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Category: Class Action

  • Careful Reading of Insurance Policies Crucial to Prevent Disaster

    Insurance can be a tricky subject for the average consumer. There is a lot of paperwork, confusing terms, and many people do not understand what their insurance actually covers. However, the easiest way to combat the confusion is to take the time to read through your insurance policy. Oftentimes, the answers to all of your questions can be found buried deep within your policy. You just have to know where to look.

    It is important to note that insurance companies will strictly follow and enforce the written policy, so it is vital that you are familiar with your plan. You should get a complete copy of the plan and keep it in your records in case you need it in the future. Pay particular attention to the four major sections. The four sections include declarations, conditions, insuring agreements, and exclusions.

    The declarations section states who is being insured, what is covered, policy limits, and the effective dates of coverage. The correct name of the insurance company will also be found in this section. The timing of the coverage is very important. If the policy says that it is in effect January 1, then it does not apply if you have an accident a few hours sooner. For example, one man was rushed the hospital with a medical emergency, but was denied coverage by his insurance company because his hospital visit was merely five hours before his plan activated.

    The next piece of the policy is the conditions section. This part includes all of the things that you must do in order to be insured. There may also be a conditions section for each coverage part (such as liability, collision, etc.). These conditions are important because they may also limit what the insurance company will cover and your ability to file a claim. A common condition, for example, is if you are going to file suit then you must file within a certain amount of time. Definitions for some of the terms of the policy may also be found in this section if they do not have their own section within the policy.

    The third part of the policy is the insuring agreements section. This section states specifically what the policy will actually cover. Insuring agreements is also the most important section of your policy, so read this part carefully!

    Lastly, the final section is the exclusions section. The exclusion section takes away or limits some of the insuring agreements coverage. It is vital that you read both of these sections together because you may think something should be covered based on the insuring agreements section, but actually, it is not covered because of the exclusions section.

    A case in the Eastern District of Louisiana gives a good example of the importance of reading through your policy and knowing your plan well. An individual was in a car accident with a company vehicle. At the time of the accident, the individual who ran the company was insured under his own name in the amount of $300,000. Four months after the accident, the insurance was extended to $1 million and the policy changed to the company name. The victim of the accident then sued claiming that the insurance company had fraudulently led the victim to believe that the insurance coverage was only $300,000, not $1 million.

    Unfortunately, the victim did not read the policy very well. The court ruled that the policy clearly stated the amount that it covered and who it covered. There was actually no fraud involved. It was just a matter of reading the policy. The timing of the accident was also important. At the time of the accident, the coverage was for $300,000, not $1 million, so the accident was only covered for up to $300,000.

    Insurance coverage is very complicated and it is too important to be misunderstood. Coverage could be the determining factor in whether you have to pay a big bill on your own or with help from your insurance company.

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  • Auto Insurance Case Illustrates Need for Following Statutory Requirements

    It is widely accepted in Louisiana that insurance companies may limit coverage in any manner they desire, so long as the limitations do not conflict with the law or with public policy. Coverage limitations must be written into the policy and the burden to prove that a claim is excluded generally falls on the insurer. One common limitation for auto insurance policies is a driver exclusion. Louisiana law specifically authorizes insurance carriers and their customers to agree to exclude a resident of an insured’s household from coverage under a policy. LSA-R.S. 32:900(L). This arrangement allows the insured to pay a lower premium since excluding one or more drivers in the household from the policy would reduce the insurance company’s potential liability. A dispute over the effectiveness of an excluded driver provision was at the center of the recent case of Young v. McGraw.

    In December of 2007, Vernon Washington took out an insurance policy for his two cars with the USAgencies Casualty Insurance Company. During the application process, Washington signed an excluded driver endorsement. The provision expressly excluded as insured drivers Aretha McGraw and her two children, Christopher McGraw and Tiffany McGraw. During the policy’s period of coverage, Aretha McGraw was involved in a car accident while driving one of Washington’s cars. The owner of the other vehicle, Jacqueline Young, filed a suit which named McGraw, Washington, and USAgencies as defendants. USAgencies filed a motion for summary judgment, arguing that McGraw was an excluded driver under its policy and therefore was not covered. The trial court denied the motion and, after a trial, the court concluded that the evidence presented failed to establish that Washington and McGraw lived in the same household when the policy was issued. Therefore, McGraw could not be considered an excluded driver under the policy because the requirements of LSA-R.S. 32:900(L) were not met. The trial court awarded Young personal injury and property damages totaling $5,800. USAgencies appealed.

