On May 12, 2016, the U.S. Occupational Safety and Health Administration (“OSHA”) published a rule that required a “reasonable procedure” for employees to report work-related injuries and illnesses and prohibited retaliation against employees who report such injuries or illnesses. The regulations defined an unreasonable procedure as one that deterred or discouraged a reasonable employee from accurately reporting a workplace injury or illness. Although no portion of the rule itself expressly prohibited post-accident drug and alcohol testing, commentary accompanying the rule stated drug testing policies should limit post-incident testing to situations in which employee drug use is likely to have contributed to the incident and for which the drug test can accurately identify impairment caused by drug use. Since then, there has been great uncertainty among employers as to when post-accident drug and alcohol testing policies and procedures could be applied. Last week, on October 11, 2018, OSHA issued a memorandum clarifying that the Department’s position is that the May 2016 rule does not prohibit post-incident drug testing. The memorandum stated that most instances of workplace drug testing are permissible under the rule and then listed the following as examples: (a) random drug testing; (b) drug testing unrelated to the reporting of a work-related injury or illness; (c) drug testing under a state workers’ compensation law; (d) drug testing under other federal law, such as a U.S. Department of Transportation rule; and (e) drug testing to evaluate the root cause of a workplace incident that harmed or could have harmed employees. Of course, the memorandum included the caveat that the testing must include all employees whose conduct could have contributed to the incident, not just employees who reported injuries. Assumedly, doing the latter could still subject the employer to retaliation. To read the complete memorandum, click here.
The United States District Court for the Western District of Louisiana recently relied on Louisiana Revised Statutes 9:2779 in holding unenforceable a mandatory forum selection clause in a construction contract. Pittsburg Tank & Tower Maintenance Co., Inc. (“Pittsburg”) contracted with the Town of Jonesboro (the “Town”) to perform maintenance and repair work on an elevated water tower in the Town. Pittsburg issued to the Town its standard form contract, which contained a provision stating, “This contract is governed by the laws of the Commonwealth of Kentucky and any claim should be filed with the Commonwealth of Kentucky.”
After becoming dissatisfied with the work, the Town filed suit in Louisiana state court. After having the case removed to federal court, Pittsburg moved to have the Court transfer the case to the Western District of Kentucky based on the contract’s forum selection clause, quoted above. Although acknowledging that forum selection clauses are generally enforceable, the Court found that extraordinary circumstances prevented its enforceability here.
The Court relied on R.S. 9:2779 for its holding, which provides in pertinent part:
The legislature finds that, with respect to construction contracts . . . for public and private works projects, when one of the parties is domiciled in Louisiana, and the work to be done and the equipment and materials to be supplied involve construction projects in this state, provisions in such agreements requiring disputes arising thereunder to be resolved in a forum outside of this state or requiring their interpretation to be governed by the laws of another jurisdiction are inequitable and against the public policy of this state.
In summary, R.S. 9:2779 generally provides that for “construction contracts” where the work is in Louisiana and one of the parties to the contract is “domiciled” in Louisiana, a forum selection clause that selects a forum outside of Louisiana or a choice of law provision that selects the law of another state is against public policy and will not be enforceable.
In the Pittsburg Tank case, there was no doubt that one of the parties, the Town of Jonesboro, was a Louisiana domiciliary and that the work was performed in Louisiana. Thus, after finding that the contract was, in fact, a “construction” contract, the Court determined that the case should not be transferred because the clause was unenforceable as against Louisiana’s public policy.
Although under Louisiana law, parties may generally agree that actions involving a contract be brought in another state or be subject to the law of another state, for contracts related to a construction project in Louisiana, R.S. 9:2779 may make their agreement unenforceable. Any contractor or owner wishing to perform construction work in Louisiana must be aware of R.S. 9:2779’s implications in order to appropriately set its expectations for the proper forum and applicable law in the undesirable event of a dispute.
