On June 15, 2022, Governor John Bel Edwards signed into law Act No. 425, S.B. 426, named the “Allen Toussaint Legacy Act.”[1] The Act is named after the late Allen Toussaint, a famous New Orleans musician, songwriter, and producer. Toussaint was known for hits such as “Java,” “Fortune Teller,” “Southern Nights,” “Working in the Coal Mine” and “Mother-in-Law.”

After seeing drink koozies featuring Toussaint’s image sold by vendors outside of the Jazz Fest months after the artist died, Tim Kappel, an entertainment law professor at the Loyola University New Orleans, began pushing for a bill protecting the right to publicity in Louisiana.[2] Before the Act, despite the clear commercial benefit from products featuring Toussaint and other New Orleans legends like Fats Domino and Professor Longhair, the deceased musicians’ estates received no benefit from the sales nor had any power to stop the commercialization.

Act No. 425

The right of publicity is not a new concept in the United States. New York and California are leading examples of the right of publicity, particularly because those states are dense with famous individuals, who are more likely to be affected by right of publicity laws. For example, in the 1990s, the Ninth Circuit U.S. Court of Appeals found Vanna White could seek damages from Samsung for an advertisement involving a futuristic female robot turning the letters on a game show board.[3] Although the advertisement did not mention Vanna White by name, or use her actual image, the court held Samsung may have violated the law by “attempt[ing] to capitalize on White’s fame to enhance their fortune.”[4]

Act 425 creates a property right in the use of Louisiana residents’ identity for commercial purposes. The Act prohibits third party commercial use of an individual’s identity in Louisiana without written consent from the individual or the individual’s authorized representative or, if the individual is deceased, by more than 50% of the authorized representatives currently holding the right to commercialize. The Act defines an “individual” as “a living natural person domiciled in Louisiana or a deceased natural person who was domiciled in Louisiana at the time of the individual’s death.” “Identity” includes “an individual’s name, voice, signature, photograph, image, likeness, or digital replica.”

Violations can carry hefty penalties. Successful plaintiffs may recover the greater of $1,000 and the actual damages in compensatory damages, and (to the extent not duplicative of compensatory damages) payment of all profits earned from the violation. Similar to copyright infringement claims, plaintiffs must only prove the gross revenue attributable to the unauthorized use, and the defendant must prove any deductible expenses. A court may also award attorneys’ fees, costs, and expenses to the successful party, as well as equitable relief (e.g., injunctions or temporary restraining orders).

The Act carves out several exceptions, which include the “fair use” exceptions found in the Copyright Act, first amendment exceptions, and protections for works of creative expression. The Act also provides exceptions for advertisers, publishers, speakers, and others who passively transmit or distribute the commercialized material created by the third party.

The granted rights are not perpetual. Termination occurs either: (a) after 3 consecutive years of non-use by the authorized representative after the individual’s death; or (b) 50 years after the individual’s death. The Act is retroactive and will apply to individuals who died on or before the effective date of August 1, 2022. However, the Act will not apply to any alleged violations committed before August 1, 2022; also exempt are works created before this time, even if they are republished or distributed after that date. Any claim under the Act must be filed within 2 years of the alleged violation.

Future Considerations

Several interesting issues arise in response to this passage. Although Louisiana may not be dense with popstars and movie stars like New York, Louisiana does have its fair share of talented athletes. Considering the NCAA’s recent move toward permitting college athletes to profit off their name, image, and likeness, this Act will be instrumental in restricting commercialization of the Louisiana-domiciled athletes to only those authorized by the athlete themselves.

But the Act is not limited to persons in the public eye. It applies to any person domiciled in Louisiana or a deceased person that was domiciled in Louisiana at the time of death. Ordinary persons captured in videos that later go viral on social media often find their likeness plastered onto commercial products. The Act could provide some avenue to capture the monies made off of their “15 minutes of fame.” However, the Act does not provide for statutory damages and attorney fees are within the discretion of the court, which may complicate or discourage recovery by persons with limited means against unprofitable violations.

Legal scholars have expressed concern about defining identity as a property right that is “heritable, licensable, assignable, and transferrable.” Professor Jennifer Rothman at the University of Pennsylvania Carey Law School identified problematic potential for parents’ ability to transfer their children’s identity to third parties, as well as record labels, movie producers, sports leagues, and others who may pressure young, aspiring athletes and performers to assign rights to them in perpetuity.[5] Professor Rothman also questions whether identity being a property right could incur property-based liabilities. The Act specifically prohibits its property rights being subject to a security interest, material property distribution, or debt collection. However, other liabilities could compel commercialization against an individual or heir’s wishes.

Concluding Remarks

Commercialization of individual identities presents a compelling new right for Louisiana residents. How the Act operates in practice remains to be seen. The opportunity to “sign your name away” may be profitable in the short term, but could have long-standing implications if an exclusive license omits favorable termination or sunset clauses. Potential commercial licensees should further ensure that they actually have the right to make commercial use of an individual’s likeness—even if that person is an employee, a student, or has signed a general photograph release.

[1] https://legis.la.gov/legis/ViewDocument.aspx?d=1289308.

[2] James A. Smith, “An Allen Toussaint law? Attempting to ban koozies, unlicensed merchandise using likeness”, The Advocate (April 30, 2019) (available at https://www.theadvocate.com/baton_rouge/news/politics/legislature/article_5ec7233c-6bab-11e9-8279-fb05c40acaea.html).

[3] White v. Samsung Elecs. Am., Inc., 971 F.2d 1395 (9th Cir.1992), as amended (Aug. 19, 1992).

[4] Id. at 1396.

[5] Jennifer E. Rothman, “Louisiana’s Allen Toussaint Legacy Act Heads to Governor’s Desk”, Rothman’s Roadmap to the Right of Publicity (Jun. 6, 2022) (https://rightofpublicityroadmap.com/news_commentary/louisianas-allen-toussaint-legacy-act-heads-to-governors-desk/).

On June 1, 2022, the United States District Court for the Eastern District of Louisiana reminded insureds of the importance of providing early notice to their insurers of claims that may trigger coverage.

