STATE OF LOUISIANA COURT OF APPEAL, THIRD CIRCUIT
17-896
HAROLD FILS
VERSUS
STARR INDEMNITY & LIABILITY COMPANY, ET AL
************
APPEAL FROM THE FIFTEENTH JUDICIAL DISTRICT COURT PARISH OF LAFAYETTE, NO. C-20154212 HONORABLE MARILYN C. CASTLE, DISTRICT JUDGE
************ SYLVIA R. COOKS JUDGE ************
Court composed of Sylvia R. Cooks, Billy Howard Ezell, and D. Kent Savoie, Judges.
MOTION FOR REHEARING GRANTED; REVERSED AND REMANDED.
Bart Bernard 1031 Camellia Boulevard Lafayette, LA 71360 (337) 989-2278 COUNSEL FOR PLAINTIFF/APPELLANT: Harold Fils
D. Scott Rainwater Rachel Kovach Taylor, Wellons, Politz & Duhe, APLC 8550 United Plaza Boulevard, Suite 101 Baton Rouge, LA 70809 (225) 387-9888 COUNSEL FOR DEFENDANT/APPELLEE: Starr Indemnity & Liability Insurance Company COOKS, Judge.
ON REHEARING
Plaintiff-appellant, Harold Fils, filed this Motion for Rehearing, asking this
court to reconsider our prior ruling affirming the trial court’s judgment that bad faith
claims against insurers are subject to a one-year prescriptive period.1 We granted
Plaintiff’s Motion for Rehearing. After further review, we now hold the appropriate
prescriptive period for bad faith claims arising out of a contract of insurance is the
ten-year prescriptive period found in La.Civ.Code art. 3499.
Plaintiff claimed injuries and personal damages as a result of an August 28,
2013 accident and filed suit on August 27, 2015, against Starr Indemnity & Liability
Insurance Company seeking additional UM benefits. Plaintiff alleged his medical
expenses alone exceeded the $45,000.00 amount tendered to him by Starr. Asserting
that Starr was acting in bad faith, Plaintiff supplemented his petition on January 26,
2017, to seek penalties and attorney fees pursuant to La.R.S. 22:1973 and La.R.S.
22:1892 for Starr’s alleged bad faith refusal to pay his UM claim. Plaintiff’s original
petition had not included any allegations of bad faith on the part of Starr.
In response, Starr filed a peremptory exception of prescription, maintaining
the bad faith claim was barred by the prescriptive period of one year from the time
suit was filed seeking damages under the UM policy provisions. The trial court ruled
in favor of Starr and maintained the exception of prescription as to the bad faith
claims asserted in Plaintiff’s First Supplemental and Amending Petition. The bad
faith claims were dismissed with prejudice, and the court designated that ruling as a
final, appealable judgment. In our previous opinion, we held the trial court did not
1 Several interested parties were granted permission to file amicus briefs, both in support of, and in opposition to, Plaintiff’s motion for rehearing. 2 err in finding a one-year prescriptive period applied to Plaintiff’s bad faith claims
against Starr.
I. Review of Applicable Jurisprudence.
Even before the creation of a statutory cause of action for the bad faith
handling of claims by an insurer, courts have imposed liability for an insurer’s failure
to act in good faith in the interests of its insureds. The Louisiana Supreme Court in
Roberie v. Southern Farm Bureau Casualty Insurance Co., 250 La. 105, 194 So.2d
713, 716 (1967), found the insurer was liable for its failure to inform its insurer as
to settlement negotiations and the insurer’s failure to provide “information and
advice on the point of his potential liability.” The insurer rejected a settlement
demand unilaterally when the potential liability exceeded the policy limits. As a
result, the court found the insurer liable to its insured for the amount in excess of the
policy limits that he was required to pay as part of the judgment in the original
litigation.
In 1970, La.R.S. 22:1220 [now La.R.S. 22:1973] was enacted. It created a
statutory cause of action for bad faith by an insurer. Discussing the duties imposed
on the insurer by La.R.S. 22:1220, the supreme court in Theriot v. Midland Risk Ins.
