The issue before us concerns two-tier insurance coverage which provided reduced coverage of $10,000, the statutory minimum, under an endorsement. The lower courts determined that the endorsement did not apply, thus the face amount of the policy, $1,000,000, was applicable. For the following reasons we reverse, finding
The insurance coverage issue was triggered by a rear-end collision which occurred on Christmas morning, December 25, 1997, at 1:40 a.m. near DeQuincy, Louisiana. On that date, the defendant, Charles Rials, Jr. ("Rials"), who was intoxicated, was operating a 1996 Ford pick-up truck owned by Wheels Incorporated and leased to Rials' employer, Scafco, Ltd. ("Scafco"). Scafco is a subsidiary of Turner Industries and is in the business of erecting scaffolding pursuant to contract throughout Louisiana. Scafco usually had approximately 10 to 15 trucks which were assigned to Scafco superintendents and other supervisory personnel as an employee perk. In addition to the assigned trucks, there is usually one truck assigned to each plant site. The trucks assigned to the plant sites are called "yard trucks" and are primarily used to run errands on the plant site and pick up and deliver materials to the plant site.
Steve Clark ("Clark"), an employee of Scafco, was acting as a temporary supervisor in the months prior to the accident. In his capacity as temporary supervisor, Clark was given permission by Jackie Stone, the manager of Scafco, to use the yard truck to drive to work in the mornings and home from work in the evenings. Because of his temporary status, Clark did not sign the list of guidelines which every employee who is assigned a vehicle is required to sign. Instead, Clark simply began using the truck as though it were permanently assigned to him, including the use of the truck for personal errands. Clark also permitted Rials to use the truck on weekends for Rials' personal use.
On the evening of the accident, Rials had the truck with Clark's permission since Rials had to work Christmas morning and Clark did not. Clark was aware that Rials had no transportation of his own
Also in attendance at the party were the plaintiffs, the Blackburns and the Royers ("the plaintiffs"). At approximately 1:30 a.m. on December 25, 1997, Rials left the party shortly after the plaintiffs and began driving toward his home. Ten minutes later, Clark was informed that Rials had been in an accident in the Scafco truck. Clark immediately left the party and went to the scene of the accident and saw that Rials had rear-ended the truck being operated by Mr. Blackburn in which the Royers were passengers.
Clark was suspended from employment with Scafco due to the accident and Rials was fired. Rials testified that he had never discussed the parameters of his permission to use the truck with anyone, including Clark, and that he had never been warned of the consequences of driving the
The Blackburns and the Royers filed suit against Wheels Incorporated, Scafco, Rials, National Union Fire Insurance Company of Pittsburgh ("National Union"), and State Farm Mutual Automobile Insurance Company ("State Farm"). National Union insured the trucks which were leased by Scafco through a policy acquired by Turner Industries, Scafco's parent company. State Farm insured the Blackburns. The suits were consolidated and National Union filed a motion for summary judgment asserting that under Endorsement # 005 of the policy, the limit of liability coverage for the accident was the statutory minimum. The plaintiffs, along with State Farm, filed a cross-motion for summary judgment asserting that the policy limits for the accident were $1,000,000, the face amount of the policy.
The trial court granted the cross-motion for summary judgment filed by the plaintiffs and State Farm, setting the policy limits for the accident at $1,000,000, although it is unclear whether the trial court's reasons were based on Endorsement # 005 or the MCS-90 Endorsement. Specifically, the trial court found: (1) that Rials was not in the course and scope of his employment; (2) that the MCS-90 Endorsement was applicable to Scafco;
The court of appeal affirmed the trial court's ruling that there was $1,000,000 in coverage, holding that Endorsement # 005 allowed for the granting of permission to use a Scafco truck outside the course and scope of employment and that Rials was granted such permission. Blackburn v. National Union Fire Ins. Co. of Pittsburgh, 99-1872, p. 7 (La.App. 3rd Cir.8/23/00), 771 So.2d 175. The court further found that, under the facts of this case, Rials was acting within the scope of that permission.
The sole issue in this writ is the interpretation of Endorsement # 005, which provides:
The rules for the interpretation of an insurance contract are well established in our jurisprudence and our Civil Code.
An insurance policy is an aleatory contract subject to the same basic interpretive rules as any other contract. La. Civ.Code art.1912, cmt. e; Magnon v. Collins, 98-2822, p. 6 (La.7/7/99), 739 So.2d 191, 196; Peterson v. Schimek, 98-1712, p. 4 (La.3/2/99), 729 So.2d 1024, 1028; Smith v. Matthews, 611 So.2d 1377, 1379 (La. 1993). The 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.4/11/94), 634 So.2d 1180, 1183. The judicial responsibility in interpreting insurance contracts is to determine the parties' common intent. La. Civ.Code art. 2045; Magnon, 98-2822 at 6, 739 So.2d at 196; Ledbetter v. Concord Gen. Corp., 95-0809, p. 3 (La.1/6/96), 665 So.2d 1166, 1169. Obviously, the initial determination of the parties' intent is found in the insurance policy itself. La. Civ.Code art.2046. In analyzing a policy provision, the words, often being terms of art, must be given their technical meaning. La. Civ.Code art. 2047. When those technical words are unambiguous and the parties' intent is clear, the insurance contract will be enforced as written. La. Civ.Code art.2046; Magnon, 98-2822 at 7, 739 So.2d at 197. If, on the other hand, the contract cannot be construed simply, based on its language, because of an ambiguity, the court may look to extrinsic evidence to determine the parties' intent. Peterson, 98-1712 at 5, 729 So.2d at 1029.
