Brian T. Butler

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.

In recent years, the dollar amount of general damage awards to personal injury plaintiffs has been on the rise. However, the Louisiana Supreme Court recently issued an opinion that may signal greater scrutiny for heightened general damage awards going forward. In Pete, v. Boland Marine and Manufacturing Co., the state’s highest court changed the standard of review in quantum disputes to require courts of appeal to consider general damage awards in similar cases when determining whether a trial court has abused its discretion in awarding a specific general damage award.

In Pete, a 74-year old mesothelioma patient was awarded $9.8 million in general damages after it was found he was exposed to asbestos. The jury awarded $2 million for past and future physical pain and suffering, $2.3 million for past and future mental pain and suffering, $3 million for past and future disability, and $2.5 million for past and future loss of enjoyment of life. The appellate court held the defendant failed to demonstrate the general damage award “shocks the conscience,” and found the jury did not abuse its discretion.

The Louisiana Supreme Court reversed the decision. In so holding, it also changed the standard by which appellate courts evaluate whether a trial court abused its discretion in awarding general damages. The Louisiana Supreme Court now instructs appellate courts to compare general damage awards to those awarded in similar cases in their review of the reasonableness of the trial court’s award. Applying the new standard, the Louisiana Supreme Court found the trial court abused its discretion and reduced the Pete plaintiff’s general damage award from $9.8 million to $5 million.

Previously, Louisiana courts employed a two-step analysis in evaluating general damage awards. First, the court of appeal determined whether the trial court’s award constituted a clear abuse of discretion. Second, and only if the court first determined that there was an abuse of discretion, the appellate court would consider prior damage awards in similar cases to determine what an appropriate award should have been. This test had proven problematic because there were no clear objective standards for determining whether the trial court’s award was an abuse of discretion.

The appellate court’s decision in Pete v. Boland Marine serves as an excellent example of the problems this test presented. While the majority found that the $9.8 million awarded to Pete did not “shock the conscience,” a dissenting judge believed the award did shock the conscience, because it far exceeded general damage awards in similar cases. The “shocking the conscience” test has been long criticized because of its lack of objectivity, as the result ultimately depended on the thoughts and feeling of the presiding judges. Critics argued this led to unpredictability within the law.

The Louisiana Supreme Court’s decision reforms the two part test in an attempt to resolve this issue. The new test mandates that appellate courts consider damage awards in similar cases in the initial inquiry, to objectively consider whether the trial court abused its discretion under the particular facts and circumstances of the case at hand. The second step of the test remains unchanged. If the court finds that the trial court abused its discretion, then the appellate court will look to recent cases to determine what is the highest or lowest award a reasonable trier of fact could have found and then reform the damage award accordingly.

This decision is a significant change in the law. It aims to increase predictability within the law and affords defendants objective standards by which to challenge damage awards. However, it remains to be seen how courts will implement this new test in practice.

References:

Pete v. Boland Marine & Mfg. Co., LLC, 23-170 (La. 10/20/23), reh'g denied, 23-170 (La. 12/7/23), 374 So. 3d 135.

The COVID-19 pandemic had a profound impact on the global economy. Louisiana was not spared, and many businesses had to close as sales to their customers slowed or stopped altogether. Not surprisingly, the question arose regarding whether business interruption insurance would provide coverage to businesses in this situation. The Louisiana Supreme Court recently was asked this question in Cajun Conti, LLC v. Certain Underwriters at Lloyd’s, London and found that the policy at issue did not provide such coverage.

The mayor of New Orleans issued a proclamation on March 16, 2020, that prohibited most public and private gatherings. This applied to restaurants, whose business initially was limited to takeout and delivery services. Before the pandemic, Oceana Grill, a restaurant located in the French Quarter, could serve up to 500 customers at one time. However, it had to limit its business to takeout and delivery services when the mayor’s proclamation was announced. Because of social distancing guidelines, it remained at 60% or less capacity throughout the pandemic.

Oceana maintained a commercial insurance policy with loss of business income coverage and filed suit to request a declaratory judgment that the “policy provides business income coverage from the contamination of the insured premises by COVID-19.” Oceana’s insurer argued that there was no coverage under the policy because COVID-19 did not cause “direct physical loss of or damage to property” under the policy’s terms.

The trial court denied Oceana’s request for declaratory relief at trial. The appellate court reversed and found the policy’s terms ambiguous because it held “direct physical loss” could mean loss of use of the property. Because the pandemic prevented the full use of the property due to capacity limitations, the appellate court found coverage was triggered.

The Supreme Court disagreed and reversed the appellate court’s decision, finding its focus on the use of the property to be misguided. The Court found that suspension of operations “caused by direct physical loss of or damage to property,” as defined by the policy, required “the insured’s property to sustain a physical, meaning tangible or corporeal, loss or damage.” The Court noted that the restaurant’s physical structure was not lost or damaged because of the pandemic. COVID-19 restrictions did not cause damage or loss that was physical in nature. Therefore, the policy did not provide coverage for loss of business income.

Whether a policy affords coverage depends on the terms and conditions of each policy and the facts of each case. However, in light of this decision, businesses with insurance policies that include provisions with language like that at issue in Cajun Conti should not anticipate coverage for loss of business income allegedly caused by the COVID-19 pandemic.

Case References:

Cajun Conti LLC v. Certain Underwriters at Lloyd's, London, 2022-01349 (La. 3/17/23), 2023 WL 2549132.