    The Second Circuit Court of Appeal reviewed the evidence presented at the trial concerning whether McGraw was actually a member of Washington’s household at the time he took out the auto policy. McGraw testified that she and her children had lived with Washington continuously since 1998 and at the address of 1996 Joe G. Drive in Monroe since 2003. She admitted to giving the address of her parents’ house to the police officer at the accident scene, but said she “didn’t think it was a big deal” since she visits there every day and receives her mail there. Washington testified that he and McGraw had lived together at 1996 Joe G. Drive for seven years. He also explained that at the time he bought the auto policy, he informed USAgencies that McGraw was a member of his household but wanted to exclude her from coverage due to “financial constraints.” The court noted: “Our review of the record convinces us that the lower court’s finding that McGraw and Washington were not residents of the same household at the time the automobile liability policy was issued is clearly wrong.” “Consequently,” the court reasoned, “the trial court was manifestly erroneous in concluding that the policy endorsement excluding Aretha McGraw … under the policy was inapplicable and that … [she] was a covered operator of the vehicle at the time of the automobile accident.” The trial court’s judgment was, accordingly, reversed.

    This case demonstrates the requirement that insurance companies carefully follow all statutory requirements, if they exist, when writing coverage limitations into policies. Post-contract reviews of the insurer’s processes may, like in this case, require a fact-intensive analysis and a clear understanding of the law’s requirements. Thus, a skilled attorney is essential for any party facing a dispute over a coverage limitation.

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  • Summary Judgment Summarily Dismissed by Third Circuit in Vehicle Accident Case

    A summary judgment is rendered when a trial court decides that there are no genuine issues of material fact that need to be determined. “Manifestly erroneous” is the high standard under which summary judgments are reversed on appeal. Summary judgments are cheaper and less time consuming than full blown trials; they are a means toward the end of judicial expediency, a goal that becomes increasingly important to our judicial system over time. Despite the importance of this procedural device, many cases do not call for summary judgment. Sometimes trial courts grant full or partial summary judgments in error and are reversed. That is what occurred in the case of Jagneux v. Frohn, which you can read here.

    The defendants in this case convinced the trial court that no issues of fact existed that required litigating. Their legal journey was not over though due to the plaintiff’s appeal. The court of appeals applied the standard promulgated by the Louisiana Supreme Court. This Louisiana Supreme Court’s standard initially places the burden of proof on the party that is moving for a summary judgment. The moving party must prove that one or more elements of the adverse party’s claim or defense lacks any factual support on the record so far. The opposing party is then granted an opportunity to prove that there have been facts alleged that support that party’s position. At the time of summary judgment the record is sparse so a granting of summary judgment represents a finding by the court that no facts supporting a particular party’s, in this case the plaintiff’s, position.

    The appellate court reversed the trial court’s decision in this case because it found that the issue of whether Mrs. Kling, a defendant in this case, was the driver of the white SUV at the time that it, at least partially, caused the accident at issue in this case. Because there was conflicting evidence about where Mrs. Kling was and whether or not she was actually in control of the car at the time of the accident, summary judgment was not the right choice in this case. The trial court is not to weigh the merits of the case when addressing summary judgment. Summary judgment is only appropriate in cases where no potentially meritorious case is presented by one of the parties.

    Judicial efficiency is a desirable goal at this point in history. America is an incredibly litigious society and with good reason. Science and technology move faster now than ever before and this leads to more pernicious injuries becoming increasingly common. Society functions better when injured people are compensated. This is even more true when injured people are compensated quickly and at minimal expense to society. However, as important as these goals are, the pursuit of the truth is the most important aim of our justice system. When the truth of a matter is in question, it falls to our trial courts with their judges and juries to put together an authoritative version of events. This version, when properly decided, becomes the truth for all intents and purposes. When there is no need to conduct an exhaustive search for truth, summary judgment becomes necessary and expedient.

