SOUTHERN AMERICAN INS. CO. v. DOBSON

BLANCHE, Justice.

We are called upon in this case to determine whether a commercial umbrella liability insurance policy is a policy of "automobile liability insurance" which under our uninsured motorist statute, specifically La. R.S. 22:1406(D)(1)(a), must provide uninsured motorist coverage. This question is res nova in Louisiana.

The facts are not in dispute. On April 9, 1978, Ronald Dobson was driving a truck owned by Dobson Pulpwood Company, Inc., when he was struck by a car owned and operated by an underinsured motorist. Ronald Dobson was severely injured as a result of the accident and sought to recover uninsured motorist insurance proceeds under three policies issued to Dobson Pulpwood. One of the policies was issued by Aetna Casualty and Surety Company (Aetna), another by Southern American Insurance Company (Southern), and the third by Northeastern Fire Insurance Company of Pennsylvania (Northeastern). All three policies were in effect on the date of the accident.

The policy issued by Aetna to Dobson Pulpwood is termed as an "Automobile Liability and Physical Damage Policy." It offers the insured coverage for bodily injury liability, automobile medical payments, property damage liability, uninsured motorists as well as comprehensive, theft and collision insurance. The policy shows that Dobson Pulpwood had expressly elected to provide uninsured motorist coverage on the truck driven by Ronald Dobson at the time of the accident.

Southern's policy is a "Commercial Umbrella Liability Insurance Policy." By the provisions of this policy, Southern agrees to indemnify Dobson Pulpwood up to a limit of $1,000,000 when Dobson Pulpwood is exposed to either personal injury liability, property damage liability or advertising liability in excess of the limits of the underlying insurance policy or policies. In relation to automobile accidents for example, Southern would indemnify Dobson Pulpwood if its personal injury or property damage liability exceeds the relevant insurance limits provided for in Aetna's underlying policy. Southern's policy does not expressly offer any uninsured motorists coverage to the insured.

Northeastern's policy is a commercial excess umbrella liability insurance policy and contains provisions very similar to those included in Southern's policy. Northeastern contracts to indemnify Dobson Pulpwood up to a limit of $2,000,000 if Dobson Pulpwood is exposed to liability in excess of the limits of the underlying policies. The policy issued by Northeastern, however, is an "excess umbrella" policy which means that the insurer will pay only when the insured's liability exceeds that of the underlying umbrella policy limits (here, Southern's $1,000,000 limit) and any other relevant underlying policy or policies (such as Aetna's policy). As in the policy issued by Southern, Northeastern's policy offers no uninsured motorists protection.

Ronald Dobson instituted a tort suit on September 13, 1978 and named Aetna, Southern, and Northeastern as defendants in order to recover uninsured motorists insurance proceeds. Dobson alleged that Aetna provided uninsured motorists protection by the express terms of its policy. He further alleged that both policies issued by Southern and Northeastern are "automobile liability insurance" policies within the meaning of La.R.S. 22:1406(D)(1)(a), and, thus, the policies statutorily provide uninsured motorist coverage up to their limits for bodily injury liability.

Aetna admitted coverage and paid the uninsured motorists policy limit a $100,000 to Ronald Dobson. Southern and Northeastern denied that their respective policies are required by statute to provide uninsured motorists coverage and filed separate actions for declaratory judgment. These actions were consolidated for trial and comprise the present case which we now consider. Northeastern and Southern seek a declaration that commercial umbrella liability policies, whether they be commercial excess umbrella policies or commercial umbrella policies, are not policies of "automobile liability insurance" and, accordingly, they are not subject to La.R.S. 22:1406(D)(1)(a). The trial court held in favor of the defendant, Ronald Dobson. The court of appeal reversed. We granted writs to determine the correctness of the appellate court's ruling.

The issue before us does not involve interpretation of the provisions of the policies issued by Southern and Northeastern. Each policy affords coverage to the insured in excess of the limits of the underlying policies for liability to third persons arising out of the ownership, maintenance or use of any motor vehicle by or on behalf of the insured. Neither policy expressly provides for uninsured motorist protection.

