MADELEINE M. LANDRIEU, Judge.
This appeal concerns a purely legal issue: the scope of an insurer's duty to defend in a long latency disease case where the insurer's occurrence-based policies were in effect for only a portion of the time span during which the plaintiffs' alleged exposure occurred.
In 2006, two sets of plaintiffs (respectively referred to as the "Barbe plaintiffs" and the "Waguespack plaintiffs") filed separate suits against American Sugar Refineries, Inc. ("American Sugar") alleging that they had suffered occupational hearing loss from their exposure to industrial noise while working at the defendant's Arabi, Louisiana refinery during various years ranging from 1941 to 2006.
On September 19, 2007, defendant American Sugar brought a third-party demand against Continental Casualty Company ("Continental") alleging that Continental had issued certain policies that provided coverage for the plaintiffs' claims during a portion of the time span cited in the plaintiffs' petition. American Sugar further alleged that it had put Continental on notice of the litigation in June of 2006 and that Continental had breached its policies by failing to provide American Sugar
On May 22, 2013, more than five years after filing its third-party demand, American Sugar brought a motion for partial summary judgment seeking reimbursement from Continental for 100% of the costs incurred by American Sugar in defending the litigation since its inception, as well as a declaration that Continental owed American Sugar a full defense going forward; American Sugar also sought attorney's fees and statutory penalties for alleged bad faith on the part of Continental. The trial court heard the motion on August 30, 2013. At the conclusion of the hearing, the trial court ruled from the bench, granting the motion for partial summary judgment in part, finding that Continental was obliged to provide American Sugar a complete, one hundred percent (100%) defense going forward from the date of the ruling. The trial court denied the motion for summary judgment in all other respects, thus denying American Sugar's claims for reimbursement of past defense costs, attorney's fees and penalties for bad faith. The trial court did not give oral or written reasons for judgment. In its written judgment signed October 3, 2013, the trial court designated the judgment as final for purposes of immediate appeal pursuant to Louisiana Code of Civil Procedure article 1915 B.
Continental suspensively appeals the judgment, arguing that the trial court misinterpreted the law in long latency disease cases when it ordered Continental to provide a full defense to American Sugar despite the fact that Continental's policies covered only 26 months of the approximately 60-year time span during which the plaintiffs' alleged exposure occurred.
Whether the trial court erred by ordering Continental to provide American Sugar with a full defense going forward in this litigation is purely an issue of law. The parties do not dispute the relevant facts. Continental argues that the trial court's ruling ignores the current law with respect to long latency disease cases, as expressed by the Louisiana Supreme Court in Southern Silica of Louisiana, Inc. v. Louisiana Insurance Guaranty Ass'n, 2007-1680 (La.4/8/08), 979 So.2d 460. Continental contends that Southern Silica establishes that, in a long latency disease case, an insurer issuing an occurrence-based policy or policies in effect for only a portion of the alleged time of exposure is not obligated to provide its insured a full defense, but only to pay a pro-rata share of the defense costs based upon the allegations of the petition and the four corners of the insurer's policy or policies. Continental argues that in this case, because it had policies without employee exclusions in effect for only 26 months (from Dec. 31, 1975 to March 1, 1978), its pro-rata share of defense costs is 4.3%.
We review the granting of a motion for summary judgment de novo, using the identical criteria that govern the trial court's consideration of whether summary judgment is appropriate. Smitko v. Gulf South Shrimp, Inc., 2011-2566, p. 7 (La.7/2/12), 94 So.3d 750, 755. A motion for summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions, together with the affidavits, if any, show that there is no genuine issue as to material fact, and that mover is entitled to judgment as a matter of law." Id.; La. C.C.P. art. 966.
In the present case, there are no relevant facts in dispute, and the issue is purely a legal one: the scope of Continental's duty to defend under these circumstances. Whether a defendant owes a legal duty and the scope of that duty are questions of law. Haney v. Delta Petroleum Co., 99-0170, p. 4 (La.App. 4 Cir. 10/6/99), 748 So.2d 36, 38. Appellate review of a question of law is simply to determine whether the trial court's decision was correct or incorrect. Watkins v. Lake Charles Mem'l Hosp., 2012-1320, p. 6 (La.App. 3 Cir. 4/17/13), 114 So.3d 503, 507, aff'd, 2013-1137 (La. 3/25/14), 144 So.3d 944.