In Nucor Steel Louisiana, LLC v. HDI Glob. Ins. Co., CV 21-1904, 2022 WL 1773866, at *1 (E.D. La. June 1, 2022), at issue was whether, under Louisiana law, an insurer of a commercial general liability policy (“CGL policy”) has a duty to reimburse its additional insured’s “pre-tender” defense costs when: (a) the insurer agreed to defend the additional insured under a reservation of rights; (b) the insurer did not expressly state in its communications to the additional insured that it would not reimburse the pre-tender defense costs; and (c) the insurer learned of a potential duty to defend its additional insured from a source other than the additional insured. The Court found that the insurer was not responsible for the additional insured’s “pre-tender” defense costs.

The ruling was significant for the parties, as the additional insured’s post-tender defense costs totaled $37,067.47, while its pre-tender defense costs totaled $135,950.75. Although it appears that there may have been additional arguments to be made by the insured which were not made, the ruling serves as a stark reminder to all insureds to provide prompt notice to their insurers of claims made against them – even if the claim has not yet resulted in a lawsuit, even if the insurer has already obtained notice by other means, and even if the claim has been tendered to an indemnitor.

Insurance coverage is a highly-specialized area of the law with many nuances, and you should not navigate those waters alone. If you need assistance in reporting claims, obtaining coverage opinions, analyzing reservation of rights letters, or challenging denials of coverage, Kean Miller’s Insurance Coverage and Recovery Team is here to help. Kean Miller protects our clients’ coverage positions prior to and during the claims process by reviewing insurance policies, negotiating coverage enhancements, satisfying policy notice requirements, complying with policy terms and conditions, and documenting claims – all important steps that can avoid loss or denial of coverage and maximize your chances of insurance recovery.

In recent years many employers have implemented mandatory arbitration agreements to require that legal disputes with employees be decided by a neutral arbitrator, rather than by jury trial.  Arbitration agreements are coming under scrutiny as unfairly preventing employees from having their “day in court” and having access to jury trials – most recently with the passage of the “Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021,” which took effect March 3, 2022 and now prohibits pre-dispute agreements to arbitrate sexual harassment and sexual assault claims (unless the employee – after the claim arises – voluntarily elects to participate in arbitration).  Other legislative attempts to broadly bar the use of mandatory arbitration agreements with respect to all employment claims have been proposed in Congress but, to this point, have not gained much traction.

But it is not all doom and gloom for employers with mandatory arbitration programs – as federal Courts continue to uphold their use.  One area where arbitration agreements have been especially effective is in precluding employees from pursuing class action claims against employers, and in particular, collective action claims seeking unpaid minimum wages and overtime pursuant to the federal Fair Labor Standards Act (“FLSA”).  In FLSA cases a single employee who claims violations can bring a collective action and be granted permission by the Court to send written notice inviting past and current employees of the employer (which can number in the dozens, hundreds or even thousands – depending on the size of the employer) to join the lawsuit.  Collective action FLSA claims present significant exposure and litigation costs for employers.  However, federal Courts, including the Fifth Circuit Court of Appeals (which governs Louisiana, Texas and Mississippi) have held that mandatory arbitration agreements can be used to require one-on-one resolution of legal claims in private, single plaintiff arbitration, thereby barring the collective action strategy often favored by plaintiff attorneys in FLSA cases.

In the recent case of In re A&D Interests, Inc. 2022 WL 1315465 (5th Cir. 5/3/22), the Fifth Circuit demonstrated continued support of these principles.  A panel of the Fifth Circuit issued a writ of mandamus reversing a lower federal district court decision that permitted the plaintiffs in the case (exotic dancers who were suing the employer for minimum wage and overtime violations) to move forward with sending notices of a collective action – even though many of the claimants in the case had signed mandatory arbitration agreements that required single claimant arbitration of legal claims.  The district court ruled against the company on a technicality – finding that while the arbitration agreements explicitly precluded dancers from joining “class action” lawsuits, it did not expressly prohibit them from participating in “opt in” collective action claims brought under the federal Fair Labor Standards Act. The district court did not address the issue of whether the plaintiffs who signed the arbitration agreements would be required to arbitrate their claims, but ruled that the case could proceed as collective action in the preliminary phase of the litigation. This would have almost certainly resulted in more claimants joining the case as the result of a court approved collective action notice being sent to several current and former dancers.

By granting this relief and reversing the district court at an early stage in the litigation, the Fifth Circuit nipped the collective action in the bud by preventing notices from being sent to other current and former dancers – thereby sparing the company from the high stakes consequences and expense of litigation that might otherwise have involved scores of additional claimants.

A writ of mandamus is a remedy that is rarely granted, and is reserved for situations in which the Court of Appeals finds not only that the lower court committed an abuse of its discretion, but also concludes that special relief is required before an appeal following a final judgment in the case.   According to the Fifth Circuit:

“[i]ssuing notice [of a collective action] to those who will not ultimately be able to participate “merely stirs up litigation,’…In sum, the district court apparently recognized that the arbitration agreement would prevent the opt-in plaintiffs from ultimately participating in the collective action, but approved class notice anyways. This was not merely an erroneous exercise of discretion…it was wrong as a matter of law. Because the district court clearly and indisputably erred, mandamus relief is appropriate.”

The Fifth Circuit’s timely decision in this case re-affirms that the Court will aggressively protect the use of arbitration agreements as a means for avoiding the exposure and expense associated with collective action claims – and is certainly a boon for employers that use arbitration agreements.  However, the In re A&D Interests case also reinforces the importance of carefully worded arbitration agreements that specifically preclude employees from participating in class action and collective action claims.  Employers that want to utilize the still-valuable tool of mandatory arbitration agreements should work with closely with their legal counsel to carefully craft an effective and enforceable agreement.  Had the company in this case done so, it might not have needed the rescue that the Fifth Circuit provided.