Co., 95-2895, pp. 5-6 (La. 5/20/97), 694 So.2d 184, 187 (emphasis added), stated
“the statute recognizes the jurisprudentially established duty of good faith and fair
dealing owed to the insured, which is an outgrowth of the contractual and fiduciary
relationship between the insured and insurer.” Louisiana Revised Statutes 22:658
[now La.R.S. 22:1892] provided additional causes of action for an insurer’s
violations of good faith and fair dealing, including a bad faith failure to settle claims.
Neither statute sets forth a specific prescriptive period.
In 1989, the appellate court in Cantrelle Fence and Supply Co. v. Allstate
Insurance Co., 550 So.2d 1306 (La.App. 1 Cir. 1989), writ denied, 559 So.2d 123 3 (La.1990), applied the ten-year prescriptive period of La.Civ.Code art. 3499 to the
insurer’s claim under La.R.S. 22:658 [now La.R.S. 22:1892]. The court stated
“[f]inding no other prescriptive period specifically established for La.R.S. 22:658
actions, we apply the prescriptive period of ten years, established by La.[Civ.Code]
art. 3499.” Cantrelle, 550 So.2d at 1308.
Similarly, in 1991, the court in Keith v. Comco Insurance Co., 574 So.2d 1270
(La.App. 2 Cir.), writ denied, 577 So.2d 16 (La.1991), found the ten-year
prescriptive period was applicable to an insurer’s bad faith failure to settle under
La.R.S. 22:1220 [now La.R.S. 22:1973]. The court stated as follows:
An action against an insurer for failure to defend a claim or settle within policy limits is in contract. Wooten v. Central Mut. Ins. Co., 182 So.2d 146 (La.App. 3d Cir.1964); Comment, “Duty of Insurer to Settle,” 30 La.L.Rev. 622, 628-633 (1970). It therefore prescribes in 10 years. La.[Civ.Code] art. 3499.
Keith, 574 So.2d at 1276.
In 1993, the First Circuit Court of Appeal (which authored the Cantrelle
opinion) in Zidan v. USAA Property and Casualty Insurance Co., 622 So.2d 265
(La.App. 1 Cir.), writ denied, 629 So.2d 1138 (La.1993), found the one-year
prescriptive period applied to a claim made by a guest passenger alleging the insurer
had concealed the fact that coverage existed. In Zidan the plaintiff, Ali Zidan was a
guest passenger in a vehicle driven by Mohammed Rawashdeh and insured by
Liberty Lloyds. That vehicle was involved in a collision on September 17, 1990,
with a vehicle driven by Richard Bengston and insured by USAA Property and
Casualty Insurance Company. Zidan filed suit against Bengston and his insurer,
USAA, as well as Rawashdeh and his insurer, Liberty Lloyds. That suit was not
filed until September 18, 1991, one year and one day from the date of the injury.
Thus, on its face the action had prescribed. Liberty Lloyds filed a peremptory
exception of prescription. Zidan contended his action had not prescribed because 4 Liberty Lloyds misrepresented or concealed the fact that coverage existed on
Rawashdeh’s vehicle in violation of a duty imposed by La.R.S. 22:1220 [now
La.R.S. 22:1973]. The trial court granted the insurer’s exception of prescription.
On appeal, Zidan again argued the tort claims had not prescribed because the
insurer concealed the fact coverage existed in violation of La.R.S. 22:1220. The
plaintiff argued this violation triggered the application of contra non valentum,
preventing the running of prescription on the underlying tort claim. The first circuit
recognized the plaintiff’s tort claims and bad faith claims arose separately and were,
in fact, two separate claims. The court noted the tort claim could have prescribed
even though the bad faith claim could still be viable. The Zidan court did not
specifically address the applicable prescriptive period for a bad faith claim, but
found only the alleged violation of La.R.S. 22:1220 did not toll prescription of the
plaintiff’s tort claim. The failure of the plaintiff in Zidan was that he failed to timely
file any tort claim against any insurer and was attempting to “piggy-back” his
underlying tort claim to his bad faith claim. Zidan has since been extended by
several federal courts to hold that the one-year prescriptive period applies to all bad
faith claims brought under La.R.S. 22:1973 and La.R.S. 22:1892. Other federal
courts have distinguished Zidan on the grounds it involved a third-party claim.
