CARTER, C.J.
The sole issue for our consideration in this writ action is whether the plaintiff's pretrial settlement and dismissal of all claims against the alleged tortfeasor automatically resulted in a release of the tortfeasor's liability insurer from its contractual obligation.
FACTS AND PROCEDURAL HISTORY
This case arose out of a physical altercation shortly after midnight on December 5, 1999, between plaintiff-respondent, Zander Sumrall, III, and defendant, William Cole Bickham, who were both attending an outdoor party hosted by friends. It is alleged that alcoholic beverages were being consumed and illegal drugs were being used at the party. Sumrall was seriously injured when Bickham tackled him from behind as he attempted to leave the party after a fight broke out. At the time of the incident, Bickham, who was home on leave from the U.S. Army, believed that Sumrall was retrieving a gun from his vehicle. Bickham's impact caused an injury to Sumrall's left leg as well as a severe hip injury, resulting in a permanent limp and weakness.
Sumrall filed suit against Bickham and defendant-relator, Continental Insurance Company (Continental), the homeowner insurer for Bickham's father. Bickham filed a motion requesting a stay of the proceedings against him pursuant to the Soldiers' and Sailors' Civil Relief Act of 1940. Sumrall later settled his claims against Bickham, releasing him from the suit. In the receipt and release agreement (the release agreement), Sumrall expressly agreed, in exchange for the compensation he received, to:
RELEASE, ACQUIT, AND FOREVER DISCHARGE
William Cole Bickham from any and all actions, claims, demands, damages, costs, loss of services, expenses, and compensation on account of, or in any way growing out of, any and all known and unknown personal injuries and property damage resulting or to result from an incident that occurred on or about the 5th day of December, 1999, . . .
reserving to said Zander
Sumrall, III
all rights as to all other parties, named or unnamed, including specifically, but without limitation, all rights as to Continental Insurance Company, the insurer of William Cole Bickham,. . . .
Sumrall's petition named several additional defendants not relevant to this writ application. The petition also incorrectly referred to Continental as "Continental Casualty Company."
See 50 U.S.C.App. § 521.
In his brief to this court, Sumrall explained that it was necessary to release Bickham, who is on active duty with the Army, in order to avoid a stay of the action.
* * *
It is further understood and agreed that this settlement is the compromise of a doubtful and disputed claim, and that the
payment is not to be construed as an admission of liability on the part of the payor or of the persons, firms, and corporations released hereby, by all of whom
liability is expressly denied. (Italics added.)
The trial court signed a judgment of dismissal in accordance with the terms of the settlement agreement, dismissing Sumrall's claim with prejudice as to Bickham "only," and expressly reserving all rights as to Continental. Shortly thereafter, Continental filed a motion for summary judgment, based in part on the language of the release agreement and the judgment of dismissal. The trial court denied the motion, and Continental applied to this court for supervisory review.
Additionally, Continental sought dismissal of the suit based on a policy exclusion for intentional acts. Sumrall filed a cross-motion for summary judgment seeking a declaration of coverage under the Continental policy. The trial court rejected both bases for Continental's motion and also denied Sumrall's cross-motion for summary judgment, finding the existence of genuine issues of material fact.
In its writ application to this court, Continental raised two issues: (1) whether certain policy exclusions applied to deny coverage of the underlying claim, and (2) whether the dismissal of its insured, Bickham, resulted in the discharge of its obligation under the policy to provide coverage for Sumrall's damages. Following our review of the application, we denied the writ. Sumrall v. Bickham, 03-1252 (La.App. 1 Cir. 9/22/03) (unpublished writ action).
Parro, J., dissented and would have granted the writ, finding that policy exclusions applied to deny coverage.
Continental then applied to the Louisiana Supreme Court for supervisory and/or remedial review. The writ was granted and by per curiam order, the matter was remanded to this court for an "opinion solely on the issue of whether a plaintiff's settlement with an insured eliminates an insurer's obligation to pay the plaintiff according to the terms that the policy would otherwise require." Sumrall v. Bickham, 03-2965 (La. 1/30/04), 865 So.2d 44 (emphasis added). It is in this procedural posture that the matter now comes before us.
