author: JASPER E. JONES, Judge.

text:
    TRICO SERVICES CORPORATION, et al., Plaintiffs-Appellants, v. HOUSTON GENERAL INSURANCE CO., Defendant-Appellee.
    No. 14805.
    Court of Appeal of Louisiana, Second Circuit.
    April 5, 1982.
    Rehearing Denied May 12, 1982.

      Durrett, Hardin, Hunter, Dameron & Fritchie by Roger M. Fritchie, Baton Rouge, for plaintiffs-appellants.
    Cook, Clark, Egan, Yancey & King by Benjamin C. King, Shreveport, for defendant-appellee.
    Before HALL, JASPER E. JONES and NORRIS, JJ.
   JASPER E. JONES, Judge.

This is an action on a fire and extended coverage insurance policy. The plaintiffs sued to recover amounts in excess of those previously paid by the defendant and for penalties and attorney’s fees. The plaintiffs appeal the judgment of the district court seeking an increase in the amount awarded under the policy and penalties and attorney’s fees which were denied by the trial judge. The defendant answered the appeal seeking to have the amount of the judgment reduced.

The plaintiffs are Trico Services Corporation, owner of the insured property; The Reliable Life Insurance Company, mortgagee of the insured property; and Equity Management Corporation, manager of the insured property. The defendant is Houston General Insurance Company.

The facts of the case are set out below.

The insured property was the “Security U Stor & Lock” mini-warehouse complex located in Bossier City, Louisiana. The complex was composed of a building containing an office and living quarters for the resident manager (we will refer to this building as the “office”), nine warehouse buildings denominated “A” through “I” and one warehouse building denominated as “Phase II, or J” (hereinafter referred to as “J”). The buildings were constructed of hadite concrete blocks.

The complex was managed by Equity for a percentage of the rentals. It was operated as a self-service mini-warehouse complex. The warehouse units were rented without locks which were supplied by the renters. Because the renters supplied their own locks, Equity could not open the units.

The record shows that the business was very successful. In December 1978, 99.5% of the 709 units were occupied. Expansion was planned and a metal building to be erected as Phase III was on order.

Equity obtained fire and extended coverage insurance on the complex from defendant. The policy had limits of $1,066,000 on the buildings and other improvements, $5,000 on the contents of the office and $129,600 on lost rentals. The policy insured against damage due to windstorms. The policy was a blanket-type policy in that it provided the total amount of coverage on eleven separate buildings.

On December 3, 1978, a tornado struck the complex doing extensive damage. Buildings A, B, C, D and I and the office were destroyed, or so heavily damaged that they had to be razed. The other buildings were damaged, but repairable.

The tornado left the complex in chaos. Photographs in evidence show the site was strewn with debris, much of it the contents of the damaged units. The damage made whatever remained in many of the units subject to theft.

To protect the persons trying to remove their belongings from the site and to begin and speed repairs, Equity quickly acted to have the debris removed from the site. This was accomplished by the use of heavy equipment which pushed the debris off the site.

On December 15, 1978, Houston General made an advance payment of $50,000 to plaintiffs.

A few days after the storm the metal building that was to be used as Phase III was delivered. The plaintiffs had the building erected as quickly as possible and tried to encourage persons moving their property out of the damaged units to move into units in the new buildings.

In an effort to get back into operation quickly, plaintiffs had buildings A, B and I replaced with metal rather than concrete block buildings. The other buildings were rebuilt or repaired with concrete blocks. When the office was rebuilt the original one-story structure was replaced with a two-story building.

Following the storm plaintiffs obtained bids from several contractors for the repair of the complex. Houston General refused to accept these bids because they were insufficiently detailed to allow verification.

Houston General had J. 0. Loehridge General Contractors, Inc. prepare a bid for restoration of the complex. On March 19, 1979, Lockridge submitted a bid of $494,945. This was later increased to $504,900. Loch-ridge is based in Dallas, Texas and was not authorized to do business in Louisiana at the time it submitted its bid.

Equity had the Loehridge bid reviewed by Coyle Engineering Company and Robert E. Jones & Associates. After review, neither Charles Coyle, P.E., nor Robert Jones, P.E., found the bid adequate. However, the Florsheim Construction Company of Shreveport agreed to perform the work in the Loehridge bid for the specified price. When approached by Equity, Florsheim refused to contract to restore the complex to its pre-storm status for the price in the Loehridge bid. Florsheim later submitted a bid of $775,000 to restore the complex to its pre-storm status.

On March 22, 1979, Equity submitted a proof of loss of $833,762 excluding lost rentals. After Houston General had refused to accept the earlier bids they had obtained, plaintiffs contacted the Whitaker Construction Company and asked it to prepare a bid. In April, Whitaker submitted a bid of $706,-088.

On May 18, 1979, Houston General responded to the proof of loss with a tender of $578,017.40. The letter enclosing this draft itemized the loss as follows:

The plaintiffs contend that additional amounts were due based on the amount of the Whitaker bid and Florsheim’s refusal to guarantee to fully restore the property for Lochridge’s price. Despite those facts Houston General refused to make any further payments after which plaintiffs brought this action.

After a trial on the merits the district court found the amount owed under the policy to be $690,060.70, against which the court offset the $50,000 advance, the May 18th payment of $578,017.40, the $1,000 deductible and salvage of $1,100, and rendered judgment for the balance of $59,943.30, with interest from date of judgment. The excellent reasons for judgment prepared by the trial judge sets forth the manner in which he arrived at the amount of his award as follows:

“CREDITS
The following credits are due defendant herein:
For the reasons set forth above it is the opinion of the court that the plaintiffs should have judgment against the defendant Houston General Insurance Company as follows:
Subject to a credit of $630,117.40, leaving a net amount due of $59,943.30, and all costs herein.”

By the time of trial in June 1980, the appellants had substantially restored the complex by using their own employees and the services of various contracting firms. None of the work was performed by Loch-ridge, Whitaker or Florsheim who had bid the job.

The trial court determined the amount that appellants were entitled to based upon the amount which was actually expended by them in replacing buildings A, B, C, D, I and the west 115 ft. of J. There was no reliable evidence in the record as to what appellant spent on the repair of buildings E, F, G and H, and for this reason the trial court determined the amount of the appellants’ loss on those buildings to be the amount which Whitaker had bid to repair them. Because appellants replaced the one-story office building, which was destroyed by the storm, with a larger two-story building, the trial judge used the amount bid by Whitaker to replace the original office structure as the amount to which appellants were entitled to for destruction of the office building. The trial judge based the award for fencing, landscaping and cleanup on the amount which appellants’ records established were actually expended by them in connection with these activities. Because appellants replaced much of the damaged asphalt with more expensive concrete and because some of the asphalt had been damaged before the storm in connection with the installation of a drainage system, the trial court made the asphalt award based upon the Whitaker bid for replacement of the asphalt, reduced by the cost of replacing the asphalt which had been damaged before the storm.

We amend the judgment to change the time at which legal interest commences to run, and, otherwise, affirm the judgment.

On appeal the appellants urge seven assignments of error. Appellants contend:

1) that the trial judge erred in applying the replacement cost endorsement of the policy to determine appellants’ loss;

2) alternatively, they contend that the trial court erred in its interpretation of the replacement cost endorsement to the policy;

3) that the trial judge erred by incorrectly applying the total cost provisions regarding evaluation of losses (appellants contend here they are entitled to the total amount of the Whitaker bid for replacing the complex rather than the actual cost of replacing each item damaged or destroyed);

4) that the trial judge erred in basing the amount of recovery on expenditures for replacement of property unrelated to the value of the damaged property (appellants here contend that the trial judge erred in awarding the actual cost of replacing destroyed concrete block buildings with metal buildings);

5) that the trial judge erred in awarding interest only from the date of judgment;

6) that the trial judge erred in failing to award penalties and attorney’s fees; and

7) that the trial judge should have found the deductible to have been only $500.

In its answer to the appeal defendant urges five assignments of error. The defendant suggests that the district court erred:

1) by granting judgment in favor of Trico as it was not named an insured on the face of the policy;

2) in granting judgment in favor of Reliable as it was not a designated loss payee on the face of the policy, and there is no proof of the amount of its mortgage;

3) in granting judgment in Equity’s favor for more than its insurable interest;

4) in awarding additional sums when the amount paid were sufficient to fully restore the property; and

5) alternatively, in awarding excessive amounts for paving and lost rent.

We begin by considering defendant’s first three contentions.

The form of the judgment was as follows: “IT IS ORDERED, ADJUDGED AND DECREED that there be judgment herein in favor of the plaintiffs, Trico Services Corporation, Equity Management Corporation and The Reliable Life Insurance Company, and against the defendant, Houston General Insurance Company, for the sum of $59,943.30 together with legal interest thereon from date of judgment until paid.”

Equity was the only named insured on the policy. Houston General argues that it was error to grant judgment in favor of Trico because it was not an insured, and Reliable because it was not a loss payee and did not prove the amount of its mortgage.

Houston General contends that an insurance policy is a personal contract between the insurer and the named insured and does not cover any portion of the loss beyond the interest of the named insured shown on the face of the policy. To support that proposition appellee cites Union Central Life Ins. Co. v. Harp, 203 La. 806, 14 So.2d 643 (1943) and In Re: Clover Ridge Planting & Mfg. Co., 178 La. 302, 151 So. 212 (1933). Those cases, however, do not stand for the defendant suggested rule.

Harp merely says that a fire policy does not pass with insured property which is sold. Clover says only that insurance “is a personal contract between the insurer and insured” which does not run with the property. (151 So. p. 216). Neither case holds that a policy is personal between the insurer and the named insured and for that reason covers only the interest of the party designated as the named insured on the face of the policy at the time it was issued.