In the recent unanimous United States Supreme Court opinion, Morgan v. Sundance, Inc., No. 21-328, 2022 WL 1611788 (2022), issued May 23, 2022, the Court abrogated existing case law and held that prejudice is not a condition of finding that a party, by litigating too long, waived its rights to stay litigation or compel arbitration under the Federal Arbitration Act (“FAA”), 9 U.S.C.A. § 1, et seq.  Morgan establishes a showing of prejudice is not required to argue that a party by its actions in either litigation or mediation has waived its rights under an arbitration agreement overruling Fifth Circuit precedent in Miller Brewing Co. v. Fort Worth Distributing Co., Inc., 781 F.2d 494 (5th Cir. 1986).  This ruling may have vast implications in the construction industry given the prevalence of arbitration agreements in most commercial construction projects.

Morgan arose in the context of an agreement to arbitrate an employment dispute when Sundance initially defended the lawsuit acting as though no arbitration existed:  Sundance filed an unsuccessful motion to dismiss and participated in an unsuccessful mediation.  Eight months after initiation of the suit, Sundance moved to stay the case and compel arbitration under the FAA.  Morgan opposed arguing Sundance waived its rights to arbitration by its inconsistent actions and had been prejudiced by those inconsistent actions.  The Supreme Court held that “[t]he Eight Circuit erred in conditioning a waiver of the right to arbitrate on a showing of prejudice.”   Morgan, 2022 WL 1611788, at *1.  The Morgan case has been remanded for the appellate court to resolve whether Sundance knowingly relinquished its right to arbitrate by acting inconsistently with that right or “determine whether a different procedural framework (such as forfeiture) is appropriate.”  Morgan, 2022 WL 1611788 at *5.

21-328 Morgan v. Sundance, Inc. (05/23/2022) (supremecourt.gov)

Defendants who delay can lose their chance to arbitrate, court rules in 9-0 decision – SCOTUSblog

U.S. Supreme Court Rejects Prejudice Requirement for Waiver of Arbitration Rights – State Bar of Texas Alternative Dispute Resolution Section Newsstand – Powered by Lexology

Supreme Court Holds that Prejudice Is Not Required to Find Waiver of Right to Arbitration – State Bar of Texas Alternative Dispute Resolution Section Newsstand – Powered by Lexology

In Helix Energy Solutions Group Inc v. Hewitt, an en banc U.S. Fifth Circuit Court of Appeals issued a 12-6 ruling last year finding that a highly paid offshore supervisor (who was paid more than $200,000 per year on a day rate basis) was entitled to overtime premium pay because he was not paid on a “salary basis” consistent with long-standing Department of Labor Regulations.

Helix Energy, with the support of amicus curiae briefing by the American Petroleum Institute, filed a petition for certiorari seeking further review of the issue, which the United States Supreme Court recently granted.

Helix, along with the API, other trade energy industry trade groups and the Attorneys General of six Republican states, argued that paying offshore supervisors on a day rate basis has been common practice in the oil and gas industry for several years, and that invalidating this practice as a method of compensating overtime exempt personnel would result in catastrophic litigation exposure for the offshore energy industry.  Under the Fair Labor Standards Act (“FLSA”) employees can sue to recover unpaid overtime premium, an equal amount of liquidated damages and attorney’s fees.  Worse yet for employers, individual employees can pursue FLSA overtime pay claims on a “collective action” basis, which, if approved by a district court, could result in a few plaintiffs and their attorneys being authorized to send notice inviting current and former employees of the employer to join (opt in) the FLSA class.

While the grant of certiorari alone does not necessarily mean that the Fifth Circuit’s decision will be overturned, the odds of that occurring appear significant. The results of the Supreme Court’s certiorari votes are not published, but under the Court’s protocols, certiorari is only granted if at least four out of the nine Justices voted in favor of Supreme court review (known as the “rule of four”).  The rule of four is an informal internal rule, and is not dictated by federal statute, formal court rules of the United States Constitution.  The court can grant review and hear oral argument even in cases where five of the nine Justices are not in favor of granting review.  So it remains possible that five of the Justices on the Court might yet vote to affirm the Fifth Circuit’s decision.

The Court’s three liberal Justices almost certainly did not vote in favor of certiorari given that the employee prevailed at the Fifth Circuit on the basis of the literal application of long-standing Department of Labor regulations that plainly require the payment of an exempt supervisor on a guaranteed salary basis (in order for them to qualify as overtime exempt).  Accordingly, it is likely that the votes to grant certiorari were cast by at least four out of the Court’s six conservative Justices – the question is whether or not five or more of these conservative Justices favor reversal of the Fifth Circuit’s decision or not.

It will be interesting to see how the Court’s conservative Justices might find a way to overturn a Fifth Circuit decision that was based on a strict construction and literal application of regulations that were issued by the Department of Labor defining the requirements of this overtime exemption –principles that are typically the hallmark of conservative jurists.

The outcome of the Hewitt case will be important to follow, as the Court’s holding will have important ramifications for employers in the oilfield and other industries that pay their highly compensated supervisors (and other overtime exempt employees) using methods other than the traditional salary basis.

The following is prepared by the Kean Miller LLP Utilities Regulation team on important topics affecting consumers of electrical power in Louisiana related to recent and current proceedings of the Louisiana Public Service Commission (“LPSC”).  For more information, please contact us at client_services@keanmiller.com

LPSC Rulemaking on Customer-Centered Options:  The LPSC has a proceeding underway to research and evaluate customer-centered options.  In the proceeding, an industrial customer trade association – – the Louisiana Energy Users Group (“LEUG”), has proposed an Industrial Customer Market Option that would provide access to off-site CHP generation, the bilateral wholesale power market and the MISO energy, capacity and operating reserve markets.  LEUG proposes the option as a means to offset some of the need for Entergy to replace aging generation fleet, and thereby help avoid or reduce costs for all ratepayers, while also helping industrials maintain competitive rates in Louisiana.

LPSC Rulemaking on Renewable Generation Options:  The LPSC has an ongoing rulemaking proceeding to consider customer options to access renewable generation.  In the proceeding, an industrial customer trade association – – the Louisiana Energy Users Group (“LEUG”), has proposed tariff options for industrial customer participation in renewable projects through “sleeve transactions” and “virtual PPAs”.

