Regions Bank v. Carroll Kountz, Ken Sullivan and Bryant Kountz

STATE OF LOUISIANA
COURT OF APPEAL, THIRD CIRCUIT

05-1106

REGIONS BANK

VERSUS

CARROLL KOUNTZ, ET AL.

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APPEAL FROM THE
FIFTEENTH JUDICIAL DISTRICT COURT,
PARISH OF LAFAYETTE, NO. 2000-5827,
HONORABLE GLENNON P. EVERETT, DISTRICT JUDGE

************

JIMMIE C. PETERS
JUDGE

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Court composed of Jimmie C. Peters, Michael G. Sullivan, and Glenn B. Gremillion,
Judges.

AFFIRMED.

Jeffrey Ackermann
Durio, McGoffin, Stagg and Ackermann
220 Heymann Boulevard
Lafayette, LA 70503
(337) 233-0300
COUNSEL FOR PLAINTIFF/APPELLANT:
Regions Bank

James H. Gibson
Allen & Gooch
1015 St. John Street
Post Office Drawer 3768
Lafayette, LA 70502-3768
(337) 291-1000
COUNSEL FOR DEFENDANT/APPELLEE:
Westport Insurance Corporation

PETERS, J.

This is an appeal from the trial court’s grant of a partial summary judgment in

favor of Westport Insurance Corporation (Westport), dismissing with prejudice a

third-party demand filed by Bryant Kountz (Kountz) against Westport, the

professional liability insurer of Donald G. Coffman, Jr. (Coffman), a Baton Rouge,

Louisiana attorney. For the following reasons, we affirm the trial court’s grant of the

summary judgment.

DISCUSSION OF THE RECORD

The facts as they pertain to the issue now before us are not in dispute. Kountz

is a Lafayette, Louisiana businessman, and Coffman was a Baton Rouge, Louisiana

attorney. Westport issued Coffman a claims-made policy of professional liability

(legal malpractice) insurance covering the period from July 22, 2000, to July 22,

2001, with a retroactive date to July 22, 1997.

Kountz and others invested $150,000.00 in an unsuccessful business venture

which, according to Kountz’s pleadings, involved South African gold and was

spearheaded by Coffman. As a part of the business venture, on June 15, 2000,

Coffman issued a $150,000.00 check to Kountz drawn on his client trust account in

Whitney National Bank. Kountz deposited the check in an account in Regions Bank

in New Iberia, Louisiana, on September 28, 2000. On October 3, 2000, Kountz

obtained a cashier’s check from Regions Bank in the amount of $150,000.00, based

on the September 28 deposit and negotiated that check to a third party. On the next

day, Regions Bank received notification that Whitney National Bank had dishonored

Coffman’s check because the client trust account from which it was drawn had been

closed.

On November 2, 2000, Regions Bank instituted suit against Kountz and others

in an effort to recover the $150,000.00 it had disbursed by issuing the cashier’s check.

Kountz responded to the suit by filing a number of pleadings, including a third-party

demand against Coffman. This third-party demand, filed on September 27, 2001,

named Coffman as a defendant in his capacity as an attorney and asserted an

indemnity claim based on various causes of action, including Coffman’s role as

Kountz’s attorney in the unsuccessful South African gold venture.

Kountz amended his third-party demand on October 31, 2001, by adding XYZ

Insurance Company as another third-party defendant. The amendment alleged that

XYZ Insurance Company was either Coffman’s legal malpractice insurer or his

commercial general liability insurer, that Coffman had left the state and had not

appointed an agent for service of process, and that Coffman’s whereabouts were

unknown. It further requested that the trial court appoint an attorney to represent

Coffman as an absentee defendant. The trial court granted this relief, and, since that

date, all appearances on behalf of Coffman in this litigation have been through his

appointed attorney ad hoc.1

On November 7, 2003, or over three years after Regions Bank filed its suit and

over two years after Kountz filed his third-party claim against Coffman, Kountz again

amended his third-party demand—this time to name Westport and another insurance

company as third-party defendants based on policies of professional liability

insurance issued by the two companies insuring Coffman for legal malpractice.

