Courts Address Circumstances that Support Summary Judgment Dismissing Claims of Bad Faith Against Insurers

In a very important ruling by the Louisiana Supreme Court, a tort defendant is no longer liable for any “actual charges” by medical providers above the amount paid by a Workers Compensation insurer pursuant to promulgated Workers Compensation fee schedule . In Simmons v. Cornerstone Investments, LLC, 2018-cc-0735 (La. 5/18/19), the court concluded:

“…the amount of medical expenses charged above the amount actually incurred is not a collateral source and its exclusion from the purview of the jury was proper.” See http://www.lasc.org/opinions/2019/18-0735.CC.OPN.pdf

The court conducted a detailed analysis of the development of the collateral source rule under applicable jurisprudence noting that the genesis of the collateral source rule:

“Under the collateral source rule, a tortfeasor may not benefit, and an injured plaintiff’s tort recovery may not be reduced, because of monies received by the plaintiff from sources independent of the tortfeasor’s procuration or contribution. Under this well-established doctrine, the payments received from the independent source are not deducted from the award the aggrieved party would otherwise receive from the wrongdoer.” See Louisiana Dept. of Transp. & Dev. v. Kansas City Southern Railway Co., 02-2349, p. 6 (La. 5/20/03), 846 So.2d 734, 739.

Essentially, the court asks two questions when assessing whether the collateral source rule should apply. First, does the claimed benefit arise from some payment, wage deduction or other contribution by the Plaintiff that would diminish the plaintiff’s patrimony? Second, will the goal of tort deterrence be promoted by allowing the windfall? In a series of cases culminating in the case at bar, the court has been limiting the application of the collateral source rule in a number of contexts.

The court in Bozeman v. State, 03-1016 (La. 7/2/04), 879 So.2d 692, found that the collateral source rule did not apply when Medicaid was the payor such that the defendant could not be responsible for any amounts above what Medicaid paid to the provider. The court reasoned that it would be “unconscionable” to require taxpayers to pay the bills and then let a plaintiff recover the full undiscounted medical expenses and “pocket the windfall.” The court continued by noting in “Cutsinger v. Redfern, 08-2607 (La. 5/22/09), 12 So.3d 945, this court found the collateral source rule did not apply to prevent the plaintiff’s uninsured motorist carrier from receiving a credit for workers’ compensation benefits paid by her employer, even though the plaintiff paid for the UM coverage herself.” In Hoffman v. 21st Century North American Ins. Co., 14-2279 (La. 10/2/15), 209 So.3d 702, the court held that the collateral source rule does not apply to attorney-negotiated medical discounts. The court also looked at the US 5^th Circuit in Deperrodil v. Bozovic Marine, Inc., 842 F.3d 353 (5th Cir. 2016), that the collateral source rule does not apply above any amounts actually paid by the employer in the context of the LHWCA.

In each of the instances outlined, the court noted that the patrimony of the plaintiff was not impacted by limiting recovery to the amount of medical bills actually paid. Moreover, the court noted that the goal of tort deterrence is not negatively impacted, and that allowing a plaintiff to recover a windfall in this context is tantamount to an award of punitive damages that are not recoverable absent statutory authority which is not present in this context. The Simmons decision now extends that same logic to cases where a Workers Compensation insurer has paid the medical benefits pursuant to the Louisiana Workers Compensation Law.

This ruling will have significant impact on the evaluation, settlement and trial of tort cases that have corresponding Workers Compensation claims.

Submitted by John P. Wolff, III (Partner)

Winning or losing in court often comes down to who possesses the burden of proof. Like a driver at a four-way stop, a litigant has to know when it is their turn.

Civil Procedure Article 966, the "Summary Judgment Article," provides that the mover bears the burden of proof. The Louisiana Supreme Court recently addressed this burden in Dan Veuleman & Jody Veuleman v. Mustang Homes, LLC, 2013-C-190 (La. 4/5/13), - So. 3d - in the context of insurance coverage.

The general rule in Louisiana is that an insurer bears the burden of proving that a loss falls within a policy exclusion. In Veuleman, the insurer argued that the loss was excluded through a "work product" exclusion. However, the "work product" exclusion contained a "subcontractor" exception. The plaintiffs argued that the work was performed by a subcontractor and should for that reason be covered under the policy.

At the hearing, the insurer introduced its policy as evidence of the exclusion. However, it offered no evidence to show who performed the work at issue. The plaintiffs attempted to introduce an affidavit to establish that the work was performed by a subcontractor. The court of appeal rejected the affidavit as insufficient and concluded that the plaintiffs did not establish that their claims were spared from the work product exclusion.

The Louisiana Supreme Court disagreed. It stressed that the insurer, not the plaintiff, possessed the burden of proving that the policy exclusion applied. The Court stated that "[t]he insurer offered no proof to accomplish its burden." Id. at 1.　

The Veuleman Court held that the appellate court "erroneously shifted the burden of proof on the motion for summary judgment" to the plaintiffs and that the insurer had the burden to show that "the exception [to the exclusion] is not met." In keeping, the Court vacated the summary judgment and remanded the matter for further proceedings.

The Veuleman decision reminds that a litigant should be aware when it is their turn to go.

Picture it – you purchase a new home in a quiet, family-friendly neighborhood. On your first night, you notice that the neighbors are having a party – a big loud party. Your haven of peace and tranquility is interrupted by thumping bass and the shrieks of people jumping into a pool. The next day, the neighbors are gone, and the block is quiet again. However, the party returns the next weekend, bigger and louder than before. You do some research and find the house is listed on a popular website for short term rentals. What do you do?

This is the exact question that was posed to the Louisiana Court of Appeals for the Second Circuit in Marina Homeowners Association, Inc. v. Cahill. In that case, the Marina Homeowner’s Association filed a petition seeking declaratory judgment against the owner of the house on the basis that the use of the home as a short-term rental violated the covenants of the homeowner’s association. In response, the property owners argued that the covenants had expired and were no longer applicable. Therefore, they claimed they were free to use their property as they saw fit.

Many homeowners in Louisiana are familiar with building restrictions. Authority for the issuance of building restrictions is found in Louisiana Civil Code article 775. A building restriction is a real right under Louisiana Civil Code article 777. However, Louisiana Civil Code article 778 provides that if there is doubt as to the existence, validity, or extent of building restrictions, the issue should be resolved in favor of the unrestricted use of the immovable. These articles also provide a subsequent purchaser of the immovable property is also bound by the building restrictions if they are recorded in the public records.

The building restrictions for the subdivision at issue provided that the restrictions had a term of twenty years and then would renew automatically in ten-year periods. These restrictions bound the original property owners and all subsequent property owners. The court found that even though the original twenty-year term for the building restrictions had expired, the restrictions would automatically renew unless amended by the Association. Therefore, the property owner’s house was subject to the building restrictions.

Importantly for this case, the building restrictions specifically prohibited the use of the property for any reasons other than residential purposes. Therefore, the operation of a short-term rental was a violation of the building restrictions.

The Homeowners Association prevailed in this case – the property owners were no longer able to use their property for short term rentals. As the moral of the story – to be a good neighbor – it helps to follow the rules. And it is always important to check the fine print to know what those rules are!

References:

Marina Homeowners Ass'n, Inc. v. Cahill, 56,423 (La. App. 2 Cir. 8/27/25), 420 So. 3d 782.