Tag: Automobile insurance

Legislature Responds to Louisiana Supreme Court Decision and Sets New Public Policy Regarding Insurance Coverage for Permissive Use of Non-Owned Vehicles

11.14.2022

Imagine you are visiting family during the holidays. As a favor, you take a family member’s vehicle to the gas station for a fill-up. While in transit, you get into an accident where you are at fault. Does your insurance policy provide coverage for the accident?

According to La. R.S. 22:1296.1, a new statute that went into effect on August 1, 2022, the answer to this question is “yes,” your insurance may afford coverage under these facts.

La. R.S. 22:1296.1 now requires insurance policies issued in Louisiana to provide coverage when the driver insured under the policy operates a non-owned vehicle with the express or implied permission of the vehicle’s owner. The statue was enacted to declare a new public policy regarding this issue and was passed in response to the Louisiana Supreme Court’s decision in Landry v. Progressive Security Insurance Company, 2021-00621 (La. 1/28/22), reh’g denied, 2021-00621 (La. 3/25/22); 338 So.3d 1162.

The Landry case involved a motor vehicle accident that occurred as the defendant-driver, as a favor to the vehicle’s owner, drove the vehicle to a tire shop to repair a tire. The plaintiffs brought an action against the defendant-driver, the driver’s insurer, and the insurer of the vehicle that he drove at the time of the collision.

The Louisiana Supreme Court upheld a provision in the driver’s policy that stated coverage under such circumstances was only available when the driver’s own vehicle was out of service. Because the driver’s vehicle was not out of service, no coverage was found under the driver’s policy. In so holding, the Landry court found that public policy did not  require automobile insurance liability coverage for a driver’s negligent operation of a non-owned vehicle.

The Louisiana legislature enacted La. R.S. 22:1296.1 in response to the Landry decision. The statute provides that an insurer writing automobile liability, uninsured, underinsured, or medical payments coverage shall not exclude the benefits of such coverage under its policy to an insured operating a non-owned vehicle if all of the following requirements are satisfied:

  • The coverage is in full force and effect.
  • The insured is operating a vehicle owned by another with the express or implied permission of the vehicle’s owner.
  • The non-owned vehicle that is being operated by the insured is not provided, furnished, or available to the insured on a regular basis.

The statute also provides this coverage is secondary to the vehicle owner’s insurance policy. Furthermore, if the coverage provided under the statute is included within the coverage provided pursuant to La. R.S. 22:1296, which addresses coverage for temporary, substitute, and rental vehicles, the provisions of La. R.S. 22:1296 determine which coverage is primary. (For additional information regarding La. R.S. 22:1296 click here.) [Sophia, please include link to blog from 5/25/22].

Let’s return to real life scenarios like those we addressed above. Perhaps you are blocked in at a party, so a friend tosses you the keys to move their car, or, like the situation in Landry, maybe you are trying to do a good deed by driving your parents’ car to a gas station for a fill-up when an accident occurs. While it remains to be seen how courts will interpret this statute in these circumstances, under the new legislation, these actions may now implicate coverage under your insurance policy.

Case Reference: Landry v. Progressive Security Insurance Company, 2021-00621 (La. 1/28/22), reh’g denied, 2021-00621 (La. 3/25/22); 338 So.3d 1162.

Insurance Coverage for “Temporary Substitute Autos” in Louisiana

05.25.2022

Louisiana insurance law recognizes a practical problem faced by many: the need to obtain alternative transportation when the car won’t start. Under La. R.S. 22:1296, any insurance on your personal vehicle must also extend to vehicles that are used as “temporary substitute autos.”

The statute provides that a car’s status as a “temporary substitute auto” depends on how the term is defined in the particular auto policy at issue. However, some rules typically apply to determine whether the auto is a “temporary substitute.” First, the use must be temporary, i.e. limited in duration. Second, the car must be a substitute for the auto insured under the policy and used for the same purpose. Third, policies typically limit coverage to substitute vehicles that the driver does not own.

Some policies also limit coverage by requiring that the substitution be needed for a purpose identified in the policy, such as the breakdown, repair, or destruction of the covered auto.

