In Louisiana, an insurer’s duty to defend it’s insured typically depends on the “four corners rule,” in which the court examines the allegations contained in the plaintiff’s petition and the terms of the insurance policy.  If there is the possibility of coverage, the insurer’s duty to defend is triggered. However, in Sibley v. Deer Valley Home Builders, Inc., 32 So. 3d 1034 (La. App. 2nd Cir. 2010), the court applied the four corners rule by examining not only the plaintiff’s petition, but also the insured’s third party demand against the insurer to determine if coverage might apply for the claims alleged against the insured.  No duty to defend was found because the third party demand “did not expand upon the fact that allegations of the plaintiff’s petition so as to show that those claims raised allegations of liability falling under the coverage of the CGL policy.”  Accordingly, the decision indicates that this appellate court would consider the insured’s allegations against its insurer, and not only the plaintiff’s allegations, to determine the duty to defend.

In Perkins v. Entergy Corp., 2010 WL 2332357 (June 10, 2010), the Louisiana Third Circuit Court of Appeal held that a non-settling insurer was obligated to pay an allocated amount of the settlement in which it did not participate.  The suit arose out of a flash fire at an industrial facility that caused significant bodily injury.  Several insurers settled, and sought an allocation and contribution from another insurer that contended its policy did not afford coverage for the underlying accident.  That insurer urged that it was prepared to defend the insured, and should not be compelled to pay for the strategic decision made by the other insurers, pointing out that the insured’s liability had yet to be adjudicated, and that the settlement was unreasonable.  The appellate court initially recognized that when more than one potentially liable insurer pays a loss “whether in satisfaction of a judgment or in settlement of a claim,” it can seek contribution from the other insurers.  The court also rejected the argument that the settlement did not provide proof of the original damages, finding that if the settlement was fair and not excessive, and would form the basis for a demand for contribution.  A reasonable prudent person would have settled the case, which was supported by the underlying facts without a separate judicial determination of the “actual” damages.

On March 17, 2010, Mississippi Governor Hayley Barbour signed into law an amendment to Mississippi’s public bid law, more specifically, to Mississippi’s resident “preference law.” Miss. Code Ann. § 31-3-21(3). Under this recent amendment, all non-Mississippi resident contractors who bid on Mississippi public works contracts must attach to their bid a copy of their own state’s bidder preference laws. In other words, if a Louisiana resident contractor wants to bid on a Mississippi public works contract, that contractor must attach to his bid a copy of Louisiana’s resident bidder preference laws, or else the Mississippi public agency must reject the bid.

Each state has different resident bidder preference laws. Some states require either that a non-resident’s bid amount be reduced by a certain percentage or that a resident’s bid be increased by a certain percentage if a non-resident bidder also bids on the project. Other states require that a resident bidder’s amount be increased only to the same percentage as allowed in a non-resident’s state, if a non-resident bids on the contract. Still other states have no bidder preference laws at all. The Association of General Contractors of Mississippi promoted this amendment to the statute in hopes of benefiting the Mississippi construction industry, as prior to this amendment, the failure to include a copy of the non-resident bidder’s state preference laws was insufficient grounds to reject the bid.

Be aware that when bidding for public works projects in Mississippi, Louisiana contractors must attach a copy of Louisiana’s bidder preference laws.

In one of its last acts before its summer 2010 recess, the United States Supreme Court issued its opinion in the long-awaited case of Bilski v. Kappos (S.Ct. 2010 80-964). In the Bilski case, the inventor was seeking to obtain a patent on a method of hedging risk. The Supreme Court found that the method was not patentable because it was merely an abstract idea. In earlier jurisprudence from the Court of Appeals for the Federal Circuit (CAFC), the CAFC had used a “machine-or-transformation test” to determine whether business methods were patentable. In Bilski, the Supreme Court refused to say that the machine or transformation test was the sole test for determining patentability, and the Court did not reject the machine or transformation test. Instead, the Bilski court stated that the machine or transformation test is a useful tool, but not the only tool, for evaluating whether an invention is proper subject matter for patent protection.

