Key Changes in Louisiana Tort Law: What You Need to Know

By Stephen Dale Cronin & Michael A. Grace

Introduction

As Louisiana enters a new era under the Landry Administration, significant changes are on the horizon for the state’s legal landscape, particularly in the realm of tort law. Lawmakers introduced various bills aimed at tort reform in the 2024 Legislative Session, promising a more comprehensive overhaul than previous efforts under prior administrations. While efforts during the Edwards’ Administration had not brought the degree of “savings” and “sanity” to the tort system that had been promised by their proponents (e.g., lowering jury trial threshold, new “collateral source” rules, allowing “seatbelt” evidence), the new environment presaged the chance for a more comprehensive effort.

While there wasn’t a singular tort reform package presented during the 2024 session, the legislature enacted a panoply of impactful laws that will undoubtedly reshape the tort system in Louisiana. This article breaks down several key changes coming from the legislature.

Major Changes to Insurer Bad Faith Law

Act 3 (SB 323) substantially revises Louisiana’s insurer “bad faith” laws and went into effect July 1, 2024. Previously, the laws were governed by two statutes: La. R.S. 22:1892 and 22:1973. These statutes, while similar, imposed different duties and penalties, leading to a confusing legal landscape, especially with the surge in bad faith lawsuits since Hurricane Katrina and more recently, Hurricanes Laura, Delta and Ida.

Here’s what’s changing:

• Consolidation of Statutes: La. R.S. 22:1973 is being eliminated, with its provisions integrated into the newly amended 22:1892 and the newly created 22:1892.2 (specific to catastrophic claims). Importantly, any claims that would have fallen under 22:1973 can now include attorney’s fees.
• Adjustment of Penalty Calculations: The amendments provide for combined penalties under 22:1892(B)(1), which now include 50% of the amount owed under the policy plus any proven economic damages, or $5,000, whichever is greater.
• No More General Damages: Previously, plaintiff-insureds were able to recover general damage awards for mental anguish against insurers that violated their duty of good faith and fair dealing. Under the new statute, damages are limited to only “proven economic damage” arising from the breach of an insurer’s duty under the new La. R.S. 22:1892.
• Insured’s Duty of Good Faith: Insureds and their representatives now also have a duty of good faith and fair dealing. Acts and omissions which constitute a breach of an insured’s duty include failing to comply with obligations contained in the insurance policy or misrepresenting facts, among others. Under 22:1892(J)(4) the trier of fact is bound to consider any breach by the insured when determining penalties or fees against an insurer. 
• Changes to Prescription Period: The prescriptive period for bad faith claims is now two years (the Supreme Court had held recently that contractual [i.e., first party] bad faith claims were subject to a 10-year prescriptive period).
• Introduction of a “Safe Harbor” Provision: For catastrophic claims involving immovable property, the new law provides a “cure period” allowing insurers to rectify issues before being subjected to bad faith claims. The cure period is 60 days for residential and 90 days for commercial claims.

End of Direct Action Against Insurers

Act 275 (HB 337) marks a significant shift in Louisiana’s approach to direct actions against insurers for third-party claims. The new law effectively ends the ability to bring direct actions against insurers, with a few exceptions:

1. Bankruptcy: The Act allows for direct action where an insured has filed for bankruptcy (as opposed to being adjudged bankrupt).
2. Refusal to Answer: Direct actions are still allowed if the insured refuses to respond after being served.
3. Reservation of Rights: Insurers defending under a reservation of rights or denying coverage can be sued directly, but only to establish coverage.
4. Insurer Naming Restrictions: Even when a direct action is permitted, the insurer cannot be named in the case caption, although they can be included in the final judgment or settlement enforcement actions.

Significant Overhaul of Uninsured/Underinsured Motorist Coverage

Act 770 (SB 499) makes substantial changes to UM/UIM by allowing testimony by an insured (or his/its representative) regarding intent where the insured signed, but did not properly complete, a UMBI Option Form.  Prior to this, regardless of whether the form was signed by the insured, where there was an irregularity in the completion of the rest of the form, it was invalid on its face under applicable jurisprudence and no evidence of intent could be introduced to overcome that issue.  Now, where the form is signed but not properly completed, there is no UM/UIM coverage if it is proven that the insured or his representative intended to reject or modify it.

The Act also includes new Section 7, which makes it optional for a commercial carrier to execute the Commissioner’s UMBI Option Form.  If there is no signed form (or no selection on a form that is signed) and there is no payment of premium for such coverage, there is a presumption that no UM/UIM coverage was selected for that policy/contract.

Extension of Prescription Periods

Act 423 (HB 315) extends the prescription (statute of limitations) for tort claims from one year to two years, starting from the day the injury or damage is sustained. This change aims to address concerns that the shorter prescription period hindered settlement efforts. However, this change may also lead to issues with staleness of evidence in third-party claims because of the potential for delayed notification to insurers.

Procedural Changes

Venue for Foreign Insurers: With the passage of HB 803/88 (Act 595 and Act 789), East Baton Rouge Parish is no longer a proper venue for actions against foreign insurers unless it’s appropriate through other means. The plaintiff’s domicile is now considered a proper venue in these cases.

Offer of Judgment: Act 502 (SB 84) introduces a change allowing defendants to recover relief if they obtain a zero verdict after making an unaccepted offer of judgment. Previously, relief was only available if the final verdict was less than 75% of the offer of judgment.

Conclusion

The 2024 legislative session ushered in a series of changes that will significantly impact the tort landscape in Louisiana. From insurer bad faith laws to prescription periods and procedural rules, these reforms aim to streamline the legal process and provide clearer guidelines for both plaintiffs and defendants. As these laws are now in effect, it will be crucial for legal professionals and the public alike to stay informed and adapt to the new legal environment.