UNITED STATES COURT OF APPEALS
For the Fifth Circuit
No. 98-31274
WILLIAM J. McAVEY,
Plaintiff-Appellee,
v.
CHEN-HORNG LEE; CHIN-LI LEE,
Defendants-Appellees,
v.
FIRST FINANCIAL INSURANCE CO.,
Defendant-Appellant.
Appeal from the United States District Court
For the Eastern District of Louisiana
July 25, 2001
Before GARWOOD, WIENER, and DENNIS, Circuit Judges.
DENNIS, Circuit Judge:
William J. McAvey brought this diversity action against Chen-
Horng Lee (Mr. Lee), his wife, Chin-Li Lee (Mrs. Lee), and Ming
Chun, Inc. d/b/a Tomfort Lodge (“Ming Chun”) (collectively, “the
insureds” or “the innkeepers”), and First Financial Insurance
Company (“First Financial”), the insureds’ commercial liability
insurer, for damages for personal injury to McAvey caused by the
negligence of the insureds and their employees in failing to take
1
reasonable precautions and to exercise proper vigilance for the
safety and security of their hotel guests. McAvey alleged that he
fractured his heel while chasing two unidentified robbers who had
taken his wallet by force in his Tomfort Lodge motel room. He
further averred that the criminals entered the motel and the hall
outside his room without detection by the motel employees, tricked
him into opening his door, committed the robbery, and escaped
without being identified or detained, because of the defendants’
inadequate motel security and safety precautions and the negligence
of the motel clerk in failing to exercise reasonable efforts to
monitor and protect hotel guests against such dangers. At the close
of the plaintiff’s case at trial, the district court entered a
judgment as a matter of law (“JMOL”) dismissing the action against
Mr. and Mrs. Lee. After completion of the trial, the jury returned
a verdict in favor of McAvey, fixing damages and apportioning fault
between him and the innkeepers. The district court rendered a
judgment in McAvey’s favor against First Financial.
First Financial appealed, contending, inter alia, that its
policy excluded coverage for bodily injuries arising from assault
or battery; that all of McAvey’s injuries arose from a battery by
the robbers; that the dismissal of the suit against two of First
Financial’s insureds, Mr. and Mrs. Lee, and the plaintiff’s failure
to properly serve the third insured, Ming Chun, effectively
extinguished the plaintiff’s right to a direct action and judgment
against the insurer; and that the district court erred in not
2
instructing the jury to determine whether the fault of the
unidentified criminals was a legal cause of McAvey’s injuries, and,
if so, to apportion a share of the fault and liability to them.
I.
McAvey, a truck driver, arrived in New Orleans, Louisiana, on
the evening of November 6, 1995, with a load of household goods to
be delivered the next morning. McAvey checked into the Tomfort
Lodge, a modestly priced motel on Tulane Avenue.
Mr. and Mrs. Lee had purchased the building in which the
Tomfort Lodge was located in 1988, and Mr. Lee had managed a motel
business in the building from 1988 to 1995. At some point prior to
1993, the motel business was taken over by Ming Chun, Inc. (“Ming
Chun”). The Lees leased the building to Ming Chun for minimum and
percentage-of-profits rentals, pursuant to an oral agreement. In
1995, the Lees and Ming Chun signed a written lease formalizing
their existing oral lease agreement. Mr. Lee continued to manage
the motel business for Ming Chun.
According to McAvey, he was awakened around 11 p.m. the night
of his stay at the Tomfort Lodge by a man who knocked on the door
and announced himself as “motel security.” When McAvey opened the
door, two men forced their way in and hurled him onto the bed. As
McAvey struggled with one assailant, the other grabbed McAvey’s
wallet and ran. McAvey pursued the robber outside the room and down
3
the motel stairs. During the chase, the second robber made contact
with McAvey as he passed McAvey on the stairs; McAvey’s bare right
heel landed on the edge of one of the steps, fracturing his heel
bone.
McAvey filed suit in district court initially only against Mr.
Lee. First Financial, the innkeepers’ commercial liability insurer,
refused to defend the claim against Mr. Lee on the ground that
McAvey’s claim arose from a battery, a risk it alleged was excluded
from coverage under the policy. McAvey added Mrs. Lee as a
defendant in his First Amended Complaint, and added Ming Chun and
First Financial as defendants in his Second Amended Complaint.
First Financial moved for summary judgment on the basis that
McAvey’s loss arose from a battery, which it claimed was excluded
from coverage by the policy. On November 20, 1997, the district
court denied the insurer’s motion, holding that the documents
constituting the insurance contract were ambiguous as to whether an
assault and battery exclusion had been incorporated by reference and
therefore must be construed in favor of coverage. On August 8,
1998, for the same reasons, the district court granted Mr. and Mrs.
Lee’s motion for a partial summary judgment, decreeing that the
policy did not include an assault and battery exclusion.
During trial, after McAvey rested his case-in-chief, the Lees’
attorney, James Swanson, moved orally for a JMOL to dismiss the
action against the Lees on the ground that “[t]here is no evidence
. . . that Mr. Lee did anything that was unreasonable under the
4
circumstances. The evidence seems to be that at worse the desk
clerk should have done something and he wasn’t Mr. Lee’s employee,
he was the corporation’s employee.” The district court granted JMOL
dismissing the action against the Lees “for the reasons argued by
the plaintiff [sic].” Evidently, the district court meant “for the
reasons argued by the defendants’ attorney, Mr. Swanson.” After the
defendants presented their case-in-chief, First Financial moved for
dismissal of Ming Chun on the grounds that the corporation had not
been properly served pursuant to Federal Rule of Civil Procedure 4.
After that motion was denied, First Financial moved for a JMOL
pursuant to Rule 50(a)(2) to dismiss McAvey’s suit on the grounds
that Louisiana’s direct action statute did not permit the
maintenance of a direct action against an insurer when the insureds
were no longer parties to the action, arguing that the Lees had been
dismissed and Ming Chun, the only other insured, had not been
properly served. The district court denied the motion and, after
closing arguments and instructions, submitted the case to the jury.
