Louisiana Direct Action Statute Amendments Impact Rights Against Insurers and Procedural Rules

Significant amendments to the Louisiana Direct Action Statute will take effect on Aug. 1, 2024. Recently signed into law by the Governor, Act No. 275 amends and adds several new provisions to the Louisiana Direct Action Statute, La. R.S. § 22:1269, and it repeals Louisiana Code of Evidence article 411(D). These changes and additions to the Louisiana Direct Action Statute will particularly impact insurers. Keep reading for a breakdown of some of the more significant changes to the Louisiana Direct Action Statute.

New Protections for Insurers: Limitation to Disclosure of Insurance Coverage to Juries and Caption Rule

Broadly, the Louisiana Direct Action Statute provides an injured party with a right of direct action against the tortfeasor’s liability insurer, subject to certain procedure. Act No. 275 imposes several new procedural rules, some of which limit an injured party’s right of direct action and others which implement new protections for insurers.

Per the Act, the Louisiana Direct Action Statute will now include the following provision: “A court shall not disclose the existence of insurance coverage to the jury or mention such coverage in the jury’s presence unless required by Code of Evidence Article 411.” Comparatively, the Act repeals Louisiana Code of Evidence article 411(D), which provided: “In all cases brought against an insurer pursuant to R.S. 22:1269 or 1973, at the opening and closing of the trial, the court shall read instructions to the jury that there is insurance coverage for the damages claimed by the plaintiff.” Other provisions within article 411 provide specific circumstances by which the existence of insurance coverage may be communicated to the jury. As such, the intersection of this amendment to the Louisiana Direct Action Statute and the repeal of article 411(D) limits the ability of the court to disclose existence of insurance coverage to the jury, which should prove to be a positive change for insurers. 

Another new procedural rule reads: “An insurer shall not be included in the caption of any action brought against the insurer pursuant to this Section. The action shall instead be captioned only against the insured defendant or other noninsurance defendants.” This amendment encourages more attention to the non‑insurer entities involved in the lawsuit, which may redirect some focus away from insurers.

Limiting the Scope of Direct Action Scenarios

The current version of the Direct Action Statute permits an injured party to sue the tortfeasor’s liability insurer under any circumstance. The amendment limits the injured party’s right of action against a liability insurer to seven enumerated circumstances, those being:

1. The insured files for bankruptcy in a court of competent jurisdiction or when proceedings to adjudge an insured bankrupt have been commenced.
2. The insured is insolvent.
3. 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.
4. 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.
5. The insurer is an uninsured motorist carrier.
6. The insured is deceased.
7. 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.

Thus, an insurer can no longer be sued under the Direct Action Statute when it unconditionally defends the insured and when the other six circumstances do not exist. 

Other Notable Changes to the Louisiana Direct Action Statute

Act No. 275 provides several other amendments to the Louisiana Direct Action Statute. Some of these changes are briefly described below: 

• Insurers are now required to provide the named insured with written notice of a reservation of rights to deny coverage within 90 days after the insurer determines the existence of the coverage defense. The notice must be delivered by the U.S. Postal Service with proof of mailing, registered or certified mail, other similar tracking method used or approved by the U.S. Postal Service or a commercial courier, or hand delivery.   
• The defendant insured is also subject to new notice requirements, including when a reservation of rights letter or an insurer’s refusal to defend is issued and when counsel for an insured defendant (who is authorized by an insurer) files the first responsive pleading on behalf of the insured.
• Plaintiffs or their counsel may provide notice of commencement of a civil action to a nonparty insurer by any method of service on a defendant provided by law. 
• When an action is filed against the insured, prescription (Louisiana’s term for statute of limitations) is interrupted as to all insurers whose policies provide coverage for the claims asserted in that action.
• Even if direct action is not authorized by law, a liability insurer may be joined as a defendant for purposes of entering final judgment or enforcing a settlement, subject to specific restrictions and the terms and limits of the policy. This amendment does not apply if the insurer timely denied coverage or reserved rights per the statute, unless an adjudication in favor of coverage has taken place.

Insurers should closely monitor how these changes impact direct actions in Louisiana as the amendments become effective. Please contact Meredith Will or any member of Phelps’ Insurance team if you have any questions or need advice or guidance.