Louisiana Task Force on Climate Change: Through participation in the Power Production Committee, an industrial customer trade association – – the Louisiana Energy Users Group (“LEUG”) is pursuing interests that include long-term reliable and competitive power supply for Louisiana, exploring access to renewable power, and use of cogeneration to increase efficiencies and reduce emissions.

Electric Grid Status / Maintenance: In December 2021, the LPSC initiated a proceeding to evaluate the Louisiana electric grid regarding status, maintenance and whether there is more that could have been done and can be done to benefit Louisiana customers.  In urging the need for the evaluation, a presentation by an LPSC Commissioner showed Louisiana SAIDI / SAIFI levels at well-above national averages.

Electric Grid Resiliency / Hardening: In December 2021, the LPSC initiated a proceeding to conduct an assessment of the Louisiana utility grid infrastructure for resilience and hardening for future storm events.

Minimum Generation Capacity Obligation: In January 2022, the LPSC initiated a new rulemaking to consider whether to adopt a Minimum Physical Capacity Threshold obligation for electric generation for jurisdictional electric utilities.

Energy Efficiency:  The LPSC has issued and has under consideration a proposed new Phase II Energy Efficiency Rule that would have the LPSC take-on the implementation of programs in Louisiana rather than the utilities, including retention by the LPSC of an: (a) Administrator, (b) Energy Efficiency Manager, (c) Fiscal Agent, (d) EM&V Contractor, and (e) Fiscal Auditor.  Costs of the programs would be funded through a new Public Benefits Fee (“PBF”).  Opt-out provisions are included in the proposed rule for certain larger customers.

Entergy Storm Restoration Cost Securitization and Recovery:   Proceedings are underway at the LPSC to consider $4+ Billion of Entergy restoration costs for Hurricanes Laura, Delta, Zeta in 2020 and Winter Freeze Uri and Hurricane Ida in 2022.  In February 2022, the LPSC approved $3.1 Billion of costs to proceed to securitization financing and recovery from ratepayers including $290 million to replenish reserves for future storms.  And, proceedings are underway at the LPSC for review of an additional $1.6 Billion of costs submitted by Entergy for recovery.

LPSC Audit of Additional Fuel Adjustment Costs From Winter Freeze Uri: Audit proceedings are underway at the LPSC on $163 million of additional fuel adjustments costs incurred during the February 2021 freeze event.  The $163 million additional costs were recovered from ratepayers through the fuel adjustment, amortized over the months of April-August 2021.

Entergy Integrated Resource Plan (“IRP”):  Proceedings are underway at the LPSC on the Entergy 2023 IRP, including a stakeholder process.  The draft IRP is due in October 2022, and the final IRP is due in May 2023.  The objective of the IRP process is for the utility to provide its evaluation of a set of potential resource options that offers the most economical and reliable approach to satisfy future load requirements of the utility. However, the IRP process does not result in LPSC approval of the proposed resource plan or approval of construction or acquisition of any particular resources. Rather, LPSC consideration of resource approvals occurs in separate certification proceedings on individual proposals submitted by the utility on a case-by-case basis.

LPSC Rulemaking on Demand Response: In May 2021, the LPSC approved a new rule that emphasizes the importance of Demand Response in Louisiana and requires electric utilities to pursue Demand Response tariffs or justify why they are not.

Entergy Market Value Demand Response (“MVDR”) Tariff: In September 2020, the LPSC approved a new Entergy tariff that allows customers and aggregators to access MISO Demand Response products.

Entergy Proposed Experimental Interruptible Option (“EIO”) Tariff: In July 2021, the LPSC approved new Entergy tariffs that provide interruptible rate options for industrial customers.

Entergy Proposed Certification of 475 MW Solar Generation and Geaux Green Subscription Tariff: Proceedings are underway at the LPSC to consider an Entergy request for certification of three purchase power agreements and a build-own-transfer agreement for 475 MW of new solar generation development projects, plus a new tariff that would allow customers to purchase subscriptions in the projects.  Costs of the subscriptions would be incremental to the customer’s existing electric bills, and the subscriptions would be capped initially at 50 MW.  Subscribing customers would receive credits for market revenues, and also benefit from associated Renewable Energy Credits (“REC”), relative to their subscribed share.

Entergy Proposed Green Pricing Option (“GPO”):  In March 2021, the LPSC approved new Entergy tariffs that provide for sale of Renewable Energy Credits (“REC”).

Entergy Proposal for Distributed Generation: Proceedings at the LPSC are underway to consider an Entergy application seeking approval to deploy 120 MW of utility-owned distributed natural gas fired generation ranging in size from 100 kW to 10 MW, including a rate schedule to charge host customers for a portion of the generators as back-up power costs.

Entergy Proposal for Increase in Nuclear Decommissioning Cost Funding: Proceedings are underway at the LPSC to consider an Entergy request to increase its funding for nuclear decommissioning costs, based on evaluations for its Waterford and River Bend nuclear generation units.

Plan (“FRP”) Extension: In May 2021, the LPSC approved an extension and modification of Entergy’s FRP for annual filings and rate adjustments in 2021, 2022, and 2023, subject to settlement terms reached by Entergy, LPSC Staff and intervenors.  The settlement terms included, among other things: a 9.50% ROE; a $63 million rate reset for 2021; a 9.0-10.0% earnings bandwidth subject to a $70 million cumulative rate cap for 2022/2023; resolution of lost revenue claims from covid and hurricanes; a distribution investment cost recovery rider; and a transmission investment cost recovery rider.

LPSC Rulemaking on New Generation Deactivation Transparency Rule:  In October 2018, the LPSC issued a rule which requires electric utilities to report generation unit deactivations and retirements 120 days prior to implementation, including support for the decisions and continuing reports on units that are placed in deactivation status for possible return in the future. The final rule creates more transparency and accountability on the part of utilities.

Entergy 980 MW Power Plant in St. Charles Parish:  In December 2016, the LPSC approved Entergy’s proposal to construct a 980 MW CCGT unit located in Montz, Louisiana (near New Orleans), at a site adjacent to the existing Little Gypsy generation units.  The project was selected as a self-build project in a Request-for-Proposals (“RFP”), was estimated to cost $869 million, and went into service in 2019.