    Summary judgments take up less of a court’s time than a trial. Because of this, summary judgments allow a court to hear more cases in less time. This benefits society as a whole. Frequently, American and Louisiana courts have a substantial backlog of cases. This prevents swift access to the justice that many people require. Summary judgment and other procedural and dispute resolution devices that avoid full trials aid in mitigating this abundant caseload. The case of Jagneux v. Frohn was not one in which summary judgment was appropriate but many cases are decided this way every day saving time, money and stress for our judges and juries.

    For help navigating the legal system and potentially winning a summary judgment of your own, call the Berniard Law Firm toll-free at 504-521-6000.

  • Personal Injury Case Delves into Medical Malpractice Difficulties

    The following very interesting and compelling question by plaintiffs, and the contingent commentary by the court, is articulated in this appeal to the Second Circuit Court of Appeals in Louisiana: “Does a diagnosis by a doctor rendering a second and correct opinion, equate to a per se reasonable belief that the previous treating physicians committed medical malpractice?”
    This question arises in the context of the Second Circuit’s consideration of the plaintiff’s appeal of the trial courts “judgment of defendants, sustaining an exception of prescription as to the malpractice claim filed by Joseph Lee Amos prior to his death and granting summary judgment which dismissed their wrongful death claim.” The purpose of this paper is to discuss the question posed by the plaintiff and the Second Circuit’s response to that question.

    On April 12, 1999, Joseph Lee Amos had his first appointment with Dr. Rebecca Crouch: he was experiencing “occasional rectal bleeding.” Mr. Amos “repeatedly complained of similar symptoms in his subsequent visits to Dr. Crouch.” Mr. Amos claims that “when he was under Dr. Crouch’s care, he was continually ‘hurting a lot’ and that the blood was ‘bright red’…The physicians report states that Mr. Amos said that Rebecca Crouch checked down there ‘and (Mr. Amos) was told everything was okay.” His final appointment with Dr. Crouch was on January 3, 2000.

    On January 11th, 2000 Mr. Amos went to another physician to seek a second opinion due to Mr. Amos’s “questions about the quality (or lack thereof) of Dr. Crouch’s medical treatment.” This visit to another doctor resulted in a diagnosis of colorectal cancer and subsequent treatment for the condition. On April 6, 2001 Amos filed a medical malpractice complaint with the Patient’s Compensation Fund against Dr. Crouch and her insurance company for her “failure to recommend and conduct the proper diagnostic testing called for by Mr. Amos’s symptoms, which delayed an accurate diagnosis and treatment of his disease.”

    The medical review panel rendered a decision on February 3, 2003. In the decision the panel articulated the appropriate standard of care in Mr. Amos’s circumstances. The panel determined that Dr. Crouch should have “recommended further evaluation and diagnostic tests, including but not limited to ordering a barium enema with proctoscopy or a complete colonoscopy”. The panel deferred the issue of breach due to some contested issues of fact. One of the issues was Dr. Crouch’s claim that she repeatedly recommended these tests; while Amos denied that she made those recommendations.

    Mr. Amos filed a lawsuit on April 26 2003. The trial court granted summary judgment, but the decision was reversed and remanded by the Second Circuit. Upon remand the defendants filed an exception of prescription, claiming that “the filing of the initial medical review complaint was untimely.”

    The defendants claim that prescription began to run on January 11, when Amos visited another doctor for a second opinion. The plaintiff’s claim that May 1, 2001 is the earliest date that prescription should begin to toll, since this is the date that Dr. Crouch terminated her doctor/patient relationship with Mr. Amos. Louisiana Revised Statute 9:5628(A) is as follows:

    “No action for damages for injury or death against any physician, chiropractor, nurse, licensed midwife practitioner, dentist, psychologist, optometrist, hospital or nursing home duly licensed under the laws of this state, or community blood center or tissue bank as defined in R.S. 40:1299.41(A), whether based upon tort, or breach of contract, or otherwise, arising out of patient care shall be brought unless filed within one year from the date of the alleged act, omission, or neglect, or within one year from the date of discovery of the alleged act, omission, or neglect; however, even as to claims filed within one year from the date of such discovery, in all events such claims shall be filed at the latest within a period of three years from the date of the alleged act, omission, or neglect.”

