Timothy Ladner, et al. v. Ochsner Baptist Medical Center, LLC, et al., 2024 WL 5054503 (La. 4th Cir., Dec. 10, 2024).
Louisiana Fourth Circuit Court of Appeals expands the Louisiana Construction Anti-Indemnity Act as it relates to additional insured coverage.
Authors: Christopher K. LeMieux and Trey Talley
In Timothy Ladner, et al. v. Ochsner Baptist Medical Center, LLC, et al., the Fourth Circuit examined the impact of Louisiana’s Construction Anti-Indemnity Act on indemnity obligations and additional insured coverage, ultimately expanding the role of fault determination in enforcing such provisions for additional insured defense coverage.
Ladner arises out of a personal injury sustained by Timothy Ladner, an employee of Carriere-Stumm, LLC, who was hired as a contractor to perform roofing work on the Ochsner Baptist Medical Center (“Ochsner”) in New Orleans, LA. On April 2, 2018, Mr. Ladner was injured when he fell down an elevator shaft while attempting to access the service elevator. Plaintiffs filed suit against Ochsner, Ochsner Clinic Foundation (“OCF”), and The Gray Insurance Company (“Gray”), Carriere-Stumm’s liability carrier. Ochsner filed a Third Party Demand against Carriere-Stumm and OCF filed a Crossclaim against Gray, asserting its status as an additional insured under Carriere-Stumm’s insurance policies.
Gray moved for summary judgment, arguing that under the Louisiana Construction Anti-Indemnity Act (“LCAIA”), the contractual indemnity provisions were null and void, and Carriere-Stumm did not have an obligation to defend an indemnify OCF. Gray further argued that since the additional insured provision was not limited to only the actions of Carriere-Stum, and because OCF could not establish that Carriere-Stumm was at least partially at fault, the LCAIA precluded coverage as an additional insured. In its opposition, OCF argued that the contract only included indemnity for the negligent acts and omissions of the indemnitor, Carriere-Stum, and thus the LCAIA did not preclude the coverage. OCF likewise moved for partial summary judgment against Gray, asserting that Gray owed OCF a defense as an additional insured. Carriere-Stumm also filed a motion for summary judgment, arguing that the LCAIA prohibits any contractual indemnity obligations to OCF, as OCF cannot be indemnified for its own negligence.
The trial court denied Gray’s and Carriere-Stumm’s motions and granted OCF’s motion, holding that Gray was in breach and bad faith for its coverage denial to OCF and further ordering that Gray immediately undertake the defense of OCF. Gray and Carriere-Stumm filed writ applications to the Fourth Circuit.
On review, the Fourth Circuit first cited to the Louisiana Supreme Court’s ruling in Fontenot v. Chevron U.S.A. Inc., 676 So.2d 557, in which the Court held that contractual indemnity agreements “are voided only to the extent that they purport to require indemnification and/or defense where there is negligence or fault on the part of the indemnitee; otherwise, they are enforceable just as any other legal covenant.”
In connecting the dots, the Fourth Circuit held that the contractual indemnification obligations of Carriere-Stumm could not properly be determined by the Court until the liability of the parties was determined at trial. However, interestingly, the Fourth Circuit took this a step further, applying the holding to the additional insured status.
Specifically, the Court held that, like the contractual indemnity, the additional insured coverage for indemnification and defense was only enforceable to the extent that Carriere-Stumm was at least partially at fault, which could only be determined by the trier of fact. Accordingly, the Court held that Gray was not required to provide the additional insured coverage unless and until there was a determination that Carriere-Stumm was negligent.
The Court agreed that under a liability insurance policy, the insurer’s duty to defend under the additional insured status arises based on the allegations in the petition. But the Court drew a distinction in causes of action for indemnification for cost of defense, holding that in those cases, the terms of the contractual indemnity agreement govern and are limited under the LCAIA. The Court held that the ultimate responsibility for defense costs in indemnity agreements is governed by the result rather than the allegations.
Accordingly, the Fourth Circuit ultimately reversed the trial court’s finding that Gray breached its contract by failing to perform its duties under the insurance policy issued to Carriere-Stumm and that Gray must immediately take up OCF’s defense. The Fourth Circuit’s application of the LCAIA to the additional insured coverage will certainly have a profound effect on the handling of additional insured claims going forward. Going forward, it will be interesting to see if the Supreme Court weighs in on the Fourth Circuit’s holding that, under the LCAIA, an insurer’s duty to defend based on additional insured status requires a determination of fault prior to a defense being owed.