The jury returned a verdict finding that the negligence of the
innkeeper and McAvey were legal causes of McAvey’s injury, charging
the insureds with eighty percent of the fault and McAvey with twenty
percent. The district court entered final judgment against First
Financial as insurer of Ming Chun, awarding McAvey a net sum of
$301,600 in damages after discounting his recovery by his
apportioned fault. First Financial’s motions for a JMOL and a new
trial were denied. First Financial appealed from the district
5
court’s final judgment. McAvey appealed from the JMOL dismissing
his action against the Lees. Mr. and Mrs. Lee appealed from
evidentiary and legal rulings made during the trial and the final
judgment. After appellate briefs had been filed, however, McAvey
and the Lees settled the dispute between them. Upon a joint motion
by McAvey and the Lees, their appeals were dismissed by order of the
Clerk of Court on July 21, 1999.1
II.
A.
First Financial contends that the policy for 1995, the
applicable policy year, excluded coverage for losses arising from
assault or battery; and that McAvey’s injuries resulted from a
battery. We conclude, however, that (1) the policy did not exclude
coverage for such losses and, (2) therefore, whether McAvey’s
injuries arose from a battery is irrelevant to determination of the
insurer’s liability. This coverage issue was raised by Mr. and Mrs.
Lee’s partial motion for summary judgment, which the district court
granted, and First Financial’s motion for summary judgment, which
1
The Lees reserved their rights as appellees regarding First
Financial’s appeal, insofar as that appeal implicated the propriety
of the partial summary judgment awarded to the Lees on the issue of
coverage.
6
was denied by the trial court.
“The general standard that an appellate court applies in
reviewing the grant or denial of a summary-judgment motion is the
same as that employed by the trial court initially under Rule
56(c)–a summary judgment is proper when it appears ‘that there is
no genuine issue as to any material fact and that the moving party
is entitled to a judgment as a matter of law.’” 10A CHARLES ALAN
WRIGHT, ARTHUR R. MILLER, & MARY KAY KANE, FEDERAL PRACTICE AND PROCEDURE: CIVIL
3D § 2716 (1998) (quoting FED. R. CIV. P. 56(c)) (citing, inter alia,
GATX Aircraft Corp. v. M/V Courtney Leigh, 768 F.2d 711 (5th Cir.
1985); McCrae v. Hankins, 720 F.2d 863 (5th Cir. 1983)). “[O]n
summary judgment the inferences to be drawn from the underlying
facts contained in such materials [such as affidavits, depositions,
and exhibits] must be viewed in the light most favorable to the
party opposing the motion.” United States v. Diebold, Inc., 369
U.S. 654, 655 (1962). “[W]e look at the record on summary judgment
in the light most favorable to . . . the party opposing the motion
. . . .” Poller v. Columbia Broad. Sys., Inc., 368 U.S. 464, 473
(1962); see also John v. La. Bd. of Trustees, 757 F.2d 698 (5th Cir.
1985); Simon v. United States, 711 F.2d 740 (5th Cir. 1983).
The record contains numerous documents pertaining to contracts
of commercial general liability insurance between First Financial
and Ming Chun. First Financial issued one new policy and two
renewal policies for the annual policy periods commencing in 1993,
1994, and 1995, insuring Ming Chun against liability in connection
7
with the motel business and property: (1) First Financial New
Policy No. F0070G400045; Named Insured: Ming Chun, Inc., DBA Carib
Motel, 4025 Tulane Avenue, New Orleans, La. 70119; Policy period:
April 25, 1993 to April 26, 1994 (hereinafter “1993 policy”); (2)
First Financial Renewal Policy No. F0070G400045 R1; Named Insured:
Ming Chun, DBA Comfort Lodge, 4025 Tulane Ave., New Orleans, La.
70119; Policy period: April 26, 1994 to April 26, 1995 (hereinafter
“1994 policy”); (3) First Financial Renewal Policy No. F0070G400045
R-2; Named Insured: Ming Chun, DBA Tomfort Lodge, 4025 Tulane Ave.,
New Orleans, La. 701192; Policy period: April 26, 1995 to April 26,
1996 (hereinafter “1995 policy”).
Each policy incorporated and/or deleted by reference other
documents, forms, and endorsements governing various aspects of
coverage. The policies referred to the separate documents by
company form numbers. Consequently, the contours of coverage of
each policy cannot be determined without laboriously tracking down
each pertinent document incorporated or deleted by reference among
the numerous documents, forms, and endorsements in the record..
The 1993 policy, in pertinent part, provided: “Form(s) and
Endorsement(s) made a part of this policy at time of issue: . . .
CL150(11/85)[.]” (footnote and other forms listed omitted). That
form, entitled “General Commercial Liability Coverage Part
2
The policy was amended on April 26, 1995, to change the
named insureds to “Chen-Horng Lee, Chin-Li Lee, and Ming Chun Inc.
DBA: Tomfort Lodge.”
8
Declarations,” filed of record with the 1993 policy, in pertinent
part provides: “Forms and Endorsements applying to this Coverage
Part and made part of this policy at time of issue: . . . BG-2-
CW(9/92)[.]” (numerous others omitted). “BG-2-CW(9/92)
(Intermediate Form)” contains exclusion BG-G-042 492 entitled
“Exclusion–Assault Or Battery,” which provides:
Exclusion (a) of Coverage A (Section 1) is replaced by
the following: a. ‘bodily injury,’ ‘property damage,’ or
‘personal injury’: (1) Expected or intended from the
standpoint of any insured; or (2) Arising out of assault
or battery, or out of any act or omission in connection
with the prevention or suppression of an assault or
battery.