    The question “does a diagnosis by a doctor rendering a second and correct opinion, equate to a per se reasonable belief that the previous treating physicians committed medical malpractice” can be interpreted in more than one way. The inquiry is directed towards the belief of the patient that is receiving the treatment. A clearer articulation of the question would be “does a diagnosis by a doctor rendering a second and correct opinion about a patient, equate to a per se reasonable belief on the part of the patient that the previous treating physicians committed medical malpractice?”. The Second Circuit determined that the answer depends “on the particular circumstances of each case.”

    In the present case, the issue between the two parties is fundamentally whether Mr. Amos claim is permitted by the prescription statute. The disputed matter is when the statute begins to toll: did Mr. Amos file his claim “within one year from the date of discovery of the alleged act, omission, or neglect.” “Prescription begins when a plaintiff obtains actual or constructive knowledge of facts indicative to a reasonable person that he or she is the victim of a tort… Constructive knowledge is notice enough to excite attention, to put the injured party on guard, and to call for inquiry.”

    Mr. Amos was a 61 year old man who was working for Dry Crouch as a custodian while he was seeing her as a patient. The plaintiffs claim that this personal relationship, Mr. Amos’s age, and his relative unsophistication, all indicate that “Mr. Amos had a more personal trusting relationship with Dr. Crouch than he would have had with an unfamiliar physician.” The plaintiff’s argue that Mr. Amos had no reason to question Dry Crouch’s opinion until she terminated her relationship with him after a phone call on May 1 2000… The ultimate issue is the reasonableness of the patient’s action or inaction, in light of his education, intelligence, the severity of the symptoms, and the nature of the defendant’s conduct.”

    The defendants argue that Mr. Amos had “constructive knowledge that he was the victim of a tort” when he procured the second opinion and was provided with the diagnosis of cancer. They argue that although Mr. Amos had a special and trusting relationship with Dr. Crouch, this “does not translate into being unaware that the medical care he received from his doctor/employer was substandard.”

    The Second Circuit considered the “circumstances” in the case, and affirmed the trial court’s decision: “the conclusion of the trial court that Mr. Amos had notice enough to excite attention, to put him on guard and call for inquiry when his cancer was diagnosed on January 11, 2000 is not clearly in error or manifestly wrong”. Ultimately, the decision confirms the statement made regarding the lack of a “bright line rule,” and sets the precedent for future situations like this; that a determination of prescription in cases of second medical opinions will not automatically render the first per se evidence of malpractice.

  • Class Action Rules Difficult to Understand, Important for Successful Litigation

    The Class Action Fairness Act of 2005 was passed in an effort to prevent class action lawsuit abuse. CAFA changed the practice of class action litigation in state and federal courts. This change was accomplished by CAFA’s jurisdictional alterations in both the diversity and removal components of the traditional framework of class action practice, i.e. Rule 23 of the Federal Rules of Civil Procedure.

    In Williams v Homeland Insurance, the Fifth Circuit applied the “local controversy” exception of CAFA to the facts of the case, determining that a class arbitration is not, nor does it preclude a class action. Williams provides a lesson in the application of the elements of CAFA and an understanding of CAFA’s features. The decision also demonstrates yet another unique feature of Louisiana law that distinguishes it from the law of all of the other jurisdictions in the United States: the Louisiana Direct Action Statute.

    CAFA changed the rules for federal diversity jurisdiction and removal. The Act enables large class action law suits to be filed in and/or removed to federal court. CAFA changed the numerosity requirement of Rule 23 from by raising the requirement from 40 class members to more than 100 class members; the citizenship requirement of Rule 23 by relaxing the diversity criteria, i.e. any class member must be diverse from any defendant; and the amount-in-controversy (from one named plaintiff having a claim of more than $75,000) to the total of $5 million. In addition, CAFA incorporated looser removal rules: in diversity cases any defendant can remove the case (including in-state defendants); any defendant can remove without the unanimous consent of the other defendants; there is no 1 year limit on the timing for removal of the case to another court’s jurisdiction; and the decision to grant or deny a remand is subject to appellate review.

    CAFA “essentially makes the resolution of large class actions with minimal diversity a federal court matter”, while reserving “for the states certain types of large class actions arguably more local in nature. Four key exceptions to CAFA’s jurisdictional expansion accomplish this reservation of state authority.” The exception discussed in Williams is the “local controversy” exception.