The defendant also relies on Eagle Star Ins. Co., Ltd. v. General A. F. & L. A. Corp., 315 So.2d 826 (La.App. 3d Cir. 1975). Eagle Star has no application to this case. There the court held that the purchaser of an airplane could not recover on a policy issued to his vendor. No sale of the insured property is involved in this case and defendant’s reliance on Eagle Star is misplaced.

Duncan v. Sun Mut. Ins. Co., 12 La. Ann. 486 (La.1857), sets out the test to determine whether or not Trico and Reliable are protected by the policy. That case states that when a general survey of the policy and circumstances under which it was procured show that it was the intention of the company and the named insured to protect any party in interest, then that party, even though un-named, may recover on the policy. Duncan, supra.

The evidence shows Equity intended to insure and protect the interest of Trico and Reliable as well as its own. David Watkins, Jr., an executive vice president of Equity, so testified. This is also shown by the policy purchased. Equity’s only interest was in the rents themselves, but, they purchased a policy which insured not only the rents but the complex and office contents as well. The latter items were ones in which only Trico and Reliable had interests. The policy contains an endorsement effective November 1, 1978 which states “Mortgagee-The Reliable Life Ins. Co., c/o Trico Services Corp.” The defendant paid the $578,017.40 on May 18, 1979 by draft payable to Trico, Equity and Reliable. We conclude that all of these circumstances establish an intent of the insurer and the Equity Management Corporation to include in this policy the interest of Reliable and Trico as insureds under the policy.

Trico and Reliable can both recover on the policy in addition to the named insured, Equity. Duncan, supra; Nielsen v. Lafayette Insurance Company, 300 So.2d 217 (La.App. 2d Cir. 1974); Diaz v. Cherokee Insurance Company, 275 So.2d 922 (La.App. 4th Cir. 1973).

That Trico, the owner of the insured property, may recover on the policy renders harmless any error in granting judgment for more than Equity’s insurable interest or in Reliable’s favor absent proof of the amount of its mortgage. This is true because Trico will be entitled to any part of the judgment which is not attributable to the smaller interests of Equity and Reliable. Neither Trico, Equity nor Reliable complain about the manner in which the judgment was rendered.

These contentions by defendant are without merit.

PLAINTIFFS’ ASSIGNMENT # 1

Through this assignment appellants contend that the trial court erred in applying the replacement cost endorsement of the policy. The replacement cost endorsement provides the insured is to recover the lesser of:

a) the policy limits
b) the replacement cost of the property or any part thereof with identical property
c) the amount actually and necessarily expended in repairing or replacing the property.

The replacement cost endorsement also provides:

“[t]he insured may elect to make claim under this policy in accordance with its provisions, disregarding this endorsement. .. ”

The plaintiffs desired to have the basic policy provisions, which provide for recovery on actual cash value, applied. They were entitled to have their losses assessed under the basic policy provisions under the language of the policy. LSA-C.C. art. 1901. The trial court in its reasons for judgment clearly stated that it was applying the provisions of the replacement cost endorsement to determine the amount which appellants were entitled to recover under the policy. The trial court should have made this determination under the actual cash value provisions of the policy. Actual cash value is the amount required to repair or replace the damaged or destroyed property to or in its original condition. Gibsland Supply Co. v. American Employers Ins. Co., 242 So.2d 310 (La.App. 2d Cir. 1970); Holloway v. Liberty Mutual Fire Insurance Co., 290 So.2d 791 (La.App. 1st Cir. 1974).

The thrust of appellants’ contention here is directed at the trial judge’s determination that because the appellants replaced buildings A, B and I with metal buildings the amount they were entitled to recover was determined by Section C of the replacement cost endorsement which provides that the insured is entitled to recover the amount actually expended in replacing the property. Appellants properly argue that because the replacement cost endorsement is inapplicable they are entitled to recover the actual cash value of the block buildings destroyed. They contend the actual cash value of A, B and I is the amount of the Whitaker bid to replace them with concrete block which exceeds by $105,254 the actual cost of replacing A, B and I with metal buildings. As will be hereinafter shown in our discussion of plaintiffs’ assignment of error # 4, a determination of the loss based upon actual cash value would have resulted in a conclusion that the loss was substantially the same as determined by the trial court, and, therefore, the amount awarded for buildings A, B and I was correct.

Our resolution of Assignment # 1 makes it unnecessary to consider plaintiffs’ alternative Assignment # 2.

PLAINTIFFS’ ASSIGNMENT # 3

Through this assignment appellants contend that the trial court erred in applying the provisions of the replacement cost endorsement for the evaluation of losses to the individual buildings. The replacement cost endorsement provides:

“If the coverage on property under this policy be divided into two or more items, all of the foregoing shall apply separately to each item to which the endorsement applies.”

As previously stated, the replacement cost endorsement was inapplicable and the trial judge’s application of its provisions was in error. However, the evaluation of losses based upon damage to individual buildings was correct under the provisions of LSA-R.S. 22:695(B) which provides:

“B. Under any fire insurance policy, which may be written hereafter, and which is intended to take effect, at or after 12 o’clock noon, Central Standard Time, on the first day of August, 1964, on any inanimate property, immovable by nature or destination, situated within the State of Louisiana, the insurer shall pay to the insured, in case of partial damage, without criminal fault on the part of the insured or the insured’s assigns, such amount, not exceeding the amount for which the property is insured, at the time of such partial damage, in the policy of such insurer, as will permit the insured to restore the damaged property to its original condition; provided, however, that for any loss of an insured object which would constitute total loss under Sub-section A of this provision but which loss is covered by a blanket-form policy of insurance, Sub-section B of this provision shall apply, and the insurer shall pay to the insured an amount equal to the actual cash value at the time of the loss of each insured object so destroyed, not exceeding the total amount of the insurance.” (emphasis added)

The crux of appellants’ contention is that they are entitled to the damages to the complex as reflected in the total amount of the Whitaker bid in the amount of $706,088, rather than the amount of the cost required to repair and replace each damaged or destroyed item of property added together. Appellants cite no authority for this contention and it is contrary to the intent expressed in the quoted provision of the valued policy law and the jurisprudential definition of actual cash value which provides they are entitled to the actual cost of repairing or replacing the damaged or destroyed property. Appellants have cited no case, and we found none, that holds that an insured is entitled to recover his loss based upon the total of some estimated amount by one contractor for which he will repair or replace all of the property covered by the blanket policy.

The trial judge’s action was correct under § 695(B) because this statute provides that the loss on partially damaged buildings shall be the amount required to restore the building to its original condition and on totally destroyed buildings covered by a blanket policy, such as we have here, the loss shall be the actual cash value of each building destroyed.

PLAINTIFFS’ ASSIGNMENT # 4

The appellants argue that the trial judge erred by using expenditures unrelated to the actual cash value of the property as a measure of recovery. The basis for this assignment is the award for the destroyed buildings A, B and I which was determined by the trial judge to be the cost of the metal buildings used to replace them.

Appellants are entitled to an amount sufficient to restore the property to its condition before the storm. LSA-R.S. 22:695(B); Gibsland; Holloway, supra.

Appellants contend that the cost of the metal buildings is not a proper basis of measurement of the cost of restoration because the metal buildings are inferior to block and did not restore the property to its pre-storm condition. Plaintiffs seek to recover for the amount Whitaker bid to restore A, B and I, which was the sum of $281,615.

We agree that the recovery should be based on the cost of restoring the destroyed buildings with block buildings. However, that cost is best shown by the cost of replacing buildings C, D and the west 115 ft. of J, rather than the Whitaker bid. These buildings, which had an area of 23,625 sq. ft. were rebuilt with concrete blocks at a cost of $187,097, or $7.92 per sq. ft.

The Whitaker bid to replace A, B and I, which had a total of 18,760 sq. ft., with concrete blocks was $281,615, or $15.01 per sq. ft., which is almost twice the actual cost of rebuilding C, D and the west 115 ft. of J. The trial judge awarded $176,361 for A, B and I. This is $9.40 per sq. ft. Though the award is somewhat higher than the actual cost on C, D and J, the difference is justified to allow for possible minor variations in the two groups of buildings which could result in a slightly higher cost in replacing buildings A, B and I with block than it cost to replace buildings C, D and the west 115 ft. of J with block. We conclude that the amount awarded by the trial judge for buildings A, B and I was adequate to have replaced them to their original condition of concrete block construction.

PLAINTIFFS’ ASSIGNMENT # 5

The plaintiffs assign as error the trial judge’s refusal to grant pre-judgment interest through assignment number five. Plaintiffs contend that interest should begin running sixty days after they submitted their proof of loss. We agree.

The policy provided that amounts due under the policy are payable sixty days after the proof of loss. Debts bear interest from the time they are due. LSA-C.C. art. 1938. The debt in this case was due sixty days after the proof of loss, and, therefore, interest would commence to run sixty days after proof of loss. Isadore v. Washington Fire and Marine Insurance Co., 75 So.2d 247 (La.App.Orl.1954); Haynes v. Standard Fire Ins. Co., 370 So.2d 118 (La.App. 1st Cir. 1979). The proof of loss was submitted on March 22, 1979; therefore, interest should have commenced to run on May 22, 1979. However, in this case the award made by the trial court included $29,183.05 for loss of rent that was not included in the funds paid by defendant to appellants on May 18,1979. The funds tendered on this date included projected rent loss through August 1979. The additional rent loss awarded by the court was not actually totally sustained by the appellants until November 1979. For this reason we award interest on the $29,-183.05 commencing January 1, 1980, sixty days after the loss of this rent was actually sustained, and at which time appellee should have paid it; and interest on the remaining part of the judgment which is the sum of $30,760.25 shall commence on May 22, 1979.

