NEW ORLEANS BAR ASSOCIATION PROCRASTINATOR’S PROGRAM LOUISIANA INSURANCE PENALTIES: RECENT DEVELOPMENTS David Strauss King & Jurgens (504) 582-3816 dstrauss@kingjurgens.com
OVERVIEW OF BAD FAITH
Elements of the Bad Faith Claim
Insurer’s Duties – First Party Fail to Pay Settlement within 30 Days after Pay Claim due within 30 Days after Written Agreement Receipt of Satisfactory Proofs of Loss Fail to Pay Amount Due within 60 Days of Initiate Loss Adjustment within 14 days Satisfactory Proof of Loss (not a catastrophic loss) or 30 days (catastrophic loss) after Notification Violate La. R.S. 22:658.2 (Immovable Property Claims) Make Written Offer to Settle Property Damage Claims within 30 Days of Receipt of Satisfactory Proofs of Loss Deny Coverage or Fail to Settle Based on Altered Application and No Notice Misrepresent Coverages Mislead Re: Applicable Rx Period
Insurer’s Duties – Third Party La. R.S. 22:1892 La. R.S. 22:1973 Offer to Settle Misrepresent Misleads Re: Property Damage Coverage Prescription Period Claims within 30 Days of Satisfactory Fails to Pay within 30 Proof of Loss Days of Written Pay within 30 Days Agreement of Settlement
What Damages Are Available? In addition to amount In addition to general of loss, penalty of 50% or special damages, of damages or $1,000, penalties not to exceed whichever is greater; 2x damages or $5,000, Plus reasonable whichever is greater attorney fees and costs
Other Damages Under R.S. 22:1892 Penalty not to exceed Failure to 10% of reasonable reimburse for expenses, or $1000, alternative whichever is greater, plus transportation atty fees and costs Delay in Penalty not to exceed processing 15% of check, or $200, check or draft whichever is greater Requiring Penalty not to exceed particular $500 for each offense repair place
TRENDS
Trends: Third Party Excess Exposure • PL obtains judgment beyond policy limits • Tortfeasor assigns his bad faith rights against his insurer to PL • PL sues liability insurer: asserts tortfeasor’s bad faith failure to settle within limit claim
Trends: Third Party Excess Exposure Kelly v. State Farm = robust interest 1. Affirmative duty to settle within limits 2. Poor communication with insured = bad faith 3. Misrepresentation of facts = bad faith
Trends: Third Party Excess Exposure
Trends: Third Party Excess Exposure Set ups A strict application of the statute does not contemplate gamesmanship, such as having “unrealistic offers ... presented through ‘carefully ambiguous demands coupled with sudden-death timetables' ” in order to “set up” the insurer for an excess liability judgment.
Kelly v. State Farm - Lessons • Clear, complete and timely communications with the insured during the claims process, particularly where the damages may exceed the limits “pertinent • Communications must contain all information” (coverage information, facts developed, liability analysis, exposure analysis, settlement efforts, insured’s right to retain his own counsel etc.) in a way that demonstrates consideration of the risk from the insured’s perspective.
Trends: Auto Property Damage THIRD PARTY • Failed to settle – but no such duty • Failed to pay enough – but no such duty • Diminunition in value BODY SHOP CHAOS
Body Shop Anti-Steering Bad Faith Do body shops have right of action against insurers for bad faith under anti-steering provision 22:1892(D)(1)? . . . No insurer shall require . . . repairs be made to a motor vehicle, including window glass repairs or replacement, in a particular place or shop or by a particular entity. Any insurer violating the provisions of this Subsection shall be fined not more than five hundred dollars for each offense. NO: Medine’s Body Shop v. Progressive (La. 1 st Cir. 2016)
BAD FAITH PRESCRIPTIVE PERIODS IN LOUISIANA
Prescriptive Period for Bad Faith: First Party State Court = 1 year, so far • Fils v. Starr Indem. & Liab. Co. , 2018 WL 2123564 (La. App. 3 Cir. 5/9/18) • Labarre v. Texas Brine Co. , 2016-265 (La. App. 1 Cir. 12/2/16), 2016 WL 7031633
Prescriptive Period for Bad Faith: First Party Federal Court = 1 year in Eastern District Naz, L.L.C. v. United Nat. Ins. Co. , 2018 WL 3997299 (E.D.La. 2018); Ross v. Hanover Ins. Co. , 2009 WL 2762713 (E.D.La. 2009); Brown v. Protective Life Ins. Co. , 353 F. Supp. 2d 739 (E.D.La. 2004); Rodriguez v. Travelers Ins. Co. , 2002 WL 31409452 (E.D.La. 2002). Federal Court = 10 years in Western/Middle Districts • Aspen Specialty Ins. Co. v. Technical Indus., Inc. , 2015 WL 339598 (W.D.La. 2015) • Brooks v. Safeco Ins. Co. , 2017 WL 8944056 (M.D.La. 2017).
