Judicial Interest Rate for Louisiana Hits a 17-Year High

Under Louisiana’s comparative fault system, each party in a lawsuit generally is only liable for their own percentage of fault. However, in some instances, a party may be “vicariously” liable for the fault of another party. One example of vicarious liability is an employment relationship, where an employer can be liable for the fault of its employees. On the other hand, vicarious liability generally does not apply when the alleged “employee” is found to be an independent contractor. Whether a worker qualifies as an employee or an independent contractor often becomes an important issue in suits related to construction projects.

The test for determining whether a party is an employee or an independent contractor involves analysis of who has the right to control his or her work. In the construction context, courts distinguish between “operational control” (which suggests an employment relationship) and control as it relates to the results of the work (which suggests an independent contractor relationship). Two recent cases examine this issue and provide examples of how courts analyze the type of control necessary to establish vicarious liability in the construction projects.

In Stonetrust Com. Ins. Co. v. TBT Contracting, Inc. of LA, homeowners hired a general contractor to renovate their home. During the project, an electrical subcontractor was injured after falling through an attic space. It was alleged that the general contractor created a hazard by cutting a hole in the attic and concealing it. The plaintiff sued the general contractor and the homeowner. The court had to determine whether the homeowner could be liable for the subcontractor’s injuries, which would require a finding that the homeowner was vicariously liable for the general contractor’s fault.

The plaintiff argued that the homeowners were particularly involved in the project. It presented evidence to show the homeowners would give suggestions regarding the work to be performed and also directed alterations or additions to the work. The plaintiff argued that this demonstrated control over the general contractor’s work. However, the court disagreed. Despite the homeowners’ level of involvement, the court held that their control was limited to the results of the work, and was not “operational control.” The general contractor therefore was an independent contractor, and the homeowners were not vicariously liable for its acts.

In Baham v. Fisk Elec. Co., a city worker brought suit against a general contractor after suffering injuries from an electrical shock. The worker alleged that the general contractor was vicariously liable for the fault of its subcontractor. While evidence showed the subcontractor relied on the general contractor for the location of its work, the court found that this was not “operational control.” The court observed that general contractors are entitled to exercise supervisory control over its independent contractors to ensure compliance with the contract. It further found that suggestions or instructions given to an independent contractor do not equate to control over the methods or details of the work. Absent such “operational control” vicarious liability could not be imposed.

Though they may be limited to their facts, these cases show courts usually require a showing of more than suggestions or instructions regarding the work to establish the “operational control” necessary to trigger vicarious liability. Absent such a showing, independent contractors usually remain independent.

Case References:

Stonetrust Com. Ins. Co. v. TBT Contracting, Inc. of LA, 2022-0971 (La. App. 1 Cir. 4/14/23), 2023 WL 2947826

Baham v. Fisk Elec. Co., 2022-0551 (La. App. 4 Cir. 3/22/23), 2023 WL 2595253

Limited liability companies (“LLCs”) are usually formed with the goal of protecting its members from personal liability for the actions of the LLC. Under Louisiana law, there is a “presumption” that the members of an LLC are not personally responsible for the liabilities of the LLC. However, a recent Third Circuit decision highlights how an LLC member may be exposed to personal liability for performance of a contract when the LLC’s name is not displayed on the contract.

In Bourque v. Bergeron, 2021-108 (La. App. 3 Cir. 12/1/21), 331 So. 3d 1089, the plaintiff filed suit against his contractor seeking damages from allegedly defective work. The contractor filed a motion to dismiss the claims against him individually, arguing that he was acting on behalf of his LLC and therefore had no personal liability. In support of his motion, the contractor introduced evidence that: (1) the contractor was the sole member of the LLC; (2) the required contracting license was in the name of the LLC; and (3) plaintiff’s checks were deposited into the LLC’s financial accounts.

The plaintiff argued that he contracted with the contractor individually, and the contractor did not represent that he was acting on behalf of an LLC. The proposal and invoices listed a business name, but did not indicate the business was an LLC. The trial court granted the contractor’s motion, finding the evidence showed the plaintiff was dealing with the LLC, and not the contractor individually.

