Fallon Bailey v. State Farm Mutual Auto. Ins. Co.

STATE OF LOUISIANA
COURT OF APPEAL, THIRD CIRCUIT

22-091 consolidated with 22-092

FALLON BAILEY, INDIVIDUALLY, AND
ON BEHALF OF HER MINOR CHILD, I.B.

VERSUS

STATE FARM MUTUAL AUTOMOBILE
INSURANCE COMPANY, KENT MORGAN,
AND ALLEN CARRIERE

**********

APPEAL FROM THE
FIFTEENTH JUDICIAL DISTRICT COURT
PARISH OF LAFAYETTE, NO. 2017-3390 C/W 2017-3391
HONORABLE THOMAS FREDERICK, DISTRICT JUDGE

**********

JONATHAN W. PERRY
JUDGE

**********

Court composed of Billy Howard Ezell, Jonathan W. Perry, and Gary J. Ortego,
Judges.

REVERSED AND REMANDED.

Andrew J. Quackenbos
Kaliste Joseph Saloom IV
Domengeaux Wright Roy & Edwards, LLC
556 Jefferson Street, Suite 500
Post Office Box 3668
Lafayette, Louisiana 70502-3668
(337) 233-3033
COUNSEL FOR PLAINTIFF/APPELLANT:
Fallon Bailey

F. Douglas Wimberly
Cloyd & Wimberly, LLC
302 La Rue France, Suite 204
Post Office Box 53951
Lafayette, Louisiana 70505-3951
(337) 289-6906
COUNSEL FOR DEFENDANT/APPELLEE:
State Farm Fire & Casualty Insurance Company

Michelle D. Brooks
Porteous, Hainkel and Johnson, LLP
211 West Fifth Street
Thibodeaux, Louisiana 70301-3199
(985) 446-8451
COUNSEL FOR DEFENDANTS/APPELLEES:
State Farm Mutual Automobile Insurance Company,
Kent Morgan, and Allen Carriere

PERRY, Judge.

At issue in this appeal is the trial court’s grant of partial summary judgment

finding the excess insurer’s policy does not provide coverage for plaintiff’s claims

against the tortfeasor defendant. The plaintiff appeals, arguing the excess insurer’s

policy provides coverage because the waiver doctrine applies and, alternatively,

because the terms of the excess insurer’s policy are ambiguous. For the following

reasons, we reverse the judgment of the trial court.

FACTS AND PROCEDURAL HISTORY

This lawsuit resulted from a rear-end collision on Johnston Street in Lafayette,

Louisiana, on June 13, 2016, wherein Allen Carriere (“Carriere”), who was driving

a 2010 Chevrolet Malibu owned by Kent Morgan1 (“Morgan”), collided into the rear

of a stopped vehicle being operated by Anne Marie Valentine (“Valentine”). The

collision caused Valentine’s vehicle to travel across the intersection of Johnston

Street and Jefferson Street and crash head-on into a Ford F-350 truck which was

stopped at a red traffic light in the opposite direction of travel. Valentine’s daughter,

Plaintiff/Appellant, Fallon Bailey (“Bailey”), and her minor child, I.B.,2 were

passengers in Valentine’s vehicle and allegedly suffered personal injuries in the

crash.

On June 9, 2017, Valentine and Bailey filed separate personal injury lawsuits

against Carriere; Morgan; and State Farm Mutual Automobile Insurance Company

(“State Farm Mutual”), Morgan’s automobile liability insurer. On July 10, 2019,

first supplemental and amended petitions were filed naming State Farm Fire &

1
Kent Morgan is Allen Carriere’s maternal uncle.

2
Initials are used to protect the identity of the minor. Uniform Rules—Courts of Appeal,
Rule 5–2.

Casualty Insurance Company (“State Farm Fire”), the issuer of a Personal Liability

Umbrella Policy (“PLUP”) to Morgan, as an additional defendant.

