Written by: Mark P. Allain
The Louisiana Supreme Court fortified insurance agents' peremption defense in November, 2021 when it granted a defendant insurance agent's writ in Mckernan v. ABC Ins. Co., AIG Prop. and Cas. Co., Brad Bourg and Bourg. Ins. Agency., Inc., 2021-00869, p. 1 (La. 11/23/2021).
In Mckernan, the plaintiff Diane Mckernan sued her homeowner's insurer, alleging it failed to pay out the maximum amount of damages for flooding owed under her homeowner's policy, and her insurance agent, alleging professional malpractice and negligent misrepresentation claims.[1]
In response, the defendant insurance agent filed a peremptory exception under La. R.S. 9:5606, which mandates that any action against an insurance agent must be brought within one year from the date the alleged wrongful act, error, or omission was discovered or should have been discovered; and in all other cases, no later than three years after the date of the alleged wrongful act, error, or omission. Though the district court granted the agent's exception, the Louisiana First Circuit Court of Appeal reversed, ruling that the presumption that an insured is continually put on notice of the contents of an insurance policy is not applicable as between a client and her insurance agent, and thus each failure by the agent to inform Mckernan of a change in her flood coverage constituted a separate tort for the purposes of peremption.[2]
While this ruling no doubt had many insurance professionals scratching their heads, the Louisiana Supreme Court set the record straight on November 23, 2021, when it granted the defendant's writ and reaffirmed the principles set forth Serantine v. State Farm Fire & Cas. Co., 10-1108 (La. 9/3/19) and Isidore Newman School v. J. Everett Eaves, Inc., 090-2161, p.12 (La. 7/6/10).[3] Namely, the insured has an obligation to read the policy when it's received and is deemed to know the policy contents.
As made clear under the ruling, this principle applies between a client and his or her insurance agent. For this reason, an insurance agent’s failure to communicate changes in a policy to his or client, does not constitute a tort - separate, continuing, or otherwise- if the client has received a copy of the changed policy. Thus, in Mckernan, the Supreme Court reversed the First Circuit's ruling regarding the defendant insurance agent's exception and reinstated the district court's ruling sustaining it. [4]
[1] McKernan v. ABC. Ins. Co., 2020 0519, p. 1 (La. App. 1 Cir. 04/16/21).
[3] Mckernan v. ABC Ins. Co., AIG Prop. and Cas. Co., Brad Bourg and Bourg. Ins. Agency., Inc., 2021-00869, p. 1 (La. 11/23/2021).