Brandon Forvendel v. State Farm Mutual Automobile Insurance Company , 251 So. 3d 362 ( 2018 )

Supreme Court of Louisiana
FOR IMMEDIATE NEWS RELEASE NEWS RELEASE #030
FROM: CLERK OF SUPREME COURT OF LOUISIANA
The Opinions handed down on the 27th day of June, 2018, are as follows:
PER CURIAM:
2017-C-2074 BRANDON FORVENDEL v. STATE FARM MUTUAL AUTOMOBILE INSURANCE
COMPANY (Parish of Jefferson)
In this case, we are called upon to decide whether an insurer
waived its defenses to plaintiff’s current claim by paying on an
earlier claim to him in error. For the reasons that follow, we
find that the insurer did not waive its rights. Accordingly, we
reverse the judgments of the courts below.
REVERSED.
06/27/18
SUPREME COURT OF LOUISIANA
No. 2017-C-2074
BRANDON FORVENDEL
VERSUS
STATE FARM MUTUAL AUTOMOBILE
INSURANCE COMPANY
ON WRIT OF CERTIORARI TO THE COURT OF APPEAL,
FIFTH CIRCUIT, PARISH OF JEFFERSON
PER CURIAM
In this case, we are called upon to decide whether an insurer waived its
defenses to plaintiff’s current claim by paying on an earlier claim to him in error. For
the reasons that follow, we find that the insurer did not waive its rights. Accordingly,
we reverse the judgments of the courts below.
FACTS AND PROCEDURAL HISTORY
Plaintiff, Brandon Forvendel, was injured in a multi-vehicle accident in 2013.
At the time of the accident, plaintiff was driving a Chevrolet Equinox owned by him
and insured under a policy issued by State Farm Mutual Automobile Insurance
Company (“State Farm”), which included uninsured motorist (“UM”) coverage.
Plaintiff recovered the limits of his UM coverage under his State Farm policy.
At the time of the 2013 accident, plaintiff lived in the household of his mother,
Deborah Forvendel, who was also insured by State Farm. Plaintiff also sought to
recover under his mother’s State Farm UM policy, which carried significantly higher
policy limits. State Farm refused to allow him to recover under his mother's policy,
citing the anti-stacking provisions of La. R.S. 22:1295(1)(c).1
As a result, plaintiff filed the instant suit against State Farm. In his petition,
plaintiff alleged that the facts of the instant case were strikingly similar to an earlier
2007 accident in which State Farm allowed him to recover UM benefits under both
his own UM policy and his mother’s UM policy.
At trial, plaintiff offered evidence regarding the 2007 accident. In particular,
he relied on a June 9, 2008 letter from a State Farm manager to plaintiff’s attorney.
This letter referenced to the 2007 accident and plaintiff’s claim under his mother’s
policy, stating, “your client does qualify as an insured for Uninsured Motorist
coverage.” Thereafter, State Farm allowed plaintiff to recover under both policies for
the 2007 accident. Ms. Forvendel testified State Farm did not notify her of any error
in permitting plaintiff’s recovery under her policy in 2007.
1
La. R.S. 22:1295(1)(c) provides:
(c) If the insured has any limits of uninsured motorist coverage in a
policy of automobile liability insurance, in accordance with the terms
of Subparagraph (1)(a) of this Section, then such limits of liability
shall not be increased because of multiple motor vehicles covered
under such policy of insurance, and such limits of uninsured motorist
coverage shall not be increased when the insured has insurance
available to him under more than one uninsured motorist coverage
provision or policy; however, with respect to other insurance
available, the policy of insurance or endorsement shall provide the
following with respect to bodily injury to an injured party while
occupying an automobile not owned by said injured party, resident
spouse, or resident relative, and the following priorities of recovery
under uninsured motorist coverage shall apply:
(i) The uninsured motorist coverage on the vehicle in which the
injured party was an occupant is primary.
(ii) Should that primary uninsured motorist coverage be exhausted
due to the extent of damages, then the injured occupant may recover
as excess from other uninsured motorist coverage available to him. In
no instance shall more than one coverage from more than one
uninsured motorist policy be available as excess over and above the
primary coverage available to the injured occupant.