On June 18, 2020, State Farm Fire filed a motion for partial summary

judgment3 asserting that although State Farm Mutual’s “policy did provide liability

coverage for the loss at issue . . . Carriere was not covered by the umbrella policy

issued to [Morgan by State Farm Fire].” The main emphasis of State Farm Fire’s

summary-judgment motion was that Carriere did not meet the definition of an

insured under the PLUP issued to Morgan because at the time of the accident,

Carriere was not a relative of Morgan whose primary residence was Morgan’s

household. Attached to State Farm Fire’s motion was the PLUP, which contains the

following relevant definition:

6. “insured” means:

a you and your relatives whose primary residence is
your household;

b any other human being under the age of 21 whose
primary residence is your household and who is in
the care of a person described in 6.a.;

c any other person or organization to the extent they
are liable for the use of an automobile,
recreational vehicle or watercraft by a person
included in 6.a. or 6.b.

However, any such person or organization is not an
insured if:

(1) the use is in the course of a business that sells
or services automobiles, recreational motor
vehicles or watercrafts, or

3
We note that originally, State Farm Fire’s pleading was titled “Motion for Summary
Judgment on the Issue of Insurance Coverage.” At the hearing of this matter, however, it accepted
Bailey’s contention that it was not entitled to summary judgment and dismissal from this litigation
because whether or not Carriere is an insured under State Farm Fire’s PLUP has no effect on
Bailey’s negligent entrustment claim against Morgan. Thus, State Farm Fire was allowed to orally
retitle its pleading as a motion for partial summary judgment.

2

(2) such person or organization owns, leases or
rents the automobile, recreational motor
vehicle or watercraft[.]

Attached to State Farm Fire’s motion were excerpts from the depositions of Carriere

and Morgan, both held on February 18, 2020. Carriere testified that on the date of

the accident, June 13, 2016, he was living with his mother in Conroe, Texas. Morgan

testified that on the date of the accident, the only person living with him at his

address in The Woodlands, Texas, was his wife. Thus, State Farm Fire contended it

was entitled to judgment as a matter of law that the PLUP issued to Morgan does not

provide coverage for Bailey’s claims against Carriere.

Bailey opposed State Farm’s motion on the grounds that State Farm waived

any coverage defenses by providing an unconditional defense to Carriere with the

full knowledge that Carriere was not a resident relative of Morgan’s household when

the accident occurred. Alternatively, Bailey alleged that the definition of “insured”

contained in State Farm Mutual’s PLUP is ambiguous, therefore, the court must

interpret the ambiguity against the insurer in favor of coverage.

After a hearing, the trial court granted State Farm Fire’s motion for summary

judgment. Written judgment was signed on November 5, 2021, declaring State Farm

Fire’s partial motion for summary judgment “regarding lack of coverage for Allen

Carriere under the [State Farm Fire] policy, is GRANTED, dismissing all claims

against [State Farm Fire], as the purported insurer of Allen Carriere, with prejudice.”

From this judgment, Bailey appeals.

APPELLANT’S ASSIGNMENTS OF ERROR

Bailey has urged the following three assignments of error:

1. The trial court erred by failing to follow Supreme Court and Third
Circuit precedent holding that coverage defenses are waived when
the insurer, with knowledge of facts indicating noncoverage under
the insurance policy, continues the representation of the insured
without obtaining a nonwaiver agreement or reserving its rights.

3

2. The trial court erred by construing the evidence in the light most
favorable to the movant, State Farm, instead of the non-movant,
Ms. Bailey, by disregarding the established facts that State Farm
continued its conflicted joint representation of Mr. Carriere after it
had knowledge of facts indicating noncoverage under the insurance
policy. Consequently, Ms. Bailey’s claims against State Farm Fire
as the insurer of Mr. Carriere were wrongfully dismissed.

3. The trial court erred by incorrectly determining Mr. Carriere did not
meet the definition of “insured” under the excess policy and by
failing to construe ambiguous policy provisions against the insurer
and in favor of coverage.

APPELLANT’S ARGUMENT

Bailey’s chief argument is that State Farm waived its right to contest coverage

because it had notice in 2016 that Carriere did not reside with Morgan. Relying on

Steptore v. Masco Construction Co., Inc., 93-2064 (La. 8/18/94), 643 So.2d 1213,

and Rivers v. Daigle, 16-805 (La.App. 3 Cir. 2/1/17), 210 So.3d 815, Bailey

contends that Louisiana courts have recognized that such notice with a failure to

investigate and take appropriate action, i.e., obtaining a nonwaiver agreement,

results in a waiver of the insurer’s right to contest coverage.

