Opinion
No. 98-578.
December 30, 1998. Writ Denied March 26, 1999.
APPEAL FROM FIFTEENTH JUDICIAL DISTRICT COURT, PARISH OF LAFAYETTE, NO. 971,975, STATE OF LOUISIANA, HONORABLE JOHN D. TRAHAN, J.
John Daniel Rayburn Jr., J. Clemille Simon, Kevin R. Duck, Lafayette, for Alise Celestine et al.
Preston D. Cloyd, Lafayette, for State Farm Mutual Automobile Insurance Company.
En Banc.
This circuit has decided to address en banc the issue of whether a third party who is not an insured under an insurance contract has a cause of action for damages and penalties under La.R.S. 22:1220 (B)(5). The trial court granted a motion for summary judgment in favor of State Farm Mutual Automobile Insurance Company and Johnathan Boudreaux and against Alise Celestine, individually and as natural tutrix on behalf of her minor children, Jasper and Coltlain Celestine. We affirm.
ACTION BEFORE THE TRIAL COURT
This suit arises out of an automobile accident that occurred on the evening of April 26, 1996. Alise Celestine and her two minor children, Jasper and Coltlain Celestine, were guest passengers in a vehicle owned and operated by Lynndell M. Melancon when it was allegedly struck from behind by a vehicle operated by State Farm's insured, Johnathan Boudreaux. Boudreaux was, at all relevant times, insured by State Farm.
On April 25, 1997, plaintiff filed suit against State Farm and Boudreaux and, of particular relevance, stated in paragraph 26 of her petition:
At all times mentioned herein, defendant, State Farm Mutual Automobile Insurance Company, was fully aware of the severity of the injuries sustained by petitioners as well as the full extent of their damages, including medical expenses. Despite this knowledge defendant, State Farm Mutual Automobile Insurance Company, has breached its duty to petitioners by failing to adjust these claims fairly and by failing to make a reasonable effort to settle and has further engaged in arbitrary and capricious behavior in failing to pay the full extent of petitioner's damages, without probable cause.
Seeking to establish a claim under La.R.S. 22:1220 (B)(5) based on the allegations of paragraph 26 of her petition, plaintiff noticed State Farm's adjustor, Vickie Temonia, for the taking of her deposition. Defendants moved to quash the deposition challenging its relevance in light of Theriot v. Midland Risk Ins. Co., 95-2895 (La. 5/20/97); 694 So.2d 184, which, defendants argued, would deny plaintiff a cause of action under La.R.S. 22:1220. The trial judge granted the motion to quash finding that Theriot interpreted La.R.S. 22:1220 to give a cause of action for failure of an insurer to timely pay only to an insured, not a third-party claimant; since the lower court found the plaintiff was without a cause of action under La.R.S. 22:1220, it found that evidence taken from the State Farm agent would be irrelevant and not likely to lead to discoverable evidence. Defendants then moved for summary judgment, arguing that plaintiff's demands under La.R.S. 22:1220 should be dismissed where La.R.S. 22:1220 does not provide third parties a cause of action under the rationale of Theriot. Granting a partial summary judgment in defendants' favor, the trial judge assigned as his reasons for ruling the same reasons that he rendered on the motion to quash.
APPLICATION of La.R.S. 22:1220
Following the amendment of the summary judgment law, summary judgment is now favored. It shall be used to "secure the just, speedy, and inexpensive determination" of all actions, except those excluded by La. Code Civ.P. art. 969. La. Code Civ. P. art. 966 (A)(2). The trial court is required to render summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions of file, together with the affidavits, if any, show that there is no genuine issue as to material fact, and that mover is entitled to judgment as a matter of law." Article 966 (B). A summary judgment may be rendered dispositive of a particular cause of action even though the granting of the summary judgment does not dispose of the entire case. Article 966 (E). Finally, it is well settled that the appellate review of summary judgment is de novo, applying the same standard as the trial court. Accordingly, we take a de novo review of the matter at bar.
Celestine is not a person insured by the State Farm contract in this case. She is a third party. The insurance contract was between Boudreaux and State Farm.
La.R.S. 22:1220 (emphasis supplied) provides in pertinent part:
A. An insurer, including but not limited to a foreign line and surplus line insurer, owes to his insured a duty of good faith and fair dealing. The insurer has an affirmative duty to adjust claims fairly and promptly and to make a reasonable effort to settle claims with the insured or the claimant, or both. Any insurer who breaches these duties shall be liable for any damages sustained as a result of the breach.