On appeal, the Third Circuit recognized the general rule that an LLC member is not personally liable for acts committed by the LLC. However, it found an LLC member can be personally liable when they fail to disclose that the member is contracting on behalf of the LLC. The court noted that the proposal/invoice did not reflect the LLC’s involvement – it only included a business name along with the contractor’s individual name and address. Simply including a business name was not sufficient to alert plaintiff he was contracting with an LLC as opposed to an individual with a tradename. The Third Circuit reversed the trial court’s dismissal of the personal liability claims, finding issues of fact as to whether the contractor disclosed that he was acting on behalf of the LLC, which opened the door for potential personal liability for the LLC member.

This case shows that LLC members can create personal liability if they do not express that the LLC is the true party to the contract.

I have met smart, sophisticated “business” people whose eyes glass over when they try to explain their understanding of “UM” coverage. The picture becomes murkier when discussing “economic-only UM,” a form of UM coverage many people purchase without even knowing it. Through many years and conversations, I have come to conclude that there is a general fogginess that obscures this entire subject with many, if not most, people. This blog is an effort to improve understanding on the subject.What is “UM” Coverage?“UM” signifies “uninsured motorist” insurance coverage, but is more properly described as “uninsured/underinsured” motorist coverage. A person, family, business, or group purchases UM coverage to respond to damages caused in an accident by someone who has either no insurance or not enough to cover the loss. You purchase UM insurance to protect yourself or those connected to you. Without UM, you are gambling that the person who caused the accident (the “tortfeasor”) will have insurance coverage, and enough coverage, to respond to the injuries and damages they have caused.Why UM?This question is simply answered in a two-part response:#1- The roads are dangerous-Unless you are a crop duster or an undercover agent, the most dangerous thing you will likely do on any given day is to drive on a public road, even more so in the age of “smartphones” and distracted-driving.#2- Many drivers lack sufficient liability coverage- An unhealthy portion of drivers have either no insurance on insufficient insurance coverage to address an accident involving severe injuries or damages. The State of Louisiana requires motorists to obtain at least the minimum insurance of $15,000 “per person,” $30,000 “per accident,” and $25,000 to address property damage. If you do not purchase UM, you are trusting that these limits will be enough, as they might be in a minor accident. But what if the injuries are severe or you have multiple passengers in your car, van, or suburban?Often, the same people who reject UM, will buy “collision” coverage on their car to make sure they are not left paying for a car note after the car is destroyed in an accident. In this limited way, you can think of UM insurance as collision coverage on you, your family, passengers, or employees.While perfect statistics are not available, many drivers on the road have no insurance. Frequently, drivers will obtain minimum limits insurance through a “premium finance” arrangement, but will have stopped paying the premiums (thereby losing coverage) by the time of an accident.What is “Economic-Only” UM?In Louisiana, UM coverage will be afforded to you unless you “waive” the coverage under La. R.S. 22:1295. Louisiana residents are presented with a form that allows them to waive or select UM coverage. They are also allowed to select “economic-only” UM. People often choose this option because it is cheaper, but economic-only UM coverage will only pay for economic damages such as lost wages, medical bills, funeral costs, and other monetary damages. Economic-only UM will not pay money to compensate for pain and suffering/mental anguish, scarring and disfigurement, or other non-economic damages.FAQS

• Can UM protect me from a hit-and-run driver? Yes.

• What if another driver’s negligence caused the accident, but there was no physical contact with that driver’s vehicle and they fled? In this scenario, UM may be available under La. R.S. 22:1295(1)(f); however, you will need to identify an “independent and disinterested witness” to establish the actions of the unidentified driver.

• Will UM protect me if I am at fault in an accident? No. The law would consider that a “moral hazard” and invite unscrupulous individuals to cause an accident in hopes of recovering under the policy they purchased.

• Will UM protect me if I am a pedestrian? It may, depending upon the terms of your insurance policy.

• What if an object falls from a vehicle and causes an accident? UM may be available in this circumstance. The ultimate answer may depend upon whether the “falling object” had come to rest before the accident. Rener v. State Farm Mut. Auto. Ins. Co., 99-1703 (La.App. 3 Cir. 4/05/2000), 759 So.2d 214, 215.

CONCLUSIONRational people may decide to reject UM to save money; and this decision may be the right one if they have health insurance, short-term disability, long-term disability, or others such protections. However, people often make such decisions with less than full information. Hopefully, you will make the smart choice.