Don A. Perkins, Individually and as Administrator of the Minor Children, Ross Alan Perkins, Brittany Nicole Perkins, Kurt Michael Perkins and Cynthia E. Perkins, Individually and Administratrix of the Minor Child Howard Mack Hughes VS Entergy Corporation, Louisiana Power & Light Company, Gulf States Utilities Company, Inc., Air Liquide America Corporation, Big Three Industries, Inc., Dresser Industries, Inc., Masoneilan International, Exxon Corporation and Highlands Insurance Company (2009CA0632 Consolidated With 2009CA0633 2009CA0634)
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NOT DESIGNATED FOR PUBLICATION STATE OF LOUISIANA COURT OF APPEAL OA DON FIRST CIRCUIT FPERKINS 2009 CA 0632 INDIVIDUALLY AND AS ADMINISTRATOR OF THE MINOR CHILDREN ROSS ALAN PERKINS BRITTANY NICOLE PERKINS AND KURT MICHAEL PERKINS AND CYNTHIA E PERKINS INDIVIDUALLY AND AS ADMINISTRATRIX OF THE MINOR CHILD HOWARD MACK HUGHES VERSUS ENTERGY CORPORATION LOUISIANA POWER LIGHT COMPANY GULF STATES UTILITIES COMPANY INCORPORATED AIR LIQUIDE AMERICA CORPORATION BIG THREE INDUSTRIES INC DRESSER INDUSTRIES INC MASONEILAN INTERNATIONAL EXXON CORPORATION HIGHLANDS INSURANCE COMPANY Consolidated with 2009 CA 0633 JOSEPH E BUJOL III INDIVIDUALLY AND AS ADMINISTRATOR OF THE MINOR CHILDREN DEREK BUJOL DUSTIN BUJOL AND DEVIN BUJOL AND TINA HEBERT BUJOL VERSUS ENTERGY CORPORATION LOUISIANA POWER LIGHT COMPANY GULF STATES UTILITIES COMPANY INCORPORATED AIR LIQUIDE AMERICA CORPORATION BIG THREE INDUSTRIES INC DRESSER INDUSTRIES INC MASONEILAN INTERNATIONAL EXXON CORPORATION HIGHLANDS INSURANCE COMPANY Consolidated with 2009 CA 0634 ROBERT HRACEK FRANK E HRACEK AND ERIC RAY HRACEK VERSUS ENTERGY CORPORATION LOUISIANA POWER LIGHT COMPANY GULF STATES UTILITIES COMPANY INCORPORATED AIR LIQUIDE AMERICA CORPORATION BIG THREE INDUSTRIES INC DRESSER INDUSTRIES INC MASONEILAN INTERNATIONAL EXXON CORPORATION Judgment Rendered JUN 10 2010 APPEALED FROM THE EIGHTEENTH JUDICIAL DISTRICT COURT IN AND FOR THE PARISH OF IBERVILLE DOCKET NUMBERS 45 45 45 DIVISION D 646 647 718 STATE OF LOUISIANA THE HONORABLE JACK T MARIONNEAUX AND WILLIAM C DUPONT JUDGES PRESIDING 2 COUNSEL OF RECORD Jay Russell Sever Attorney for IntervenorAppellee Great American Assurance Company New Orleans Louisiana b da Agricultural Insurance Company Ralph S Hubbard III Attorneys for IntervenorAppellee Tina L Kappen Travelers Casualty and Surety Company dba AETNA Casualty Surety Company New Orelans Louisiana Edward T Hayes Attorney for Defendant Appellee Royal Indemnity Company New Orleans Louisiana T Justin Simpson Metairie Louisiana Attorney for Defendant Appellee Hartford Casualty Insurance Company John P Wolff III Baton Rouge Louisiana Attorney for Defendant Appellee Federal Insurance Company Ralph H Wall Louis C LaCour Jr Laurie B Young Lauren J Delery New Orleans Louisiana Attorneys for Defendant Appellant Thomas E Schwab New Orleans Louisiana Attorney for Defendant Appellee L X Insurance Company Patrick W Pendley Plaquemine Louisiana Attorney for Defendant Appellee The Big Three Insurers Melvin A Elden Attorney for Defendant Appellee Reliance Insurance Company National Union Fire Insurance Company of Pittsburgh PA Lafayette Louisiana BEFORE PARRO KUHN AND MCDONALD JJ 3 McDONALD J National Union Fire Insurance Company of Pittsburgh PA National Union appeals from two summary judgments the first finding that a policy issued by National Union afforded coverage for injuries suffered by three employees of its insured Air Liquide America Corporation ALAC and the second ordering National Union to pay over 17 million including interest in contribution toward the settlement of the injured employees claims We affirm BACKGROUND On April 6 1994 ALAC operated an air separation facility near Plaquemine Louisiana which produced oxygen nitrogen and argon An oxygen flash fire and explosion occurred at the ALAC facility after an electrical disturbance and while three employees were assisting in restarting the plant They were near the end of the task of restarting the plant when an operating problem developed in the letdown station An automatic control valve was regulating differential pressures between a 700pound oxygen pipeline supplying one customer Exxon and a 400 pound pipeline supplying other customers The employees were closing an eightinch manual isolation valve upstream from the automatic control valve when the plant manager told them to stop He then climbed inside the loop of piping that formed the letdown station while the other men watched standing close enough to the automatic control valve to see it cycle open and then abruptly close The flash fire erupted with catastrophic results Z The nature of the air separation business was to draw air into air machines where the oxygen nitrogen and argon are separated via a cryogenic process The air is then liquefied and sold The core business of the Air Liquide conglomerate is to supply oxygen nitrogen hydrogen and other gases and services to various industries 2 For a detailed description of the accident see Perkins v Entergy Corporation 98 2081 98 2082 98 2083 La App 1st Cir 12 756 So 388 aft 20001372 La 3 99 28 2d d 2001 23 782 So 606 see also Bujol v Entergy Services inc 20001621 La App 1 st Cir 8 2d 02 14 833 So 947 rev 20030492 2003 0502 La 5922 So 1113 2d d 2004 25 2d 4 SUBSTANTIVE AND PROCEDURAL HISTORY Air L Liquide Societe Anonyme pour L et L des Etude Exploitation Procedes Georges Claude ALSA is a multinational company headquartered in France In the 1960s ALSA was distributing pressurized oxygen by pipeline in France and