In 1998, the appellate court in We Sell Used Cars, Inc. v. United National
Insurance Co., 30,671 (La.App. 2 Cir. 6/24/98), 715 So.2d 656, again held the
insured’s claim for penalties and attorney fees under La.R.S. 22:658 [now La.R.S.
22:1892] was ten years.
In the aftermath of the above cases, the federal district courts have been split
on the issue of prescription for first-party claims arising from alleged violations of
La.R.S. 22:1973 and La.R.S. 22:1892. In 2004, the Eastern District of Louisiana in
Brown v. Protective Life Insurance Co., 353 F.Supp.2d 739, 743 (E.D. La. 2004), 5 found La.R.S. 12:1220 “is subject to a one-year liberative prescription.” It gave no
analysis for this finding, but only cited Zidan in support of its conclusion. In 2008,
the eastern district in Harrell v. Fid. Sec. Life Ins. Co., 17-1439 (E.D. La. 2008),
held “that a violation of [La.R.S. 22:1220] is delictual in nature and therefore subject
to the one year prescriptive period.” It cited Brown¸ which relied on Zidan, in
support of this proposition. In 2009, the eastern district in Ross v. Hanover
Insurance Co., 09-3501 (E.D. La. 2009), again applied the one-year prescriptive
period relying on the Brown case for jurisprudential support.
In contrast, the Western District of Louisiana has concluded, in line with the
decisions in Cantrelle, Keith, and We Sell Used Cars, Inc., that a claim against an
insurer for violations of La.R.S. 22:1973 and La.R.S. 22:1892 is subject to a ten-
year prescriptive period. In 2015, the federal court in Aspen Specialty Insurance Co.
v. Technical Industries, Inc., 2015 WL 339598 (W.D.La. 2015), noting the facts in
Zidan involved a third-party claim, declined to follow the Zidan line of cases and
concluded a ten-year prescriptive period applies to the bad faith claim against the
insurer. The Aspen Specialty court set forth the following analysis:
It is logical that the claim by a third-party to an insurance contract against an insurer would be classified as a tort and subject to the one- year prescriptive period for delictual actions, but it is not logical that a first-party claim, that is, a claim by an insured against its insurer, would be classified as a delictual claim. A first-party claim arises out of the relationship created by the insurance contract and, therefore, is either contractual or quasi-contractual in nature. Indeed, Section 1973 “recognizes the jurisprudentially established duty of good faith and fair dealing owed to the insured, which is an outgrowth of the contractual and fiduciary relationship between the insured and the insurer.” Both contractual and quasi-contractual claims are classified, under Louisiana law, as personal actions subject to a liberative prescription of ten years.
Later that same year in Prudhomme v. Geico Insurance Co., 15-98 (W.D. La.
2015), the federal court followed Aspen Specialty in finding the ten-year prescriptive
period applied to an insured’s claim under La.R.S. 22:1973. The court reasoned:
6 La.R.S. 22:1973 does not include a provision establishing a prescriptive period for asserting bad faith claims arising under that statute. In support of their contention that the appropriate prescriptive period is the one-year period for delictual claims, Defendants cite Zidan v. USAA Prop. & Cas. Co., 622 So.2d 265, 266 (La.App. 1 Cir. 1993) and a line of cases following Zidan. Defendants note however, in Aspen Specialty Ins. Co. v. Technical Industries, Inc., 2015 WL 339598, 2 (W.D.La., 2015), Magistrate Judge Hanna recently held that a ten-year prescriptive period applies to Section 1973 claims. The Court agrees with Judge Hanna’s reasoning in [Aspen Specialty].
Id. at p. 5.
