Donald Paul Ardoin v. State Farm Mutual Automobile Insurance Company

STATE OF LOUISIANA
COURT OF APPEAL, THIRD CIRCUIT

18-582 consolidated with 18-413

DONALD PAUL ARDOIN

VERSUS

STATE FARM MUTUAL AUTOMOBILE INSURANCE CO., ET AL.

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APPEAL FROM THE
NINTH JUDICIAL DISTRICT COURT
PARISH OF RAPIDES, NO. 253,103
HONORABLE MONIQUE F. RAULS, DISTRICT JUDGE

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ELIZABETH A. PICKETT
JUDGE

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Court composed of Elizabeth A. Pickett, Shannon J. Gremillion, and John E.
Conery, Judges.

AFFIRMED.

Glen E. Mercer
Kourtney Twenhafel
Salley Hite Mercer & Resor, LLC
365 Canal Street, Suite 1710
New Orleans, LA 70130
(504) 566-8800
COUNSEL FOR DEFENDANT-APPELLEE:
Federated Mutual Insurance Co.

Bonita Preuett-Armour
Armour Law Firm, L.L.C.
Post Office Box 8386
Alexandria, LA 71306
(318) 442-6611
COUNSEL FOR DEFENDANT-APPELLANT:
State Farm Mutual Automobile Insurance Company

Paul M. Lafleur
Stafford, Stewart & Potter
3112 Jackson Street
Alexandria, LA 71301
(337) 487-4910
COUNSEL FOR DEFENDANT-APPELLANT:
Cynthia Price

Benjamin T. Lowe
Spencer H. Calahan
Attorneys at Law
827 Saint Louis Street
Baton Rouge, LA 70802
(225) 387-2323
COUNSEL FOR PLAINTIFF-APPELLEE:
Donald Paul Ardoin

PICKETT, Judge.

These consolidated matters present the issue of whether a garage liability

insurance policy provided coverage to an automobile (auto) dealership’s customer

when she was driving an auto that the dealership loaned to her while it repaired her

auto. For the reasons discussed below, we affirm the trial court’s judgment

granting summary judgment in favor of the dealership’s insurer and denying the

customer’s insurer’s motion for a declaratory judgment.

FACTS

Donald Ardoin filed suit on December 15, 2014, alleging that he was injured

in an accident that occurred when Cynthia Price failed to stop the auto she was

driving behind him at a stop sign. Ms. Price was driving an auto owned by

Southern Chevrolet Cadillac, Inc. that it loaned to her while it repaired her auto.

Mr. Ardoin named Ms. Price and State Farm Mutual Automobile Insurance

Company, her insurer, as defendants. Ms. Price filed a third-party demand against

Federated Mutual Insurance Company, alleging that it issued an insurance policy

which included garage liability coverage to Southern Chevrolet and that under the

terms of the policy, Federated was obligated to defend her and provide her liability

coverage.

State Farm filed a motion and petition to obtain a judgment declaring that

Federated was obligated to provide Ms. Price a defense and liability coverage for

Mr. Ardoin’s claim. Ms. Price filed a memorandum supporting State Farm’s

request for a declaratory judgment. Federated then filed a motion for summary

judgment, asserting that State Farm’s motion for declaratory judgment should be

dismissed because Federated’s policy did not provide liability coverage to Ms.

Price.

On April 16, 2018, the trial court held a hearing on the insurers’ competing

motions. At the conclusion of the hearing, the trial court denied State Farm’s

request for a declaratory judgment and granted Federated’s motion for summary

judgment. State Farm filed a writ application with this court, seeking reversal of

the trial court’s denial of its motion for declaratory judgment. It also appealed the

trial court’s grant of summary judgment in favor of Federated. The two matters

were consolidated.

