263 So. 3d 1157
La. Ct. App.2018Background
- Harold Fils was injured in an August 28, 2013 accident and sued his UM insurer, Starr, for additional benefits on August 27, 2015; he later (Jan. 26, 2017) supplemented to add bad‑faith penalties and attorney fees under La. R.S. 22:1973 and 22:1892.
- Starr raised a peremptory exception of prescription, arguing bad‑faith claims prescribed after one year; the trial court granted the exception and dismissed the bad‑faith claims with prejudice.
- On initial appeal this court affirmed the one‑year prescriptive period; Fils moved for rehearing and the panel granted rehearing.
- The central legal question became whether first‑party bad‑faith claims by an insured against its insurer are governed by a one‑year delictual prescriptive period or the ten‑year contractual prescriptive period (La. Civ. Code art. 3499).
- The court reviewed Louisiana and federal precedent (including cases applying ten years to first‑party claims and cases applying one year to third‑party claims) and distinguished Zidan, which involved a third‑party claimant.
- On rehearing the court held the insurer’s duty of good faith to an insured arises from the insurance contract and therefore a ten‑year prescriptive period applies; it reversed the dismissal and remanded for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Applicable prescriptive period for insured's bad‑faith claim under La. R.S. 22:1973/22:1892 | Bad‑faith claims arise from the insurance contract and fiduciary duty, so art. 3499's ten‑year period applies | Bad‑faith penalty statutes create statutory/tort duties subject to the one‑year delictual prescriptive period | Held: Ten‑year prescriptive period applies to first‑party bad‑faith claims by insureds; reversed dismissal |
| Whether Zidan controls first‑party bad‑faith claims | Zidan is distinguishable because it involved a third‑party; does not control first‑party cases | Starr and some federal courts relied on Zidan to support one‑year rule | Held: Zidan is distinguishable; its one‑year rule applies to third‑party claims, not insured’s first‑party claims |
| Interaction with prescriptive period for underlying UM claim (La. R.S. 9:5629) | Applying one‑year to bad‑faith would conflict with two‑year UM period and produce absurd results (e.g., require early suit) | One‑year proponents argue policy/statute basis for short period | Held: Applying ten‑year avoids conflict and practical problems with UM two‑year rule |
| Nature of the duty breached (contract vs tort) | Duty of good faith is an outgrowth of contractual/fiduciary relationship; breach is contractual | Statutory penalty provisions impose duties independent of the contract, so delictual | Held: Duty flows from the contract; bad‑faith claim is personal/contractual in nature and governed by ten‑year prescription |
Key Cases Cited
- Roberie v. Southern Farm Bureau Cas. Ins. Co., 194 So.2d 713 (La. 1967) (recognizing insurer liability for failing to advise insured and for settlement conduct)
- Theriot v. Midland Risk Ins. Co., 694 So.2d 184 (La. 1997) (statute recognizes jurisprudential duty of good faith emerging from contractual/fiduciary relationship)
- Cantrelle Fence & Supply Co. v. Allstate Ins. Co., 550 So.2d 1306 (La. App. 1 Cir. 1989) (applied ten‑year prescriptive period to insurer penalty statute claim)
- Keith v. Comco Ins. Co., 574 So.2d 1270 (La. App. 2 Cir. 1991) (held bad‑faith failure to settle is contractual and prescribes in ten years)
- Zidan v. USAA Prop. & Cas. Ins. Co., 622 So.2d 265 (La. App. 1 Cir. 1993) (applied one‑year prescription to a third‑party claimant; distinguished in this opinion)
- We Sell Used Cars, Inc. v. United Nat'l Ins. Co., 715 So.2d 656 (La. App. 2 Cir. 1998) (applied ten‑year prescription to penalty/attorney fee claim)
- Manuel v. La. Sheriff's Risk Mgmt. Fund, 664 So.2d 81 (La. 1995) (addressed source of duty and interaction of statute with contract; did not decide prescription question)
- Sultana Corp. v. Jewelers Mut. Ins. Co., 860 So.2d 1112 (La. 2003) (noting insurer's duty of fair dealing emanates from contractual/fiduciary relationship)