Sudden Shifts - Burden Shifting under Louisiana Law

Unfortunately, recent flooding and storm events have again affected our area in Louisiana. Many people experienced flooding and storm damage to their homes and businesses. If you experienced flood or storm damage, please consider following these steps to ensure your damage claim is properly documented and submitted:

• DOCUMENT, DOCUMENT, DOCUMENT - Once you are able, make sure to document the damages to your home and contents. Whether for a homeowners or flood insurance policy or to obtain government assistance, take plenty of photos and video of the damage. Make a list of the items that were damaged or destroyed. One way to organize this list is to group items from each room together, approximate its age, where it was purchased, and its value when purchased. It will be more difficult to document your claim once the cleanup or rebuilding begins.

• OBTAIN MULTIPLE ESTIMATES -To the extent you are able, obtain multiple estimates for the work needed on your home. Pay for the estimate if necessary. If you have three estimates and the amounts are close, they are much more credible. Also, try and get as much detail as possible in each estimate, including specific materials to be used, dimensions, and finishes.

• NOTIFY YOUR INSURER – Whether a homeowners or flood policy claim, or other insurance claim related to your business, promptly notify your insurer of your damage. Your insurer will send someone to inspect the damage and start your claim. Provide as much information as possible to make their job as easy as possible. That will likely quicken the pace of your claim.

• FLOOD CLAIMS – If you have flood insurance, it is likely provided by the federal government through the National Flood Insurance Program (NFIP). There are specific rules for submitting your claim through the NFIP. YOU MUST SUBMIT FEMA FORM 086-0-11 (NOTICE OF LOSS) WITHIN 120 DAYS OF YOUR DAMAGE. You can find this form here.

Louisiana law requires UM coverage in automobile liability insurance policies in the same amount as the policy’s bodily injury liability coverage. UM coverage will be included in the policy unless the insured rejects UM coverage, selects lower limits, or selects economic-only coverage. This rejection, selection of lower limits, or selection of economic-only coverage must be made on a form prescribed by the commissioner of insurance and must be signed by the insured or its legal representative. See La. R.S. 22:1295. If a rejection form is not completed, UM coverage will be read into the policy. However, a valid UM waiver form executed for a policy of insurance remains in effect when that policy is renewed with a few exceptions. Generally, execution of a new waiver form is not required unless a new policy is issued or the liability limits increased. These basic principles were considered in the recent First Circuit decision in Johnson, et al. v. Bass, Geico General Ins. Co., and GoAuto Management Services, LLC, 2021 CA 0139 (La. App. 1 Cir. 12/22/21).

In Johnson, the plaintiff obtained a policy of insurance from GoAuto on July 17, 2015 and validly rejected UM coverage on the commissioner’s UM rejection form. The plaintiff renewed the policy multiple times and also completed an “Application for Personal Automobile Insurance” on February 23, 2018 to add her husband and an additional vehicle to the policy.

The Johnson plaintiff was in a motor vehicle accident on November 26, 2019 and claimed UM benefits under the policy. She argued that the insurance application she completed in February 2018 to add a new driver and a new vehicle to the policy created a new policy of insurance that required completion of a new UM waiver form. Because a new UM waiver form was not executed in February 2018, the plaintiff argued that UM coverage should be read into the policy. Thus, the question posed to the court was whether the 2018 policy became new or was simply a renewal. The trial court found that the policy was a renewal and dismissed the UM claim.

The First Circuit affirmed and rejected the plaintiff’s argument holding, “the language of La. R.S. 22:1295 is clear and unambiguous; only changes in the ‘limits of liability’ to an existing policy will create a new policy that requires the completion of a new UM selection form.” Despite multiple renewals, the liability limits of the policy did not change from the date it was issued through the date of the accident. Importantly, the limits also did not change when the new driver and vehicle were added to the policy in February 2018. Thus, no new policy was created. The original rejection of UM coverage remained in effect, and the plaintiff’s claims against her alleged UM insurer were dismissed.

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.