And the storm rages on

Hurricane Katrina came and went almost six years ago, but the litigation it spawned is nowhere near complete. And more surprisingly, there are new Katrina-related lawsuits still being filed daily.

In Louisiana, many lawsuits are subject to one year liberative prescription. What that means, effectively, is that after an accident or storm or other event that damages a person, that person has one year to bring a lawsuit to make him whole, either against the person who did him harm or against his insurer or both. Normally, if the person doesn’t bring his lawsuit within the one-year window, he can never bring it.

But after Katrina, the legislature extended the normal prescriptive period because of the huge number of insurance claims and the general disorder left in the storm’s wake. The legislature extended the deadline from August 29, 2006, to September 1, 2007, unless a longer period was provided by law or contract.

But a recent Louisiana Supreme Court decision has effectively extended that deadline indefinitely.

In Taranto v. Louisiana Citizens Property Insurance Corporation, 2010-0105  (La. 3/15/10), the Court held that the filing of a class action within the prescriptive period suspends the running of prescription as to all the members of the putative class. If class certification is denied, the class is redefined to exclude certain former putative class members, or putative class members opt out, the prescriptive period begins to run again with respect to those parties only.

In Taranto, the plaintiffs filed a petition against Citizens on June 27, 2008 (almost a year after the legislative cutoff of September 1, 2007). Citizens filed an exception of prescription, arguing that the plaintiffs’ claims prescribed, at the latest in September of 2007. The trial court sustained the exception and dismissed the plaintiffs’ claims with prejudice.

The Fourth Circuit reversed the trial court and held that the prescriptive period was interrupted by the filing of a class action against Citizens on August 26, 2006, since the plaintiffs were putative class members. Citizens filed a writ of certiorari, and the Louisiana Supreme Court granted its application.

First, the Court examined the law of prescription and found that, despite the general ten year prescriptive period for claims on a contract, the insurance contract at issue in the case required the plaintiffs to file suit within one year of the date of the loss. The Court rejected Citizens’s argument that the one year time limitation in the policy was a contractual limitation and not a prescriptive period (and therefore not subject to interruption or suspension).

Instead, the Court found that the “contractual limitation … merely adopts the Louisiana statutory prescriptive period to file claims” and that, consequently, the period was subject to the laws governing  prescription, including those concerning suspension. The Court reasoned that, by law, Louisiana insurance policies must allow claimants to make claims for at least one year after the loss. Accordingly, the period is partially statutory and, therefore, subject to legislative extension. The Court also found that the legislature extended the prescriptive periods and did not make them peremptive periods.

Since the period at issue in Taranto was a prescriptive period, they could be suspended. Louisiana Code of Civil Procedure Article 596 suspends prescription as to all members of a putative class when the class action is filed. Prescription begins to run again if certain events occur. If a person opts out of the class, prescription begins running again thirty days after he submits his opt-out form. Similarly, if a the class is restricted to exclude certain former putative members or if the class-action claims are stricken entirely, prescription begins to run against the former putative class members thirty days after notice of their ejection from the class is mailed or otherwise published.

The Court found that the Taranto plaintiffs were putative class members in the Buxton and Chalona class actions filed on August 25, 2006, and that prescription was suspended as to them on that date. The Court noted that Buxton was denied class certification on August 9, 2007, but that no order had been entered requiring notice to the putative class. The Court also noted that the Taranto plaintiffs were restricted out of the Chalona class definition on January 25, 2008, but that notice was not given until April 24, 2008.

Prescription, then, again began to run against the Taranto plaintiffs on May 24, 2008 — thirty days after notice was issued in the Chalona class action. When the Chalona and Buxton class actions were filed on August 25, 2006, those plaintiffs still had until September 1, 2007 to file claims. When prescription began to run against the Taranto plaintiffs again on May 24, 2008, they still had the remaining time to file suit that they would have had when the classes were filed (i.e., from August 25, 2006, to September 1, 2007). Therefore, the Court held that the Taranto plaintiffs had until May 31, 2009, to file suit and that they did so on June 27, 2008, well before the deadline. Therefore, Citizens’s exception remained overruled, and the plaintiffs could continue with their lawsuit.

That’s great for the Taranto plaintiffs, but what’s it mean for everyone else? The big takeaway is that, as long as there are pending class actions (or denied class members who haven’t been notified) against whatever insurer you’d like to sue, it’s not too late to file suit. For example, there are myriad class actions filed in the wake of Katrina that can support a would-be plaintiff. For example, as of July 2011, Orrill v. AIG, Inc. was still pending. Similarly, State v. AAA, et al. (Road Home Class Action) was filed by the state on behalf of all citizens effected by Katrina and has a sweeping class definition. Again, the class claims were still pending as of July 2011. There is also a consolidated class action before Judge Duval in the Eastern District of Louisiana with a sweeping class definition. Class certification was denied on June 16, 2009, but no notice has been issued to former putative class members, so arguably prescription has yet to begin running again.

So get to filing. It’s not too late.

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