The first circuit court of appeal recently in Labarre v. Texas Brine Company,
LLC, 16-265 (La.App. 1 Cir. 12/2/16) (unpublished writ decision), granted writs and
reversed the lower court’s finding that “a ten-year prescriptive period was available”
on the “claims of the breach of the insurer’s duty of good faith and fair dealing.” In
that case, the plaintiff filed a claim against its insurer via a third-party demand, then
added bad faith claims through an amending third-party demand. The court
specifically held bad faith claims were subject to a one-year prescriptive period. The
Louisiana Supreme Court subsequently denied writs on the case. Labarre v. Texas
Brine Company, LLC, 17-1761 (La. 12/5/17), 231 So.3d 631. The first circuit
granted certiorari and, in a May 31, 2018 order, set full briefing on a pending writ
application filed in the case on the issue of whether bad faith claims by an insured
against its insurer are subject to a one-year or ten-year prescriptive period. The court
concluded, “[u]pon review, we cannot say that our colleagues committed palpable
error in determining a one-year prescriptive period applied to Texas Brine Company,
LLC’s claims of bad faith under La.R.S. 22:1973.” Labarre v. Texas Brine
Company, LLC, 17-1676, pp. 1-2 (La.App. 1 Cir. 8/30/18), (unpublished opinion).
One judge dissented, and offered the following reasoning in support of a ten-year
prescriptive period:
Louisiana Revised Statutes 22:1973 (formerly La. R.S. 22:1220) and 22:1892 (formerly La. R.S. 22:658) codified the insurer’s pre-existing 7 duty of good faith and fair dealing and provide for damages when an insurer acts in bad faith. Though this duty has been codified, an abundance of legal analysis from the Louisiana Supreme Court indicates that this duty is an outgrowth of the contractual and fiduciary relationship between the insured and the insurer, and the duty of good faith and fair dealing emanates from the contract between the parties. Theriot v. Midland Risk Ins. Co., 95-2895 (La. 5/20/97), 694 So.2d 184, 187; Pareti v. Sentry Indem. Co., 536 So.2d 417, 423 (La. 1988); Langsford v. Flattman, 2003-0189 (La. 1/21/04), 864 So.2d 149, 151; Kelly v. State Farm Fire & Cas. Co., 2014-1921 (La. 5/5/15), 169 So.2d 328. Since the duty emanates from the contract and would not exist but-for the contract, I find it appropriate to apply the ten-year prescriptive period for contracts to this claim. Furthermore, finding no specific prescriptive period established for bad faith claims, this court has previously held that the default ten-year prescriptive period for personal actions established by Louisiana Civil Code article 3499 applies to first-party claims against an insurer. Cantrelle Fence & Supply Co. v. Allstate Ins. Co., 550 So.2d 1306, 1308 (La.App. 1st Cir.1989), writ denied, 559 So.2d 123 (La. 1990). I would refuse to deviate from this jurisprudence.
Very recently, in Naz, LLC v. United National Insurance Co., 2018 WL
3997299 (E.D. La. 2018), the eastern district again addressed the “unsettled” judicial
pronouncements “regarding whether an insured’s claim for an insurer’s bad faith are
subject to a prescriptive period of one or ten years.” In holding that such bad faith
claims are subject to a one-year prescriptive period, the court in Naz cited our earlier
statement in this case that “a contract is not necessary to bring a bad faith claim
against an insured under Louisiana’s penalty statutes.”
