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Since 1948, the expressed public policy of the State of Louisiana, by the Louisiana Legislature, has been that an insurable interest is required of persons seeking protection from property insurance, so as to differentiate an enforceable indemnity agreement from a wagering pact. La. R.S. 22:614 provides that no contract of insurance on property or any interest therein or arising therefrom shall be enforceable except for the benefit of persons having an insurable interest in the things insured. Insurable interest means any lawful and substantial economic interest in the safety or preservation of the subject of the insurance free from loss, destruction, or pecuniary damage.

Generally, the interest of the insured sought to be protected must have for its object the obviation of pecuniary or financial loss to or liability of the assured which would otherwise result from damage to or destruction of the insured property. If the loss or damage to the insured property does not expose the insured to either direct, immediate, or potential loss or liability, the insured is without insurable interest therein.

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“In the absence of bad faith, a liability insurer generally is free to settle or to litigate at its own discretion, without liability to its insured for a judgment in excess of the policy limits. William Shelby McKenzie & H. Alston Johnson, III, 15 Louisiana Civil Law Treatise-Insurance Law and Practice § 218 (1986). On the other hand, a liability insurer is the representative of the interests of its insured, and the insurer, when handling claims, must carefully consider not only its own self-interest, but also its insured’s interest so as to protect the insured from exposure to excess liability. Holtzclaw v. Falco, Inc., 355 So.2d 1279 (La.1978) (on rehearing). Thus, a liability insurer owes its insured the duty to act in good faith and to deal fairly in handling claims. Id.” Smith v. Audubon Ins. Co., 679 So.2d 372 (La.1996).

“[T]he determination of whether the insurer acted in bad faith turns on the facts and circumstances of each case. Of course, an insurer is not obliged to compromise litigation just because the claimant offers to settle a claim for serious injuries within the policy limits, and its failure to do so is not by itself proof of bad faith. 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. Nevertheless, when an insurer has made a thorough investigation and the evidence developed in the investigation is such that reasonable minds could differ over the liability of the insured, the insurer has the right to choose to litigate the claim, unless other factors, such as a vast difference between the policy limits and the insured’s total exposure, dictate a decision to settle the claim.” Id.

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An insurer’s duty to defend its insured is broader than its liability for damage claims. The insurer’s duty to defend suits brought against its insured is determined by the allegations of the injured plaintiff’s petition, with the insurer being obligated to furnish a defense unless the petition unambiguously excludes coverage. American Home Assurance Co. v. Czarniecki, 230 So.2d 253 (La.1970).

Once a petition states one claim within the policy’s coverage, the insurer has a duty to accept defense of the entire lawsuit, even though other claims in the petition fall outside the policy’s coverage. Ellis v. Transcontinental Ins. Co., 619 So.2d 1130 (La. App. 4th Cir.), writ denied, 625 So.2d 1043 (La.1993).

If the insurer chooses to represent the insured but deny coverage, it must employ separate counsel. If it fails to do so, the insurer is liable for attorney’s fees and costs the insured may incur in defending the suit. Dugas Pest Control of Baton Rouge v. Mutual Fire, Marine and Inland Ins. Co., 504 So.2d 1051 (La.App. 1st Cir. 1987).

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For insurance policy language which limits coverage to “accidents which occur during the policy period”, the loss occurs at the time the tort is committed, and not when the loss is discovered or becomes manifest. Audubon Coin & Stamp Co. v. Alford Safe & Lock Co., 230 So.2d 278 (La.App. 1st Cir. 1969).

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.” Id.

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For insurance policy language which limits coverage to “damage which occurs during the policy period,” there is no coverage for damages accidentally occurring after the policy expiration, but resulting from a delictual act committed during the policy period. Oceanonics, Inc. v. Petroleum Distributing Company, 292 So.2d 190 (La.1974).

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The standard commercial general liability policy contains “work-product” exclusions. “These exclusions reflect the intent of the insurance industry to avoid the possibility that coverage under a CGL policy will be used to repair and replace the insured’s defective products and faulty workmanship.” McKenzie & Johnson, 15 La. Civil Law Treatise, Insurance Law and Practice, 3d, p.555.

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“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).

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We lawyers are paid to talk, and talk we do. We talk too much. We never learn anything by talking, but we are driven to it.

I saw this at a closing I attended with my wife. The closing attorney talked the whole time, interrupted my wife and everyone else in the room, and insisted on his voice being the only one heard. It made my wife mad, and she felt that he refused to answer her questions. As a lawyer, I knew he was trying to explain the process; still, his inability to listen and understand the concerns of everyone in the room irritated me, too. He knew what he was doing and was trying to educate us, but because he didn’t listen (or at least appear to) better, he did poorly.

The hardest skill to learn is listening. When I went to the FBI course on Crisis/Hostage Negotiations, they taught me not just what to say, but what to hear. Jury selection in a trial is not just asking the right questions, but actually listening to and expanding upon the answers you get. Good lawyering requires good listening at all levels, and it is the hardest thing for us lawyers to remember, frequently because we are so unused to doing it!

Writing this column today helped me to remember that. Every lawyer (including me) has done exactly what this competent real estate attorney did. I am even embarassed to recall all the talking I did today without actively listening to what others said. I guess the lesson of this week’s blog is actively listening to everyone in all we do (lawyering or not) will make us do a better job, or at least be perceived as such. After all, isn’t how people perceive you almost as important as how you really are?

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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)

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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).

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