The replaced Exclusion (a) provides: “This insurance does not apply
to: a. ‘Bodily injury’ or ‘property damage’ expected or intended
from the standpoint of the insured. This exclusion does not apply
to ‘bodily injury’ resulting from the use of reasonable force to
protect persons or property.” Thus, the 1993 policy plainly
excluded coverage of bodily and personal injury and property damage
arising out of assault or battery.
The 1995 policy in effect at the time of McAvey’s injury,
however, failed to continue or re-adopt the assault or battery
exclusion. The 1995 policy, in pertinent part, provides:
9
In consideration of the payment of the premium, it is
agreed that the Policy designated herein is renewed for
the period stated, subject to all its terms unless
otherwise specified below.
RENEWAL TERMS:
. . . In consideration of our continuing coverage and
the premium charged, you understand and agree that the
following forms changes are made and apply, or no longer
apply, as the case may be, to coverage provided by this
policy.
These forms are deleted and no longer apply: FIF(4/89
Revised 5/92; BG-I-051(4/92); CG0001(11/88);
CG0300(11/85); CG2244(11/85)
These forms are added and apply: FIF(4/89)Revised
6/94; BG-1-015(2/94); CG0001(10/93); CG0300(10/93);
CG2244(10/93)
Form CG0001(10/93), the Commercial General Liability Coverage Form
filed of record with the 1995 policy, provides in pertinent part:
“2. Exclusions. This insurance does not apply to: a. Expected or
Intended Injury[:] ‘Bodily injury’ or ‘property damage’ expected or
intended from the standpoint of the insured. This exclusion does
not apply to ‘bodily injury’ resulting from the use of reasonable
force to protect persons or property.”
But the foregoing quoted 1995 policy provisions clearly
10
deleted and made inapplicable Form CG0001(11/88), the original
Commercial General Liability Coverage Form, which had been amended
by the “BG-2-CW(9/92) (Intermediate Form)” that contained the BG-G-
042 492 assault or battery exclusion. The 1995 policy contains only
the much narrower exclusion of injury or damage expected or intended
by the insured, unless resulting from use of reasonable force to
protect persons or property. Consequently, it is evident that the
1995 policy did not continue or re-adopt the assault or battery
exclusion. Thus, McAvey’s injuries arising out of assault or
battery are not excluded from coverage under the 1995 policy.
Furthermore, assuming arguendo that it is reasonable to
interpret the insurance documents as First Financial proposes, viz.,
that the parties’ unexpressed intention was that the 1993 assault
and battery exclusion would affect all future contracts unless
expressly abrogated, that would only provide an alternative reading
of an ambiguous contract. We have recognized that Louisiana courts
have required that insurance policy ambiguities be resolved in favor
of coverage of the insured. Huey T. Littleton Claims, Inc. v.
Employers Reinsurance Corp., 933 F.2d 337, 340 (5th Cir. 1991)
(citing Benton Casing Serv., Inc. v. AVEMCO Ins. Co., 379 So. 2d 225
(La. 1979); Stewart v. La. Farm Bureau Mut. Ins. Co., 420 So. 2d
1217 (La. Ct. App. 3d Cir. 1982)); accord LA. CIV. CODE ANN. art. 2056
(West 2000) (“In case of doubt that cannot be otherwise resolved,
a provision in a contract must be interpreted against the party who
furnished its text. A contract executed in a standard form of one
11
party must be interpreted, in case of doubt, in favor of the other
party.”); Crabtree v. State Farm Ins. Co., 632 So. 2d 736, 741 (La.
1994) (“If after applying the other general rules of construction
an ambiguity remains, the ambiguous contractual provision is to be
construed against the insurer who issued the policy and in favor of
the insured.”). Accordingly, even if we accept First Financial’s
contractual interpretation as a reasonable choice, we are
constitutionally required, as Erie held,3 to apply Louisiana law,
which here mandates that we resolve the ambiguity by adopting the
other reasonable interpretation that favors coverage for the benefit
of the insured.
B.
First Financial next argues that the district court erred in
rendering judgment against the insurer alone, because Louisiana’s
direct action statute, LA. REV. STAT. ANN. § 22:655 (West 2000),
provides that “such action may be brought against the insurer alone
3
Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938). Under Erie,
when confronted with a diversity case arising under state law, we
must apply the law of that state as the state’s highest court would
apply it. Id. at 78. If the decisions of that court are silent on
an issue, we must conscientiously determine how that court would
decide the issue before us, looking to the sources of law–including
intermediate appellate court decisions of that state–that the
state’s highest court would look to for persuasive authority.
Transcont. Gas v. Transp. Ins. Co., 953 F.2d 985, 988 (5th Cir.
1992); see also 19 CHARLES ALAN WRIGHT, ARTHUR R. MILLER & EDWARD H. COOPER,
FEDERAL PRACTICE AND PROCEDURE § 4507, at 126 (2d ed. 1996).
12
only when” the insured is deceased, insolvent, unable to be served,
engaged in bankruptcy proceedings, or a spouse, child, or parent of
the plaintiff, and none of these exceptions applies in the present
case. Id. § 655(B)(1)(a)-(e). In the absence of a Louisiana case
on point, First Financial urges us to Erie guess that the Supreme
Court of Louisiana would hold that the statute bars the district
court’s judgment against the insurer because none of the insureds
was a party to the direct action against the insurer when final
judgment was rendered against the insurer. According to First
Financial’s argument, McAvey “has no right of action without the
presence of at least one of the insureds.”
We do not think the State’s highest court would reach that
conclusion in the present case. On the contrary, as indicated by
that court’s previous decisions, we believe that it would hold that
the injured plaintiff’s substantive right and remedial direct action
against the insurer and the insured tortfeasor accrues immediately
upon the commission of the tort under the opening provisions of
section 655(B). Because those provisions of the direct action
statute have not been changed, we think that the Supreme Court of
Louisiana would conclude that the accrual of the injured plaintiff’s
right and remedy against the insurer under the direct action statute
has not been substantively altered. Instead, we believe that the
court would decide that the section 655(B)(1)(a)-(e) provisions
restricting suits against an “insurer alone,” which were added to
the end of that section by amendment in 1988, set forth a procedural
13
joinder requirement that authorizes the insurer, subject to
specified exceptions, to object to non-joinder of an insured and
seek dismissal of the direct action if the insured is not joined.
