On October 22, 2019, the Louisiana Supreme Court issued its opinion in the Smith v. Citadel Insurance case. Kean Miller’s Insurance Recovery Team assisted several amici in presenting arguments to the Court in the case.
In Smith, the Louisiana Supreme Court held that an insured’s bad faith claims against its insurer are governed by a ten-year prescriptive period, instead of a one-year prescriptive period. In Louisiana, prescription (which is similar to the common law “statute of limitations”) is a mode of barring claims as a result of a failure to timely file a lawsuit on those claims.
The Smith decision is a big win for Louisiana insureds. The ruling provides insureds sufficient time to discover their insurer’s bad faith acts or omissions and assert their rights, and it eliminates the often costly, complex, and fact-intensive litigation that previously ensued when some courts applied a one-year prescriptive period.
In ruling that an insured’s bad faith claims against its insurer are governed by a ten-year prescriptive period, the Smith Court relied heavily on Kelly v. State Farm (a case argued and briefed by Kean Miller’s Insurance Recovery Team) and reiterated that “in every case, the insurance company is held to a high fiduciary duty to discharge its policy obligations to its insured in good faith.”