As directed, we only address Continental's second contention that after its insured was dismissed from the suit, Sumrall's action against it could no longer be maintained because the sole basis for its coverage is the legal liability of its insured.
LAW AND ANALYSIS
Continental asserts that its policy only obligates it to pay claims for which its insured is legally liable. Continental's argument is that because Sumrall settled with and fully released Bickham from the lawsuit, a "natural consequence" of the release is that Bickham can no longer be found legally liable for Sumrall's injuries, and therefore, Continental's policy obligation cannot be triggered. Sumrall counters this argument by noting that Bickham's release and concomitant dismissal from the action was unambiguous and it affected only Bickham. Sumrall points to the express and specific reservation of rights as to Continental in the release agreement, as well as the clear statement in the agreement that Sumrall's settlement with Bickham was not to be construed as an admission of liability by Bickham, which was expressly denied.
The pertinent policy provision is as follows:
Louisiana law provides that the scope of a compromise agreement extends to the differences clearly comprehended by the parties, not to differences that the parties never intended to include. See LSA-C.C. art. 3073. In the release agreement, Sumrall unambiguously released Bickham from all "actions, claims, demands, damages, costs, loss of services, expenses, and compensation on account of, or in any way growing out of . . . [the] incident . . . reserving to . . . Sumrall . . . all rights as to all other parties, . . . including specifically, but without limitation, all rights as to Continental . . . the insurer of . . . Bickham." (Emphasis added.) The release language shows that the parties, Bickham and Sumrall, clearly comprehended and intended that Sumrall would maintain his rights to pursue Bickham's liability insurer, Continental. The release agreement expressly provides that Bickham's settlement with Sumrall "is not to be construed as an admission of liability" on the part of Bickham. The agreement goes on to clearly state that Bickham "expressly denie[s]" liability. Similarly, the judgment dismissing Bickham tracks the language of the release agreement, inserting the word "only" after Bickham, emphasizing the intent of the parties that only Bickham was released by the settlement.
There is no dispute concerning the facts. There is no evidence filed into the record substantiating any mistaken intent by either party to the release agreement. Therefore, the jurisprudence regarding cases where genuine issues of material fact were found to exist as to the intent of the parties in a release agreement are not helpful to our analysis in this case. Continental was not involved in the settlement between Sumrall and Bickham. Since Continental was not a party to the release agreement, it has no right to raise the issue of Sumrall and Bickham's intent upon entering into their settlement. See Duet v. Lucky, 621 So.2d 168, 172 (La.App. 4 Cir. 1993). Furthermore, Continental has not produced any evidence to prove that the intent of the parties to the compromise was anything other than what is portrayed by the clear language in the release agreement. Thus, our interpretation of the release agreement does not require an inquiry outside the four corners of the agreement to ascertain intent. See Gaubert v. Toyota Motor Sales U.S.A., Inc., 99-2569 (La.App. 1 Cir. 11/3/00), 770 So.2d 879, 882.
For example, see Rollins v. Richardson, 02-0556 (La. 12/4/02), 833 So.2d 921, 924-925.
We are called upon to examine and interpret the language of the release agreement, as well as the pertinent policy provision regarding Continental's obligation to pay any claim for which Bickham becomes "legally liable." Our interpretation involves the single issue surrounding the legal effect of Bickham's release with respect to Sumrall's rights against Continental. The issue presents a question of law, which is appropriate for decision by summary judgment; our review must be de novo. Smith v. Williams, 03-0433 (La.App. 1 Cir. 5/14/04), 879 So.2d 233, 235-36; Gaubert, 770 So.2d at 882. Appellate review of legal questions simply involves a determination as to whether the trial court's decision was legally correct. Simmons v. Berry, 98-0660 (La.App. 1 Cir. 12/22/00), 779 So.2d 910, 913-914.
