223 So. 3d 17
La. Ct. App.2017Background
- Ronald and Antoinette Johnston received a Hazard Mitigation Grant Program (HMGP) elevation grant and hired LAA Shoring, LLC (LAA) to elevate their Katrina-damaged home; they paid LAA $80,000 from HMGP funds.
- The Johnstons alleged LAA’s work left the house uninhabitable; their insurer, Louisiana Citizens Property Insurance Corporation (LCPIC), paid $65,230.20 and filed a subrogation cross-claim against multiple defendants including the State (which administered the HMGP) and contractors.
- The State (Division of Administration, Office of Community Development, Disaster Recovery Unit) moved the trial court for an exception of no right of action, arguing the Johnstons were not contracting parties and were not third-party beneficiaries of the State’s contracts (including a contract with CB&I to staff HMGP administration).
- The trial court sustained the State’s exception and dismissed claims against the State with prejudice; LCPIC filed a devolutive appeal.
- The appellate court denied the State’s motion to dismiss the appeal (holding LCPIC had partial subrogation and could appeal) but affirmed the trial court’s dismissal on the merits — finding no stipulation pour autrui (third-party beneficiary) and no assumed duty by the State.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Right to appeal by insurer after insured did not appeal | LCPIC is partially subrogated and retains independent appellate rights | Johnstons’ failure to appeal released defendants by res judicata; insurer has no greater rights than insured | LCPIC had partial subrogation; appeal not barred; motion to dismiss denied |
| Stipulation pour autrui (third-party beneficiary) — is State contractually liable to Johnstons? | The State/CB&I negligently vetted/managed the HMGP list and thus Johnstons were intended beneficiaries | Contract with CB&I provided staffing; any benefit to homeowners was incidental; no clear intent to benefit third parties; covenant limited State responsibility | No stipulation pour autrui; benefit to homeowners was incidental; exception of no right of action proper |
| Assumption of duty by the State (oversight, inspections, verifying licenses) | State/CB&I undertook review/inspection duties for HMGP projects and thus assumed a duty to homeowners | Administration of HMGP and staffing does not create a private duty; homeowner covenant allocates responsibility to owners | No assumption of duty as a matter of law; allegations insufficient to impose a legal duty |
| Whether trial court erred in sustaining exception of no right of action | Facts warranted factual development and submission to factfinder on State’s liability | Juridical issue: plaintiff lacks legal right to sue State; dismissal appropriate | Trial court did not err; dismissal with prejudice affirmed |
Key Cases Cited
- Travelers Ins. Co. v. Impastato, 607 So.2d 722 (La. App. 4th Cir. 1992) (insurer acquires no greater rights than its subrogor)
- Perkins v. Scaffolding Rental & Erection Serv., Inc., 568 So.2d 549 (La. 1990) (plaintiff’s failure to appeal can tacitly release an obligor)
- S. Farm Bureau Cas. Ins. Co. v. Sonnier, 406 So.2d 178 (La. 1981) (partial subrogation allows both insurer and insured to pursue recovery)
- Joseph v. Hosp. Serv. Dist. No. 2 of Par. of St. Mary, 939 So.2d 1206 (La. 2006) (three-element test for stipulation pour autrui; such stipulations are never presumed)
- Hebert v. Rapides Par. Police Jury, 974 So.2d 635 (La. 2007) (elements for assumption of duty and limits on creating duties by inspection/recommendation)
- Mendonca v. Tidewater Inc., 862 So.2d 505 (La. App. 4th Cir. 2003) (exception of no right of action is a question of law reviewed de novo)