PLAINTIFFS’ ASSIGNMENT # 6

Plaintiffs’ sixth assignment of error addressed the trial judge’s failure to find defendant’s refusal to pay additional amounts arbitrary and capricious.

Plaintiffs concede that defendant’s payment based on the Loehridge bid on May 18, 1979 was reasonable at the time made. They contend, however, that defendant’s subsequent failure to pay additional amounts after it was given the Whitaker bid and Florsheim repudiated the Loehridge bid, was unreasonable.

The record shows that the trial judge allowed $560,460.70 for damages to the complex and $129,600 for loss of rent. Thus, the Loehridge bid of $504,900 was approximately $55,000 off the amount allowed, while the Whitaker bid of $706,088, which plaintiffs contend impeached the Loehridge bid, was off by approximately $146,000, or nearly three times as much as the Loehridge bid.

An insured may recover penalties and attorney’s fees on the difference in the amount tendered and the amount due when the failure to tender the full amount is arbitrary and capricious. Haynes v. Standard, supra. An insurer’s misinterpretation of its policy is not a reasonable grounds for delay in payment and will not avoid liability for penalties and attorney’s fees. Carney v. American Fire & Indem. Co., 371 So.2d 815 (La.1979). Where a plaintiff inflates his claim so as to hamper efforts to settle no penalties or attorney’s fees may be recovered. Gambrell v. Audubon Insurance Company, 115 So.2d 727 (La.App.Orl.1959). In the case of Menard v. Andrew Jackson Apartments, Inc., 225 So.2d 249 (La.App. 4th Cir. 1969), it was held that where there was a serious dispute on the extent of the insured’s damages which could only be resolved by litigation, that no penalties and attorney’s fees could be recovered against the insurer.

We begin by noting that in the instant case the dispute arises not from misinterpretation of the policy by Houston General, but from a factual dispute. Therefore, Carney is inapplicable to this case.

The question here is was the defendant’s failure to pay due to plaintiffs’ inflating their claim and to a serious and justified dispute as to the extent of the damages, or was defendant acting in an arbitrary and capricious manner in its failure to pay the full amount which the trial court found to be owed.

Appellants contend that Houston General was arbitrary and capricious in continuing to rely on the Lochridge bid after Whitaker bid the work at a much larger amount and Florsheim informed it that it would not contract to restore the complex for Loch-ridge’s price.

The trial judge awarded $560,460.70 for damages to the complex. Thus, Lochridge’s bid was approximately $55,000 low and Whitaker’s about $146,000 high. The error in the Whitaker bid was almost three times the error in the Lochridge bid.

We do not find that defendant was arbitrary or capricious in relying on by far the more accurate of the two bids. We also note that the Florsheim bid of $775,000 was even more inaccurate than the Whitaker bid. Thus, we cannot say that Houston General was arbitrary or capricious in its failure to be alarmed by Florsheim’s refusal to accept a contract to repair the complex for the amount of the Lochridge bid and by Florsheim’s subsequent bid which exceeded the amount of the Whitaker bid.

The record further shows that the Loch-ridge bid was judged reasonable by a qualified engineer who reviewed it. Florsheim agreed with the pricing in the Loch-ridge bid, but later differed on whether the work it proposed was enough to completely restore the project.

It is also relevant that the plaintiffs’ claims were consistently excessive. The proof of loss included a $15,000 supervision fee for Equity’s employee, McClure, who was resident manager of the complex and a $75,000 fee for Equity. This type of unnecessary expense would not be covered under the policy and appellants make no contention in brief that it was covered by the policy. The proof of loss also included highly excessive amounts for paving, fencing and landscaping.

The record shows that there was a genuine factual dispute between the parties as to the amount of work necessary to restore the complex and the cost of the work. The defendant’s position in the dispute was reasonable and supported by substantial grounds. The trial judge did not err in failing to find defendant’s actions arbitrary and capricious.

PLAINTIFFS’ ASSIGNMENT # 7

Appellants contend that the $1,000 deductible reflected upon the declaration sheet of the policy was incorrectly allowed as a credit because they purchased for a separate premium “Special Extended Coverage” which provides for a maximum deductible of $500 for the eleven buildings damaged or destroyed. In the Special Extended Coverage Endorsement we find the following provisions relating to the deductible:

“Deductibles
The sum of $100.00 shall be deducted from the amount of loss to all property covered hereunder in any one occurrence resulting from all perils insured against. This deductible shall apply separately to each building or structure.”

There are no other deductible provisions contained in the Special Extended Coverage Endorsement.

The appellants quoted from the deductible clause contained in the EXTENDED COVERAGE ENDORSEMENT which provides for a maximum of $50.00 deductible for each building. The SPECIAL EXTENDED ENDORSEMENT provides that the EXTENDED coverage endorsement is superseded by this endorsement. This provision of the Special Extended Coverage Endorsement has the effect of eliminating the deductible clause relied upon by appellants.

This assignment of error is without merit.

We now turn to the defendant’s two final contentions in its answer to the appeal. In its fourth ground, the defendant urges that the trial court erred in awarding plaintiffs additional amounts when the property had been fully restored with the funds already tendered. Through its fifth contention, defendant urges that the trial court erred by awarding excessive damages. These arguments have essentially the same basis and we will therefore consider them together.

The record shows that the trial judge was correct in finding that the amounts paid by defendant were insufficient to fully restore the property. The payment was based partly on the Lochridge bid, which did not include an adequate amount for the repair of the pavement, and for the repair and replacement of the damaged and destroyed buildings, and the payment did not include a sufficient amount for loss of rent, which the evidence clearly establishes exceeds the loss of rent coverage of $129,600.

The totality of the evidence does not support defendant’s contentions that appellants failed to diligently repair and replace the damaged and destroyed rental units so as to minimize the rent loss.

There is substantial evidence in the record to support all amounts awarded by the trial judge and we find no manifest error in his determination of the cost required to replace the damaged and destroyed property. The appellants were entitled to the additional amount awarded them by the trial judge above the amount previously paid by defendant.

These assignments are without merit.

The judgment appealed is AMENDED to commence the running of interest on May 22, 1979 on $30,760.25 of the judgment, and to commence running of interest on the remaining amount of the judgment, which is $29,183.05, on January 1, 1980. Otherwise, the judgment is AFFIRMED. All costs of this appeal are assessed equally between appellants and appellee.

      . Replacement cost coverage is designed to protect not only actual value of the insured property, but the depreciation on that property as well, thus maintaining the insured in the position to replace the insured property even though the cost of doing so exceeds the actual value of the insured property at the time of the loss. Columbia College v. Pennsylvania Insurance Co., 157 S.E.2d 416 (S.C.1967); Ruter v. Northwestern Fire and Marine Ins. Co., 72 N.J.Super. 467, 178 A.2d 640 (1962), pet. den. 37 N.J. 229, 181 A.2d 12 (N.J.1962).
      Replacement cost coverage is of diminished utility in Louisiana because of the valued policy law and the jurisprudential construction of coverage on an actual cash value basis to mean the cost of repair or replacement of a partially destroyed object or of a totally destroyed object covered by a blanket-type policy without any allowance for depreciation. LSA-R.S. 22:695; Gibsland Supply Co. v. American Employers Ins. Co., 242 So.2d 310 (La.App. 2d Cir. 1970); Holloway v. Liberty Mutual Fire Insurance Co., 290 So.2d 791 (La.App. 1st Cir. 1974).

      . C.C.1901 — Agreements legally entered into have the effect of laws on those who have formed them.
      They can not be revoked, unless by mutual consent of the parties, or for causes acknowledged by law.
      They must be performed with good faith.

      . Art. 1938 — “All debts shall bear interest at the rate of twelve percent per annum from the time they become due, unless otherwise stipulated.”


source: Caselaw Access Project

author: FRED W. JONES, Jr., Judge.

license: Public Domain

text:
    Charles A. HERRIN, Plaintiff-Appellee, v. GEORGIA CASUALTY & SURETY COMPANY, Defendant-Appellant.
    No. 14827.
    Court of Appeal of Louisiana, Second Circuit.
    April 5, 1982.

      Hall, Lestage & Lestage by David R. Lestage, DeRidder, for defendant-appellant.
    Ford & Nugent by Howard N. Nugent, Jr., Alexandria, for plaintiff-appellee.
    Before HALL, FRED W. JONES, Jr. and SEXTON, JJ.
   FRED W. JONES, Jr., Judge.

Finding that a workmen’s compensation claimant was totally and permanently disabled as a result of an on-the-job accident, the trial court awarded plaintiff judgment against the defendant insurance company for benefits at the maximum rate of $130 per week for the duration of his disability, subject to a credit for 17 weeks compensation benefits paid by defendant to plaintiff.

Defendant appeals, contending that (1) plaintiff failed to prove a causal connection between his disability and the on-the-job accident, particularly in view of a second unrelated accident in which plaintiff was involved several months after the first accident; (2) since plaintiff performed substantially the same work after the on-the-job accident as before, he had either fully recovered from that accident or was only partially disabled as a result thereof; and (3) plaintiff failed to establish entitlement to the maximum allowable benefit of $130 per week.

We amend the trial court judgment to reduce the weekly benefit award, but otherwise affirm.

Factual Context

On April 14,1978 the 76 year old plaintiff was engaged in the course of his employment by a timber company, using his own truck to haul wood for which he was compensated on a per cord basis. When attempting to go up a hill, the brakes on the heavily loaded truck failed and the vehicle rolled backwards, turning over in a ditch. Plaintiff left his truck and walked a mile or so to seek the assistance of other workers in that area of the woods. With their machinery, the latter uprighted and reloaded plaintiff’s truck. Plaintiff completed his work day and then reported the accident to his employer, relating that he was “shook up” somewhat by the incident.

