New Orleans, La. (March 25, 2021) - The Louisiana Supreme Court, reversing multiple lower circuit court decisions, has now invalidated the "regular use" exclusion in an Uninsured/Underinsured Motorist (UM) policy based on Louisiana public policy. In Higgins v. La. Farm Bureau Cas. Ins. Co., No. 2020-01094 (La. 3/24/21), the plaintiff, Charles Higgins, was injured in an automobile accident while operating a truck owned by his employer, AT&T. Because his employer did not carry UM coverage on the truck, Higgins filed a claim with his own UM insurer, Farm Bureau Casualty Insurance Company (Farm Bureau), and ultimately filed suit in East Baton Rouge Parish.
Farm Bureau moved for summary judgment, claiming coverage was excluded under the "regular use" exclusion of its UM policy, which excluded "any automobile or trailer owned by or furnished or available for the regular use of the named insured or a resident of the named insured's household if that automobile is not described on the Declarations." Notably, Farm Bureau's liability coverage part contained the same exclusion. The parties did not dispute that Higgins regularly used the truck, and the truck was not described in the Declarations of the Farm Bureau policy. Rather, Higgins argued the "regular use" exclusion violates the Louisiana UM/UIM Statute, Revised Statutes 22:1295(1)(e), which mandates UM coverage is written into every automobile liability policy issued in Louisiana, unless validly rejected or within the limited exception under the statute for vehicles an insured owns but has not been declared under the policy. The truck operated by Higgins, though not declared in the policy, was not owned by him.
The trial court denied summary judgment, and Farm Bureau was granted a supervisory writ from the First Circuit Court of Appeal. The First Circuit reversed the trial court, finding UM coverage was not mandated under R.S. 22:1295, because the policy did not provide liability coverage for the accident, as the "regular use" exclusion was also excluded under the liability coverage. The Louisiana Supreme Court then granted Higgins' writ to determine whether, based on the facts in this case, UM coverage was mandated for the accident at issue.
The Louisiana Supreme Court first identified a two-step analysis to determine the existence of UM coverage: (1) the automobile insurance policy is first examined to determine whether UM coverage is contractually provided under the express provisions of the policy; and (2) if no UM coverage is found under the policy provisions, then the UM statute is applied to determine whether statutory coverage is mandated. Because the parties did not dispute UM coverage was contractually provided under the express provisions of the Farm Bureau policy, the court moved to the second step of the analysis.
The court first reasoned that Higgins was clearly an insured person under his own policy. The court distinguished these facts from prior cases in which the issue was whether the plaintiff met the definition of an insured under the policy and cases in which an employee did not qualify as an insured under his or her employer's policy. By contrast, Higgins was the named insured on the Farm Bureau policy.
The court then sought to determine whether statutory UM coverage was mandated in this case. The court agreed "regular use" exclusions serve a legitimate purpose in auto liability policies – namely, to protect an insurance company against double coverage when a premium has been paid on only one vehicle. Nevertheless, the court also emphasized Louisiana's strong public policy favoring UM coverage, to provide full recovery for innocent accident victims who suffer damages caused by a tortfeasor who has no coverage or insufficient coverage.The court held UM coverage cannot be qualified by a requirement of "relationship" with an insured vehicle. The court concluded that Farm Bureau's policy impermissibly expanded the categories of vehicles excluded from UM coverage beyond that which the UM statute allows.
In its opinion, the Louisiana Supreme Court acknowledged lower circuit courts had previously broadly pronounced that insurers "can exclude an insured from UM coverage in the same manner that the insured would be excluded under liability insurance." However, the court reasoned "this expansive jurisprudential principle is inconsistent with both the UM statute and this Court's jurisprudence interpreting that statute as requiring that UM coverage follow the person, not the vehicle." The court declined to grant an award for penalties and attorney fees, finding Farm Bureau had a reasonable basis to defend the claim.
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