Million Dollar Credit – January 2017

Perrier and Lacoste attorneys Guy Perrier and Ralph Aucoin, Jr. obtained a ruling from the Louisiana First Circuit Court of Appeal granting their writ application, reversing the trial court’s denial of their motion for partial summary judgment, and entering judgment in favor of their client, an excess insurer, holding that it is entitled to a credit for the full $1,000,000.00 underlying limits in compensatory damages before their excess policy applies. The panel was comprised of Judges Pettigrew, McDonald, and Calloway.

The lawsuit arose out of a minor impact, low speed, rear-end collision between two commercial vehicles. Plaintiff alleged radiating back pain and was treated with an epidural steroid injection, medial branch blocks, and bilateral rhizotomies. No surgery was recommended. Medical expenses totaled $66,926.68. Prior to trial plaintiff amended his petition based on scant evidence to allege that the defendant driver was impaired at the time of the collision and sought punitive damages from the driver and his employer. The primary policy did not exclude punitive damages, but the excess policy did.

Plaintiff then entered into a settlement agreement with the primary insurer which included a Gasquet release of the insureds in exchange for $990,000 of which $900,000 would be allocated to punitive damages with only $90,000 allocated for compensatory damages. The excess insurer was not a party to the lawsuit at this time and did not participate in these settlement negotiations, but did send written notification that it objected to any proposed apportionment and would not agree to be bound by it. Just 8 days before trial was set to begin, the excess insurer was named as a defendant and served with the original and amending petitions.

In addition to moving to continue the trial date, counsel for the excess insurer immediately filed a motion for partial summary judgment arguing that: 1) its policy excludes coverage for punitive and exemplary damages and plaintiff’s claims for same against it must be dismissed; and 2) it is entitled to a credit for the full $1,000,000 underlying liability limits for compensatory damages before its excess policy applies. Plaintiff’s counsel argued that the excess insurer was only entitled to a credit for $100,000 in compensatory damages based on the allocation. The trial court granted the first part of the motion, but denied the second stating that there were issues of material fact with respect to the settlement agreement.

Perrier and Lacoste’s appellate team argued in briefs that the failure to grant the credit was contrary to the law, ignored the express exclusion in the excess policy, did not serve the purpose behind an award of punitive damages, and constituted an abuse of discretion. In reaching its decision, the First Circuit relied on its prior ruling in Malbreaugh v. CNA Reinsurance Co., 2003-2088 (La. App. 1 Cir. 9/17/04), 887 So.2d 494, writ denied, 2001-2568 (La. 12/17/04), 888 So.2d 871. In that case, as a matter of first impression, the First Circuit held that a punitive damages award was improperly allocated to the liability coverage to allow the victim to recover compensatory damages under her UIM coverage which contained an exclusion for punitive damages.

As a result of their efforts Perrier and Lacoste obtained a favorable ruling that will thwart attempts at this type of improper apportionment in the future and their client can now move forward with a ruling in hand stating they are entitled to a $1,000,000 credit in compensatory damages before their excess policy applies.