However, under
the Direct Action Statute (La. R.S. 22:1269), a plaintiff can bring suit
directly against an insurer if the
insurance policy was issued in Louisiana or if the accident or injury occurred
in Louisiana.
The
Direct Action statute does NOT distinguish between a primary liability insurer
and an excess carrier. In fact, the definitions section of the Insurance
chapter defines an insurer as “includ[ing] every person engaged in the business
of making contracts of insurance, other than a fraternal benefit society.” La.
R.S. 22:46. Later in the Chapter, there is an explanation of “stop-loss
insurance coverage” which is excess coverage but there is no distinction
between an excess insurer and a primary or self-insurer.
Though
there are few, the cases that include excess carriers do not support dismissal
under the Direct Action statute. In fact, all of the reported cases required an excess carrier to provide coverage even when the limits of
the primary or self-insurance policies were not actually paid but when the
primary insurer was given credit for paying the limits.
From the jurisprudence,
there is an obvious inference that the courts prefer to find coverage than
limit it. An excess insurer
could not be dismissed from a lawsuit by a summary judgment under the
terms of the Louisiana Direct Action statute; however, summary judgment could
be possible under the terms of the policy after additional discovery is
conducted.
For example if the trucking company were self-insured for $2 million and it was established by admissions that the total damages would not exceed $2 million, then on could show that excess coverage is not necessary.
While we typically do not
want to give the plaintiff the information without her asking for it that there
is so much coverage available, one could, through requests for admissions,
medical records, and possibly experts, a defense attorney could ultimately get the excess carrier dismissed.
A typical way that claims against insurers (and excess insurers) has been denied under the direct action statute, is make the policy a "claims-made" policy.
Typical claims-made insurance policies require claims to be both made and reported within the applicable policy period. Under this type of policy, the risk of a claim incurred but not made, as well as a claim made but not reported, is shifted to the insured. See, generally, Bob Works Excusing Non-Occurrence of Insurance Policy Conditions in Order to Avoid Disproportionate Forfeiture: Claims-Made Formats as a Test Case, 5 CONN. INS. L.J. 505, 546 (1999).
“The purpose of the reporting requirement [in a claims-made policy] is to define the scope of coverage [purchased by the insured] by providing a certain date after which an insurer knows it is no longer liable under the policy.” Resolution Trust Corp. v. Ayo, 31 F.3d 285, 289 (5th Cir. 1994). Thus, once the policy period and reporting period expire, the insurer closes its books on that policy.
The Louisiana Supreme Court in Gorman v. City of Opelousas, 2014 WL 2937129 (La. Aug. 25, 2014) held that a claims-made policy provision requiring a claim to be made and reported within the period specified by the policy was not violative of public policy because of Louisiana’s direct action statute.The Louisiana Supreme Court in Gorman focused its analysis on its prior decision in Hood v. Cotter, 08-0215, 08-0237, 5 So.3d 819 (La. 12/2/08). In Hood, the plaintiff patient’s claim for medical malpractice was neither first made against the doctor nor reported to the insurer during the policy period as required by the policy.
In Hood, the Court considered whether Louisiana’s public policy as expressed in the direct action statute would permit insurer’s to deny coverage to the patient where the doctor had failed to properly report the claim to the insurer. In reversing the prior court decision in favor of the injury party in Hood, the Louisiana Supreme Court had recognized that the direct action statute “grants a procedural right of action against an insurer where the plaintiff has a substantive cause of action against the insured.” Hood, 08-1215, 08-0237 at 17-18, 5 So.3d at 829.
Thus, the Louisiana Supreme Court, as a follow up to the Hood decision has now recognized that in the claims-made insurance policy context the insured’s failure to report the claim as required by the policy will bar coverage irrespective of Louisiana’s direct action statute.
If you would like to visit more about the Louisiana Direct Action statute or any other matter pending (or not) in Louisiana or Texas, feel free to contact
me.