While the statute generally defers to the definition of “temporary substitute auto” provided in the policy, sometimes courts will overrule the insurer’s definition. For instance, in State Farm Mutual Automobile Insurance Company v. Safeway Insurance Company, 50-098 (La. App. 2 Cir. 9/30/15), 180 So.3d 450, the relevant policy defined a “temporary substitute auto” as a substitute for the owned auto when the owned auto was “being serviced or repaired by a person engaged in the business of selling, repairing, or servicing motor vehicles.” The case involved a motor vehicle accident that occurred while the policy holder operated a borrowed vehicle but before she brought her usual vehicle to a mechanic.

Citing the terms of the policy, the insurer denied coverage on grounds that the policy required the “temporary substitute auto” not only take the place of the driver’s usual vehicle, but also that the driver take the car to a mechanic before coverage would extend to the substitute vehicle. However, the court found this requirement to be against the public policies behind La. R.S. 22:1296 and found coverage under the policy extended to the borrowed vehicle.

No Pay, No Play: What is it and why does it matter?

04.06.2020

Louisiana’s automobile insurance premiums are some of the highest in the United States. With so many other demands on driver’s wallets, it may seem tempting to simply not purchase a liability automobile policy, even if it is required by Louisiana law. Louisiana’s “No Pay, No Play” statute, LA-R.S. 32:866, is intended to fight that temptation. See Progressive Sec. Ins. Co. v. Foster, 1997-2985 (La. 4/23/98), 711 So.2d 675. Below are some key considerations for drivers and insurers on either side of a potential “No Pay, No Play” dispute.

For Drivers

The “No Pay, No Play” statute means just what it seems—if you do not pay for your own liability insurance, you cannot recover under someone else’s liability insurance even if the accident is not your fault … at least to a point.

Specifically, the “No Pay, No Play” statute precludes someone who does not have liability insurance from recovering from another driver’s policy (1) the first $15,000 of bodily injury damages and (2) the first $25,000 of property damage. Of course, if damages do not exceed these amounts, it means the uninsured driver cannot recover his or her damage at all.

Of course, some exceptions exist. For example, the statute does not apply (meaning, it does reduce the plaintiff driver’s recovery) if the other driver is cited for operating his or her vehicle while intoxicated and is convicted or pleads nolo contendere; if the other driver intentionally causes the accident; if the other driver flees the scene; or if the other driver is in furtherance of the commission of a felony. However, the off-chance that a driver falls into an exception should not outweigh the obligation to comply with Louisiana law.

For Insurers

Generally, liability insurers should assert the “No Pay, No Play” affirmative defense when it appears a plaintiff driver lacks liability insurance. However, insurers should also keep in mind that this defense also has limitations.

For instance, the “No Pay, No Play” statute is not necessarily a total bar to a plaintiff’s recovery. If damages exceed $15,000 for bodily injury and/or $25,000 for property damage, payment may still be owed for these excess damages.

Secondly, the party asserting the “No Pay, No Play” affirmative defense—usually a defendant insurer—bears the burden of establishing that the plaintiff driver lacked insurance coverage on the vehicle he or she was operating at the time of the incident.

This burden can sometimes present difficult issues. For instance, in Johnson v. Henderson, 2004-1723 (La.App. 4 Cir. 3/16/05), 899 So.2d 626, the plaintiff was operating a vehicle he did not own. The defendant failed to yield and struck the plaintiff’s car.  The defendant and his insurer asserted the affirmative defense under “No Pay, No Play.”

The facts of the case suggest the vehicle that the plaintiff was operating was not insured, but plaintiff paid his “premiums” to the owners of the vehicle, had an ostensibly valid insurance card, and believed he was insured. The court found that the defendants failed to carry their burden of establishing a lack of coverage. As a result, the insurer owed the plaintiff the full amount of his damages—a total of $5,855.00 that would otherwise have been precluded under the statute.  

The “No Pay, No Play” issue is easily avoided: Louisiana drivers should get the insurance required by the statute. Failure to do so runs the risk of discounting (and potentially barring) recovery for accidents that are not the driver’s fault.