Case Name: Edward T. URSIN, II and National Indemnity Company v. INSURANCE GUARANTY ASSOCIATION
Court: Louisiana Supreme Court
Jurisdiction: Louisiana
Decision Date: 1981-10-16
Citations: 412 So. 2d 1285
Docket Number: No. 81-C-0850
Parties: Edward T. URSIN, II and National Indemnity Company v. INSURANCE GUARANTY ASSOCIATION
Judges: BLANCHE, J., dissents for reasons assigned.
Reporter: Southern Reporter, Second Series
Volume: 412
Pages: 1285–1291

Head Matter:
Edward T. URSIN, II and National Indemnity Company v. INSURANCE GUARANTY ASSOCIATION
No. 81-C-0850.
Supreme Court of Louisiana.
Oct. 16, 1981.
On Rehearing April 5, 1982.
Rehearing Denied May 14, 1982.
Sera H. Russell, III, Calvin E. Hardin, Jr. of Durrett, Hardin, Hunter, Dameron & Fritchie, Baton Rouge, for plaintiffs-applicants.
Charles A. Schutte, Jr., of Owen, Richardson, Taylor, Mathews & Atkinson, Baton Rouge, for defendant-respondent.

Opinion:
LEMMON, Justice.
This litigation involves an attempt by an excess automobile liability insurer to recover from the Insurance Guaranty Association (LIGA) the amount of the primáry limits owed by the insured and the bankrupt primary insurer, which the excess insurer paid as part of a compromise that it negotiated.
The tort victim of an automobile accident filed suit against (1) Edward Ursin, (2) Manchester Insurance and Indemnity Company, Ursin's primary liability insurer with $5,000 policy limits, and (3) National Indemnity Company, Ursin's excess insurer with policy limits of $95,000 in excess of the primary insurance limit. Manchester, be cause of financial difficulties, was unable to provide a defense for Ursin or to contribute to any settlement.
Ursin and National eventually compromised the suit for the total amount of $75,-000, with National paying the entire amount, including the first $5,000 owed only by Ursin and Manchester. Ursin and the claimant executed separate assignments to National of their rights against Manchester, and Ursin authorized National, "acting in its own name or in my name", to assert the claim against Manchester and "any other person, firm, organization, insurance fund, or agency who may be liable therefor". Ursin also agreed to pay over to National any payments received in connection with the claim, up to $5,000.
Six months later Manchester was adjudged insolvent and placed in receivership. LIGA assumed responsibility for Manchester's outstanding obligations for covered claims, as defined in the Insurance Guaranty Association Law, R.S. 22:1375 et seq.
Ursin then filed this suit to recover the $5,000 owed by Manchester in the original litigation and paid by National in the compromise. After an exception of nonjoinder of an indispensable party, National was joined as party plaintiff.
Both sides filed motions for summary judgment, which were submitted on stipulated facts. The trial court rendered judgment in favor of National for $5,000 and in favor of Ursin for attorney's fees. LIGA appealed the judgment as to National only.
The court of appeal reversed the judgment in favor of National, holding that National's claim was not a covered claim because of the exclusion in R.S. 22:1379(3), which defines covered claims. 396 So.2d 400 (La.App.). We granted National's application to review that judgment. 399 So.2d 619 (La.).
The purpose of the Insurance Guaranty Association Law is to avoid delays in payment and financial loss to policyholders and claimants when an insurer becomes insolvent. See R.S. 22:1376. National commendably accomplished that exact goal in this case, while at the same time furthering its own interest by completing a total compromise.
While conceding that Ursin would be entitled to recover the $5,000 if he (or someone on his behalf other than an insurer) had made the payment, LIGA contends that National (standing in Ursin's shoes as his as-signee) is precluded from recovery by the literal terms of the statute. LIGA argues that the legislative intent of the Insurance Guaranty Association Law was to benefit policyholders and claimants, and not to provide relief to insurance companies which have paid claims that might otherwise qualify as covered claims.
The exclusion of insurers' claims in R.S. 22:1379(3) was clearly intended to prevent an insurer from paying a claim that it was obliged to pay under its policy and then recovering all or part of that payment from LIGA upon the insolvency of another insurer who was also obliged to pay the same claim under another policy. If recovery of such claims by insurers were allowed, then the insurer would receive a windfall at the expense of the Fund, without any benefit whatsoever to policyholders or claimants.
That reasoning, however, has no applicability to the situation in the present case, in which an insurer has paid a claim it was not obliged to pay and has done so for the benefit of its policyholder and the tort victim (although admittedly there was some benefit to the insurer). Under these cir cumstances National was not acting as an insurer within the contemplation of the Insurance Guaranty Association Law and should not be held to the literal terms of that provision of the law which prevents recovery of an otherwise covered claim by an "insurer".
Moreover, compromises are favored in law and are to be encouraged. The decision under review discourages compromises for no reason other than adherence to the literal terms of a statute whose purpose is not served by the decision.
We conclude that National, as assignee of Ursin's claim, should be entitled to recover the amount unquestionably due to Ursin and that the intent of R.S. 22:1379(3) was not to preclude such recovery under the circumstances of this case.
Accordingly, the judgment of the court of appeal is reversed, and the judgment of the trial court is reinstated.
BLANCHE, J., dissents for reasons assigned.
MARCUS, J., dissents and assigns reasons.
. R.S. 22:1379(3) provides:
"As used in this Part:
* # * III
"(3) 'Covered claim' means an unpaid claim, including one for unearned premiums, which arises out of and is within the coverage and not in excess of the applicable limits of an insurance policy to which this Part applies issued by an insurer, if such insurer becomes an insolvent insurer after September 1, 1970 and (a) the claimant or insured is a resident of this state at the time of the insured event; or (b) the property from which the claim arises is permanently located in this state. 'Covered claim' shall not include any amount due any reinsurer, insurer, insurance pool or underwriting association, as subrogation recoveries or otherwise."