The question, rather, is one of interpretation of La.R.S. 22:1406(D)(1)(a). That statute provides in pertinent part:

We must determine whether the above statute requires commercial umbrella liability insurers to provide uninsured motorist coverage to the insured.

At the outset, we note that La.R.S. 22:1406(D)(1)(a) does not specify the types of policies which are required to provide uninsured motorist coverage. The provision simply states, "No automobile liability insurance covering liability arising out of the ownership, maintenance, or use of any motor vehicle ..." shall be delivered or issued for delivery in this state without affording UM protection to the insured. However, when this provision is read with reference to the other subsections of the same statute, it is obvious that La.R.S. 22:1406(D)(1)(a) was intended only to apply to automobile liability insurance policies.1 La.R.S. 22:1406(D)(1)(b) and (D)(1)(c), for example, refer solely to automobile liability insurance policies with regard to increasing uninsured motorist coverage. La.R.S. 22:1406(D)(1)(b) provides:

Similarly, in relation to admissible evidence in enforcing a claim under the UM provisions of a policy, La.R.S. 22:1406(D)(6) mentions only automobile liability insurance policies.2

Our inquiry, therefore, focuses upon whether a commercial umbrella liability policy is an automobile liability insurance policy within the meaning of La.R.S. 22:1406(D)(1)(a). Although we have yet to address this question, other states have considered it in construing uninsured motorist statutes similar to our own.

The Alabama Supreme Court has held that an umbrella policy is not an automobile liability insurance policy within the meaning of the uninsured motorist law. (Trinity Universal Ins. Co. v. Metzger, 360 So.2d 960 (Ala.1978)).3 In reaching its decision, the Alabama court drew a sharp distinction between automobile liability policies contemplated by the statute and umbrella policies:

In O'Hanlon v. Hartford Acc. and Indem. Co., 639 F.2d 1019 (3rd Cir.1981), the Delaware uninsured motorist statute was found not to apply to umbrella policies.4 As in Trinity, the court examined the nature of the umbrella policy. It noted that such a policy is designed as supplementary insurance and would not exist but for the underlying (primary) automobile policy. That underlying auto policy, the court determined, provided the insured with all the benefits accorded under the uninsured motorist statute. The court concluded that it could not read the statute as to require uninsured motorist coverage in addition to that provided in the primary policy.

Umbrella policies were held not to be subject to the New York uninsured motorist statute in the case of Maiarasso v. Continental Casualty Co., 82 A.D.2d 861, 440 N.Y.S.2d 40 (1981).5 The court in Matarasso decided that the umbrella policyholder received the protection of the uninsured motorist statute through his underlying automobile policy and thus was not left without the relief anticipated by that law.

In Hartbarger v. Country Mut. Ins. Co. 107 Ill.App.3d 391, 63 Ill.Dec. 42, 437 N.E.2d 691 (1982), the court resolved that an umbrella policy was not statutorily required to provide uninsured motorist coverage.6 The court stated that an umbrella policy is a very different sort of insurance from that contemplated by the uninsured motorist statute. Unlike an automobile liability insurance policy, the umbrella policy is designed only to protect the insured against excess judgments, and the risks and premiums are calculated accordingly.

Only two states, Florida and Georgia have construed their respective uninsured motorist laws to apply to an umbrella liability insurance policy.7 Courts in both states have taken the position that the UM statute, by its plain meaning, is applicable to all policies which offer auto liability coverage.8 Since an umbrella policy includes automobile liability protection, it is subject to the UM statute and must provide uninsured motorist coverage.'9

We hold that a commercial umbrella liability policy is not an automobile liability insurance policy within the meaning of our uninsured motorist statute, specifically La. R.S. 22:1406(D)(1)(a). In reaching this conclusion, we are persuaded by the reasoning employed in the decisions rendered by the majority of the courts discussed above. As noted in Hartbarger and Trinity, the umbrella policy is entirely different from the automobile liability insurance policy contemplated by the uninsured motorist law. An automobile liability policy offers primary automobile liability coverage to the insured. The umbrella policy, on the other hand, is clearly designed as comprehensive excess insurance. With respect to its automobile liability coverage, the umbrella policy cannot exist without an underlying primary auto policy, which is subject to the uninsured motorist law. In terms of risks undertaken, the two types of policies also differ. An automobile liability policy insures against the risk of loss through the operation of motor vehicles covered by the policy. In contrast, the issuer of the umbrella policy assumes the much smaller risk of the insured's exposure to liability in excess of the limits of the underlying primary policies (catastrophic loss).