Entergy 994 MW Power Station in Lake Charles, Louisiana:  In July 2017, the LPSC approved Entergy’s proposal to construct a 994 MW CCGT unit located in Westlake, Louisiana.  The project was selected as a self-build project in a Request-for-Proposals (“RFP”), was estimated to cost $872 million, and went into service in 2020.

Entergy 361 MW Combustion Turbine in Washington Parish:  In May 2018, the LPSC approved Entergy’s acquisition of the Washington Parish Energy Center, a new 361 MW simple cycle combustion turbine (“CT”) to be constructed in Bogalusa, Louisiana by a subsidiary of Calpine Corporation (“Calpine”) for a purchase price of approximately $222 million.  Calpine had submitted an unsolicited offer to Entergy to construct the CT and sell it to Entergy for a turn-key price.  The acquisition and related assets was estimated to cost $261 million, and the unit went into service in 2020.

Under Louisiana law, uninsured/underinsured (“UM”) insurers are under strict requirements to issue “good faith” unconditional tenders of the undisputed portion of the plaintiff’s damages. These unconditional tenders are not contingent on the final disposition of the case, rather they must be paid up front and cannot be recovered in the event of a lower judgment or settlement after the fact. The amount that is required is only that which is “undisputed”, meaning that amount which the insurer does not reasonably dispute is owed to the plaintiff. When an insurer receives “satisfactory proof of loss”, it is then under a requirement to issue an unconditional tender within 30 or 60 days.[1] However, if the insurer has knowledge of a plaintiff’s pre-existing injuries/conditions that warrant a reasonable investigation, then the insurer can rely on those injuries to delay payment while it investigates the condition, or to withhold payment altogether (if warranted) without being subject to the penalties imposed by the statutes.

The current statutory bases for these requirements come from Louisiana Revised Statute § 22:1892(A)(1) and § 22:1973. These statutes “prohibit “virtually identical” conduct, and the primary difference between them is the time period allowed for payment.”[2] Whereas § 22:1892(A)(1) allows the insurer 30 days to issue payment, § 22:1973 allows the insurer 60 days.

Louisiana Revised Statutes 22:1892(A)(1) requires all insurers to pay the amount of any claim due any insured within thirty days after receipt of satisfactory proofs of loss. Louisiana’s First Circuit Court of Appeal restates the requirement as follows:

Failure to make such payment within thirty days after receipt of such satisfactory written proofs and demand therefor …, when such failure is found to be arbitrary, capricious, or without probable cause, shall subject the insurer to a penalty, in addition to the amount of the loss, of fifty percent damages on the amount found to be due from the insurer to the insured, or one thousand dollars, whichever is greater, payable to the insured, … or in the event a partial payment or tender has been made, fifty percent of the difference between the amount paid or tendered and the amount found to be due as well as reasonable attorney fees and costs.[3]

However, Revised Statute § 22:1973 requires payment “within sixty days after receipt of satisfactory proof of loss from the claimant”. Breach of this statute will subject the insurer to penalties: “in an amount not to exceed two times the damages sustained or five thousand dollars, whichever is greater” only “when such failure is arbitrary, capricious, or without probable cause.”

So, failure to tender within 30 days will subject the insurer to a penalty in the amount of an additional 50% of the total amount later found to be owed as well as reasonable costs and attorney’s fees. However, failure to tender within 60 days will subject the insurer to a greater amount which is not to exceed two times the amount of damages sustained.

Note that “[b]oth statutes are penal in nature and must be strictly construed.”[4] Louisiana law requires that statutes authorizing punitive damages be interpreted subject to strict construction.[5] Thus, as a statute authorizing penal damages, Louisiana Revised Statutes 22:1892(A)(1) is strictly construed,[6] and “this statute is applicable to a UIM claim.” [7]

However, these statutes only require that an insurer pay amounts due after a satisfactory proof of loss. The Louisiana Supreme Court held in McDill v. Utica Mut. Ins. Co. that an insurer must tender an amount that is not in dispute only when the insurer has received sufficient facts that fully apprise the insurer (1) the owner or operator of the other vehicle involved in the accident was uninsured or underinsured; (2) that he was at fault; (3) that such fault gave rise to damages; and (4) establish the extent of those damages.[8] In other words, the insurer cannot delay payment until it has acquired satisfactory proof of the exact and entire extent of the loss. Rather, whenever a portion of the amount due becomes proven beyond dispute the insurer must pay at least that portion (the amount “not in dispute”). If the insured proves these things (or if the insurer receives such proof from a different source), then “the insurer cannot stonewall the insured because the insured is unable to prove the exact extent of his general damages.”[9] The insurer is required to tender this amount “to show their good faith in the matter and to comply with the duties imposed upon them under their contract of insurance with the insured. The amount that is due would be a figure over which reasonable minds could not differ.”[10]

The elements listed above are referred to as “satisfactory proof of loss”, and in order to recover penalties, the plaintiff is required to show both that the insurer received such satisfactory proof of loss and failed to pay the undisputed amount within 30 or 60 days, but also that the insurer’s failure to pay was conducted arbitrarily, capriciously, or without probable cause.

