CHERAMIE v. COLONY INSURANCE COMPANY LLC (2025)

In this appeal, defendants, Rathborne Properties, LLC and Colony Insurance Company, seek review of the trial court's July 8, 2024 judgment, granting Southern Cleaning & Restoration, LLC's motion for summary judgment and dismissing Rathborne and Colony's claims against Southern. For the following reasons, we reverse the trial court's judgment granting Southern's motion for summary judgment, deny that motion, and remand for further proceedings.

FACTS and PROCEDURAL HISTORY

This litigation involves injuries plaintiff, Chaz Cheramie, suffered in April 2022, when he fell through the roof of a commercial building at 220 Bark Drive in Harvey, Louisiana. Rathborne owned this Harvey property, but leased it to Southern. When the accident occurred, Cheramie was assisting Southern employees with roof repairs. In October 2022, Cheramie filed a lawsuit for his personal injuries against Southern, Rathborne, their insurers, and Teva Wache, a Southern employee.

Rathborne's lease of the Harvey property to Southern began August 8, 2002 and continued through the date of Cheramie's accident. Pursuant to the lease agreement, Southern assumed responsibility for the care, maintenance, and repair of the leased premises including the roof. Southern agreed to immediately notify Rathborne by telephone and in writing of the specifics of any problem with the roof or with the HVAC system that required maintenance or repair. Once notified, Rathborne agreed to arrange for repairs if Rathborne found the repairs necessary.

The lease agreement also contained an indemnity provision, under which Southern agreed to the following:

to indemnify, defend and hold Lessor [Rathborne] harmless from and against any and all claims, demands, damages, costs, liabilities, or causes of action of any kind, including attorneys’ fees and costs, for personal injury and/or property damages arising out of or occurring on, or relating to Southern Cleaning's use or occupancy of the leased premises, whether by acts, omissions, or negligence of any person, caused beyond control of any person or for any other reason whatsoever.

In Cheramie's lawsuit, Southern's liability insurers defended Rathborne. The Ohio Casualty Insurance Company (apparently incorrectly named as Liberty Mutual Insurance Company) settled Cheramie's claims against Southern and its employee, Teva Wache, and obtained a release of all claims asserted against Southern and Wache.

In November 2023, Ohio Security Insurance Company, The Ohio Casualty Insurance Company, and Liberty Mutual Insurance Company negotiated and funded a “Limited Receipt, Release, and Indemnification” settlement with Cheramie in favor of Rathborne in accordance with the holding in Gasquet v. Commercial Union Insurance Company, 391 So.2d 466, 483 (La. Ct. App. 1980), writ denied, 396 So.2d 921 (La. 1981) (hereinafter “the Gasquet settlement”). Rathborne did not participate in the negotiation or execution of the Gasquet settlement. Per the terms of the Gasquet settlement, Cheramie reserved the right to pursue claims “against any Non-Settling Insurers along with those limited rights against the Gasquet-Released Parties which are necessary to maintain claims against the Non-Settling Insurers.” As a result, the Gasquet settlement provided for a “partial release” of Rathborne, which stated that Cheramie fully released Rathborne from any and all claims, causes of action, and liabilities directly or indirectly attributable to the accident or lawsuit “except for those claims, causes of action, liabilities, obligations, and/or damages for which the Gasquet-Released Party [Rathborne] are afforded insurance coverage by any Non-Settling Insurer.”

Ohio Casualty paid $50,000 for Rathborne's liability and obtained an agreement relative to a future judgment as follows:

any amounts awarded to Plaintiff for the liability of the Gasquet Released Party will be subject to a credit equivalent to the amount of the Settlement Proceeds, which is the actual amount paid in settlement of the claims asserted against the Gasquet Released Party, as opposed to the Settling Insurers’ full policy limits, in determining the amount due from any Non-Settling Insurer in satisfaction of any potential future judgments rendered in the Lawsuit.

Based on the Gasquet settlement, Cheramie filed a motion and order for dismissal and partial dismissal of his claims against Southern, Wache, the settling insurers, and Rathborne. In that motion, Cheramie reserved the right to maintain any legal action against Rathborne to the extent it is afforded liability coverage by any other insurer. By judgment dated November 16, 2023, the trial court dismissed Southern, Wache, and the settling insurers. The judgment stated that Rathborne remained a “nominal defendant” to the lawsuit, and any judgment rendered against Rathborne would only be executed against Rathborne to the extent Rathborne has valid and collectible insurance for the amount due. To date, Rathborne has not paid or incurred any costs, fees, or damages as a result of Cheramie's claim.