The pertinent language of the Continental policies, which are substantially similar, is:
In the present case, it is undisputed that Continental paid 25% of the defense costs subject to a reservation of rights. Assuming, however, that Continental's coverage is limited to the 26-month period between December 31, 1975 and March 1, 1978,
The term "defend" is not defined in the policies. The Louisiana Supreme Court has held that the insurer's contractual duty to defend suits brought against its insured "is determined by the allegations
Ellis v. Transcon. Ins. Co., 619 So.2d 1130, 1134 (La.App. 4 Cir.1993). As we explained further in Mossy Motors, Inc. v. Cameras Am., 2004-0726 (La.App. 4 Cir. 3/2/05), 898 So.2d 602:
Id., p. 6, 898 So.2d at 606 (citations omitted).
In the present case, Continental suggests we depart from this established law. Continental argues that in long latency disease cases, the duty to defend is divisible; thus, if the insurer's occurrence-based policy reflects coverage for only a portion of the years of exposure alleged in the plaintiff's petition, the insurer would only be obliged to provide a corresponding portion of the defense.
Continental first notes that long latency occupational disease cases are sui generis in that a distinct body of jurisprudential law has been developed which applies solely to them. See, e.g., Cole v. Celotex Corp., 599 So.2d 1058 (La.1992). One principle already established in Louisiana law is that in a long latency disease case, the "occurrence" that triggers insurance coverage is the plaintiff's "exposure to harmful conditions within the policy period." Cole, supra, 599 So.2d at 1076. In Cole, the Louisiana Supreme Court adopted this "exposure trigger" to determine what policies provided coverage for long latency asbestos claims. The exposure trigger is also applicable here, where the plaintiffs allege that continuous exposure to noise during the course of their employment at American Sugar's refinery caused their hearing loss. Arceneaux II, 2006-1592, pp. 1-2, 969 So.2d at 760.
The second established principle relied upon by Continental is that, once the plaintiffs have alleged coverage under multiple policies in accordance with the exposure trigger, liability will be allocated among those policies on a pro rata basis.
Id., pp. 42-43, 859 So.2d at 198.
The First Circuit also stated that if the insured's damages arose out of occurrences taking place during a period in which no insurer was on the risk, "the logical approach is to treat [the policyholder] as an insurer for that period and assign it a pro rata share." Id., p. 43, 859 So.2d at 198. This pro rata allocation of coverage in long latency disease cases was adopted by the Louisiana Supreme Court in Southern Silica, supra, and applied in Arceneaux III, supra.
We agree with Continental that Louisiana law utilizes this pro rata method of allocating liability and/or indemnity among insurance carriers in long latency occupational disease cases. However, an insurer's duty to defend, which is at issue here, is not the same as its duty to indemnify (which is based upon the scope of coverage). See Steptore v. Masco Construction Co., Inc., supra, p. 8, 643 So.2d at 1218; Ellis v. Transcon. Ins. Co., supra, at 1134; Yount v. Maisano, 627 So.2d 148, 153 (La.1993).
The crux of Continental's argument on appeal is that in Southern Silica, supra, the Louisiana Supreme Court went beyond the issue of indemnity and used the pro rata approach to allocate defense costs. Relying primarily upon Southern Silica, Continental thus contends that in a long latency disease case, the duty to defend should be prorated.
In that case, Southern Silica of Louisiana, Inc. filed suit seeking a declaration that the Louisiana Insurance Guaranty Association ("LIGA") owed it indemnity and a defense costs in connection with 500 silicosis lawsuits that had been filed against Southern Silica. The claimants in those suits alleged injuries from exposure to silica dust between 1965 and 2003. Reliance Insurance Company ("Reliance"), which had issued policies covering Southern Silica for the years 1977 through 1982, had subsequently become insolvent. Other solvent insurance carriers that had policies covering the remaining years had defended the claims pursuant to a voluntary cost-sharing agreement. Southern Silica contended that LIGA was required to step into the shoes of the insolvent insurer, Reliance, by providing both indemnity and a defense under the Reliance policies. The primary issue in the case was the interpretation of La. R.S. 22:1386A, which establishes a procedure for collecting insurance benefits from the statutorily-created LIGA when one of multiple covering insurers has become insolvent. The statute requires that the insured first "exhaust all coverage provided by any other policy, including the right to a defense under the other policy, if the claim under the other policy arises from the same facts, injury or loss that gave rise to the covered claim against [LIGA]" before collecting from
2007-1680, pp. 12-13, 979 So.2d at 468-69.
