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JOHN SEIBEL, INDIVIDUALLY, AND ON BEHALF OF HIS MINOR CHILD, REX SEIBEL, AND MALEAH FLANAGAN v. CATHY HOLMES, JOE HARTEAU, ESURANCE PROPERTY AND CASUALTY INSURANCE COMPANY, AARON MUNRO, USAA CASUALTY INSURANCE COMPANY, AND XYZ INSURANCE COMPANY
In this personal injury matter, the plaintiffs appeal the judgment of the trial court that sustained a defendant insurer's peremptory exception raising the objection of no right of action and dismissed the plaintiffs' claims against the insurer. For the reasons that follow, we reverse and remand.
FACTS AND PROCEDURAL HISTORY
On April 19, 2021, John Seibel, individually and on behalf of his minor child, Rex Seibel, and Maleah Flanagan filed a Petition for Damages and Personal Injuries naming as defendants, Cathy Holmes, Joe Harteau, and XYZ Insurance Company.1 In their petition, the plaintiffs alleged that on December 12, 2020, Mr. Seibel was operating his vehicle in a careful and prudent manner traveling eastbound in the right lane on Interstate 10 in St. Tammany Parish, when suddenly and without warning, a vehicle driven by Ms. Holmes and owned by Mr. Harteau, which had been stopped on the right shoulder of the interstate, improperly merged onto Interstate 10 striking Mr. Seibel's vehicle. The plaintiffs asserted that, as a result of the collision, Mr. Seibel's vehicle spun around and became disabled in the center eastbound lane facing oncoming traffic, at which time Aaron Munro, who was operating a vehicle traveling in the center eastbound lane, collided into the front right side of Mr. Seibel's vehicle. The plaintiffs further asserted that Maleah Flanagan was a guest passenger in Mr. Seibel's vehicle, who was pregnant with his child, and that due to the accident, she was forced to undergo an emergency cesarean section for the birth of Rex Seibel. Therefore, the plaintiffs sought damages for the injuries they suffered caused by the defendants' negligence.
On June 28, 2021, the plaintiffs filed a Supplemental and Amending Petition for Damages. Therein, the plaintiffs substituted Acuity, a Mutual Insurance Company (Acuity), a Wisconsin-based insurer, as a defendant for XYZ Insurance Company and alleged that Acuity had in full force and effect an insurance policy that provided liability/bodily injury coverage to Ms. Holmes for the claims asserted in their petition.2
Thereafter, on August 19, 2021, Acuity filed a peremptory exception raising the objection of no right of action. Acuity asserted that it did not insure any party or vehicle made the subject of the plaintiffs' action on the date of the alleged accident. Therefore, according to Acuity, the plaintiffs had no right of action against it under the Louisiana Direct Action Statute, and Acuity sought the dismissal of the plaintiffs' claims with prejudice.
In support of its peremptory exception, Acuity filed a memorandum and attached thereto a copy of its January 22, 2021 correspondence addressed to the plaintiffs' counsel, wherein Acuity stated that it had searched its records and could not find any policy issued to Joe Harteau at the time of the subject accident. According to the memorandum, Acuity conducted another review of its records and identified a commercial automobile insurance policy, No. ZG6787, issued to Go Green Enterprises, LLC (Go Green), a Michigan limited liability company, that it stated may have provided coverage for the vehicle driven by Ms. Holmes prior to the date of the subject accident. However, Acuity asserted that the Go Green policy was cancelled effective November 19, 2020. Acuity attached to its memorandum a copy of an undated cancellation for insurance policy No. ZG6787, with an effective cancellation date of November 19, 2020, wherein the reason given for the cancellation was “POLICY CANCELLED MIDTERM CANCELLATION.” Acuity also stated in its memorandum that it was in the process of obtaining a certified copy of the Go Green insurance policy with the Notice of Cancellation and would supplement the memorandum with the exhibits. Acuity further argued that after the cancellation of the policy on November 19, 2020, Acuity did not renew, rewrite, or reissue any policy for any vehicle or any party involved in the subject accident.