An insured who claims penalties and attorney’s fees under this statute has the burden of proving that the insurer received a “satisfactory proof of loss” as a necessary predicate to a showing that the insurer was arbitrary, capricious, or without probable cause. Id., 437 So.2d at 827–828.[11]

In this context, arbitrary and capricious means that the insurer did not have a reasonable basis for rejecting or delaying payment. Reed v. State Farm Mut. Auto. Ins. Co.,

The sanctions of penalties and attorney fees are not assessed unless a plaintiff’s proof is clear that the insurer was in fact arbitrary, capricious, or without probable cause in refusing to pay. Block v. St. Paul Fire & Marine Ins. Co., 32,306, p. 7 (La.App. 2 Cir. 9/22/99), 742 So.2d 746, 751. The statutory penalties are inappropriate when the insurer has a reasonable basis to defend the claim and acts in good-faith reliance on that defense. Rudloff v. Louisiana Health Services and Indemnity Co., 385 So.2d 767, 771 (La.1980), on rehearing. Especially when there is a reasonable and legitimate question as to the extent and causation of a claim, bad faith should not be inferred from an insurer’s failure to pay within the statutory time limits when such reasonable doubts exist. Block, 32,306 at 8, 742 So.2d at 752. (emphasis added).[12]

Thus, if the insurer has reasonable grounds for rejecting a claim, the plaintiff cannot recover penalties.[13]

For example, investigation of a pre-existing injury affords the insurer a reasonable basis for delaying tender. In Reed v. State Farm Mut. Auto. Ins. Co., the Louisiana Supreme Court found that the UM insurer provided a reasonable timetable of as long as 15 months for tendering payment, and its decision to delay tender was not arbitrary and capricious due to concerns surrounding Plaintiff’s pre-existing medical history.[14] “Thus, the fact that State Farm subsequently tendered the full UM limits is immaterial; State Farm presented a reasonable defense for the timetable in which it tendered payment.”[15]

The question of how long the insurer can delay/withhold payment is ultimately a question of reasonableness and depends on the nature of the investigation and timeline in which it delayed/denied payment.

In Duncan v. Allstate Insurance Company, the insurer was reasonable to delay unconditional tender by approximately 7 months after questioning medical causation due to Plaintiff’s pre-existing medical history.[16]

Additionally, in Carey v. Thomas, the insurer originally paid approximately $500 in medical bills for the Plaintiff’s treatment.[17] The insurer then requested additional medical documentation for the Plaintiff’s claim. Plaintiff attempted to argue that the defendant’s failure to pay the clam was arbitrary and capricious. However, the court held that the insurer’s decision was not in bad faith as it was waiting on additional documentation from the insured.

Although a plaintiff is not required to prove to the insurer the exact extent of his damages in order to have provided an adequate proof of loss, it is also not enough for the plaintiff merely to show that he has in all likelihood suffered some damages. For the Plaintiff to succeed he must show that the insurer has received enough information for the insurer (not the plaintiff) to make a judgment on the extent of damages.

Thus, the issue in the instant case, as it was in McDill, is whether the insurer received satisfactory proof of loss; specifically, both cases address whether the insured “fully apprised” the insurer of the extent of damages occasioned by the accident. After an insurer receives notice of the claim, the basis of the claim, and the identity of the doctors involved, in order for the insurer to avoid being arbitrary or capricious, it is necessary for the insurer to determine whether there exists a legitimate basis for not paying at least what it considers to be undisputed (emphasis added).[18]

Especially when there is a reasonable and legitimate question as to the extent and causation of a claim, bad faith should not be inferred from an insurer’s failure to pay within the statutory time limits when such reasonable doubts exist. In those instances where there are substantial, reasonable, and legitimate questions as to the extent of an insurer’s liability or an insured’s loss, failure to pay within the statutory time period is not arbitrary, capricious or without probable cause.[19]

This distinction is important because the plaintiff may attempt to argue that he (the plaintiff) is not required to prove the “exact” extent of his damages (which is true). However, this is insufficient. The plaintiff may not be required to prove this to an exact number, but the plaintiff must at least give the insurer enough information[20] to make a specific determination for itself.

Note also that an insurer is not required to be satisfied by the mere allegations and contentions as represented by the Plaintiff in determining whether satisfactory proof of loss has been obtained. “A claimant’s mere contention that he has suffered a loss is not sufficient to meet the burden of showing a satisfactory proof of loss”[21] Rather, an insurer is entitled to investigate claims and perform its own analysis.

Thus, although insurer is under a strict timeline for the unconditional tender of damages, it is not required to issue an unconditional tender before engaging in a reasonable investigation of a plaintiff’s pre-existing conditions. If the plaintiff’s pre-existing conditions warrant an investigation, then the insurer is not “arbitrary, capricious, or without probable cause” in delaying/denying payment based on these facts, and penalties are not applicable.

[1] McDill v. Utica Mut. Ins. Co., 475 So. 2d 1085 (La. 1985).

[2] Cazenave v. Anpac Louisiana Ins. Co., No. CV 16-1420, 2016 WL 7368414, at *4 (E.D. La. Dec. 20, 2016).

[3] Richardson v. GEICO Indem. Co., 2010-0208 (La. App. 1 Cir. 9/10/10).

[4] Reed, 857 So.2d at 1020. Lemoine v. Mike Munna, L.L.C., 2013-2187 (La. App. 1 Cir. 6/6/14), 148 So. 3d 205, 215.

[5] “Furthermore, when a statute does authorize the imposition of punitive damages, it is subject to strict construction. International Harvester Credit, 518 So.2d at 1041; State v. Peacock, 461 So.2d 1040, 1044 (La.1984).” Ross v. Conoco, Inc., 2002-0299 (La. 10/15/02), 828 So. 2d 546, 555.

[6] “This statute must be strictly construed because it is penal in nature.” Richardson v. GEICO Indem. Co., 2010-0208 (La. App. 1 Cir. 9/10/10), 48 So. 3d 307, 314.  Citing Hart v. Allstate Ins. Co., 437 So.2d 823, 827 (La.1983).

[7] Richardson v. GEICO Indem. Co., 2010-0208 (La. App. 1 Cir. 9/10/10), 48 So. 3d 307, 314.

[8] 475 So. 2d 1085, 1089 (La. 1985).

[9] McDill v. Utica Mut. Ins. Co., 475 So. 2d 1085, 1091 (La. 1985).

[10] Id.

[11] Richardson v. GEICO Indem. Co., 2010-0208 (La. App. 1 Cir. 9/10/10), 48 So. 3d 307, 314.

[12] 2003-0107 (La. 10/21/03), 857 So. 2d 1012, 1021.

[13] “An insurance carrier must make an attempt to determine the reasonableness of a demand made upon it and the reasonableness of the amount demanded. If an insurance company has reasonable grounds for refusing to pay a claim made under a policy for uninsured motorist coverage, it will not be held liable at a later date for penalties if it is determined that the amount demanded is due and owing under an uninsured motorist policy.” Pitard v. Davis, 599 So. 2d 398, 403 (La. Ct. App. 1992).