We disagree with Continental's assertion that a liability insurer has no independent liability simply because its insured has been released pursuant to a pretrial settlement agreement with the plaintiff. Because Continental was not involved in negotiating the settlement agreement between Bickham and Sumrall, and was not a party to the compromise, Continental should not now be able to claim the benefit of the agreement by declaring that it should automatically be dismissed from the lawsuit as a natural consequence of the release of its insured. This is especially compelling in light of the clear language in the release agreement stating that Bickham was expressly denying all liability and that Sumrall was specifically reserving all rights "without limitation" as to Continental. See In re Combustion, Inc., 960 F.Supp. 1051, 1054 (W.D.La. 1997).
We have previously recognized in Rodriguez v. Louisiana Tank, Inc., 94-0200 (La.App. 1 Cir. 6/23/95), 657 So.2d 1363, 1367-1368, writ denied, 95-2268 (La. 11/27/95), 663 So.2d 739, that the release of an insured does not release the liability insurer, particularly where the plaintiff clearly intends to reserve rights against the insurer. In so holding, we reasoned that voluntary settlement of disputes, even in part, are favored in the law and parties should be allowed to reserve rights not otherwise compromised. Similarly, the third circuit has recently held in Finnie v. LeBlanc, 03-1013 (La.App. 3 Cir. 3/10/04), 875 So.2d 71, 76-77, that a partial dismissal of a tortfeasor, reserving the right to proceed against him "to the extent that he was insured" by the liability insurer was sufficient to maintain the plaintiff's suit against the insurer. However, we do not believe that the limiting language in the Finnie release, "to the extent that he was insured," is necessary for a plaintiff to properly reserve his rights against the liability insurer of a released tortfeasor. This is especially true in this case, because the settlement agreement did not acknowledge liability on the part of the tortfeasor, and legal liability has yet to be determined.
We recognize that Continental cannot be independently liable to Sumrall without the liability of Bickham first being found by the trial court or a jury or by an acknowledgment of liability on the part of its insured. See Mallet v. Credo Oil Gas, Inc., 534 So.2d 126, 129-130, writ denied, 536 So.2d 1237 (La. 1989). Settlement agreements are generally inadmissible to prove liability. See Wells v. Allstate Ins. Co., 510 So.2d 763, 766 (La.App. 1 Cir.), writ denied, 514 So.2d 463 (La. 1987). Delictual liability consists of fault, causation, and damage. To establish liability, a plaintiff must prove that the defendant's fault caused some legally compensable damage. See Hall v. Brookshire Brothers, Ltd., 02-2404 (La. 6/27/03), 848 So.2d 559, 567. "Liability" is defined in BLACK'S LAW DICTIONARY, 915 (6th ed. 1990), as "[b]ound or obliged in law or equity; responsible; chargeable; answerable; compellable to make satisfaction, compensation, or restitution." Similarly, "legally liable" is defined as "[l]iable under law as interpreted by courts." Id. at 895. An insured-tortfeasor can be "legally liable" for the victim's damages, even though he cannot be cast in judgment due to his release from liability.
In Hall, the supreme court discussed the meaning of "liability" within the context of comparative fault under LSA-C.C. art. 2323 and the Medical Malpractice Act.
The Direct Action Statute, LSA-R.S. 22:655, expressly states that a liability insurer and its insured are solidarily liable to the victim. However, the solidarity between the insured and the insurer toward the victim is only within the policy limits and coverages. See William Shelby McKenzie H. Alston Johnson, III, Insurance Law and Practice, § 28 in 15 Louisiana Civil Law Treatise (1996). Louisiana jurisprudence has consistently held that a liability insurer and its insured are co-debtors in solido. See Wertz v. Estes, 402 So.2d 166, 168 (La.App. 1 Cir. 1981). Yet it is clear that a liability insurer is not liable beyond its policy limits. The solidary obligation arises from different sources: it is delictual in nature for the insured and contractual in nature for the insurer. Therefore, the liability insurer and the insured-tortfeasor are solidarily liable to the victim, but possibly for different amounts. A tortfeasor may be found liable for an amount above and beyond the liability policy limits, potentially exposing an excess insurer's liability.