Subsequently, Acuity filed an ex parte motion for leave to supplement exhibits in support of its peremptory exception, which was granted. Acuity included a certified copy of the Go Green policy, No. ZG6787, issued with the effective Acuity policy dates of September 1, 2020 to September 1, 2021, as well as the Notice of Policy Termination to Go Green, dated October 19, 2020, with a termination date of November 19, 2020. The reason given for termination was “CHANGE IN OPERATIONS THAT INCLUDE STORM AND HURRICANE CLEANUP IN LOUISIANA. ACUITY IS NOT LICENSED TO OPERATE IN LOUISIANA AND ACUITY IS NOT A MARKET FOR STORM/HURRICANE CLEANUP OPERATIONS.” Acuity also attached the affidavit of Kim Whitaker, a Senior Inside Claims Representative for Acuity, verifying the termination information and attesting that no further policies were issued to Go Green, to Mr. Harteau, or to Cathy or Kathy Holmes as a named insured for any policy period that included December of 2020.
In response, the plaintiffs filed an opposition to Acuity's exception.3 In their opposition, the plaintiffs argued that Acuity offered no proof that it complied with the required procedures for the cancellation of the policy. The plaintiffs maintained that the policy cancellation was not effective on November 19, 2020, as the written notice of cancellation was not sent via certified mail, return receipt requested, as required by Michigan law.4
In its reply memorandum, Acuity referred to attached discovery responses by Ms. Holmes wherein she stated that she was “not personally aware of ever being insured by Acuity.” Additionally, Ms. Whitaker provided a second affidavit, dated December 15, 2021, wherein she attested to the authenticity of an attached record, maintained in the regular course of business by Acuity, showing “attempted payments/ACH withdrawals for the premium for Policy Number ZG6787” and that “Acuity was unable to process the premium for Policy Number ZG6787 in October 2020 due to insufficient funds.”5
On December 17, 2021, the trial court held a hearing on the exception. At the hearing, Acuity offered, and the trial court ordered, into evidence all of the exhibits attached to Acuity's exception. The plaintiffs did not offer any evidence at the hearing. At the conclusion of the hearing, the trial court sustained Acuity's peremptory exception raising the objection of no right of action. On January 19, 2022, the trial court signed a judgment sustaining the exception in conformity with its ruling and dismissing the plaintiffs' claims with prejudice against Acuity. The plaintiffs appealed the judgment of the trial court.6
No Right of Action
Generally, an action can be brought only by a person having a real and actual interest which he asserts. LSA-C.C.P. art. 681. The peremptory exception raising the objection of no right of action is designed to test whether the plaintiff belongs to the class of persons to whom the law grants the cause of action asserted in the suit. LSA-C.C.P. art. 927(6); Louisiana Environmental Action Network, Inc. v. Brown, 2019-0607 (La.App. 1 Cir. 1/9/20), 294 So.3d 1066, 1071, writ denied, 2020-00246 (La. 4/27/20), 295 So.3d 950. The objection assumes that the cause of action asserted is valid and tests whether the plaintiff has an interest in judicially enforcing it. The question is simply whether the plaintiff has a right to sue the defendant to enforce the claim. St. Cyr v. St. Cyr, 2016-0896 (La.App. 1 Cir. 2/21/17), 215 So.3d 283, 285, writ denied, 2017-0511 (La. 3/31/17), 217 So.3d 357. The function of the peremptory exception is to have the plaintiffs action declared legally nonexistent, or barred by effect of law, and hence this exception tends to dismiss or defeat the action. LSA-C.C.P. art. 923.
The party raising the exception has the burden of proving the plaintiff has no right of action to proceed with its claim. Louisiana Environmental Action Network, Inc., 294 So.3d at 1071. On review of an objection of no right of action, unlike the review of the objection of no cause of action, this court reviews the pleadings as well as any evidence submitted in support of or in opposition to the exception. See LSA-C.C.P. art. 931.
Generally, district court rulings maintaining exceptions raising the objection of no right of action are reviewed de novo on appeal because they involve questions of law. Pearce v. Lagarde, 2020-1224 (La.App. 1 Cir. 10/7/21), 330 So.3d 1160, 1167, writ denied, 2022-00010 (La. 2/22/22), 333 So.3d 446. However, when evidence is introduced to support or controvert an exception of no right of action, factual findings are reviewed under the manifest error standard of review. Id.