Prescriptive Period for Bad Faith: Third Party Third Party = 1 year • Zidan v. USAA Property and Casualty Ins. Co. , 622 So.2d 265 (La. App. 1 Cir. 5/28/93), writ denied , 629 So.2d 1138 (La. 1993) • Brown v. Protective Life Ins. Co ., 353 F.Supp.2d 739, 743 (E.D. La. 2004) PRESCRIPTION ON BAD FAITH ASSIGNMENT BEGIN TO RUN WHEN INSURED MUST PAY JUDGMENT ? Belanger v. Geico = YES
R.O.R. LETTER AS BAD FAITH Century Sur. Co. v. Blevins 799 F.3d 366, 368 (5th Cir. 2015) • One of claims asserted by insured was that its insurer had committed a “bad faith refusal to provide coverage” • The insured had alleged that its insurer violated its obligation of good faith and fair leading by sending “a reservation of rights letter which was ‘unclear and unintelligible’ and failed to state any ‘legitimate reason in the Policy’ for denial of coverage. ”
Century Sur. Co. v. Blevins • The insurer alleged these claims could be brought only pursuant to 22:1892 or 22:1973 • The district court agreed and held that Louisiana does not recognize a separate and distinct obligation of good faith insured’s • The district court dismissed the counterclaim for bad faith because it failed to state a claim under 22:1973 • The Court of Appeals reversed and remanded
Century Sur. Co. v. Blevins • Fifth Circuit = the district court’s decision at odds with Kelly v. State Farm • Under Kelly , a first party insured’s right to bring a cause of action for breach of the duty of good faith and fair dealing preceded 1973 and therefore is not constrained by 1973. The Court explained:
Century Sur. Co. v. Blevins In Kelly the Louisiana Supreme Court extended the logic of Theriot and held that “an insured's cause of action for a breach of the implied covenant of good faith and fair dealing is not limited to the prohibited acts listed in La. R.S. 22:[1973](B). ” The difference between the third parties in Theriot and the insureds in Kelly is that the third parties' right to bring causes of action against insurers was created by § 1973, whereas insureds' right to bring a cause of action for breach of the duty of good faith and fair dealing preceded 1973
Inter-Company Bad Faith Does the primary carrier owe a duty of good faith to the excess insurer? YES: Great Southwest Fire Insurance Ins. v. CNA Ins., 557 So.2d 966 (La. 1990) Can an excess judgment give rise to bad faith cause of action by excess carrier? YES: Great Southwest Is an excess judgment necessary for excess carrier to have bad faith claim? NO: If an excess carrier steps in and pays to facilitate a settlement over the primary’s limits does excess have a cause of action? RSUI Indemnity v. American States Ins., 768 F.3d 374 (5th Cir. 2014)
Inter-Company Bad Faith IN CLAIM BASED ON THEORY OF FORCED SETTLEMENT EVIDENTIARY BURDEN IS HIGH: RSUI TRIAL VERDICT AFTER REMAND (1) The insureds had no claim against the underlying insurer in light of the settlement agreement and release the underlying insurer obtained from the plaintiff for the benefit of the insureds (the settlement agreement included a “ Gasquet ” release) And thus insureds had no claim against underlying insurer to which the excess insurer could be subrogated
Inter-Company Bad Faith (2) Even if there was a viable claim against the underlying insurer, excess insurer failed to establish that underlying insurer’s breach of its duties to the insureds caused the excess insurer to pay a particular amount more than it otherwise would have paid This is troublesome for the excess insurers because the Court placed a lot of weight on the Plaintiff’s attorney’s testimony about how he valued his case and how the underlying insurer’s failure to aggressively defend had no impact on settlement value. The excess insurer had many complaints about the underlying insurer’s lack of defense. Nevertheless, the Court found that the excess didn’t prove that it had paid more than it otherwise would have.
STRICT LIABILITY FOR FAILURE TO TIMELY INITIATE ADJUSTMENT: Oubre v. Louisiana Citizens Fair Plan
Oubre : LA Supreme Court • Narrow 4-3 opinion • Imposes Strict Liability: La. R.S. 22:658 requires only proof of notice + inaction for over 30 days. “It is the insurer’s inaction alone that triggers the penalty; no justification or lack thereof on the part of the insurer need be shown • $5,000 is ceiling when damages not proven Nevertheless, “no error” with the trial court’s decision to impose max $5,000/claimant Oubre v. Louisiana Citizens , 79 So.3d 987 (La. 2011)
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