Belgium In the early 1970s the company began expanding and by the 1990s ALSA corporate family operated in at least 60 countries including the s United States In 1986 ALSA acquired Big Three Industries Inc Big Three a major oxygen pipeline systems operator in the United States that operated air separation plants throughout the Gulf South including the Plaquemine plant for 000 500 000 1 making Big Three a part of the ALSA family of companies and adding approximately 15 plants in Louisiana Mississippi and Texas to the ALSA list of subsidiaries The Big Three plants continued to operate under the Big Three name until January 1 1994 when the Big Three division merged with its sister subsidiary Liquid Air Corporation forming the new subsidiary ALAC Though ALSA is the ultimate majority shareholder of ALAC it is not its direct parent Through a mechanism described as cascading ownership ALSA owns the majority of shares of Air Liquide International S which owns the majority of shares of A American Air Liquide Inc which owns the majority of shares of AL America Holdings Inc which owns the majority of shares of ALAC Thus ALSA is the corporate ancestor of ALAC which as of January 1 1994 is the owner of the Plaquemine plant and employer of the injured men at the time of the accident Neither the original acquisition nor the subsequent merger affected the physical operation of the Plaquemine plant which kept the same executives plant manager and workers who formerly operated under the Big Three ownership 5 The underlying plaintiffs filed suit on March 19 1995 On October 1 1996 ALAC filed a Motion for Partial Summary Judgment against the insurance providers for Big Three Big Three Insurers seeking a determination that the policies issued by the Big Three Insurers covered the underlying accident and subsequent injuries The Big Three Insurers denied coverage but the trial court ruled in favor of ALAC This Court determined that a genuine issue of material fact existed as to coverage reversed the judgment and remanded the case The Big Three Insurers subsequently settled the claims against ALAC The Big Three Insurers filed a motion for partial summary judgment seeking a determination that National Union insured ALAC for its liabilities arising out of its ownership and operation of the Plaquemine plant at the time of the accident That motion was granted on March 1 1999 However the Big Three Insurers contribution claim against National Union was stayed until all underlying claims were resolved In January 2007 the Big Three Insurers filed a motion for partial summary judgment seeking an allocation of the 34 million payment plus interest among 5 all of ALAC insurers including National Union National Union filed a cross s motion challenging the right of contribution and the reasonableness of the settlement amount The Big Three Insurers responded with a cross motion for summary judgment The trial court granted the Big Three Insurers motion and awarded principal and prejudgment interest against National Union in excess of 17 million After a decade and a half of litigation the only remaining dispute is whether National Union an insurer of ALAC and the appellant in this case must contribute a percentage of the settlement of ALAC liability already paid to the underlying s plaintiffs by the Big Three Insurers National Union contends that its policy did not afford coverage for the underlying accident and therefore it has no obligation 6 to contribute National Union further contends that even if its policy did afford coverage it does not have a solidary obligation to contribute to the settlement APPLICABLE LAW An appellate court reviews a district court decision to grant a motion for s summary judgment de novo using the same criteria that govern the district court s consideration of whether summary judgment is appropriate Smith v Our Lady of the Lake Hosp Inc 93 2512 p 26 La 7 639 So 730 750 94 5 2d Summary judgment shall be rendered if there is no genuine issue as to a material fact and the mover is entitled to judgment as a matter of law Power Marketing Direct Inc v Foster 2005 2023 p 9 La 9 938 So 662 669 06 6 2d A summary judgment may be rendered on the issue of insurance coverage alone although there is a genuine issue as to liability or the amount of damages Bilbo for Basnaw v Shelter Ins Co 961476 p 5 La App 1st Cir 7 698 97 30 2d So 691 694 writ denied 97 2198 La 11 703 So 1312 97 21 2d When the issue before the court is one on which the party bringing the summary judgment motion will bear the burden of proof at trial the burden of showing there is no genuine issue of material fact remains with the party bringing the motion Buck Run Enterprises Inc v Mapp Const Inc 99 3054 p 4 s La App 1st Cir 2 808 So 428 431 01 16 2d An insurer seeking to avoid coverage through summary judgment bears the burden of proving some exclusion applies to preclude coverage Lewis v Jabbar 2008 1051 p 5 La App 1st Cir 09 12 3d 1 5 So 250 25455 citing McMath Const Co Inc v Dupuy 2003 1413 p 4 La App 1st Cir 11 897 So 677 681 writ denied 2004 04 17 2d 3085 La 2896 So 40 05 18 2d An insurance policy is a contract between the parties and should be construed employing the general rules of interpretation of contracts set forth in the Louisiana Civil Code Reynolds v Select Properties Ltd 93 1480 La 7 94 11 4 634 So 1180 1183 2d Words and phrases used in a policy are to be construed using their plain ordinary and generally prevailing meaning unless the words have acquired a technical meaning Lewis 2008 1051 at 5 5 So at 255 3d Where the language in the