Opinion ID: 1838947
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Heading: the legislative history and development of the louisiana direct action statute

Text: The Louisiana Direct Action Statute is the product of a lengthy legislative and judicial process. See McKenzie & Johnson, Louisiana Civil Law Treatise, Insurance Law and Practice § 22 (1986). For the purpose of correcting the injustice created by insurers' avoidance of tort victims' direct suits by use of no action clauses in insurance policies the legislature by Act 253 of 1918 enacted the first element of the remedial legislation known as the Direct Action Statute. The 1918 Act prohibited the issuance of any policy of insurance against liability unless it contains a proviso that the insolvency or bankruptcy of the insured would not release the company from the payment of damages for injury sustained or loss occasioned during the life of the policy, and further provided that in the case of such insolvency or bankruptcy, an action may be maintained within the terms and limits of the policy by the injured person or his or her heirs, against the insurer company. 1918 La.Acts No. 253, § 1. In Edwards v. Fidelity & Casualty Co., 11 La.App. 176, 123 So. 162 (Orl.1929) the court of appeal in an action by an injured party against an insurer, rejected the insurer's defenses based on the insured's failure to give timely notice of the claim and the lack of a judgment establishing the insolvency or bankruptcy of the insured. The court reasoned that the purpose of the statute [is] to create immediately upon the happening of the accident, a cause of action in the injured party against the insurer, if any, of the party at fault. Of course, the right to present and enforce this cause of action is conditioned upon the obtaining of a judgment against the party at fault and upon unsuccessful efforts to collect that judgment.... 11 La.App. at 178, 123 So. at 163; and that an unsatisfied execution of a judgment was satisfactory proof of insolvency. In the next legislative session, Act 55 of 1930 was enacted, virtually codifying the Edwards decision. See McKenzie & Johnson, supra § 22 at 24. This act added two concepts to the Direct Action Statute: (1) any judgment which may be rendered against the assured, for which the insurer is liable, which shall have become executory, shall be deemed prima facie evidence of the insolvency of the assured, and (2) the injured person or his or her heirs, at their option, shall have a right of direct action against the insurer company within the terms and limits of the policy, in the parish where the accident or injury occurred, or in the parish where the assured has his domicile, and said action may be brought either against the insurer company alone or against both the assured and the insurer company, jointly and in solido. 1930 La.Acts No. 55. In permitting a suit against the insurer either alone or jointly with the insured, the Louisiana Direct Action Statute differed significantly from that of most other states. The absence of similar provisions in other statutes reflects the traditional fear that to permit the jury to know that a defendant is protected by insurance will prejudice its consideration of the case. Comment, Legislative Efforts To Make Insurance Guarantee the Payment of Tort Claims, 46 Harv.L.Rev. at 1328; 1 Wigmore, Evidence § 282 (2d ed. 1927); see James & Thornton, supra at 437. In 1948 the legislature, in an effort to collect and codify the body of laws regulating insurance, adopted the Louisiana Insurance Code of 1948. (1948 La.Acts No. 195) The Direct Action Statute was embodied in the Code as section 14.45 without any change important to the present case. Also incorporated into the Code by the same act was section 1.06, which provided that [i]nsurance shall be classified and defined as follows:    (4) Liability. Insurance against the liability of the insured for the death, injury or disability of an employee or other person, and insurance against the liability of the insured for damage to or destruction of another person's property.    (14) Miscellaneous. Any other kind of loss, damage, or liability properly the subject of insurance and not within any other kind or kinds of insurance as defined in this Section, if such insurance is not contrary to law or public policy. 1948 La.Acts No. 195, § 1.06; La.R.S. 22:6 (4), (14). Like the Direct Action Statute, these provisions evidence a primary design to regulate liability insurance related to personal injury and tangible property damage but a certain reluctance or ambivalence toward fixing the ultimate range of the legislation. The final amendment of significance in the present case occurred in Act 125 of 1958. In that act the present final paragraph of the statute was added: It is also the intent of this Section, that all liability policies within their terms and limits are executed for the benefit of all injured persons, his or her survivors or heirs, to whom the insured is liable; and that it is the purpose of all liability policies to give protection and coverage to all insureds, whether they are named insureds or additional insureds under the omnibus clause, for any legal liability said insured may have as or for a tort-feasor within the terms and limits of said policy. 1958 La.Acts No. 125.