Limitation of Liability under the LPLA: Can Internet Retailers be Manufacturers?

Louisiana’s automobile insurance premiums are some of the highest in the United States. With so many other demands on driver’s wallets, it may seem tempting to simply not purchase a liability automobile policy, even if it is required by Louisiana law. Louisiana’s “No Pay, No Play” statute, LA-R.S. 32:866, is intended to fight that temptation. See Progressive Sec. Ins. Co. v. Foster, 1997-2985 (La. 4/23/98), 711 So.2d 675. Below are some key considerations for drivers and insurers on either side of a potential “No Pay, No Play” dispute.

For Drivers

The “No Pay, No Play” statute means just what it seems—if you do not pay for your own liability insurance, you cannot recover under someone else’s liability insurance even if the accident is not your fault … at least to a point.

Specifically, the “No Pay, No Play” statute precludes someone who does not have liability insurance from recovering from another driver’s policy (1) the first $15,000 of bodily injury damages and (2) the first $25,000 of property damage. Of course, if damages do not exceed these amounts, it means the uninsured driver cannot recover his or her damage at all.

Of course, some exceptions exist. For example, the statute does not apply (meaning, it does reduce the plaintiff driver’s recovery) if the other driver is cited for operating his or her vehicle while intoxicated and is convicted or pleads nolo contendere; if the other driver intentionally causes the accident; if the other driver flees the scene; or if the other driver is in furtherance of the commission of a felony. However, the off-chance that a driver falls into an exception should not outweigh the obligation to comply with Louisiana law.

For Insurers

Generally, liability insurers should assert the “No Pay, No Play” affirmative defense when it appears a plaintiff driver lacks liability insurance. However, insurers should also keep in mind that this defense also has limitations.

For instance, the “No Pay, No Play” statute is not necessarily a total bar to a plaintiff’s recovery. If damages exceed $15,000 for bodily injury and/or $25,000 for property damage, payment may still be owed for these excess damages.

Secondly, the party asserting the “No Pay, No Play” affirmative defense—usually a defendant insurer—bears the burden of establishing that the plaintiff driver lacked insurance coverage on the vehicle he or she was operating at the time of the incident.

This burden can sometimes present difficult issues. For instance, in Johnson v. Henderson, 2004-1723 (La.App. 4 Cir. 3/16/05), 899 So.2d 626, the plaintiff was operating a vehicle he did not own. The defendant failed to yield and struck the plaintiff’s car. The defendant and his insurer asserted the affirmative defense under “No Pay, No Play.”

The facts of the case suggest the vehicle that the plaintiff was operating was not insured, but plaintiff paid his “premiums” to the owners of the vehicle, had an ostensibly valid insurance card, and believed he was insured. The court found that the defendants failed to carry their burden of establishing a lack of coverage. As a result, the insurer owed the plaintiff the full amount of his damages—a total of $5,855.00 that would otherwise have been precluded under the statute.

The “No Pay, No Play” issue is easily avoided: Louisiana drivers should get the insurance required by the statute. Failure to do so runs the risk of discounting (and potentially barring) recovery for accidents that are not the driver’s fault.

Under Louisiana law, uninsured/underinsured insurance coverage is implied in any automobile policy of insurance, and UM coverage will be read into the policy unless it is validly rejected. This rejection of UM coverage must be “clear and unmistakable.” The Louisiana Supreme Court recently addressed the issue of what qualifies as a valid rejection of UM coverage in Baack v. McIntosh, 2021-01054 (La. 6/30/21), --- So.3d ---.

The Louisiana Commissioner of Insurance provides a form which must be completed to reject UM coverage. This form allows the insured to initial one of four selections regarding UM coverage: (1) UM coverage at lower limits than liability coverage; (2) economic-only coverage with same limits; (3) economic-only UM coverage at lower limits; or (4) no UM coverage. A representative of the insured must initial one of these options for that option to apply to the policy at issue. This list does not include an option to select UM coverage. Therefore, the Baack Court held that “the only way to ‘select’ UM coverage on the form is to not initial any of the provided choices.”

The insured in Baack properly rejected UM coverage through the UM form in 2002. A proper rejection of UM coverage remains valid for the life of the policy, and a new form is not required when a policy is renewed. However, the Court found that, under La. R.S. 22:1295, an insured may change its rejection of UM coverage at any time by submitting a new UM form to the insurer.