 Town of Jonesboro v. Pittsburg Tank & Tower Maintenance Co., Inc., No. 17-1589, 2018 WL 3199476 (W.D. La. Feb. 12, 2018).
 The Court spends a substantial portion of the opinion addressing whether Pittsburg’s scope of work should be considered a “construction” or “maintenance” contract. The Court used the “principal value” test to determine that the contract was a “construction” contract such that R.S. 9:2779 applies.
By the Data Security & Privacy Team
On September 27, 2018, Gov. John Bel Edwards declared October to be Cybersecurity Awareness Month in the State of Louisiana, signing a Proclamation in front of members of the Louisiana Cybersecurity Commission. By signing this Proclamation, Gov. Edwards is simultaneously kicking off a Cybersecurity Awareness Campaign promulgated by the Louisiana Cybersecurity Commission. The goal of the Louisiana Cybersecurity Commission, the Proclamation, and Cybersecurity Awareness Month Campaign is to enhance and improve Louisiana’s cybersecurity ecosystem. Gov. Edwards stated at the Proclamation signing that, “There is no doubt that Louisiana is a leader in cybersecurity.” He emphasized that “No state has more protections for its citizens and its businesses than Louisiana.” Gov. Edwards referenced upcoming proposed legislation concerning cybersecurity protections for Louisiana citizens and businesses during his remarks following the Proclamation signing. The Proclamation signing and the formation of the Louisiana Cybersecurity Commission follow Louisiana’s recently updated data breach notification laws that went into effect earlier this year. Copies of both the Proclamation and Cybersecurity Awareness Campaign Model can be found on the Louisiana Cybersecurity Commission’s website found here.
Kean Miller attorneys will continue to update their clients on relevant cybersecurity news and changes in any relevant legislation and regulations. If you have any questions concerning this, please contact Sarah Anderson and Jessica Engler from Kean Miller.
In a recent Supreme Court decision involving the Fourth Amendment, Justice Roberts noted that there are 396 million cell phones accounts in the United States for a nation of only 326 million people. The cell phone provides numerous functions including access to contacts, data, information and the internet. Some studies suggest people check cell phones every ten minutes and are less than five feet away from the phone most of the time. It seems the cell phone has become an integral part of daily living. While the development may be productive in terms of the overall access to information, it also creates certain risks that employers should consider.
In many instances companies operate on a platform of bring your own device to work (“BYOD”). Employers should consider what business information may be available to that employee on his or her personal cell phone. An employer is vulnerable if an employee is connected to the employer’s computer system and can access valuable confidential information through the cell phone. The risk is that the employer’s business information may “walk” out the door with the employee. Moreover, if the information gets comingled with the employee’s personal information, there could be a problem in terms of “unscrambling” or wiping the phone on departure. Certainly one approach is to not permit the employee to have access to the information on the phone. However, an employee may need access in order to perform his or her job responsibilities. Employers should consider whether to have a cellular phone policy that addresses how employees should use the phone, any issues regarding expectation of privacy, ownership of information, and wiping upon termination.
Additionally, a cell phone may cause distracted driving. Whether ringing, beeping, vibrating – the cell phone may cause drivers to lose focus. A driver’s perceived belief that the ever important text/email may have just come in can create an overwhelming desire to check/respond. To the extent an employee is on the road, the temptation to text, call or open an app may create serious risks. Distracted driving is alleged to be a contributing factor in 80% of the automobile accidents on the road today. Employers need to recognize this risk and be proactive in addressing it. Employers should consider having a policy regarding the use of cell phones while driving.
Cell phones are integrated into our daily activities – just look around at any restaurant, getting on an elevator, or at a stop light. No matter the time, place or circumstances, staying connected seems to be of utmost importance. A cell phone is certainly very beneficial in terms of facilitating access to people and information. However, cell phones may also bring about certain risks. Employers may want to consider the risks which that may be applicable to it and any policies to put in place to address them.
