Creating Obstacles to Frivolous Claims

Litigation is increasingly a “part of doing business.” In federal court, corporate depositions are governed by Federal Rule of Civil Procedure 30(b)(6) (frequently referred to as a “30(b)(6) deposition”). When a corporate representative is appointed to testify on behalf of a company, they are typically provided a deposition notice which identifies the subjects he or she will be asked to address in their testimony. However, the process is not always smooth when the parties disagree about what is fairly covered in the notice. A recent amendment to Rule 30 aims to improve the process.

Preparing for a 30(b)(6) deposition can be overwhelming and time-consuming. Often, the imprecise identification of subjects in the notice leaves the corporation wondering what the noticing party really seeks to explore or even who is the best individual to testify to the topics identified. The federal judiciary has observed that corporate representative(s) under the current practice are often unprepared to provide the necessary testimony and/or that the entity’s interpretation of the deposition topics does not match the intent of the noticing party. The result is aborted or suspended depositions, extended litigation, increased costs, and the birth of theories that the deponent intentionally obstructed the deposition, which is usually not the case.

To address these issues, effective December 1, 2020, Rule 30(b)(6) now reads as follows (changes in bold):

Notice or Subpoena Directed to an Organization. In its notice or subpoena, a party may name as the deponent a public or private corporation, a partnership, an association, a governmental agency, or other entity and must describe with reasonable particularity the matters for examination. The named organization must designate one or more officers, directors, or managing agents, or designate other persons who consent to testify on its behalf; and it may set out the matters on which each person designated will testify. Before or promptly after the notice or subpoena is served, the serving party and the organization must confer in good faith about the matters for examination. A subpoena must advise a nonparty organization of its duty to confer with the serving party and to designate each person who will testify. …

The recent amendment directs the serving party and the named organization to confer before or promptly after the notice or subpoena is served about the matters for examination. The intent is to “facilitate collaborative efforts” and to encourage “candid exchanges about the purposes of the deposition and the organization’s information structure [which] may clarify and focus the matters for examination and enable the organization to designate and to prepare an appropriate witness or witnesses, thereby avoiding later disagreements.” (Committee Notes; Rule 30). The Committee Notes even suggest that the notice of the deposition may be “refined as the parties confer.” The Committee Notes further provide that the obligation is to “confer in good faith,” not to reach agreement, and remind that “it may be desirable to seek guidance from the court.”

The recent changes to Rule 30 are subtle but may prove impactful. Because the new procedure is now in effect, we should know soon.

For decades, Louisiana law provided a claimant or injured person an uncommon opportunity (1) to directly name an insurer in a lawsuit, and (2) to make the jury aware of the presence of insurance. This was known nationally as the “Louisiana Direct Action Statute.” This statute, embodied in LSA—R.S. 22:1269, has long been a topic of debate.

The Louisiana Legislature recently amended the “direct action statute” in Act 275 and declared that the injured person “shall have no right of direct action against the insurer” unless at least one of the exceptions applies: the insured files for bankruptcy, the insured is insolvent, service cannot be made on the insured, a tort cause of action exists against a family member, uninsured motorist claims, the insured is deceased, or when the insurer issues a reservation of rights or coverage denial (but only for the purpose of establishing coverage). The Act further provides that the insurer shall not be included in the caption of the case. And, the existence of insurance is not to be disclosed unless the Louisiana Code of Evidence requires it. This new legislation is effective August 1, 2024.

But, the Act also provides for new provisions that allow for the joinder of an insurer after settlement or in connection with a final judgment. The Act further includes specific provisions enacted to provide notice to an insurer of an action and outlines the procedures and timelines for how insurers assert reservation of rights or a denial of coverage.

The revisions to LSA—R.S. 1269 represent a significant change in how lawsuits involving insurance companies will proceed.