In 2011, the insured increased its liability limits under the policy, which required completion of a new form. UM coverage again was properly rejected. Even though not legally required, the insurer sent new UM waiver forms to the insured in 2012, 2013, and 2014 when the policy was renewed. However, the insured completed each of these forms without initialing any of the four selections related to UM coverage. The insurer later issued the insurance policies without objection. The court found that the insured changed its rejection of UM coverage when it submitted the new forms in 2012, 2013, and 2014.

Because the insurer did not initial these forms when they were resubmitted, the insured “selected” UM coverage under Baack’s analysis, and UM coverage was afforded under the policy. Importantly, the Court held that, if the insurer believed the failure to make a selection on the forms was a mistake, it was the insurer’s responsibility to follow-up with the insured to make any necessary corrections. Three justices dissented and argued that the majority opinion negates other law which provides that an insured must make a “written request” to add UM on a policy where UM is rejected. UM cases are often fact-intensive and each case should therefore be assessed under their own specific facts.

As part of the unique aura that surrounds Mardi Gras inSouth Louisiana, the expression “Laissez les bons temps rouler” is foreverlinked to the spirit of the season. The Cajun French phrase meaning “Let thegood times roll” captures the eccentric soul of Carnival. However, it might bedifficult to let the good times roll after being struck by a bag of beadshurled from the second deck of float. If the spectator suffers a severe injuryas a result, who is liable? Does the injured party have any recourse againstthe person who threw the beads? Against the Mardi Gras krewe organizers?

The Fourth Circuit Court of Appeal held that spectatorsassume the risk of injury when attending a parade. Citron v. Gentilly CarnivalClub, Inc., 14-1096 (La. App. 4 Cir. 4/15/15), 165 So.3d 304. The foundation ofthe decision was based on the Mardi Gras Immunity Statute, La. R.S. 9:2796,which has two parts: (1) creates broad immunity for krewes which sponsorparades; and (2) states that anyone who attends such a parade “assumes the riskof being struck by any missile whatsoever which has been traditionally thrown,tosses or hurled by members,” which include, but are not limited to: beads,cups, doubloons, and many other things.

To impose liability on a krewe, there must be evidence ofthe krewe’s—as opposed to its member’s—gross negligence. Palmer v. Zulu Soc.Aid & Pleasure Club, Inc., 09–0751 (La. App. 4 Cir. 3/1/10), 63 So.3d 131(emphasis added). Furthermore, a carnival krewe or organization may not bevicariously liable for its members' acts. To the contrary, Louisianajurisprudence has rejected the argument that a krewe is vicariously liable forits members' acts. Kibble v. B.P.O. Elks Lodge No. 30, 640 So.2d 267, 269 (La.App. 4th Cir. 1993).

The Mardi Gras Immunity Statute imposes an extremely high burden of proving the “loss or damage was caused by the deliberate and wanton act or gross negligence” of the krewe or organization. Gross negligence has been defined as the “entire absence of care” and an “extreme departure from ordinary care or the want of even scant care.” Ambrose v. New Orleans Police Department Ambulance Service, 93–3099 (La. 7/5/94), 639 So.2d 216. In calculating whether an act was grossly negligent in the context of Mardi Gras Immunity Statute, the Citron court considered several factors: (1) the weight of the object thrown, (2) the distance the object was throw, and (3) the manner in which the object was thrown. Citron, 165 So.3d at 317.

Ultimately, the statute absolves krewes from liability for injuries caused by objects thrown to parade spectators, except in extreme and unusual circumstances. Therefore, be alert during parades this Mardi Gras season and Laissez les bons temps rouler.

Cole Frazier joined Keogh Cox as an associate in 2019 after working at the firm as a law clerk during law school. He earned his J.D. and Diploma in Comparative Law from Louisiana State University, Paul M. Hebert Law Center. During his time at LSU Law, he also studied comparative law at Jean Moulin Lyon 3 University in Lyon, France. Cole received his Bachelor’s degree in Business Administration with a concentration in Pre-law from Nicholls State University in 2015. He was elected to the Southland Conference all-academic team twice as a member of the Nicholls State football program.