That evening, since he was experiencing some discomfort as a result of his accident, plaintiff was taken by his wife to consult their family physician, Dr. Harry Winters, in Columbia. Noting that plaintiff was complaining of chest and back pain, Dr. Winters gave him a shot and directed that he return the following day. On April 15, 1978 Dr. Winters had plaintiff admitted to the Caldwell Hospital for observation and treatment.

During his stay in the hospital, plaintiff was visited by his sister-in-law, Mrs. Majo-rie Guinn, owner of the timber company for which he worked. Asked if he desired his employer to report the accident to her workmen’s compensation insurance carrier, plaintiff replied that he “didn’t want to fool with it right now.” Be that as it may, Mrs. Guinn did, soon thereafter, give a claims representative of the defendant insurance company informal notice of the accident.

Plaintiff was discharged from the hospital on April 19, 1978, but remained under the care and treatment of Dr. Winters for his neck and back condition. On referral by Dr. Winters, plaintiff was examined on May 24, 1978 by Dr. Claire Justice, a West Monroe thoracic surgeon. Although she saw plaintiff primarily because of his chest discomfort, Dr. Justice also noted complaints of neck and back pain which, upon the basis of the history given by plaintiff, she related to the April 14 accident.

On August 9, 1978 plaintiff was involved in a motor vehicle accident in Lecompte when his car collided with a truck. Besides suffering a minor laceration to the forehead, plaintiff was found by Dr. Winters to have aggravated the injuries to his neck and back which were sustained in the April accident.

In September 1978 plaintiff requested that his employer send in a formal report on his April 1978 accident to its workmen’s compensation insurance carrier. Upon the completion of its investigation, but without having received from plaintiff a detailed statement of expenses incurred in connection with the use of his truck on the job, defendant insurance company paid plaintiff $2210, representing workmen’s compensation benefits at the maximum rate of $130 per week for the 17 week period running from the date of the April 1978 accident to the date of the second accident in August 1978. The position of the insurance company was that any present disability experienced by plaintiff was due to the second accident and that his disability resulting from the on-the-job accident terminated after 17 weeks.

Plaintiff did not return to work for his sister-in-law’s timber company after the April 1978 on-the-job accident.

This suit for workmen’s compensation benefits for total and permanent disability was filed on May 17, 1979. Trial on the merits was held on February 28, 1980. Judgment was rendered on November 18, 1980 and signed on June 10, 1981.

Causal Connection Between Disability and April 1978 Accident

Appellant concedes that plaintiff was involved in an on-the-job accident on April 14, 1978, but argues that any disability he suffers is due to a separate, intervening cause—the August 1978 motor vehicle accident.

Prior to the April 1978 accident, plaintiff was afflicted with a variety of maladies common to those of advanced years whose livelihood has depended upon the performance of manual labor—including a generalized arthritic back condition. However, it was undisputed that before the accident plaintiff worked regularly, free of significant pain and discomfort.

As pointed out in Lindsey v. H. A. Lott, Inc., 387 So.2d 1091 (La.1980):

“As in any other civil suit the plaintiff in a workmen’s compensation action has the burden of establishing his disability and the causal relation between it and the accident by a preponderance of the evidence. This court has held, however, that a claimant’s disability is presumed to have resulted from an accident if, before the accident, the injured person was in good health, the symptoms of the disabling condition appearing after the accident and manifesting themselves continuously afterwards, providing there is a reasonable possibility of causal connection between the accident and the disabling condition.”

Furthermore, an employee’s disability is compensable if a non-disabling pre-ex-isting condition is activated or precipitated into disabling manifestations as a result of a work injury. Lucas v. Insurance Company of North America, 342 So.2d 591 (La.1977).

There is no question but that plaintiff was disabled as a result of the April 1978 accident. Defendant recognized this fact by paying 17 weeks compensation benefits thereafter. Its argument that this condition had substantially subsided by the time of the August 1978 accident is not supported by the record and is directly refuted by the testimony of Dr. Winters who, queried on this point, simply stated that “the second accident didn’t help anything” since the injuries were in the same areas of the body [as those sustained in the April 1978 accident]. Dr. Winters refused to speculate on whether the second accident either prolonged or made more permanent the injuries suffered by plaintiff in the on-the-job accident.

Since his conclusion is amply supported by the record, the trial judge was not clearly wrong in finding that plaintiff’s on-the-job April 1978 accident was a substantial factor in causing his disability, although the August 1978 accident apparently aggravated his injuries or otherwise contributed to his disabling condition. See Byrer v. Southern Baptist Hospital, Inc., 350 So.2d 1233 (La.App. 4th Cir. 1977).

Extent of Plaintiff’s Disability

After repeated examinations and months of treatment, it was Dr. Winters’ conclusion that plaintiff’s arthritis of the spine was aggravated by the trauma sustained in the April 1978 on-the-job accident. Based upon an examination of plaintiff just the day before the trial on the merits, Dr. Winters testified that plaintiff continued to experience “too much difficulty with his back and neck” to engage in any kind of work.

Plaintiff’s testimony, corroborated by that of his wife, was that he had suffered persistent neck and back pain since the time of the April 1978 accident, and that he had to take pain pills on a regular basis at night for relief. He denied having engaged in any work since the date of that first accident.

A workmen’s compensation claimant is totally and permanently disabled if he is unable to engage in any gainful occupation for wages. La.R.S. 23:1221(2).

Appellant argues that, if disabled at all by the April 1978 accident, plaintiff’s disability is only partial since there was evidence that he had driven a pulpwood truck for several days on a wood-hauling job in Texas subsequent to the first accident.

Our review of the record reveals that the evidence relied upon by appellant consists of the rather vague deposition testimony of Phacker, the operator of a Texas wood yard, that he saw plaintiff on at least one occasion in June 1978 drive a truck loaded with wood into his yard. Even if accepted as true, this evidence alone would not serve to refute the categorical medical testimony that plaintiff was unable to engage in gainful employment because of injuries received in the on-the-job accident. Consequently, the trial judge correctly found that plaintiff was totally and permanently disabled for workmen’s compensation purposes.

Computation of Weekly Compensation Benefits

We find merit in appellant’s argument that plaintiff failed to prove entitlement to the maximum weekly compensation award of $130.

As previously stated, plaintiff used his own truck to haul wood for his timber company employer, for which he was paid $5.00 per cord of wood hauled. A truck load usually consisted of five cords and plaintiff routinely made four loads per day, working an average of five days each week. Plaintiff testified that the expense of running his truck (including gas, oil, etc.) averaged between $5 to $7 per load.

Pertinent to this issue is the following comment found in Malone & Johnson, Workers’ Compensation, Sec. 327, pp. 102-104:

“The term ‘wages’ means the amount earned by the employee through his own labor, rather than profits for his enterprising or rental for any equipment he may provide. Where an employee furnishes his own truck or other piece of equipment or provides his own helpers, an adjustment is ordinarily made in arriving at his wage so as to exclude those sums paid by the employer in remuneration for these items.
“Two methods have customarily been used by our courts in making this adjustment. Often the courts select the wage of another worker who was doing the same work on a wage basis. The other method is to select the full per unit price or the gross wage paid, from which is deducted the reasonable rental value of the equipment and the amount paid to helpers. Sometimes the latter method is impractical because of the venturous nature of the undertaking.
“Almost all of the recent cases involving calculations of the ‘wages’ of an employee who supplies his own equipment or helpers have involved persons employed in the logging industry, in which it is common to pay persons per cord of wood delivered. Obviously, a person who supplies a truck, or saws, or other laborers whom he himself pays will be entitled to a higher per-cord price than a person who merely provides his labor to cut the wood. In these instances, the court has used one or the other of the methods described above to reach a fair wage figure.”

After having been amended in 1968 and 1975, La.R.S. 23:1021(7) provides in pertinent part:

(7) “ ‘Wages’ means average weekly wage at the time of the accident. The average weekly wage shall be determined as follows:
% sj: jfs sfc
(d) If the employee is employed on a unit, piecework, commission, or other basis, his gross earnings from the employer for the twenty-six week period immediately preceding the accident divided by the number of days the employee actually worked for the employer during said twenty-six week period and multiplied by four; provided, however, that if such an employee has worked for the employer for less than a twenty-six week period immediately preceding the accident, his gross earnings from the employer for the period immediately preceding the accident divided by the number of days the employee actually worked for the employer during said period and multiplied by four.”

Although the cited statutory provision stipulates that a claimant’s average weekly wage in a case of this nature is to be computed on the basis of his “gross earnings,” we construe this to mean the claimant’s return on labor only rather than on capital also. Consequently, this requires that we deduct the expense incurred by plaintiff in the use of the truck owned by him in his employment in order to determine his “gross earnings” from his labor as a truck driver.

We find that the computations relating to this question, set forth in appellant’s brief and derived from evidence in the record, are substantially correct. Using those figures, we calculate the weekly compensation benefit to which plaintiff is entitled as follows:

$1448.45 . . . total paid to plaintiff by his employer over 7 week period prior to accident
less 406.00 . . . expense involved in operating truck, hauling 58 loads of wood at $7 per load
$1042.45 . . . gross earnings for plaintiff’s labor, divided by the 30 working days, with that figure multiplied by 4, results in an average weekly wage of $139; 662/3% of the latter computes to $92.66 as the weekly compensation benefit to which plaintiff is entitled.