policy is clear unambiguous and expressive of the intent of the parties the agreement must be enforced as written Id The purpose of liability insurance is to afford the insured protection from damage claims coverage Thus policies should be construed to effect and not to deny A provision that seeks to narrow the insurer obligation is strictly s construed against the insurer and if the language of the exclusion is subject to two or more reasonable interpretations the interpretation which favors coverage must be applied Reynolds 93 1480 634 So at 1183 However subject to the above 2d rules of interpretation insurance companies have the right to limit coverage in any manner they desire so long as the limitations do not conflict with statutory provisions or public policy Id The rule of strict construction does not authorize a perversion of language or the exercise of inventive powers for the purpose of creating an ambiguity where none exists Nor does it authorize courts to alter the terms of policies under the guise of contractual interpretation when the policy provisions are couched in unambiguous language Lewis 2008 1051 at 5 6 5 So at 255 citing Doiron v 3d Louisiana Farm Bureau Mut Ins Co 98 2818 p 8 La App 1st Cir 2 00 18 753 So 357 363 2d The mere fact that an insurance policy is a complex instrument requiring analysis to understand it does not render it ambiguous Paul Fire St Marine Insurance Company v Valentine 95 0649 p 5 La App 1st Cir 11 665 So 43 46 writ denied 95 2961 La 2 667 So 95 9 2d 96 9 2d 534 However any ambiguity that does exist must be resolved by construing the policy as a whole one policy provision is not to be construed separately at the 9 expense of disregarding other policy provisions Louisiana Ins Guar Ass v n Interstate Fire Cas Co 93 0911 La 1630 So 759 763 64 94 14 2d COVERAGE National Union issued two policies relevant in this case The primary insurance policy No RMGL 17593 18 was issued on September 10 1993 with a stated policy period of June 1 1993 to June 1 1994 It covered those sums that the insured became legally obligated to pay as damages because of bodily injury caused by an occurrence during the policy period The definition of insured under the terms of the policy includes those designated in the Declarations that is Liquid Air Corporation as well as those listed or described in Endorsement No 1 Endorsement No 1 reads NAMED INSURED LIQUID AIR CORPORATION AIR LIQUIDE INTERNATIONAL S A AMERICAN AIR LIQUIDE INC AND ANY PAST PRESENT OR FUTURE SUBSIDIARY AFFILIATED OR PROPRIETARY PARTNERSHIP ORGANIZATION PROVIDED THE NAMED INSUREDS ABOVE MAINTAIN AND OR CONTROL DIRECTLY OR INDIRECTLY 50 OR MORE OWNERSHIP INTEREST NONE THE OF AFOREMENTIONED ARE AFFORDED COVERAGE WITH RESPECT TO THE OPERATIONS OF BIG THREE INDUSTRIES INC WITH THE EXCEPTION OF LIQUID AIR CORPORATION INDUSTRIES HAS EXCEPT PLANTS IN WHICH BIG THREE 100 OPERATIONAL AND OWNERSHIP TITLE CONTROL LIQUID AIR ENGINEERING AIR PUERTO RICO CORPORATION CORP LIQUID CANADIAN LIQUID AIR ALOXY CANADA INC OXYCHEM CANADA INC AND LA OXIGENA S ALSO EXCLUDED A ARE THE DISTRIBUTORS IN WHICH LIQUID AIR CORP HAS AN EQUITY INTEREST THE POLICY CLAIMS ANONYME PROCEDES SHALL ARISING POUR ALSO APPLY FROM AIR L ETUDE L ET GEORGES TO ANY CLAIM LIQUIDE OR SOCIETE EXPLOITATION L DES CLAUDE AND ALAC ENVIRONMENTAL SERVICES INC OR THEIR RESPECTIVE SUBSIDIARY OR OWNED OR CONTROLLED 0 COMPANIES BUT ONLY WITH RESPECT TO THE OPERATIONS AND PRODUCTS OF THE NAMED INSURED The policy subsequently was amended by Endorsement No 24 dated January 12 1995 after the subject accident to add ALAC and AL America Holdings Inc to the list of Named Insureds effective January 1 1994 before the subject accident That same endorsement states IT IS FURTHER AGREED THAT THIS POLICY EXCLUDES FROM COVERAGE THE OPERATIONS FORMERLY KNOWN AS BIG THREE INDUSTRIES INC ETAL sic National Union excess insurance policy No BE 308 57 86 covered that s portion of the ultimate net loss in excess of the retained limit which the Insured shall become legally obligated to pay as damages for liability imposed upon the insured by law because of i personal injury caused by an occurrence The named insured under the primary policy is Liquid Air Corporation as per Endorsement No 1 Endorsement No 1 as to the excess policy reads NAMED INSURED ENDORSEMENT It is agreed that Item 1 of the Declaration Named Insured shall read Air Liquide International S A American Air Liquide Inc Liquid Air Engineering Corporation D Air Liquide Societe Ingenierie Liquid Air Puerto Rico Corporation S U Divers Co Inc Sea Quest Inc Industrial Gases Distributors in which Liquid Air Corporation has an equity interest Vitalaire Limited Partnerships Q S Oxygen Processes Inc Argonal Inc Hydrogenal Inc Hydrogenal II Inc Medal L P ASGT Inc Canadian Liquid Air CSI as ALAC Environmental interest may appear s Pro Cal as LAC interest may appear s There is no dispute regarding whether ALAC was included as an insured at the time of the accident Even if ALAC had not been added to the list of Named Insureds the policies specifically provided coverage to subsidiaries affiliations and subsequently acquired companies not otherwise excepted 10 ALAC Environmental Services And any past present or future subsidiary partnership affiliated or proprietary organization provided that any of the aforementioned maintains andor directly or indirectly controls a 50 or more ownership interest None of the aforementioned are afforded coverage with respect to the operations of Big Three Industries Inc Oxychem Canada Inc and Aloxy Canada Inc with