APPELLEE’S POSITION

State Farm Fire seeks to distinguish Steptore, reasoning that unlike the excess

insurer in Steptore, who was made a full participant in the case from the beginning

of the lawsuit, State Farm Fire was not made a defendant in this matter until Bailey

amended her petition on July 8, 2019. In brief, State Farm Fire submits the facts

presented in its motion for partial summary judgment established that a claim was

made against State Farm Mutual; its insured, Morgan; and its insured driver,

Carriere. Thereafter, State Farm Mutual undertook the defense of Morgan and

Carriere until extensive discovery and evaluation of Bailey’s claims revealed the

value of said claims could exceed the underlying liability limits of the automobile

policy issued by State Farm Mutual to Morgan. According to State Farm Fire, it did

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not have a duty to investigate whether Carriere qualified as an insured under the

PLUP issued to Morgan until State Farm Fire opened a claim under the PLUP.

STANDARD OF REVIEW

Appellate courts review summary judgments de novo using the same criteria

that govern the trial court’s consideration of whether summary judgment is

appropriate, i.e., whether there is any genuine issue of material fact and whether the

movant is entitled to judgment as a matter of law. Samaha v. Rau, 07-1726

(La. 2/26/08), 977 So.2d 880. On a motion for summary judgment, the mover bears

the burden of proof; however, if the mover will not bear the burden of proof at trial

on the issue before the court on the motion for summary judgment, the mover’s

burden on the motion does not require that all essential elements of the adverse

party’s claim, action, or defense, be negated. La.Code Civ.P. art. 966(D)(1).

Instead, the mover must point out to the court the absence of factual support for one

or more elements essential to the adverse party’s claim, action, or defense. Id.

Thereafter, the adverse party must produce factual evidence sufficient to establish

the existence of a genuine issue of material fact or that the mover is not entitled to

judgment as a matter of law. Id.

In order to reverse the trial court’s decision, this court would have to find on

de novo review that the record reveals a genuine issue of material fact which

precludes summary judgment as a matter of law. A fact, for summary judgment

purposes, “is material if it potentially insures or precludes recovery, affects a

litigant’s ultimate success, or determines the outcome of the legal dispute.” Hines

v. Garrett, 04-806, p. 1 (La. 6/25/04), 876 So.2d 764, 765. An issue, for summary

judgment purposes, is genuine if “reasonable persons could disagree; if reasonable

persons could reach only one conclusion, there is no need for trial on that issue and

summary judgment is appropriate.” Id. at 765-66.

5

LAW AND DISCUSSION

Bailey argues that jurisprudence on the issue of waiver of coverage defenses

requires an insurer to promptly reserve its right to plead a coverage defense. She

alleges State Farm obtained a copy of the accident report less than one month after

the crash, which identified Carriere’s address as Lafayette, Louisiana, and Morgan’s

address as The Woodlands, Texas. Bailey also points to her original petition, filed

in June 2017, which alleged Carriere was domiciled in Louisiana and Morgan was

domiciled in Texas. Despite this knowledge, counsel hired by State Farm answered

on behalf of Carriere on December 22, 2017, and continued to represent Carriere

without reservation for nearly three years after the accident at issue herein. Bailey

argues the knowledge of the above facts triggered a duty to investigate long before

State Farm Fire’s unilateral decision to open a claim under the PLUP and then deny

Carriere coverage thereunder.

According to State Farm Fire’s motion for summary judgment, it is

undisputed that when the accident occurred, Carriere was not a resident of Morgan’s

household; therefore, Carriere did not meet the definition of an insured under the

terms of the PLUP issued to Morgan. State Farm Fire further argues its duty to

investigate whether the PLUP afforded coverage to Carriere was not triggered until

a claim was made against the PLUP, which it alleges did not occur until 2019. It

contends these facts are sufficient to warrant granting of summary judgment in its

favor and its dismissal from this lawsuit. We disagree.

Waiver is “the intentional relinquishment of a known right, power, or

privilege[]” which “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.” Steptore, 643 So.2d at 1216. The supreme court further explained:

6

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. 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 coverage defense, the insurer waives such
policy defense.

Id. at 1216 (citations omitted) (emphasis added).

