Direct Action Update—Retroactivity and the Gasquet Settlement

The Louisiana Supreme Court recently announced a decision that could alter the impact of Louisiana's "Direct Action Statute." See Soileau v. Smith True Value and Rental, et. al., 2012-1711, -- So. 3d ---.In Soileau, the injured plaintiff initiated suit after a John Deere front-end loader malfunctioned. She settled with a number of parties but proceeded to trial against the store from which the machinery was rented, the store's owners (collectively, the Smiths) and the Smiths' insurer, Hartford Insurance Company.The plaintiff sued Hartford under Louisiana's Direct Action Statute, which was enacted to provide plaintiffs with a "direct" right of action against a tortfeasor's insurance company. In many other states, a plaintiff cannot sue a tortfeasor's insurer directly as this cause of action is not permitted by the common law. Insured Lloyd's v. Bobo, 156 S. E. 2d 518 (Ga. App. 1967).Generally, the Direct Action Statute allows a plaintiff to assert a claim against both the insured and its insurer. However, suit may be brought against the insurer only in the few exceptions outlined in the statute.The plaintiff's original petition in Soileau complied with the statute because it joined both Hartford and its insureds, the Smiths. During the trial, the plaintiff verbally dismissed the Smiths from the suit, not seeking "any damages personally against them."Following the dismissal, Hartford was the only party who remained. The plaintiff did not expressly reserve any rights against Hartford who then sought dismissal on two grounds:

1. Hartford according to its policy was obligated it to pay only "those sums that the insured becomes legally obligated to pay as damages." Because Hartford's insureds were fully released (and therefore could not be "legally obligated to pay damages"), Hartford denied liability.
2. Hartford also asserted that the dismissal terminated the plaintiff's right to sue Hartford under the Direct Action Statute because none of the six circumstances allowing suit to be brought against Hartford alone existed.

The trial court rejected both of Hartford's arguments. The jury found for the plaintiff in the amount of $9.4 million and allocated 15% of the fault to the Smiths. Judgment was then rendered against Hartford. Hartford appealed. The Third Circuit Court of Appeal agreed with Hartford's arguments and dismissed it from the suit. The Louisiana Supreme Court accepted writs.In a 4-3 decision, the Supreme Court held that the plaintiff maintained her right of action against Hartford despite the dismissal. The Court accepted the plaintiff's position that she intended to reserve her rights against Hartford and cited to Civil Code article 1802 which provides that the renunciation of rights against one solidary obligor "must be express." Therefore, because the plaintiff did not expressly release Hartford, its release would not be presumed.The majority also ruled that the Direct Action Statute did not bar the plaintiff's claim against Hartford. Under the Court's reasoning, the circumstances outlined in the Direct Action Statute are relevant only at the time suit is filed. Thereafter, after suit is "brought," a plaintiff can freely dismiss the insured and maintain its suit against the insurer alone.The Court expressed that its holding is consistent with the statute because the naming of the Smiths in the caption of the suit allowed the jury to recognize that the suit was not just against a "company." In support, the Court quoted from one of the drafters of the Direct Action Statute who testified as follows:[T]he purpose of the bill is to permit the trier of fact to see that there are two human beings involved, a plaintiff and an insured defendant, rather than just a victim and a company.However, the plaintiff's counsel in Soileau was allowed to inform the jury during closing arguments that Hartford was the only defendant left in the lawsuit and that the Smiths could not be held liable.Three justices dissented.One dissenting opinion reasoned that Hartford should not be held liable because it could never be liable for the conduct of a dismissed insured who could not be "legally liable to pay damages."All dissenters complained that the majority's holding will, in effect, allow plaintiffs to sidestep the requirements of the Direct Action Statute. Justice Guidry wrote that the majority ruling will allow plaintiffs to "circumvent" the direct action. Justice Victory added that the Court's holding allows a "plaintiff to name the insured along with the insurer as defendants in order to comply with the statute, but then dismiss the insured and proceed at trial against the insurer alone..."　 The true impact of Soileau remains to be seen.

In 2024, the Louisiana Legislature revised La. R.S. 22:1269, the Louisiana Direct Action Statute, to provide an injured person “shall have no right of direct action against the insurer” unless one of several exceptions applies. This legislation took effect on August 1, 2024. Since its effective date, litigants in Louisiana have debated whether this change to the law was substantive or procedural. If the amendment were procedural, it would apply to all cases filed after August 1, 2024. If substantive, the changes would only apply when the accident occurred after August 1, 2024.