the exception of Liquid Air Corporation plants in which Big Three Industries owns assets This policy shall also apply to any claim or claims arising from L Air Liquide Societe Anonyme pour L et L des Etude Explotation Procedes Georges Claude or Aqualung International or their respective subsidiary or owned or controlled companies only as respects the operations and products of the Named Insured ALL OTHER TERMS AND CONDITIONS OF THIS POLICY REMAIN UNCHANGED This endorsement was likewise revised to add ALAC and AL America Holdings Inc after the subject accident said revision is dated December 14 1994 with an effective date of January 1 1994 Finally just as Endorsement No 24 was added to the primary policy Endorsement No 27 attempted to add or clarify depending on which party is asserting the claim the Specific Entity Exclusion stating THIS POLICY DOES PROPERTY NOT APPLY DAMAGE ADVERTISING INJURY TO BODILY PERSONAL ARISING INJURY INJURY OUT OF OR ANY OPERATIONS OF THE ENTITY FORMERLY KNOWN AS BIG THREE INDUSTRIES INC ET AL This endorsement is not dated but was undisputedly issued after the accident sometime between December 14 1994 and October 10 1995 It is undisputed that after the merger in January 1994 the Plaquemine plant was owned and operated by ALAC When asked which entity operated the plant on the date of the accident ALAC scorporate designee responded It would have G ALAC Environmental Services should not be confused with the ALAC that owned the Plaquemine plant at the time of the accident s The endorsement falls sequentially between Revised Endorsement No I issued December 14 1994 and Endorsement No 28 issued October 10 1995 11 been the tonnage operations of Air Liquide America The Big Three insurers contend that this resolves the coverage dispute In other words Big Three stopped operating the Plaquemine plant when it ceased to exist as a separate entity having dissolved as a result of the merger with ALAC Thus any exclusion as to Big Three operations no longer applied National Union contends that the endorsement language excluded coverage for all operations at the Plaquemine plant It argues that the Plaquemine plant was one of the operations of Big Three at the time of the inception of the policy and that the exclusion of those operations included ALAC liabilities at that location s ENDORSEMENT NO 1 We turn to the provisions of the National Union policies in place on the date of the accident to determine the merits of National Union assertion that the s policies specifically excluded coverage for the underlying accident The pertinent provisions are found in the Named Insured Endorsements which each have an effective date of June 1 1993 The named insured is Liquid Air Corporation the corporation that merged with Big Three on January 1 1994 to become ALAC the owner of the Plaquemine plant on the date of the accident National Union does not dispute that ALAC is a covered insured under its policies However National Union contends in its brief that the accident resulted from the operations of Big Three Industries which operations are specifically excluded by Endorsement No 1 and further asserts that this Court has already determined this issue in National Union favor s In Bujol this Court considered whether ALSA the ultimate parent company of ALAC was entitled to coverage under the excess liability policy at issue now We said The pertinent provisions are found in the Named Insured Endorsement which has the effective date of 6 The named 93 I insured is Liquid Air Corporation the corporation that merged with 12 Big Three on January 1 1994 to become ALAC the owner of the Plaquemine plant on the date of the accident Thus Liquid Air Corporation as well as Big Three had no operations at the Plaquemine plant on the date of the flash fire However the endorsement provides for additional named insureds some of which were in the cascading ownership scheme which begins with ALSA and ends with ALAC ALSA is mentioned only in the final paragraph of the endorsement and not in the list of additional insureds beginning with Air Liquide International S ALSA is not one of the aforementioned to which A the exclusion of the operations of Big Three was meant to apply Thus coverage for ALSA is not excluded by the terms of the second tolast paragraph of the Named Insured Endorsement in effect on the date of the accident Bujol 2000 1621 at 3940 833 So at 978 79 Thus National Union argues 2d inasmuch as we determined ALSA was not one of the aforementioned entities in the endorsement to which the exclusion could apply ALAC is one of the aforementioned entities in the endorsement and therefore an insured to which the exclusion was intended to apply But the exclusion was not in fact analyzed by this Court in Bujol On the contrary because the exclusion could not apply to ALSA regardless of whether it would apply to the accident in question any further analysis became moot Generally speaking upon a merger of corporations the separate existences of the constituent or merging corporations cease to exist except that of the surviving business El Chico Restaurants of Louisiana Inc v Louisiana Gaming Control Bd 2001 0205 p 5 La App 1st Cir 12 837 So 02 20 2d 641 645 citing La R 12 8 De1 S 11513 C a 259 The surviving corporation then possesses the rights and privileges of the former corporations that are merged or consolidated Id Moreover the property and assets of the constituent corporations are deemed to be transferred to the surviving corporation without As previously mentioned ALAC was not specifically named as an aforementioned