Author: Henri Saunders
What is the Direction Action Statute?
For years, Louisiana has been one of the many states that has the Direct Action Statute (R.S. 22:1269), a law that allows someone who has been hurt (plaintiff) to sue an insurance company (insurer) directly in addition to naming the person (insured) who caused the harm.
Louisiana’s Direct Action Statute gave injured parties the right to sue a liability insurer directly under certain circumstances:
- The policy was issued or delivered in Louisiana
- The accident or injury occurred in Louisiana
- The policy covers the risk
The plaintiff, their survivors, or heirs could choose to sue the insurer along with the insured. The action was subject to all lawful conditions of the policy or contract. Direct action lawsuits could be helpful because they can show a jury or judge that there’s insurance to cover damages, which can increase the likelihood of an award.
Direct Action Statute Revisions Under Act No. 275
The statute has been a topic of debate due to insurance fraud cases and rising rates. As of this year, the Louisiana Legislature amended the “Direct Action Statute” in Act No. 275 and in June 2024, Governor Landry signed the bill, virtually revoking direct action.
Effective August 1, 2024, the new law provides for the following (in summary):
- Limiting Direct Claims – Limits the circumstances in which a plaintiff can directly claim against a defendant’s insurer. (Exceptions listed below)
- Prohibiting Insurer Naming – Prevents insurers from being named in the caption of a lawsuit, except in certain circumstances, such as uninsured motorist claims or insured insolvency.
- Procedural Rules – Introduces new procedural rules, such as requiring insurers denying coverage to provide written notice within 90 days of determining a coverage defense.
- Disclosing Insurance Coverage – Repeals Louisiana Code of Evidence article 411(D), which allowed courts to disclose insurance coverage to juries in all cases brought against an insurer.
What does this mean for the injured victims and insured defendant?
This new law repealing the direct-action statute is troublesome for both plaintiffs and defendants. For plaintiffs, the law prevents their attorneys from disclosing to the jury the fact that a negligent defendant carried insurance coverage. The rationale behind this law pushed heavily by corporations and insurance companies, is to create sympathy for a negligent defendant who, in the minds of the jury, could possibility be stuck with paying a judgment. However, at Saunders & Chabert, we have rarely, if ever, pursued an individual personally for damages over and above the amount of insurance coverage they carried. We believe that hiding the fact that a defendant was covered by insurance is actually deceptive to a jury and creates a lack of transparency. If you are selected to serve on a jury in the future in the state of Louisiana, and the only named defendant is a negligent individual, you can assume there is a very high likelihood that that individual did indeed have liability insurance coverage.
Under certain circumstances, an insurance company can still be named in a lawsuit:
For a direct action against an insurance company, alone or in conjunction with the insured, the following exceptions must apply: can bring direct action against the insurer into the case:
- The insured files for bankruptcy in a court of competent jurisdiction or when proceedings to adjudge an insured bankrupt have been commenced.
- The insured is insolvent.
- Service of process has been attempted on the insured without success or the insured refuses to answer or otherwise defend the action within 180 days of service.
- The cause of action is for damages as a result of an offense or quasi-offense between children and their parents or between married persons.
- The insurer is an uninsured motorist carrier.
- The insured is deceased.
- The insurer is defending the lawsuit under a reservation of rights or denies coverage to the insured, but only for the purpose of establishing coverage.
What do the revisions mean for the insurers?
The new law prohibits the name of an insurer from inclusion in the caption of the suit, and prohibits the court from disclosing the existence of insurance coverage to the jury or mentioning coverage in the jury’s presence unless required by Louisiana Code of Evidence Article 411.
Ultimately, it protects the name of the insurance company (insurer) only, and it could cause the jury to be less likely to go after an award. But in the end, there’s still a 99.9% chance that the insurer is paying for the damage, not the insured defendant.
It should be noted that an insurer denying coverage is required to
- provide written notice of reservation of rights to assert a coverage defense to the named insured at his last known address by U.S. postal mail or other similar tracking method, commercial courier, or by hand delivery, within 90 days after the liability insurer makes a determination of the existence of a coverage defense, but not later than 30 days before trial, and
(b) provide notice to all counsel of record in a cause of action against the insured that a reservation of rights has been issued, and provide such notice within 60 days of sending the notice of reservation of rights, but not later than 30 days before trial.
When does your legal counsel need to be prepared?
The law takes effect for claims that arise on July 1, 2024, or later. The time frame begins when the date of the injury happens, and the injured plaintiffs now have up to two years to treat before filing suit (due to Act 423, signed by Governor Landry).
Our team is prepared to help you navigate these changes in the law. Contact a Louisiana personal injury lawyer at Saunders & Chabert for questions or advice, and if you need guidance with statute of limitations in Mississippi, Scotty Chabert is licensed there and can answer related questions there.