2
State Farm’s representative, Aaron Angel, testified that the 2007 payment was
made in error. Paul Robichaux, a State Farm Auto Team Manager in 2008, testified
the 2007 claim was referred to him to consider whether plaintiff, as a resident
relative, could select UM coverage under Ms. Forvendel’s policy, but he did not
consider the anti-stacking statute. Mr. Robichaux stated he was unaware plaintiff
collected UM benefits under his own policy at the time, and he did not make any
determination regarding stacking.
At the conclusion of trial, the district court entered judgment for plaintiff in the
amount of $50,000 in damages, plus interest and costs. In its reasons for judgment,
the district court explained “State Farm previously interpreted the agreement between
the parties to cover plaintiff under his mother's UM policy, and this fact can be
considered by the Court in interpreting the agreement between the parties in effect at
the time of the 2013 accident.”
State Farm appealed. In a split decision, the Court of Appeal, Fifth Circuit,
affirmed, concluding the trial court did not err in finding State Farm waived any
defense to the 2013 claim by paying the 2007 claim in error. Forvendel v. State Farm
Mut. Auto. Ins. Co., 17-77 (La. App. 5 Cir. 11/15/17), 230 So. 3d 687. The dissenting
judge rejected the majority’s reasoning, finding it would be in contravention of the
anti-stacking statute to find State Farm extended coverage to plaintiff beyond his
policy limits.
Upon State Farm’s application, we granted certiorari to consider the correctness
of this decision. Forvendel v. State Farm Mut. Auto. Ins. Co., 17-2074 (La. 3/9/18),
___ So.3d ___.
DISCUSSION
3
The anti-stacking statute, La. R.S. 22:1295 provides, in pertinent part:
(c) If the insured has any limits of uninsured motorist
coverage in a policy of automobile liability insurance, in
accordance with the terms of Subparagraph (1)(a) of this
Section, then such limits of liability shall not be increased
because of multiple motor vehicles covered under such
policy of insurance, and such limits of uninsured
motorist coverage shall not be increased when the
insured has insurance available to him under more than
one uninsured motorist coverage provision or policy. .
..
[emphasis added].
Plaintiff does not dispute that the provisions of this statute apply under the
instant facts. However, he argues State Farm waived its right to assert this defense
based on its actions in connection with plaintiff’s earlier 2007 accident.
In finding a waiver occurred, the court of appeal relied on our opinion in
Steptore v. Masco Constr. Co., 643 So. 2d 1213 (La. 1994). In Steptore, we held an
insurer waived its right to assert a coverage defense by assuming and continuing the
defense of its insured in the face of facts indicating that it had a right to deny
coverage for the accident. We explained the law as follows:
Waiver is generally understood to be the intentional
relinquishment of a known right, power, or privilege. Tate
v. Charles Aguillard Ins. & Real Estate, Inc., 508 So. 2d
1371 (La.1987); Ledoux v. Old Republic Life Ins. Co., 233
So. 2d 731 (La.App. 3d Cir.), cert denied 256 La. 372, 236
So. 2d 501 (1970); Peavey Co. v. M/V ANPA, 971 F.2d
1168 (5th Cir.1992); Comment, Waiver and Estoppel in
Louisiana Insurance Law, 22 La.L.Rev. 202 (1961); 16B
Appleman, Insurance Law and Practice, § 9081 (1981);
Couch on Insurance 2d, § 35:249 (Rev. ed. 1985). Waiver
occurs when there is an existing right, a knowledge of its
existence and an actual intention to relinquish it or conduct
so inconsistent with the intent to enforce the right as to
induce a reasonable belief that it has been relinquished.
Tate, supra; Peavey, supra; Ledoux, supra; 16B Appleman,
supra, § 9085. A waiver may apply to any provision of an
insurance contract, even though this may have the effect of
bringing within coverage risks originally excluded or not
covered. Tate, supra.
4
It is well established that an insurer is charged with
knowledge of the contents of its own policy. Youngblood
v. Allstate Fire Ins. Co., 349 So. 2d 462 (La.App. 3d
Cir.1977); Davis v. Aetna Casualty & Surety Co., 329
So. 2d 868 (La.App. 2d Cir.), writ denied, 333 So. 2d 233
(1976); Pellets, Inc. v. Millers Mutual Fire Ins. Co., 241
So. 2d 550 (La.App. 2d Cir.1970), writ denied, 257 La. 607,
243 So. 2d 274 (1971). In addition, notice of facts which
would cause a reasonable person to inquire further imposes
a duty of investigation upon the insurer, and failure to
investigate constitutes a waiver of all powers or privileges
which a reasonable search would have uncovered. Swain
for and on behalf of Swain v. Life Ins. Co. of Louisiana,
537 So. 2d 1297 (La.App. 2d Cir.1989), writ denied, 541
So. 2d 895 (1989); Foret v. Terrebonne Towing Co., Inc.,
632 So. 2d 344 (La.App. 1st Cir.1993); Peterson v. Pacific
Fire Ins. Co., 148 So. 283 (La.App.Orl.Cir.1933); Franz v.