1
Coffman’s whereabouts have remained unknown since the events that gave rise to the main
demand. No one was able to contact him after his check was dishonored in October of 2000. At
the time of the hearing of the motion for summary judgment, it was believed that he had left the
country, and it was rumored that he was in Costa Rica.

2

Kountz asserted in his pleadings that the identity of the two insurers had been

discovered only within the two weeks prior to filing the amended third-party demand.

After being served with the third-party demand, Westport responded by filing

the motion for summary judgment, which is the subject of this appeal. In its motion

for summary judgment, Westport acknowledged that it had issued a professional

liability or legal malpractice policy to Coffman, covering the period from July 22,

2000, to July 22, 2001, with a retroactive date to July 22, 1997, but asserted that the

policy was a claims-made policy such that coverage extended only to those claims

made against it and reported to it during the policy period.2 Westport further asserted

that its first notice of Kountz’s claim against Coffman occurred on November 17,

2003, when it received service of the third-party demand arising from the November

7, 2003 filing. Because of this chronology, Westport sought a judgment in its favor

declaring that there was no coverage relative to the $150,000.00 dishonored check.3

In support of its motion for summary judgment, Westport filed a copy of the policy

issued to Coffman, an affidavit of its authorized agent referring to particular

provisions of the policy relative to the notice requirement,4 and depositions of both

Kountz and a Regions Bank representative.

2
Westport’s motion for summary judgment pleaded as an additional ground for noncoverage
that the relationship between Coffman and Kountz was one of business and not attorney-client.
Whether Coffman’s conduct was within the professional scope of coverage was not addressed by the
trial court and is not now before us.
3
The other newly named third-party defendant, Continental Casualty Company, answered the
amended third-party demand, asserting that it provided Coffman with professional liability insurance
for the period from July 21, 2001, through July 22, 2002, and also denied that any claim had been
reported to it as required by its claims-made policy. However, that coverage issue is not before us.
4
The agent also denied receiving any notice of a claim against Coffman. However, in doing
so, the affidavit twice referred to “a claim by Regions Bank against Donald Coffman.” The claim
being denied was, of course, the claim by Kountz against Coffman. The reference to having been
Regions Bank’s lack of notice was obviously a typographical error.

3

The trial court heard the motion for summary judgment on March 21, 2005,

and, on the next day, entered judgment in favor of Westport, granting the motion and

dismissing Kountz’s third-party demand against it. In reaching this decision, the trial

court concluded that the insured under the policy (Coffman) had not complied with

the claims-made and notice requirements of that policy and that consequently the

policy provided no coverage. The trial court later designated the judgment as a final

judgment as authorized by La.Code Civ.P. art. 1915, and Kountz perfected this

appeal.

The principal issue in this appeal is whether, considering the terms of

Westport’s policy and the undisputed facts that appear in the pleadings, depositions

and affidavits on file, summary judgment was proper. A second issue raised by the

assignments of error is whether summary judgment was proper where Westport failed

to establish that it was prejudiced by the delayed notice.

OPINION

We review a summary judgment determining insurance coverage de novo,

using the same criteria for these insurance issues as those governing the trial court’s

consideration of whether summary judgment is appropriate. Schroeder v. Bd. of

Supervisors of La. State Univ., 591 So.2d 342 (La.1991). “Where the meaning of a

contract is to be determined solely from the words upon its face, without the necessity

of extrinsic evidence, the appellate courts are as competent to review the evidence as

the trial court, and no special deference is usually accorded the trial court’s findings.”

Id. at 345. Summary judgment should be granted where “the pleadings, depositions,

answers to interrogatories, and admissions on file, together with the affidavits, if any,

4

show that there is no genuine issue as to material fact, and that mover is entitled to

judgment as a matter of law.” La.Code Civ.P. art. 966(B).

The specific language of Westport’s policy provided Coffman with coverage

only for claims made against him and reported to it during the same policy period.

The DECLARATIONS page of Westport’s policy states the following with regard to

the notice requirements:

This is a Claims-Made and Reported Policy. Except as may be
otherwise provided herein, this coverage is limited to liability for only
those CLAIMS which are first made against the NAMED INSURED
and reported to the Company while the POLICY is in force.