First Financial’s argument misinterprets the procedural
joinder requirement of section 655(B)(1), ending in subparagraphs
(a)-(e), as a substantive condition precedent to the injured
plaintiff’s right, remedy, and judgment against the insurer under
the direct action statute. Consequently, First Financial
erroneously contends that the dismissal by directed verdict of
McAvey’s action against two of the insureds, Mr. and Mrs. Lee, and
his alleged failure to properly serve the insured corporation, Ming
Chun, nullified his substantive right, remedial action, and judgment
against the insurer.
We are convinced that the Supreme Court of Louisiana would
reject First Financial’s theory of interpretation, however, because
it is incompatible with the text, structure, history, and
jurisprudential environment of the direct action statute. Under
First Financial’s proposed reading of the direct action statute, the
opening provision of section 655(B)(1) would be effectively repealed
and the basic historical public purpose of the statute would be
defeated; for it is the beginning provision of section 655(B)(1)
that establishes for automobile accident victims and other injured
plaintiffs substantive rights and remedial actions, accruing
immediately with the insured tortfeasor’s wrongful act, which are
enforceable directly against the insurer to the same extent as
14
against the insured tortfeasor, subject to the coverage and limits
of the liability insurance policy. The express purpose of the
direct action statute, to ensure that all liability policies inure
to the benefit of people injured through the fault of the insured,
LA. REV. STAT. ANN. § 655(D) (West 2000), can be effectuated only
through the substantive rights and direct remedial actions
established by the initial provision of section 655(B)(1).
The first provision of section 655(B)(1), which has been the
principal substantive part of the direct action statute since 1930,
plainly states:
The injured person or his or her survivors or heirs . .
. at their option, shall have a right of direct action
against the insurer within the terms and limits of the
policy; and, such action may be brought against the
insurer alone, or against both insured and insurer
jointly and in solido . . . .
Id. (emphasis added). Without the creation of a substantive right
for the injured plaintiff against the insurer by that provision, all
else in the statute would be useless and meaningless. It is
axiomatic that without a right there can be no remedy or action;
and it is self-evident that without the plaintiff’s right and action
or remedy against the insurer there would have been no need for the
legislature to create a procedural method whereby the insurer may
15
have the court require the joinder of insureds. Unless the three
elements of section 655(B)(1)–substantive right, remedial action,
and procedural joinder–are understood as fulfilling three different
legal purposes, they are irreconcilable and cannot all be given
meaning as required by one of the paramount principles of statutory
construction. See LA. CIV. CODE ANN. art. 13 (West 2000) (“Laws on
the same subject matter must be interpreted in reference to each
other.”); cf. id. art. 2050 (“Each provision in a contract must be
interpreted in light of the other provisions so that each is given
the meaning suggested by the contract as a whole.”); LA. REV. STAT.
ANN. § 1:3 (West 2000) (“Words and phrases shall be read with their
context and shall be construed according to the common and approved
usage of the language.”); see also ABL Management, Inc. v. Bd. of
Supervisors of Southern U., 773 So. 2d 131, 135 (La. 2000) (“It is
presumed that every word, sentence or provision in the statute was
intended to serve some useful purpose, that some effect is to be
given to each such provision, and that no unnecessary words or
provisions were used. . . . The Legislature is presumed to have
enacted each statute with deliberation and with full knowledge of
all existing laws on the same subject. . . . Where it is possible,
the courts have a duty in the interpretation of a statute to adopt
a construction which harmonizes and reconciles it with other
provisions. . . . A construction of a law which creates an
inconsistency should be avoided when a reasonable interpretation can
be adopted which will not do violence to the plain words of the
16
statute and will carry out the Legislature's intention.”).
Accordingly, we calculate that the Supreme Court of Louisiana
would hold that section 655(B)(1) of the direct action statute
consists of three complementary elements4: (1) the injured
plaintiff’s substantive right against the insurer, which accrues
derivatively with his substantive right against the insured
tortfeasor; (2) the injured plaintiff’s direct action or remedy
against the insurer; and (3) the procedural requirements, set forth
in the provision ending with subparagraphs (a)-(e) of section
4
The distinctions between rights, remedies, and procedure
have been clearly described by Professor Dobbs. See 1 DAN B. DOBBS,
DOBBS LAW OF REMEDIES §§ 1.1-1.10, esp. §§ 1.1, 1.6, 1.7 (2d ed. 1993).
Under common-law theory, a right is a creature of substantive law,
a remedy is created by remedial law, and procedural rules are
products of procedural law. See id.
The law of remedies is thus sharply distinguished from
the substantive law of rights. It is also distinguished
from the law of procedure. Procedural law deals with the
process of getting from right to remedy. The methods for
presenting both substantive and remedial issues are its
concern. Some remedies questions are closely connected
with the substantive law or with procedural problems and
more is to be said about that later. For most purposes,
however, remedies questions and remedies law are quite
distinct from both substance and procedure.
Id. at 2. Although in both civil-law and common-law theory, the
concept of “right” is distinct from that of “action” or “remedy,”
civil law theory does not distinguish between procedure, action, or
remedy but, in fact, considers all three to be part of “procedural
law.” See A.N. YIANNOPOULOS, PROPERTY § 239, at 472-74 (2 LOUISIANA CIVIL
LAW TREATISE) (3d ed. 1991). In both common and civil law systems,
rights and actions or remedies are interdependent corollaries; that
is, if one has a right one may have an action or remedy, and vice
versa. See id.; 1 DOBBS, supra; JULIUS STONE, THE PROVINCE AND FUNCTION
OF LAW: LAW AS LOGIC, JUSTICE, AND SOCIAL CONTROL, A STUDY IN JURISPRUDENCE
128-29 (reprint 1973).