The Industrial Tax Exemption Program (ITEP) is a key tax incentive for manufacturers looking to expand or build facilities in Louisiana. The property tax exemption is authorized in the Constitution and is administered by the Louisiana Department of Economic Development (LED). Historically, exemption contracts were approved at the state level and manufacturers enjoyed ten years of 100% property tax exemption on eligible capital expenditures. In 2016, Gov. John Bel Edwards issued two Executive Orders that upended the program by making local approval of the exemption a prerequisite to LED application and consideration, and reducing the number of years and percentage of exemption on eligible capital expenditures.
In early 2018, LED proposed revisions to reinstate much of the old ITE program. Manufacturers once again enjoy ten years of exemption, but only as to 80% of property tax liability. Additionally, LED regained initial approval authority, with local governmental entities having a short window for an “up or down” vote on any LED-approved project. This allows for a more efficient process as applications will receive automatic approval if the local governmental entities take no action within the specified time.
The last few weeks have been significant for ITEP: the Board of Commerce and Industry approved the first batch of exemption contracts under the new rules at its August 29th meeting. And, on September 19th, the Louisiana Tax Commission approved new rules regarding reporting exempt property, including manufacturing establishments with ITEP contracts. Parish assessors are now required to classify ITEP property on their tax rolls and report the start/end date of any exemption contract, the fair market value and assessed value of exempt property, the exemption percentage and value of the exemption contract, and the amount of property tax subject to exemption. Finally, LED has gone completely digital, and ITEP applications must now be submitted online through the Fastlane system.
Indemnity provisions are widely used in the energy industry as a method of contractually apportioning liability between parties. These provisions are a staple in Master Service Agreements and can be unilateral or mutual. Often, agreements contain knock-for-knock provisions where each party assumes responsibility for claims made by its own employees or subcontractors. When disputes arise, indemnity provisions are often the first thing reviewed, because of their potential to dramatically affect the liability (or lack thereof) of one of the contracting parties. But many states limit contractual indemnity agreements, particularly those that attempt to indemnify a party for its own negligence. And four states – Louisiana, New Mexico, Texas, and Wyoming – have “anti-indemnity” acts specific to oilfield contracts.
While the primary purpose and language of these Oilfield Anti-Indemnity Acts are similar, there are some significant differences between them. Some of the biggest differences relate to what agreements are covered, the treatment of property damage claims, and whether additional insured/waiver of subrogation provisions are permitted to cover indemnity obligations. Given the importance of these indemnity provisions, oil and gas transactional and litigation attorneys should be well-versed in the laws governing them.
A brief treatment of the four Oilfield Anti-Indemnity Acts follows, but there are various nuances to each and years of case law that are beyond the scope of this article. Contract drafters and litigators alike should familiarize themselves with the statute for the state in which their contract work is performed. This is particularly important with Anti-Indemnity Acts because courts typically reject attempts to avoid such acts through choice-of-law provisions selecting more favorable state laws or general maritime law.
Texas Oilfield Anti-Indemnity Act
The Texas Oilfield Anti-Indemnity Act (“TOAIA”) applies to agreements pertaining to a well for oil, gas, or water or to a mine for a mineral. The TOAIA applies not only to agreements for production activities at the wellhead, but also to agreements for collateral services including furnishing or renting equipment, incidental transportation, and other goods and services furnished in connection with such services. But the TOAIA expressly excludes construction, repair, and maintenance of pipelines.
The TOAIA voids indemnification obligations that purport to indemnify a person against loss or liability for damage that (1) is caused by or results from the sole or concurrent negligence of the indemnitee; and (2) arises from (a) personal injury or death; (b) property injury; or (c) other loss, damage, or expense that arises from personal injury, death or property injury.
The TOAIA is the only Oilfield Anti-Indemnity Act that expressly allows limited insurance coverage of indemnity agreements that are otherwise void under the Act. With respect to a mutual indemnity obligation, the indemnity obligation is limited to the extent of the coverage and dollar limits of insurance or qualified self-insurance each party (as indemnitor) has agreed to obtain for the benefit of the other party (as indemnitee). If the indemnity obligation is unilateral, the amount of insurance required may not exceed $500,000.