entity at the time of the accident but was added in the revised endorsements after the accident occurred Nevertheless the parties agree that ALAC was a covered insured exclusions as if ALAC were specifically named in the original policies 13 Thus we address the further act Id Thus Big Three did in fact cease to exist at the time of the merger National Union urges however that the exclusion was not intended to apply to those acts of the corporation known as Big Three but rather to the activities of ALAC that were formerly performed by Big Three In essence National Union suggests in its brief that Big Three Industries Inc should be read as an adjective identifying the physical plants facilities and operations engaged in tonnagegas activity But reading Big Three Industries Inc as a descriptor of the specific type of facilities for which coverage would not be afforded as National Union suggests rather than as a noun identifying a corporate entity confounds the endorsements specifically and the policies as a whole Insurance contracts are to be read as a whole 1712 p 5 La 3 729 So 1024 1029 99 2 2d Peterson v Schimek 98 One portion should not be construed separately at the expense of disregarding another Farm Ins Co 93 0509 La 2 632 So 736 741 94 28 2d Crabtree v State When read as a whole it is clear that the references to corporate names within the Named Insured endorsements are references to the corporate entities and are not used as descriptors of various operations This interpretation is in line with the policy as a whole as it is a contract to provide coverage for the liabilities of the insured entities and not for specific property or facilities The operations of Big Three Industries Inc when read within the whole of the insurance policies cannot mean anything other than the corporation known as of the issuance date of the policy as Big Three Industries Inc Furthermore the term operations is not defined in the policy Words and phrases used in an insurance policy are to be construed using their plain ordinary and generally prevailing meaning unless the words have acquired a technical meaning Cadwallader v Allstate Insurance Co 2002 1637 p 3 La 6 03 27 14 848 So 577 580 When the terms of the policy are clear and explicit and lead 2d to no absurd consequences no further interpretation may be made in search of the parties intent La C art 2046 The word operations is the plural of operation a noun which is understood to mean an act or manner of functioning See http dictionaryreference combrowseoperations accessed 2 2010 18 Neither Liquid Air Corporation nor Big Three had any operations at the Plaquemine plant on the date of the accident ALAC both owned and operated the Plaquemine plant at the time of the accident The underlying plaintiffs claims therefore were not based on the operations of Big Three Rather those claims were based on the operations of ALAC which National Union accepted as an additional insured Thus Endorsement No 1 does not operate to exclude coverage for the accident in question ENDORSEMENT NO 27 National Union contends that Endorsement No 27 evidences the parties mutual intent to exclude the operations at the Plaquemine plant The Specified Entity Exclusion was meant according to National Union brief to memorialize s the pre merger decision to exclude coverage for all operations formerly conducted by Big Three Industries Emphasis in original The district court dismissed the endorsement as an attempt to annul coverage retroactively See La R 22 specifically prohibiting an insurer and an S 1262 insured from retroactively annulling liability coverage after the occurrence of an injury This Court likewise rejected National Union argument that Endorsement s No 27 evidenced an exclusion of coverage in Bujol 20001621 at 39 833 So 2d at 978 We maintain that the retroactive endorsement issued by National Union after the accident in question can have no effect on the claims that resulted from the accident To the extent that National Union offers Endorsement No 27 as La R 22 was redesignated Acts 2008 No 415 S 639 15 1 to La R 22 S 1262 evidence of the parties previous intent accepting such evidence would be contrary to public policy and jurisprudence regarding strict construction of insurance policies Even if the post accident endorsement was signed by the insured and the insurer in good faith allowing it to have effect would encourage badfaith cooperation between an insured who seeks to avoid payment of claims and a named insured whose premiums are affected by past losses See e Duncan v g A S U Ins Co 2006 363 p 15 La 11 950 So 544 553 regarding 06 29 2d reformation of a UM policy waiver Thus National Union cannot rely on Endorsement No 27 to deny coverage EXTRINSIC EVIDENCE Lastly as to the coverage issue National Union argues that the trial court should have considered extrinsic evidence to ascertain whether coverage exists under its policy for the accident in question if it had any doubt that no coverage existed But the use of extrinsic evidence is proper only when a contract is found to be ambiguous after an examination of the four corners of the agreement or when it is susceptible to more than one interpretation or the intent of the parties cannot be ascertained Sanders v Ashland Oil Inc 96 1751 pp 89 La App 1st Cir 6696 So 1031 1036 writ denied 97 1911 La 10 703 97 20 2d 97 31 2d So 29 Whether a contract is ambiguous is a question of law Gaylord Container Corp v CNA Ins Companies 99 1795 p 9 La App 1st Cir 01 3 4 807 So 864 870 writ denied 2001 2368 La 12 803 So 31 2d 01 07 2d