Opinion ID: 52295
Heading Depth: 3
Heading Rank: 2

Heading: NNIC’s Insurance Coverage

Text: In 1980, American Druggists’ Insurance Company (ADIC) issued a liability insurance policy (“the original ADIC Policy”) to the Louisiana Sheriffs Association.3 This policy was renewable for 12-month terms and (if renewed) would remain in effect until September 1, 1983. It specified a coverage limit of $100,000 per occurrence.4 ADIC subsequently issued an amended policy (“the amended ADIC Policy”), which restated the same terms and coverage period as the original ADIC Policy but increased the coverage limit to $1,000,000. The original ADIC Policy was marked “cancelled flat.” The amended ADIC Policy indicated in a notation on the Declarations Page and in an amending endorsement that the effective date for the new $1,000,000 coverage limit was September 1, 1981, not the original commencement date of September 1, 1980. When ADIC became insolvent in 1986, its reinsurer, NNIC, assumed 86694 (E.D. La. Mar 9, 1994), aff’d on other grounds, 187 F.3d 452 (5th Cir. 1999). Burge voluntarily dismissed the Sheriff’s Office as a defendant early in the case, but continued to pursue his claims against the Sheriff in his official capacity. 3 The “Named Insureds” under the ADIC Policy were “each Sheriff [and his employees] of the Parishes of the State of Louisiana.” 4 For the purposes of this opinion, “coverage limit” will consistently refer to coverage limit per occurrence. 4 responsibility for any coverages under the ADIC policies pursuant to a “cutthrough” reinsurance endorsement.5 In the Burge litigation, NNIC filed a motion for summary judgment seeking dismissal, because the ADIC policies’ coverage ended on September 1, 1983, and Burge’s alleged injury did not “occur” until he was indicted in November 1983, or possibly until he was convicted in 1986. NNIC also asked the court to rule that the coverage limit applicable to any misconduct by Hale was $100,000, as specified in the original ADIC Policy, because his employment with the Sheriff’s Office ended in the summer of 1981, before the $1,000,000 coverage limit in the amended ADIC Policy went into effect on September 1 of that year. The district court denied NNIC’s motion, ruling that the issues raised by NNIC were “hotly disputed” and worthy of full development at trial.6 The coverage issue centered on whether the ADIC policies’ definition of a covered “occurrence” was broad enough to encompass all conduct related to the Frierson murder investigation, including both Hale’s actions while he was employed as a detective with the Sheriff’s Office and his post-employment conduct during Burge’s murder trial in 1986. The coverage limit issue concerned, inter alia, 5 “[A] ‘cut-through’ clause is any term within a reinsurance agreement under which the reinsurer assumes liability towards the original insured in the event of the liquidation of the reinsured.” Lee R. Russ & Thomas F. Segalla, Couch on Insurance § 9:16 (3d ed. 2006). 6 The same district judge presided over both the Burge litigation and the instant case. 5 whether (1) marking the original ADIC Policy “cancelled flat” indicated an intention to make the terms of the amended ADIC Policy effective retroactively,7 or (2) the Louisiana Sheriffs Association had intended for the original ADIC Policy to provide a $1,000,000 coverage limit.8