LSA-C.C. art. 1797 recognizes that a solidary obligation may derive from a different source for each obligor.
It is important to note that Continental is not an excess insurer in this case; therefore, the jurisprudence maintaining actions against excess and/or uninsured motorist insurers after the insured-tortfeasor has been released does not apply in this case. In reviewing this issue, we must first make a distinction as to the type of insurer involved.
We emphasize that in this particular instance, Bickham's liability has yet to be determined and can only be determined by the trier of fact. Bickham expressly denied liability in the release agreement. The settlement, evidenced by the release agreement, did not determine Bickham's or any other person's legal liability. By entering into the settlement agreement and releasing Bickham, Sumrall simply waived his right to pursue Bickham for more damages regardless of how serious Sumrall's injuries are eventually determined to be at trial. Sumrall waived his claim against Bickham, while specifically preserving his claim against the non-settling insurer, Continental.
See Garrett v. Safeco Ins. Co., 433 So.2d 209, 210 (La.App. 2 Cir. 1983).
For a similar scenario, see In re Combustion, 960 F.Supp. at 1055.
The Direct Action Statute was passed for the purpose of protecting plaintiffs from insurers who attempt to avoid coverage after collecting premiums from insured-tortfeasors. LSA-R.S. 22:655D; see William Shelby McKenzie H. Alston Johnson, III, Insurance Law and Practice, § 22 in 15 Louisiana Civil Law Treatise (1996). For all of these reasons, we hold that the settlement between Sumrall and Bickham resulting in Bickham's release did not bar Sumrall's separate right to pursue Bickham's non-settling insurer, Continental, through a direct action. We believe this view to be correct in this case, particularly in light of the additional facts that Sumrall specifically reserved his rights against Continental in the release agreement while simultaneously denying any admission of liability. See In re Combustion, 960 F.Supp. at 1054.
CONCLUSION
After considering the law and the contracts involved in this matter, we hereby deny defendant-relator's writ, thereby affirming the trial court's judgment denying the relator's motion for summary judgment on the basis addressed in this opinion.
We hold as a matter of law, that absent a clear intent to release the non-settling insurer, the release of the insured-tortfeasor pursuant to a compromise agreement between the insured-tortfeasor and the plaintiff, with an express reservation of rights as to the non-settling insurer, as well as an express denial of liability by the insured-tortfeasor, does not eliminate the insurer's responsibility for the tortfeasor's potential liability. Essentially, as long as it can be determined in a settlement agreement (such as the release agreement in the present case) that liability has not been acknowledged or determined, and the plaintiff did not intend to release its claims against the non-settling insurer, the non-settling insurer will still be responsible for its insured's potential liability for damages at the contracted coverage level. The non-settling insurer in this case has not produced any evidence that the plaintiff intended to release it from liability. Thus, plaintiff-respondent's direct action claim against the defendant-relator remains viable.
We also note that the decision reached in this opinion is in conformity with the general policy of promoting settlement of lawsuits. See Rodriguez, 657 So.2d at 1368. Were we to rule otherwise, the precedential impact of this case would only serve to discourage settlements in cases where some, but not all, of the parties wanted to compromise and settle the plaintiff's claims against them. GHR Energy Corp. v. Carboline Co., 744 F.Supp. 1408, 1411-1412. (E.D.La. 1990).
All costs are assessed against defendant-relator, Continental Insurance Company. This matter is remanded to the trial court for further proceedings consistent with this opinion.
WRIT DENIED; TRIAL COURT JUDGMENT AFFIRMED; REMANDED.
PARRO, J., concurs and assigns reasons.