Louisiana Supreme Court Rejects Mental Anguish Claim

Uninsured/underinsured motorist coverage (“UM coverage”) is included in all automobile liability policies by Louisiana law unless the insured “rejects [UM] coverage, selects lower limits, or selects economic only coverage.” What constitutes an adequate rejection of UM coverage has been the crux of countless lawsuits across the state. Recently, in Havard v. Jeanlouis, et al, 2021-C-00810 (La. 6/29/22), the Louisiana Supreme Court examined the validity of a corporate representative’s signature in the context of execution of a UM waiver form. Louisiana courts have found that without a valid signature, UM coverage generally may not be waived.

The Havard court recognized that a corporation cannot “sign” its own name, and that an authorized representative must act on its behalf. Under the facts of this case, an administrative assistant attempted to execute a UM waiver form at the corporate representative’s direction with a stamp of the representative’s signature. The plaintiff argued that the use of the stamp did not meet the requirements for proper execution of the UM waiver form at issue.

Considering these facts, the court noted that Louisiana law of mandate provides that “when the law prescribes a certain form for an act, a mandate authorizing the act must be in that form.” The court continued: “Accordingly, where one individual signs a UM form on behalf of another individual and authority is not conferred by law, our Civil Code requires this authority be in writing.”

While the corporate representative in Havard verbally instructed his administrative assistant to complete the waiver with his signature stamp, no written mandate existed between the representative and the assistant to confirm this authority. Absent the written mandate, the court disregarded the express intention of the corporate representative and held the form invalid.

The court recognized the impracticality of its holding. However, it also commented “Concerns over the practical impact within the insurance industry in scrutinizing stamped signed UM forms are unavailing. Inconvenience is not absurdity. The insurer has the authority, opportunity, and responsibility to assure the UM form is completed properly. … Practical considerations regarding increased due diligence requirements are matters of policy best directed to the legislature.”

Cases involving UM waiver forms are fact-sensitive. Havard involved unique facts where the company’s authorized agent did not sign the UM waiver form personally. While Havard may be limited to its facts, it reminds that proper execution of a UM waiver form is necessary for UM coverage to be properly waived.

Louisiana Supreme Court Provides Updated Guidance on Execution of UM Waiver Forms

The Louisiana Supreme Court recently ruled a plaintiff’s bad faith insurance claim was prescribed where the policy at issue required actions to be brought within two years after the date of loss.

In Phyllis Wilson v. Louisiana Citizens Property Insurance Corporation, the plaintiff asserted a bad faith claim against an insurer. The applicable policy of insurance provided “[n]o action can be brought unless the policy provisions have been complied with and the action is started within two years after the date of loss.” The plaintiff alleged that the insurer failed to timely tender payments for losses that occurred on August 27, 2020 and October 20, 2020. However, the plaintiff did not file her suit unit January 9, 2023.

Prior to the Wilson decision, courts frequently relied on the Louisiana Supreme Court’s decision in Smith v. Citadel Ins. Co., which held that actions against insurers under Louisiana’s bad faith statutes are subject to a ten-year prescriptive period. In Smith, the Supreme Court addressed the issue of whether a bad faith action against an insurer was a delictual or tort action subject to a one-year prescriptive period, or a contractual action, which is subject to a ten-year prescriptive period under Louisiana law. The Smith court concluded that the duty of good faith owed by the insurer to the insured “emanates from the contract between the parties” such that the “insured’s cause of action is personal and subject to a ten-year prescriptive period.”

In Wilson, the Louisiana Supreme Court examined whether Smith required the Court to uphold a ten-year prescriptive period for bad faith actions even though the insurance policy at issue prohibited actions brought more than two years after the date of loss. The Wilson court ultimately concluded that an action against an insurer brought more than two years after the date of loss is prescribed where the applicable insurance policy set a term of two years for filing a claim against the insurer.

To reach this conclusion, the Wilson court cited Taranto v. Louisiana citizens Prop. Ins. Corp., which held “in the absence a statutory prohibition, a clause in an insurance policy fixing a reasonable time to institute suit is valid.” The Wilson court then turned to the applicable statute and noted that La. R.S. 22:868(B) “expressly provides that no policy ‘shall contain any condition, stipulation, or agreement limiting right of action against the insurer to a period of less than twenty-four months next after the inception of the loss when the claim is a first-party claim…’” The Wilson court noted the two-year limitation in the applicable policy was consistent with La. R.S. 22:868(B).

The court’s ruling supports the argument that policy provisions requiring actions to be filed within two years of the date of loss are enforceable. However, the Court did not disturb its holding in Smith, noting the Smith case was factually distinguishable because it did not involve a policy that contained a contractual limitation on the insured’s institution of suits.

References:

Phyllis Wilson v. Louisiana Citizens Property Insurance Corporation, No. 2023-CC-01320 (La. 1/10/2024) (per curiam), 2024 WL 108714.

Smith v. Citadel Ins. Co., 2019-00052 (La. 10/22/19), 285 So.3d 1062.

Taranto v. Louisiana citizens Prop. Ins. Corp., 2010-0105 (La. 3/15/11), 62 So.3d 721, 728.

A Louisiana litigant has a right to appeal a judgment rendered against it at trial and has two options to appeal the judgment. The litigant can take a suspensive appeal, which suspends the execution of the judgment pending the outcome of the appeal, or it can take a devolutive appeal, which does not. La. C.C.P. art. 2124 provides that when the judgment if for a sum of money, a party seeking a suspensive appeal must post security, or a bond, “equal to the amount of the judgment,” including interest.

What happens when a monetary judgment is cast against an insurer (and its insureds) and the amount of the judgment exceeds the limits of the insurer’s policy? Can the insurer be required to post bond in excess of its policy limits to suspensively appeal the judgment? The Louisiana Supreme Court recently addressed this issue and ruled an insurer is required to post a security bond covering only its policy limits.

In Martinez v. Am. Transp. Grp. Risk Retention Grp., Inc., a jury cast judgment against a transportation group, its driver, and its insurer for damages the plaintiff sustained in a motor vehicle accident. The trial court rendered a judgment in the amount of $2,802,054.66, which was in excess of the $1,000,000 limits of the insurer’s policy. The insurer moved for a suspensive appeal and requested a reduced bond because its insured was no longer in existence and could not post a bond. Nevertheless, the trial court set the appeal bond at $2,802,054.66, plus interest. The insurer posted a bond in the amount of its policy limits plus interest and costs and sought appellate review of the trial court’s appeal bond order.

The Supreme Court observed that the contracts clauses of the federal and state constitutions prohibit the enactment of any law “impairing the obligation of contracts.” Therefore, the Court found that to require an insurer to post a bond for suspensive appeal in excess of its policy limits would render meaningless, and therefore impair, the terms of the insurance contract setting the policy’s limits. Thus, the Martinez court should have set security to allow the insurer to suspensively appeal the portion of the judgment up to its policy limit.

However, the Court refused to reduce the suspensive appeal bond for all the defendants cast in judgment. Instead, the Court ruled the insurer could suspensively appeal the judgment up to the amount of its policy limits, stay execution of that portion of the judgment, and devolutively appeal the remainder of the case for its insureds.

References:

Martinez v. Am. Transp. Grp. Risk Retention Grp., Inc., 2023-01716 (La. 10/25/24) 2024 WL 4579047.