In Rivers, 210 So.3d 815, this court reversed the trial court’s grant of summary

judgment in favor of the insurer of two defendants on the basis that the insurer’s

policy did not provide coverage for the minor tortfeasor and its denial of the

plaintiffs’ cross motion on the same issue. A panel of this court found that Allstate,

the insurer, had waived its claim of coverage in a case involving its insureds, the

Allemands. The panel noted Allstate had hired an attorney to represent its insured,

Mrs. Allemand, the mother of the alleged minor tortfeasor in that case. Counsel

hired by Allemand, in turn, answered on behalf of itself, Mrs. Allemand, and the

minor. Although Allstate notified Mrs. Allemand of its representation of her, it

specifically “did not seek a non-waiver agreement or assert any coverage defenses.”

Id. at 819. The following month, however, Allstate discovered a potential coverage

defense and notified Mrs. Allemand of such by sending reservation of rights letters

to Mrs. Allemand and her minor daughter. It thereafter “split the defense between it

and the Allemands” and hired separate counsel for each. Id.

The plaintiffs in Rivers, 210 So.3d 815, argued that Allstate had waived its

coverage defense despite its decision to split its defense prior to trial. This court

agreed, finding “Allstate had all the information it needed to determine a coverage

defense existed upon being served with and reviewing the Rivers’ petitions. At the

least, Allstate had ‘knowledge of facts indicating noncoverage under its policy.’” Id.

at 820.

7

In this case, we find the record reveals a genuine issue of material fact which

precludes summary judgment as a matter of law. Whether State Farm’s conduct in

this case satisfies the elements of waiver requires a credibility determination and

weighing of testimony. See Broussard v. Univ. Hosp. & Clinics, 21-153 (La.App. 3

Cir. 11/17/21), 330 So.3d 723 (Summary judgment is inappropriate for judicial

determinations of subjective facts, such as motive, intent, good faith, or knowledge

that call for credibility evaluations and the weighing of the testimony.)

For instance, State Farm Fire submitted the La.Code Civ.P. art. 1442

deposition of Steven G. Fosgate (“Mr. Fosgate”) in support of its motion for

summary judgment. Since June 2019, Mr. Fosgate has served as “the claim team

manager with supervision of the claim file for State Farm Mutual Automobile

Insurance Company, and State Farm Fire and Casualty Company.”4 According to

Mr. Fosgate, the same person serves as the claims specialist for both State Farm

Mutual and State Farm Fire. When asked “at what point in time did State Farm Fire

decide it was going to claim no coverage for this incident . . . regarding Allen

Carriere[,]” Mr. Fosgate stated:

[T]here was a claim submitted in March or April 2019. When I say a
claim, a claim was opened up within -- I looked at this, within 30 days
there was a letter. I want to say the letter was dated April 17th, and it
was a reservation of rights letter.

Despite State Farm Fire’s representations, whether and when a reservation of

rights letter was sent to Carriere are questions for which answers are not provided in

the record before us. Our review of the summary-judgment evidence reveals that

State Farm Fire did not introduce into evidence any such letter.

Furthermore, in an excerpt from the deposition of Carriere, submitted into

evidence with Bailey’s opposition to State Farm Fire’s motion for summary

4
According to Mr. Fosgate, State Farm Mutual is the parent company of State Farm Fire.

8

judgment, Carriere does not verify if or when he received any such letter. When

asked if he “ever receive[d] a letter telling [him] that State Farm reserve[d] its rights

to deny coverage[,]” Carriere responded, “I don’t recall[]” and “I don’t know.”5

Thus, we find the trial court erred in granting State Farm Fire’s motion for

summary judgment. Accordingly, the judgment of the trial court granting summary

judgment in favor of State Farm Fire & Casualty Insurance Company is reversed,

and the matter is remanded to the trial court for further proceedings.

Finally, having found the trial court erred in granting summary judgment, we

will not consider Bailey’s remaining assignments of error.

DECREE

For the foregoing reasons, we reverse the judgment of the trial court, and the

matter is remanded for further proceedings. Costs of this appeal are assessed to

Defendant/Appellee, State Farm Fire & Casualty Insurance Company.

REVERSED AND REMANDED.

5
Carriere answered subject to the objections of counsel for State Farm Mutual
(attorney-client privilege) and counsel for State Farm Fire (letter prepared in anticipation of
litigation).

9