ASSIGNMENTS OF ERROR

1. The trial court erred in failing to follow the prior Third Circuit
jurisprudence of Stanfield v. Hartford Accident & Indemnity Co.,
581 So.2d 340 (La.App. 3[] Cir. 1991) and Hargrove v. Missouri
[Pacific Railroad Co.], 00-228 (La. App. 3 Cir. 01/10/2001), 780
So. 2d 454, when granting the Motion for Summary Judgment filed
by Federated Mutual Insurance Company.

2. The trial court failed to follow binding jurisprudence from the
Louisiana Supreme Court, namely, Marcus v. Hanover
[Insurance]. Co., [Inc.] 98-2040 (La. 06/04/1999), 740 So.2d 603,
which requires that an automobile liability policy follows the
[auto], regardless of the type of permissive operation of the driver
of the [auto], and thereby violated the public policy of this state.

3. The trial court failed to adhere to the legislative mandates in
La.R.S. 32:900(8)(2) and 22:1282.

DISCUSSION

Summary Judgment

“Appellate courts review summary judgments de novo under the same

criteria that govern the district court’s consideration of whether summary judgment

is appropriate.” Elliott v. Cont’l Cas. Co., 06-1505, p. 10 (La. 2/22/07), 949 So.2d

1247, 1253 (quoting Reynolds v. Select Props., Ltd., 93-1480 (La. 4/11/94), 634

So.2d 1180, 1183). “[A] summary judgment shall be granted if the motion,

memorandum, and supporting documents show that there is no genuine issue as to

material fact and that the mover is entitled to judgment as a matter of law.”

2

La.Code Civ.P. art. 966(A)(3). “Interpretation of an insurance policy ordinarily

involves a legal question that can be properly resolved by a motion for summary

judgment.” Bernard v. Ellis, 11-2377, p. 9 (La. 7/2/12), 111 So.3d 995, 1002

(citing Cutsinger v. Redfern, 08-2607 (La. 5/22/09), 12 So.3d 945).

Did the Trial Court Apply the Appropriate Jurisprudence?

In the first two assignments of error, State Farm and Ms. Price argue the trial

erred in failing to apply the conclusions reached by this court in Stanfield v.

Hartford Accident & Indemnity Co., 581 So.2d 340, and Hargrove v. Missouri

Pacific Railroad Co, 780 So.2d 454, in determining that Federated’s policy does

not provide coverage for Ms. Price.

State Farm’s and Ms. Price’s claims are based on the following provisions

contained in Federated’s policy:

SECTION II—LIABILTIY COVERAGE

A. Coverage

....

2. “Garage Operations”—Covered “Autos”

We will pay all sums an “insured” legally must pay as damages
because of “bodily injury” or “property damage” to which this
insurance applies, caused by an “accident” and resulting from “garage
operations” involving the ownership, maintenance or use of covered
“autos”.

....

3. Who Is An Insured

a. The following are “insureds” for covered “autos”:

(1) You for any covered “auto”.
(2) Anyone else while using with your permission a covered “auto”
you own, hire or borrow except:

....

(d) Your customers. However, if a customer of yours:
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(i) Has no other available insurance (whether primary, excess or
contingent), they are an “insured” but only up to the compulsory or
financial responsibility law limits where the covered “auto” is
principally garaged.

(ii) Has other available insurance (whether primary, excess or
contingent) less than the compulsory or financial responsibility law
limits where the covered “auto” is principally garaged, they are an
“insured” only for the amount by which the compulsory or financial
responsibility law limits exceed the limit of their other insurance.

(Emphasis added.)

The policy provisions at issue here are essentially the same as those in

Stanfield, 581 So.2d 340, and Hargrove, 780 So.2d 454. In Stanfield, the court

determined that an exclusion for leased autos evidenced an “intent [] to provide

coverage to customers of the garage who are given replacement vehicles when

their vehicle is left for servicing.” Stanfield, 581 So.2d at 341. The exclusion

excluded coverage for any auto that the dealership “leased or rented to others,” but

further provided that the exclusion did not apply to any auto rented to one of the

dealership’s customers while their auto was being serviced or repaired. Based on

this exclusion, the court made a distinction between the two different types of

business conducted by auto dealerships: the sale of autos and the repair of autos.

