Arceneaux v. Amstar Corp.

969 So.2d 755

Daniel ARCENEAUX, Louis Daverede, Jr., Vives Lemmon, and Jules Menesses v. AMSTAR CORP., Amstar Sugar Corp., Tate & Lyle North American Sugars, Inc., and Domino Sugar Company.

No. 2006-CA-1592.

Court of Appeal of Louisiana, Fourth Circuit.

October 31, 2007.

Rehearing Denied November 28, 2007.

Daniel L. Dysart, Dysart & Tabary, L.L.P., Chalmette, LA, and Lee M. Epstein, Fried & Epstein, LLP, Philadelphia, PA, for Defendant/Appellee, Tate and Lyle North American Sugars, Inc.

Glenn G. Goodier, Jones Walker Waechter Poitevent Carrere & Denegre, L.L.P., New Orleans, LA, for Continental Casualty Company.

(Court composed of Judge CHARLES R. JONES, Judge PATRICIA RIVET MURRAY, Judge MAX N. TOBIAS, JR.)

PATRICIA RIVET MURRAY, Judge.

This is a complex insurance coverage dispute. The underlying action is a cumulated tort suit by almost three hundred present and former employees of Tate & Lyle North American Sugars, Inc. ("Tate & Lyle"),¹ who sued Tate & Lyle for occupational hearing loss. The underlying action has been settled. This appeal arises out of Tate & Lyle's third party demand against its general liability insurer, Continental Casualty Insurance Company ("Continental"), for indemnity of the settlement awards, defense costs, and bad faith penalties. From a multimillion-dollar judgment in favor of Tate & Lyle, Continental appeals. The primary issues on this appeal relate to the scope of the waiver of policy defenses that results when an insurer assumes the defense of its insured without securing a non-waiver agreement or issuing a reservation of rights declaration.

FACTUAL AND PROCEDURAL BACKGROUND

On February 2, 1999, four plaintiffs commenced this suit against Tate & Lyle as a cumulated action under La. C.C.P. art. 463. The plaintiffs alleged that they were exposed to unreasonably loud noise in the course of their employment with Tate & Lyle at its Domino Sugar Refinery in Arabi, Louisiana. The period of alleged tortious exposure was "various times between 1947 and 1994." In response, Tate & Lyle retained the Lamothe & Hamilton law firm (the "Lamothe Firm") to defend it.

Continental insured Tate & Lyle under eight general liability insurance policies covering bodily injury occurring between 1963 and 1978. Based on those policies, Tate & Lyle notified Continental in March 1999 of this suit. In May 1999, Continental retained the law firm of Galloway, Johnson, Burr & Smith (the "Galloway Firm") to defend Tate & Lyle. Thereafter, the Galloway Firm enrolled as co-counsel with the Lamothe Firm in this suit.

In April 2001, the plaintiffs filed a First Supplemental and Amending Petition. The first amending petition added about one hundred and thirty new plaintiffs. In February 2003, the law firm of Rabalais, Unland & Lorio (the "Rabalais Firm") became Tate & Lyle's sole defense counsel.

Due to the large number of cumulated plaintiffs, the trial court decided to try this case in flights of about fifteen plaintiffs.² Given the plaintiffs' stipulation that their individualized damages did not exceed the $50,000 jury trial threshold, a bench trial was scheduled on the first flight for May 5, 2003. At that time, neither Continental nor any other insurer of Tate & Lyle was named as a defendant. On May 9, 2003, the trial was suspended to allow for settlement negotiations. On that same date, Tate & Lyle, without Continental's consent, settled with the first flight of plaintiffs for $35,000 each (a total of $525,000). In its May 14, 2003 letter to plaintiffs' counsel memorializing the settlement agreement, the Rabalais Firm requested that the settlement be kept confidential because Tate & Lyle was "attempting to negotiate with several insurance companies." On May 29, 2003, Tate & Lyle first notified Continental of the settlement.

On June 6, 2003, Continental made a written offer to contribute $50,000 towards the settlement of the first flight. On that same date, Continental issued a disclaimer letter to Tate & Lyle.³ In that letter, Continental disclaimed coverage based on certain exclusions in its policies for employer's liability and workmen's compensation (hereinafter referred to as the employee exclusions).⁴ In that letter, Continental reserved its right to disclaim coverage to the extent that "[t]he alleged bodily injury did not take place during one or more of the Continental Casualty policy periods," and stated that its reservation of rights extended to any "future litigation regarding these policies." At that point, Continental withdrew from the defense. Shortly thereafter, Continental was joined as a third party defendant by Tate & Lyle and as a direct defendant by the plaintiffs.

