Smart Phones: Dangerous Weapons?

The Louisiana Supreme Court recently upheld as constitutional two statutes requiring the registration of sex offenders even when applied to a person who was found not guilty by reason of insanity. See State of Louisiana v. Isaiah Overstreet, Jr., 12 - 1854 (La. 3/19/13). While an ultimate resolution of this issue would cause the Court to measure the asserted personal interests of the defendant against the public's interest in safety, the defendant's challenges were rejected because he failed to properly raise and brief the constitutional issues.

In Overstreet, it was factually established that the defendant attempted to force himself upon co-eds at two universities. After his arrest, he was diagnosed as schizophrenic and consistently denied any recollection of the crimes. Overstreet was found not guilty by reason of insanity and continued in state-run mental facilities for over a decade until filing a Motion to be Released in 2010. The motion was denied as a consequence of his refusal to participate in sex offender treatment.

When he inquired about the potential release to a group home, he was advised that he would have to register as a sex offender. He then moved to declare LSA-R.S. 15:541(7) and 15:542 (the sex offender registration statutes) unconstitutional.

The Trial Court struck down the statutes as an affront to the Louisiana Constitution, giving conflicting oral and written reasons in support of the ruling. The Trial Court later explained in a per curiam opinion that the primary concern is one of capacity and that it would be unjust to require registration from one lacking capacity to do so.

At the Supreme Court, the defense attorney argued that an application of the registration statutes to Overstreet would violate due process and equal protection because he had not been convicted as a sex offender. In response, the State argued that a finding of not guilty by reason of insanity is not equivalent to an acquittal and that the registration statutes are not punitive but instead are designed to protect the public. The State contended that the defendant was a "sex offender" irrespective of the not guilty by reason of insanity defense.

The Louisiana Supreme Court did not address the merits of these positions. Instead, the Court held that the defendant had not sufficiently particularized the grounds for a constitutional challenge. The Court reasoned that legislation is presumed constitutional. As a result, if a party desires to challenge the constitutionality of a statute, that party must raise the unconstitutionality and specifically plead the basis of the alleged unconstitutionality.

The Overstreet Court reversed the Trial Court because it is the challenger's duty to sufficiently raise the constitutional objections. In so doing, the Court disregarded the Trial Court's sua sponte ruling ("on its own motion") that the sex offender registration statutes were unconstitutional because the Trial Court did not have the authority to raise these challenges.

While Overstreet did not resolve the ultimate issues of the constitutionality of the sex offender statutes in this setting, it did define the issues which would likely guide its decision should the issue ever be properly raised before the Court.

Sometimes in law, the facts of a case may threaten to eclipse the legal issue. However, Louisiana law instructs the fact finder to see through the facts, and their sometimes tragic nature, and apply the law as written. As Aristotle once wisely said, “The Law is reason free from passion.”

In Kazan, et. al. v. Red Lion Hotels Corporation, et. al., 2021-CC-01820 (La. 6/29/22), the Louisiana Supreme Court recently ruled on a case with tragic facts, and its ruling provides an example of Aristotle’s description of law in action. In Kazan, a female patron was in the parking lot of a motel when a male patron approached her and used Kazan’s vehicle to abduct her from the premises. The car was later found submerged in a lake, and Kazan’s body was recovered from the water. The family filed a tort suit against several parties, including the motel’s owner and its insurer, the Great Lakes Insurance Company SE.

Great Lakes filed a motion for summary judgment and asked to be dismissed on grounds that coverage for the event was excluded from its policy. Specifically, the insurer argued that bodily injury caused by an “assault,” “battery,” or “physical altercation” was excluded under the policy’s terms. Great Lakes further argued that the kidnapping and ultimate death of the patron was excluded under the policy as bodily injury caused by an assault, battery, or physical altercation. The Louisiana Supreme Court agreed and reversed the decision of the trial and appellate courts.

Under Louisiana law, “[a]n insurance policy is a contract between the parties and should be construed using the general rules for the interpretation of contracts.” Id. at p. 3. “When the words of an insurance policy are clear and explicit and do not lead to absurd consequences, courts must enforce the language as written.” Id. at p. 3. “Courts lack authority to alter the terms of an insurance policy under the guise of interpretation and should not create an ambiguity where none exists.” Id. at p. 3.

With these basic rules in mind, the Court carefully reviewed the wording of the exclusion in the Great Lakes policy which stated as follows: “This insurance does not apply to ‘bodily injury,’ ‘property damage,’ or ‘personal advertising injury’ arising out of an ‘assault,’ ‘battery,’ or ‘physical altercation.’” “Physical altercation” was defined in the policy as “a dispute between individual [sic] in which one or more persons sustain bodily injury arising out of the dispute.” Citing Merriam-Webster’s dictionary, the Court defined the term “dispute” as “verbal controversy” or “quarrel.”