Additionally, under the INSURING AGREEMENTS section of the policy, the

following language appears:

The Company shall pay on behalf of any INSURED all LOSS in excess
of the deductible which any INSURED becomes legally obligated to pay
as a result of CLAIMS first made against any INSURED during the
POLICY PERIOD and reported to the Company in writing during the
POLICY PERIOD or within sixty (60) days thereafter, by reason of any
WRONGFUL ACT occurring on or after the RETROACTIVE DATE,
if any . . . .

Under the DEFINITIONS section of the policy, the following language appears:

“CLAIM” MEANS a demand made upon any INSURED for LOSS, as
defined in each of the attached COVERAGE UNITS, including, but not
limited to, service of suit or institution of arbitration proceedings or
administrative proceedings against any INSURED . . . .5

Thus, while sometimes referred to by Westport as a claims-made policy, it is

better described as a claims-made-and-reported policy. That is to say, it is a policy

in which coverage attaches only if the wrongful act is discovered and reported to the

insurer within the policy period or within sixty days thereafter. This type of policy

5
The filing of suit in a court of competent jurisdiction and venue interrupts prescription.
La.Civ.Code art. 3462. However, because there was never personal service on Coffman and the
record demonstrates no notice to him by any other means, Coffman never received notice of
Kountz’s claim in accordance with the requirements of the insurance policy.

5

is different from an occurrence policy in that the insured peril is different. In an

occurrence policy, the peril insured is the occurrence itself. Once the occurrence

takes place, coverage attaches even though the claim may not be made for some time

thereafter. In a claims-made policy, the making of the claim is the event and peril

being insured, regardless of when the occurrence took place. Anderson v. Ichinose,

98-2157, (La. 9/8/99), 760 So.2d 302. Pure claims-made policies shift to the insured

only the risk of claims incurred but not made, whereas claims-made-and-reported

policies shift the risks both of claims incurred but not made and of claims made but

not reported. Id. The purpose of a claims-made-and-reported policy is to alleviate

problems in determining when a claim was made or whether an insured should have

known a claim was going to be made. Id.

In Livingston Parish School Board v. Fireman’s Fund American Insurance

Co., 282 So.2d 478, 481 (La.1973), the supreme court addressed the nature of claims-

made policies and stated the often-cited general rule that “[w]here a policy

unambiguously and clearly limits coverage to acts discovered and reported during the

policy term, such limitation of liability is not per se impermissible.” In doing so, the

supreme court reaffirmed the general principle that, in the absence of conflict with a

statutory provision or public policy, insurers may by unambiguous and clear notice

provisions “limit their liability and impose such reasonable conditions as they wish

upon the obligations they assume by their contract.” Id.; see also Anderson, 760

So.2d 302. However, the general rule enunciated by the supreme court does not end

our inquiry because, as the jurisprudence has established, application of the general

rule is fact intensive to each case.

6

This circuit has considered claims-made policies in a number of opinions. In

Case v. Louisiana Medical Mutual Insurance Co., 624 So.2d 1285 (La.App. 3 Cir.

1993), this court considered a claim against the insurer of a physician in the context

of a medical malpractice action. The malpractice act at issue occurred on September

26, 1986, well within the insurer’s policy period of July 1, 1986, through July 1,

1987. The plaintiffs initially brought an action against the physician on September

25, 1987, and the physician’s insurer first received notice of the claim on October 5,

1987. The trial court granted the insurer a summary judgment, finding that its claims-

made policy provided no coverage for the medical malpractice because the incident

was not reported during the policy’s effective period. This court affirmed the trial

court’s judgment, applying the general rule enunciated in the Livingston Parish

School Board decision. However, in doing so, this court did not address whether any

Louisiana statutory provision might have affected the claims-made conditions of the

policy.

