Vanessa Emery and Nedra Wrights VS Progressive Casualty Insurance Company, T & T Seafood, Inc., Joshua Tourere, Allstate Property & Casualty Insurance Company and Liberty Mutual Fire Insurance Company
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STATE OF LOUISIANA COURT OF APPEAL FIRST CIRCUIT J 2010 CA 0327 ilo I VANESSA EMERY AND NEDRA WRIGHTS VERSUS PROGRESSIVE CASUALTY INSURANCE COMPANY T ALLSTATE T SEAFOOD INC JOSHUA TOURERE PROPERTY CASUALTY INSURANCE COMPANY AND LIBERTY MUTUAL FIRE INSURANCE COMPANY On Appeal from the 19th Judicial District Court Parish of East Baton Rouge Louisiana Docket No 552 Section 22 541 Honorable Timothy E Kelley Judge Presiding David J Schexnaydre Attorneys for Mary B Lord Defendant Appellant Pajares Progressive Security Insurance Company Schexnaydre L C Mandeville LA Keith L Richardson Brad M Boudreaux Guglielmo Marks Schutte Terhoeve Attorneys for Defendant Appellee T T Seafood Inc Love Baton Rouge LA BEFORE PARRO GUIDRY AND HUGHES JJ Judgment rendered September 10 2010 PARRO J Defendant Progressive Security Insurance Company Progressive appeals the judgment of the trial court granting a partial motion for summary judgment in favor of another defendant TT Seafood Inc TT finding that Progressive had waived its coverage defenses in this matter For the reasons that follow we affirm the judgment of the trial court FACTUAL AND PROCEDURAL BACKGROUND Plaintiffs Vanessa Emery and Nedra Wrights were involved in an automobile accident in which the vehicle they were occupying was rearended by a vehicle driven by Joshua Tourere Joshua on April 25 2006 According to the plaintiffs petition the impact from the collision forced the plaintiffs vehicle off the road where the vehicle then struck a sign and two parked cars When the accident occurred Joshua was allegedly in the course and scope of his employment with TT thus making TT allegedly vicariously liable for the accident and the resulting damages At the time of the accident Progressive provided automobile liability coverage to TT for various vehicles listed on the declarations page of the policy however Joshua was not driving any of these listed vehicles when the accident occurred Instead Joshua was driving his personal vehicle which Progressive alleges was not covered by the policy it issued to TT as it was not one of the listed vehicles covered by the policy nor was it a replacement or substitute vehicle Progressive contends that it was notified of the accident on November 13 2006 and that eleven days later on November 24 2006 it sent TT a reservation of rights letter citing the parts of the policy defining what was considered an insured auto and advising TT that it was conducting an investigation into the issue of coverage In the letter Progressive advised TT that no action it might take to investigate explore Progressive is referred to as Progressive Casualty Insurance Company at various times in the record however the judgment refers to it as Progressive Security Insurance Company Furthermore in its answer Progressive states that it was incorrectly named in the petition as Progressive Casualty Insurance Company and gives its correct name as Progressive Security Insurance Company Therefore when we use the full name of the company we will use the name as it appears in the answer and in the judgment 2 settlement or defend a lawsuit arising out of the accident should be deemed to be an admission of coverage under the policy The letter further stated that it would notify TT when its coverage investigation was complete However on the same date Progressive sent another letter to TT advising TT that it had completed its investigation into the accident and that it had concluded that there was no coverage available for this loss At no point in this letter did Progressive advise TT that there was a conflict of interest or that TT should consult a separate attorney with regard to the issue of coverage Despite having sent these letters to TT Progressive subsequently appointed a single attorney to defend both Progressive and TT when the plaintiffs filed their lawsuit against them on February 21 2007 One month later this attorney filed an answer on behalf of both TT and Progressive that contained various defenses including an affirmative defense asserting that there was no coverage under the policy Although Progressive had now denied coverage to TT by letter and in an official pleading Progressive continued to use a single attorney to represent both itself and its insured in this matter On August 12 2008 while still representing both Progressive and TT this attorney deposed Joshua and specifically inquired about facts concerning coverage Only after taking this deposition did Progressive appoint separate counsel for TT Therefore on August 22 2008 almost twenty months after Progressive one had first denied coverage by letter to TT and more than seventeen months after the original attorney had filed an answer asserting the affirmative defense that there was no coverage Progressive provided a separate attorney solely to represent the interests Z The lawsuit also named as defendants Joshua Tourere Allstate Property Casualty Insurance Company Allstate and Liberty Mutual Fire Insurance Company Liberty Mutual The plaintiffs later amended the petition to add Toyota Motor Sales U Inc andor Toyota Motor Corporation andor Toyota Motor A S Company LTD Toyota for failure of the airbag in the plaintiffs vehicle to deploy Joshua and Allstate were dismissed with prejudice when Allstate Joshua insurer paid the limits of its policy Toyota was s also dismissed pursuant to a motion for summary judgment Liberty Mutual is the uninsured motorist carrier on the plaintiffs vehicle and it remains in the lawsuit however it is not involved in this appeal 3 In addition to the affirmative defense asserting no coverage paragraph nine of the answer contained a straight denial of the petition allegation that the policy provided coverage for the accident s 4 At the hearing on the motions for summary judgment the attorneys noted that the attorney representing TT and Progressive