B. Any one of the following acts, if knowingly committed or performed by an insurer, constitutes a breach of the insurer's duties imposed in Subsection A:
(1) Misrepresenting pertinent facts or insurance policy provisions relating to any coverages at issue.
(2) Failing to pay a settlement within thirty days after an agreement is reduced to writing.
(3) Denying coverage or attempting to settle a claim on the basis of an application which the insurer knows was altered without notice to, or knowledge or consent of, the insured.
(4) Misleading a claimant as to the applicable prescriptive period.
(5) Failing to pay the amount of any claim due any person insured by the contract within sixty days after receipt of satisfactory proof of loss from the claimant when such failure is arbitrary, capricious, or without probable cause.
Celestine claims that the trial court misread Theriot, 694 So.2d 184, when it concluded that La.R.S. 22:1220 (B)(5) does not apply to third-party claimants. She argues that the supreme court unequivocally held that La.R.S. 22:1220 (B)(1-5) applies to both insured and third-party claimants. We do not agree.
In Guidroz v. State Farm Mut. Auto. Ins. Co., 97-200 (La. App. 3 Cir. 6/25/97); 698 So.2d 967, writ granted, reversed on other grounds and remanded, 97-2653 (La. 1/30/98); 705 So.2d 738, this court held that the express language of La.R.S. 22:1220 (B)(5) did not grant a third party a cause of action under La.R.S. 22:1220 because that subsection applies only to "any person insured by the contract."
The second circuit in Smith v. Midland Risk Ins Co., 29,793 (La.App. 2 Cir. 9/24/97); 699 So.2d 1192, reversing a trial court's assessment of statutory penalties against Midland Risk, has also held that La.R.S. 22:1220 (B)(5) by its express language applies only to claims due to an insured.
In Venible v. First Financial Ins. Co., 97-2495, 97-2667 (La.App. 4 Cir. 8/26/98); 718 So.2d 586, the fourth circuit, likewise addressed the issue of whether the penalty provisions of La.R.S. 22:1220 (B)(5) are applicable to third parties. The fourth circuit pointed out that the supreme court in Theriot was not called upon to address the issue of whether a third-party claimant stated a cause of action for damages and penalties under La.R.S. 22:1220 (B)(5). Specifically addressing the issue of whether a third party has a cause of action for penalties pursuant to La.R.S. 22:1220 (B)(5), the fourth circuit explained:
Specifically, subsection B(5) imposes damages on a [sic] insurer who knowingly "[f]ail[s] to pay the amount of any claim due any person insured by the contract within sixty days after receipt of satisfactory proof of loss from the claimant when such failure is arbitrary, capricious, or without probable cause" (emphasis added). The confusion in this case stems from the use of two different terms within that subsection: "insured" and "claimant."
The plaintiffs argue that the phrase "insured by the contract" modifies "any claim" instead of "any person." In the definition section of the Part of the Insurance Code containing La.Rev.Stat. 22:1220, however, "insured" is defined as the party named on the policy. A claimant can be any person entitled to recover under the policy. In La.Rev.Stat. 22:658, the legislature avoided the problem presented by this language by stating, "[a]ll insurers shall make a written offer to settle any property damage claim within thirty days after receipt of satisfactory proofs of loss of that claim." See La.Rev.Stat. 22:658 A(4).
Furthermore, although subsections B(1)-B(4) are not before us, none contains language which could be interpreted as limiting recovery to only an insured, and each of those provisions specifies a punishable act that is dishonest or fraudulent. It is only B(5) that contains the word "insured" and mentions "proof of loss" which is a term more readily associated with the relationship between an insured and his insurer than it is between non-contracting parties.
We believe that the language used by the legislature in La.Rev.Stat. 22:1220 B(5) is confusing and subject to various reasonable, but contradictory, interpretations. Considering that the provision is clearly a penal statute and therefore must be strictly construed, we hold that La.Rev.Stat. 22:1220 B(5) does not provide a cause of action in favor of third-party claimants. See Armstrong v. Rabito, 95-0659, 95-0660 (La.App. 4 Cir. 10/26/95), 663 So.2d 512; Hernandez v. Continental Cas. Ins. Co., 615 So.2d 484 (La.App. 4 Cir. 1993), writ denied, 620 So.2d 850 (La. 1993). If the legislature intended otherwise, it could have easily written the provision to express such an intent. Although the plaintiffs' [sic] offer logical arguments, we will not supply or clarify legislative intent when we are required to strictly construe penal statutes.
