“Claims Made” policy: coverage is effective only if the negligent harm is discovered and reported within the policy term.
“Occurrence” policy: coverage is effective if the negligent harm occurs within the policy period, regardless of the date of discovery.
Livingston Parish School Board v. Fireman’s Fund American Insurance Co., 282 So.2d 478 (La.1973).
Because of a liability insurer’s obligation to its insured not to arbitrarily refuse reasonable offers of settlement within policy limits when faced with liability in excess of the policy limits, a liability insurer faced with multiple claims to inadequate insurance proceeds is generally not required to prorate the proceeds, but may enter into compromise agreements with one or several claimants to the exclusion of others, even to the extent of exhausting the entire fund, as long as the compromises are reasonable and are made in good faith. Manieri v. Horace Mann Mut. Ins. Co., 350 So.2d 1247 (La.App. 4th Cir. 1977); Holtzclaw v. Falco, 355 So.2d 1279 (La. 1978); and Richard v. Southern Farm Bureau Cas. Ins. Co., 254 La. 429, 223 So.2d 858 (1969).
A different obligation is involved when multiple claims are asserted against inadequate UM policy limits. It is believed that prorata distribution should be required after all possible claims are presented. It is also believed that a UM insurer has discretion to make a reasonable distribution of the insurance proceeds in an effort to achieve substantial proration. Manieri v. Horace Mann Mut. Ins. Co., 350 So.2d 1247 (La.App. 4th Cir. 1977)
For UM policies that require the uninsured or underinsured owners’ or operators’ liability for damages caused by an accident to “arise out of the ownership, maintenance, or use of the uninsured motor vehicle,” the Courts are required to answer two separate questions:
1. Was the conduct of the uninsured of which the plaintiff complains a legal cause of the injury?
2. Was it a use of the automobile?
Carter v. City Parish Government, 423 So.2d 1080 (La.1982).
Legal interest on a UM claim begins to run from the date of the original judicial demand against any solidary obligor, regardless of the language in the insurance policy. Ainsworth v. Government Employees Ins. Co., 433 So.2d 709 (La.1983); and Burton v. Foret, 498 So.2d 706, 712 (La.1986).
Prescription on actions for the recovery of damages sustained in automobile accidents brought pursuant to UM (uninsured/underinsured) provisions in automobile liability insurance policies is 2 years from the date of the accident in which the damages were sustained. La.R.S. 9:5639.
Timely suit against the tortfeasor interrupts prescription as to the UM insurer because the tortfeasor and UM insurer are solidarily liable. Hoefly v. Government Employees Ins. Co., 418 So.2d 575 (La.1982).
Timely suit against the tortfeasor’s liability insurer does not interrupt prescription as to the UM insurer because the liability insurer and the UM insurer are not solidarily liable. Rizer v. American Sur. & Fid. ins. Co., 669 So.2d 387 (La. 1996).
The Louisiana Supreme Court in Valentine v. Bonneville Ins. Co., 691 So.2d 665 (La.1997), held that the automobile liability insurance policy definition of “occupying” as “in, upon, getting in, on, out, or off” was clear and unambiguous, and therefore did not extend coverage to a deputy sheriff who was directing traffic.
This same definition was found to extend coverage to a deputy sheriff who was returning to his vehicle after setting flares to divert traffic because of the “special exigent relationship between an officer and his vehicle.” Ashy v. Migues, 760 So.2d 440 (La.App. 3rd Cir.), writ denied, 771 So.2d 84 (La. 2000).
A guest passenger cannot recover under both the liability and UM coverages of the host driver’s insurance policy when the negligence of the host driver is the sole cause of the accident. Nall v. State Farm Mut. Auto. Ins. Co., 406 So.2d 216 (La. 1981).
However, if the guest passenger is injured as a result of the joint negligence of the host driver and of another underinsured motorist, the guest passenger may recover under the liability coverage of the host driver’s policy for the host driver’s negligence, and may recovery under the UM coverage of the host driver’s insurance policy for the negligence of the other underinsured motorist. Casson v. Dairyland Ins. Co., 400 So.2d 713 (La.App. 3d Cir. 1981).
Rejection of UM coverage or selection of lower limits of UM coverage in Louisiana shall be on a form prescribed by the Louisiana Commissioner of Insurance and shall be provided by the insurer and signed by the insured or his legal representative.
A UM rejection or selection of lower limits form is valid for the life of the policy and a new form is not required to be signed for a renewal, reinstatement or substitute policy. A new UM rejection or selection of lower limits form is only required if the amount of coverage changes. The form shall be conclusively presumed to be part of the policy whether or not attached.
A properly completed form creates a rebuttable presumption that the insured “knowingly” rejected coverage, selected lower limits or selected economic only. Compliance with the prescribed form involves six tasks as set forth by the Louisiana Supreme Court in Duncan v. USAA Ins. Co., 950 So.2d 544 (La. 2006):
La.R.S. 22:1295 (formerly 22:1406(D) and 22:680) generally provides that all automobile liability insurance, including excess or umbrella policies, delivered or issued for delivery in Louisiana, and covering liability arising out of the ownership maintenance or use of a motor vehicle required to be registered in Louisiana, provides UM coverage in an amount not less than the limits of bodily injury (BI) liability coverage for the protection of insureds who are legally entitled to recover non-punitive damages from owners or operators of uninsured or undersinsured motor vehicles unless the insured:
1. rejects UM coverage;
2. selects lower limits of UM coverage; or
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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