410_C152
DOES
CLERICAL ERROR BAR EXCESS STATUS?
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Automobile
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Reformation
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Other Insurance
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Excess Insurance
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November 20, 2000, Alvin
Samuels and his family were involved in a serious single-car accident. The
vehicle involved, a Plymouth Grand Voyager, was owned by Samuels' son, Mark,
but Alvin was
driving at the time of the accident. One passenger, Mark's wife, Patty, was
killed in the accident. The remaining passengers were seriously injured.
The van was insured by
State Farm Mutual Automobile Insurance Company in a policy issued to Mark and
Patty. That policy had liability limits of $100,000 per person and $300,000 per
accident. Alvin and his wife, Madilyn, also had a
State Farm automobile policy with liability limits of $250,000 per person and
$500,000 per accident. Both policies covered Alvin as the operator of the vehicle.
In addition to their
automobile policy, Alvin and Madilyn carried two
personal umbrella liability policies that covered the accident. One was a State
Farm policy with a limit of $2 million. The other policy, also with a $2
million limit, was issued by Evanston Insurance Company.
The State Farm umbrella
policy listed three "required underlying insurance policies": (1) an
automobile liability policy (250/500/100); (2) a personal residential policy
with $100,000 limits of liability; and (3) a watercraft liability policy with
$100,000 limits of liability. In addition, the policy provided that
"[t]his policy is excess over all other valid and collectible
insurance." The annual premium was $1,385.
The Evanston Insurance
umbrella policy listed as underlying policies: (1) "AUTO LIABILITY
250,500/100 STATE FARM INSURANCE S1048BACEOK" and (2) "HOMEOWNERS
LIABILITY 2,000,000 STATE FARM INSURANCE T8PO00161F." The annual premium
for this policy was $577.50. The policy provided that it would pay "[e]xcess insurance over and above the amounts provided for in
basic policies" (defined as those "policies listed on the
declarations (including renewals or replacements) which provide liability
coverage for Personal Injury or Property Damage because of accidents."). In
addition, the Evanston
policy provided: "There may be other collectible insurance, other than
basic policies, covering a claim which is also covered by this policy. If this
occurs, the other insurance will pay first and this policy will be excess of
the other insurance."
Mark Samuels filed suit
against Alvin Samuels and both insurance companies. State Farm then filed a
Motion to Rank Insurance Policies. According to State Farm, the State Farm and Evanston umbrella policies
provided coverage on a pro rata basis. Evanston
argued that its policy was excess of the State Farm umbrella policy. In support
of this argument, Evanston claimed its agent had
made some clerical errors that misrepresented the parties' intent that the Evanston policy would be
excess of the State Farm policy. Specifically, Evanston claimed its agent erroneously
identified the underlying State Farm policy as a "Homeowners Policy"
on the original 1999 policy and the 2000 renewal policy, and that the agent had
used the wrong policy identification number on the 2000 renewal policy.
The trial court concluded
that the State Farm and Evanston
umbrella policies both contained excess "other insurance" clauses
that were "mutually repugnant" and that both insurers should share
pro rata on the limits of their policies. The district court of appeals
reversed, finding that the Evanston
policy should be "reformed" to reflect the true intent of the
parties. The case was then appealed to the Supreme Court of Louisiana.
On appeal, the Supreme
Court found that the evidence indicated that Evanston
and Samuels intended that the Evanston
policy should provide excess umbrella coverage over and above the State Farm
umbrella policy. The court noted that Evanston
had provided affidavits from several agents who supported Evanston's position, and the policy's annual
premium was only $577.50 per year. Furthermore, State Farm did not rely on the
clerical errors in issuing its policy or assessing its risks. The only issue,
then, was whether, under Louisiana
law, a clerical error by an insurer's agent could be corrected to reflect the
intent of the parties to the insurance contract. The court found in favor of Evanston. It concluded
that, where the insurance agent makes a clerical error on the declarations page
as to the identity of underlying insurance policies, and where the evidence
demonstrates the true intent of the parties, the policy can be
"reformed" (or corrected) to show the true intent. In reaching its
decision, the court noted that the third-party insurer (State Farm) should not
benefit from the error, especially when it did not rely on the error in issuing
its own policy.
The decision of the court
of appeals was affirmed.
Samuels
vs. State Farm Mutual Insurance Company-No. 2006-C-0034-Supreme Court of Louisiana-October
17, 2006-939 Southern Reporter 2d 1235