Accordingly, the plaintiffs do not state a cause of action under La.Rev.Stat. 22:1220 B(5) because a strict reading of that provision requires that it only applies to an insured, not third-party claimants such as the plaintiffs. Therefore, the plaintiffs have failed to allege facts which would entitle them to the relief they seek under subsection B(5).
Venible, 718 So.2d at 589-590.
We agree with the analysis by the fourth circuit and adhere to our previous holding in Guidroz, 698 So.2d 967. La.R.S. 22:1220 (B)(5) expressly applies only to a claim by an insured and does not apply to a person such as Celestine who is not insured under the contract.
The judgment of the trial court is affirmed at Alise Celestine's costs.
AFFIRMED.
SAUNDERS, J., dissents and assigns written reasons.
THIBODEAUX, J., WOODARD, J., and PETERS, J., dissents for the reasons assigned by Judge SAUNDERS.
I respectfully disagree from the majority's application of Theriot v. Midland Risk Ins. Co., 95-2895 (La. 5/20/97); 694 So.2d 184. I read Theriot to grant this plaintiff relief. A close look at Theriot reveals significant distinguishing factors from the matter sub judice. Fundamentally separating the Theriot plaintiff from the present one is the fact that Ms. Theriot admitted that none of the enumerated acts in La.R.S. 22:1220 (B) were committed by the insurers; rather, Ms. Theriot sought relief under a theory that the insurers were "liable for violating broad general duties set forth in Subsection A of the statute." Id. at 186. The insurers in Theriot set forth two arguments: one, that the statute imposes no duties on insurers running in favor of third parties and two, if the statute does give third parties any remedy, it is only under Subsection B. The Louisiana Supreme Court in Theriot rendered a two-pronged holding that established the crux of La.R.S. 22:1220: first, Subsection B is an exclusive list, and second, the duties of good faith and fair dealing that insurers owe to third party claimants, as Subsection A informs us and when violated as listed under Subsection B, grant to third parties a cause of action. The introductory sentence of La.R.S. 22:1220 (B) clearly states that "[a]ny one of the following acts, if knowingly committed or performed by an insurer, constitutes a breach of the insurer's duties imposed in Subsection A. . . ." Those duties "imposed in Subsection A" are as we previously noted, that of good faith, fair dealing and prompt, fair adjustment of claims as to "the insured or the claimant, or both." La.R.S. 22:1220 (A). Subsection A sets forth the policy considerations and to whom they apply while Subsection B lists what violations will give rise to penalties.
Much of Theriot focuses on determining the exclusivity of Subsection B. The Supreme Court does not directly address the language of Subsection B(5) that seems to limit the cause of action to insureds, to wit: "Failing to pay the amount of any claim due any person insured by the contract within sixty days after the receipt of satisfactory proof of loss from the claimant when such failure is arbitrary, capricious, or without probable cause." La.R.S. 22:1220 (B)(5). However, guidance pertinent to the present discussion can be gleaned from the court's discussion of the derivation of the exclusivity of the Subsection B list.
The Louisiana Supreme Court thoroughly analyzed La.R.S. 22:1220 using the traditional civilian method of interpretation. The court began with the plain wording of La.R.S. 22:1220, and where faced with ambiguity, looked to the related laws, legislative history and well-settled principles of statutory construction to glean the legislature's intent when it enacted the statute. Id. The court in Theriot narrowly interpreted the penal statute using the maxim expressio unius et exclusio alterius and concluded that the legislature did intend to grant third parties a claim under the statute, but only under the listed circumstances of Subsection B — not under a broad general duty under Subsection A as the Theriot plaintiff argued. Id. The Theriot court noted that "[h]aving separated § 1220 from its original cross-reference to the proposed limited version of § 1214 (14), it was natural and structurally appropriate for the legislature to introduce the newly created private cause of action with a statement of policy and introductory language in Subsection A." Id. at 192. Where Subsection A serves the statute as an introduction, then certainly the principles and objectives expressed therein must necessarily guide interpretation of the statute as a whole. The supreme court further notes that there is no private right of action under Theriot's claim that the insurers failed to attempt in good faith to effectuate fair and prompt settlement when liability had become reasonably clear — such claims are to be policed by the Commissioner under La.R.S. 22:1214. Id. This is not the same private right of action as that under Subsection B(5) wherein, as the supreme court stated, "La.R.S. 22:1220, B(1)-(5) and La.R.S. 22:658 do statutorily create certain limited causes of action in favor of third-party claimants that derogate from established rules of insurance law. However, the expression of legislative intent in those instances is express and unambiguous." Id. at 193.
