Louisiana Defenses: Strategies for Avoiding Waiver of Claims Defenses
Insurance policies are contracts. As such, contract law doctrines apply to insurance policies, including the doctrine of waiver. Here in New Orleans and elsewhere in Louisiana, waiver can apply to policy provisions and with respect to rights, privileges, and protections provided by Louisiana statute. This article will discuss waiver issues with a discussion of a recent case out of the Court of Appeals for the Fifth District. See Forvendel v. State Farm Mut. Auto. Ins. Co., 230 So. 3d 687 (La: Court of Appeals, 5th Circuit November 15, 2017). In Forvendel, the Court of Appeals affirmed a finding of not one, but two waivers that resulted in substantial liability by the insurance carrier that could have been easily avoided.
Louisiana Insurance Defense Law: The Elements of Waiver
A leading case in Louisiana on the issue of waiver and insurance policies is Tate v. Charles Aguillard Ins. & Real Estate, Inc., 508 So.2d 1371 (La. Supreme Court 1987). Tate established the rule that waiver can apply to an insurance contract “… even though the effect may bring within coverage risks originally excluded or not covered.” In many jurisdictions, there is a special rule for waiver as it relates to insurance policies where the waiver cannot result in an increase or expansion of coverage. Such is not the rule in Louisiana.
Waiver has three parts or elements:
- An existing right, power, or privilege
- Knowledge of the existing right, power, and privilege
- Actual intention to relinquish it or conduct so inconsistent with the intent to enforce the right as to induce a reasonable belief that it has been relinquished
The first and second elements are generally easy to establish since, under Louisiana law, an insurer is charged with knowledge of the contents of its own policy and of the law. See Steptore v. Masco Const. Co., Inc., 643 So.2d 1213 (La. Supreme Court 1994). Steptore is another leading case with respect to waiver and insurance policies.
Louisiana Insurance Defense Law: The Forvendel Case
Forvendel provides a good illustration of waiver principles and provides some clues about how to avoid some waiver pitfalls. In Forvendel, waiver was found and affirmed based on the past course of conduct (in 2007) involving the same set of insureds for an auto accident that occurred in 2013. In both 2007 and 2013, Brandon Forvendel had insurance coverage from State Farm Mutual Auto Insurance Company. The 2013 accident involved an uninsured motorist who was at fault. State Farm paid Mr. Forvendel the full policy limits under the uninsured motorist (“UM”) coverage. But the UM coverage was insufficient to cover the full extent of the damages and injuries sustained. As such, Mr. Forvendel sought additional UM coverage under his mother’s State Farm insurance policy.
In 2013 (as in 2007), Mr. Forvendel lived with his mother who also had auto insurance with State Farm. Mrs. Forvedel’s UM coverage was higher than the UM coverage contained in Mr. Forvendel’s policy and this is the reason that Mr. Forvendel sought extra coverage under his mother’s policy.
As one might expect, State Farm refused to allow the son to recover under his mother’s policy both because Mr. Forvendel was not “an insured” under his mother’s policy and because of the Louisiana anti-stacking statute found at La. R.S. 22:1295(D)(1)(c). However, the trial court held these defenses waived by actions that took place in 2007.
In 2007, Mr. Forvendel had an auto accident involving an uninsured motorist. In 2007, he and his mother had State Farm insurance. In 2007, State Farm paid the policy limits under Mr. Forvendel’s policy. As with the 2013 accident, the UM coverage was not sufficient, and Mr. Forvendel sought to use his mother’s UM coverage. In 2007, State Farm provided a letter to Mr. Forvendel stating that he was covered by his mother’s UM coverage provisions. Thereafter, State Farm paid out under Mr. Forvendel’s mothers UM policy despite the anti-stacking statute being in place. Because of State Farm’s actions in 2007, the trial court for the 2013 accident held that State Farm had waived both its defense that Mr. Forvendel was not an “insured” under his mother’s policy and that the anti-stacking statute limited State Farm’s liability.
One judge filed a dissent in Forvendel arguing, essentially, that the anti-stacking statute prohibits stacking and, as such, a party cannot be held to waive something that the law prohibits. That is, according to the dissenting judge, the 2007 payment under the mother’s policy was in violation of the anti-stacking statute by State Farm. Logically, such a violation cannot then constitute a waiver, essentially allowing more and additional violations of Louisiana law.
Louisiana Defense Law: Lessons
What should insurers do to avoid waiver? Update Company Policies and Procedures: There are several broad areas of concern with regard to waiver and insurance companies need new policies and procedures to handle them. Among the issues:
- Add “no-waiver” clauses to policies
- Add language to settlement letters and documents disclaiming waiver based on current coverage decisions
- Add nondisclosure, confidentiality, and non-admissibility provisions to settlement documents
- Add language disclaiming waiver based on past coverage decisions and make such clauses stronger by adding a contractual prescription period such as disclaiming waiver based on “coverage decisions made more than twelve months prior to the effective date of this policy …”
Contact an Experienced Insurance Defense Lawyer
As can be seen, new technology creates new legal issues. An experienced Louisiana insurance defense lawyer can help if you have any questions or want more information. Contact Kristin M. Lausten at 504.377.6585 or via email at firstname.lastname@example.org.
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Kristin M. Lausten
This article is provided as an educational service for general informational purposes only. The material does not constitute legal advice or rendering of professional services.