Continue Reading Supreme Court Decides Long-Awaited Patent Case

The application of corporate veil piercing theories to limited liability companies is still in its early stages in Louisiana jurisprudence. In Hollowell v. Orleans Regional Hosp. LLC, the U.S. Court of Appeals for the Fifth Circuit became the first court applying Louisiana law to pierce the veil of a Louisiana limited liability company on an “alter ego basis,” adopting from corporate veil piercing jurisprudence a non-exhaustive list of factors, namely: 1) commingling of corporate and shareholder funds; 2) failure to follow statutory formalities for incorporating and transacting corporate affairs; 3) undercapitalization; 4) failure to provide separate bank accounts and bookkeeping records; and 5) failure to hold regular shareholder and director meetings. 217 F.3d 379, 385-386 (5th Cir. 7/18/00); citing Riggins v. Dixie Shoring Co., 590 So.2d 1164, 1168 (La. 1991). The court emphasized that the inquiry is in fact a “totality of the circumstances” test, and “courts are not limited to these five factors when invoking the alter ego doctrine.” Id., at 387, citing Riggins, at 1168.

Continue Reading Piercing the Veil of an LLC – The Fourth Circuit Weighs In

In an arbitration, the parties agree to hire one or more neutral third parties to hear the dispute and issue a ruling.  The parties further agree to abide by that ruling.  If one party fails to do so, the ruling can be enforced by a court of law just as if an actual judgment had been entered.  Some suggest the process is less costly and more efficient than litigation; however, significant rights can be lost under the guise of so called legal efficiency.

Continue Reading Beware: Arbitration

On September 30, 2010, the Internal Revenue Service issued guidance providing relief to homeowners who have suffered property losses due to the effects of certain imported drywall installed in homes between 2001 and 2009.  In particular, the IRS issued Revenue Procedure 2010-36 which enables affected taxpayers to treat damages from corrosive drywall as a casualty loss and provides a ”safe harbor” formula for determining the amount of the loss.

Continue Reading IRS Issues Safeharbor Relief for Those Impacted by “Chinese Drywall”

Electronic Discovery, or “E-Discovery”, is not considered the “novel issue” it once was. However, E-Discovery still presents problems that litigants and courts struggle with. Below is a summary of recent Louisiana Federal Court opinions dealing with the issues surrounding E-Discovery.

In Frees, Inc. v. McMillian, 2007 WL 184889 (W.D. La. Jan. 22, 2007), the Western District of Louisiana granted the plaintiff’s motion to compel. In an unfair competition and trade secret theft action, the plaintiff claimed that the defendant, a former employee, had stolen various data files. Plaintiff had unsuccessfully requested production of defendant’s laptop and desktop. The Court granted the motion to compel the defendant to produce these two items because they were the most likely places that the data files would be located. The Court did institute protective measures so as to prevent the disclosure of any irrelevant or personal information.
Continue Reading Recent Developments in E-Discovery in Louisiana

The Patient Protection and Affordable Care Act (the Act) included a new requirement that nursing homes have in operation a compliance and ethics program within 36 months of the effective date of the Act, or by March 23, 2013. The Secretary and the Inspector General of the Department of Health and Human Services must promulgate regulations by March 23, 2012 for an effective compliance and ethics program. The formality of the program, including the establishment of written policies and procedures to be followed by employees, will depend on the size of the organization. An organization that operates five or more facilities will be expected to have a more formal program.

Continue Reading New Compliance and Accountability Requirements For Nursing Homes

The Nursing Home Residents’ Bill of Rights (La. R. S. 40:2010.8) was amended effective June 8, 2010 to provide more freedom and more choice to residents and to remove some reasonable restrictions imposed by nursing homes.

Nursing homes must now provide the right to “immediate access” to certain state and federal government workers, the resident’s individual physician, immediate family members or other relatives of the resident, the resident’s clergy, and other visitors. The prior version of the statute required nursing homes to have flexible visiting hours and to allow for visitation. The new version of the statute allowing for immediate access does not take into consideration visiting hours. However, the nursing home may impose “reasonable restrictions” to protect the security of all residents and may change the location of visits to assist in care giving or to protect the privacy of other residents. The nursing home must also provide “reasonable access” to any resident by any entity or individual that provides health, social, legal or other services to the resident.
Continue Reading Nursing Home Bill of Rights Changes