Louisianans, once again, endured nature’s wrath as Tropical Storm Olga moved across the Gulf Coast on October 25 and 26.  The heavy rains and wind gusts left many without electricity—some estimating that number to be 80,000—as down power lines and wind-blown trees caused disruption.   Those whose homes and businesses were damaged will now start the process of rebuilding and rebounding from the storm.  

In many cases, people will look to their insurance company and rely on the coverage for which premiums have been dutifully paid.  In many cases, those insurance companies will hold up their end of the bargain.  But sometimes claims are wrongfully denied, payments are wrongfully withheld, and damaged property is ignored.  What happens then? How long does an insured have to bring a claim against his insurance company for the bad faith claim handling?

Earlier this year, Louisiana’s Supreme Court determined that first-party bad faith claims against an insurer are governed by a ten-year prescriptive period.  In so doing, the court recognized the duty of good faith and fair dealings owed to an insured as an offspring of the contractual and fiduciary relationship between the insured and insurer. The Court also acknowledged that the duty of good faith and fair dealings originates from the contract between the parties, and, therefore, if there is no contractual obligation, the duty of good faith does not exist. The Court then held that the insured’s cause of action is personal and subject to a ten-year prescription period due to its finding that the insurer’s bad faith is a breach of its contractual obligation and its fiduciary duty.