The insurer bears the burden of proving the applicability of an exclusionary clause within a policy. Dubois v. Parish Gov't Risk Mgmt. Agency Group Health, 95-546, p. 5 (La.App. 3 Cir. 1/24/96), 670 So.2d 258, 260; Shaw v. Fidelity & Cas. Ins. Co., 582 So.2d 919, 925 (La.App. 2nd Cir.1991); Landry v. Louisiana Hosp. Serv., Inc., 449 So.2d 584, 586 (La.App. 1st Cir.1984); Barber v. Best, 394 So.2d 779, 781 (La.App. 4th Cir.1981).. Thus, it is National Union's burden to prove that the exclusion in Endorsement # 005 is applicable to this accident.
The court of appeal found that Endorsement # 005 specifically implied that an employee could be given permission to use a company vehicle outside the course and scope of employment. According to the court of appeal, when an employee is operating a vehicle with the permission of the insured, but outside the course and scope of his employment, liability coverage of $1,000,000 under the general policy would be in force.
National Union argues that the court of appeal's interpretation is contrary to the plain language of Endorsement # 005,
It is not disputed that Rials had Clark's permission to use the truck. In essence, the lower courts concluded that because Rials was using the truck with permission, he was also acting outside the course and scope of his employment with permission; therefore, the endorsement was not applicable. National Union argues that whether Rials had permission or not is irrelevant, since he was acting outside the course and scope of his employment. We agree.
The dispute centers around the effect, if any, that is given to the remaining provision in the endorsement after the word "or." National Union contends that the endorsement is clear and unambiguous, and that the disjunctive "or" means that the endorsement will apply to limit liability under the policy, if either situation exists.
The lower courts did not examine the endorsement as containing two alternative provisions; no meaning or effect was given to the disjunctive "or" in the endorsement. The court of appeal determined that because Rials was granted permission to use the truck, the endorsement "anticipates instances in which an employee is given permission to operate a company vehicle outside the course of that person's employment." Blackburn, 99-1872 at 12, 771 So.2d at 183. The court of appeal then concluded that if Rials was operating the truck with permission, the liability coverage of $1,000,000 under the general policy would apply.
We agree with National Union's contention and find that the court of appeal erred by failing to include the remaining provision of the endorsement, "or ... outside of the course and scope of that person's employment...." The court of appeal interpreted the endorsement to mean that if one has permission to use the company truck, the endorsement is not applicable regardless of whether the person is acting outside the course and scope of his employment. We find that interpreting the endorsement in this manner misinterprets the word "or" between the two provisions as though "or" meant "and." The word "or" is a clear, unambiguous term and its use between the two provisions made alternative events. The two provisions are separated by the disjunctive "or," not the conjoining "and." Thus, when reading the endorsement giving the term "or" a disjunctive interpretation rather than as "and," it is clear that the endorsement applies, since Rials was acting outside the course and scope of his employment.
We agree with the court of appeal's determination that: "The language of the # 005 Endorsement is clear and unambiguous and anticipates instances in which an employee is given permission to operate a company vehicle outside the course of his employment." Id. However, when an employee, such as Rials, does operate a company vehicle outside the course and scope of his employment, "[t]he most that we will pay ... is the statutory minimum financial responsibility...." Although Rials had permission to use the truck, this permission does not somehow nullify the second provision, "or" outside the course and scope of employment.
The coverage scenario created by Endorsement # 005 has been referred to by this Court and other courts as "two-tier" coverage.
We find that Endorsement # 005 is not ambiguous because of the insurer's use of the disjunctive "or" in the policy. The endorsement clearly creates two distinct situations where liability coverage is reduced: where an employee is acting outside the scope of permission or when an employee is acting outside of the course and scope of employment. The technical words in the endorsement are unambiguous, requiring that the insurance contract be enforced as written. La. Civ.Code art. 2046; Magnon, 98-2822 at 7, 739 So.2d at 197. Since Rials was acting outside of the course and scope of employment, the endorsement applies. Thus, liability coverage is reduced to the statutory minimum.
For the foregoing reasons, the judgment of the court of appeal affirming the cross-motion for summary judgment of the Blackburns, Royers, State Farm, and Rials is reversed and set aside. The motion for summary judgment of National Union is hereby granted, setting the limits of liability coverage for Rials' accident at the statutory minimum. This case is remanded to the district court for further proceedings.
REVERSED AND REMANDED.