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Ellis v. McDonald

Court of Appeals of Louisiana, Fifth Circuit

February 6, 2019

CARDELL ELLIS
v.
HEATH C. MCDONALD, WATERWORKS INDUSTRIAL SERVICES, LLC AND STATE NATIONAL INSURANCE COMPANY TRAMISSIAN DAVIS
v.
HEATH C. MCDONALD, WATER WORKS INDUSTRIAL SERVICES, LLC, STATE NATIONAL INSURANCE, INC., AND STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

          ON APPEAL FROM THE FORTIETH JUDICIAL DISTRICT COURT PARISH OF ST. JOHN THE BAPTIST, STATE OF LOUISIANA NO. 68, 458 C/W 68, 849, DIVISION "C" HONORABLE J. STERLING SNOWDY, JUDGE PRESIDING

          COUNSEL FOR PLAINTIFF/APPELLANT, CARDELL ELLIS George R. Tucker

          COUNSEL FOR PLAINTIFF/APPELLEE-2ND APPELLANT, TRANSMISSIAN DAVIS W. Paul Wilkins, David H. Hanchey

          COUNSEL FOR DEFENDANT/APPELLEE, ASPEN SPECIALITY INSURANCE COMPANY, James M. Garner, Debra J. Fischman, Stuart D. Kottle

          Panel composed of Judges Jude G. Gravois, Marc E. Johnson, and John J. Molaison, Jr.

          JOHN J. MOLAISON, JR. JUDGE

         In consolidated personal injury actions brought by the driver and a guest passenger in a vehicle that was struck by a truck owned by Water Works Industrial Services, LLC ("Water Works"), plaintiffs appeal a judgment dismissing their claims against Aspen Specialty Insurance Company ("Aspen") after a pre-trial evidentiary hearing to determine whether the policy limits of the policy underlying Aspen's excess coverage were exhausted, a condition precedent to Aspen's liability. The trial court found that coverage under the excess policy was not triggered because Water Works' automobile liability policy was not listed as an underlying policy in the excess policy. For the following reasons, we reverse the trial court judgment and remand the matter for further proceedings.

         Facts and Procedural History

         The background facts are undisputed. The accident occurred in St. John the Baptist Parish on January 16, 2015, when a vehicle being driven by plaintiff Tramissian Davis, in which plaintiff Cardell Ellis and another person were guest passengers, was struck by a truck being driven by Heath McDonald, a Water Works employee in the course and scope of his employment. Davis, Ellis and the other guest passenger were injured in the accident.

         Later in 2015, Davis and Ellis filed separate lawsuits against McDonald, Water Works, and State National Insurance Company ("State National"), Water Works' automobile liability insurer, for damages resulting from the accident. Davis also sued his uninsured motorist carrier, State Farm. The suits were consolidated.

         In late 2016, Aspen was named as a defendant by both plaintiffs, who alleged that Aspen provided excess automobile liability coverage to Water Works for the accident. Aspen filed answers with affirmative defenses and exceptions in both cases. Aspen averred that its insurance policy contained the best evidence of its terms, conditions, coverages and exclusions. Aspen did not assert that the State National policy was not a valid underlying policy despite the fact that Peerless Indemnity Insurance Company ("Peerless"), the underlying automobile liability insurer listed in Aspen's policy, was not named as a defendant in either lawsuit.

         In May 2017, plaintiffs dismissed their claims against State National with prejudice after State National paid its policy limits of $1, 000, 000 to settle the claims of Davis, Ellis and the other guest passenger.[1] In the motion and order to dismiss, plaintiffs reserved their rights against McDonald, Water Works and Aspen, with the stipulation that the reservation of rights as to McDonald and Water Works was "only to the extent that those parties have valid and collectible insurance with Aspen Specialty Insurance Company or any other insurer except State National Insurance Company, Inc."