Appellant argues that it is entitled to a credit for the “overpayment” of compensation ($130 per week) during the 17 week period. This argument is without merit, since it is established that amounts paid in excess of compensation due cannot be credited as payment for future compensation. Allor v. Belden Corporation, 382 So.2d 206 (La.App. 3rd Cir. 1980), reversed in part on other grounds, 393 So.2d 1233 (La.1981). Decree

For the reasons set forth, the judgment of the trial court is amended to reduce the weekly compensation benefits for the duration of plaintiff’s disability from $130 to $92.66 and, as amended, is affirmed. Costs of appeal are divided equally between appellant and appellee.


author: NORRIS, Judge.

text:
    Lovie STATEN, Plaintiff-Appellee/Appellant, v. SECURITY INDUSTRIAL INSURANCE COMPANY, Defendant-Appellant/Appellee.
    No. 14837.
    Court of Appeal of Louisiana, Second Circuit.
    April 5, 1982.

      James Sharp, Jr., Monroe, for plaintiff-appellee/appellant.
    Victor L. Marcello, Donaldsonville, for defendant-appellant/appellee.
    Before MARVIN, JASPER E. JONES and NORRIS, JJ.
   NORRIS, Judge.

Security Industrial Insurance Company appeals from an adverse judgment in the amount of $1500 for benefits under an industrial life insurance policy after the trial court found defendant-appellant had failed to prove by clear and convincing evidence that the policy in question should be reformed to provide for coverage in the amount of $150 instead of $1500.

Plaintiff in this matter is the sister of Jeff Staten, who died on September 21, 1980. Prior to his death, the deceased purchased a whole life funeral policy from defendant-appellant. According to the policy introduced into evidence as Exhibit P-1, it was numbered 2484634; the date of issue was November 15,1978; ■ the “ultimate benefit” or face amount was $1500; the monthly premium was $2.33; the policy was what the company called a “Plan 21;” and plaintiff was the designated beneficiary.

Subsequent to the death of the insured, plaintiff engaged Simms and Gunby Funeral Home in Monroe to arrange for the fi> neral, and in connection therewith she authorized defendant-appellant to pay the proceeds of the aforementioned policy directly to the funeral home. Defendant-appellant tendered to the funeral home the sum of $150 in full payment of the policy. Thereafter, plaintiff instituted this suit to collect its face amount.

Defendant-appellant answered the suit alleging that the policy issued to the deceased was in the amount of $150 as evidenced by the application for insurance and pleading payment. Thereafter, defendant-appellant filed a motion for summary judgment which was referred to the merits. At a pre-trial conference held two months pri- or to trial, the parties filed a pre-trial statement in which defendant-appellant set forth the additional contention that the life insurance policy in question provided only for a benefit of $150, that the face amount shown on the policy, i.e. $1500, was a typographical error, and that it should be reformed to reflect the true intention of the parties.

After trial, judgment was rendered in favor of plaintiff dismissing the summary judgment, awarding plaintiff benefits under the policy in the amount of $1500 together with court costs, and rejecting plaintiff’s demands for penalties and attorney’s fees. It is from this judgment that defendant-appellant suspensively appeals and plaintiff devolutively appeals.

We note that plaintiff failed to pursue her appeal. She did not file any brief or assign any errors even though given an extension until January 22, 1982, to do so. However, our ultimate conclusion in this case makes it unnecessary for us to consider plaintiff’s appeal regarding the trial court’s rejection of attorney’s fees and penalties.

The sole assignment of error is defendant-appellant’s contention that the trial court erred in not reforming the policy to reflect the true intention of the parties.

The evidence shows that in November, 1978, Elizabeth Holston, while an employee of Security Industrial Insurance Co., contacted the deceased, then age 74, and offered to sell him additional funeral insurance in the amount of $150. An application in accordance with this offer was completed by Mrs. Holston pursuant to information furnished by Mr. Staten. This application, which was signed by him, was submitted to the company which thereafter accepted the risk issuing the instant policy.

Although a correct copy of the application was not attached to the original policy delivered to Mr. Staten, the application (which defendant-appellant contends sets forth the actual agreement between the parties) was introduced and properly admitted into evidence.

La.R.S. 22:618 provides in part as follows:

A. No application for the issuance of any insurance policy or contract shall be admissible in evidence in any action relative to such policy or contract, unless a correct copy of the application was attached to or otherwise made a part of the policy, or contract, when issued and delivered. This provision shall not apply to policies or contracts of industrial insurance subject to R.S. 22:213A(1) and 22:259.

La.R.S. 22:213A(1) provides:

(1) Entire contract: Changes: This policy, including the endorsements and the attached papers, if any, and in case of industrial insurance, the written application, constitutes the entire contract of insurance. No agent has authority to change this policy or to waive any of its provisions. No change in this policy shall be valid until approved by an executive of the insurer and unless such approval be endorsed hereon or attached hereto.
******

La.R.S. 22:259 provides in pertinent part as follows:

All industrial life insurance policies, delivered or issued for delivery in this state, shall contain, in substance, the following provisions, or provisions submitted by the insurer which in the opinion of the commissioner of insurance are more favorable to policyholders:
******
(2) A provision that the policy shall constitute the entire contract between the parties, or at the option of the insurer, a provision that the policy and the application therefor shall constitute the entire contract between the parties, and in the latter case the policy must contain a provision that all statements made by the insured shall, in the absence of fraud, be deemed to be representations and not warranties.
******

This policy in question, which is an industrial life insurance policy as defined by La. R.S. 22:251 et seq., provides in pertinent part as follows:

IN CONSIDERATION of the representations and agreements made in the application for this Policy, which are hereby made a part of this contract, and the payment to this Company of the monthly premium stated in the schedule on or before each month, beginning with the date of issue of this policy and continuing each month during the continuance of this policy.
ENTIRE CONTRACT: This policy and the application therefore (sic), constitute the entire agreement between the parties hereto. All matters printed or written on the following pages of this Policy are part of this contract as fully as if recited over the signatures hereto. All statements made by the Insured or on his behalf, in absence of fraud, shall be deemed representations and not warranties ...

It was not necessary then for a true copy of the application to be attached to the instant insurance policy to be admissible as 'evidence. See La.R.S. 22:259(2), supra; Kelmell v. Atlas Lite Insurance Co., 238 La. 72, 113 So.2d 609 (1959); and McKithern v. Certified Life Assurance Co., 153 So.2d 155 (La.App.3rd Cir. 1963).

The application (Exhibit D-l), which was signed by Mr. Staten and identified by Mrs. Holston, shows that the insurance was applied for on November 7, 1978, the amount was $150, it was for a “Plan 21” policy, and the monthly premiums were $2.33. The application is also stamped with the number 2484634. According to the company’s rate book, a “Plan 21” policy provided for a monthly premium of $2.33 for $150 worth of coverage, which was shown to be the maximum amount of insurance allowed by the company for a person of Mr. Staten’s age. Mrs. Holston’s testimony clearly indicates that she explained fully to him that he was purchasing $150 worth of insurance coverage when she filled out his application.

Security Industrial’s administrative assistant, Dennis Cabellaro, who was employed by the company in 1973 and who processed that Staten claim, identified Staten’s application as the one on file with the company in connection with the instant policy. He identified Exhibit D-2 as Security Industrial’s “Plan 21 Special Old Age Funeral Policy” which corroborates the fact that $2.33 is the applicable rate for $150 worth of insurance for a person aged 74.

Cabellaro further testified that the company’s general procedure regarding writing policies is to initially receive the application and to determine if the premium has been paid. Thereafter, if the company accepts the risk, the application is given a date of issue and assigned a number. The essential information from the application is then transferred to the company’s computer register which is the official list of all policies that Security Industrial has in force on individuals in Louisiana. Cabellaro next identified Exhibit D-3 as a true copy of the page from the company’s official register pertaining to the instant policy. This exhibit reveals that on November 15, 1978, Jeff Staten, 74 years of age, was issued policy number 2484634, a “Plan 21” policy, in the amount of $150 for a monthly premium of $2.33. This information obviously corresponds with the information contained on the original application.

According to Cabellaro, after the pertinent information is transferred from the application to the official company records, a clerk in the home office takes the original application, pulls a proper blank policy form; and using the application, inserts on the blank form the policy number, issue date, name of insured, the district and debit, amount of insurance, amount of the premium and the designated beneficiary. When questioned regarding who that particular clerk would have been with regard to the policy in question, Cabellaro stated that he felt from the code letter on the policy that it had been typed by an individual named Regina, who at the time of trial was no longer with the company and who he believed had moved to another state.

Mrs. Holston’s testimony is corroborated by the application. The information on the company’s official register corresponds with that in the application and on the policy with the exception of the face amount.

The only evidence contradicting that offered by Security Industrial is the original policy which had been delivered to the insured after its issuance and the testimony of the plaintiff (belatedly objected to as hearsay and self-serving) that her brother told her he had “$1500 worth of insurance.” Plaintiff further testified that she was not present when Staten purchased the insurance from Mrs. Holston and that he first mentioned the insurance to her in late 1980.

There is ample authority in our jurisprudence to allow reformation of an insurance policy when, because of mutual error or mistake, the policy fails to reflect the intent of the parties. Ferguson v. Belcher, 230 La. 422, 88 So.2d 806 (1956); Reynaud v. Bullock, 195 La. 86, 196 So. 29 (1940); Gaudet v. North River, 156 La. 719, 101 So. 118 (1924); Billiot v. Sentry Insurance, 366 So.2d 1017 (La.App. 1st Cir. 1978); MFA Insurance Co. v. Huey, 347 So.2d 63 (La.App.2nd Cir. 1977); Adams v. Ross, 300 So.2d 192 (La.App.1st Cir. 1974); Hebert v. Breaux, 285 So.2d 829 (La.App.1st Cir. 1973); Rougeau v. State Farm Mutual Automobile Insurance Co., et al, 262 So.2d 803 (La.App.3rd Cir. 1972); Maryland Casualty Co. v. Kramel, 80 So.2d 897 (La.App.2nd Cir. 1955); and Singleton v. First National Life Insurance Co., 160 So. 437 (Orl.App.1935).