17
655(B)(1), which, in effect, provide the insurer a procedural means
to avoid defending a direct action alone, except in the
circumstances listed, by objecting to the non-joinder of the
insured.
Reading the pertinent provisions of the direct action statute
together and in light of their historical development, the state and
federal jurisprudence, and scholarly commentary further supports the
foregoing conclusions. The direct action statute, in pertinent
parts, provides:
B. (1) The injured person or his or her survivors or
heirs mentioned in Subsection A, at their option, shall
have a right of direct action against the insurer within
the terms and limits of the policy; and, such action may
be brought against the insurer alone, or against both
the insured and insurer jointly and in solido,[5] in the
parish in which the accident or injury occurred or in
the parish in which an action could be brought against
either the insured or the insurer under the general
rules of venue prescribed by Code of Civil Procedure
Art. 42 only. However, such action may be brought
5
The foregoing constitutes the principal part of the direct
action statute, which has not changed significantly since its
enactment in 1930. See 1930 La. Acts 55.
18
against the insurer alone only when:
(a) The insured has been adjudged a bankrupt by a court
of competent jurisdiction or when proceedings to adjudge
an insured a bankrupt have been commenced before a court
of competent jurisdiction;
(b) The insured is insolvent;
(c) Service of citation or other process cannot be made
on the insured.
(d) When the cause of action is for damages as a result
of an offense or quasi-offense between children and
their parents or between married persons; or
(e) The insured is deceased. [6]
* * *
D. It is also the intent of this Section that all
liability policies within their terms and limits are
executed for the benefit of all injured persons and
their survivors or heirs to whom the insured is liable;
and, that it is the purpose of all liability policies to
give protection and coverage to all insureds, whether
they are named insured or additional insureds under the
6
Italicized subsection added by 1988 La. Acts 934. In
subsequent amendments, the enumeration within this subsection was
changed from 22:655(B)(1)-(5) to 22:655(B)(1)(a)-(e), 1989 La. Acts
117, and the provision for bringing action solely against the
insurer in the case of the death of the insured was added as
22:655(B)(1)(f), 1992 La. Acts 584.
19
omnibus clause, for any legal liability said insured may
have as or for a tortfeasor within the terms and limits
of said policy.[7]
(bold and emphasis added).
The original act that became part of the present direct action
statute was Act 253 of 1918. That law made it illegal to issue a
liability policy without a provision that, in case of the insured’s
insolvency or bankruptcy, the insurer would not be released, but
subject to a direct action within the terms and limits of the policy
by the injured person or his or her heirs. 1918 La. Acts 253. In
Edwards v. Fid. & Cas. Co., 123 So. 162 (La. Ct. App. Orl. 1929),
the court of appeals upheld under the statute the right and action
of a person injured by an insured tortfeasor to recover from the
latter’s insurer the amount of his unsatisfied judgment against the
insured. The court held that “the purpose of the statute [was] to
create, immediately upon the happening of the accident, a cause of
action in the injured party against the insurer . . . or the party
at fault . . . conditioned upon the obtaining of a judgment against
the party at fault and upon unsuccessful efforts to collect that
judgment[.]” Id. at 163.
In its next session, the legislature enacted Act 55 of 1930,
7
This second emboldened part of the statute was added by
1956 La. Acts 475.
20
codifying the Edwards holding and providing that the injured person,
at his option, “shall have a right of direct action against the
insurer . . . either against the insurer company alone or against
both the assured and the insurer . . . jointly and in solido.” That
provision, without significant change, has been the principal part
of the direct action statute ever since. See supra, at n. 5.
A series of Louisiana Supreme Court and court of appeals
decisions subsequently held that under the direct action statute the
insurer could not assert the insured’s spousal, parental, or
charitable immunity. Edwards v. Royal Indem. Co., 161 So. 191 (La.
1935) (holding similarly for tort occurring before marriage); Ruiz
v. Clancy, 162 So. 734 (La. 1935) (holding that insurer could not
plead father’s immunity to suits from children); Rome v. London &
Lancashire Indemnity Co. of America, 160 So. 121 (La. 1935), on
remand, 169 So. 132 (La. Ct. App. Orl. 1936) (holding that insurer
could not plead governmental immunity of insured); Harvey v. New
Amsterdam Cas. Co., 6 So. 2d 774 (La. Ct. App. Orl. 1942) (holding
that insurer could not plead insured husband’s immunity from
liability to wife); Messina v. Société Française, 170 So. 801 (La.
Ct. App. Orl. 1936) (holding that insurer could not raise defense
of immunity for hospital).
Act 475 of 1956 added the second emboldened provision quoted
above at note 7, declaring that, within their terms and limits, all
liability policies are executed for the benefit of all injured
persons to whom the insured is liable and to protect and cover all
21
insureds for any liability they may have as or for a tortfeasor.
In West v. Monroe Bakery, Inc., 46 So. 2d 122 (La. 1950), the
Louisiana Supreme Court held an insurer liable to an injured victim
despite the insured’s violation of a policy condition by delaying
without excuse in giving the insurer notice of the accident for more
than a year. Id. at 129 (“[I]f at the time of injury, the
circumstances are such that, under the terms and limits of the
policy, the insurance carrier is liable, the rights of the injured
party against the insurer under Act No. 55 of 1930 become fixed as
of the moment of injury.”); accord Hedgepeth v. Guerin, 691 So. 2d
1355, 1362 (La. Ct. App. 1st Cir. 1997); Murray v. City of Bunkie,
686 So. 2d 45, 49 (La. Ct. App. 3d Cir. 1997); Elrod v. P.J. St.
Pierre Marine, Inc., 663 So. 2d 859, 863 (La. Ct. App. 5th Cir.