at the deposition was also representing Joshua at this time as Joshua was TT employee s 3 of TT It was that attorney who then advised TT in a letter of the conflict of interest The new attorney further advised TT that he would not be representing TT on the coverage issue and that TT might wish to retain another attorney on that issue In January 2009 after this separate attorney had been appointed the attorney representing only Progressive went to the home of John Tourere Mr Tourere the owner and president of TT to get him to sign an affidavit concerning the ownership of various motor vehicles which was a key fact in the coverage dispute It is undisputed that TT attorney was not there with him when he signed the affidavit and according s to TT briefs and argument both at the trial court level and the appellate level TT s s attorney was not notified that Progressive attorney intended to obtain this affidavit s from Mr Tourere Indeed TT attorney contends that both attorneys for TT only s found out about the affidavit when it was attached to Progressive motion for summary s judgment Moreover Mr Tourere stated in a later affidavit that he was not aware that the attorney who came to get his signature on the affidavit concerning vehicle ownership was representing only Progressive in this matter After obtaining this affidavit Progressive filed a motion for summary judgment contending that there was no coverage under the policy TT responded by filing a motion for partial summary judgment arguing that Progressive had waived its coverage defenses After a hearing the trial court granted TT motion for partial summary s judgment and denied Progressive motion for summary judgment The trial court s further designated the judgment as final and appealable after finding no just reason for delay SUMMARYJUDGMENT A motion for summary judgment is a procedural device used when there is no genuine issue of material fact for all or part of the relief prayed for by a litigant Duncan v U Insurance Co 06363 La 11 950 So 544 546 see A S 06 29 2d 5 It should be noted that the letter from this newlyappointed attorney claims that Progressive was raising a coverage defense that TT polity was cancelled for non payment of premiums prior to the accident s However this does not appear ever to have been a defense raised by Progressive at any point in this litigation 0 LSAC art 966 An appellate court review of a summary judgment is a de novo P C s review based on the evidence presented to the trial court using the same criteria used by the trial court in deciding whether a summary judgment should be granted Buck s Run Enterprises Inc v Mapo Const 993054 La App 1st Cir 2 808 So 01 16 2d 428 431 A motion for summary judgment should be granted only if all the pleadings depositions answers to interrogatories admissions and any affidavits submitted to the trial court show that there is no genuine issue of material fact and that the mover is entitled to judgment as a matter of law LSAC art 966 If the issue before the P C 8 court on the motion for summary judgment is one on which the party bringing the motion will bear the burden of proof at trial the burden of showing that there is no genuine issue of material fact is on the party bringing the motion See LSAC art P C 2 C 966 DISCUSSION Generally in the terms of its liability policy an insurer contractually agrees to provide its insured a legal defense for liability claims against the insured Problems arise however when the insurer concludes that its policy does not provide coverage for the particular claim made against its insured The insurer is faced with a dilemma between its duty to defend and its right to contest coverage with its insured Duaas Pest Control of Baton Rouge Inc v Mutual Fire Marine and Inland Ins Co 504 So 2d 1051 1053 La App 1st Cir 1987 Moreover the insurer has a duty to defend its insured even though there may ultimately be no liability on the insured part The insurer is obligated to provide this s defense unless the allegations of the petition unambiguously exclude coverage Id Thus although the allegations of the petition may ultimately turn out incorrect or untrue the insurer is still obligated to provide a defense Id at 1054 As noted in Duaas the Louisiana State Bar Association Committee on s Professional Ethics and Grievances in a formal opinion has stated w the insurer here either denies coverage to the insured or reserves its rights to do so subsequently 5 the Committee is of the opinion that it would be improper represent both the insurer and the insured Id for the same attorney to Accordingly if the insurer chooses to represent the insured but deny coverage it must employ separate counsel Id see Belanger v Gabriel Chemicals Inc 00 0747 La App 1st Cir 5 787 So 559 01 23 2d 565 writ denied 01 2289 La 11 802 So 612 01 16 2d This position is further supported by Rule 1 of the Rules of Professional 7 Conduct which provides a Except as provided in paragraph b a lawyer shall not represent a client if the representation involves a concurrent conflict of interest A concurrent conflict of interest exists if 1 the representation of one client will be directly adverse to another client or 2 there is a significant risk that the representation of one or more clients will be materially limited by the lawyer s responsibilities to another client a former client or a third person or by a personal interest of the lawyer b Notwithstanding the existence of a concurrent conflict of interest under paragraph a a lawyer may represent a client if 1 the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client 2 the representation is not prohibited by law 3 the representation does not involve the assertion of a claim by one client against another client represented by the lawyer in the same litigation or other proceeding before a tribunal and 4 each affected client gives informed consent confirmed in writing Louisiana State Bar Association Articles of Incorporation Art XVI Rules of Professional Conduct Rule 1 LSAR foll 37 7 S 222 TT contends that because Progressive failed to appoint separate counsel earlier