The nation’s first suit seeking a declaration of coverage under a commercial property policy for business interruption and extra expenses incurred as a result of COVID-19 was filed in a Louisiana state court on March 20, 2020. Since then, similar suits have been filed across the nation by restaurants, casinos, dentists, dive shops, movie theatres, repertory theatre companies, etc. Clearly, the same coverage issues raised in the Louisiana case will be litigated throughout the nation.

The suit in Cajun Conti, LLC, et al v. Certain Underwriters at Lloyd’s, London, et al, Suit No. 2020-02558, was filed on March 16, 2020, in the Civil District Court for the Parish of Orleans, State of Louisiana. Plaintiffs, doing business as Oceana Grill, a restaurant in the French Quarter, allege coverage should be declared to exist because: 1) the property policy is an “all risks” policy such that all risks are covered unless the insurer can clearly and specifically establish an exclusion from coverage; 2) the policy does not contain any exclusion “for losses from a virus or global pandemic;” 3) the virus has “physically impact[ed] public and private property” as it “physically infects and stays on the surface of objects or materials, ‘fomites,’ for up to twenty-eight days;” 4) such “contamination … [is] a direct physical loss needing remediation;” and, alternatively and in addition, 5) the current and future state orders limiting its operations serve to trigger the civil authority provisions of its policy.

A key issue in Cajun Conti as well as in the other COVID-19 business interruption coverage litigation will be whether the existence of the novel coronavirus constitutes a “direct physical loss or damage” under the intendment of an all risks property policy. The Cajun Conti plaintiffs cite to Widder v. Louisiana Citizens Prop. Ins. Corp., 2011-0196 (La. App. 4 Cir. 8/10/11), 82 So.3d 294, writ denied, 2011-2336 (La. 12/2/11) for the premise that the existence of a hazardous condition that renders the insured property unusable or uninhabitable is sufficient to constitute a “physical loss or damage” sufficient to trigger coverage. Notably, in Widder, the actual presence of inorganic lead in the insured property was confirmed to exist and coverage was therefore available. Because policyholders have the burden to establish the existence of “physical loss or damage,” reliance on Widder may require the Cajun Conti plaintiffs to establish coronavirus was actually present in their property or that its presence otherwise caused their property to be unusable or uninhabitable. Presence in the community may not be sufficient to prove the coronavirus made the insured property uninhabitable or unusable.

One of the items of proof required for the triggering of coverage under the civil authority provisions of a commercial property policy is that the alleged business loss was caused by an action by the civil authority that prohibited access to the insured premises. Relying on out-of-state jurisprudence, one Louisiana federal court has determined this factor requires proof that access to the insured premises be “actually and completely prohibited,” which is not satisfied if the access is merely “limited or hampered.” Kean, Miller v. National Fire Ins. Co. of Hartford, C.A. No. 06-770 (M.D. La. Aug. 29, 2007), 2007 WL 2489711, *4-*6. The state orders expressly referenced in the Cajun Conti suit would appear not to satisfy this standard as they served only to limit occupancy and required earlier closures. Even the subsequent stay-at-home orders [Proclamation Number 33 JBE 2020 and 41 JBE 2020, issued respectively on March 22, 2020 and April 2, 2020], may likely be insufficient to satisfy this requirement as they do not expressly mandate closure of restaurants, but simply require restaurants to “reduce operations to continue minimum contact with members of the public,” expressly allow for curbside delivery, drive-thru, and delivery services, and only prohibit the consumption of food and beverages on site.

The specific facts of each business interruption claim and the terms of the relevant policy should be considered in every occasion. Yet, these suits may face problems of proof generally. For now, we expect the novel suits to continue.

John has been practicing over 30 years and is a Senior Partner with firm where he serves on the Management Committee. He has devoted attention to non-profit boards dedicated to assisting at risk children. He enjoys time with his three children and grandchildren. He also enjoys tennis and hiking.

Nancy B. Gilbert is a partner with Keogh Cox in Baton Rouge, Louisiana. She is a puzzle-solver by nature, and specializes in providing clear and in-depth analysis of complex litigation issues.