The facts in Singleton, supra, are very similar to the facts presented in the instant situation. There, the plaintiff was the beneficiary of a life insurance policy insuring her husband. After his death, she brought suit claiming $129 as the proceeds due under the policy. The defendant insurer’s records indicated that the policy was for the sum of $120 instead of $129, and defendant sought reformation of the policy in accordance with the intention of the parties at the time the application was made by the insured. Finding for defendant and reversing the lower court, the appellate court stated:

The law, with reference to the right to reform a contract of this kind, is well settled. In Couch on Insurance, § 1391, page 4982, is found the following:
“Although the policy is presumed to contain the actual agreement of the parties and to express the contract in such words as they have mutually chosen, if, either through fraud of one and mistake of the other, or mutual mistake, or because of the inadvertence, accident, mistake or fraud of the scrivener in reducing the contract to writing, it does not embody therein the actual contract intended or fully set forth the same, equity has jurisdiction to reform it; and this even though the statutes require that the whole agreement between the parties shall be expressed in the policy * * *.
“* * * Although mutuality of mistake is not necessary, where the mistake is due to a clerical error of the scrivener, in which event relief may be had at the suit of either party even though he was the agent of the insurer. * * * ”
******
That a policy which contains a mistake may be reformed so as to properly express the intention of the parties has been definitely settled in this state. In Brodie v. Atlas Assurance Corporation, 158 La. 695, 104 So. 620, 622, the Supreme Court said: “And a court of equity on a proper case shown will reform a written contract of insurance on the ground of accident, fraud, or mistake. Such mistake, among others, may be one in reference to the amount of insurance, the term and duration of the risk, the property or interest covered by the policy. * * *
******
The facts show conclusively that the amount of insurance the parties intended should be issued was $120. The application signed by the insured contains the figure $120.00.” It is shown that the premium paid was the correct premium for a policy in the sum of $120, and that an additional premium would have been required to support a policy of $129.

Appellant complains that the trial court’s imposition of the burden of proof by “clear and convincing evidence” was error and contends that the proper burden of proof is “by a preponderance of the evidence” in this case. On this point we disagree. We conclude that the better rule is that the burden is on the one seeking the reformation to prove the error, and he must carry that burden by strong, clear and convincing evidence. See Ferguson v. Belcher & Son, supra; Reynaud v. Bullock, supra; Rougeau v. State Farm Mutual Automobile Insurance Co., supra; Couch on Insurance 2d, Sec. 66:152; and 43 Am.Jur.2nd 376. That is the rule we apply to this case.

While the trial court correctly enunciated the rule that Security Industrial had the burden of proving reformation of the contract by clear and convincing evidence, we find it incorrectly concluded from the evidence presented that appellant failed to carry that burden. While we are cognizant of the rule that the reviewing court must give great weight to the factual conclusions reached by the trial court, we are not required to affirm the trier of fact’s refusal to accept as credible uncontradicted testimony or greatly preponderant objectively corroborated testimony where the record indicates no sound reason for its rejection and where the factual finding itself has been reached by overlooking applicable legal principles. See Arceneaux v. Do- mingue, 365 So.2d 1330 (La.1978) and West v. Bayou Vista Manor, Inc., 371 So.2d 1146 (La.1979).

In the instant case it is obvious that the lower court reached the conclusion that Security Industrial had not proven its right to reformation solely on the basis of plaintiff’s self serving, hearsay statement that Staten told her in late 1980, almost two years after the date of the application, that he had $1500 worth of insurance with Security Industrial. This testimony stands alone in contrast to the testimony of defendant’s witnesses and to the business records of defendant made when the policy was written. The legal conclusion is clear, convincing and beyond reasonable doubt that the person who filled in the blank policy made a typographical error with regard to the face amount of the policy.

In Louisiana State Bar Association v. Edwins, 329 So.2d 437, 442 (La.1976), the court defined clear and convincing evidence as follows:

“Clear and convincing evidence,” in general, means that the fact of guilt must be proven to a greater degree than by “a mere preponderance of the evidence” but less than “beyond a reasonable doubt” ... “The standard requires that the existence of the disputed fact be highly probable, that is, much more probable than its non-existence.” (Citations omitted.)

Couch on Insurance 2d, Section 66:160 at page 377 states in part:

******
The rule that the evidence must be clear and satisfactory does not mean that it must be undisputed.
Reformation cannot be denied merely because the evidence is conflicting and the solution of the problem difficult.
The rule that one seeking the reformation of the insurance policy on ground of mistake must produce full, clear, unequivocal and convincing evidence does not require that that proof meeting such requirements must also be uncontradicted as distinguished from evidence contradictory within itself.
******

The overwhelming weight of the evidence introduced in this case convinces us that defendant-appellant proved by clear, convincing, and the strongest possible evidence that on November 7, 1978, Jeff Staten intended to purchase a life insurance policy in the amount of $150 and on that same date, Security Industrial, through its agent, Mrs. Holston, intended to sell a life insurance policy in the amount of $150. The proper premium of $2.33 per month was calculated for this amount of insurance. Thereafter, when the blank policy was filled in at Security Industrial’s home office, a typographical error was made in that the face amount of the policy was incorrectly typed “$1500” rather than “$150.” This mistake was mutual as to both parties in that the policy as issued and delivered did not express nor conform to their original intentions. Accordingly, the policy is hereby reformed to reflect the correct face amount of $150.

For the reasons assigned, the judgment of the lower court is reversed, the insurance contract is ordered reformed, and judgment is rendered in favor of plaintiff, Lovie Staten in the amount of $150. Costs in the lower court are to be cast against defendant-appellant, and plaintiff is cast for costs of this appeal.

JUDGMENT REVERSED AND RENDERED.

      . Defendant appellant has assigned as an error the trial court’s dismissal of his motion for summary judgment. We do not address this issue as this is not an appealable issue.

      . Mrs. Holston, at time of trial, was no longer employed by Security Industrial.

      . Exhibits D-2 and D-3 were admitted without objection.


text:
    Ray N. BOYLE, Jr., et ux., Plaintiffs-Appellees, v. FRINGE FACTS, INC. et al., Defendants-Appellants.
    No. 14822.
    Court of Appeal of Louisiana, Second Circuit.
    April 5, 1982.

      Kitchens, Benton, Kitchens & Pearce by John B. Benton, Jr., Minden, for plaintiffs-appellees.
    Conner, Martinez & Miles by William W. Miles, Metairie, for defendants-appellants.
    Before PRICE, JASPER E. JONES and NORRIS, JJ.
   NORRIS, Judge.

Defendants, Business Insurance Life of America and Fringe Facts, Inc., appeal a judgment rendered against them for benefits under a group hospitalization insurance policy as well as penalties and attorney’s fees.

Ray N. Boyle, Jr., was a lifetime member of the Louisiana Pharmacists Association and in January, 1979, was a practicing pharmacist, owning and operating Boyle’s Walgreen Drug in Minden, Louisiana. In December, 1978, Mr. Boyle was contacted by a representative of the Louisiana Pharmacists Association concerning his participation in a group hospitalization insurance plan for members of the association, their dependents, and employees. After discussing the matter with the representative, he decided to participate in the plan and began making payments for coverage which he continued to make through April, 1980.

In May, 1979, Mr. Boyle was notified that Business Insurance Life of America had agreed to insure the participants in the association’s plan, and that he would receive information in confirmation of this change of insurer. Thereafter, he received a booklet explaining the coverage and the applicable rates as well as an application which Mrs. Boyle, his bookkeeper, completed. In filling out this form in the space designated for name of the business, Mrs. Boyle put “Boyle Drug Store (Inactive).” In the space designated for nature of the business, she stated “retired (Retail Drug).” This form was signed and returned to Business Insurance Life of America. Effective June 1, 1979, the Louisiana Pharmacists Association changed its group coverage to Business Insurance Life of America. Thereafter, Mr. Boyle received by correspondence dated July 16, 1979, from Business Insurance Incorporated the certificate of insurance and supplies for this group coverage.

The information which Mr. Boyle received indicated that the group plan was for members, their employees and their dependents. When Mr. Boyle discussed the possibility of joining the group plan in question, he explained to the representative of the association that the store which he owned and operated at that time was for sale. He was assured that he would be covered under the plan even if he did sell his business as long as he maintained his membership in the association.

Mr. Boyle ceased being an active pharmacist in June, 1979, but continued his membership in the Louisiana Pharmacists Association and continued to make timely payments for insurance coverage. Premium payments were made in accord with the directions received from the various defendants in this case. During this time period Mr. Boyle became ill and was hospitalized incurring medical bills in the amount of $8882.20 in July, 1979. Claims were submitted for the payment of these bills which were refused by Business Insurance Life of America. In April, 1980, Mrs. Boyle was hospitalized for illness and incurred bills totalling $2875.85. Again, Business Insurance Life of America refused payment of these bills on the basis that the participation agreement to Business Insurance Trust specifically stated that only full time employees and their dependents were eligible for coverage under the plan. In the correspondence dated February 8, 1980, denying coverage, Business Insurance Life of America recognized that the participation agreement signed by Mr. Boyle indicated that the Boyle Drug Store was dissolved and inactive. Nevertheless, monthly statements were sent to Mr. Boyle through April, 1980, and payments were timely made.