    The local controversy exception requires the district court to decline its jurisdiction under CAFA:
    (A)(i) over a class action in which-
    (I) greater than two-thirds of the members of all proposed plaintiff classes in the aggregate are citizens of the State in which the action was originally filed;
    (II) at least 1 defendant is a defendant-
    (aa) from whom significant relief is sought by members of the plaintiff class;
    (bb) whose alleged conduct forms a significant basis for the claims asserted by the proposed plaintiff class; and
    (cc) who is a citizen of the State in which the action was originally filed; and
    (III) principal injuries resulting from the alleged conduct or any related conduct of each defendant were incurred in the State in which the action was originally filed; and
    (ii) during the 3–year period preceding the filing of that class action, no other class action has been filed asserting the same or similar factual allegations against any of the defendants on behalf of the same or other persons.
    When the Fifth Circuit looked at George Raymond Williams vs. Homeland Insurance Company of New York, Homeland Insurance was appealing the “district courts remand of a class action to Louisiana state court.” George Williams had brought a class action in Louisiana state court, representing a class of medical providers against 3 Louisiana defendants: Med-Comp USA, Risk Management Services, and SIF Consultants of Louisiana. The plaintiffs contracted with Med-Comp (an operator of a PPO network) for “discounted rates” and SIF and RMS applied Med-Comp’s discounts when administering worker’s compensation claims for Louisiana employers. A year later, Williams joined 3 non- Louisiana defendants: “Corvel Corporation and its insurers Homeland Insurance Company and Executive Risk Specialty insurance.”

    Corvel and the plaintiffs agreed to settle their claims. However, before the settlement was approved in state court, Executive Risk removed the case to Federal court, claiming federal jurisdiction under CAFA. This action demonstrates the new removal rules of CAFA, e.g. that removal does not require unanimity amongst defendants as it does under the prior and traditional rules.

    Williams and Corvel responded by moving that the case be remanded back to state court under the “local controversy” exception of CAFA. The district court found that Williams satisfied all of the elements of the “local controversy” exception and remanded the case to state court. Homeland appealed this decision to the Fifth Circuit and the Fifth Circuit reviewed the district court’s remand under CAFA’s “local controversy” exception: de novo. If any of the elements of the “local controversy” exception are not met, remand would be improper. Homeland disputed all of the elements of the exception.

    First, Homeland disputed that less than 2/3 of the plaintiff class were citizens of the state of Louisiana, and thus did not meet that requirement of the local controversy. The total number of class members numbered 1,388, many of which were registered corporations in the state of Louisiana. In its argument in front of the district court, Williams argued persuasively that 1055 of these plaintiffs met the criteria for membership in the class, i.e. that they were citizens of Louisiana. In front of the Fifth Circuit, Homeland was claiming that the plaintiff class represented either 45.4% or 65.4% Louisiana citizenship. Homeland argued that in either circumstance, the percentage did not rise to the appropriate level required by CAFA. Homeland arrived at the 45.4% by identifying many of the business organizations that made up the plaintiff class as inactive corporations, and removing them from the total number of plaintiff members. This argument was denied because “inactive corporations remain citizens of their state of incorporation.” The 65.4% was a number arrived at by Homeland though a mathematical error, and was dismissed appropriately
    Williams’ claims meet the second group of elements of the “local controversy” exception pretty simply because Med-Comp is a local defendant, and Williams seeks “thousands of discounts, including discounts applied by other defendants.” The exception requires a “local defendant, from whom significant relief is sought, and whose conduct forms a significant basis for the claims asserted.” Med Comp clearly fulfills these criteria.

    The third element that the “principle injuries resulting from each defendant’s alleged or related conduct must have occurred in Louisiana” was found to be fulfilled by the district court because, “the record showed that a supermajority of plaintiffs are Louisiana citizens, who rendered services in Louisiana and who allege that the defendants violated the Louisiana PPO act.” The defendants are alleged to have “violated the Louisiana PPO Act” and the injuries occurred “by the failure to provide notice at the point of medical service in Louisiana.”

    It is this discussion of the fulfillment of the third element of the “local controversy” exception that provides the context and opportunity for the digression into a discussion of a unique feature of Louisiana law: the Louisiana Direct Action statute. “Louisiana is one of the few states in the country with a direct action statute. A direct action statute allows an injured person (the plaintiff) to sue the insurance company of the person or entity who caused their injury directly.”