The Theriot court did not acknowledge the Subsection B(5) language that is causing the present interpretive quandary. However, the interpretative approach most consistent with this recent discussion by the supreme court is one which is informed by the principles of Subsection A when construing Subsection B(5) to ensure fair dealing with both the insured and claimant. Applying Subsection B(5) to third parties furthers Subsection A policies where an insurer refuses to pay in such a way that is arbitrary, capricious, or without probable cause. To construe Subsection B(5) to only give the insured that right would undermine the precepts of Subsection A. Indeed, as acknowledged by the Louisiana Supreme Court in Theriot, the private rights of action set forth in La.R.S. 22:1220 derogate from traditional insurance law; nevertheless, the appropriate construction of Subsection B, informed by the policies of Subsection A, grants a third-party claimant a cause of action under that exclusive list.
The majority heavily relies on a recent decision from the fourth circuit, Venible v. First Financial Insurance Company, 97-2495, 97-2667 (La.App. 4 Cir. 8/26/98); 718 So.2d 586. The claimant in Venible argued that since Theriot did not address the Subsection B(5) question, its statement in that regard is merely dicta since the plaintiff admitted that the defendant had not committed any act under Subsection B. While Ms. Theriot did concede that her claim did not fall under Subsection B, the supreme court nevertheless embraced the opportunity to consider the historical development of the statute. The fourth circuit in Venible overlooks the clear and simple language the supreme court expressed in Theriot. As explained above, the Theriot court set forth language that the legislative intent in those instances enumerated in Subsection B are exclusive and unambiguously grant a cause of action to third parties. Theriot, 694 So.2d 184. Further gratuitous analysis rendered by the fourth circuit is misleading and unnecessary in light of Theriot.
In Lucille Gauthier and Willard Gauthier v. The Traveler's Insurance Co., et al., 97-1937 (E.D. La. 7/2/98), ___ So.2d ___, 1998 W.L. 373405, Federal Judge Duval relied on the clear expression of Theriot when he denied a defendant insurer's motion for summary judgment which was argued on the grounds that La.R.S. 22:1220 B(5) did not grant a third party claimant a cause of action Judge Duval noted that under La.R.S. 22:1220, where "[as in the present case] there is clearly an alleged violation of Subsection B(5) . . . the third party claimant has a right to bring the action." Id. at 185.
A seemingly conflicting case arising out of this circuit court is Guidroz v. State Farm Mutual Automobile Insurance Company, 97-200 (La.App. 3 Cir. 6/25/97); 698 So.2d 967; writ granted, 97-2653 (La. 1/30/08); 705 So.2d 738, reversed on other grounds and remanded where this court held that the express language of Subsection B(5) did not grant a third party cause of action under La.R.S. 22:1220. What is important to note in Guidroz is that our holding primarily turned on reversing the lower court's decision and rendering instead a rule in favor of the plaintiff where a bad faith insurer unreasonably exposed her to an excess personal judgment; we did not engage in a detailed analysis of La.R.S. 22:1220.
Presently, under a closer, principled analysis of La.R.S. 22:1220, and in light of Theriot, it seems clear that third parties do have a cause of action under La.R.S. 22:1220 (B)(5).
In sum, I would find that Alise Celestine has stated a cause of action in paragraph "26" of her petition which alleged that the defendant insurer, State Farm, arbitrarily and capriciously failed to settle or pay her damages without probable cause. This language used by the plaintiff clearly invokes the specific provision of La.R.S. 22:1220 (B)(5) and not any general broad duty under Subsection A which was argued to no avail by the Theriot plaintiff. Additionally, I would find that the erroneous analysis of the lower court deprived the plaintiff of adequate discovery and denied her attempt to depose the State Farm claim's adjuster. The trial judge explained in his reasons for ruling that since he found the plaintiff had no cause of action against State Farm, all testimony and evidence procured in that regard would be irrelevant and would lead to no discoverable evidence. Accordingly, I would reverse and remand.