Applying facts similar to those in Case, this court in Murray v. City of Bunkie,

96-297 (La.App. 3 Cir. 11/6/96), 686 So.2d 45, writ denied, 97-514 (La. 5/9/97), 693

So.2d 767, considered the effect of the policy provisions of a claims-made-and-

reported policy when considered in light of the provisions of the Louisiana Direct

Action Statute, La.R.S. 22:655.6 In Murray, the plaintiff claimed to have sustained

6
Louisiana Revised Statutes 22:655, provides in pertinent part:
B. (1) The injured person . . . shall have a right of direct action against the
insurer within the terms and limits of the policy . . . .
....
D. It is also the intent of this Section that all liability policies within their
terms and limits are executed for the benefit of all injured persons and their survivors
or heirs to whom the insured is liable; and, that it is the purpose of all liability
policies to give protection and coverage to all insureds, whether they are named
insured or additional insureds under the omnibus clause, for any legal liability said
insured may have as or for a tort-feasor within the terms and limits of said policy.

7

damages as the result of the fault of the City of Bunkie in August and September of

1993. The City had a claims-made-and-reported insurance policy in effect at the time

which had an expiration date of May 1994. The plaintiff gave notice of his claim to

the City in September of 1993, but the City did not report the claim to its insurer. The

insurer first received notice of the claim when the plaintiff instituted suit against it in

August of 1994. Thus, notice was timely given to the insured during the policy

period, but not to the insurer. Basing the decision on public policy considerations as

expressed in West v. Monroe Bakery, Inc., 217 La. 189, 46 So.2d 122 (1950) and

Williams v. Lemaire, 94-1465 (La.App. 4 Cir. 5/16/95), 655 So.2d 765, writ denied,

95-1514 (La. 9/22/95), 660 So.2d 481, this court held that the right of the tort victim

to sue the insurer directly under the Louisiana Direct Action Statute was a vested

right and that the plaintiff could not be divested of this right by the breach of a policy

condition requiring prompt notice when the delay was due to the fault of the insured

over whom the injured person had no control. In other words, this court reasoned

that, if language in a claims-made policy between an insurer and its insured required

notice by the insured to the insurer within the policy period thereby defeating an

injured party’s right to proceed directly against the insurer, that language was against

public policy.

We considered a claims-made policy again in the context of a medical

malpractice case in Gary v. Witherspoon, 98-1810 (La.App. 3 Cir. 6/2/99), 743 So.2d

708. In that case, a dentist was covered by a claims-made policy providing coverage

from February 10, 1995, through February 10, 1996, with a retroactive date to

February 10, 1988. The dentist treated the plaintiff from August 11, 1993, through

January 25, 1996, and, on July 2, 1996, the plaintiff’s cause of action accrued when

8

she discovered the dentist’s malpractice. She filed suit against both the dentist and

his insurer on June 9, 1997. The insurer first received notice of the claim when it

received service of the suit on June 17, 1997.

The filing was timely for prescription purposes under La.R.S. 9:5628, the

medical malpractice prescription statute,7 and this court concluded that disallowing

the claim against the insurer would violate La.R.S. 22:6298 because the claims-made

language limited the plaintiff’s exercise of her right of action against the defendant

to a period of less than one year from the time when her cause of action accrued. The

court concluded that it was contrary to public policy as clearly and unambiguously

expressed by our legislature by that statute as well as by La.R.S. 9:5628. However,

the court was careful to point out that the claims-made language had that “effect”

because of the facts “in this case.” Id. at 713.

7
Louisiana Revised Statutes 9:5628(A) provides:
No action for damages for injury or death against any physician, chiropractor,
nurse, licensed midwife practitioner, dentist, psychologist, optometrist, hospital or
nursing home duly licensed under the laws of this state, or community blood center
or tissue bank as defined in R.S. 40:1299.41(A), whether based upon tort, or breach
of contract, or otherwise, arising out of patient care shall be brought unless filed
within one year from the date of the alleged act, omission, or neglect, or within one
year from the date of discovery of the alleged act, omission, or neglect; however,
even as to claims filed within one year from the date of such discovery, in all events
such claims shall be filed at the latest within a period of three years from the date of
the alleged act, omission, or neglect.
(Emphasis added.)
8
Louisiana Revised Statutes 22:629 provides, in pertinent part, as follows:
A. No insurance contract delivered or issued for delivery in this state and
covering subjects located, resident, or to be performed in this state or any group
health and accident policy insuring a resident of this state, regardless of where made
or delivered shall contain any condition, stipulation, or agreement:
....
(3) Limiting right of action against the insurer . . . to a period of less than
one year from the time when the cause of action accrues in connection with all other
insurances unless otherwise specifically provided in this Code.
B. Any such condition, stipulation, or agreement in violation of this Section
shall be void, but such voiding shall not affect the validity of the other provisions of
the contract.
(Emphasis added.)