Additionally, for any indemnity provision to be valid in Texas, Texas case law requires that it comply with fair notice and conspicuousness requirements. Generally the contract must clearly establish the indemnitor’s express intent to indemnify for the indemnitee’s own negligence, and the indemnity language must be conspicuous enough to put a reasonable person on notice that the obligation provides indemnity for the other party’s own negligence. For this reason, many Texas-based indemnity provisions are written in some combination of all capital letters, bold, and underline – or all three.
Louisiana Oilfield Anti-Indemnity Act
The Louisiana Oilfield Anti-Indemnity Act (“LOAIA”) applies to agreements pertaining to a well for oil, gas, or water, or drilling for minerals. The LOAIA prohibits indemnification for an indemnitee’s own negligence or fault that causes death or bodily injury to another person. Unlike the other three Oilfield Indemnity Acts, the LOAIA does not prohibit indemnification for property damage.
The LOAIA also differs from the TOAIA because it expressly prohibits agreements requiring waivers of subrogation, additional named insured endorsements, or any other form of insurance protection that would frustrate or circumvent the prohibitions on defense and indemnity agreements. In other words, contracting parties cannot avoid the LOAIA by merely requiring insurance coverage to support indemnity obligations. But, there is an important jurisprudential exception to this insurance prohibition, known as the Marcel exception. Under the Marcel exception, the LOAIA will not invalidate an indemnity provision and additional insured coverage if the party being indemnified pays the premiums for the insurance and no material part of the cost of the insurance is borne by the party procuring the coverage.
New Mexico Oilfield Anti-Indemnity Act
The New Mexico Oilfield Anti-Indemnity Act (“NMOAIA”) also applies to oilfield services, but its application is limited to production activities at the well head and does not cover all services rendered in connection with the well. New Mexico case law has provided that the NMOAIA does not apply to the distribution, processing, or transportation of oil or gas. Unlike the LOAIA, the NMOAIA is not expressly limited to death or bodily injury, but, instead applies generally to “loss or liability for damages.”
The NMOAIA also prohibits additional insured provisions or waivers of subrogation that would have the effect of imposing a duty of indemnification on the primary insured party.
Wyoming Oilfield Anti-Indemnity Act
The Wyoming Oilfield Anti-Indemnity Act (“WOAIA”) applies to agreements pertaining to any well for oil, gas or water, or mine for any mineral. The WOAIA prohibits agreements that purport to relieve the indemnitee from loss or liability for his own negligence. It also applies to death or bodily injury to persons, property damage, and any other loss, damage or expenses arising from death or bodily injury or property damage.
The WOAIA contains no language specifically addressing the effect of the Act on insurance coverage for an indemnity agreement prohibited under the Act. It simply states that the anti-indemnity act “shall not affect the validity of any insurance contract or any benefit conferred by the Worker’s Compensation Law . . . of this state.”
Construction Anti-Indemnity Acts
While this article specifically addresses Oilfield Anti-Indemnity Acts, practitioners are cautioned that many more states have enacted construction anti-indemnity statutes. While not specifically targeted to oilfield contracts, some of these construction anti-indemnity statutes can certainly apply to work in the energy industry. Imagine, for example, an indemnity provision in a Louisiana contract for sandblasting and painting an offshore platform. While this may or may not be a contract “pertaining to a well,” it arguably could be considered a “construction contract” under Louisiana’s definition, and the indemnity provision could be invalidated by the construction anti-indemnity act.
Like the Oilfield Anti-Indemnity Acts, these construction anti-indemnity acts vary widely from state to state and have many exceptions and nuances. And awareness of and familiarity with these statutes is also critical to adequately evaluating the viability of a contractual indemnity provision.