Thereafter, plaintiffs on February 6, 1981, instituted this suit against Fringe Facts, Inc., Business Insurance Life of America, Business Insurance, Incorporated and Business Insurance Trust, alleging that plaintiff was a lifetime member of the Louisiana Pharmacists Association and in January, 1979, was a practicing pharmacist and that during January, 1979, plaintiffs had joined a group insurance program sponsored by the Louisiana Pharmacists Association. It was further alleged that the plan was originally underwritten by Key Life Insurance Company but that in April, 1979, American Public Life Insurance became the insurer of the plan. It was further alleged that during July, 1979, plaintiffs had received a pamphlet from Business Insurance Trust which stated that Business Insurance Life of America had insured plaintiffs effective June 1, 1979, under group policy number SB 04635. It was further alleged that in January, 1980, Fringe Facts, Inc., notified plaintiffs that it had become the insurer effective January 1, 1980, and that there would be no lapse in their coverage. They further alleged on information and belief that Fringe Facts, Inc., was now the owner of Business Insurance Life of America, Business Insurance Incorporated and Business Insurance Trust and had contractually and/or otherwise obligated itself to and/or had assumed and agreed that it would pay all claims asserted against those entities therefore making all defendants liable jointly and solidarily unto petitioners for the amounts claimed for the unpaid medical bills plus statutory penalties and attorney’s fees.

Personal service was made on all defendants through their agent for service of process. Thereafter, Fringe Facts, Inc., and Business Insurance Life of America answered the petition in the form of a general denial. Further contained within their answer was the allegation that Fringe Facts, Inc. did not own Business Insurance Life of America, Business Insurance Incorporated and Business Insurance Trust but was merely a third party administrator by contract with Business Insurance Life of America only. Fringe Facts, Inc. contended that it had not assumed nor agreed to pay any claims asserted against those entities. Defendant Business Insurance Life of America further pled that at all times pertinent and material, it was the subject of a conservation and/or rehabilitation suit under the auspices of the Commissioner of Insurance of the State of Louisiana and specially pled said lawsuit in bar of statutory liability for penalties or attorney’s fees.

Defendants, Business Insurance Incorporated and Business Insurance Trust, neither answered the lawsuit nor appeared. A preliminary default was entered and judgment later obtained against those defendants. Neither has appealed, and we do not consider the judgment as to either of those defendants.

After trial, the trial court in written reasons for judgment found in favor of plaintiff and stated as follows:

******
The evidence clearly shows that the Boyles furnished all the information requested by the defendants in connection with the issuance of the insurance policy. No misrepresentation was made. No information was withheld. The fact that the policy was issued based on information furnished by the Boyles is evidence that the policy was intended to cover him and his dependent. Defendants simply cannot come in months later and say they did not intend to cover him as was attempted by the February 8, 1980 letter.
Since the policy was validly issued, it continued in force and effect until it was cancelled or terminated. The letter of February 8, 1980 and the letter of April 11, 1980 which refers to it do not establish that this coverage was cancelled. It is true that liability for the claim is denied (which denial was improper), but policy premiums continued to be sent by the defendants and paid by the plaintiffs. The policy was not cancelled or terminated before the medical expenses involved in this lawsuit were incurred.
In the opinion of the Court the evidence establishes that the total of the two claims amounts to the sum of $10,147.88 and plaintiffs are entitled to judgment in that amount plus legal interest from date of judicial demand until paid and for all costs of these proceedings.
Considering the facts of the case in connection with the statutes and jurisprudence cited by both counsel, the court is of the opinion that defendants are also liable for penalties and attorney’s fees. If the coverage provided is health and accident coverage as defined in R.S. 22:6, then the penalty would be double the amount due as provided by R.S. 22:657. If the coverage is something other than health and accident coverage the penalty will be 12% of the amount due as provided by R.S. 22:658. The fact that the defendant Business Insurance Life of America is the subject of a conservation/rehabilitation suit filed by the Louisiana Commissioner of Insurance has no bearing on whether plaintiffs are entitled to penalties in this case.
While the record does not contain a policy of insurance as such, the certificate of coverage and the booklets and summary of benefits, filed in the record do establish that the coverage provided by defendants in this case was health and accident coverage as defined by R.S. 22:6. Accordingly, there should be judgment in favor of the plaintiffs for an additional $10,147.88 as statutory penalties.
The statute also provides for reasonable attorney’s fees which are hereby set at the sum of $2500.00.

Judgment was signed in accordance with these reasons for judgment on July 30, 1981, against all defendants jointly and in solido. It is from this judgment that defendants Fringe Facts, Inc. and Business Insurance Life of America appeal, citing two specifications of error, to-wit: (1) Plaintiffs failed to prove by a preponderance of the evidence that Fringe Facts, Inc. was liable to them for any part of the amount sought; and (2) that the trial court erred in applying La.R.S. 22:657 to this case and awarding penalties equal to the amount of benefits due under the policy sued upon.

We will address these specifications of error in reverse order dealing first with the applicability of La.R.S. 22:657 to the instant case.

La.R.S. 22:6 provides as follows in pertinent part:

Insurance shall be classified and defined as follows:
******
(2) Health and accident. Insurance against bodily injury, disablement or death by accident and against disablement resulting from sickness and every insurance appertaining thereto.
******
La.R.S. 22:657 provides as follows:
A.All claims arising under the terms of health and accident contracts issued in this state, except as provided in Subsection B, shall be paid not more than thirty days from the date upon which written notice and proof of claim, in the form required by the terms of the policy, are furnished to the insurer unless just and reasonable grounds, such as would put a reasonable and prudent business man on his guard, exist. The insurer shall make payment at least every thirty days to the assured during that part of the period of his disability covered by the policy or contract of insurance during which the insured is entitled to such payments. Failure to comply with the provisions of this Section shall subject the insurer to a penalty payable to the insured of double the amount of the health and accident benefits due under the terms of the policy or contract during the period of delay, together with attorney’s fees to be determined by the court. The district court of the parish where the insured lives or has his domicile shall have jurisdiction to try such cases.
B. All claims for accidental death arising under the terms of health and accident contracts where such contracts insure against accidental death shall be settled by the insurer within sixty days of receipt of due proof of death and should the insurer fail to do so without just cause, then the amount due shall bear interest at the rate of six percent per annum from date of receipt of due proof of death by the insurer until paid.
C. Any person, partnership, corporation or other organization; or the State of Louisiana which provides or contracts to provide health and accident benefit coverage as a self-insurer for his or its employees, stockholders or any other persons, shall be subject to the provisions of this Section, including the provisions relating to penalties and attorney fees, without regard to whether the person or organization is a commercial insurer provided, however, this Section shall not apply to collectively bargained union welfare plans other than health and accident plans.

Appellant argues that hospitalization insurance is not the type of insurance which is referred to by this statute contending that the statute only applies to disability insurance. We disagree. The Louisiana Supreme Court in Rudloff v. La. Health Services and Indemnity Co., 385 So.2d 767 (La.1980), has specifically held that a policy providing for hospital and medical care is a health and accident policy. Although the issue of penalties and attorney’s fees was not specifically before the court in Rudloff, subsequent cases have held that La.R.S. 22:657 is the controlling statute for such policies. Peters v. Life General Security Ins. Co., 400 So.2d 1103 (La.App. 1st Cir. 1981); Lucito v. La. Hospital Service, Inc., 392 So.2d 700 (La.App. 3rd Cir. 1980); and Poche v. La. Health Service & Indemnity, 391 So.2d 17 (La.App. 3rd Cir. 1980). See also Conner v. B.I.L.A., 414 So.2d 1340, handed down on this same date wherein we addressed this same issue and arrived at the same conclusion.

Appellant Business Insurance Life of America does not question the correctness of any aspect of the judgment rendered against it other than the imposition of the statutory penalties and attorney’s fees as provided by La.R.S. 22:657. Accordingly, the judgment obtained against Business Insurance Life of America- is affirmed.

Appellant Fringe Facts, Inc., contends that there is insufficient evidence in the record to form the basis for the imposition of a judgment against it. Fringe Facts, Inc. further asserts that plaintiffs. offered no proof that the basis, of their claim lay under any theory of law other than contract, and that the only contractual relationship proved at trial was that between plaintiffs and Business Insurance Life of America. Succinctly stated, the position of Fringe Facts, Inc. is that the evidence only establishes that Fringe Facts, Inc. was the claims administrator for Business Insurance Life of America. We agree that the evidence presented at trial is insufficient to prove that a contract existed between plaintiffs and Fringe Facts, Inc. There is no- evidence of any contractual relationship between these two parties.

However, plaintiffs suggest to the court that the evidence presented does prove that the relationship created between Fringe Facts, Inc. and Business Insurance Life of America meets all of the requirements of a “suretyship agreement” and that under the obligations of a surety towards a creditor, Fringe Facts, Inc. should be held solidarily liable with Business Insurance Life of America.

Suretyship is defined in Article 3035 of the Louisiana Civil Code:

Suretyship is an accessory promise by which a person binds himself for another already bound, and agrees with the creditor to satisfy the obligation if the debtor does not.

A contract of guaranty is equivalent to a contract of suretyship, and the two terms may be used interchangeably. A surety’s contract need not observe technical formalities, but it must contain an absolute expression of an intent to be bound. Ball Marketing Enterprise v. Rainbow Tomato Co., 340 So.2d 700 (La.App. 3rd Cir. 1976). It is an accessory promise by which one binds himself for another already bound and agrees with the creditor to satisfy the obligation if the principal debtor does not do so. American Indemnity Co. v. Robertson, 309 So.2d 737 (La.App. 4th Cir. 1975). An agreement of suretyship must be in writing to be provable and must be explicit. Boro Industries, Inc. v. James J. Culotta, Inc., 336 So.2d 878 (La.App. 4th Cir. 1976). Parol evidence may not be used to establish either a suretyship or a promise to pay the debt of another even when admitted at trial without objection. Altex Ready-Mixed Concrete Corp. v. Employers Commercial Union Ins. Co., 308 So.2d 889 (La.App. 1st Cir. 1975).