    The direct action statute is mentioned in relation to the defendant Homeland and the fact that Homeland’s conduct “must have occurred in Louisiana,” the requirement of CAFA. “Although Homeland is an out-of-state defendant who insured the out-of-state Corvel, the CAFA exception is satisfied because Homeland’s related conduct as insurer includes Corvel’s failure to notify in Louisiana.”

    The claims asserted against Homeland are described by the Fifth Circuit as “unique” in nature because the “sole claims against Homeland are by virtue of the Louisiana Direct Action statute and based on the conduct of Homeland’s insured.” These claims would clearly not be possible in most states because most states do not have a direct action statute.

    The Fifth Circuit does not elaborate on, or even mention the rarity of a direct action statute. However, the statute is important to take notice of out of the discussion of the Fifth Circuit because it plays a very important part in Louisiana insurance law. “There may be no other Louisiana statute which has so affected the development of an area of the law as has the Direct Action Statute. ” The Direct Action statute is not of primary importance in the discussion in Williams v Homeland Insurance, but it is important exactly because it does permit claims to be made against Homeland that otherwise could not be made directly.

    The last element of the “local controversy” exception provokes the most interesting feature of the Fifth Circuit’s discussion, and provides the context for the major holding of the case: “a class arbitration is not a class action”. The element of the exception is as follows: “during the 3–year period preceding the filing of that class action, no other class action has been filed asserting the same or similar factual allegations against any of the defendants on behalf of the same or other persons.”
    The parties disputed whether a class arbitration qualified as a class action. Consequently, the Fifth Circuit addressed the question. The district court had determined that the two were different because an arbitration involved out-of-court resolutions to disputes, while a class action involved in-court resolutions to disputes. The Fifth Circuit decided that “a class arbitration is not a class action, and consequently, a prior class arbitration does not frustrate the CAFA exception.” The Court looked at the CAFA definition of “class action,” i.e. “any civil action filed under rule 23 of the Federal Rules of Civil Procedure or similar State statute or rule of judicial procedure.” Homeland argued for an “expansive reading” of the definition to “encompass arbitrations”, but the Court determined that this expansive of a reading would “require district courts to exercise original jurisdiction over any arbitration that satisfies CAFA’s threshold requirements. We hold that a class arbitration is not a class action, and consequently, a prior class arbitration does not frustrate the CAFA exception.”

    Williams v Homeland Insurance is an interesting case because of the important holding that makes the distinction between class arbitrations and class actions. This decision will not only provide precedent for Louisiana, but will provide persuasive law for other jurisdictions. This holding will probably be followed in other jurisdictions. The discussion reveals the features and dynamics of CAFA, which has made a significant impact upon class action jurisprudence in Louisiana and the nation as a whole. Lastly, the discussion in Williams reveals the unique and distinguishing feature of Louisiana insurance law: the Direct Action Statute.

  • Hurricane Katrina Case Allowed to Move Forward

    On August 29, 2005, Hurricane Katrina devastate much of the Gulf Coast, prompting the Louisiana Legislature to enact Acts 2006, which extended the prescriptive period within which insured’s were allowed an additional year to file certain claims under their insurance policies for losses incurred by the storms. Despite many insurance contracts granting only one year for insured’s to file claims, this prescriptive period extension allowed many residents more time to file as a result of the difficult circumstances caused by the storm. The Louisiana Supreme Court recently were asked to determine whether the Plaintiffs’ lawsuit, seeking damages from the Louisiana Citizens Property Insurance Corporation (LCPIC), filed nearly three years after Hurricane Katrina had prescribed. In an earlier decision made by the Fourth Circuit Court of Appeal, the prescriptive period was held to be interrupted by a timely filing of a class action petition against the insurer, which included the Plaintiffs as putative class members. Time is of the essence when filing lawsuits, here, the Louisiana Supreme Court held that the plaintiffs were timely and permitted to continue their lawsuit against LCPIC.