 Tex. Civ. Prac. & Rem. Code § 127.001, et seq.
 La. Rev. Stat. Ann. § 9:2780.
 Marcel v. Placid Oil Co., 11 F.3d 563, 569–70 (5th Cir. 1994).
 N.M. Stat. Ann. § 56-7-2.
 Wyo. Stat. Ann. § 30-1-131.
On August 29, 2018, the U.S. Court of Appeals for the Fifth Circuit dismissed an appeal for lack of appellate jurisdiction involving the issue of whether a vessel’s primary and excess insurers may limit their liabilities to the same extent available to the vessel. See SCF Waxler Marine, L.L.C. v. ARIS T M/V, No. 17-30805 (5th Cir. August 29, 2018). SCF Waxler addressed the interplay between the Louisiana Direct Action Statute, La. R.S. § 22:1269, that allows third party claimants to bring claims directly against a tortfeasor’s insurer and the U.S. Shipowner’s Limitation of Liability Act, 46 U.S.C. § 30501, a federal statute that permits a vessel owner (and some vessel charterers) to limit their liability to the post-casualty value of the vessel and the pending freight.
SCF Waxler involved an accident in which the M/V ARIS T collided with multiple vessels and facilities along the Mississippi River, allegedly resulting in damages expected to exceed $60 million. The M/V ARIS T blamed the accident on unsafe maneuvering by two tugs. The owner and operator of one of the tugs, Cenac Marine Services (“Cenac”), filed a Limitation action in defense of the claims against it seeking to limit its liability to the value of the vessels involved. Claims were filed against Cenac’s primary and excess insurers directly pursuant to the Louisiana Direct Action Statute. Cenac’s insurers filed defenses arguing that their liability, if any, was derived solely from their policies’ terms and conditions and that they were entitled to limit their liability to the extent Cenac was entitled to limit its liability to the subject vessels and pending freight.
In a motion for partial summary judgment, Claimants asked Judge Zainey to resolve whether the excess insurers could limit their liability to the value of Cenac’s insured vessel. They argued that Cenac’s insurance policies did not contain the requisite language allowing them to limit their liability vis-à-vis an injured third party (the primary insurers advised that they had no interest in the outcome of motion because their primary $1 million limits of coverage were less than the $14.6 million limitation fund posted by Cenac). Judge Zainey rejected their arguments holding that the policies in question were excess follow-form policies, and accordingly the legal question turned on the language of the primary P&I cover to which they followed form. Judge Zainey noted controlling U.S. Fifth Circuit precedent, which provides that a P&I insurer “may limit its liability to that of the vessel owner’s liability when the terms of the policy allow it to do so.”
Claimants appealed, asserting that the Fifth Circuit had jurisdiction to hear an appeal of that interlocutory order under 28 U.S.C. §1292(a)(3), which provides that appellate courts may entertain appeals from district courts’ interlocutory orders that determine the rights and liabilities of the parties to admiralty cases. The Fifth Circuit stated that “the heartland of this court’s jurisdiction over an interlocutory appeal under § 1292(a)(3) is a conclusive determination of the rights and liabilities as to the claim on appeal.” Claimants argued that because the district court, in denying their motion for partial summary judgment, granted the excess insurers rights to limit their liability, then that determination was the final order on the extent of the excess insurers’ liability in this case. Because the district court’s order determined “the rights and liability of the parties” in an admiralty case, Claimants contend that section 1292(a)(3) applied and the Fifth Circuit was afforded jurisdiction over the case.
The Fifth Circuit disagreed with their contentions. Instead, the Court focused on whether Claimants were legally permitted to recover anything from the excess insurers and if so, the amount of that liability. The Circuit Court determined that the limitation of liability question was ancillary to the main question regarding the extent of the insurer’s liability. Further, the Court found no compelling reason to distinguish between a district court’s determination of a contractual entitlement rather than statutory entitlement to limit liability. The Court joined the Eleventh Circuit in holding that neither decision was reviewable on appeal under section 1292(a)(3).