Rathborne and its insurer, Colony, filed a third party demand against Southern seeking a defense and indemnification. Rathborne and Colony contend that Southern is obligated under the terms of the lease to defend and indemnify Rathborne for any costs or loss associated with Cheramie's claims. Colony also sought defense and indemnity from Southern in the Cheramie lawsuit as a “subrogated insurer of Rathborne” for any amounts paid to Cheramie under its policy.

On May 9, 2024 Southern filed a motion for summary judgment seeking dismissal of the third party demand based on its arguments that (1) Southern's insurers obtained a release of Rathborne except to the extent other collectible insurance is available; (2) Rathborne has no exposure for which it would require indemnity from Southern; and (3) the settlement fully protects Rathborne from any exposure in that it effectively erased any claim to which Rathborne's insurer could subrogate.

In opposition, Rathborne and Colony argued that (1) this claim involves the defense and indemnity provision contained in the lease agreement, which is valid and enforceable; and (2) any payments Colony has to make in the future would be predicated on an allocation of fault to Rathborne for Cheramie's injuries. Thus, Colony asserts that as Rathborne's insurer, it would be subrogated to Rathborne's indemnity rights under the lease agreement.

After a hearing, the trial court granted Southern's motion for summary judgment and dismissed Rathborne and Colony's claims against Southern in a judgment dated July 8, 2024. This appeal followed.

LAW and ANALYSIS

On appeal, Rathborne and Colony (hereinafter collectively referred to as “appellants”) assert the trial court erred in concluding that (1) appellants are not entitled to indemnity from Southern based on the Gasquet settlement; and (2) Colony is not subrogated to Rathborne's contractual indemnification rights under the lease agreement. As a result of these erroneous conclusions, appellants contend the trial court erred in granting Southern's summary judgment motion. Southern's position relies on the Gasquet opinion, which Southern asserts permits a plaintiff to release a primary insurer and the insured from all claims, reserving claims against the insured to the extent collectible coverage is afforded by excess insurance. Southern claims the settlement released Rathborne except as a nominal defendant that allows Cheramie to prosecute his claim for the sole purpose of collecting from Rathborne's insurers.

Appellate courts review the granting of a summary judgment de novo using the same criteria governing the trial court's consideration of whether summary judgment is appropriate. Faciane v. Golden Key Div. Ltd. P'ship, 17-636 (La. App. 5 Cir. 5/23/18), 249 So.3d 230, 233. Summary judgment shall be granted if the motion, memorandum, and supporting documents show that there is no genuine issue as to material fact and the mover is entitled to judgment as a matter of law. La. C.C.P. art. 966 A(3).

Due to Southern's sole reliance on the Gasquet release and the merits of the Gasquet decision, we begin our discussion with Gasquet. Plaintiff therein brought an action against an airboat owner and his insurer to recover damages for personal injuries sustained in an airboat accident. Gasquet v. Com. Union Ins. Co., 391 So.2d 466, 468 (La. Ct. App. 1980), writ denied, 396 So.2d 921 (La. 1981), and writ denied, 396 So.2d 922 (La. 1981). Prior to the trial, the plaintiff settled all claims against the airboat owner's primary insurer for $200,000; and pursuant to that settlement, the plaintiff granted the excess carrier a $300,000 credit against any judgment that might be rendered against it by the trial court.¹ Id. The excess insurer sought dismissal by summary judgment, asserting that because the settlement was for less than the primary policy's limits, no coverage existed under the excess policy. Id. at 470. The trial court denied the excess insurer's summary judgment motion. Id.

On appeal, the excess carrier argued that it had no liability because the underlying limit was not “paid.” Id. The Louisiana Fourth Circuit Court of Appeal held that the plaintiff's release of the primary insurer and partial release of the airboat owner for less than the full primary limit, with a credit for the full primary limits and a reservation of the right to proceed against the excess carrier, did not release the excess carrier from its liability. Id. at 471.

In reaching its conclusion, the Gasquet court did not cite any Louisiana code article or statutory law in support of its decision. The Gasquet court also did not consider or discuss any relevant policy language in denying the excess insurer's motion for summary judgment.

Following that decision, courts have interpreted Gasquet to permit a release in a settlement agreement, in which a plaintiff (1) releases the primary insurer entirely, and (2) releases the insured from all claims which might be recovered from the insured directly, but reserving claims against the insured only to the extent that collectible coverage is afforded by an excess insurance policy. Aggreko, L.L.C. v. Chartis Specialty Ins. Co., 942 F.3d 682, 695 (5th Cir. 2019), citing RSUI Indemnity Co. v. American States Insurance Co., 127 F.Supp.3d 649, 657 (E.D. La. 2015). Primary insurers take the position that procedurally, after a Gasquet release is executed, the insured remains in the lawsuit as a “nominal” defendant while the plaintiff pursues recovery from the excess insurer. Id.