9

In reaching the conclusion that the facts effectively caused a conflict between

the claims-made language and both La.R.S. 22:629 and La.R.S. 9:5628 and that the

policy’s claims-made reporting requirements had to give way to the statutory

requirements, this court in Gary considered and found persuasive the decision of

Hedgepeth v. Guerin, 96-1044 (La.App. 1 Cir. 3/27/97), 691 So.2d 1355, writ denied,

97-1377 (La. 9/26/97), 701 So.2d 983. In Hedgepeth, as in Gary, the notices

complied with the statutes but not with the policy requirements. The medical

procedure giving rise to the plaintiffs’ malpractice action in Hedgepeth occurred on

October 2, 1985. The claims-made policy was in effect between January 31, 1985,

and January 31, 1986, and the plaintiffs’ claim for medical malpractice was initiated

on July 23, 1986, and reported to the insurer on August 7, 1986. These dates were

outside the policy period but less than one year from the date of the acts giving rise

to the medical malpractice action. However, the insurance policy limited its liability

to those acts which occurred and were reported prior to the end of the policy’s

coverage. As a result, the plaintiffs in Hedgepeth effectively had less than one year

from the date of the act of malpractice to commence the action against the insurer.

On those chronological facts, the court in Hedgepeth relied upon La.R.S. 22:629,

La.R.S. 9:5628(A), and La.R.S. 40:1299.45 in holding that the insurer used the policy

limitations to decrease impermissibly the amount of time the medical malpractice

plaintiff had to bring suit. The Hedgepeth court held that under its facts the policy

was unenforceable and without effect to the extent it limited the liability of the insurer

to those claims which occurred and were reported while the policy was in force.

Accordingly, it held that the “policy would afford coverage to those acts of

malpractice which occurred during the policy period, were filed within one year from

10

accrual of the cause of action, and were reported to the insurer within one year of the

date from accrual of the cause of action.” Hedgepeth, 691 So.2d at 1364. The

Hedgepeth facts met those three requirements, and coverage was afforded.

The court in Hedgepeth gave consideration to the Direct Action Statute, which

we had applied in Murray, 686 So.2d 45. However, unlike Murray, where the injured

party provided notice to the insured during the policy period, in Hedgepeth the

plaintiffs did not make a claim during the policy period. Because of that distinction,

Hedgepeth was not decided on the basis of a violation of the Direct Action Statute.

Instead, Hedgepeth held that the claims-made policy was unenforceable as contrary

to the prescriptive period for insurance and medical malpractice actions and the

general principles of the Medical Malpractice Act. Hedgepeth, 691 So.2d 1355.

Shortly after the Gary case was decided by this court, the supreme court in

Anderson, 760 So.2d 302, examined a medical malpractice third-party claim

involving a claims-made-and-reported policy. There, the doctor’s October 1986

misdiagnosis of the cancerous nature of a mole was discovered in December of 1987.

In November of 1988, the plaintiffs filed suit against the doctor, and in May of 1995

the plaintiffs amended their petition to add as a defendant the doctor’s insurer. The

policy period had expired on October 1, 1987, and the supreme court stated that it

was significant that “the event that triggered policy coverage [the May 1995 suit

against the doctor] did not occur during the policy period.” Id. at 307. The supreme

court further stated that, “[u]nless there is a conflict with statutory provisions or

public policy, insurers are entitled to limit their liability and to impose and enforce

reasonable conditions upon the policy obligations they contractually assume.” Id. at

306. The decision concluded that the “application of the requirements of the

11

claims-made policy under the facts of the present case does not violate public

policy.” Id. at 307 (emphasis added).

