Opinion
CA NO. 01-2854 SECTION "L" (5)
August 28, 2002
ORDER REASONS
Before the Court is the Defendant Massachusetts Bay Insurance Company's motion for summary judgment. For the following reasons, the motion is DENIED.
I. BACKGROUND
This case arises out of an automobile accident between the Plaintiffs, Donald and Linda Ellis, and the Defendant, Patricia Emerson. On November 4, 2000, Donald Ellis was driving his car on Lee Drive in Baton Rouge, Louisiana, with his wife Linda Ellis as a passenger. The Plaintiffs allege that without warning, a car driven by the Defendant Patricia Emerson and owned by the Defendant Sim Shattuck, exited a parking lot and impacted with the driver's side of the Plaintiffs automobile.
In September of 2001, Donald and Linda Ellis brought suit against Patricia Emerson, driver of the car, her father, Sim Shattuck, owner of the car, State Farm Insurance Company, liability insurer of Patricia Emerson, and Allstate Insurance Company, the under- insured/uninsured liability insurer of Donald Ellis. The Plaintiffs alleged that the collision was caused by the negligence of Patricia Emerson and sought damages for their personal injuries. In March of 2002, Plaintiffs filed an amended complaint to add Hanover Insurance Company as a Defendant in its capacity as Patricia Emerson's liability insurer.
The State Farm policy was issued to Sim Shattuck and provided primary liability coverage to Patricia Emerson. Defendant's Answer and Special Defenses under F.R.C.P. 12(b) and Demand for Trial by Jury, ¶ XI; See also Allstate's Memorandum in Opposition to Motion for Summary Judgment, ¶ I. The record does not disclose the terms or coverage of the State Farm policy.
On March 21, 2002, Donald Ellis and Linda Ellis signed a settlement agreement releasing Defendants Patricia Emerson, Sim Shattuck, and State Farm Insurance Company from all claims on account of the accident. However, Linda Ellis specifically reserved her rights to pursue any claims against other liability insurers of Patricia Emerson and Sim Shattuck, specifically but not limited to Hanover Insurance Company, and all uninsured or underinsured motorist insurers, including but not limited to Allstate Insurance Company, that may provide coverage for the accident. Donald Ellis also signed a settlement agreement with the same language as Linda Ellis' release, but only released the Defendants from claims he had "as a result of bodily injury that my wife, Linda Ellis, sustained in an automobile accident. . . ." He specifically reserved his rights against all liability insurers, including but not limited to Hanover, and all under insured/uninsured insurers, including but not limited to Allstate, for his own injuries that he sustained in the accident.
On April 3, 2002, this Court granted a Motion for Partial Dismissal with Prejudice, dismissing Linda Ellis' claims against the Defendants (Patricia Emerson, Sim Shattuck, and State Farm Insurance Company), but reserving her rights against all other liability insurers and uninsured/underinsured motorist insurers. In addition, this Court dismissed Donald Ellis' claims against the Defendants (Patricia Emerson, Sim Shattuck, and State Farm Insurance Company) for his "loss of consortium and any other claims he may have deriving from bodily injury to Linda Ellis," but reserving his rights for his own injuries and his loss of consortium claims and any other claims he may have deriving from bodily injury to Linda Ellis against all other liability and uninsured/underinsured motorist insurers who may be liable to him.
On April 8, 2002, Massachusetts Bay Insurance Company was substituted as Defendant for Hanover Insurance Company. Massachusetts Bay has filed this motion for summary judgment, arguing that the Plaintiffs Donald and Linda Ellis no longer have a cause of action against Massachusetts Bay.
