Opinion ID: 35247
Heading Depth: 2
Heading Rank: 2

Heading: Shocklees' Claim of Contractual Ambiguity

Text: 6 As noted above, the district court initially determined that the insurance contract was ambiguous as to the source of the premium payments. We review this determination de novo under the same standard that guided the district court. Am. Totalisator Co. v. Fair Grounds Corp., 3 F.3d 810, 813 (5th Cir.1993) (noting that the district court's determination of whether the contract is ambiguous, as well as its interpretation of the contract is to be reviewed de novo). The parties agree that Louisiana law governs this action. Under Louisiana law, [w]hen the words of a contract are clear and explicit and lead to no absurd results, no further interpretation may be made in search of the parties' intent. LA. CIV.CODE ANN. art. 2046 (West 1987). As a result, if a contract is unambiguous on its face, the contract's meaning and the intent of its parties must be sought within the four corners of the document and cannot be explained or contradicted by extrinsic evidence. Am. Totalisator Co., 3 F.3d at 813. Under Louisiana law, a contract is ambiguous when the contract is uncertain as to the parties' intentions and susceptible to more than one reasonable meaning under the circumstances and after applying established rules of construction. In re Liljeberg Enterprises, Inc., 304 F.3d 410, 440 (5th Cir.2000) (internal quotation marks and citations omitted). Importantly, Louisiana law does not allow the parties to create an ambiguity where none exists and does not authorize courts to create new contractual obligations where the language of the written document clearly expresses the intent of the parties. Omnitech Int'l, Inc. v. Clorox Co., 11 F.3d 1316, 1326 (5th Cir.1994). 7 In a recent case, the Eighth Circuit examined similar vanishing premiums insurance policies under Louisiana law. See In re Minn. Mut. Life Ins. Co. Sales Practices Litig., 346 F.3d 830, 836-37 (8th Cir.2003). 2 The policies at issue in Minnesota Mutual are identical in all material respects to the policy at issue here. First, both sets of policies contain an explicit merger and integration clause. Id. at 837. The MassMutual policy provides that [t]he policy and the application constitute the entire contract and that the insurance company's agents cannot alter or modify any of the terms of the policy ... [nor] waive any of its provisions. Second, both sets of policies state that a premium is due annually. Id. Indeed, both the cover page and the benefits and premiums section of the Shocklees' policy explicitly so indicate. Third, the allegations made by the Minnesota Mutual plaintiffs are nearly identical to those made by the MassMutual plaintiffs — that insurance agents using sales illustrations represented that the policy premiums would vanish after seven years. Id. at 832-33. Finally, in Minnesota Mutual, the Eighth Circuit faced the same claims for breach of contract and breach of the duty of good faith and fair dealing under Louisiana law that confront this court. Id. at 836. As a result, the plaintiffs' attempt to distinguish Minnesota Mutual from this case is without merit. 3 8 The Eighth Circuit held that the Minnesota Mutual plaintiffs' contract claims failed on the merits because the policies were unambiguous as to the source of the premiums. The Minnesota Mutual court noted that [n]othing in the policies themselves suggests that the source of the premiums [was] to be anything other than the insured's own funds and that [t]he policies [did] not specifically state the source of the premium payments due in the first seven years when the Appellants admit to being responsible for payment. Id. As a result, the Eighth Circuit declined to find ambiguity in the policies simply because they failed to specify the source of the premium payments in the following years. Id. 9 The Eighth Circuit's analysis is persuasive. Courts should not strain to find an ambiguity in an insurance policy when none exists. Indeed, Louisiana law discourages such an effort. See LA. CIV.CODE ANN. art.2046; Succession of Fannaly v. Lafayette Ins. Co., 805 So.2d 1134, 1138 (La.2002) (noting that Louisiana's rules of contractual interpretation `do not authorize a perversion of the words or the exercise of inventive powers to create an ambiguity where none exists') (quoting Peterson v. Schimek, 729 So.2d 1024, 1029 (La.1999)); Bergeron v. Pan Am. Assurance Co., 731 So.2d 1037, 1043 (La.Ct.App.1999) (An insurance contract... should not be interpreted in an unreasonable or strained manner under the guise of contractual interpretation to enlarge or to restrict its provisions beyond what is reasonably contemplated by the unambiguous terms). 10 The district court, in initially holding that the policy was ambiguous as to the source of the premium payments, appears to have been unduly influenced by the plaintiffs' allegations regarding representations made by the MassMutual sales agent. The policy on its face, however, evinces no ambiguity as to where the payments will come from; as with most individually-purchased life insurance policies, the insured is responsible for paying the premiums. Indeed, the Shocklees do not dispute that they were required to make payments for the first seven years of the policy and, as in Minnesota Mutual, nothing within the four corners of the contract suggests that payments would come from any other source in the following years. In the absence of any ambiguity on the face of the contract, Louisiana law bars this court from examining extrinsic evidence. Id. Without the extrinsic evidence regarding the sales illustrations, the plaintiffs are unable to support either of their theories of recovery. That is, without being able to demonstrate that their policy contained a promise to vanish premiums, the Shocklees cannot maintain claims for breach of contract or breach of the implied duty of good faith and fair dealing with regard to such a promise. Therefore, the Shocklees' claim fails as a matter of law and summary judgment in favor of MassMutual was proper. 4