The United States District Court for the Eastern District of Louisiana denied a policyholder’s motion to remand its action against its commercial property insurer on the basis that, because the peremptive period had expired, the policyholder could not maintain a claim against its nondiverse insurance agent. Ron-Del Floor Serv., Inc. v. St. Paul Travelers Ins. Co., Civil Action No. 06-7520 (E.D. La. Nov. 27, 2006).
Ron-Del Floor Service, Inc. (“Ron-Del”), a flooring business, filed suit in Louisiana state court against St. Paul Travelers Insurance Company and United States Fidelity and Guaranty Company (collectively, “USF&G”), its alleged property insurers, contending that its business was interrupted after Hurricane Katrina, and USF&G failed to pay the business interruption claim. Ron-Del also sued Gaynell J. Martin Insurance Company (“Martin”), its insurance agent, contending that Martin misrepresented the policy’s coverage by stating that the policy would provide for full coverage for a business interruption loss. USF&G removed the case to the Eastern District of Louisiana on the basis of diversity jurisdiction, arguing that Ron- Del improperly joined Martin, the only non-diverse defendant. USF&G argued that any claim against Martin had been preempted under Louisiana Revised Statute 9:5606, which provides a one-year/ three-year peremptive period for a claim against an insurance agent. Specifically, the statute provides that a claim against an insurance agent must be brought within one-year from the date of discovery. Regardless of when a claim is discovered, however, the statue provides that any action against an insurance agent must be brought within three years from the date of the alleged act or omission.
USF&G argued that any alleged misrepresentations made by Martin took place on January 25, 2003, when the policy was originally issued, and thus the three-year peremptive period had expired before Ron-Del filed suit. Because the policy was renewed without changes, USF&G argued that any misrepresentations made after the policy was originally issued would be a continuing tort and would not interrupt peremption.
Ron-Del sought to remand the action on the ground that Martin’s statements about the policy at renewal were not a continuing tort and thus the claims against Martin were not perempted. Ron-Del claimed that each time the policy was renewed, Martin discussed the scope of the policy’s coverage with Ron-Del. Ron-Del argued that each of these discussions constituted an independent tort and a separate basis for bringing a claim against Martin.
The Court’s Decision — Remand Denied
The federal district court held that any claim against Martin was perempted and refused to remand the action. The court found that the peremption period began when the policy was first issued to Ron-Del in January 2003. Rejecting Ron-Del’s arguments, the court explained that Ron-Del’s renewal of its policy each year did not toll the peremptive period under “well-settled Louisiana law.” Citing Bel v. State Farm Mut. Auto. Ins. Co., 845 So.2d 377 (La. Ct. App. 2003) (“[t]herefore, we find that the insurance policy renewals do not constitute separate and distinct torts, commencing the peremptive period anew at each renewal.”). Thus, any alleged misrepresentation made by Martin during the renewal process was a continuing tort that related back to when the policy was first issued. Because a claim could not be sustained against Martin, the court concluded that Martin’s citizenship could not be considered for purposes of determining jurisdiction and denied Ron-Del’s remand motion.
This decision highlights the fact that a policyholder will not be able to avoid a federal court’s diversity jurisdiction by bringing a perempted claim against a non-diverse defendant. This decision also confirms that, under Louisiana law, the peremption period for a claim against an insurance agent commences when a policy is issued, and a renewal of the policy will not toll or restart the peremption period.