Based upon the evidence in the case, the Court found the female patron was involved in a “dispute” with her male attacker, and ultimately sustained bodily injury as a result of the dispute. Therefore, the patron was injured in a physical altercation, as defined under the specific terms of the Policy, and coverage for the event was excluded under the policy’s terms.

The Court noted as follows: “The facts of this case are undoubtedly tragic. Nonetheless, absent a conflict with statutory provisions or public policy, insurers are entitled to limit their liability by imposing reasonable conditions upon the policy obligations they contractually assume. That is what Great Lakes did in the insurance policy at issue here.” Despite the tragic facts presented in the case, in so holding, it appears the court agreed with Aristotle’s belief that the Law is Reason Free from Passion.

Many insurance policies contain a Concealment or Fraud provision that provides no coverage where the insured concealed or misrepresented any material fact or circumstance, engaged in fraudulent conduct, or made false statements related to the insurance.

But will a court enforce the Concealment or Fraud provision to deny an insured recovery on an otherwise covered peril? According to a recent decision out of the Eastern District of Louisiana, the answer is YES.

In Fahimipour v. United Property & Casualty Insurance Company, the plaintiffs sought contractual and extra-contractual damages from their insurance carrier for damages to their residential property allegedly sustained during Hurricane Zeta. After a bench trial, Judge Morgan concluded Plaintiffs’ application for insurance included a false statement made with knowledge of its falsity and voided the insurance policy from inception, in its entirety.

Citing Talbert v. State Farm Fire & Cas. Ins. Co., the Fahimipour court noted that “Under Louisiana law, an insurance policy is voided entirely and from its inception when the insured makes a material misrepresentation in the application for insurance with the intent to deceive the insurer.” The insurer must prove by a preponderance of the evidence the following elements in order to succeed on such a claim:

(1) the insured made a false statement;

(2) the false statement was material; and

(3) the false statement was made with intent to deceive.

With regard to the first factor, the Court found the insureds obtained and read an inspection report in connection with their purchase of the property. They “were concerned enough about the findings of the inspectors to contact their real estate agent” about the issues. The insureds represented in their insurance application that the property was well maintained, and free of damage, debris, and liability hazards, despite the extensive contradictory findings in the inspection report.

Regarding the second element, the carrier’s in-house expert testified that the insurer would not have bound coverage if the application contained the information from the inspection report. Therefore, the court found the insured’s false statements were material.

The third element – intent to deceive – “must be determined from the surrounding circumstances indicating the insured’s knowledge of the falsity of the representations made in the application and his recognition of the materiality of his representations, or from circumstances which create a reasonable assumption that the insured recognized the materiality.”

In finding the insurer established the third element, the Court noted the insureds were “sophisticated users of insurance.” Evidence showed the insureds previously purchased houses for renovation and resale, owned multiple properties, submitted insurance applications before, and also submitted claims for coverage on at least three prior occasions.

Ultimately, the Court denied plaintiffs any recovery for alleged hurricane damages because of the misrepresentations they made in their application for insurance coverage.

Prior to Fahimipour,Courts had found that post-loss misrepresentations may also void a policy. In Roach v. Allstate Indem. Co., 476 Fed. App’x 778, 779 (5^th Cir. 2012), the plaintiff’s house was damaged in a fire. The Fifth Circuit upheld a summary judgment that voided the plaintiff’s policy after he submitted a falsified claim that included contents not located on inspection following a fire at the residence.

The policy at issue in Roach included a similar Concealment or Fraud provision that stated the policy would provide no coverage if the insured misrepresented any material fact before or after a loss. In granting summary judgment, the district court applied the same three factors used in the Fahimipour case to find the plaintiff made material misrepresentations in his personal property claim when he claimed items not located on inspection.

While the policy in Fahimipour was voided in part because the insureds were “sophisticated users of insurance,” it remains to be seen whether a Louisiana court will void coverage based on a similar provision brought by a less sophisticated insured under a different set of facts.

However, the Fahimipour and Roach decisions show that a court can void a policy, from its inception, because of an insured’s misrepresentations, whether they occur in connection with the application for the policy or after a loss. These rulings also suggest that Louisiana law recognizes an insured also has a reciprocal duty of good faith in its relationship with its insurer.

Case References: Behnaz Fahimipour, et al. v. United Property & Casualty Insurance Company, 2022 WL 16833693 (E.D. La. Nov. 9, 2022); Roach v. Allstate Indem. Co., 476 Fed. App’x 778, 779 (5^th Cir. 2012); Talbert v. State Farm Fire & Cas. Ins. Co., 971 So.2d 1206 (La. App. 4 Cir. 2007).