Article 3492 of the Louisiana Civil Code governs the time period in which a “delictual action” – an action that is considered to be tortious or causing harm to someone’s rights or property – may be filed in Louisiana. Article 3492 provides that “[d]elictual actions are subject to a liberative prescription of one year.” This prescription (referred to in nearly all other states as a Statute of Limitations) begins to run the day injury or damage is sustained. La. Civ. Code Art. 3492.
With a one-year prescriptive period to file suit in Louisiana for property damage actions, an issue often arises regarding the timing of adjustment of subrogation claims. Due to delays in claim reporting, lengthy investigations, and thorough adjustment processes (among other reasons), insurers may not have made a payment to the insured – a fundamental aspect of any subrogation claim – prior to the expiration of Louisiana’s one-year prescriptive period. This can be especially true in complex commercial claims. As there is technically no claim to “subrogate” if payment has not been made to the insured, subrogation attorneys have historically been pinched between a rock and a hard place and sometimes forced to abandon otherwise valid subrogation claims due to the lack of payment within the one-year period.
In Corley Enterprises of Louisiana, Inc. v. Bear Creek Saloon, Inc., the court addressed this issue and provided an avenue for “subrogation plaintiffs” to bring a claim after the one-year prescriptive period, albeit with some limitations described further below.
Under the principle of subrogation, the insurer stands in the shoes of the insured and acquires the right to assert the actions and rights of the plaintiff. Louisiana Farm Bureau Casualty Insurance Company v. Burkett, 2018-0468 (La. App. 1st Cir. 11/2/18), 266 So. 3d 908, 911, citing A. Copeland Enterprises. Inc., v. Slidell Memorial Hospital, 94-2011 (La. 6/30/95), 657 So.2d 1292, 1298. Pursuant to Louisiana law, a subrogated insurer has the same right as its insured to a direct action against liability insurers of third parties. Louisiana Farm Bureau Casualty Insurance Company v. Burkett, 266 So. 3d at 911.
Prescription runs against all persons unless exception is established by legislation. LSA-C.C. art. 3467. There are exceptions, however, to this general rule: (1) LSA-C.C.P. art. 1153 allows an amending petition to relate back to the date of the original pleading; (2) LSA-C.C.P. art. 1041 allows an additional ninety days for an incidental demand; and (3) in circumstances where the parties share a single cause of action. Gallagher Bassett Services, Inc., v. Canal Insurance Company, 2016-0088 (La. App. 1st Cir. 9/16/16), 202 So.3d 1160, 1164.
Corley Enterprises of Louisiana, Inc. v. Bear Creek Saloon, Inc., 2018-1147 (La. App. 1 Cir. 2/28/19), 273 So. 3d 1236.
In the Corley case, the insured, Corley, leased the property at issue to Bear Creek Saloon to operate a restaurant and bar. On April 26, 2014, a fire started at the premises, ultimately rendering the premises and their contents a total loss. Corley filed its Petition for Damages in April 2015, alleging several premises related claims against various defendants. On July 17, 2017, nearly three years after the fire at issue and nearly two years after the expiration of the prescriptive period, Corley’s insurers ( “the Underwriters”), as subrogees to the rights of Corley, filed a Petition in Intervention against the named defendants. The Underwriters alleged that they paid benefits to Corley and, pursuant to the terms of the policy, were subrogated to the rights of Corley to obtain reimbursement as a result of the defendants’ negligence.
One of the defendants filed an exception of prescription as to the Underwriters’ Petition contending that it was not timely filed, which the trial court granted. On appeal to the First Circuit Court of Appeals, the appellate court tackled the issue of whether “an insurer’s incidental demand (petition for intervention) asserting a claim of subrogation in a suit filed by its insured, arising out of the same factual occurrence as that pleaded by the insured, and involving a single cause of action shared by the insurer and its insured, is governed by the provisions of LSA-C.C.P. art. 1041, or whether the insured’s timely filed suit serves to interrupt prescription as to the insurer’s subrogation claims against defendants.” Corley Enterprises, 273 So. 3d at 1238.
On appeal, the Underwriters relied upon the analysis provided by the Court of Appeals in Gallagher Bassett Services, Inc., v. Canal Insurance Company, 2016-0088 (La. App. 1st Cir. 9/16/16), 202 So. 3d 1160, 1164, which illustrates the exceptions codified by the Louisiana Civil Code. Specifically:
Prescription runs against all persons unless they fall within an exception provided by law. La. C.C. art. 3467. The filing of a tort suit by one party generally does not affect the running of prescription against other parties who sustained separate damages in the same accident. Louviere v. Shell Oil Co., 440 So. 2d 93, 95 (La. 1983). There are exceptions to the general rule: (1) La. C.C.P. art. 1153 allows an amending petition to relate back to the date of filing the original pleading; (2) La. C.C.P. art. 1067 allows an additional ninety days for an incidental demand; and (3) when parties share a single cause of action. Colbert v. Batiste, 2012-852 (La.App. 3 Cir. 2/6/13), 109 So. 3d 505, 507 (citing Louviere, 440 So. 2d at 93). [Emphasis added.]
Corley Enterprises, 273 So. 3d at 1238-39.
In the Corley case, the Court of Appeals determined that Corley, timely filed suit against the defendants to recover property damages resulting from the fire. Corley’s insurer, the Underwriters, subsequently intervened to recover monies paid to Corley for property damage resulting from the fire. Because the Underwriters’ petition for intervention arose from the same factual occurrence as that initially pleaded by Corley, and both Corley and the Underwriters, as Corley’s subrogated insurer, shared a single cause of action, the court found that the timely filing of suit by Corley interrupted prescription as to the intervention claims asserted by the Underwriters. Id.; see also Fair Grounds Corporation v. ADT Security Systems, 719 So. 2d at 1119.
While the one-year prescriptive period still poses some unique subrogation-related challenges, the Corley decision provides the framework for a “subrogation plaintiff” to take additional time to bring suit in instances in which the claims arise from the same factual occurrence and share a single cause of action.