The particular question in Anderson was “whether the policy’s denial of the

applicability of coverage, when the professional service occurred within the policy

period but the claim was not made or reported until after the policy period expired,

violates public policy.” Id. at 303. The Anderson decision addressed the application

of the Direct Action Statute and held that the Direct Action Statute did not “extend

the protection of the liability policy to risks that were not covered by the policy or

were excluded thereby (at least in the absence of some mandatory coverage

provisions in other statutes),” stating further:

The unambiguous terms of the policy in the present case limit
coverage to professional services for which claims were made during the
policy period. No claim was made against either the insured or the
insurer during the policy period, and the insured has no right to coverage
under the terms of the policy. Under these circumstances, the Direct
Action Statute does not extend any greater right to third party tort
victims who were damaged by the insured.

Id. at 307.

The court referred to Murray and other court decisions on the issue of whether

a third-party tort victim, who is denied coverage under a claims-made policy because

the timely notified insured failed to notify the insurer timely, may resort to the public

policy provisions of the Direct Action Statute to obtain coverage. However, the court

held that, because the doctor was not notified of the claim and neither knew nor

should have known of the claim during the policy period, it did not need to discuss

whether notice to the insured satisfied the policy requirement of notice to the insurer

in the absence of prejudice resulting from the delay in notice. Id.

12

Although it mentioned parenthetically that mandatory coverage provisions in

statutes other than the Direct Action Statute might affect coverage, the Anderson

decision did not discuss or mention La.R.S. 22:629, nor did it discuss or mention

Hedgepeth, the first case that had relied principally on La.R.S. 22:629 and held that

a claims-made policy was unenforceable when it was effectively contrary to the

statutory time allowed for filing insurance actions. We assume that the reason it was

not believed necessary to mention that case was because of the factual distinction that

in Anderson the claim was not reported to the insurer within the policy period and

was also not reported until more than a year after accrual of the cause of action.

After Anderson, this circuit considered a claims-made policy once again in

Robicheaux v. Adly, 00-1207 (La.App. 3 Cir. 1/31/01), 779 So.2d 1048. The claims-

made medical malpractice policy in that case had a term from January 1, 1995,

through January 1, 1996, with a retroactive date to May 7, 1994. The doctor treated

the plaintiffs’ deceased during the policy period. She died on December 6, 1995.

The plaintiffs filed their suit against the doctor on August 16, 1996. The doctor could

not be located, and a curator ad hoc was appointed to protect his interests. On

December 4, 1996, the curator was served with the petition for damages. We noted

in Robicheaux that under La.R.S. 9:5628, the medical malpractice prescription statute,

the plaintiffs’ suit was timely brought against the doctor. However, we also noted

that the insurer’s first notice of the claim was on February 12, 1999, when personal

service was made on its agent for service of process, which was well over two years

after suit was timely brought against the doctor and approaching four years after the

death of the plaintiffs’ deceased. Accordingly, notice to the insurer was too late. We

recognized that prior jurisprudence had interpreted La.R.S. 22:629 and La.R.S.

13

9:5628 to hold that a policy provision which effectively reduces the prescriptive

period against the insurer to less that the statutorily mandated period is without effect.

However, we found that such was not the factual situation in Robicheaux. Citing

Hedgepeth and Gary as authority, we stated that “[i]f the alleged incident occurs

within the policy period, and a claim is filed outside of the policy period but within

one year of the alleged incident, and the insurer is notified of the claim within one

year of the alleged incident, coverage will be afforded under the claims made policy

in order to conform to Louisiana law.” Id. at 1054. Because the insurer was not

notified of the claim within one year of the alleged incident, we found that the

application of the policy language to the particular facts of that case did not

impermissibly limit the statutory time granted to bring the claim. We affirmed the

judgment finding that there was no coverage.9

The first circuit has continued to follow the rule of Hedgepeth. In Bennett v.

Krupkin, 99-2702 (La.App. 1 Cir. 12/22/00), 779 So.2d 923, writ denied, 01-193 (La.