II. LAW AND ANALYSIS
Summary judgment will be granted only if the pleadings, depositions, answers to interrogatories, and admissions, together with affidavits show that there is no genuine issue as to any material fact and that the defendant is entitled to a judgment as a matter of law. Fed.R.Civ.P. 56. If the party moving for summary judgment demonstrates the absence of a genuine issue of material fact "the nonmovant must go beyond the pleadings and designate specific facts showing that there is a genuine issue for trial." Willis v. Roche Biomedical Laboratories, Inc., 61 F.3d 313, 315 (5th Cir. 1995). "[A] dispute about a material fact is genuine if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id. To oppose a motion for summary judgment, the non-movant cannot rest on mere allegations or denials but must set forth specific facts showing that there is a genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 321-22 (1986).
The burden of demonstrating the existence of a genuine issue is not met by "metaphysical doubt" or "unsubstantiated assertions." Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 586 (1986)). The Court must "resolve factual controversies in favor of the nonmoving party, but only when there is an actual controversy, that is, when both parties have submitted evidence of contrary facts." Id. The Court does not, "in the absence of proof, assume that the nonmoving party could or would prove the necessary facts." Id. If the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, no genuine issue exists for trial. See Matsushita, 475 U.S. at 588. Finally, "the mere existence of some factual dispute will not defeat a motion for summary judgment; Rule 56 requires that the fact dispute be genuine and material." Willis, 61 F.3d at 315. If the evidence leads to only one reasonable conclusion, summary judgment is proper. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986).
This case is brought pursuant to the diversity jurisdiction of this Court. This Court is, therefore, bound to apply substantive law of Louisiana to the issue of coverage. Erie R. Co. V. Tompkins, 304 U.S. 64, 58 S.Ct. 817 (1938). Before the Court are two issues: (1) whether Massachusetts Bay should be dismissed from this case due to the release of its insured, Patricia Emerson, in the settlement agreement with the Plaintiffs; and (2) whether the Louisiana Direct Action statute bars the Plaintiffs' claim against Massachusetts Bay when the insured has been released from the action. The Court will address each issue in turn.
First, Massachusetts Bay argues that its insured (Patricia Emerson) can never be "legally responsible" for damages for bodily injury or property damage as is required for coverage under the Massachusetts Bay policy because she has been fully and finally dismissed from the lawsuit as a result of the settlement agreements executed by Donald and Linda Ellis. Thus, Massachusetts Bay concludes that the policy coverage is not triggered. Massachusetts Bay relies on Rollins v. Richardson, 803 So.2d 1028 (La.Ct.App. 2d Cir. 2001), in which the Louisiana Second Circuit held that when an insured was totally released and dismissed from the lawsuit, the defendant insurer was no longer legally obligated to pay because the condition giving rise to the insurer's obligation for indemnity could no longer occur.
The policy provides that "We will pay damages for "bodily injury" or "property damage" for which any "insured" becomes legally responsible because of an auto accident."
The Defendant's reliance on Rollins is misplaced. Rollins is distinguishable from the present case because it did not involve an excess insurer. In this case, Massachusetts Bay is an excess insurer for this accident under the terms of its policy. In addition, the language of the policy in Rollins provided coverage for damages that an insured becomes "legally obligated" to pay, as opposed to the "legally responsible" language in this case. The more specific law applicable to this case is the rule of the Louisiana Supreme Court in Futch v. Fidelity Cas. Co. of New York, 166 So.2d 274, 276 (La. 1964), as cited by the Plaintiffs.
According to the Louisiana Supreme Court in Futch, an excess insurer is unaffected by the plaintiffs release of the tortfeasor when the plaintiff reserves his rights to proceed against that insurer. Futch, 166 So.2d at 276. In Futch, the Louisiana Supreme Court was faced with an identical fact pattern as in this case. The Defendant was driving a car that she did not own when she was involved in an accident with the Plaintiff. The Defendant driver was covered as an omnibus insured under the car owner's liability insurance policy with Allstate and also received excess coverage from a second liability insurance policy with Fidelity Casualty Company. The plaintiff settled with the tortfeasor and Allstate, but reserved her right to proceed against Fidelity Casualty Company. The court held that "the renunciation by the Plaintiff of all claims, demands, etc. extended only to the differences between Allstate and the plaintiffs and anything beyond those differences was without legal effect." Id.
