Hickey v. Allstate Ins. Co.

Citations: 159 So. 3d 1167; 14 La.App. 3 Cir. 1088; 2015 La. App. LEXIS 402; 2015 WL 898537Docket: No. 14-1088

Court: Louisiana Court of Appeal; March 3, 2015; Louisiana; State Appellate Court

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The lawsuit initiated by Rhonda B. Hickey, Edward W. Hickey, and Barbara J. Hickey has settled, leaving the appeal focused on cross-motions for partial summary judgment regarding Allstate Insurance Co.'s duty to defend Express Courier International, Inc. (Express) against claims stemming from an automobile accident on February 9, 2009. In this incident, Alton G. Croom, driving a Honda CRV, collided with the Hickeys’ vehicle, resulting in Croom's estate settling with the Hickeys. The Hickeys alleged in their "Fourth Amended and Restated Petition" that Croom was acting within the scope of his employment with Express and that the vehicle was leased to Express and insured under a "Hired and Non-Owned" policy from Federal Insurance Company.

Express and Federal Insurance asserted that Allstate, as Croom's insurer, had a duty to defend Express against the Hickeys' claims, prompting Express and Federal to file a motion for partial summary judgment. Allstate countered with its own motion, stating its policy did not obligate it to defend Express. The trial court reviewed evidence, including the Allstate policy and the Fourth Amended Petition, but excluded the Independent Contractor Agreement between Express and Croom, deeming it irrelevant. The court denied the admission of previous petitions filed by the Hickeys, indicating that while the record was open for legal briefs, it was not open for new evidence submission. Ultimately, the trial court ruled in favor of the Hickeys, leading to the appeal which culminated in a reversal of that decision.

No response was filed by Express and Federal regarding the trial court's evidentiary rulings. On April 4, 2014, the trial court granted Express and Federal's motion for partial summary judgment and denied Allstate's cross-motion. The court ordered Allstate to reimburse Federal for defense expenses incurred on behalf of Express, with the judgment signed on May 12, 2014. Allstate subsequently filed a writ application, which was denied based on the requirement that partial summary judgments be designated as final and appealable. An amended judgment was issued on June 10, 2014, from which Allstate appealed.

Allstate's appeal includes several assignments of error: 

A. The trial court incorrectly determined that the plaintiffs’ petition imposed a duty on Allstate to defend Express, despite the employer not qualifying as a named insured under the policy.
B. The trial court wrongly denied Allstate's cross-motion for summary judgment, even after finding allegations in the petition that indicated Express did not meet the criteria for coverage.
C. The trial court misapplied the requirement that all petition allegations must unambiguously exclude coverage to avoid a duty to defend, disregarding clear facts stating the employer did not fit the covered classification.
D. The trial court's strict interpretation of case law resulted in the unreasonable requirement for Allstate to defend an entity that did not meet the insured criteria.
E. The trial court erred in granting partial summary judgment based solely on one paragraph of the petition, ignoring language in other paragraphs that excluded coverage.

The standard of review for summary judgments is de novo, and such judgments are favored to facilitate a just and efficient resolution of legal matters. The trial court must grant summary judgment if there is no genuine issue of material fact, allowing for the determination of Allstate’s duty to defend Express against the claims made by the plaintiffs.

An insurer's duty to defend its insured is broader than its liability for damages, as established in Arceneaux v. Amstar Corp. The insurer must provide a defense against suits unless the allegations in the plaintiff's petition unambiguously exclude coverage. If the allegations, assumed to be true, indicate both coverage under the policy and potential liability, the insurer is obligated to defend the insured regardless of the suit's outcome. The allegations are interpreted liberally to determine if they fall within the insurer's duty to defend.

When interpreting insurance contracts, as outlined in Sims v. Mulhearn Funeral Home, courts apply general contract interpretation principles from the Louisiana Civil Code. The judiciary's role is to ascertain the common intent of the parties by examining the insurance policy's language, which is construed using its plain meaning unless a technical meaning is established. Determining whether a contract is clear or ambiguous is a legal question, and if the contract's meaning can be discerned from its text alone, the interpretation may be resolved as a matter of law, allowing for summary judgment.

