First American Title Insurance v. Continental Casualty Co.
2013 U.S. App. LEXIS 4153
| 5th Cir. | 2013Background
- Claims-made-and-reported policy for Titan Title, LLC (First American insured) covers claims first made and reported during 2008-08-16 to 2009-08-16.
- Policy requires written notice to CNA during the policy period of any claim, and coverage depends on a claim being made and reported within the term.
- Underlying claim concerns Titan issuing title policies for First American and alleged negligent performance by Titan and its member Stelly.
- Lawsuit filed 2009-07-24, within policy period, but CNA was not informed until 2010-01-08 after First American discovered potential coverage.
- Direct Action Statute La. Rev. Stat. § 22:1269(B)(1) allows an injured third party to sue the insurer under the policy’s terms and limits; district court granted CNA summary judgment relying on Hood v. Cotter.
- First American appeals contending the Direct Action Statute vests rights regardless of the insurer’s reporting timing; court affirms CNA’s restrictions on coverage under a claims-made-and-reported policy.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Direct Action Statute allows suit when claim is made in period but not reported then. | First American argues Direct Action permits suit despite late reporting. | CNA argues reporting within the policy period is a prerequisite to coverage. | No; reporting within the period is required. |
| Whether the claims-made-and-reported reporting requirement defines coverage or is overridden by Direct Action. | First American contends the reporting obligation is trumped by the statute. | CNA contends the reporting condition confines coverage as bargained. | Reporting protocol governs coverage and cannot be overridden by Direct Action. |
| Whether Louisiana precedents (Hood/Anderson) control enforcement of the reporting clause in Direct Action cases. | First American relies on Hood/Anderson to expand injured-party rights. | CNA relies on strict construction of the Direct Action Statute. | Yes; precedents uphold enforcing reporting obligations. |
| Does strict construction of the Direct Action Statute apply to claims-made policies in this context? | First American asserts injury if claim was made though not reported. | CNA relies on strict construction to limit coverage. | Direct Action does not override the policy’s reporting requirement. |
Key Cases Cited
- Livingston Parish Sch. Bd. v. Fireman’s Fund Am. Ins., 282 So.2d 478 (La.1973) (unambiguous limits on coverage in policy terms permissible under law)
- Anderson v. Ichinose, 760 So.2d 302 (La.1999) (Direct Action does not extend coverage beyond policy terms)
- Hood v. Cotter, 5 So.3d 819 (La.2008) (claims-made policy requirements enforceable; cannot convert to occurrence policy)
- West v. Monroe Bakery, 46 So.2d 122 (La.1950) (notice provisions in occurrence policies generally not binding on Direct Action rights)
- Ayo (Resolution Trust Corp. v. Ayo), 31 F.3d 285 (5th Cir.1994) (claim-triggering notice provisions affect when a claim vests under claims-made policies)
- Murray v. City of Bunkie, 686 So.2d 45 (La.Ct.App.3d Cir.1996) (divergent intermediate rulings on Direct Action and reporting)
- Williams v. Lemaire, 655 So.2d 765 (La.Ct.App.4th Cir.1995) (similar position on reporting in Direct Action context)
- Vitto v. Davis, 23 So.3d 1048 (La.Ct.App.3d Cir.2009) (injured third party not always barred where reporting terms are narrow)