         A jury trial was set for October 2017. Shortly after the trial date was set, Aspen sought leave to file a motion for summary judgment on the issue of whether the underlying liability coverage was exhausted in light of the fact that the excess policy listed Peerless, and not State National, as the underlying carrier. The trial court found the motion to be untimely under La. C.C.P. art. 966(B)(1) because it was filed less than 65 days before trial, but held an evidentiary hearing on the substance of the motion in advance of the jury trial.

         For reasons discussed in more detail below, the trial court found that the underlying automobile liability coverage was not exhausted, and that Aspen was not liable to plaintiffs, because State National's policy was not listed as an underlying policy in Aspen's excess policy and the Peerless policy that was listed as an underlying policy was cancelled by Water Works before the date of the accident. With respect to each plaintiff, the trial court dismissed the claims against Aspen and also dismissed "this case."

         Davis filed a motion for new trial, which the trial court denied. Both plaintiffs appealed the judgment, assigning as error the trial court's ruling on the excess coverage issue and its dismissal of the entire case when the only issue before the court concerned the liability of one defendant, Aspen. The trial court stayed the proceedings pending appellate review of the judgment of dismissal.

         Insurance Policies

         Water Works purchased the Aspen excess insurance policy with an initial policy period of 1/1/14 to 1/1/15. The policy provided additional coverage to Water Works if an underlying policy listed in the Aspen policy paid its policy limits. The schedule of underlying policies in the Aspen policy included an Aspen General Liability and Environmental Exposure policy, a LUBA worker's compensation policy, and the Peerless automobile liability policy. The required underlying coverage limit for the Peerless policy was a combined single limit of $1, 000, 000. The maximum coverage available under the excess policy was $5, 000, 000.

         Water Works purchased a Peerless automobile liability policy with an initial policy period of 1/1/14 to 1/1/15 and a combined single loss limit of $1, 000, 000. The policy remained in effect for all of 2014 and was automatically renewed for the following year, 1/1/15 to 1/1/16. However, Water Works did not pay the renewal premium. Water Works asked Peerless to cancel the policy "flat," effective January 1, 2015, which Peerless did on January 15, 2015.[2]

         Water Works purchased an automobile liability policy from State National for the policy period 1/1/15 to 1/1/16, with a combined single loss limit of $1, 000, 000, but did not notify Aspen of this or ask Aspen to list the State National policy in place of the Peerless policy in Aspen's schedule of underlying policies. There was no lapse in coverage because the State National policy took effect on January 1, 2015, the same date upon which the cancellation of the Peerless policy took effect.

         The accident occurred on January 16, 2015. All three insurance policies in question-the Peerless policy, the State National policy and the Aspen policy- were introduced in evidence at the hearing on the coverage issue.

         Policy Provisions in Excess Policy

         The insuring agreement in Aspen's policy stated:

CLAUSE I. INSURING AGREEMENT
The Insurer will pay on the Insured's behalf ultimate net loss (resulting from bodily injury, property damage, personal injury, advertising injury, environmental damage, emergency response costs, clean-up costs or loss) in excess of, and not in contribution with, the underlying policies. Except as otherwise provided in this Policy, this Policy shall follow all provisions, exclusions, limitations, and all other terms and conditions of the followed policy. In the event of a conflict between this Policy and the followed policy, this Policy shall govern and control. Notwithstanding any other provision of this Policy, in no event shall this Policy grant broader coverage than that provided to the Insured under any of the underlying policies.

         Terms appearing in boldface are defined in the policy. The term "followed policy" is defined as the policy identified in Item 8 of the Declarations and the term "underlying policies" is defined as the followed policy and all policies set forth in Item 9 of the Declarations. The Peerless policy appears only in Item 9 of the Declarations. It is not the followed policy, but it is an underlying policy.

         The Aspen policy further provides:

CLAUSE IV. EXCLUSIONS
.....
Notwithstanding anything herein to the contrary, this Policy shall not apply to any coverage provided in any of the underlying policies to which this Policy would otherwise respond that ...

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