United Casualty Co., 49 F. Supp. 267 (E.D.La.1943);
Comment, La.L.Rev. supra 206; 16B Appleman, supra §
9084.
Waiver principles are applied stringently to uphold the
prohibition against conflicts of interest between the insurer
and the insured which could potentially affect legal
representation in order to reinforce the role of the lawyer as
the loyal advocate of the client's interest. Employers
Mutual Liability Ins. Co. of Wisconsin v. Sears, Roebuck &
Co., 621 F.2d 746, 747 (5th Cir.1980); Pacific Indemnity
Co. v. Acel Delivery Serv., 485 F.2d 1169, 1173 (5th
Cir.1973), cert denied, 415 U.S. 921, 94 S. Ct. 1422, 39
L. Ed. 2d 476 (1974); Parsons v. Continental National
American Group, 113 Ariz. 223, 550 P.2d 94 (1976);
Employers Casualty Co. v. Tilley, 496 S.W.2d 552
(Tx.1973); Transamerica Ins. Group v. Chubb and Son,
Inc., 16 Wash.App. 247, 554 P.2d 1080 (1976). Cf. Dugas
Pest Cont. v. Mutual Fire, Marine and Inland Ins. Co., 504
So. 2d 1051 (La.App. 1st Cir.1987); Brasseaux v. Girourd,
214 So. 2d 401 (La.App. 3d Cir.), writ denied, 253 La. 60,
216 So. 2d 307 (1968); Storm Drilling Company v. Atlantic
Richfield Corp., 386 F. Supp. 830 (E.D.La.1974). See Rule
1.7, La.Rules of Professional Conduct; Restatement of the
Law (3rd), The Law Governing Lawyers, Chapter 8,
Introductory Note, §§ 201 & 202 (Tentative Draft 1990);
Opinion 342, Opinions of the Committee on Professional
Responsibility (La.State Bar Ass'n 1974); 15 McKenzie &
Johnson, Insurance Law and Practice § 216 (1986).
Accordingly, when an insurer, with knowledge of facts
indicating noncoverage under the insurance policy,
assumes or continues the insured's defense without
obtaining a nonwaiver agreement to reserve its
5
coverage defense, the insurer waives such policy
defense. Peavey Co. v. M/V ANPA, 971 F.2d 1168 (5th
Cir.1992); Pitts By and Through Pitts v. American Sec. Life
Ins. Co., 931 F.2d 351 (5th Cir.1991); Ideal Mut. Ins. Co.
v. Myers, 789 F.2d 1196 (5th Cir.1986); Employers Mutual
Liability Ins. Co. of Wisconsin v. Sears, Roebuck & Co.,
621 F.2d 746, 747 (5th Cir.1980); 16C Appleman,
Insurance Law and Practice § 9361.25 (1981). Cf. Tate v.
Charles Aguillard Ins. & Real Estate, Inc., 508 So. 2d 1371
(La.1987); Ledoux v. Old Republic Life Ins. Co., 233 So. 2d
731 (La.App. 3d Cir.), cert denied 256 La. 372, 236 So. 2d
501 (1970).
There is no genuine dispute as to the material facts
pertinent to the waiver issue. Applying the foregoing
precepts to those facts, we conclude that Ocean Marine
waived its right to assert a coverage defense by assuming
and continuing the defense of its insured in the face of facts
indicating that it had a right to deny coverage for the
accident.
Id. at 1216-1217 [emphasis added].
We find Steptore is factually distinguishable from the case at bar. Steptore
involved a waiver based on the actions of the insurer during the course of a single
proceeding. In sharp contrast to those facts, the plaintiff in the instant case is seeking
to rely on the insurer’s actions which occurred in connection with a prior 2007 claim
to find a waiver occurred in the context of the current 2013 claim.