In its third party demand against Continental, which was filed on July 11, 2003, Tate & Lyle sought (i) indemnification for the amounts it is required to pay in this case; (ii) defense costs; and (iii) bad faith penalties under La. R.S. 22:658.⁵

The plaintiffs filed their Second and Third Supplemental and Amending Petitions on August 26, 2003, and April 28, 2004, respectively. In these petitions, new defendants, including Continental, were added,⁶ and about one hundred and sixty new plaintiffs were added. (The plaintiffs who were added in these petitions, which were filed after Continental disclaimed coverage and issued its reservation of rights letter, are referred to as the post-denial plaintiffs). In these petitions, the plaintiffs extended the period of alleged tortious exposure from "various times between 1947 and 1994" to "various times between 1939 and present."⁷

On October 29, 2004, the trial court granted Tate & Lyle's motion for partial summary judgment on its third party demand against Continental. Agreeing with Tate & Lyle, the trial court found that Continental waived its right to deny coverage based on the employee exclusions in its policies by participating in Tate & Lyle's defense for a period of four years without securing a non-waiver agreement or providing Tate & Lyle with a reservation of rights declaration. However, the trial court limited its decision to "only those cases for which coverage is provided as a result of the policies issued for the periods of time set forth in the insurance contracts or policies," which is from 1963 to 1978 (Continental's policy period). The trial court certified its partial summary judgment as a final judgment for purposes of appeal under La. C.C.P. art. 1915.

In Arceneaux v. Amstar Corp., 05-0177 (La.App. 4 Cir. 12/14/05), 921 So.2d 189 ("Arceneaux I"), we affirmed the trial court decision. While Continental's appeal in Arceneaux I was pending in this court, the trial court set the second flight of fifteen plaintiffs for trial. Shortly before the scheduled trial date, Tate & Lyle announced in open court on April 14, 2005 that it had settled the claims of not only the second flight of plaintiffs, but also of all the remaining plaintiffs. The second flight of plaintiffs was settled on the same basis as the first flight; the fifteen plaintiffs in that flight received $35,000 each. As to the remaining plaintiffs, Tate & Lyle entered into a matrix settlement agreement. Under that agreement, the remaining plaintiffs likewise would be deemed eligible to receive $35,000 each if they met certain settlement criteria. The claims of plaintiffs that did not meet the criteria would be dismissed.

Shortly before the announcement of the settlements, on April 1, 2005, the trial court denied the cross-motions for summary judgment that were filed by Tate & Lyle and Continental seeking a determination regarding the scope of Continental's waiver of its policy defenses. The principal issues the parties raised in the cross-motions and in this appeal are two-fold: (i) whether Continental's waiver expanded the period of Continental's coverage beyond its policy period — the fifteen years (1963 to 1978) for which it issued policies; and (ii) whether Continental's waiver applies to the post-denial plaintiffs — the plaintiffs who were not included in the original and first amended petitions.

As to the issue of whether Continental's waiver extended to its policy period, the court denied summary judgment, reasoning that neither side had cited any jurisprudential authority directly addressing that issue. As to Continental's contention that it had not waived any defenses with regard to the post-denial claims, the trial court stated in its April 1, 2005 reasons for judgment that "the amended and supplemental petitions relate to the original and first amended Petitions." Also in its reasons for judgment, the trial court recognized that its earlier decision, rendered October 29, 2004 (the decision this court affirmed in Arceneaux I), provided for the following three things: (i) it recognized Tate & Lyle's right to recover past defense expenses from Continental; (ii) it required Continental to undertake the defense of the plaintiffs' entire claim; and (iii) it required Continental to indemnify Tate & Lyle from any loss which may have been occasioned by the plaintiffs' claims due to the policies of insurance that were issued by Continental to Tate & Lyle from 1963 to 1978.

Trial on Tate & Lyle's third party demand against Continental began on August 22, 2005, and concluded on August 25, 2005. At trial, Tate & Lyle's sole witness was its corporate representative, Bobbi Claypool. Ms. Claypool was one of the Tate & Lyle claims managers who handled this claim. Continental presented four witnesses: (i) Linda Graft, Continental's claims consultant who handled this claim;⁸ (ii) Daniel Caswell, Continental's corporate representative; (iii) Dr. Herbert Marks, an expert in the field of otolaryngology (the study of the diseases of the ear and throat); and (iv) Dr. Michael Seidemann, a specialist in the field of audiology. The parties also introduced hundreds of documents. The trial court, with the consent of the parties, left the record open at the end of the trial for the purpose of filing...