Conversely, the Court stated that if the district court had decided that the excess insurers were not entitled to limitation of liability, jurisdiction would be appropriate. A denial of exoneration or limitation of liability would require a district court to conclude that a party was negligent and not entitled to limitation.
Thus, the Fifth Circuit would not exercise jurisdiction when a district court determines whether a party may, under a contractual provision, limit his liability should the liability question be determined in that party’s favor. The Fifth Circuit’s decision to not exercise jurisdiction in cases where a final adjudication of the liability has not been made is not surprising considering their history in narrowly construing section 1292(a)(3). However, it assists in guiding vessel owners and insurers on the costs involved in doing business in the maritime arena.
“A big day for trade!” was President Donald Trump’s enthusiastic announcement concerning the bilateral negotiations recently reached between the United States and Mexico on August 27, 2018, merely three months away from the North American Free Trade Agreement’s 25th birthday.
While ratified by the Legislatures of Canada, Mexico, and the United States in 1993, and signed into law by President Bill Clinton on December 8, 1993, NAFTA, which became effective on January 1, 1994, traces its direct origins to 1980 when the three North American nations first sought an accord to establish mutual trading, cost reduction, increased business investment, and heightened competition in the global market place. Shortly thereafter, President Ronald Reagan – whose campaign platform included provisions advancing a North American common market – supported the 1984 Congressional passage of the Trade and Tariff Act, which gave the U.S. President unilateral authority to negotiate free trade agreements. The Act facilitated the U.S. Chief Executive’s ability to expedite trade negotiations. Since its passage, Congress retains only the ability to approve or reject the complete agreement as negotiated, but not to alter it or suggest revisions. President Reagan and Canadian Prime Minister Brian Mulroney negotiated a Canada-U.S. Free Trade Agreement in 1998, which was signed in that year, and went into effect in 1999. Reagan’s successor, President George H. W. Bush, negotiated with Mexican President Carlos Salinas de Gortari to reduce Mexican tariffs on U.S. imports, which before NAFTA were 250% higher than U.S. tariffs on Mexican imports. In conjunction with the Bush-Salinas negotiations, in 1991, Canadian Prime Minister Mulroney requested a trilateral agreement, from which NAFTA was born.
Citing a compelling need to revitalize and modernize the aging NAFTA content, the United States and Mexico recently commenced and completed preliminary negotiations in support of a mutually-beneficial trade agreement to promote vibrant economic growth, balanced trade, and less-restricted markets to help North America keep pace with the 21st century-global economy. The recent discussions, which excluded Canada, have seemingly created more of a path to replace NAFTA than to revise it. In fact, President Trump has been quite vocal about the name of the new agreement, which he says will not be NAFTA.
The negotiations seek to modernize NAFTA to conform with recent technological, digital, and environmental innovations, as well as address the arenas of intellectual property, copyright, digital trade, and financial services. Other developments focus on eliminating customs duties on low-valued goods, levying prohibitions on local data storage requirements for information accessible to financial regulators, and establishing new trade rules of origin, vastly improving the North American labor force benefits and upping local content requirements in the automotive industry. Bolstering their commitment to technological and ever-changing labor market advancements, the United States-Mexico negotiations also brought to bear a heavy import on environmental concerns and obligations pertaining to wildlife, timber, fish, and air quality.
Despite the newly-developed and comprehensive enforcement provisions pertaining to intellectual property and trade secret protections, the key points of negotiations also involved added benefits for innovators and stronger disciplines on digital trade; all of which tend to provide a firm foundation for the expansion of trade and investment in products and services where the United States has a competitive advantage.
An additional noteworthy development involves the increased de minimis shipment value of cross-border goods, which will facilitate greater trade between the United States and Mexico by reducing or eliminating customs duties and taxes on shipments valued up to $100. Increasing the de minimis value will significantly lower costs to small and medium-size enterprises, which do not have the resources to pay shipping costs on small shipments. The cost savings will also trickle down to the new traders entering Mexico’s market, and of course, the consumers.