3/30/01), 788 So.2d 1190, the court affirmed a final partial summary judgment in

favor of the plaintiffs, holding that, as in Hedgepeth, the policy provided coverage for

the alleged act of malpractice. Under the undisputed facts of Bennett, the cause of

action accrued on October 25, 1996, the policy period ended January 15, 1997, and

the suit against both the insured and the insurer was filed on April 17, 1997. The

policy provision reduced the prescriptive period such that the plaintiffs effectively

9
In our opinion in Robicheaux, we defined the issue as being “whether the trial court erred
in granting [the insurer’s] motion for summary judgment despite the statutory language of La.R.S.
22:629, Louisiana’s Direct Action Statute, precluding an insurer from limiting the prescriptive period
in a policy for a period of less than twelve months.” Id. at 1051. Obviously, it was an inadvertence
that we called La. R.S. 22:629 “Louisiana’s Direct Action Statute.” The Direct Action Statute is La.
R.S. 22:655, not La. R.S. 22:629. We did not perpetuate that inadvertence, however, as we fully
discussed the appropriate statutes and expressly found that, when the facts of the case were
considered, the policy language did not shorten the statutorily mandated period dictated by either
La.R.S. 22:629 or La.R.S. 9:5628.

14

had less than one year from the date of the accrual of their cause of action to

commence the action against the insurer.

In LeBlanc v. Succession of Raggio, 00-2407 (La.App. 1 Cir. 2/20/02), 818

So.2d 140, writ denied, 02-870 (La. 5/31/02), 817 So.2d 95, a legal malpractice suit

brought by the third-party client, the court again applied the rule of Hedgepeth. As

in Hedgepeth and Bennett, the claim was made and notice given after the policy

terminated. The record in LeBlanc disclosed that the alleged act of legal malpractice

occurred sometime in 1996. The decision did not state exactly when the act was

discovered and the cause of action accrued. The attorney had malpractice insurance

from August 6, 1995, to August 6, 1998. The client filed suit against the succession

of her deceased attorney on January 14, 2000, amending the petition on January 24,

2000, to join the malpractice insurer whose policy was in effect at the time of the

alleged malpractice. This was the first notice the insurer had of the claim. The

LeBlanc court noted that Anderson, although ruling that insurers are entitled to limit

their liability and to impose and enforce reasonable conditions upon the policy

obligations they contractually assume, qualified its ruling just as had Livingston by

recognizing an exception if there should be a conflict with statutory provisions or

public policy. The LeBlanc court concluded that the notice requirement of the

claims-made policy conflicted with La.R.S. 22:629 and La.R.S. 9:560510 and voided

10
The attorney malpractice prescriptive statute provides in pertinent part as follows:
A. No action for damages against any attorney at law duly admitted to
practice in this state, any partnership of such attorneys at law, or any professional
corporation, company, organization, association, enterprise, or other commercial
business or professional combination authorized by the laws of this state to engage
in the practice of law, whether based upon tort, or breach of contract, or otherwise,
arising out of an engagement to provide legal services shall be brought unless filed
in a court of competent jurisdiction and proper venue within one year from the date
of the alleged act, omission, or neglect, or within one year from the date that the
alleged act, omission, or neglect is discovered or should have been discovered;
however, even as to actions filed within one year from the date of such discovery, in

15

the terms of the policy regarding when a claim could be made. Finding that the

insurer had failed to show it was entitled to judgment as a matter of law, the court

reversed the summary judgment granted in favor of the insurance company and

remanded the matter for further proceedings. The court stated that, because of the

disposition made, it would not consider the plaintiff’s additional argument regarding

notice to the insurer through notice to the insured. The court stated that it would

“pretermit the issue of when notice to an insured satisfies policy requirements of

notice to the insurer in the absence of prejudice resulting from the delay in notice.”

Id. at 143.

Other circuits after Anderson have considered claims-made-and-reported

policies and the effect on coverage when notice to the insurer is not given during the

policy period. In Verhalen v. Forum Health Management, of Georgia, Inc., 34,090

(La.App. 2 Cir. 11/3/00), 771 So.2d 238, writ denied, 01-72 (La. 3/9/01), 786 So.2d

738, a medical malpractice case, the court, distinguishing its facts from those of Gary

and Hedgepeth, held there was no coverage because the particular facts did not

shorten the statutorily mandated period for bringing suit dictated by either La.R.S.

9:5628 or La.R.S. 22:629. The holding in Sanches v. Morris, 01-398 (La.App. 5 Cir.

11/14/01), 802 So.2d 755, suggests that the court applied the simple test that coverage

is determined by whether or not notice is given to the insurer during the policy period

without regard to the presence of any other factors, including any statutory mandate.