The object of the uninsured motorist statute is to afford protection to the insured when he becomes the innocent victim of the negligence of uninsured motorists. Hoefly v. Government Employees Ins. Co., 418 So.2d 575 (La.1982); Booth v. Fireman's Fund Ins. Co., 253 La. 521, 218 So.2d 580 (La.1968). This object has been achieved by the underlying primary automobile liability insurance policy which must exist before an umbrella policy is issued covering automobile liability. We see no reason to strain the interpretation of "automobile liability insurance" as used in La.R.S. 22:1406(D)(1)(a) to include a policy, such as the commercial umbrella liability insurance policy, which is wholly different in nature and purpose from that contemplated by the uninsured motorist statute.

We conclude, therefore, that commercial umbrella liability policies are not automobile liability insurance policies and do not come within the scope of the uninsured motorist statute. Accordingly, the commercial umbrella liability policies involved in this suit are not required to provide uninsured motorist protection by La.R.S. 22:1406(D)(1)(a).

DECREE

For the foregoing reasons, we affirm the decision of the court of appeal that the commercial umbrella liability insurance policies issued by Southern American Insurance Company and Northeastern Fire Insurance Company of Pennsylvania are not subject to La.R.S. 22:1406(D)(1)(a) and thus are not required to provide uninsured motorist coverage. Costs assessed to the defendant.

AFFIRMED.

DIXON, C.J., dissents with reasons.

WATSON, J., dissents for reasons assigned by DIXON, C.J.

LEMMON, J., dissents and will assign reasons.

DIXON, Chief Justice (dissenting).

I respectfully dissent.

Without any question or doubt the umbrella policies in this case are policies of "automobile liability insurance covering liability arising out of the ownership, maintenance and use of any motor vehicle," R.S. 22:1406(D)(1)(a), required by law to provide uninsured motorist coverage in limits not less than the liability limits. Only by divining the secret, unstated intent of the legislature does the majority explain that the statute was not intended to apply to umbrella policies.

In so doing, the majority thwarts the very object of uninsured motorist coverage as recognized in the majority opinion—to protect the innocent victim of uninsured (and underinsured) motorists.

ON REHEARING

DIXON, Chief Justice.

In our original opinion in this case we held that excess insurance policies in the form known as "commercial umbrella" policies and "excess umbrella" policies were not automobile liability insurance policies for the purposes of R.S. 22:1406(D)(1)(a), and therefore were not required to provide uninsured motorist coverage. Consequently, we affirmed the court of appeal ruling to that effect (Southern American Insurance Co. v. Ronald Dobson, 415 So.2d 641 (La. App.1982)). Upon rehearing, we reverse and find the statute to be applicable to such policies.

The facts were adequately stated in our original opinion and need not be repeated here. In that opinion, we placed considerable emphasis on decisions from other states on this issue. We failed, however, to consider fully that the uninsured motorist statutes in those states whose reasoning we adopted were significantly different than the Louisiana statute. Moreover, we now question both the need to refer to other jurisdictions and the need to speculate on legislative intent.

Louisiana Civil Code article 13 states: "When a law is clear and free from all ambiguity, the letter of it is not to be disregarded under the pretext of pursuing its spirit." The plain language of R.S. 22:1406(D)(1)(a) makes it applicable to "automobile liability insurance covering liability arising out of the ownership, maintenance, or use of any motor vehicle." These policies unquestionably apply to liability "arising out of the ownership, maintenance, or use of a motor vehicle." That such coverage is made to depend on a primary policy or that the policy contains other provisions which cover other types of losses makes no difference to this central fact. The directive of the statute, being mandatory, must be read into the terms of such a policy, absent a written waiver by the insured. There is no such written waiver in this case. Therefore, the provisions of the statute apply. See Ewing v. Sanson, 394 So.2d 849, 854 (La.App.1981); LeBoyd v. Louisiana Transit Co., 375 So.2d 749, 751 (La.App.1979).