1996); Williams v. Lemaire, 655 So. 2d 765, 767-68 (La. Ct. App. 4th
Cir. 1995).
Of course, the injured person’s right against the insurer,
which is derived by the direct action statute from the plaintiff’s
right against the insured tortfeasor, generally is dependent upon
that substantive delictual right for its existence and scope. See,
e.g., Cacamo v. Liberty Mut. Fire Ins. Co., 764 So. 2d 41 (La. 2000)
(holding that the direct action statute gives special rights to tort
victims, not to insureds with contractual claims against their own
insurer); Descant v. Adm’rs of the Tulane Educ. Fund, 639 So. 2d
246, 249 (La. 1994) (holding that the insured’s medical malpractice
22
act cap also limits plaintiff’s direct recovery from insurer).
The state supreme court and appellate courts, the United
States Supreme Court, and this Circuit have recognized, however,
that when the injured plaintiff acquires a valid right against the
tortfeasor’s insurer under the direct action statute, that right is
substantive in nature. See Quinlan v. Liberty Bank & Trust Co., 575
So. 2d 336, 352 (La. 1991) (on reh’g) (“When the statute is
applicable and authorizes a direct suit against a tortfeasor’s
insurer, the statute is read into and becomes a part of a policy
written pursuant thereto, even though the policy does not contain
the language required by the statute, or contains language
prohibited by the statute. . . . [T]he Direct Action Statute is a
mandate for a tort victim to bring a direct suit to recover damages
for personal injury or corporeal property damage from the
tortfeasor’s insurer, regardless of whether the insurer has framed
the policy as a liability or an indemnity contract.”) (internal
citations omitted); West v. Monroe Bakery, Inc., 46 So. 2d 122, 123
(La. 1950) (“[The direct action statute] has been treated
consistently as conferring substantive rights on third parties to
contracts of public liability insurance, which become vested at the
moment of the accident in which they are injured”); Zimmerman v.
Int’l Cos. & Consulting, Inc., 107 F.3d 344, 346 (5th Cir. 1997)
(quoting Quinlan, supra); Auster Oil & Gas, Inc. v. Stream, 891 F.2d
570, 577-78 (5th Cir. 1990) (quoting Quinlan, supra) (citing West,
supra); In re Combustion, Inc., 960 F. Supp. 1056, 1061 (W.D. La.
23
1997) (quoting Quinlan, supra); accord Lumbermen’s Mut. Cas. Co. v.
Elbert, 348 U.S. 48, 51 (1954) (“The Louisiana courts have
characterized the statute as creating a separate and distinct cause
of action against the insurer which an injured party may elect in
lieu of his action against the tortfeasor”); WILLIAM S. MCKENZIE & H.
ALSTON JOHNSON III, INSURANCE LAW & PRACTICE § 23, at 32-33 (15 LOUISIANA
CIVIL LAW TREATISE 1986) (noting that Lumbermen’s Mutual approved the
view that “the statute created substantive rights which the federal
court was bound to enforce”).8
The legislature did not affect the plaintiff’s substantive and
remedial rights under the direct action statute in the 1988
amendment that added the italicized portion quoted at note 6, supra.
The 1988 amendment merely added a procedural method by which the
8
The foregoing cases appear to represent the prevailing view
of jurists who have carefully considered the nature of the injured
person’s right against the tortfeasor’s insurer under the direct
action statute. In other cases, when the nature of the right was
not at issue, courts have spoken of the right loosely as a
“procedural right,” a “cause of action,” a “right of action,” or in
other imprecise terms. See, e.g., Dumas v. United States Fidelity
& Guar. Co., 134 So. 2d 45, 52 (La. 1961); Ruiz v. Clancy, 162 So.
734, 738 (La. 1935). Lack of precision in the use of “right,”
“remedy,” “action,” and “procedure” is not uncommon. See, e.g.,
YIANNOPOULOS, supra, at 473 (“Action is frequently defined as a
recourse to justice in case of contestation or violation of a
right, as well as an aspect of the right that the judge will
recognize and protect. Thus, while distinction is made in principle
between right and action, the two are frequently regarded as one
and the same thing.”); see also 1 DOBBS, supra, at 24-25 (“Lawyers
use the word remedies in a host of different ways . . . . []that
makes it difficult to know how a remedies question differs from a
procedural or some other kind of question. . . . In a broad sense,
almost any solution to any kind of problem can be regarded as a
remedy.”).
24
insurer can object to the non-joinder of the insured (other than in
the exceptional circumstances listed), which operates as an
exception to the principle of Louisiana Code of Civil Procedure
article 643, which provides that the injured plaintiff, as a
solidary obligee, may enforce his claim against either the insurer
or the insured, as a solidary obligor, or together, at the
plaintiff’s option. The legislature’s intention to preserve the
injured person’s substantive right and remedial action against the
tortfeasor’s insurer is clear. By continuing the 1930 substantive-
remedial provision verbatim and intact when it added the joinder
provision in 1988, the legislature obviously did not intend to
abrogate the right and remedy which had been enforced for seventy-
one years; instead it meant simply to add a procedural rule of
joinder to accompany the pre-existing right and remedy. If the
legislature had intended to drastically limit or hamper the
substantive rights and remedial actions under Louisiana’s venerable
and unique direct action statute, surely it would have said so in
explicit, clear, and unambiguous terms. For this reason, and to
give meaning to every provision of the whole direct action statute,
as amended, we conclude that the statute must now be read as
establishing a substantive right, a remedial action, and a joinder
procedure.9
9
In the present case, we need not decide to what extent, if
any, the procedural joinder rule added by the 1988 amendment should
be read in pari materia with Louisiana’s general provisions for
joinder of parties, specifically Louisiana Code of Civil Procedure
25
In this case, First Financial’s motion for JMOL was not based
on a procedural objection to non-joinder but on its misconception
that the injured plaintiff’s right, remedy, and judgment against the
insurer are substantively dependent upon joinder of the insureds.