The Direct Action Statute
An insurance policy is a contract between the insured and insurer and has the effect of law between them. See LSA-C.C. arts. 1906 and 1983; Gorman v. City of Opelousas, 2013-1734 (La. 7/1/14), 148 So.3d 888, 892. In this matter, the plaintiffs' right to sue Acuity arises out of the Louisiana Direct Action Statute, LSA-R.S. 22:1269, which provides that an injured person, at his or her option, “shall have a right of direct action against the insurer within the terms and limits of the policy.” LSA-R.S. 22:1269(B)(1); Gorman, 148 So.3d at 893.
The Direct Action Statute grants a procedural right of action against an insurer where the plaintiff has a substantive cause of action against the insured. Soileau v. Smith True Value and Rental, 2012-1711 (La. 6/28/13), 144 So.3d 771, 775. The Direct Action Statute was enacted to give special rights to tort victims. In the absence of the Direct Action Statute, a plaintiff would have no right of action against an alleged tortfeasor's liability insurer because the obligation between the plaintiff and the alleged tortfeasor is delictual in nature, and the plaintiff has no contractual relationship with the tortfeasor's insurer. Because the Direct Action Statute provides the sole procedural right of action against the insurer in this case, the Direct Action Statute provides the rules regulating the subject. Soileau, 144 So.3d at 775-76.
The Direct Action Statute allows a tort victim to sue both the insured and its insurer, as a solidary obligor, or the insurer alone, when certain conditions set forth in the statute are met. LSA-R.S. 22:1269(B). The Direct Action Statute does not create an independent cause of action against the insurer. It merely grants a procedural right of action against the insurer when the plaintiff has a substantive cause of action against the insured. OXY USA Inc. v. Quintana Production Co., 2011-0047 (La.App. 1 Cir. 10/19/11), 79 So.3d 366, 377, writ denied, 2012-0024 (La. 3/2/12), 84 So.3d 536.
A defendant challenging a plaintiff's right to proceed under the Louisiana Direct Action Statute may do so by means of an exception of no right of action. Diamond v. Progressive Sec. Ins. Co., 2005-0820 (La.App. 1 Cir. 3/24/06), 934 So.2d 739, 742. Thus, an insurance company that proves that the requirements of the Direct Action Statute have not been fulfilled is entitled to dismissal of the claim against it on an exception raising the objection of no right of action. Id.
Accordingly, in light of these applicable precepts, we must now examine whether the plaintiffs possessed a procedural right of action to assert claims against Acuity pursuant to the Louisiana Direct Action Statute.
In their appeal, the plaintiffs maintain that the trial court erred in sustaining Acuity's exception, as Acuity did not submit sufficient admissible evidence that it had validly cancelled the insurance policy in question prior to the subject motor vehicle accident. Particularly, the plaintiffs suggest that Acuity admitted that its Notice of Cancellation was not sent by certified mail, return receipt requested, as required by M.C.L. § 500.3224. Michigan Compiled Laws § 500.3224, part of Chapter 32 regarding Cancellation of Automobile Policies, provides, in pertinent part:
(2) For the provisions of this chapter only, no cancellation shall be effective unless a written notice of cancellation is mailed by certified mail, return receipt requested, to the insured at the last address known to the insurer either through its records, the personal records of the agent who wrote the policy, or as supplied by the insured.
The plaintiffs aver that cancellations must comply with the provisions of M.C.L. § 500.3224, including the requirement that notice of cancellation be sent by certified mail, return receipt requested.
In contrast, Acuity maintains that under the particular facts and circumstances of this matter, Michigan law did not require certification of mailing with a return receipt. Acuity specifically points to M.C.L. § 500.3212, found in the same chapter relied on by the plaintiffs, which provides, in part, that “[t]he provisions of this chapter are not applicable to cancellations occasioned by nonpayment of premiums.” Acuity argues that the applicable cancellation provision is M.C.L. § 500.3020(b), found in Chapter 30 regarding Casualty Insurance Contracts, which provides, in relevant part, that:
[T]he policy may be canceled at any time by the insurer by mailing to the insured at the insured's address last known to the insurer or an authorized agent of the insurer, with postage fully prepaid, a not less than 10 days' written notice of cancellation with or without tender of the excess of paid premium or assessment above the pro rata premium for the expired time.
