The Louisiana Supreme Court held that a claims-made and reported requirement in a policy does not violate the rule in Louisiana that an insured’s action after an injury cannot abrogate a plaintiff’s right of direct action against an insurer which vests at the moment of injury. Gorman v. City of Opelousas. (La. July 1, 2014).
A prisoner in a city jail was allegedly beaten by inmates and died. His mother filed suit against the city. The city’s insurer was later named as a defendant under the Louisiana Direct Action Statute and it moved for summary judgment on the basis that the claim, although made during the policy period, was not timely reported to it as required by the policy. The trial court granted the motion, but the court of appeal reversed holding that the failure of the insured to report the claim during the policy period cannot abrogate the direct action rights of the plaintiff.
The Louisiana Supreme Court reversed, holding that the plaintiff had no rights under the policy that vested at the time of injury as it pre-dated the policy inception and would not have been covered under a policy that had not been issued. Thus, it held that she had no rights under the policy at the time of the injury and was therefore deprived of no such rights. The Supreme Court concluded that to hold otherwise would convert a claims-made and reported policy to an occurrence policy, “resulting in the judicial modification of the bargained for exchange between the insurer and insured.”