Even if the motion for JMOL could be construed as a procedural
objection to non-joinder of an insured, however, the district
court’s denial was not an abuse of discretion because the motion
came so late in the litigation–at the conclusion of all the evidence
in the case, two years after the filing of the initial
complaint—that granting it would have prejudiced the parties present
with undue delay; the district court did not err or abuse its
discretion because its denial of the motion will not result in First
Financial incurring multiple or inconsistent obligations, or in Ming
Chun being subjected to liability for which it had no opportunity
to defend itself. See Pulitzer-Polster v. Pulitzer, 784 F.2d 1305,
1309 (5th Cir. 1986); Schutten v. Shell Oil Co., 421 F.2d 869, 873-
74 (5th Cir. 1970); 7 WRIGHT § 1688.1, at 510-512.
As we have suggested above, the judgment against First
Financial was based only on the delictual right which McAvey had
against First Financial’s insured, Ming Chun, not on any delictual
articles 641-643. Articles 641 and 642, which mirror the
provisions of Federal Rule of Civil Procedure 19, require a court
to determine via a “close factual analysis” of the interests
involved whether an absent party should be joined, and whether the
action should proceed if the party cannot be joined. See State
Department of Highways v. Lamar Advertising Co. of La., Inc., 279
So. 2d 671, 677 (La. 1973).
26
right which McAvey had against either Mr. or Mrs. Lee, who were also
First Financial’s insureds. First Financial’s challenge to the
service on Ming Chun plainly came too late and was hence waived.
FED. R. CIV. P. 12.
Consequently, we conclude that in the present case McAvey’s
right, remedy, and judgment against First Financial was not affected
by the directed verdict dismissing Mr. and Mrs. Lee or the failure
to serve Ming Chun properly.10
C.
First Financial next argues that the district court erred when
it ruled in limine that the jury would not be instructed, or
requested in response to an interrogatory, to assign a percentage
of fault to the unidentified criminal intruders who intentionally
attacked and robbed McAvey.
“The district court’s instructions to the jury and special
interrogatories are reviewed for abuse of discretion.” EEOC v.
10
Because we conclude that the Louisiana Supreme Court would
hold that the 1988 amendment to the direct action statute is a
procedural joinder requirement, and that First Financial’s motion
for JMOL either did not object to the non-joinder of an insured or
did not file its objection promptly so as to avoid unfair delay and
prejudice to other parties, we expressly do not reach the issue of
whether the statute’s requirement that the action be “brought
against” the insureds in this case was satisfied by the
commencement of the action against them, see LA. CODE CIV. PROC. art.
421, FED. R. CIV. P. 3, or also requires the perfection of service
of process against all of the insureds.
27
Manville Sales Corp., 27 F.3d 1089, 1096 (5th Cir. 1994). “[S]o
long as the jury is not misled, prejudiced, or confused, and the
charge is comprehensive and fundamentally accurate, it will be
deemed adequate and without reversible error.” Davis v. Avondale
Indus., Inc., 975 F.2d 169, 173-74 (5th Cir. 1992).
The district court instructed the jury to answer the following
interrogatory on comparative fault:
IV. What percentage of fault do you place on each of
the parties? (You will not be asked to assign a
percentage of fault to the intruders. The percentage of
fault between the innkeeper and the plaintiff must equal
100%.)
The Innkeeper _________%
Mr. McAvey _________%
The jury assigned eighty percent of the fault to “The Innkeeper” and
twenty percent to McAvey. First Financial contends that the jury
should have been instructed to assign fault to the unidentified
criminal intruders, and that if the jury had done so McAvey’s
recovery from First Financial would have been reduced substantially.
On November 6, 1995, when McAvey’s rights under delictual law
and the direct action statute accrued and became vested against
First Financial and its insured tortfeasors, neither Louisiana Civil
Code article 1212 nor Louisiana Code of Civil Procedure article
28
1812(C), or any other pertinent Lousisiana law, required a trial
court to cause a diminution of McAvey’s full recovery for his
injuries by instructing a jury to assign percentages of fault to
unidentified non-party intentional criminal tortfeasors. See
Cavalier v. Cain’s Hydrostatic Testing, Inc., 657 So. 2d 975 (La.
1995) (“[S]ince the Legislature did not specify which non-parties
should have their fault quantified by the jury, the appropriateness,
and indeed the necessity, of quantifying the fault of a particular
non-party as a substantive requirement of the overall statutory
scheme of comparative fault is inherently a question to be decided
by the courts.”); Veazey v. Elmwood Plantation Assocs., Ltd., 650
So. 2d 712, 719, 720 (La. 1994)(“Louisiana law is broad enough to
allow comparison of fault between intentional tortfeasors and
negligent tortfeasors, [but] [] whether such a comparison should be
made must be determined by the trial court on a case by case basis,
bearing in mind the public policy concerns discussed herein[,
viz.,][a]s a general rule, [] negligent tortfeasors should not be
allowed to reduce their fault by the intentional fault of another
that they had a duty to prevent[;] [a negligent tortfeasor] should
not be allowed to benefit at the innocent plaintiff’s expense by
an allocation of fault to the intentional tortfeasor under
comparative fault principles[;][b]ecause [] intentional torts are
of a fundamentally different nature than negligent torts, [] a true
comparison of fault based on an intentional act and fault based on
negligence is, in many circumstances, not possible.”)(emphasis and
29
footnotes omitted).