II. Analysis.
An insured’s claim for bad faith ordinarily is based upon the obligation that
arises from the relationship between the insurer and insured. Plaintiff argues
because bad faith claims are derived from contractual obligations and fiduciary
duties owed by the insurer pursuant to the contract of insurance between the parties,
they are appropriately governed by the ten-year prescriptive period which governs
contracts. Plaintiff cites Cantrelle Fence and Supply Co., 550 So.2d 1306, Keith,
8 574 So.2d 1270, We Sell Used Cars, 715 So.2d 656, Aspen Specialty Insurance Co.,
2015 WL 339598 and Prudhomme, 15-98, in support of this contention.
It follows, but for the existence of the insurance contract between Plaintiff and
Starr, there would be no claim. Likewise, all obligations of the UM insurer in this
case originate and flow from the insurance contract. We note in Kelly v. State Farm
Fire & Casualty Co., 14-1921, pp. 12-13 (La. 5/5/15), 169 So.2d 328, 336 (emphasis
added) (alteration in original), the Louisiana Supreme Court stated:
Why only an insured may have a cause of action under La. R.S. 22:1973(A) was suggested in Theriot [v. Midland Risk Ins. Co., 95- 2895 (La. 5/20/97), 694 So.2d 184]. “The first sentence of Subsection A of the statute recognizes the jurisprudentially established duty of good faith and fair dealing owed to the insured, which is an outgrowth of the contractual and fiduciary relationship between the insured and insurer.” Theriot, 95-2895 at 5-6, 694 So.2d at 187. Or, as our federal judicial colleagues later explained in Stanley, “[i]nasmuch as it is not the statute that creates the insured’s cause of action against the insurer, the basis for an insured’s cause of action for a breach of the implied covenant of good faith and fair dealing are not limited to the prohibited acts listed in La. R.S. 22:[1973](B).” Stanley [v. Trinchard], 500 F.3d 411, 427. (emphasis in original)
Because any bad faith on an insurer’s part is a breach of a contractual duty, it
necessarily follows the cause of action is personal and subject to the ten-year
prescriptive period found in La.Civ.Code art. 3499. Louisiana Civil Code Article
1759 provides that “[g]ood faith shall govern the conduct of the obligor and obligee
in whatever pertains to the obligation.” Thus, the breach of the duty of good faith,
which the insurer owes, is the breach of an obligation that flows from the insurance
contract.
Moreover, the statutory law provides that UM claims are subject to a two-year
prescriptive period. La.R.S. 9:5629. Thus, it would be nonsensical to find that UM
bad faith claims prescribe after one year from the first act of bad faith. To do so
would potentially force plaintiff attorneys to file suit in order to protect their client’s
interests against a UM carrier within the one-year period from the accident or the 9 date the defendant possibly acted in bad faith, even though the two-year prescriptive
period on the underlying claim has not run. It would also require a plaintiff to “pierce
the corporate mind” of the insurer to determine a “fixed” date when the bad faith
occurred to avoid the short one-year prescriptive period as opposed to relying on the
cumulation of acts or failure to act by the insurer over the course of time.
In Mentz Construction Services, Inc. v. Poche, 11-1474, p. 5 (La. App. 4 Cir.
4/17/12), 87 So.3d 273, 276-77, the appellate court stated “the main distinction
between an action on a contract and a tort action is that the former flows from the
breach of a special obligation contractually assumed by the obligor, whereas the
latter flows from the violation of a general duty owed to all persons. Certain
Underwriters at Lloyd’s, London, 00-1512 at p. 7, 787 So.2d at 1075, citing Ridge
Oak Development, Inc. v. Murphy, 94-0025 (La.App. 4 Cir. 6/30/94), 641 So.2d
586.” As Plaintiff notes, to find his bad faith claims to be delictual, the claims must
“flow[ ] from violation of a general duty owed to all persons,” and thus available to
all persons. However, the Louisiana Supreme Court in Langsford v. Flattman, 03-
189 (La. 1/21/04), 864 So.2d 149, stated these claims are only available to insureds.
In that case, the court specifically held third-party claimants have no cause of action
against an insurer under La.R.S. 22:1220(B) [now La.R.S. 22:1973(B)] for a bad
faith failure to pay within sixty days of satisfactory proof of loss. See also Howard
v. United Services Automobile Ass’n, 14-1429, p. 18 (La.App. 1 Cir. 7/22/15), 180
So.3d 384, 399 (emphasis added), wherein the plaintiffs were third-party claimants,
and the court held they “do not fall within the category of individuals who can bring
a ‘bad faith handling of a claim’ cause of action against [the insurer], with whom
plaintiffs have no contractual relationship.”
