The Louisiana Direct Action Statute was signed by Governor Jeff Landry and took effect on Aug. 1, 2024. The law limits in what situations a plaintiff may assert a direct claim against a defendant’s insurance company. This is a significant change that may affect a person’s personal injury case, especially after a motor vehicle accident. Understanding these changes is critical to protecting injured people’s rights under Louisiana personal injury law.
We explain how the Louisiana Direct Action Reform bill will impact personal injury lawsuits and direct actions against insurance companies.
What Is the Louisiana Direct Action Reform Bill?
Thanks to Gov. Landry’s signature, Act. No. 275 makes several significant changes and additions to the Louisiana Direct Action Statute. These primarily impact insurers within the state but also directly affect injured plaintiffs.
The Louisiana Direct Action Statute is designed to give injured parties the right to sue the responsible party’s liability insurer directly. The act imposed many new procedural rules, including ones limiting when a plaintiff may file directly against a negligent person’s liability insurer.
Under the old version of the law, the plaintiff or their surviving heirs could exercise the option to sue the insurance company in a direct action. Claims were asserted against that insurer alone or through a joint filing against the defendant and their insurer. The Louisiana Code of Civil Procedure permitted these choices prior to the new statute’s enactment. With these changes comes a new dynamic for injured victims and their attorneys. While they limit when a person may file directly, they do not forbid it outright.
When Can You File a Direct Action Against the Insurer Under the New Law?
The new law limits a direct lawsuit against the insurer to the following situations:
1. The Insured Person Files Bankruptcy
Many defendants file bankruptcy in an attempt to avoid paying out large claims. The new law permits an injured plaintiff to file directly against the insurance company if their insured files bankruptcy in a court of competent jurisdiction. The condition also accounts for the possibility that the insured has already filed bankruptcy before the commencement of the proceedings, whether as a result of the accident or not.
This helps protect injured people from avoidance tactics that many defendants take.
2. The Insured Person Is Insolvent
A person is insolvent if they are unable to pay the debts they owe. For example, if the negligent driver who caused the accident is impoverished, they are unable to pay for substantial economic and non-economic damage claims. If the plaintiff were unable to sue directly against the insurer in these situations, they could be left without recourse despite the existence of insurance coverage.
Proving an insured is insolvent will require appropriate proof to permit filing the direct claim. An experienced personal injury attorney is already familiar with this new process and how to account for it.
3. There Is Difficulty Serving the Defendant or Defendant Refuses To Answer
Part of initiating any lawsuit is serving the complaint on the defendant. In some cases, this proves difficult. Some defendants are hard to find or purposely avoid being served the applicable paperwork. If this happens, the new law permits the injured party to sue the defendant’s insurance company directly to seek compensation.
In other situations, the defendant is served but fails to follow through. They may fail to file an answer, a legal document that responds to the allegations in the complaint. They may also fail to defend in other ways, which could make the lawsuit difficult if the victim is unable to file directly against the insurer. The changes still permit direct action under these circumstances.
4. The Insured Person Is Deceased
The new statutory changes also permit direct filing if the insured person is deceased. For example, imagine that a person causes a severe car accident because they ran a red light. Unfortunately, that person passed away from their injuries. The plaintiff may now file against the insurance company directly to protect their legal rights to compensation.
5. In Claims Against Uninsured Motorist Carriers
Uninsured motorist carriers cover injured drivers in situations in which the negligent party has no insurance. The injured plaintiff may file a direct claim against their own insurance carrier if it provides uninsured motorist coverage. These policies are typically called uninsured/underinsured (UM/UIM) policies. An injured driver’s attorney can help review their coverage and determine if this exception applies to permit direct filing.
6. In Cases of Offense or Quasi-Offense Between Certain Family Members
Damages stemming from offenses or quasi-offenses between family members may permit direct filing against an insurance company. This occurs if the offense or quasi-offense occurs between:
- Children and their parents
- Married persons
7. In Reservation of Rights or Insurance Coverage Denial
If the defendant’s insurance company attempts to deny coverage or defends under a reservation of rights, the injured plaintiff may still file a direct claim against the insurance company. However, if this is the only exception that applies, the direct filing is only to establish coverage. Damage claims, collections, and other aspects of the case may still restrict direct action.
Other Changes Made by the Louisiana Direct Action Bill
The revised law also makes several other important changes. These include new rights and requirements for the insurer. It also creates procedural changes for filing direct actions. Some of the most important changes:
- Insurers must now provide a named insured with written notice of any reservation of rights to deny coverage within 90 days. This notice must be served by the U.S. Postal Service as registered or certified mail with proof of mailing or a similar tracking method. It may also be served through hand delivery.
- The defendant is now subject to several new notice requirements. If the insurer issues a refusal to defend or a reservation of rights letter, the defendant and their counsel must notify the proper parties through their responsive pleading.
- Injured plaintiffs and their lawyers can commence a civil action against a nonparty insurance company and provide notice through any method of service under applicable law.
- If an action is filed against an insured, the statute of limitations — the limited time period during which a claim may be filed — is interrupted on any insurer whose policy covers the claims asserted through that action. In other words, the deadline to file a claim would be extended.
- In situations in which a direct action is not permitted under the new rules, an insurer may still be joined as a defendant for other purposes. This could include settlement enforcement, for entering final judgment, or other limited situations.
Another critical change affects case captions. The caption is the name of the case, such as “Jane Doe v. John Smith.” In prior cases, a direct action could include the insurance company’s name in the caption as well. Captions may contain several plaintiffs and defendants, depending on the circumstances. Now, the caption must only contain the insured defendant and any other noninsurance defendants, excluding the insurance company’s name.
Insurance companies and injured plaintiffs are still figuring out all of these changes. These revisions have altered the landscape for direct actions, but they do not prevent injured plaintiffs from asserting their rights. Despite the additional complications, a qualified personal injury attorney can navigate these challenges to protect their client’s rights to compensation.
Changes to the Rules of Evidence
The new statute also includes language that prohibits the trial court from disclosing the existence of insurance coverage to the jury or mentioning coverage in the jury’s presence unless required by Code of Evidence Article 411. It also repeals Code of Evidence 411(D), which required the trial court to inform the jury that insurance coverage for the damages in the case exists.
This rule increases protections for insurance companies. Many other states also forbid disclosure of insurance coverage to the jury. The logic here is that jurors who know the damages will be paid by an insurance company may simply award compensation to the injured plaintiff. The fear is that the jury may do so without fully considering the issues or whether liability is appropriate. Despite these changes, there are still some circumstances that may permit the jury to hear about insurance coverage, especially if they must consider whether insurance coverage applies in the given situation.
Get Help With Direct Actions Against Insurers in Louisiana
Every injured plaintiff deserves the right to file a claim against the person who injured them. In many circumstances, they may also be entitled to file directly against the insurance company. Understanding the legal nuances can be difficult, but this can be handled by an experienced attorney.
The lawyers at Morris & Dewett Injury Lawyers can help explain these new changes and how they may affect a plaintiff’s case.
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