Although we have not had occasion to address this precise issue, the United
States Court of Appeals for the Fifth Circuit rejected a similar argument in American
International Specialty Lines Ins. Co. v. Canal Indemnity Co., 352 F.3d 254 (5th Cir.
2003). We quote with approval the sound reasoning set forth in the opinion of Judge
Carl Stewart:
We also find that Louisiana's Code articles governing the
“payment of a thing not owed” compel our conclusion that,
contrary to Canal's argument, an insurer does not, by
virtue of making a payment on a claim, waive the right
to assert coverage defenses to a subsequent claim. See
La. Civ. Code Ann. arts. 2299-2305 (2003). Indeed,
Louisiana's intermediate appellate courts have relied on
6
these articles in holding that an insurer's erroneous, or even
negligent, payment of a claim to its insured does not bar
the insurer from later recouping the amount paid. Dear v.
Blue Cross of Louisiana, 511 So. 2d 73, 74-76 (La.Ct.App.
3d Cir.1987) (holding that an insurer's erroneous payment
to its insured for medical expenses arising from a
preexisting condition that was excluded from coverage did
not bar the insurer from recovering the amounts paid);
Central Sur. & Ins. Corp. v. Corbello, 74 So. 2d 341, 344
(La.Ct.App. 1st Cir.1954) (allowing insurer to recover
payments it made to its insured for costs related to an
accident that occurred after the expiration of the policy);
see also Pioneer Bank & Trust Co. v. Dean's Copy Prods.,
Inc., 441 So. 2d 1234, 1236-37 (La.Ct.App. 2d Cir.1983)
(holding that a bank's negligence in mistakenly paying a
judgment creditor who had no account with the bank did
not bar the bank's claim for reimbursement of the amount
of debt paid). Moreover, under Louisiana Civil Code
article 2299, analyzed in detail below, even “a person who
knowingly has paid a thing not owed may reclaim” the
amount paid from the recipient. La. Civ.Code. Ann. art.
2299 cmt. (d) (2003). Applied to the facts before us, even
if AISLIC's payment to Canal for the Comal County loss
were made knowingly, such knowing payment would not
waive its right to reclaim that amount. We therefore are
unpersuaded by Canal's assertion that AISLIC's payment of
the Comal County claim can waive the right to contest the
subsequent Bexar County claim, when under Louisiana law
such payment would not even estop the payor, AISLIC,
from reclaiming the amounts paid for the Comal County
loss. In sum, we decline to extend application of the
waiver rule articulated in Steptore to the relationship
among insurers particularly when, under the facts
presented, such application would contravene the
Louisiana Civil Code and this Circuit's precedent.
Therefore, like the district court, we reject the
contention that AISLIC waived the right to rely on its
“other insurance” clause to contest liability for the
Bexar County loss by having paid the prior Comal
County claim.
Id. at 271 [emphasis added; footnotes omitted].
Applying this reasoning to the present case, we find any purported waiver by
State Farm of its defenses with regard to the 2007 claim cannot constitute a waiver
7
with regard to the current claim.2 Accepting plaintiff’s argument would result in the
absurd conclusion that State Farm is forever precluded from raising the anti-stacking
defense in any future claim filed by plaintiff.
Accordingly, we find the court of appeal erred in affirming the judgment of the
district court which held plaintiff was entitled to recover beyond the limits of his UM
policy. That judgment must be reversed.
DECREE
For the reasons assigned, the judgment of the court of appeal is reversed.
Judgment is hereby rendered in favor of State Farm Mutual Automobile Insurance
Co. dismissing the claims of Brandon Forvendel with prejudice.
2
Because the 2007 claim is not before us, we need not pass on the question of whether the
law or public policy would countenance an action by an insurer which has the effect of expanding
coverage beyond the limits set forth in La. R.S. 22:1295, although we acknowledge this question has
prompted some divergence in the circuits. See Livas v. State Farm Mutual Automobile Ins. Co., 99-
1169 (La.App. 5 Cir. 7/18/00), 797 So. 2d 694 (holding that a policy could extend coverage beyond
that required by the statute); Egle v. Allstate Ins. Co., 04-1144 (La. App. 3rd Cir. 12/08/04), 889
So. 2d 413 (explaining the facts of Livas “are inapposite to the ones at hand, and we find this holding
inapplicable to this case.”). It suffices to say that for purposes of the facts before us, we find State
Farm has not waived its defenses under the statute or its policy.
8