Written by F. Douglas Ortego

The Louisiana Supreme Court recently ruled that an insurance company can suspensively appeal the amount of the judgment representing its policy limit on behalf of itself and its insureds without posting the amount of the entire judgment, when the judgment exceeds the policy limit.

Martinez v. Am. Transp. Grp. Risk Retention Grp., Inc. arose from a 2019 motor vehicle accident in which the vehicle driven by Huberto Martinez slid off I-49 in Shreveport due to ice on the highway. [1] A short time later, a tractor trailer owned by Starr Carriers, LLC (“Starr Carriers”) and driven by Salah Dahir (“Dahir”) slid off the interstate due to the same icy condition and struck Martinez’s vehicle. Starr Carriers’ insurer, American Transportation Group Risk Retention Group, Inc. (“ATG”) carried a $1 million policy limit. Martinez sued ATG, Starr Carriers, and Mr. Dahir the driver.  Three passengers in his car filed a separate suit, which was consolidated for trial.

Martinez settled before trial. The jury awarded the passengers of $2,802,054.66 in total damages, plus legal interest and $55,207.88 in costs. The judgment on the verdict, however, did not delineate fault or set forth ATG's policy limits.

Defendants filed for a suspensive appeal. The trial court set the suspensive appeal bond at $2,802,054.66, plus additional interest as “the amount of the judgment, including the interest allowed by the judgment to the date the security is furnished,” but did not reflect ATG’s policy limits.

ATG furnished an appeal bond in the amount of $1,429,081, representing ATG’s remaining policy limits plus interest on the entire judgment and costs. ATG then applied for supervisory review of the trial court’s ruling fixing the suspensive appeal bond. The Second Circuit denied the writ application. The Supreme Court granted ATG’s subsequent writ application and reduced the bond to the amount posted by ATG.

In upholding ATG’s bond, the Supreme Court held that La. Code of Civ. P. article 2124(B) does not require an insurer “with contractually enforceable limits of liability, to post funds in excess of its policy limits to secure a suspensive appeal for its portion of the judgment.”

The Court reasoned that absent bad faith, it is “axiomatic” in Louisiana law that an insurer cannot be liable for more than its policy limits. Thus, to require ATG “to post a bond in excess of its policy limits as security for a suspensive appeal would render meaningless the limits of the insurance policy, which is a critical term of an insurance contract.”  To hold otherwise would, in the Court’s view, violate the contract clause in Louisiana’s Constitution that prohibits the enactment of any law “impairing the obligation of contracts.” La. Const. Art. 1, § 23.

The Court noted that the trial court should have made clear in its order granting the Defendants’ suspensive appeal the amount of security required to be posted by ATG in accordance with the limitations of its policy obligations. The Court’s decision recognized that its holding left unresolved the core issue of “what happens when an insurer's policy limit, and therefore the amount that it is required to post as security for a suspensive appeal, does not cover the entire amount of the judgment.” The Court’s solution, rather than reducing the suspensive appeal amount for all Defendants, was to “permit Defendants to suspensively appeal up to the amount of the policy limit, and devolutively appeal the remainder of the case for the insureds.” That solution conforms to the usual remedy for converting an insufficient suspensive appeal to a devolutive appeal, instead of dismissing the appeal altogether.

It is now clear that under Louisiana law, an insurer is permitted to suspensively appeal the amount of the judgment representing its policy limit on behalf of itself and its insureds without posting the amount of the entire judgment when the judgment exceeds the policy limit.

The Court did add one caveat to its ruling, however. In keeping with the strong duty insurers have to their insureds under Louisiana law, the Court held that under an insurer’s “duty to defend in good faith, an insurer should make a reasonable effort to help the insured protect his property pending the outcome of the appeal.”[2] The question of what lengths an insurer would need to go to, in order to protect its insured’s property in line with that caveat, remains unresolved at this time.