[14] 2003-0107 (La. 10/21/03), 857 So. 2d 1012, 1023–24.

[15] Reed v. State Farm Mut. Auto. Ins. Co., 2003-0107 (La. 10/21/03), 857 So. 2d 1012, 1023–24.

[16] 01–840, pp. 8–9 (La.App. 5 Cir. 12/26/01), 803 So.2d 420, 425.

[17] 603 So. 2d 263 (La. Ct. App. 1992).

[18] Reed v. State Farm Mut. Auto. Ins. Co., 2003-0107 (La. 10/21/03), 857 So. 2d 1012, 1022.

[19] Lemoine v. Mike Munna, L.L.C., 2013-2187 (La. App. 1 Cir. 6/6/14), 148 So. 3d 205, 21.

[20] The plaintiff is not under a strict requirement to provide this information to the insurer, if the insurer obtains this information on its own or through another source, that will be sufficient to begin the clock.

[21] Marie v. John Deere Ins. Co., 1996-1288 (La.App. 1 Cir. 3/27/97) 691 So.2d 1327.

Russia’s unprovoked attack on the Ukraine has not been restricted to land. Ukrainian tech resources have been hit by cyber-attacks, particularly against its government and banking systems in a coordinated effort by Russia’s military intelligence unit.[1] Several websites of Ukrainian government departments and banks were hit with distributed denial of service attacks (DDoS), which is a form of attack where threat actors overwhelm a website with traffic until it crashes. While the conflict has not yet spread to western countries, U.S. businesses may still feel the impact due to their reliance on Ukrainian IT services and from potential retaliatory attacks from Russia due to significant U.S. sanctions.

Though not having a physical presence in the Ukraine, many U.S. companies use outsourced Ukrainian IT services. According to the Ukraine’s Ministry of Foreign Affairs, 1 in 5 Fortune 500 companies rely on the Ukraine’s IT outsourcing sector.[2]  Ukraine’s tech workers support banking, insurance, and financial operation services around the world. To mitigate potential impacts, software and technology providers are working to move services and workers elsewhere. For example, SAP SE has closed its office in Kyiv and website development platform Wix.com Ltd. moved its workers to Poland and Turkey last week.[3] However, technology resources such as code, designs, and documentation may still be vulnerable.

The Department of Homeland security has yet not advised of any specific or credible threats to the U.S. homeland, but the Cybersecurity & Infrastructure Security Agency (CISA) published a “Shields Up” memo advising U.S. businesses to prepare to respond to disruptive cyber activity.[4] Though Russia’s cyber attack efforts have primarily targeted the Ukrainian government and critical infrastructure, growing support for Ukraine in the US and other NATO countries increases the likelihood of Russian cyber-attacks against businesses, governments, and critical infrastructure of those allies. Attacks are also a possibility as a retaliation for the heavy sanctions being levied against Russia by the U.S., with direct targets being critical infrastructure.

All businesses, large and small, should remain vigilant during this time of heighted risk and vulnerability. As part of its support of U.S. businesses, CISA has compiled a catalog of free cybersecurity services and tools, which include very helpful resources and up to date information about the latest attack and defense strategies. Certain additional steps recommended by CISA and industry leaders can help shore up vulnerabilities and lower the risk of a cyber incident, as well as renew the commitment as a business to maintaining a strong cybersecurity program. These steps include but are not limited to:

  1. Hope for the best, plan for the worst. It is near certain that all U.S. businesses will be the victim of an attempted cyber-attack at some point (whether that be from Russia or other threat actors); what is in question is the level of success. Businesses should check with their cloud providers to ensure all protections are enabled, even if there is increased cost. Ensure that data is being regularly backed up to minimize business interruption from an encryption event or if data is wiped. If it has been a while since you have updated your cyber incident response plan, review the plan to ensure it is up to date and conduct tabletop exercises to run through how a cyber event will be handled.
  2. Take proactive steps to reduce the likelihood of a cyber event. Review policies regarding remote access, authentication requirements, and secure controls to ensure they are up to date and consistent with best practices. Ensure that all software is updated to the latest version, and that IT has disabled ports and protocols that are not essential for a business purpose. Particularly if your organization or your critical service providers work with Ukrainian organizations, take extra care to monitor, inspect, and isolate traffic from those organizations. IT should also take additional care to monitor unexpected traffic from overseas.
  3. Conduct trainings with employees. Regular cyber security trainings with employees should already be a part of your business’ practices for employees with access to company networks and data. However, the heightened risk presented today merits additional reminder trainings, as well as targeted trainings about how to best protect business computer systems by employees with significant access.

[1] Ryan Browne, “The world is bracing for a global cyberwar as Russia invades Ukraine”, CNBC (Feb. 25, 2022) (https://www.cnbc.com/2022/02/25/will-the-russia-ukraine-crisis-lead-to-a-global-cyber-war.html).

[2] Edward Segal, “Why The Impact of Russian Cyberattacks On Ukraine Could Be Felt Around the World”, Forbes (Feb. 23, 2022) (https://www.forbes.com/sites/edwardsegal/2022/02/23/the-impact-of-russian-cyberattacks-in-ukraine-could-be-felt-around-the-world/?sh=649680cb56b2).

[3] Isabelle Bousquette and Suman Bhattacharyya, “Ukraine’s Booming Tech Outsourcing Sector at Risk After Russian Invasion,” The Wall Street Journal (Feb. 24, 2022) (https://www.wsj.com/articles/ukraines-booming-tech-outsourcing-sector-at-risk-after-russian-invasion-11645749755).

[4] “Shields Up”, CISA (last accessed Feb. 25, 2022) (https://www.cisa.gov/shields-up).

The U.S. Interior Department recently announced that it is awarding Louisiana with about $47 million to be used to plug and abandon the orphaned well sites throughout the state.  This is part of phase one of many under the Infrastructure Investment and Jobs Act, which was signed by President Biden in November.

