Louisiana Takes First Steps Toward Tort Reform

Louisiana drivers pay some of the nation’s highest auto insurance premiums. To combat these excessive rates, the Civil Justice Reform Act of 2020 was signed into law on July 13. Proponents of the act hope it will lower the cost of insurance policies by easing the burden on insurance companies—who regularly find themselves as defendants in Louisiana courts. The act is Louisiana’s latest attempt at “tort reform.” Tort reform refers to changes to the civil justice system that diminish a plaintiff’s ability to bring tort litigation or reduce the amount of damages available to a plaintiff.

The act makes the following changes to the Louisiana civil court system:

• Lowers the threshold amount a plaintiff must seek to allow a jury trial from $50,000 to $10,000.
• Establishes a “collateral source” rule. This limits a plaintiff’s recovery to actual out-of-pocket medical expenses rather than what their medical provider billed them. In addition to this amount—to compensate a plaintiff for the cost of obtaining insurance—the court shall also award 40% of the difference between the amount billed by the provider and the amount paid by the plaintiff.
  • Under the prior rule, a defendant could not introduce evidence that a plaintiff received payment from a third party, such as their insurance provider. Plaintiffs could then recover the “sticker price” of their medical bills, although their insurance company paid part or all of their medical expenses.
• Allows defendants to introduce evidence of a plaintiff’s failure to wear a seat belt in an auto accident. Previously, a defendant could not introduce this as evidence to establish that a plaintiff was partially at fault for their own damages.
• Prevents the mention of a party’s insurance company and policy except in limited circumstances.
• Limits the transfer of cases from courts of limited jurisdiction to district courts.
• Enacts other reform measures.¹

The act becomes effective on Jan.1, 2021,and does not apply to any cause of action prior to Jan.1, 2021. Before the passage of the Civil Justice Reform Act, the Louisiana Legislature tried to enact similar legislation. Earlier in the legislative session, the Louisiana House and Senate passed SB 418, which included even more sweeping reform. SB 418 would have extended the deadline to file a lawsuit from one year to two years for most civil actions. It also would have abolished the direct action statute, which allows a plaintiff to sue the wrongdoer’s insurance company directly when a liability policy covers a certain risk. However, Gov. John Bel Edwards vetoed the bill, reasoning that there were no guarantees the bill would cause insurance companies to lower auto premiums.

Please contact Phelps’ Litigation team if you have any questions or need compliance advice and guidance.