Auto Insurer Loses Appeal for Dismissal of Complaints in Louisiana Claims Dispute

In late June, the Louisiana Supreme Court ruled against an insurer and its insureds seeking summary judgement dismissing complaints against them in a case involving auto insurance claims.

At issue was whether or not the defendants were parties to an agreement under which a separate insurer and its insured reached a settlement with the plaintiff that released them from further action brought by the plaintiff.

The Court in its written opinion explained that the issue in Kerry Maggio v. James Parker; the Sandwich Kings LLC (D/B/A Jimmy John’s); Republic-Vanguard Insurance Company; and Metropolitan Property and Casualty Insurance Company, is “whether a settlement which purports to release ‘all other persons, firms, or corporations who are or might be liable’ applies to defendants who were not direct parties to the settlement,” according to the Court’s written opinion.

The Court said it was undisputed that in January 2015, Kerry Maggio was injured when his vehicle was struck by a vehicle driven by James Parker, an employee of Sandwich Kings. Parker’s vehicle was owned by Brenda Parker and insured by Louisiana Farm Bureau.

Maintaining that James Parker was working in service of his employer at the time of the accident, Maggio in June 2015 filed for damages against James Parker; Sandwich Kings; Sandwich King’s auto insurer, Republic-Vanguard; and Maggio’s uninsured motorist insurer, Metropolitan Property and Casualty Insurance Company. He did not name Brenda Parker or Farm Bureau as defendants in the complaint.

Subsequently, in July 2015, Maggio reached a settlement with Brenda Parker and Farm Bureau for the policy limit of $25,000. In exchange, he released Brenda Parker and Farm Bureau from further action in an agreement that states in part that he releases, acquits and forever discharges “the said payor(s), their agents and employees, and all other persons, firms or corporations who are or might be liable, from any and all actions, causes of action, claims, demands, damages, costs, loss of services, loss of consortium, expenses, and compensation on account of or in any way growing out of any and all known and unknown personal injuries and property damage, resulting or to result from an accident that occurred on or about 01/14/2015 …”

After receiving a copy of that release, Sandwich Kings and Republic-Vanguard filed for summary judgment in March 2016, maintaining the claims against them should be dismissed because of the clause in the release exempting “all other persons, firms or corporations who are or might be liable” as a result of Maggio’s accident.

Maggio argued, however, that because Sandwich Kings and Republic-Vanguard were not party to the release settlement, the summary judgment should be denied. Both the district court and the appeals court agreed.

In the Supreme Court’s opinion, Justice Scott J. Crichton wrote that the majority at the court of appeals after a supervisory review “reasoned that summary judgment was inappropriate because defendants did not meet their burden of proving that the release manifested a clear intention to benefit them as third party beneficiaries.”

At least one appeals court judge disagreed with the majority, stating in a dissent that “the language of the release was clear and unambiguous and ‘offers no other conclusion than that the relators had been released from liability.'”

The state’s high court was petitioned to resolve the matter. Among other things, the Court looked at the standards for determining whether a contract provides for a benefit of a third party. The Court noted there are three criteria needed to meet the burden of proof for the third party benefit: “1) the stipulation is ‘manifestly clear’; 2) there is certainty as to the benefit provided the third party; and 3) the benefit is not a ‘mere incident of the contract between the promisor and the promisee.'”

The Court ultimately determined that the lower courts “reached the correct result in denying defendants’ motion for summary judgment insofar as they claim that the Release manifested a clear intention to benefit them as third-party beneficiaries.” The case was remanded for further consideration.

Justices Clark, Guidry and Weimer dissented.