Louisiana first turned its attention to orphaned well sites in 1993, when the Louisiana Department of Natural Resources (LDNR) created the Louisiana Oilfield Site Restoration Program (“OSR Program”) to address a growing number of unrestored orphaned oilfield sites throughout the state.  See La. Rev. Stat. Ann. § 30:80, et seq. (known as “Louisiana Oilfield Site Restoration Law”).   Under the statute, an oilfield site is orphaned when it “has no continued useful purpose for the exploration, production, or development of oil or gas” and has been declared to be orphaned by the Assistant Secretary of the Office of Conservation.  La. Rev. Stat. Ann. § 30:82(9).  To be declared orphaned, either (1) no responsible party can be located, or the responsible party cannot financially undertake the plugging and abandonment, and (2) the well was not closed or maintained properly under the regulations or is dangerous or potentially dangerous to public health, the environment, or an oil or gas strata.  La. Rev. Stat. Ann § 30:91(A).  Essentially, the State takes on the plugging and abandonment obligations of a well when the responsible party is unresponsive or no longer financially viable.  But the State does not take ownership of the orphaned well.  Instead, the last operator of record remains the owner. La. Rev. Stat. Ann. § 30:93(A).

Since launching the OSR Program in 1993, the Louisiana Department of Natural Resources has plugged about 3,300 wells, [1] and the OSR Program aims to undertake approximately 46 well sites per year.[2]  Louisiana’s list of orphan wells currently sits as 4,605. State officials are certain that there are many more undocumented orphaned wells across the state, a number that can likely increase due to the impacts of lower oil prices (i.e., bankruptcies and downsizings of smaller oil companies).

Funding from the federal government under the Infrastructure Investment and Jobs Act will significantly help tackle the growing number of orphaned well sites throughout the state.  Louisiana is expected to receive a total of at least $111.4 million in later phases, which is estimated to cover only about 25% of the State’s documented orphan wells.

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[1] State of Louisiana Department of Natural Resources, Office of Conservation, Oilfield Site Restoration (OSR) Program, http://www.dnr.louisiana.gov/index.cfm/page/155.

[2] State of Louisiana Department of Natural Resources, Office of Conservation, OSR Program, Frequently Asked Questions, http://www.dnr.louisiana.gov/index.cfm/page/157.

In August of 2020, Louisiana Governor John Bel Edwards issued an executive order establishing emission reduction goals of reaching net zero greenhouse gas (GHG) emissions by 2050, putting the state in line with pledges made under the Paris Agreement, and by the federal government, 25 other states, and hundreds of companies in the private sector.[1] Approximately a year and half later, Governor Edwards’ Climate Initiatives Task Force has unanimously approved the state’s first ever Climate Action Plan.[2] Prior to Louisiana’s Climate Action Plan, the City of New Orleans implemented the State’s first renewable and clean energy standard. Under the local ordinance, by 2050, New Orleans’s power must be 100% emissions free.[3] The Louisiana Climate Action Plan contains 28 strategies (theoretical approaches) and 84 actions (implementation policy steps) to reduce GHG emissions across the entire state economy.[4]

The first strategy on Louisiana’s Climate Action Plan is the transformation of Louisiana’s electric grid to clean and renewable energy sources. The plan defines “clean” as energy generation that results in emission of little to zero GHGs (i.e., nuclear, biowaste, and natural gas with carbon capture) and “renewable” as naturally replenishing energy sources with zero GHG emissions (i.e., solar, wind, hydropower, and geothermal).[5] The first action in pursuit of the shift towards a clean and renewable power grid is the adoption of a Renewable and Clean Portfolio Standard (RCPS).

A Renewable and Clean Portfolio Standard (“RCPS”) is a law or regulation that seeks to reduce GHG emissions by imposing requirements associated with electricity generation. According to the Plan, Louisiana’s RCPS would require electricity used in Louisiana to be generated from an increasing percentage of renewable or clean sources. In addition to Louisiana utilizing utility-scale solar or other more traditional renewable generation resources, two studies conducted by National Renewable Energy Laboratory (NREL) and funded by the Bureau of Ocean Energy Management (BOEM) examined the range of clean and renewable energy in the context of the Gulf of Mexico and quickly determined offshore wind power to be a viable energy source, finding offshore solar power, tidal energy, wave energy, and ocean current to all be unreasonably burdensome for the foreseeable future.[6] According to the aforementioned studies, the Gulf has the potential to generate 1,806 terawatt-hours of offshore wind energy per year—significantly greater than the current energy needs of all five Gulf states.[7]

Resultantly, in June 2021, the BOEM initiated a process that will open the Gulf to wind lease sales by 2025. However, to date, discussions with major developers of offshore wind power have focused on the need for Louisiana to make the same commitment to clean and renewable energy that New Orleans previously made so as to increase developers’ access to a larger customer base. Now that Louisiana’s Climate Action Plan has been adopted, the Climate Initiatives Task Force is set to meet again in early March to begin moving forward with the plan’s implementation.  At this time, it is unclear whether the Governor, the Louisiana Legislature, the Louisiana Public Service Commission, or other governmental entities, will take the next steps.  It will be interesting to see how the Louisiana Climate Action Plan unfolds as Louisiana moves towards carbon reduction and net zero GHG emissions goals for the future.

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[1] Exec. Order No. JBE 2020-18 (Aug. 19. 2020).

[2] Press Release, Off. of the Governor, (Jan. 31, 2022), https://gov.louisiana.gov/index.cfm/newsroom/detail/3551.

[4] Press Release, supra note 2.

[5] Climate Initiatives Task Force, Louisiana Climate Action Plan 44 (2022).

[6] See e.g. Walter Musial et al., Survey and Assessment of the Ocean Renewable Energy Resources in the US Gulf of Mexico, (2020); see also Walter Musial et al., Offshore Wind in the US Gulf of Mexico: Regional Economic Modeling and Site-Specific Analyses (2020).

[7] Walter Musial et al., Offshore Wind in the US Gulf of Mexico: Regional Economic Modeling and Site-Specific Analyses, at 33.