The court then concluded that the policies at issue did not provide coverage to the

sales side of the business but did provide coverage to garage customers “who are

given loaner vehicles when their vehicle is left for servicing.” Id. at 341.

Hargrove accepted and followed the reasoning espoused in Stanfield.

Douga v. Progressive Casualty Insurance Co., 16-543 (La.App. 3 Cir.

12/7/16), 208 So.3d 394, writ denied, 16-2271 (La. 2/3/17), 215 So.3d 694,

presented the same issue addressed in Stanfield, 581 So.2d 340, and Hargrove, 780

So.2d 454. In Douga, this court reviewed the distinction made in Stanfield and

Hargrove, in light of conflicting opinions reached by the first and fourth circuits in
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Savana v. Certain Interested Underwriters at Lloyd’s London, 01-2450 (La.App. 1

Cir. 7/2/02), 825 So.2d 1242; Baker v. Kenney, 99-2950 (La.App. 4 Cir. 5/3/00),

767 So.2d 711, writ denied, 00-2153 (La. 10/13/00), 771 So.2d 650; and, Gambino

v. Lamulle, 97-2798 (La.App. 4 Cir. 6/10/98), 715 So.2d 574. The panel declined

to apply Stanfield and Hargrove and held that the reasoning in the above-cited

cases applied to the policy provisions at issue.

In reaching this conclusion, the panel agreed with the first circuit’s

determination that Stanfield’s, 581 So.2d 340, distinction between auto dealership

customers and garage customers is “artificial.” Douga, 208 So.3d at 399 (quoting

Savana, 825 So.2d at 1244). Douga also agreed with Savana’s conclusion that:

[U]nder La. R.S. 22:671, the primary liability coverage for a loaner
vehicle is provided by the driver’s policy, not the service dealer’s
policy. Thus, [the defendant driver’s] policy which met the
requirements of La.R.S. 32:900 provided the plaintiff with
compensation contemplated by the Louisiana Motor Vehicle
Responsibility Law. Further, because the policy provided coverage in
the event the driver of the covered vehicle lacks the insurance
coverage required by La.R.S. 32:900, we find that the language of the
policy does not violate public policy and should be interpreted as
written.

Id. (Emphasis added.) We agree with Douga’s conclusion and decline to apply

Stanfield or Hargrove, 780 So.2d 454.

State Farm and Ms. Price next assert that the trial court erred in failing to

apply the holding of Marcus v. Hanover Insurance Co. Inc., 98-2040 (La. 6/4/99),

740 So.2d 603, to Federated’s claims. These assertions are misplaced. The

supreme court held in Marcus that a “business use exclusion that excludes from

coverage the named insured while operating his insured car in ‘any business other

than an auto business, contravenes the purpose of the Louisiana Motor Vehicle

Safety Responsibility Law.” Id. at 608 (emphasis added). Accordingly, Marcus

applies only when an insured is operating his own auto. Moss v. Nat’l Fire &

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Marine Ins. Co., 12-1084 (La.App. 3 Cir. 3/27/13), 111 So.3d 1166. Ms. Price is

not an insured under Federated’s policy; therefore, Marcus does not apply here.

Furthermore, the compulsory liability insurance law requires only that

insurance policies provide liability coverage to the named insured and any other

person driving a covered auto with the permission of the named insured. Id.

Federated’s policy provides liability coverage for auto dealer customers if they do

not have “other available insurance” that provides coverage “up to the compulsory

. . . law limits” or if their insurance provides coverage for an amount less than that

required by law. Therefore, the exclusion at issue does not conflict with the Motor

Vehicle Safety Responsibility Law. Id (citing Dees v. Nat’l Sec. Fire and Cas. Ins.

Co., 97-962 (La.App. 3 Cir. 2/11/98), 707 So.2d 137).