We realize that the use of a Gasquet release has been recognized by some Louisiana courts. Jones v. Capitol Enters., Inc., 11-956 (La. App. 4 Cir. 5/9/12), 89 So.3d 474, 480-81, writ denied, 12-1634 (La. 10/26/12), 99 So.3d 651. Given the unique nature ² of the Gasquet release and the facts present here, we have considered the compatibility of this settlement with Louisiana contract law.³

In Louisiana, the Civil Code establishes only two sources of law: legislation and custom. La. C.C. art. 1. Of these two categories, legislation is superior to custom and will supersede it in every instance. La. C.C. art. 3. Judicial decisions, on the other hand, are not an authoritative source of law in Louisiana. Bergeron v. Richardson, 20-1409 (La. 6/30/21), 320 So.3d 1109, 1114. Louisiana courts have frequently noted that our civilian tradition does not recognize the doctrine of stare decisis in our state. Bergeron, 320 So.3d at 1114-15; Ardoin v. Hartford Acc't & Indem. Co., 360 So.2d 1331, 1334 (La. 1978); Gulf Oil Corp. v. State Mineral Bd., 317 So.2d 576, 591 (La. 1975); Carter v. Moore, 258 La. 921, 959, 248 So.2d 813 (1971).

Louisiana's civilian tradition requires Louisiana courts to begin their legal analysis by examining primary sources of law, consisting of the constitution, codes, and statutes. Bergeron, 320 So.3d at 1116; Delta Chemical Corp. v. Lynch, 07-431 (La. App. 4 Cir. 2/27/08), 979 So.2d 579, 588, writ denied, 08-683 (La. 5/30/08), 983 So.2d 898, and 08-761 (La. 5/30/08), 983 So.2d 904. La. C.C. art. 4 states, when no rule exists for a particular situation, the court is bound to proceed according to equity. An equitable result is determined based on justice, reason, and prevailing usages. La. C.C. art. 4. Jurisprudence, even when it rises to the level of jurisprudence constante, is a secondary law source. Id.

Guided by the above principles of law and many others set forth below, we discuss the contractual issues related to the Gasquet release as it pertains to this case. Considering these issues, we find the trial court erred in granting Southern's motion for summary judgment.

 Southern's Obligations under the Lease

Under the lease, Southern is obligated to fully defend and indemnify Rathborne in this lawsuit, which its liability insurer did until its insurers entered into the Gasquet settlement. Specifically, the lease stated:

Lessee hereby assumes responsibility for the condition of the leased premises and for the actions of its agents, employees and invitees and liability for personal injury and/or property damage arising or occurring on, or relating to Lessee's use or occupancy of, the leased premises. Lessee hereby agrees to indemnify, defend and hold Lessor harmless from and against any and all claims, demands, damages, costs, liabilities or causes of action of any kind, including attorneys’ fees and costs, for personal injury and/or property damages arising or occurring on, or relating to Lessee's use or occupancy of, the leased premises, whether by acts, omissions or negligence of any person, causes beyond the control of any person, or for any other reason whatsoever.

Thus, Southern agreed to indemnify, defend, and hold Rathborne harmless against any and all claims of any kind arising out of or occurring on the property.

The general rules governing the interpretation of other contracts apply in construing an indemnity contract. Soverign Insurance Company v. Texas Pipe Line Company, 488 So.2d 982, 984 (La. 1986); Dean v. Griffin Crane & Steel, Inc., 05-1226 (La. App. 1 Cir. 5/5/06), 935 So.2d 186, 191, writ denied, 06-1334 (La. 9/22/06), 937 So.2d 387. Courts interpret contracts to determine the common intent of the parties. La. C.C. art. 2045; Soverign Insurance Company, 488 So.2d at 984; Dean, 935 So.2d at 191. The determination of the intention of the parties is the foremost requirement in the interpretation and construction of a contract. Polozola v. Garlock, Inc., 376 So.2d 1009, 1014 (La. Ct. App. 1979), writ denied, 379 So.2d 1103 (La. 1980). This determination is an objective inquiry; thus, “a party's declaration of will becomes an integral part of his will.” Dean, 935 So.2d at 191. The purpose of the indemnity agreement is to allocate risks inherent in the activity between the parties to the contract. Id.