A more recent federal district court decision applied the Futch rule and further explained the effect of a plaintiffs release of a tortfeasor on a non-settling insurer. GHR Energy Corp. v. Carboline, 744 F. Supp. 1408 (E.D. La. 1990) In GHR Energy Corp., the Plaintiff totally and completely released the insured and insurers at various coverage levels. Two excess insurers filed motions for summary judgment arguing that the release of the insured exonerated them from liability to the plaintiffs. The insurers asserted that because the tortfeasors were released and as a result no longer liable, the insurers must also be released because their obligation to indemnify is contingent upon the liability of the insureds.
See also In re Combustion, 960 F. Supp. 1051, 1053 (W.D. La. 1997) (stating that ". the tortfeasor's liability beyond that which was settled has not actually been compromised because it has not yet accrued. By releasing the tortfeasor, the plaintiff is in fact only waiving its claim against the tortfeasor, while preserving its claim for that same liability against the non-settling insurer.]").
Relying on the Futch case, the court reasoned that the intent of the parties in the settlement agreement must be analyzed to determine whether a non-settling insurer is released. The court noted that the presence of a reservation of rights by the Plaintiff to proceed against a non-settling insurer "is an indication that the parties intended to compromise and release only that portion of the tortfeasor's liability which is subject to coverage by the settling insurer." Id. at 1410. The court found that "the fact that the plaintiff also released the tortfeasor completely was of no consequence, because of the plaintiffs outstanding and separate claim against Fidelity Casualty Company for the excess portion of the tortfeasor's liability not made a part of the settlement agreement." Id.
In this case, Massachusetts Bay is an excess insurer according to the terms of its policy, which provided that: "If there is other applicable insurance we will pay only our share of the loss. Our share is the proportion that our limit of liability bears to the total applicable limits. However, any insurance we owe for a vehicle you do not own shall be excess over any other collectible insurance." In this case, at the time of the accident the Defendant Patricia Emerson was driving a car she did not own, thereby triggering this provision of Massachusetts Bay's policy.
Applying Futch and GHR Energy Corp., this Court finds that Massachusetts Bay was not affected by the settlement agreement releasing the tortfeasor, Patricia Emerson. The settlement agreement Linda and Donald Ellis executed specifically reserved their rights to pursue claims against other liability insurers and under insured/uninsured motorist insurers. The release even named Hanover Insurance Company in the reservation of rights clause, for whom Massachusetts Bay has been substituted. When scrutinized, the settlement agreement in this case reflects a clear intent to compromise only that portion of the Patricia Emerson's liability which was subject to coverage by State Farm Insurance Company as the primary liability insurer, and not Massachusetts Bay or any other liability insurer.
With regard to the second issue, Massachusetts Bay asserts that under the Louisiana Direct Action Statute, La. Rev. Stat. 22:655 (1995), a plaintiff can only sue an insurer directly in certain enumerated circumstances, none of which are present in this case. In addition, Massachusetts Bay relies on McAvey v. Lee, 260 F.3d 359 (5th Cir. 2001), for the proposition that the Direct Action Statute gives the insurer the right to object to the non-joinder of the insured and to request dismissal if its insured is not joined.
Again, because of Massachusetts Bay's status as an excess insurer in this case, more specific state law governs this issue. Under Louisiana law, the release of the insured under an insurance policy does not defeat the Plaintiff's right to maintain the direct action against an excess insurer when the Plaintiff reserved his right in the release to proceed against the excess insurer. Webre v. Fabre, 800 So.2d 1036, 1039 (La.Ct.App. 5th Cir. 2001). Therefore, the Plaintiffs' release of Patricia Emerson in this case does not defeat their action against Massachusetts Bay because the Plaintiffs specifically reserved their rights to proceed against other liability insurers such as Massachusetts Bay in the settlement agreement.
III. CONCLUSION
For the foregoing reasons, Defendant's motion for summary judgment is DENIED.