For these reasons, we find no error with the trial court’s determination that

Federated’s policy does not provide coverage to Ms. Price.

Did the Trial Court Fail to Apply La.R.S. 32:900(B)(2) & 22:1282?

In their third assignment of error, State Farm and Ms. Price urge that

Federated’s policy contravenes La.R.S. 32:900(B)(2), 1 which requires liability

insurance policies provide coverage for persons driving with the auto owner’s

permission, and La.R.S. 22:1282, which requires full coverage for insureds and

permissive operators. 2 They argue that because Federated’s “policy provides

1
Louisiana Revised Statutes 32:900(B)(2) requires that an owner’s liability insurance
policy:

Shall insure the person named therein and any other person, as insured, using any
such motor vehicle or motor vehicles with the express or implied permission of
such named insured against loss from the liability imposed by law for damages
arising out of the ownership, maintenance, or use of such motor vehicle or motor
vehicles.”
2
Louisiana Revised Statures 22:1282 provides:

No motor vehicle liability insurance policy nor any uninsured motorist
coverage for bodily injury shall limit the coverage of, or the amount that can be
recovered by, the named insured . . . express or implied permissive users, for
6

$500,000 in liability coverage for accidents caused by permissive operators of

vehicles owned by Southern Chevrolet” but provides limited coverage for

customers who are permissive operators only if they do not otherwise have state

minimum liability coverage, it violates these two provisions.

This court rejected State Farm’s argument regarding La.R.S. 32:900(B)(2) in

Bennett v. Brown, 16-622 (La.App. 3 Cir. 12/21/16), 209 So.3d 830, writ denied,

17-146 (La. 3/13/17), 216 So.3d 803, which dealt with the policy provision at issue

here. The panel looked to Alexander v. Cornett, 42,147 (La.App. 2 Cir. 7/11/07),

961 So.2d 622, writ denied, 07-1681 (La. 11/2/07), 966 So.2d 603, for guidance.

In Alexander, the second circuit first noted that “a statutory omnibus clause such as

[La.]R.S. 32:900(B)(2) supercedes only conflicting insurance policy provisions.”

Id. at 639. No such conflict existed there, nor does it exist here. The court then

reiterated the basic tenet that insurance companies have the right to limit the

coverage a policy provides if the limiting provision does not conflict with

applicable laws or public policy. Bennett, 209 So.3d at 835 (quoting Alexander,

961 So.2d at 630), agreed with Alexander’s conclusion that: “The provision in

question does not conflict with La.R.S. 32:900(B)(2) because it provides liability

coverage when the customer’s insurance is inadequate to satisfy the minimum

requirements of the statute.” See also, Savana, 825 So.2d 1242; Baker v. Kenney,

767 So.2d 711; Gambino v. Lamulle,, 715 So.2d 574.

We further observe that La.R.S. 22:1282 requires that all permissive users

“for whom the policy provides coverage” be provided the same amount of

coverage. Pursuant to the exclusion, Ms. Price is not an insured under Federated’s

policy. Therefore, La.R.S. 22:1282 does not apply to the claims herein.

whom the policy provides coverage, to any amount less than the highest policy
limit provided in the policy for the respective coverage or potential recovery.
7

State Farm and Ms. Price cite Rolston v. United States Services Automobile

Ass’n, 06-978 (La. 12/13/06), 948 So.2d 1113, as support for this argument. In

Rolston, State Farm issued a personal liability umbrella policy to the plaintiff’s

husband that excluded “the named insured, spouse, or anyone within the meaning

of . . . the definition of insured” from the coverage provided by the policy. Id. at

1115. The insured contested the validity of the exclusion, arguing that it violated

public policy and that error or mistake vitiated his consent to the policy and the

exclusion. Ms. Price is not an insured under Federated’s policy; therefore, Rolston

has no application here. This assignment of error lacks merit.

DISPOSITION

The judgment of the trial court is affirmed. All costs are assessed to State

Farm Automotive and Casualty Insurance Company.

AFFIRMED.

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