The case of Burns v. CLD, Inc., 38,998 (La.App. 2 Cir. 10/27/04), 886 So.2d 607,

writ denied, 04-2906 (La. 2/18/05), 896 So.2d 31, expressly rejected the reasoning

all events such actions shall be filed at the latest within three years from the date of
the alleged act, omission, or neglect.
(Emphasis added.)

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of Hedgepeth, Gary, and Bennett and held that because a claim was not made during

the policy period there was no coverage.

As the cases we have discussed demonstrate, the problem is a confusing one,

and the results have not been entirely consistent. However, the baseline rule which

we choose to follow in this case is that appearing in the supreme court’s Anderson

decision and our Robicheaux case, both of which were decided on similar facts.

Applying the policy language to the facts involved in the case now before us, we

conclude that the partial summary judgment in favor of Westport was properly

granted.

The insuring agreement in the policy covered a loss by an insured which the

insured became legally obligated to pay as a result of a claim first made against the

insured during the policy period and reported to the insurer during the policy period

or within sixty days thereafter. Although “claim” is defined in the policy as “a

demand made upon any INSURED for LOSS . . . including, but not limited to, service

of suit,” service was not made on Coffman because a curator ad hoc was appointed

to represent him, by authority of La.Code Civ.P. art. 5091, et seq., when it was

determined that he was an absentee whose whereabouts were unknown. The

authority given by statute to an attorney appointed to represent an unrepresented

defendant does not include filing a third-party demand. La.Code Civ. P. art. 5095 and

its comments. Kountz failed to produce any evidence that Coffman either knew or

should have known of the claim during the policy period. Thus, although the suit by

Kountz may have interrupted prescription, it was not a demand as required by the

policy language to qualify as a claim made within one year of the wrongful act. The

claim was made on Westport long after the end of the policy term and more than sixty

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days thereafter as well as more than a year after the date of the wrongful act. On

these facts, the policy language did not impermissibly limit the statutory time granted

to assert the claim. There was no coverage under the policy.

There remains for consideration the other issue raised by the appellant, which

is whether the policy required the insurer to show that it was prejudiced by delayed

notice in order to avoid its obligations. That issue involves an interpretation of the

REPORTING AND NOTICE provisions of the policy, from which we quote the

following relevant language:

As a condition precedent to coverage under this COVERAGE UNIT, if
a CLAIM is made against any INSURED, or any INSURED becomes
aware of any CLAIM, the INSURED(S) shall, as soon as practicable, but
no later than sixty (60) days after termination of the POLICY PERIOD,
provide written notice to the Company, provided, that coverage under
this COVERAGE UNIT shall not be denied or forfeited solely as a result
of the failure of the INSURED to provide such notice as soon as
practical, unless such notice is provided later than sixty (60) days after
termination of the POLICY PERIOD or the Company proves actual
prejudice as a result of the failure of the INSURED to provide such
notice. However, breach of this condition shall not result in a denial of
coverage with respect to any INSURED who had no knowledge of the
CLAIM. Nothing contained herein shall be construed as limiting the
reporting requirements of INSURING AGREEMENT I.A.

Attached to the policy is an AMENDATORY ENDORSEMENT stating:

It is agreed that the REPORTING AND NOTICE SECTION of the
individual COVERAGE UNITS is hereby amended to the extent that
coverage will not be denied or forfeited solely as a result of the failure
of the INSURED to provide such notice within the POLICY PERIOD
or the EXTENDED REPORTING PERIOD unless the Company can
demonstrate actual prejudice as a result of the INSURED’S failure to
provide such notice.

The appellant argues that this language imposed on Westport the burden of proving

it was prejudiced by the delayed notice and that, having failed to offer any evidence

of prejudice, it was not entitled to summary judgment in its favor.

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We disagree with that strained construction of the policy language. An

interpretation of contractual language which would lead to absurd consequences must

be rejected as unreasonable.

DISPOSITION

For the foregoing reasons, we affirm the grant of the partial summary judgment

in favor of Westport Insurance Company, dismissing Bryant Kountz’s third-party

demand against it. We assess all costs of this appeal to Bryant Kountz.

AFFIRMED.

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