On the labor front, the new trade rules of origin in the automotive manufacturing industry will require at least 75% of a car’s value to be manufactured in North America (compared to 62.5% previously). And at least 40% of each vehicle manufactured in North America must be made by workers earning at least $16 per hour. These and other labor revisions seek to create more U.S. jobs carrying competitive wages, as well as stimulate the domestic automotive industry’s overall production and global competitiveness.
The proposed content of the environmental chapter marks the first ever articles of a Free Trade Agreement to directly improve air quality, prevent and reduce marine litter, support sustainable forest management, and to create and implement procedures for environmental impact studies and assessments, and modernize mechanisms for public participation and environmental cooperation. Other enforceable-environmental obligations seek to combat unlawful trafficking in wildlife, timber, and fish, and address pertinent environmental issues related to air quality and marine dumping.
Indeed, Canada’s absence during the NAFTA re-negotiations likely bodes well in favor of a NAFTA replacement rather than revision. While Mexico’s administration has contacted Canada requesting a return to the negotiating table, in hopes of a trilateral NAFTA deal, the Trump administration has unequivocally expressed its concerns about multi-lateral agreements and voiced a strong preference for bilateral ones.
A “no claims bonus” is an attractive carrot that insurers can write into a policy to attract more customers. Indeed, the recovery of a “no claims bonus” can result in a substantial payoff for an insured. Given the maxim: “accidents happen”, the question arises, can the “no claims bonus” be recovered as an element of damages if a third party causes you to forfeit the bonus through their fault. Currently, this exact issue is making its way through the Eastern District of Louisiana in Cox Operation, LLC v. Settoon Towing, LLC et al., Civil Action No. 17-1933 c/w 17-2087.
Cox Operation concerns a September 13, 2016, accident where a Settoon vessel allided with a well owned by Cox. In addition to its property damage claims, Cox seeks to recover the loss of its “no claims bonus”, allegedly due to Settoon’s neglect.
Specifically, Cox had insured the well with a policy that provided a “10% no claims bonus payable at expiry subject to a total gross earned premium exceeding USD 2,000,000 hereon.” Accordingly, if Cox submitted no claims under the applicable policy, then the insurer would refund Cox 10% of the total premium amount for the policy period, assuming that total premium amount exceeded two million dollars (which it did). If Cox submitted a claim during the policy period, then no refund would issue. Interestingly, Cox also insured the potential loss of its “no claims bonus” through a separate policy.
As a result of the subject allision, Cox was forced to submit a claim under the policy. It then became obligated to repay the “no claims bonus” which the insurer had prepaid to Cox. Critically, the claim associated with the allision was the only claim Cox filed during the applicable policy period. Thus, it was Cox’s contention that Settoon’s negligence caused a loss/damage to Cox in the amount of the loss “no claims bonus.” Settoon challenged Cox’s entitlement to the “no claims bonus” and moved for summary judgment arguing that Cox was precluded as a matter of law from pursuing recovery of the “no claims bonus.” Settoon also put at issue the policy insuring Cox’s loss of the bonus, which Cox argued should be excluded as a collateral source.
Settoon argued that Cox could not recovery the no claims bonus under either the General Maritime Law or the Oil Pollution Act (OPA). Cox did not address Settoon’s arguments that the no claims bonus was not recoverable under the OPA. Instead, Cox focused on the recoverability of the “no claims bonus” under the General Maritime Law.
