Louisiana has long had a direct action statute (La. R.S. 22:1269) which allows a plaintiff to file suit both against the alleged wrongdoer and that person’s insurance company. The statute affords a plaintiff the right to sue the insurer directly. Louisiana has been an outlier, as most states do not allow plaintiffs to name insurance companies as defendants in personal injury lawsuits.
In a medical malpractice action against a LAMMICO-insured healthcare provider, the direct action statute has allowed the plaintiff to name both the provider and LAMMICO as defendants in the lawsuit.
The availability of a direct action against LAMMICO has several drawbacks. First, the procedural rule encourages juries to award damages and is thus prejudicial to healthcare providers. Plaintiffs are able to list LAMMICO as the first-named defendant such that the caption of the lawsuit reads “Smith v. LAMMICO et al.” So, when the docket is called in Court during trial, the jurors hear the name of the insurance company as the first defendant. The caption of the case is also on written discovery responses, affidavits and deposition transcripts which may be introduced as exhibits during trial and published to the jury during their deliberations. LAMMICO may also be listed as a defendant during the jury selection process when checking with potential jurors for possible conflicts. Plaintiffs like having LAMMICO front and center during trial. It reminds the jury that there is a source of financial recovery behind the provider and suggests that insurance will be available to cover any damages awarded, no matter how high the amount. Some jurors have unfavorable opinions of insurance companies or poor experiences with their own insurance companies, and plaintiffs hope that any negative sentiments will increase the likelihood of a verdict awarding damages. Thus, the direct action statute prejudices defendants by encouraging juries to award money – regardless of the merits of the claim – because an insurer is paying the award rather than the healthcare provider.
Second, the existence of LAMMICO as a defendant sometimes allows plaintiffs to “forum shop” and file suit in a venue they believe to be more favorable to their cause. The venue provisions allow LAMMICO to be sued in Jefferson Parish because its registered office is in Metairie. Lawsuits against individual providers may generally be filed in the parish where the provider lives, or in the parish where the alleged malpractice occurred. When both the provider and LAMMICO are named as defendants, the plaintiff may file suit in any parish that would be proper as to either defendant. So, for example, even if the provider lived in St. Tammany Parish and treated the plaintiff in St. Tammany Parish, the plaintiff could file suit against all defendants in Jefferson Parish and argue that it is an acceptable venue based on LAMMICO’s registered office.
Third, when LAMMICO is part of the proceedings as the provider’s insurer, that fact is often used to cross-examine medical review panelists or other defense experts who may also be LAMMICO insureds. Plaintiffs will try to argue that the expert is only testifying for the defense because of a shared financial interest in LAMMICO as mutual policyholders.
The Louisiana Legislature recently enacted significant changes to the direct action statute. The amendment to the law eliminates a plaintiff’s right of direct action against the insurer of a healthcare provider except in a few unusual circumstances, including insolvency or bankruptcy of the insured; death of the insured; or when the insured cannot be served with a lawsuit or fails to respond to the lawsuit. Thus, in most medical malpractice lawsuits, the plaintiff will only be able to name the provider as a defendant, and their insurer will not be a named defendant and will not appear on the caption of the case.
When LAMMICO is not a named defendant, it will prevent plaintiffs from filing lawsuits in Jefferson Parish instead of in the parish where the provider lives and/or provides patient care.
Additionally, the amendment provides that “A court shall not disclose the existence of insurance coverage to the jury or mention such coverage in the jury’s presence … ” Prior to the amendment, the law required the court to instruct the jury at the opening and closing of trial that there is insurance coverage for the damages claimed by the plaintiff.
Now, plaintiffs should be unable to introduce any evidence of LAMMICO’s involvement or make any statements to the jury about the existence of insurance coverage. Generally, the rules of evidence provide that the existence of insurance coverage shall not be communicated to the jury, but such coverage may be admissible to attack the credibility of a witness. So, it remains to be seen whether a plaintiff will still be able to cross-examine defense experts who happen to be LAMMICO insureds. Defense attorneys will object to such questioning, and the trial judge will have to balance the prohibition on evidence of insurance coverage against the plaintiff’s right to vigorously cross-examine witnesses as to their credibility.
The amendment to the statute took effect on August 1, 2024, and will thus apply to new lawsuits filed after that date. It remains to be seen whether the changes to the law will apply to lawsuits filed before that date. Substantive changes to law apply prospectively while procedural changes to law apply retroactively, absent language in the law showing contrary intention. Of note, judicial opinions explain that the direct action statute grants a procedural right of action against an insurance company where the plaintiff has a substantive cause of action against the insured. Considering that the amendment eliminates the procedural right of action against an insurance company, one might argue that the law should be retroactively applied to dismiss LAMMICO as a defendant from any pending lawsuits, even those filed prior to the effective date of the amendment. LAMMICO’s defense attorneys are litigating this novel issue of law in several pending cases.
As always, LAMMICO actively monitors legislation and advocates with various partners to support or oppose new laws that may affect its insureds. This change to the direct action statute represents one of many successful efforts by LAMMICO to promote favorable legislation on behalf of its insureds.