    The plaintiffs, like so many other Gulf Coast residents, suffered extensive property damage as a result of Hurricane Katrina. Maneuvering through the insurance filing process became tedious and very difficult, the plaintiff’s constantly received refusals by the insurance company to make any payments on their policy limits. Thus, the plaintiff’s turned to legal help in order to obtain help to rebuild their homes and their lives. On June 27, 2008, the Plaintiffs filed a petition against their insurer, LCPIC, seeking payment of their policy limits and damages, including damages for emotional distress and mental anguish. The allegations included: The plaintiff’s property was completely destroyed during the storm, the properties in question were covered by a policy of insurance issued by the defendant LCPIC, yet, the company refused to pay the policy limits. In response, LCPIC filed an Exception of Prescription, arguing that the suit was not filed within one year of loss and that the extended period of prescription provided by legislation had also expired. The trial court initially granted the defendant’s exception of prescription and dismissed the plaintiff’s claim with prejudice, finding that they had failed to file their claim timely. However, on appeal the trial court’s decision was reversed, the prescriptive period had been interrupted by the timely filing of a class action against the defendant insurer in which the Plaintiff’s were putative class members.

    Prescription, as defined by Louisiana’s civilian tradition, is defined as a means of acquiring real rights or of losing certain rights as a result of the passage of time. In the case of Cichirillo v. Avondale Industries, Inc, the court reasoned that prescription is designed to “afford a defendant economic and psychological security if no claim is made timely and to protect the defendant from stale claims and from the loss or non-preservation of relevant proof.” Prescription itself is a safety measure that was created in order to prevent defendants from the constant fear of a lawsuit twenty or more years after the fact. Conversely, the other type of period that exists in Louisiana, is liberative prescription. This is a period of time fixed by law for the exercise of a right, yet, a contractual limitation period is not a period of time fixed by law, it is a fixed agreement between the parties. Time is of the essence, yet, there are exceptions to the rule, this is exemplified by the fact that Louisiana extended the initial one year prescriptive period for property damage claims against insurers, for one additional year, allowing victims fo Hurricane Katrina more time to organize the various aspects of their lives that were devastated by the storm.

    The primary issue in this recent Louisiana Supreme Court decision, was whether or not the class action suit in which the plaintiff’s were putative class members, interrupted prescription, thus, allowing them continued access to their legal claim against the insurance company. Louisiana civil code article 1793 states, “Any act that interrupts prescription for one of the solidary obligees benefits all the others.” Thus, by becoming putative class members in the initial lawsuit against the insurance company, the plaintiff’s maintained their legal claims against the defendants, allowing them to pursue further legal action against the company despite the passage of time. The court of appeal held that the filing of the class action suits against LCPIC suspended or interrupted the running of prescription against the plaintiff’s property damage claims since they were found to be putative class members when the original class action petitions were filed.

    The defendant insurer argued that the contract, which provided one year from the date of the property damage, was the governing time period, even over the statutory extension provided by the Louisiana Legislature. The defendants supported this assertion by declaring that the public interest is served by permitting the insurer to limit the time of its exposure, as Louisiana Civil Code 802 states, “any suit not instituted within the specified time and any claims relating thereto, shall be forever barred unless a contract or the parties thereto provide for a later time.” However, even though the plaintiff’s did not unilaterally file a claim against the insurer within the one year contractual time period, they did enter into the class action against the insurer within the aforesaid time period. Upon the filing of the class action, liberative prescription on the claims arising out of the transaction or occurrences described in the petition were suspended as to all members of the class. The insurance contract provided a contractual time period, not a prescriptive time period, as a result, the additional one year time period afforded to Gulf Coast residents affected by the storm governs. The insurance company attempted to assert the contractual nature of its agreement to circumvent the application of the general codal and statutory rules of prescription is adverse to Louisiana civil Code Article 3471, which clearly circumscribes the limits of any contractual agreement attempting to incorporate a limitation period different from that established by law. Specifically, Louisiana Civil Code Article 3471 states:

    A juridical act purporting to exclude prescrption, to specify a longer period than that established by law, or to make the requirements of prescription onerous, is null.

    Thus, parties cannot “opt out” of prescriptive periods created by general codal and statutory rules. The plaintiff’s entered into a class action within the prescriptive time period, this interrupted the passage of time that would have taken away their legal rights to sue the insurer. Thus, the subsequent suit against the defendants was timely, and despite the contractual language that attempted to circumvent the Louisiana Legislature, the plaintiff’s filing was timely.

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