arise out of “use” even though the insured’s duty could have been performed by use of an automobile. In the final analysis, common sense must be utilized in making the determination of whether “use” of the automobile is an essential ingredient of the duty breached by the insured. McKenzie & Johnston, Louisiana Civil Law Treatise, Insurance (West).

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Liability insurance policy language requiring “permission” by the owner to use a vehicle imposes a different standard than a policy requiring only a “reasonable belief” by the operator that he or she had permission of the owner to use the vehicle.

When the insurance policy requires permission by the owner, coverage exists only when the operator has the express or implied permission of the owner. The operator’s subjective reasonable belief will not suffice. This language is often applicable to users of covered vehicles under the policy.

When the insurance policy requires a “reasonable belief” by the operator that he or she had the permission of the owner to the use the vehicle, whether the owner actually granted express or implied permission is no longer an element. This language is often applicable to insureds under the policy using a non-owned vehicle.

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Black’s Law Dictionary defines INSURANCE as:

A contract by which one party (the insurer) undertakes to indemnify another party (the insured) against risk of loss, damage, or liability arising from the occurrence of some specified contingency, and to defend the insured or to pay for a defense regardless of whether the insured is ultimately found liable.

An insured party pays a premium to the insurer in exchange for the insurer’s assumption of the insured’s risk.

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Principles of Interpretation of Insurance Policies:

1) An insurance policy is a contract between the parties and is the law between the parties.

2) An insurance policy is construed using the general rules of interpretation of contracts set forth in the Civil Code. See La. C.C. art. 2045: Interpretation of a contract is the determination of the common intent of the parties.

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In Louisiana, benefits under any personal insurance contract accruing upon the death, disablement, or injury of the individual insured are not payable to any beneficiary held by a final judgment of a court of competent jurisdiction to be criminally responsible for the death, disablement, or injury of the individual insured, or to a beneficiary who is judicially determined to have participated in the intentional, unjustified killing of the individual insured.

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Stacking of multiple UM (uninsured/underinsured motorist) liability policies is prohibited by the Anti-Stacking provision contained in La.R.S. 22:1295(1)(c), unless the injured party is occupying an automobile not owned by him/her, a resident spouse, or a resident relative. In that instance, the UM coverage on the automobile in which the injured party is an occupant is primary, and if exhausted due to the extent of the injured occupant’s damages, then the injured occupant may recover as excess from one other UM policy available to him/her.

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In the absence of physical contact, the insured can prove “by an independent and disinterested witness, that the injury was the result of the actions of the driver of another vehicle whose identify is unknown.” La. R.S. 22:1295(1)(f). This is “justifiable because miss and run is too fraud-fraught: every driver who falls asleep or otherwise loses control and injures himself in a one-car accident could blame a non-existent miss-and-run driver and collect under his uninsured motorist coverage.” Springer v. GEICO, 311 So.2d 36 (La.App. 4th Cir.), writ denied, 313 So.2d 598 (La.1975).

The Third Circuit Court of Appeal in Stracener v. Millers Cas. Ins. Co. Of Texas, 682 So.2d 940 (La.App. 3d Cir. 1996), held that 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 stands to recover be considered a disinterested witness.”

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Is it reasonably forseeable that the first permittee might allow others to operate the automobile?

Implied permission by the named insured can be found even in the face of a specific prohibition against allowing others to operate the automobile if there is evidence that the named insured was aware of subsequent breaches by the permittee and took no remedial action or made no protests. On the other hand, the named insured’s express prohibition and consistent conduct enforcing the prohibition will preclude the implication that permission extends beyond the first permittee.