First Financial argues, however, that the 1996 amendments to
Louisiana Civil Code article 2323 and Louisiana Code of Civil
Procedure article 1812 retroactively required the district court to
give the jury instructions to quantify the fault of the unidentified
non-party criminal intentional tortfeasors and thereby reduce
McAvey’s recovery from First Financial by a percentage of fault
assigned to the criminals. We need not decide whether First
Financial’s interpretation of the meaning of these articles, as
amended, is correct because we conclude that the Louisiana Supreme
Court would not permit the retroactive application of those laws,
and therefore would not regard the district court’s refusal to give
the instruction requested by First Financial as harmful or
reversible error.11 Assuming, without deciding, that quantification
of fault and reduction of recovery is now required by the 1996
legislation, we are satisfied that the Supreme Court of Louisiana
would not permit or require those laws to be applied retroactively
to reduce McAvey’s recovery in the present case. Therefore, the
district court did not abuse its discretion and thus did not err
reversibly in its in limine ruling that the jury would not be given
11
See Aucoin v. State DOTD, 712 So. 2d 62, 67 (La. 1998)
(“[S]ince the amendment resulted in changing the amount of damages
recoverable, the change was clearly substantive. . . . As such,
the amendment can have only prospective application.”) (citing
Socorro v. City of New Orleans, 579 So. 2d 931, 944 (La. 1991));
see also Bourgeois v. A.P. Green Indus., Inc., 783 So. 2d 1251,
1256-58 (La. 2001).
30
such instructions.
III.
First Financial presents a number of other arguments that are
without reversible merit. We will dispose of the issues raised by
these arguments without extended discussion.
First Financial argues that the jury erred in finding the
innkeeper liable, and, alternatively, that it erred in apportioning
eighty percent of the fault to the innkeeper. McAvey presented
evidence from which the jury reasonably could have found that the
only access to the motel’s guest rooms was through a lobby occupied
by a single desk clerk; the desk clerk was the only employee on duty
on the night the unidentified intruders robbed McAvey in his room;
although the innkeeper had found it necessary to employ security
guards occasionally in the past, there was no security guard on duty
at the motel because Ming Chun had decided to dispense with that
security measure on week nights; McAvey and the other guests were
not informed there was no security guard on duty (otherwise, McAvey
might not have been tricked into opening his door by the robber who
identified himself as “security”); the single desk clerk could not
adequately deter or prevent the entry of dangerous intruders because
he was unarmed, had been instructed to not protect or defend guests
who were being attacked or abused but to simply call the police, and
could not maintain an adequate lookout for unauthorized intruders
31
because he was required to deal with customers, patrol the premises,
and take restroom breaks during the period when he was the sole
watchman and guardian of the motel; the only security monitor on the
premises changed perspective every five to ten seconds, rather than
displaying a constant surveillance of the guestroom corridors and
the entryways. Either First Financial or a previous insurer had
required the erection of a barbed-wire-topped fence around all or
a part of the motel property, indicating that the surrounding area
was not safe. The defendants produced no evidence or testimony
regarding whether its security measures and staffing levels were
adequate, other than Mr. Lee’s own conclusory insistence that he had
been a trained police officer in Taiwan and that he felt the Tomfort
Lodge was adequately secured.
We have long recognized that, under Louisiana law, although
the innkeeper is not the insurer of his guests against injury or
loss due to violent crime, “‘[t]he innkeeper’s position vis-a-vis
his guests is similar to that of a common carrier toward its
passengers. Thus, a guest is entitled to a high degree of care and
protection. The innkeeper has a duty to take reasonable precautions
against criminals.’” Banks v. Hyatt Corp., 722 F.2d 214, 220 (5th
Cir. 1984) (quoting Kraaz v. La Quinta Motor Inns, Inc., 410 So. 2d
1048, 1053 (La. 1982). This duty is “a more demanding duty of care
than that required of other businesses.” Id. at 220 n.5. In
enforcing this duty, we have found it proper for a jury to find an
innkeeper liable when the innkeeper was aware of the risk of
32
criminal assault on its guests but took inadequate safety
precautions. Id. at 226. The parties here do not dispute that this
is the precedent by which we are bound. Applying this law to the
evidence presented at trial, we believe that reasonable jurors could
have found the innkeeper negligent. See Reeves v. Sanderson
Plumbing Prods., Inc., 120 S. Ct. 2097, 2109 (2000).
Nor can we find in the record such overwhelming evidence or
testimony regarding McAvey’s fault as to overcome the deference we
must show the jury’s apportionment of eighty percent of the fault
to the innkeepers. See Douglas v. DynMcDermott Petroleum Operations
Co., 144 F.3d 364, 369 (5th Cir. 1998) (“We will not disturb the
jury’s verdict unless, considering the evidence in the light most
favorable to [McAvey], the facts and inferences point so
overwhelmingly to [the innkeepers] that reasonable jurors could not
have arrived at a verdict except in [their] favor.”).
First Financial also argues that the quantum of damages
awarded to McAvey was excessive. However, where, as here, there was
testimony presented by both parties as to the amount of McAvey’s
future wages and the amount of damages incurred in repairing his
heel fracture, our review of the record reveals that the jury was
not clearly in error in determining the amount of total damages to
be awarded to McAvey. See Pendarvis v. Ormet Corp., 135 F.3d 1036,
1038 (5th Cir. 1998) (holding that the issue of the amount of the
damages awarded by the jury is reviewed for clear error).
33
Finally, First Financial argues that McAvey’s prior criminal
record should have been admitted into evidence to support its
hypothesis that McAvey was actually injured by drug dealers he might
have invited up to his hotel room. However, First Financial offered
no evidence that tended to show that McAvey had invited anyone to
his room or that he had engaged in any drug activity that night.
Because the admission of McAvey’s prior criminal record would have
been for a purely speculative, rather than probative, purpose, and
would have had a comparatively high prejudicial effect, FED. R. EVID.
403, we find that the district court did not abuse its discretion
in deciding not to admit the criminal records. See United States
v. Townsend, 31 F.3d 262, 268 (5th Cir. 1994) (“This Court will
reverse a decision of the trial court in excluding or admitting
evidence only upon a showing that the trial court abused its
discretion in weighing the probative value of the evidence against
its prejudicial effect.”).
For the reasons assigned, the judgment of the District Court
is AFFIRMED.
34