As previously addressed we find no ambiguity in the phrase operations of Big Three Industries Inc The terms of the policy are clear and unambiguous and lead to no absurd consequences Thus no further investigation into the parties intent may be made The trial court properly refused to consider National Union s offer of extrinsic evidence 16 Having determined no valid basis for the denial of coverage we find that the policies issued by National Union provide coverage for ALAC liability resulting s from the underlying accident Thus summary judgment on this issue was proper CONTRIBUTION National Union contends that even if the policies provided coverage the Big Three Insurers claim for contribution must nevertheless fail As a ready and willing insurer prepared to defend its insured at trial National Union asserts that it should not be compelled to pay for the strategic decision made by the Big Three Insurers to avoid trial by settling with the underlying plaintiffs on behalf of ALAC National Union relies on three bases to support its assertion ALAC s liability if any has yet to be adjudicated any obligation that National Union has resulting from that liability is joint with the Big Three Insurers and not solidary as expressed in the policies at issue and the settlement reached between the Big Three Insurers and the underlying plaintiffs was unreasonable in light of the then existing state of the law regarding punitive damages SOLIDARY LIABILITY It is axiomatic that when one of two or more potentially liable insurers pays a loss whether in satisfaction of a judgment or in settlement of a claim it may then seek payment from the other insurers of their fair share of the loss Under Louisiana law an obligation is solidary among debtors when they are obliged to the same thing so that each may be compelled for the whole and when payment by one exonerates the other toward the creditor Hoefly v Gov tEmployees Ins Co 418 So 575 576 La 1982 see also Great Southwest Fire Ins Co v 2d CAN Ins Cos 557 So 966 La 1990 2d In other words if two or more insurance companies fully insure the same loss and one company pays total loss that company may force contribution from others See Bellard v American Cent Ins Co 2007 1335 and 2007 1399 p 11 La 4 980 So 654 66364 a 08 18 2d 17 solidary obligation exists when the obligors 1 are obliged to the same thing 2 so that each may be compelled for the whole and 3 when payment by one exonerates the other from liability toward the creditor We have previously determined that National Union had an obligation regarding ALAC liability for the underlying accident The settlement reached by s the Big Three Insurers relieved National Union from its liability to its insured Thus the obligation of National Union is solidary to that of the Big Three Insurers and payment by the Big Three Insurers to the underlying plaintiffs subrogated the Big Three Insurers to ALAC rights against National Union s ADJUDICATION OF LIABILITY National Union contends that the settlement reached between the Big Three Insurers and the underlying plaintiffs does not provide proof of the original damages and such proof is required before the Big Three Insurers can seek contribution National Union cites Citgo Petroleum Corp v Yeargin Inc 95 1574 La App 3d Cir 2 690 So 154 to support this assertion 97 19 2d In Citgo the Third Circuit originally rendered an opinion concluding that parties who had requested a jury trial on all issues were wrongfully denied their right to have the issue of insurance coverage not underlying liability decided by the jury Id 95 1574 at p 7 690 So at 161 citing Citgo Petroleum Corp v 2d Yeargin Inc 95 1574 at p 12 13 La App 3d Cir 7 678 So 936 942 96 3 2d The supreme court granted writ applications and stated in a one sentence order Granted and remanded to the court of appeal to decide the case on the record Gonzales v Xerox 320 So 163 La 1975 2d Citgo Petroleum Corp v Yeargin Inc 962000 La 11 682 So 746 Citgo Petroleum Corp v 96 15 2d Yeargin Inc 962007 La 11 682 So 747 We do not find this case 96 15 2d persuasive 18 National Union also cites Constans v Choctaw Transport Inc 97 0863 and 97 0864 La App 4th Cir 12 712 So 885 writs denied 98 0408 97 23 2d and 980412 La 3 716 So 892 in which a trucking company that was 98 27 2d ultimately found to be without fault in an auto accident settled with various plaintiffs and took a subrogation and assignment of rights to proceed against other parties The Constans court found that recovery had been made against the trucking company by virtue of the settlement which it had entered into and that therefore a third party claim by the trucking company against another entity was appropriate Id However the Fourth Circuit later clarified that it was referencing third parties who previously had been determined to be at fault by the trial court See Spiro v Liberty Mutual Fire Ins Co 991797 p 7 La App 4th Cir 00 12 4761 So 53 57 2d The Fourth Circuit determined in Spiro that awarding contribution absent a joint stipulation or a judicial ruling as to the amount of damages would be patently unfair forcing one tortfeasor to contribute a percentage of whatever amount the other tortfeasor chooses to offer in settlement and the injured party chooses to accept unless that amount is clearly less than the amount of the injured s party damages Id But Spiro did not involve multiple insurers settling the same liability oftheir underlying insured More similar is Maryland Casualty v Liberty Mutual Insurance Co 254 La 489 224 So 465 La 1969 in which the supreme court addressed