Even if we conceded that the statute is not free from ambiguity in this regard, we would reach the same conclusion. C.C. 18 states: "The universal and most effectual way of discovering the true meaning of a law, when its expressions are dubious, is by considering the reason and spirit of it, or the cause which induced the Legislature to enact it." Upon reconsidering the evolution of our uninsured motorist statute, in light of past judicial interpretations, we conclude that the reason and spirit of the legislation clearly dictate making its provisions applicable to the types of policies at issue in this case.

R.S. 22:1406(D)(1)(a) presently requires that the insurer provide coverage "in not less than the limits of bodily injury liability provided by the policy." Originally our uninsured motorist statute protected a motorist only to the same extent as if the person who had struck him had complied with the minimum requirements of the motor vehicle responsibility law.1 However, Act 154 of 1974 amended the liability limits of mandatory uninsured motorist coverage to equal the limits of bodily injury liability provided by the policy. Then, in 1977, Act 623 eliminated the limitation on uninsured motorist coverage and allowed an insured to increase his coverage "to any amount." See, generally, McKenzie, Louisiana Uninsured Motorist Coverage—After Twenty Years, 43 La. L.Rev. 691, 691-94 (1983). Our legislature has thus progressed from allowing only limited recovery to the innocent victim to permitting the insured to choose the maximum limits of his uninsured motorist coverage.

This court, also, has consistently interpreted the statute, in a variety of contexts, to provide full recovery under the terms of any applicable policies to a person injured, through no fault of his own, by an uninsured or underinsured motorist.2 Our holding today is consistent with the evolution of the statute and the jurisprudence interpreting it.

As previously noted (fn. 1), the uninsured motorist statutes of Alabama, Delaware, New York and Illinois require only that uninsured motorist coverage be provided in the minimum amounts required by law. Courts in those states have accordingly reached a different conclusion under those statutes than the one we reach today under ours.3 The different statutory language compels a contrary inference to the one we draw today with regard to the Louisiana statute. Under those statutes, the legislative purpose is satisfied when the victim is compensated to the same extent as if he had been struck by a driver who had complied with the minimum coverage requirements of insurance mandated by law in the respective jurisdictions.4 The language of the Louisiana statute is different, and so is the policy behind it.5

The effect of today's decision will be to require insurance companies doing business in this state to offer uninsured motorist coverage to an insured under the provisions of umbrella and excess policies when those policies cover "liability arising out of the ownership, maintenance, or use of any motor vehicle." The procedure will thus become the same as that for primary policies providing such coverage. If the insured, after having been informed of the (presumably higher) cost, declines such coverage, then the insurance company should have the insured execute a written waiver. Thus insureds in Louisiana will henceforth be in a position to make informed choices, and the costs can be allocated accordingly.

For these reasons, there is now judgment in favor of defendant Ronald Dobson and against plaintiffs, Southern American Insurance Company and Northeastern Fire Insurance Company of Pennsylvania, declaring the policies in this case to be "automobile liability insurance" policies for the purposes of R.S. 22:1406(D)(1)(a); the judgments of the court of appeal are reversed and set aside, and the judgments of the district court are reinstated, all at the plaintiffs' cost.

CALOGERO, J., dissents for the reasons assigned in this court's majority opinion on original hearing.

BLANCHE, J., dissents for reasons assigned on original hearing.

MARCUS, J., dissents, adhering to the opinion on original hearing.

ON APPLICATION FOR REHEARING

LEMMON, Justice, Concurring in the Denial of Rehearing.

This decision is not conclusive on the stacking issue raised by applicant Northeastern. See Taylor v. Tanner, 435 So.2d 440 (1983).