In analyzing this issue, the EDLA cited the U.S. Fifth Circuit’s opinion in Louisiana ex rel., Guste v. M/V TESTBANK, 752 F.2d 1019 (5th Cir. 1985) (en banc), which holds that “physical injury to a proprietary interest is a pre-requisite to recovery of economic damages in cases of unintentional maritime tort.” Next, the District Court reviewed Corpus Christi Oil & Gas Co. v. Zapata Gulf Marine Corp., 71 F.3d 198, 203. (5th Cir. 1995) where the Fifth Circuit interpreted the TESTBANK rule and held that simply meeting the requirement of showing physical damage of a proprietary interest does not automatically open the door to all foreseeable economic consequences.” Rather, “economic consequences” must be “attendant” to the physical damage to a Plaintiff’s own property to be recoverable economic damages under TESTBANK.
Based on the facts that had been established to date, the District Court held that TESTBANK’s pre-requisites were satisfied. Thus, the door to the recoverability of the “no claims bonus” was opened. The alleged damage to Cox’s well constituted physical damages to Cox’s own property. Cox’s loss of the “no claims bonus” was tied to the physical damage to Cox’s well. Bottom line: if Cox suffered physical damage to its property and suffered an economic loss that was attendant to that damage, then “all of the TESTBANK rules boxes have been checked.” As such, Cox could pursue recovery of the “no claims bonus.”
After concluding that recovery of the “no claims bonus” was an allowable element of damages, the District Judge next addressed whether the Collateral Source Rule barred Settoon from introducing evidence of the separate insurance policy that insured Cox against the loss of the bonus. It is longstanding jurisprudence that the Collateral Source Rule bars a tortfeasor from reducing the quantum of damages owed to a Plaintiff by the amount of recovery the Plaintiff receives from other sources of compensation that are independent of (or collateral to) the tortfeasor. Davis v. Odeco, Inc., 18 F.3d 1237, 1243 (5th Cir. 1994). The underlying rationale of the Collateral Source Rule is that Plaintiffs should not be penalized because they have the foresight and prudence (or good fortune) to establish and maintain collateral sources of compensation, such as insurance. Insurance policies, such as the one purchased by Cox, clearly fall within the definition of a collateral source. As such, the District Court concluded that Settoon could not introduce – and the Court could not consider – evidence that Cox was, in fact, insured against the loss of the “no claims bonus.”
Ultimately, Cox was not legally precluded from seeking recovery of the no claims bonus. However, at trial Cox must still prove the value of its loss related to the “no claims bonus” in order to recover that loss. Be on the lookout for future updates as this matter proceeds to a final resolution.
Some exciting news for liquor license holders in the City of New Orleans! Effective August 27, 2018, the City of New Orleans (“City”) has transferred the administration of liquor licenses from the Department of Revenue to the Department of Safety and Permits in an effort to streamline the permitting process. Years ago, the City created the “One Stop Shop”, which consolidated the permit application process to a single outlet. Prior to the creation of the “One Stop Shop”, applicants for building or business permits would be required to coordinate between several departments within the City, and often within the Department of Safety and Permits itself, in order to obtain necessary approvals for certain building, zoning, or business applications. The One Stop Shop created a more user-friendly department wherein applications were submitted for intake, and the City undertook the task of routing the application to the various departments required approval the application. The creation of the One Stop Shop alleviated some of the frustrations expressed by prospective licensees. Nevertheless, the Department of Revenue maintained control of the liquor licensing process, requiring applicants to obtain building permits, zoning actions, occupational and other licenses from the Department of Safety and Permits, but work with the Department of Revenue for its liquor licenses.
Last spring, the New Orleans City Council ordered that the liquor licenses be administered by the Department of Safety and Permits instead of the Department of Revenue. Several City Council members cited complaints from constituents regarding the inefficiencies in the licensing process as the reason for the change.
The Department of Safety and Permits has already revised the liquor license application to provide for an alternative “short form” application that eliminates most information duplicative of the State Alcohol and Tobacco Control application. The Department of Safety and Permits also plans to promulgate regulations to clarify and document some of the policies previously unwritten yet practiced by the Department of Revenue. We will provide an update when new regulations are promulgated.
In the meantime, if you have any questions regarding the new licensing process, please do not hesitate to contact me.