While several Federal Court cases previously addressed this issue, no Louisiana appellate court had done so until the Louisiana Fourth Circuit Court of Appeal issued its ruling in Hurel v. National Fire and Marine Ins. Co., et at.

In Hurel, the plaintiff filed suit on October 1, 2024, naming the insurer and other parties as defendants in a case filed in connection with a motor vehicle accident. The insurer filed an Exception of No Right of Action, Motion to Strike, and a Motion in Limine, on the basis that the amendment to the Direct Action Statute prohibited the plaintiff from (1) naming the insurer in the case caption and (2) presenting evidence of insurance coverage at trial. In response, the plaintiff argued that the amendment could not apply because the accident occurred before the effective date of the statutory amendment. The trial court denied the exception, the motion to strike and the motion in limine.

On appellate review, the Louisiana Fourth Circuit cited prior jurisprudence that routinely found the Direct Action Statute granted a procedural right of action against an insurer where the plaintiff has a substantive cause of action against the insured. The Court found the recent amendments “removed the procedural right of action against an insurer.” The plaintiff had a procedural right of action, but it became operative only when, and if, that right was invoked timely— that is before the amendment went into effect.

After August 1, 2024, the plaintiff had no right or interest in a direct action against the insurer. Thus, because the plaintiff did not have a statutory right of direct action against the insurer, the Court granted the insurer’s exception. For the same reasons, the court of appeal also granted the insurer’s Motion in Limine to prevent plaintiff from disclosing insurance coverage to the jury and granted its Motion to Strike the insurer’s name from the case caption.

Reference:

Hurel v. Nat'l Fire & Marine Ins. Co., 2025-0049 (La. App. 4 Cir. 3/11/25), --- So.3d ---, 2025 WL 762645.

We previously posted discussion relating to the “LouisianaDirect Action Statute” which was disembodied in LSA—R.S. 22:1269,effective August 1, 2024. Click here to review our prior analysis. Previously,the law provided a claimant with a right of action against an insurancecarrier. But the amendment ended that right of action except for specificallynamed circumstances. The primary changes include a prohibition from naming theinsurance carrier directly (absent certain exceptions) and preventing thedisclosure of insurance coverage to the jury unless the Louisiana Code ofevidence requires it.

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Sincethe law became effective, courts have answered questions regarding theretroactivity of the statute. Recent decisions hold that the 2024 amendment toLSA—R.S. 22:1269 is procedural and applies retroactively, unless doing so woulddisturb a litigant’s vested rights.*

TheLouisiana First Circuit recently outlined a circumstance where the claimantswere allowed to proceed with a claim against the tortfeasor and the insurer. InMunson et al v. Heniff Transportation Systems LLC et al, on remand, theCourt rejected the insurers’ argument that an amended petition which named onlythe carrier was prohibited, absent proof that one of the narrow exceptions inLSA—R.S. 22:1269 was established.^  The Court found that because theamending petition naming the carrier occurred before the 2024 amendment, theplaintiffs had a vested right of action against the carrier which “cannot bedisturbed.” Thus, the Court denied the carrier’s exception of no right ofaction and allowed the plaintiffs to proceed directly against the carrier. The Court noted that if the claim was timely filed against the tortfeasorand the insurer, the right of direct action continued, regardless of whetherthe tortfeasor is thereafter dismissed, citing Soileau v Smith True Value& Rental.**

Althoughnot discussed in Munson, collateral issues arise when Louisiana’s uniqueGasquet settlement is considered, i.e., the claimant settles with theinsured while reserving rights against all valid and collectable insurance.This concept was specifically authorized in LSA—R.S. 22:1269.  Can thecarrier be named by amended pleadings after such a settlement?

Thenatural consequence of the Court’s analysis in Munson suggests that ifan action was timely “brought” against the tortfeasor and the carrier prior toAugust 1, 2024, then the right of direct action against the carrier wouldpersist even in the context of a Gasquet settlement. On the contrary, ifthe action was not brought against the carrier prior to August 1, 2024, itstands to reason that a claimant could not now amend to name the carrierfollowing such a settlement and would have to proceed against the insured inthe status of nominal defendant.

References:

* Avrieas Next Friend of A.A. v. Ascot Specialty Ins., 2025- 1029 (La. App. I Cir.5/ 20/26), --- So.3d ----,  2026 WL1429934 *4-5.

^ 2025-0022and 2025-0085 (La. App. 1 Cir. 9/22/26).

** 2012-1711(La. 6/28/13), 144 So. 3^rd 771, 778-79.

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