La. Civil Code Article 3039 further explains the contract of suretyship and provides:

Suretyship can not be presumed; it ought to be expressed, and is to be restrained within the limits intended by the contract.

Therefore, it is apparent under the afore-discussed statutes and jurisprudence that we can only consider the “writings” involved in the instant situation in order to determine if a suretyship relationship or a continuing guaranty existed which would result in Fringe Facts, Inc.’s being liable to plaintiffs. The only written evidence adduced at trial concerning the claim of plaintiffs against Fringe Facts, Inc. consists of certain letters and billing statements received by plaintiffs from representatives of Fringe Facts, Inc.

Our review of the evidence reveals that two letters and one “Read & Reply” were received by plaintiffs from Fringe Facts, Inc. One undated letter begins “Dear Policyholder: As administrators of your group insurance program, we are striving to provide you with the most accurate and efficient service available. * * * ” We construe this letter as clearly establishing Fringe Facts, Inc.’s position as administrators of the program. Another letter dated January 2,1980, from Janel Crump, Administrative Assistant, contains the only language which could possibly be construed as an expression of intent to be bound to make the payments due and owing to plaintiffs. This letter reads as follows:

Dear Insured:

Enclosed please find the Group Life and Health billing statement for employees of your company under the new Trust insured by the Business Insurance Life of America, Monroe, Louisiana.
We have made every effort to duplicate benefits as to types of coverages your company had with the Business Insurance Trust. If we have failed to include or exclude someone or incorrectly assumed coverages, please make a notation on your billing when making payment. Adjustments will be reflected on your February billing.
Please note that there will be no lapse in coverage with your conversion. The new plan became effective January 1, 1980. Please review the Schedule of Benefits on the reverse side of this letter. All claims incurred prior to January 1, 1980, will be honored and paid under the Business Insurance Trust Schedule of Benefits.
New employee booklets, certificates, and claims administration kits will be forthcoming within the next few weeks. You may continue to use the forms you currently have, the only change we request is that you address your correspondence to:
Fringe Facts, Inc.
P. 0. Box 23532
Tampa, Florida 33623
If you have further questions regarding this matter, please refer them to me at (813) 870-1510.
* * * * * *

While possibly ambiguous, this letter in our opinion cannot be construed as containing language sufficient to evidence an absolute expression of intent to pay the contractual debt of Business Insurance Life of America. . This is particularly true when this letter is read in conjunction with the undated letter identifying Fringe Facts, Inc. as administrator of the group insurance plan. Our conclusion is also bolstered by the billing statements entered into evidence which specifically provide that all checks are to be made payable to “B. I. L. of America.” The special rule laid down in Article 3039 must control this situation, and that rule is clearly that a contract of sure-tyship or guaranty cannot be presumed. See Exchange National Bank v. Waldron, 177 La. 1015, 150 So. 3 (1933); Ball Marketing Enterprise v. Rainbow Tomato Co., supra.

Therefore, we conclude that plaintiff’s argument that the evidence presented at trial is sufficient to prove a suretyship agreement is without merit.

However, alternatively, plaintiffs argue in their brief that Fringe Facts, Inc. neglected to inform them that all assets of Business Insurance Life of America were in the possession of the Commissioner of Insurance, who by statute, i.e., La.R.S. 22:736 could at any time apply to the court for an order directing the liquidation of the property. They argue that Fringe Facts, Inc. continued to urge policyholders to continue their insurance program with an entity that obviously was in a precarious position with the Commissioner of Insurance, and whose claims may or may not be paid by Business Insurance Life of America, although Fringe Facts, Inc., would collect all of the premiums and would thus be rewarded no matter how the policyholder eventually fared. They urge that Fringe Facts, Inc. was at the very least negligent or imprudent in not imparting all of the facts to the policyholders. They further submit that Fringe Facts, Inc. should be found solidarily liable under the provisions of La. Civil Code Article 2316 or 2324. However, there is insufficient evidence in the record to prove that there is a factual basis to support this conclusion. In fact, we find no evidence whatsoever in the record in support of this contention which was not even pled by plaintiffs in their original petition. The only allegation in the record regarding the conservation order prior to trial is an allegation in the defendants’ answer in response to plaintiffs’ plea for statutory penalties and attorney’s fees. We note that plaintiffs did no further investigation regarding this assertion after the answer and that the Commissioner of Insurance was not made a party to this suit.

We conclude therefore that the record is devoid of any evidence which could support any legal basis for holding Fringe Facts, Inc. liable to plaintiffs either under a theory of contract as originally pled by plaintiffs or otherwise. Since the trial court’s ruling in this regard is clearly wrong, we reverse that portion of the judgment rendered against Fringe Facts, Inc.

Accordingly, for the foregoing reasons the judgment against Business Insurance Life of America is affirmed in its entirety. The judgment rendered against Fringe Facts, Inc. is reversed, and judgment is rendered in favor of Fringe Facts, Inc. against plaintiffs, Ray N. Boyle, Jr. and Verlyn M. Boyle, rejecting plaintiffs’ demands against Fringe Facts, Inc. All costs of this proceeding are assessed equally between plaintiffs and appellants.

JUDGMENT AFFIRMED IN PART AND REVERSED AND RENDERED IN PART.

      . La. Civil Code Article 2316 provides as follows:
      Every person is responsible for the damage he occasions not merely by his act, but by his negligence, his imprudence, or his want of skill.
      La. Civil Code Article 2324 provides as follows:

        He who causes another person to do an unlawful act, or assists or encourages in the commission of it, is answerable, in solido, with that person, for the damage caused by such act.
      Persons whose concurring fault has caused injury, death or loss to another are also answerable, in solido; provided, however, when the amount of recovery has been reduced in accordance with the preceding article, a judgment debtor shall not be liable for more than the degree of his fault to a judgment creditor to whom a greater degree of negligence has been attributed, reserving to all parties their respective rights of indemnity and contribution.

      . We note in our review of the record that plaintiff directed certain interrogatories to defendants which interrogatories were answered. However, the answers to the interrogatories provided little, if any, useful information to plaintiffs. We note further that the record does not reflect that plaintiffs made any effort to traverse these answers. We also note that there was no one subpoenaed from Fringe Facts, Inc., or any of the other defendants to testify, nor was any evidence elicited regarding the alleged conservation order.

      . We further note that under the provision of La. Code of Civil Procedure Article 741, the proper defendant in this action should have been the Commissioner of Insurance as the court appointed receiver of Business Insurance Life of America; however, this issue was never raised by any of the parties.


author: PRICE, Judge.

text:
    Iva Barksdale CONNER, Plaintiff-Appellee, v. BUSINESS INSURANCE LIFE OF AMERICA, Defendant-Appellant.
    No. 14815.
    Court of Appeal of Louisiana, Second Circuit.
    April 5, 1982.

      Conner, Martinez & Miles by Joseph P. Williams, Jr., Metairie, for defendant-appellant.
    Sanders & Castete, Ltd. by Herman A. Castete, Winnfield, for plaintiff-appellee.
    Before PRICE, JASPER E. JONES and NORRIS, JJ.
   PRICE, Judge.

Defendant, Business Insurance Life of America, appeals that portion of the trial court judgment which awarded plaintiff statutory penalties in the amount of $6,729.08 pursuant to La.R.S. 22:657. The sole issue to be decided is whether the group hospitalization insurance policy issued by defendant is “health and accident” insurance within the terms of La.R.S. 22:657. We affirm.

Although the levy of statutory penalties under La.R.S. 22:657 was not at issue, the Supreme Court, in Rudloff v. La. Health Services and Indemnity Co., 385 So.2d 767 (La.1980) held on rehearing that a policy providing benefits for hospital and medical care is “health and accident” insurance under Louisiana law. This decision specifically overruled Tabb v. La. Health Services and Indemnity, Co., 361 So.2d 862 (La.1978) which had previously found that such a hospitalization policy was not “health and accident” insurance.

In Lucito v. La. Hospital Service, Inc., 392 So.2d 700 (La.App. 3d Cir. 1980), the court was faced with the issue of whether the insurer was liable for penalties and attorney fees under La.R.S. 22:657 for failure to pay benefits under a group hospitalization insurance policy. Although penalties and attorney fees were not awarded, the court found that La.R.S. 22:657 was the appropriate statute to apply.

Peters v. Life General Security Insurance Co., 400 So.2d 1103 (La.App. 1st Cir. 1981), writ denied 403 So.2d 70, presented the exact issue raised here. There the defendant insurer argued that La.R.S. 22:658, rather than La.R.S. 22:657, was the appropriate statute to apply to an award of penalties for arbitrary failure to pay on a group hospitalization plan. The court rejected this approach, finding that a hospitalization insurance policy was “health and accident” insurance within the meaning of La.R.S. 22:657.

In line with the above cited jurisprudence, we find that the group hospitalization insurance policy issued by defendant is “health and accident” insurance within the contemplation of La.R.S. 22:657. Therefore, the trial court was correct in its assessment of penalties. See also Ray N. Boyle, Jr., et ux v. Fringe Facts, Inc., et al, 414 So.2d 1333 (La.App. 2d Cir. 1982), a decision rendered this day where the court has decided the same issue.

For the reasons assigned, the judgment appealed is affirmed at defendant’s costs.