The Louisiana Supreme Court held that an underlying plaintiff’s claim as an assignee of the insured’s bad-faith claim against its insurer is subject to the 10-year prescriptive period in Civil Code article 3499. Smith v. Citadel Insurance Co., No. 2019-CC-00052, (2019 La. LEXIS 2698, Oct. 22, 2019).

An underlying plaintiff obtained a judgment against a defendant, who assigned her rights to pursue a bad-faith action against her insurer. Suit was filed, and the insurer excepted based on the argument that the one-year prescriptive period had run. The exception was overruled, which was affirmed and the Louisiana Supreme Court agreed to review.

The Supreme Court considered the claim as one of the insured to which an insurer owes a duty of good faith, and which is an outgrowth of the contractual and fiduciary relationship between the insured and the insurer. It concluded that the duty of good faith and fair dealing “emanates” from the contract between the parties. Thus, the Supreme Court held that such claims are subject to the 10-year prescriptive period.