Wilks v. Allstate Insurance Company
1967 La. App. LEXIS 5836, 195 So. 2d 390 (1967)
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Rule of Law:
An automobile liability insurer's 'pro rata' other insurance clause does not reduce its liability to its insured below policy limits, even if other valid insurance exists. The insured may collect the full amount of the loss up to the policy limits from any one insurer, leaving that insurer to seek contribution from any other co-insurers.
Facts:
- Jimmie Wilks's wife was driving her vehicle when she was struck by a car that negligently ran a stop sign.
- The at-fault vehicle was driven by an employee of a garageman named Jacobs.
- The vehicle belonged to a customer of Jacobs, named Calhoun, and was insured under a liability policy issued by Allstate Insurance Company.
- Jacobs had previously held a garage liability policy, but it had expired nineteen days before the accident.
- On the day of the accident, Jacobs contacted his insurance agent to request new coverage.
- A factual dispute exists as to whether Jacobs secured an oral binder for new insurance coverage before or after the accident occurred.
Procedural Posture:
- Jimmie Wilks and his wife sued the garageman, Jacobs, and Allstate Insurance Company in a Louisiana trial court for tort damages.
- Allstate's initial defense of no coverage was defeated in a prior appeal, and the case was remanded for a trial on the merits.
- Immediately before trial, Allstate amended its answer to assert its liability should be reduced by half due to its 'pro rata' other insurance clause, alleging Jacobs had other valid coverage.
- The plaintiffs filed a motion for summary judgment seeking to strike Allstate's 'other insurance' defense.
- The trial court granted the plaintiffs' motion for summary judgment and, following a trial, entered a judgment against both defendants for the full amount of damages.
- Allstate, as defendant-appellant, appealed the adverse judgment to the Court of Appeal of Louisiana, Third Circuit.
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Issue:
Does a liability insurer's 'pro rata' other insurance clause reduce its obligation to the insured to a proportionate share of the loss when another potential insurer is not a party to the action?
Opinions:
Majority - Tate, Judge
No, a liability insurer's 'pro rata' other insurance clause does not reduce its obligation to the insured to a proportionate share of the loss when another potential insurer is not a party to the action. An insurer's obligation to its insured is solidary, meaning the insured can recover the full amount of damages, up to the policy limits, from the insurer they have sued. The 'pro rata' clause is intended to govern the rights of contribution between co-insurers, not to diminish the protection afforded to the insured. To allow an insurer to reduce its liability based on the mere possibility of other coverage would unfairly shift the burden of litigation onto the policyholder. The insurer, with its superior investigative and legal resources, bears the burden of impleading any other potential insurers to enforce contribution rights. Therefore, other insurance cannot be considered 'valid and collectible' for the purpose of reducing an insurer's liability unless that other insurer's liability is determined in a proceeding where it is a party.
Analysis:
This decision establishes a pro-insured interpretation of 'other insurance' clauses in Louisiana, clarifying that they primarily govern the relationship between co-insurers, not the insurer's primary obligation to its insured. It prevents insurers from using the mere possibility of other coverage to reduce their immediate payout and shift the burden of complex litigation onto their policyholders. The ruling solidifies the principle that an insurer seeking to benefit from a pro rata clause must take the affirmative step of bringing the other alleged insurer into the lawsuit, thereby protecting the insured's right to a full and prompt recovery from the insurer they contracted with.