whether 2d a workers compensation compromise settlement can form the basis for fixing the indebtedness of a third party as a solidary obligor In Maryland Casualty an employee worked for a company that leased equipment and workers to other companies The employee was injured while working for the special employer The insurer of the general employer settled with the employee and sought to recover one half of the settlement from the special employer The supreme court 19 found that the demand was proper and held that the general employer and the special employer were solidary obligors with the settlement acting as the basis for the demand holding In Morris v Kospelich 253 La 413 218 So 316 we held 2d If the joint tortfeasor requesting contribution proves that a tort was in fact committed that the defendant was solidarily liable with him for the amount compromised and that the amount paid was not in excess of the damage inflicted he may collect his pro rata share from the The record other joint tortfeasor by virtue of a separate suit now before us reflects that the settlement was not excessive and that no real issue is made by the defendant as to its fairness Additionally as required by law the workmen compensation settlement was s approved by a judgment of court and it should be accorded even greater respect than a tort compromise We hold that the settlement by this plaintiff may be the basis for a demand for contribution under a solidary obligation Id 254 La at 494 224 So at 467 The insurer of the general employer was 2d allowed to claim contribution of one half of the settlement from the special employer Thus just as in Morris and Maryland Casualty the settlement entered into by the Big Three Insurers and the underlying plaintiffs if determined to be fair and not excessive may form the basis for the demand for contribution from National Union as a solidary obligor in lieu of a judicial adjudication of liability REASONABLENESS OF SETTLEMENT National Union contends that the subrogation claims asserted by the Big Three Insurers which derive from the personal injury claims of the underlying plaintiffs can only subsist on proof of actionable punitive damages because ALAC was statutorily immune from tort claims filed by its injured workers Thus National Union surmises in order to obtain contribution the Big Three Insurers were required to establish ALAC punitivedamage liability and that the s settlement reached was reasonable considering that liability and none other Because punitive damages never would have been assessed against ALAC says 20 National Union had the issue gone to trial this is a hurdle the Big Three Insurers cannot mount At the time of the accident the workers compensation exclusivity provision of La R 23 provided immunity to ALAC from tort claims arising from S 1032 unintentional acts Five months after the underlying accident occurred and before suit was filed the supreme court issued Billiot v B Oil Co 93 1118 La P 94 29 9 645 So 604 2d In Billiot the supreme court held that employers otherwise immune from tort liability under La R 23 could be held liable S 1032 to their employees for punitive damages as provided for in La C art 2315 3 Id 93 1118 at p 12 645 So at 611 Article 2315 had been added by Acts 2d 3 1984 No 335 1 effective September 4 1984 It was repealed by Acts 1996 1st Sess Ex No 2 1 effective April 16 1996 It provided In addition to general and special damages exemplary damages may be awarded if it is proved that plaintiff injuries were caused by s the defendant wanton or reckless disregard for public safety in the s storage handling or transportation of hazardous or toxic substances As used in this Article the term hazardous or toxic substances shall not include electricity Subsequent to the settlement in this case the supreme court overruled Billiot in Adams v J Merit Const Inc 97 2005 pp 3 12 La 5 712 So 88 E 98 19 2d Because Billiot was not the state of the law at the time of the accident and because it was subsequently reversed National Union contends that the Big Three Insurers cannot rely on it to support the reasonableness of the settlement The Big Three Insurers respond that Billiot was merely an interpretation of the application of the exclusive remedy provision of the worker compensation statute that was in s effect at the time of the accident and that was silent as to an employee ability to s collect punitive damages from an employer and as such could support a reasonable belief that punitive damages could be awarded for the underlying 21 accident Furthermore the trial court determined that ALAC could be held liable for punitive damages and both this Court and the Louisiana Supreme Court denied s ALAC writ application regarding its potential liability for punitive damages less than two weeks before trial and settlement of its liability Thus the Big Three Insurers assert in April of 1997 it was reasonable to believe that punitive damages would be awarded against an employer notwithstanding La R 23 as S 1032 interpreted by the supreme court in Billiot Contrary to this assertion is the legislative history associated with La R S 1032 23 as cited by the supreme court in Deshotel v Guichard Operating Co Inc 2003 3511 pp 1213 La 12 916 So 72 80 taken verbatim from 04 17 2d the minutes dated May 25 1995 made The Supreme Court rendered an opinion September of 1994 two very substantive changes in the area of workers comp and tort law This bill deals with one of those areas and specifically would reinstate comp as the exclusive remedy in the work place What the Supreme