Louisiana's Direct Action Statute Significantly Revised

Governor Landry has signed a bill that limits the situations in which a plaintiff can assert a direct claim against a defendant’s insurer under Louisiana’s Direct Action Statute, LSA—R.S. 22:1269. It also includes new provisions relating to joinder of an insurer after settlement or final judgment. It includes specific provisions for provisions of notice to an insurer of an action and outlines the procedures and timelines for how insurers assert reservation of rights or a denial of coverage. The new law is effective on August 1, 2024.

New Provisions and Obligations for Plaintiff and Insurer

Under prior version of the law, a tort plaintiff could bring suit against an insurer jointly and in solido with its insured. The new law provides that a tort plaintiff “shall have no right of direct action against the insurer” unless at least one of the following exceptions applies:

The insured files for bankruptcy in a court of competent jurisdiction or when proceedings to adjudge an insured bankrupt have been commenced before a court of competent jurisdiction.
The insured is insolvent.
Service of citation or other process has been attempted without success, or the insured defendant refuses to answer or otherwise defend the action within 180 days of service.
When 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.
When the insurer is an uninsured motorist carrier.
The insured is deceased.
When the insurer is defending the lawsuit under a reservation of rights, or the insurer denies coverage to the insured, but only for the purpose of establishing coverage.

With respect to an insurer’s obligations, the new law provides that an insurer that denies coverage is required to (a) 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.

The Act also includes new provisions that allow for the joinder of an insurer after settlement or in connection with a final judgment. The new law does not prevent a plaintiff from resolving a claim of coverage against one insurer while preserving a claim against another insurer of the same defendant in the cause of action. It provides that the filing of an action against an insured interrupts prescription for all insurers whose policies provide coverage for the claims asserted in the action.

Also of note, 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.