623 F. App'x 684
5th Cir.2015Background
- On Dec. 27, 2007 Michael Belanger was injured in an auto accident with GEICO-insured Natalie Stephen; a state trial court later entered judgment: $450,000 against Stephen and $25,000 (policy limits) against GEICO.
- The trial court denied post-judgment relief (order signed Nov. 17, 2011); Louisiana First Circuit affirmed (Nov. 13, 2012); La. Supreme Court denied writs on Apr. 1, 2013.
- GEICO paid the $25,000 policy limits; on Sept. 25, 2013 Stephen assigned to Belanger any bad-faith claim she had against GEICO related to the excess judgment.
- Belanger sued GEICO Oct. 4, 2013 (removed to federal court Nov. 20, 2013). GEICO moved to dismiss under Rule 12(b)(6) arguing the bad-faith claim is time-barred under Louisiana’s one-year prescription for delictual (tort) claims.
- District court held the cause of action arose when the excess judgment was entered (Apr. 26, 2011) and thus was prescribed; contra non valentem argument not pursued on appeal; Belanger attempted for first time on appeal to argue a 10-year prescriptive period and waived that argument.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| When did the insured’s §22:1973 bad-faith cause of action arise? | Belanger: it arose only when the La. Supreme Court denied writs (Apr. 1, 2013). | GEICO: it arose when the state trial court entered the excess judgment (Apr. 26, 2011). | Cause of action arose when the excess judgment was entered (2011), because the appeal of the excess judgment was devolutive and did not suspend its effect. |
| Applicable prescriptive period for assigned §22:1973 claim | Belanger (on appeal): claim is subject to a 10-year contractual prescription. | GEICO: one-year delictual prescription applies. | Plaintiff waived the 10-year argument by failing to raise it below; court applied one-year period. |
| Whether contra non valentem prevented prescription | Belanger (district court): argued contra non valentem should delay prescription. | GEICO: prescription was not interrupted. | Contra non valentem was not pursued on appeal and is waived; district court previously rejected it. |
| Whether removal timing affects prescription | Belanger: argued suit filed within one year of writ denial so timely regardless of removal timing. | GEICO: timing measured from accrual of cause of action, not removal date. | Accrual date governs prescription; filing was more than one year after accrual, so claim prescribed. |
Key Cases Cited
- Mathies v. Blanchard, 959 So.2d 986 (La. Ct. App. 2007) (entry of excess judgment gives rise to bad-faith claim against insurer).
- Romstadt v. Allstate Ins. Co., 59 F.3d 608 (6th Cir. 1995) (excess judgment is prerequisite to bad-faith action).
- Kelly v. Williams, 411 So.2d 902 (Fla. Dist. Ct. App. 1982) (cause of action arises when insured is legally obligated to pay judgment in excess of policy).
- Crabb v. Nat’l Indem. Co., 205 N.W.2d 633 (S.D. 1973) (entry of final excess judgment, not its satisfaction, harms insured and gives rise to claim).
- Wooten v. Cent. Mut. Ins. Co., 166 So.2d 747 (La. Ct. App. 1964) (insured’s bad-faith claim may sound in tort or contract; prescriptive period depends on nature of action).
- Zidan v. USAA Prop. & Cas. Ins. Co., 622 So.2d 265 (La. Ct. App. 1993) (third-party bad-faith claims against insurers are subject to one-year delictual prescription).