Court Opinion

ID: 8976024
Source: CourtListenerOpinion
Date Created: 2022-11-27 10:56:37.397683+00
Date Added: 2024-06-11T17:10:32.968329
License: Public Domain

GARWOOD, Circuit Judge,
specially concurring:
I join in Judge Williams’ careful opinion, and append this additional writing only to note my understanding that we do not reach the issue of whether Aetna is bound by Auster’s liability judgment against Car-mouche for purposes of Auster’s “direct action” against Aetna on its liability policy issued to the Stream estate. That issue may, indeed, never be reached in the event that on remand Aetna establishes that it was prejudiced by the lack of notice of Auster’s suit, for in that event the failure to meet the policy’s conditions precedent would be effective to defeat coverage. If, however, Aetna fails to establish prejudice, the question will arise whether Auster, in its “direct action” against Aetna, must prove Carmouche’s liability, or whether Aetna is “bound” by the judgment against Carmouche rendered when Aetna was not a party to the suit and had no notice of it. So far as I am aware, the Louisiana Supreme Court has never passed on this issue in a case where, as here, there was no notice of suit as required by the policy, and the insured for that reason was not covered.1
For one to be bound by a judgment in a suit to which it was not a party and of which it had no notice is, to say the least, unusual, if not unconstitutional. That such a party is unable to establish that it could have had a good defense to the suit is normally irrelevant. See, e.g., Peralta v. Heights Medical Center, Inc., 485 U.S. 80, 108 S.Ct. 896, 899-900, 99 L.Ed.2d 75 (1988). Certainly nothing in Aetna’s policy can reasonably be construed as a waiver of *582such notice; to the contrary, the policy expressly insists on it.
Nor is it clear that the Louisiana Direct Action Statute, La.Rev.Stat. 22:655, or the public policy behind it, provide an answer to this question. The first sentence of the Direct Action Statute2 does authorize an action by the injured party against the insurer based on an executory “judgment against the insured for which the insurer is liable.” However, this sentence is not the “direct action” part of the statute, and appears to have been directed at abrogating the “payment” rule once judgment has been obtained against the insured. Cf. Seguros Tepeyac, S.A. Compania Mexicana v. Bostrom, 347 F.2d 168 (5th Cir.1965) (payment rule). Under a proper construction, the sentence appears to be limited to instances where “the insurer is liable” to the insured, a situation that we have held is not present here. The next sentence does grant “[t]he injured party ... a right of direct action against the insurer.” And, it provides that “such action may be brought against the insurer alone, or against both the insured and the insurer jointly.” The latter language suggests that the insurer’s liability to the injured party in a direct action suit — as distinguished from the liability to the injured party that the insurer has only by reason of its liability to the insured — is to be determined only in a suit to which the insurer is a party.
In West v. Monroe Bakery, 217 La. 189, 46 So.2d 122 (1950), as Judge Williams’ opinion correctly notes, the Louisiana Supreme Court’s holding, that the insured’s failure to give the insurer notice of the accident did not vitiate the injured party’s right of direct action against the insurer, “rests ... on ... [the] conclusion that the injured third party’s rights under the Direct Action Statute vest at the time of injury.” If such rights vest at the time of injury, they cannot be enhanced by subsequent proceedings of which the insurer has no notice and to which it is not a party. In this connection, it is to be noted that West quoted at length with approval from Davies v. Consolidated Underwriters, 199 La.459, 6 So.2d 351, 357 (1942), including the following passage:
“ ‘By maintaining plaintiff’s action, the defendant [insurance] company is not deprived of any substantial right. Its liability remains contingent and is dependent upon proof of the negligence of Stahl, the [insured] driver of the automobile.’ ” West, 46 So.2d at 130 (emphasis supplied by West).
As Judge Williams observes, “[t]he third party’s rights under the statute vest at the time of injury, whereas the rights of the insured remain subject to conditions in the policy that arise subsequent to the injury, such as the requirement of notice.” Thus, where, as here, those conditions defeat coverage for the insured, they would likewise appear to prevent the injured party from merely using its judgment against the insured to establish the liability of the insurer; on the other hand, policy coverage for the benefit of the injured party is not defeated (unless prejudice to the insurer from the insured’s policy breach is established), so that the injured party remains free to proceed with a “direct action” against the insurer, in which, however, it would appear to have to prove its cause of action. Ordinarily an issue such as this would be appropriate for certification to the Louisiana Supreme Court. However, it may not prove to be material here, for if Aetna is able to establish prejudice from the lack of notice, coverage will be defeated in any event. Nevertheless, we should not foreclose the issue at this stage.

. The result in Pomares v. Kansas City S. Ry. Co., 474 So.2d 976 (La.Ct.App.1985), holds the insurer bound by the judgment against the insured, but treats the question simply as one of whether the policy coverage was forfeited (as to the injured party) by the insured’s failure to serve notice of the suit. Pomares appears to be in conflict with Hallman v. Marquette Casualty Co., 149 So.2d 131 (La.Ct.App.1963), which held that coverage was forfeited. In Miller v. Marcantel, 221 So.2d 557 (La.Ct.App.1969) (Tate, L), the issue was simply coverage, and the insurer was apparently brought into the case well before trial, and was merely contending that the lack of earlier notice of the suit relieved it of all policy obligations.

. I refer to the statute as it existed prior to the 1988 amendments thereto, Acts 1988, No. 934, § 1, which are inapplicable to causes of action accruing prior to January 1, 1989. Id. § 2.