Court said in the Billiot decision was that workers could go beyond comp a sue for punitive damages under 2315 That nd decision which ran counter to eight decades of jurisprudence ran counter to the trial courts decision ran counter to the appeals court decision is an actuarial time bomb for the workers comp system But this does not mean that such an interpretation as that reached in Billiot was unreasonable The supreme court explained its rationale in Adams In Billiot a fourjustice majority of the Court held that former La S 1032 R 23 did not bar a worker from recovering punitive a 1 A damages from his employer under former Article 2315 The Court 3 based its holding on a finding that in 1914 when the Workers Compensation Act was first enacted Louisiana law did not recognize punitive damages therefore the Legislature did not intend to include punitive damages in the phrase shall be exclusive of all other rights and remedies because punitive damages were not a right or remedy then available under the law 645 So at 608 Expanding on this 2d theme the Court further held that the remedy exclusion rule of 1914 was not tacitly amended to bar an employee rights to punitive s damages under Article 2315 3by any contemporaneous or subsequent reenactments of La R 23 essentially freezing in time the term S 1032 all other rights and remedies In addition the Billiot court held that in light of the history and policy underlying the Workers Compensation Act to preserve the general tort rights of an injured worker in the absence of explicit statutory language limiting or 22 excluding such rights punitive damages were not barred because La S 1032 R 23 did not contain such explicit language Lastly the Billiot court held that the language of Article 2315 did not exclude 3 an employee recovery of punitive damages even though the s employee would not be entitled to general damages for the same injury Id at 608 612 Adams 97 2005 at 3 4 712 So at 90 But in overruling Billiot the supreme 2d court did more than just acknowledge the express intent of the legislature in amending La R 23 to preclude employees from recovering punitive S 1032 damages in tort Rather the court detailed why the analysis in Billiot was flawed as contrary to the express language of La R 23 that t rights and S 1032A he remedies herein granted shall be exclusive of all other rights and remedies as based on erroneous underlying rationale and as inconsistent with the history and policy underlying the Workers Compensation Act 2d So at 9094 Id 972005 at 412 712 Nevertheless Billiot was the law at the time the settlement was reached and the Big Three Insurers sought guidance from all levels ofthe judiciary regarding s ALAC potential punitive damage compromise with the underlying plaintiffs liability before reaching a We conclude that the Big Three Insurers had reason to believe that punitive damages could be awarded against ALAC and were reasonable in considering that risk during the settlement negotiations Thus the question remaining is whether 34 million was a 5 reasonable amount for settlement based on the facts and law known at the time A settlement agreement entered into by an insured may be enforced against the insurer if the settlement was made in good faith on a reasonable basis and in a reasonable amount See Areeneaux v Amstar Corp 2006 1592 p 21 La App 4th Cir 10 969 So 755 771 writs denied 2007 2486 and 2008 0053 2007 31 2d La 3977 So 952 and 977 So 953 The insured need only show that 08 24 2d 2d a reasonably prudent person would have settled the case The Big Three Insurers 8 National Union has not challenged the amount awarded as its prorata contribution of principal and pre judgment interest totaling 17 336 173 23 rely on the following factors to support the reasonableness of the 34 million 5 settlement 1 Prejudgment interest on any potential award against ALAC had been accruing since March of 1995 when the plaintiffs filed the lawsuit 2 Jury research sessions in February of 1997 resulted in six jury verdicts for damages against ALAC ranging from 27 million to 60 million and punitive damages ranging from 20 million to 1 billion which equates 5 to ALAC gross revenues for one year s 3 Big Three Insurers trial counsel advised that pursuant to BMW of North America Inc v Gore 116 S 1589 1996 a punitive Ct damages award of at least 15 million per injured plaintiff was not unreasonable with a potential award of at least 75 million 4 On February 27 1997 less than two weeks before trial the Louisiana Supreme Court denied ALAC writ application regarding its exposure to s punitive damages Consequently Billiot remained the applicable law at the time of the settlement 5 ALAC counsel emphatically demanded that the Big Three Insurers s settle ALAC liability to eliminate the risk of any uninsured excess s 9 exposure Considering the above factors we conclude that the Big Three Insurers acted reasonably in settling all liability claims against ALAC in return for 34 million 5 and avoiding exposure that very well could have exceeded the amount of the settlement CONCLUSION After a careful review of the record and the law applicable to this case we find that summary judgment was appropriate and affirm both judgments of the court below Costs of the appeal are to be paid by National Union AFFIRMED Counsel for ALAC indicated an expectation of settlement and that in light of the possibility of a catastrophic verdict ALAC would take action if the Big Three Insurers failed to settle by the end of week 41 9871 72 24
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