than it did Progressive has waived its right to assert any coverage defenses in this matter Waiver is generally understood to be the intentional relinquishment of a known right power or privilege Waiver occurs when there is an existing right a knowledge of its existence and an actual intention to relinquish it or conduct so inconsistent with 6 See Opinion No 342 May 30 1974 Neither Duaas nor Belanger addressed the issue of waiver Instead both cases addressed the insurer s liability for attorney fees and costs that the insured may incur for defending the suit when the insurer fails to employ separate counsel the intent to enforce the right as to induce a reasonable belief that it has been relinquished A waiver may apply to any provision of an insurance contract even though this may have the effect of bringing within coverage risks originally excluded or not covered Steptore v Masco 932064 La 8 643 So 1213 1216 94 18 2d Waiver principles are applied stringently to uphold the prohibition against conflicts of interest between the insurer and the insured that could potentially affect legal representation in order to reinforce the role of the lawyer as the loyal advocate of the client interest Accordingly when an insurer with knowledge of facts indicating s noncoverage under the insurance policy assumes or continues the insured defense s without obtaining a nonwaiver agreement to reserve its coverage defense the insurer waives such coverage defense Id There is no dispute in this matter that Progressive had knowledge of facts indicating noncoverage under the insurance policy prior to the filing of the lawsuit in this matter Progressive contends however that its only duty in this matter was to issue a reservation of rights letter to TT and that once it had done so it was then permitted to provide only one attorney to represent both itself and its insured while it further investigated the coverage issue s Progressive argument fails to acknowledge the fact that it was not merely investigating the coverage issue Indeed on the same date that Progressive mailed TT the reservation of rights letter it also mailed TT a letter stating that it had concluded its investigation into the accident and that it had determined that there was no coverage available under the policy Thereafter despite having already denied coverage Progressive appointed a single attorney to represent itself and its insured in the litigation and that attorney filed an answer asserting for the second time that the Progressive policy did not provide coverage for the accident Despite this obvious conflict of interest Progressive did not act to provide separate counsel for its insured for approximately seventeen months 7 These actions on the part of Progressive not only constituted a conflict of interest but they constituted conduct so inconsistent with an intent to enforce its right to assert its coverage defense as to induce a reasonable belief that the right had been relinquished It is true that Progressive had advised TT that coverage was denied prior to any suit being filed as well as asserting again its coverage defense when it filed an answer using the same attorney it had appointed to represent TT However for the next seventeen months Progressive did nothing to advise TT of the conflict of interest inherent in these actions nor did the single attorney it appointed obtain any informed written consent from TT concerning this conflict of interest as required by Rule 1 of the Rules of Professional Conduct 4 b 7 Moreover Progressive did not retain separate counsel for TT as required by Duaas and Belanger until seventeen months after filing the answer denying coverage thereby evidencing the conflict of interest Only then did the new attorney appointed by Progressive advise TT that it may wish to consult another attorney on the issue of coverage The result was that for approximately seventeen months TT was represented by an attorney who was not completely dedicated to its defense in this matter Instead it was represented by an attorney who knew of an obvious conflict of interest and never notified TT of that fact In addition TT was represented by an attorney who actively took steps detrimental and prejudicial to its position in the lawsuit As waiver principles are to be applied stringently to uphold the prohibition against conflicts of interest between the insurer and the insured that could potentially affect legal representation in order to reinforce the role of the lawyer as the loyal advocate of the client interest we must find that s Progressive waived its coverage defenses by assigning only one attorney to represent itself and its insured for seventeen months despite having knowledge of facts indicating noncoverage under the policy 9 DECREE For the reasons set forth above the judgment granting the motion for partial summary judgment filed by TT Seafood Inc is affirmed All costs of this appeal are assessed to defendant Progressive Security Insurance Company AFFIRMED 8 In its brief to this court Progressive suggested that it was also appealing that portion of the judgment denying its motion for summary judgment however such judgments are not appealable LSA C art P C 2083 Counsel for Progressive acknowledged this fact in oral argument before this court 9 STATE OF LOUISIANA COURT OF APPEAL FIRST CIRCUIT 2010 CA 0327 0 VANESSA EMERY AND NEDRA WRIGHTS VERSUS PROGRESSIVE CASUALTY INSURANCE COMPANY TT SEAFOOD INC JOSHUA TOURERE ALLSTATE PROPERTY LIVERTY CASUALTY INS CO MUTUAL FIRE INSURANCE CO HUGHES J dissenting I respectfully dissent I can find no prejudice to T The letter and answer put T T on the merits T on notice but did not admit anything leading to liability The affidavit and deposition likewise revealed only the true facts which are uncontested and did nothing to harm T T on the merits The facts may be adverse to T T on the issue of coverage but I t don see how discovering the truth any quicker would have helped And had a separate conflict counsel been present from day one the result would be the same
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