Thus, according to Acuity, the policy was validly cancelled by mailing the termination letter to the last known address of the insured without any requirement of certification.
On our review, the only notice of cancellation in the record for policy number ZG6787 is the letter to Go Green dated October 19, 2020, which provides a termination date of November 19, 2020. The reason stated for the policy termination was: “CHANGE IN OPERATIONS THAT INCLUDE STORM AND HURRICANE CLEANUP IN LOUISIANA. ACUITY IS NOT LICENSED TO OPERATE IN LOUISIANA AND ACUITY IS NOT A MARKET FOR STORM/HURRICANE CLEANUP OPERATIONS.” No reference is made to any nonpayment of the premium by Go Green. Although Acuity argues that the policy was cancelled for nonpayment, the record is devoid of any evidence that Go Green was sent a notice of cancellation based on nonpayment of the premium.7 Acuity failed in its burden of proving that M.C.L. § 500.3212, regarding “cancellations occasioned by nonpayment of premiums,” applies herein. Accordingly, we find that the mailing of the notice of cancellation to the insured by regular mail, which referenced “change in operations,” failed to meet the requirements of M.C.L. § 500.3224(2), and Acuity's cancellation of Go Green's insurance policy was ineffective.
The record does not establish a lack of coverage by Acuity of Ms. Holmes or the vehicle she was operating on the date of the accident. Therefore, we find that the trial court erred in sustaining Acuity's peremptory exception raising the objection of no right of action.
For the foregoing reasons, we reverse the January 19, 2022 judgment of the trial court that sustained the peremptory exception raising the objection of no right of action filed by the defendant, Acuity, a Mutual Insurance Company, and dismissed the claims of the plaintiffs, John Seibel, individually, and on behalf of his minor child, Rex Seibel, and Maleah Flanagan. This matter is remanded to the trial court for further proceedings. All costs of this appeal are assessed to the defendant, Acuity, a Mutual Insurance Company.
REVERSED AND REMANDED.
1. The plaintiffs also named as defendants, Aaron Munro, Esurance Property and Casualty Insurance Company, and USAA Casualty Insurance Company. These defendants, however, are not part of this appeal.
2. The Supplemental and Amending Petition also added Garrison Property and Casualty Insurance Company as a defendant that provided uninsured/underinsured policy coverage for the plaintiffs in this matter.
3. The plaintiffs attached to their opposition a copy of the police report regarding the subject accident, which referenced Acuity as an insurer. However, the plaintiffs did not introduce a copy of the police report at the hearing on the exception.
4. None of the parties dispute the application of Michigan law to the cancellation of the insurance policy at issue herein.
5. Acuity also attached “a copy of the return receipt following delivery of Acuity's position letter to [Mr.] Harteau and [Ms.] Holmes at the policy address in Kingsford, Michigan.” Acuity argued that the position letter set forth its belief that it provided no coverage and, therefore, owed no defense.
6. Initially, the plaintiffs filed an application for supervisory writs with this court. See 2022 CW 0393. On July 5, 2022, this court granted the writ with an order stating that the trial court's January 19, 2022 judgment was a final, appealable judgment and granting the writ application for the limited purpose of remanding the matter to the trial court with instructions to grant an appeal to the plaintiffs. This court further instructed the plaintiffs, in the event they sought an appeal, to submit an order for appeal to the trial court within fifteen days of this court's order. The plaintiffs complied with the order, filing an order for appeal on July 18, 2022, which the trial court signed on July 19, 2022.
7. To the extent that Acuity relies on its position letter sent to Ms. Holmes and Mr. Harteau to support its position, the position letter is not in the record before us.
Response sent, thank you
Docket No: 2022 CA 1107
Decided: August 16, 2023
Court: Court of Appeal of Louisiana, First Circuit.
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