The granting of Southern's motion for summary judgment is contrary to the common intent and purpose of the clear language in Southern and Rathborne's lease. The lease obligates Southern to defend and indemnify Rathborne for personal injuries and property damage arising out of, occurring on, or relating to Southern's use of the property or occupancy of the leased property. The Cheramie claim clearly involves personal injuries related to Southern's use of the leased property.

Southern's insurers assert they have obtained a release of Rathborne and that Rathborne merely remains a nominal defendant for amounts that are covered by valid and collectible insurance. The term “nominal defendant” is not defined in this Gasquet settlement. In addition, the settlement is entitled a “Limited Receipt, Release, and Indemnification,” and the settlement expressly refers to the release of Rathborne as a “Partial Release of Gasquet-Released Party.” According to the Gasquet settlement, the only fully released parties are the Settling Insurers, who, along with Southern, have settled their way out of the case without paying their limits, and left Colony to continue to defend Rathborne and to pay any potential excess liability.

Southern asserts that Rathborne is not exposed to any further liability under the Gasquet settlement. Significantly, however, Rathborne's insurer cannot have any potential liability but for Rathborne's potential liability. An insurer's liability is contingent upon proof of the negligence or tortious conduct of its insured. Brown v. Unknown Driver, 05-421 (La. App. 4 Cir. 1/18/06), 925 So.2d 583, 590; Musmeci v. American Automobile Insurance Co., 146 So.2d 496, 501 (La. App. 4 Cir. 1962). Without Rathborne and its lease with Southern, Rathborne's insurers would have no potential liability. A liability insurer cannot be liable for claims against its insured when, substantively, the insured itself is relieved of liability. Cavalier v. Rivere's Trucking, Inc., 03-2197 (La. App. 1 Cir. 9/17/04), 897 So.2d 38, 41; Bourque v. Lehmann Lathe, Inc., A. Div. of Smith Int'l, Inc., 476 So.2d 1129, 1131 (La. Ct. App.), writ denied sub nom. Bourque v. Lehmann Lathe, Inc., Div. of Smith Int'l, Inc., 479 So.2d 362 (La. 1985). Thus, if Rathborne's insurers have any potential liability, it is based on Rathborne's potential liability.

The notion of a “nominal defendant”—one who is dismissed from the case while remaining in the case—and the assertion that Rathborne is such a “nominal defendant” appears to be a legal fiction or pretense created by Gasquet, and an illusionary dismissal of Rathborne. Regardless, Rathborne remains a defendant in the lawsuit and continues to require a defense to any claims asserted against it.

The record is clear that Southern and Rathborne had a contractual relationship upon which Southern's obligation to Rathborne is based. Southern and/or its insurers cannot unilaterally terminate Southern's contractual obligation to Rathborne under the lease via a tort settlement agreement. Rathborne was not a party to the Gasquet settlement in this case. Rathborne was not involved in the negotiation or execution of the Gasquet settlement, did not agree to terminate its rights under the lease, and did not agree to remain a defendant. Rathborne did not surrender or waive its right to a defense and indemnity relative to the claim from Southern in the Gasquet settlement.

The Civil Code is clear that if a contract does not lead to absurd consequences, it will be enforced as written. La. C.C. art. 2046; Doerr v. Mobil Oil Corp., 00-947 (La. 12/19/00), 774 So.2d 119, 124. The words used in a contract must be given their generally prevailing meaning. La. C.C. art. 2047. Counsel for Southern fails to provide any reasonable basis as to why this court should disregard the language of the lease or the Civil Code other than to point to an appellate court decision from another circuit, which lacks any analysis of these particular facts and issues. In addition, the specific facts of the Gasquet case are not clear from the opinion. As a result, we cannot say, as a matter of law, that the facts presented here are substantially similar enough to the Gasquet case to find no genuine issue of material fact exists supporting the granting of Southern's summary judgment motion.

Southern and Rathborne's contractual relationship and the obligations which flow from it continue to exist despite the Gasquet settlement. The legally created fiction of a “nominal defendant” from the Gasquet case is insufficient to support the finding that no genuine issue of material fact exists in this case. Nor do we find that Southern is entitled to summary judgment as a matter of law, i.e., the lease contract, the law between the parties, requires that Southern indemnify, defend, and hold Rathborne harmless. The settlement does not provide for or guarantee that these obligations are or will be satisfied. Rathborne and Colony have a right to pursue enforcement of these and all other obligations of the lease in a third party action. We therefore find summary judgment was not appropriate.