In our original opinion, we relied upon Zidan, 622 So.2d 265, to affirm the
trial court’s judgment that the one-year prescriptive period applied. Upon further 10 reflection, we find this was error. We find persuasive the federal court’s later
discussion of Zidan in Aspen Specialty Insurance Co., 2015 WL 339598, pp. 2-3
(footnotes omitted), which follows:
First, Zidan is a case in which a guest passenger who was injured in an automobile accident failed to assert a claim against the driver and the driver’s insurer until more than one year after the accident occurred. The plaintiff in Zidan argued that the claim had not prescribed because an insurer had misrepresented or concealed the fact that coverage existed, in violation of the penalty statute. Thus, the claim asserted was a third-party claim and not a claim by an insured against his own insurer. None of the cases cited by Evanston analyze the basis for the ruling in Zidan or use any reasoning to reach the conclusion that the one-year prescriptive period is equally applicable when an insured asserts a bad faith claim against its insurer. Instead, they simply rely upon the conclusion reached in Zidan and fail to cite any other Louisiana appellate court decisions that might be relevant.
“The proper prescriptive period to be applied in any action depends upon the nature of the cause of action.” It is logical that the claim by a third-party to an insurance contract against an insurer would be classified as a tort and subject to the one-year prescriptive period for delictual actions, but it is not logical that a first-party claim, that is, a claim by an insured against its insurer, would be classified as a delictual claim. A first-party claim arises out of the relationship created by the insurance contract and, therefore, is either contractual or quasi- contractual in nature. Indeed, Section 1973 “recognizes the jurisprudentially established duty of good faith and fair dealing owed to the insured, which is an outgrowth of the contractual and fiduciary relationship between the insured and the insurer.” Both contractual and quasi-contractual claims are classified, under Louisiana law, as personal actions subject to a liberative prescription of ten years.
Second, at least two Louisiana appellate court decisions have applied a ten-year prescriptive period to Section 1892 claims, one of which came out of the same circuit that decided the Zidan case. In Cantrelle Fence & Supply Co. v. Allstate Ins. Co., 550 So.2d 1306, 1308 (La.App. 1 Cir.1989), writ denied, 559 So.2d 123 (La.1990), the court said: “Finding no other prescriptive period specifically established for La. R.S. 22:658 [now 22:1892] actions, we apply the prescriptive period of 10 years, established by La. C.C. art. 3499.” Similarly, in We Sell Used Cars, Inc. v. United Nat’l Ins. Co., [30,671 (La.App. 2 Cir. 6/24/98), 715 So.2d 656], the court held that an insured’s claim for penalties and attorneys’ fees under La. R.S. 22:658 [now 22:1892] was ten years. The Louisiana Supreme Court has stated that “[t]he conduct prohibited in LSA-R.S. 22:658(A)(1) [now 22:1892] is virtually identical to the conduct prohibited in LSA-R.S. 22:1220(b)(5) [now 22:1973].” Evanston has provided no justification for why virtually identical conduct should be subject to a one-year 11 prescriptive period under one penalty statute but subject to a ten-year prescriptive period under another penalty statute.
With these two critical distinctions in mind, the Court declines to follow the Zidan line of cases and concludes that a ten-year prescriptive period applies to Technical’s Section 1973 bad faith claim against Evanston.
We agree with the reasoning of the court in Aspen Specialty Insurance Co., that the
facts in Zidan are distinguishable, as the plaintiff in that case was a third-party
claimant and not a party to the contract of insurance at issue. Thus, it was
appropriate in Zidan to apply the one-year prescriptive period. Likewise, we find
the federal cases of Ross v. Hanover Insurance Co., 09-3501 (E.D. La. 2009) and
Brown v. Protective Life Ins. Co., 353 F.Supp.2d 739 (E.D. La. 2004), unpersuasive
because they too erroneously relied on Zidan to apply the one-year prescriptive
period.
