Jun 20, 2024

Significant Upcoming Changes from Louisiana Direct Action Reform Bill

June 20, 2024

Written by: Jonathan M. Walsh and Jose R. Ruiz

The Louisiana Legislature recently enacted legislation that significantly alters Louisiana Revised Statute §22:1269, commonly known as the Louisiana Direct Action Statute. Under the previous version of the Direct Action Statute, a tort victim injured in an accident had the right to sue both the tortfeasor and the tortfeasor’s insurance carrier. 

Effective August 1, 2024, Louisiana has taken away a tort victim’s direct action against insurers. Act No. 275, otherwise known as the Direct Action Reform Bill, amends sections of the Direct Action Statute such that a tort victim no longer has an independent right of action against the tortfeasor’s insurance carrier under most circumstances. That right of direct action will be limited to certain situations, such as when the insured declares bankruptcy, is insolvent, is a UM carrier, or the insured avoids service. If the carrier issues a reservation of rights, the tort victim would have a right of direct action, but only to establish coverage.  

Additionally, Act No. 275 repeals Section D of Louisiana Code of Evidence Article 411. Under the old Article, in any direct action brought against an insurer, the court was required to read instructions to the jury that there was insurance coverage available for the injuries claimed by the tort victim. Act No. 275 has repealed that requirement. 

Another significant change is that when the parties settle or a judgment is entered, the carrier(s) may be joined to enforce the settlement or to enter a final judgment. Prescription, Louisiana’s “statute of limitations", is interrupted as to all the insured’s insurers. The caption shall only identify the insured defendant and any uninsured co-defendants.  

Important to the insurer and its counsel, “with the first responsive pleading,” counsel for the insured “who is authorized by an insurer” is to certify to the plaintiff the name and address of all insurers “for whom he is authorized to confirm that they waive any further notice related to the cause of action [. . .].” An insurer who authorizes this certification waives other notice unless it specifically directs notice be sent to another counsel. An insurer determining the existence of a coverage defense or denial must transmit the reservation of rights or denial to the insured within 90 days. Under all circumstances, this must occur no later than thirty days before trial. An insured receiving a reservation of rights must disclose it to the other parties in within 60 days, and again never less than 30 days before trial. 

This law is new and it changes, dramatically, the substance and form of Louisiana litigation. It will add to the carrier’s burden by, among other things, designating counsel to make the certifications above and altering procedures governing the issuance of reservations of rights. It will add to counsel’s burden, too, insofar as making those disclosures and waivers are concerned.