Doucet filed a petition for damages against Fred Gayden for injuries received in a three-car accident. Gayden collided with the rear of a vehicle, driven by Paul Catalinotto, whose vehicle, in turn, crashed into the rear of Doucet's auto. State Farm was the insurer for Doucet.

Prior to the original trial, Doucet and Gayden stipulated to a “high/low” agreement under which Doucet would receive no less than $50,000, and no more than $150,000. It was agreed that no appeal on that judgment would be taken. At that time, Doucet agreed that she no longer had a UM claim against State Farm.

State Farm continued to pursue a cross-claim for subrogation. The parties stipulated that whatever award was made in light of the high/low agreement, that award would be subject to State Farm's claim. Doucet agreed on the record that it was unnecessary for State Farm to participate further in the trial and that the absence of the insurer's counsel would not be used as grounds for an argument of failure to defend.

Doucet was subsequently awarded damages totaling $60,000 subject to a reduction of $5000 on the cross-claim. State Farm was awarded $5000 and dismissed as the UM carrier.

Doucet then brought action asserting that State Farm should be required to pay its proportionate share of the litigation costs and attorney's fees incurred in the pursuit of the third-party recovery. The trial court agreed and State Farm appealed.

The insurance policy in this case clearly states that State Farm is subrogated to the extent of the medical payments made to its insured. As co-owners, both the insured and insurer are responsible for the corresponding litigation expenses.

The court held that in subrogation cases, an important prerequisite to the assessment of attorney fees is timely notice to the insurer to allow the insurer to exercise its right to join the action, or bring its own action, and be represented by legal counsel of its own choosing if it so elects. Assessment of attorney fees is justified only when the insurer chooses to rely on the efforts of plaintiff's counsel.

In this matter, State Farm received notice via the suit by Doucet and exercised its legal rights by filing a cross-claim. State Farm was represented by its own legal counsel, who actively participated in the case. The court noted Doucet's acknowledgement that she no longer had a UM claim; that she agreed that counsel for State Farm need not remain for the trial in chief and that the issues involved in the cross-claim would be resolved at a later date; and notably, that State Farm's absence from trial would not constitute an argument regarding the proportioning of attorney's fees on the cross-claim. In this situation, we also find the effect of the high/low agreement between Doucet and Crescent to be significant.

 

Doucet relies on Insurance Directive 175, issued by the Office of the Commissioner of Insurance on January 8, 2003. The court ruled that it had long been the public policy of Louisiana , that subrogation provisions in insurance contracts cannot harm the insured. This rule applies to reimbursement provisions in insurance contracts. An insurer invoking a subrogation or reimbursement provision is required by public policy to contribute to the attorney's fees incurred in obtaining a recovery from the third party.

 

Although the above directive was referred to in oral argument, it was not otherwise introduced into the record. By its own terms, it was created to expedite the policy forms review process, and relates to administrative sanctions against a non-complying insurer by the Commission. It does not purport to change the existing law. There is nothing in the record to suggest that the policy in question has been challenged or invalidated as non-compliant.

 

The appeals court reviewed the policy and found that the trial court was manifestly erroneous in granting such fees and costs and the judgment was reversed.

 

This case is Doucet v. Gayden, 2007 WL 3014926 (La.App. 5 Cir.).