Similarly, we find our earlier reliance on Labarre, which held bad faith claims
were subject to a one-year prescriptive period was also misplaced, and find the
reasoning set forth in that case’s dissenting opinion to be a more accurate application
of the law.
Starr relies on Manuel v. Louisiana Sheriff’s Risk Management Fund, 95-406
(La. 11/27/95), 664 So.2d 81, where the court addressed whether the source of the
duty to avoid bad faith was the insurance contract or the statute. Starr argues the
“bad faith statute ‘establishes penalties for the commission of certain acts, none of
which are covered in the contract.’” Id. at 84. Starr further argues the court in
Manuel concluded “the subject matter of the statute is unrelated to that of the
contract.” Id.
Initially, we note Manuel did not address the issue of prescription, but rather
addressed whether application of the provisions of the bad faith statute impaired the
insurance contract. The court specifically found the application of La.R.S. 22:1220 12 [now La.R.S. 22:1973] “does not impair the contract.” Id. Further, there may be
instances where the duty the insurer allegedly violates is one based in tort, i.e., an
abuse of the investigative process that violates a plaintiff’s right to privacy,
misrepresentations or undue influences to force the plaintiff to settle, something that
goes beyond the four corners of the insurance contract. However, in this case the
bad faith alleged was Starr’s unconditional tender of only $45,000.00, a sum not
even sufficient to cover Plaintiff’s medical expenses. The obligation to insure
Plaintiff from the harm suffered in the accident is an outgrowth of the contractual
and fiduciary relationship of good faith required of the insurer in its dealings with
its insured. This obligation clearly stems from the four corners of the insurance
contract. As such, it is a duty imposed on the insurer based in contract. Moreover,
as Plaintiff points out the Louisiana Supreme Court in Sultana Corp. v. Jewelers
Mutual Insurance Co., 03-0360, p. 8 (La. 12/3/03), 860 So.2d 1112, 1118, noted
“the principle that an insurer’s duty of fair dealing emanates from the contractual
and fiduciary relationship between the insured and insurer. See Manuel v. Louisiana
Sheriff's Risk Management Fund, 95-0406 (La. 11/27/95), 664 So.2d 81.” The court
relied on its previous decision in Manuel for the proposition that the duty of good
faith derives from the contact of insurance.
The nature of the duty breached determines whether the action is in tort or in
contract. Roger v. Dufrene, 613 So.2d 947 (La.1993). “The classical distinction
between ‘damages ex contractu’ and ‘damages ex delicto’ is that the former flow
from the breach of a special obligation contractually assumed by the obligor,
whereas the latter flow from the violation of a general duty to all persons. State v.
Murphy Cormier Gen. Contractors, Inc., 15-111, p. 10 (La.App. 3 Cir. 6/3/15), 170
So.3d 370, 380-81, writ denied, 15-1297 (La. 9/25/15), 178 So.3d 573, (citing
Harrison v. Gore, 27,254 (La.App. 2 Cir. 8/23/95), 660 So.2d 563, writ denied, 95- 13 2347 (La. 12/8/95), 664 So.2d 426). In this case, Plaintiff’s “bad faith” claims are
derived from the obligations Starr assumed by nature of the insurance contract
between the two parties--a duty the Louisiana Supreme Court stated “is an outgrowth
of the contractual and fiduciary relationship between the insured and insurer.”
Theriot, 694 So.2d at 187. Accordingly, the ten-year prescriptive period applies, and
the trial court erred in dismissing Plaintiff’s bad faith claims.
For the foregoing reasons, on rehearing we reverse our earlier ruling,
affirming the trial court’s judgment holding the one-year prescriptive set forth in
La.Civ.Code art. 3492 is applicable to Plaintiff’s bad faith claims. We find the UM
insurer’s duty of good faith arises out of the contract of insurance between the two
parties; and, thus, is subject to the ten-year prescriptive period of La.Civ.Code art.
3499. Accordingly, the trial court’s judgment finding Plaintiff’s bad faith claims
have prescribed is reversed and the case remanded for further proceedings.