Articles Posted in Insurance Law

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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

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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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La. R.S. 22:1269 (formerly 22:655), provides for a direct action against a liability insurer in two instances:

1) where the policy or contract of liability insurance was issued (domestic insurer) or delivered (foreign insurer) in Louisiana; or

2) where the accident or injury occurred in Louisiana.

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The Louisiana Direct Action Statute, La. R.S. 1269 (formerly 22:655) confers substantive rights on third parties to contracts of public liability insurance, which become vested at the moment of the accident in which they are injured, subject only to such defenses as the tortfeasor himself may legally interpose.

Personal defenses, i.e. interspousal immunity, may not be asserted by an insurer in defense of the direct action, but general defenses, i.e. prescription, comparative fault, and worker’s compensation immunity, may be asserted by the insurer.

The insurer’s obligation to the injured person under the direct action statute cannot be prejudiced by the non-prejudicial action of the insured in breaching policy provisions, i.e. breach of a cooperation clause or failure to give timely notice of the accident or suit, in the absence of fraud, collusion or conspiracy.

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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.