The judicial responsibility in interpreting contracts is to determine the parties’ common intent. Halverson v. USAA Cas. Ins. Co., 06-69 (La. App. 4 Cir. 3/22/06), 929 So.2d 198, 200. Considering the foregoing, we find the granting of Southern's motion for summary judgment is inconsistent with the lease between Southern and Rathborne. Therefore, it is contrary to Louisiana contract law requiring that a contract must be enforced according to its plain language as written.

 Jurisprudence Constante

Louisiana's civilian tradition considers a single decision unbinding on Louisiana courts, while a series of decisions form a “constant stream of uniform and homogenous rulings having the same reasoning,” jurisprudence constante applies and operates with “considerable persuasive authority.” Doerr, 774 So.2d at 128. Because a fundamental rule of the civil law tradition is that a tribunal is never bound by previous decisions, it can always change its mind. Id. Jurisprudence is persuasive, but not authoritative, expressions of the law. Doerr, 774 So.2d at 129. Thus, it is only when courts consistently recognize a long-standing rule of law outside of legislative expression that the rule of law will become part of Louisiana's custom under Civil Code article 3 and be enforced as the law of the state. See La. C.C. art. 3; Bergeron, 320 So.3d at 1115.

Southern relies on the Gasquet release in this case with no consideration or analysis of the lease or the policies issued to Southern and Rathborne. The application of the Gasquet release in this case clearly ignores the plain language of the lease at issue, which required Southern to defend and indemnify Rathborne for personal injuries and property damage arising out of, occurring on, or relating to Southern's use of the property or occupancy of the leased property. In leasing the property to Southern, Rathborne relied on this agreement. The summary judgment motion and the Gasquet release do not take into consideration or resolve the issues under the lease herein.

By ignoring the language of the lease, application of the Gasquet case is inconsistent with civilian law on contracts. Considering the issues discussed herein and the unique circumstances of this case, upon de novo review, we find that summary judgment was not appropriate in this case. Accordingly, we reverse the judgment granting Southern's motion for summary judgment and deny that motion.

DECREE

For the foregoing reasons, after de novo review, we reverse the trial court's judgment granting Southern's motion for summary judgment, deny that motion, and remand for further proceedings.

REVERSED AND REMANDED

FOOTNOTES

1.   The release in Gasquet stated:WHEREAS, Gasquet, recognizing the uncertainties of litigation, is willing to accept $200,000 in cash for a complete release to Commercial Union for all claims arising under the primary insurance policy providing $300,000 in coverage; andWHEREAS, Gasquet is willing to allow a credit to Stonewall for the full $300,000 amount of the primary insurance policy issued by Commercial Union in consideration for the aforesaid payment by Commercial Union; andWHEREAS, Gasquet specifically desires to reserve to himself and to specifically exclude from this partial receipt and release all claims against Stonewall (in excess of the $300,000 primary insurance coverage) and to continue to prosecute the said claims against Stonewall pursuant to the Louisiana Direct Action Statute, La. R.S. 22:655; andWHEREAS, Gasquet is willing to release H & B, B & S, and Louisiana Dredging from all claims which might be recovered from H & B, B & S and Louisiana Dredging directly, but specifically reserving his claims only to the extent that collectible coverage is afforded to H & B, B & S, and Louisiana Dredging by the said policy of excess insurance issued by Stonewall * * *.Gasquet, 391 So.2d at 470–71.

2.   The Gasquet agreement is a unique aspect of Louisiana law, which should be heard by a court familiar with Louisiana law. Gruver v. Louisiana, No. CV 18-772-SDD-EWD, 2021 WL 3204747 at 5 (7/28/2021).

3.   In 2024 the legislature amended R.S. 22:1269 re. direct action against insurers. Late in the process, a committee amendment added an innominate uncodified section to the bill, but not to the Revised Statutes. It stated, “Nothing in this Act shall prevent a plaintiff from resolving a claim of coverage against one insurer while preserving a claim against another insurer of the same defendant in the same cause of action, as contemplated by Gasquet vs. Commercial Union Insurance Company, 391 So.2d 466 (La. 1981) and its progeny.” Act 275 § 4. This did not amend or add to an existing law, nor was it designated as remedial or interpretive of any statute. It does not legislatively affirm Gasquet, but states only that this Act does not prevent such a settlement. Nothing in the bill's statutory changes dealt with any aspect of Gasquet or settlements. It appears not germane to the bill as originally introduced. See La. Constitution Art. 3 § 15 C.

WINDHORST, J.