Although the opinion in Southern Silica contains no discussion of the duty to defend, the decree states, in pertinent part:
Id., pp. 13-14, 979 So.2d at 469 (emphasis added).
Seizing upon the language highlighted above, Continental argues that Southern Silica established a rule whereby the duty to defend in long latency disease cases is subject to pro rata allocation in the same way as is the duty to indemnify. In response, American Sugar argues that Southern Silica, which was based upon the interpretation of a specific statute applicable only to claims against LIGA, is factually and legally distinguishable from the present case. Additionally, American Sugar points out that in Arceneaux III, decided several years after Southern Silica, the Louisiana Supreme Court held that Continental, although responsible for only its prorated share of indemnity, was nevertheless held liable to American Sugar's predecessor for 100% of its defense costs as a result of Continental's failure to defend.
None of the cases cited by either party directly addresses the precise issue presented here. We have not found a Louisiana decision that directly considers whether an insurer's duty to defend in a long latency disease case can be prorated.
We first discuss Arceneaux III. Continental's duty to provide a full defense was not at issue in that case because Continental had voluntarily paid the full defense costs. When first notified of the claims filed against its insured, T & L, Continental defended the suit without a reservation of rights. Subsequently, Continental withdrew its defense based upon a mistaken belief that all of its policies contained employee exclusions that precluded coverage for the plaintiffs' claims. Then, according to the Supreme Court's account:
Arceneaux III, supra, p. 4, 66 So.3d at 442-43.
The issue in Arceneaux III was not whether Continental's duty to defend could be prorated, but whether Continental's breach of its duty to defend constituted a waiver of its coverage defenses, including the policy periods and the employee exclusions. Id., p. 17, 66 So.3d at 450. The Supreme Court held that Continental's breach was not knowing, and therefore could not have resulted in a waiver of its right to assert its policy defenses. The Court did not face the question presented here: Would Continental's duty to defend have been satisfied by its provision of a partial defense (based upon the extent of its liability) to its insured? Nevertheless, in finding that a breach occurred, the Supreme Court's language suggests that a partial defense would not have sufficed:
Id.
Turning to Southern Silica, the case upon which Continental primarily relies, we recognize that the decree in that case seems to indicate that the jurisprudence is moving in the direction of proration of the duty to defend. However, we agree with the appellee that Southern Silica is fundamentally distinguishable from the present case. Southern Silica is, first and foremost, a case addressing the interpretation of a procedural statute governing LIGA, which operates under different rules than those that apply to private insurers. More importantly, the provision of a defense was not an issue in Southern Silica because the suit was already being defended by the solvent insurers under a voluntary cost sharing agreement; there was no reason for the Court to upset that arrangement. The Court's decree requiring LIGA to reimburse Southern Silica for Reliance's pro rata share of past defense costs, upon proof of such costs, promotes an equitable result. However, the issue presented in this appeal is the propriety of the trial court's decision ordering Continental to provide American Sugar with a complete defense going forward in this litigation, not the reimbursement of past defense costs.
We appreciate Continental's argument that other jurisdictions have adopted proration of the duty to defend in long latency disease cases as a more equitable system. See, e.g., Commercial Union Ins. Co. v. Sepco Corp., 918 F.2d 920, 922-25 (11th Cir.1990); Budd Co. v. Travelers Indem. Co., 820 F.2d 787, 790-91 (6th Cir.1987); Century Indem. Co. v. Liberty Mut. Ins. Co., 815 F.Supp.2d 508, 517-20 (D.R.I. 2011); Fireman's Fund Ins. Co. v. Ex-Cell-O Corp., 685 F.Supp. 621, 626 (E.D.Mich.1987); Security Ins. Co. v. Lumbermens Mut. Cas. Co., 264 Conn. 688, 713, 826 A.2d 107, 123 (Conn.2003). Should the Supreme Court decide to extend and/or clarify the law on this issue, the present case might present an opportunity to do so. In the absence of any such pronouncement, however, we conclude, after close analysis of the relevant Louisiana jurisprudence, that Continental's duty to defend American Sugar going forward in this litigation is not subject to proration. Accordingly, we find no error in the trial court's judgment granting in part American Sugar's motion for partial summary judgment.
For the reasons stated, the judgment of the trial court is affirmed.