Allstate contended that Express was not an insured under the policy issued to Mr. Croom for his personal vehicle. The policy's provisions include coverage for bodily injury and property damage, defending insured individuals in lawsuits arising from covered auto accidents, and defining insured persons to include the policyholder and certain others. The Hickeys' Fourth Amended Petition, which introduced Express and its insurer Federal as defendants, alleged that Mr. Croom was an employee of Express at the time of the crash and that Express had leased the vehicle, thus making Express vicariously liable. The petition also claimed that the vehicle was insured under Federal's "Hired and Non-Owned" endorsement, which Express purchased. Allstate’s Fifth Assignment of Error, which contested the trial court's finding that Allstate had a duty to defend Express based on the allegations in the petition, highlighted that other parts of the petition explicitly excluded coverage. The trial court's position on the duty to defend was thus challenged by Allstate, focusing specifically on the conflicting language within the pleadings.

The trial court's ruling was influenced by Duhon v. Nitrogen Plumbing and Coiled Tubing Specialists, Inc., which established that an insurer has a duty to defend if any allegation in the plaintiff's petition does not unambiguously exclude coverage. In Duhon, the court found that Lloyds of London had a duty to defend NPACT against claims related to hazardous substance mishandling, despite the existence of pollution exclusions in the policy. Specifically, the court emphasized the importance of the allegations of fact over conclusions in determining the duty to defend. It stated that even if a petition contains allegations for which coverage is excluded, a duty to defend may still exist if at least one allegation allows for potential coverage. The trial court applied this principle to conclude that Allstate owed a duty to defend Express based solely on paragraph eight of the Hickeys’ Fourth Amended Petition, neglecting to analyze paragraphs eleven and twelve, which excluded Express as an insured. The court interpreted Duhon as mandating a duty to defend unless every allegation in the petition unambiguously excludes coverage.

Paragraph 8 of the Fourth Amended Petition establishes the employment relationship between Croom and Express but does not clarify whether Croom's vehicle was leased or hired. Under the precedent set in Duhon, these allegations must be evaluated independently to assess the duty to defend. The trial court accurately interpreted the Allstate policy, which obligates the insurer to cover damages for accidents linked to the ownership, maintenance, or use of an insured auto and mandates a defense for insured persons in covered auto accidents. However, the policy excludes coverage when the vehicle is owned or hired by the organization involved. 

Paragraphs eleven and twelve of the Fourth Supplemental and Amended Petition explicitly exclude coverage under Allstate’s policy. The Louisiana Supreme Court in Sims emphasized that insurance contracts should be interpreted as a cohesive whole. The trial court failed to consider these paragraphs, which made it clear that Mr. Croom’s vehicle was hired by Express and insured by Federal, thus negating Allstate's duty to defend. The Allstate policy only provides coverage if the vehicle is not owned or hired by the organization using it. The petition stated that Express "leased" the vehicle from Mr. Croom for employment purposes, placing the vehicle under Express's control and making Croom a permissive user. Therefore, all coverage and defense responsibilities fell under Federal's policy, as Express had the necessary insurance and charged Mr. Croom for premiums. Consequently, Allstate had no obligation to defend Express or indemnify Federal for related litigation expenses. The trial court's refusal to consider the relevant paragraphs led to an unreasonable interpretation of the Allstate policy, contrary to the principles established in Sims.

The court concluded that Allstate Insurance Company had no obligation to defend Express Courier International, Inc. against claims from the Hickeys, as the insurance policy clearly excluded Express as an insured party and stated there was no "duty to defend." The trial court's ruling that Allstate owed such a duty was deemed erroneous and led to an absurd outcome, where Allstate would be required to defend Express for an incident covered by another insurer, Federal, which was paid for by Mr. Croom. The court reversed the trial court's partial summary judgment in favor of Federal and Express, granting summary judgment for Allstate instead. All costs of the appeal were assigned to Federal and Express. Additionally, the case was settled among the Hickeys and all defendants, including Mr. Croom's Estate, Allstate, Express, Federal, and Scottsdale Insurance Company, the excess insurer for Express, following Mr. Croom's death due to the accident.