Under La. C.C. art. 3537, the Louisiana Third Circuit Court of Appeals decided in Ducote v. Progressive, 25-643 (La. App. 3 Cir 08/12/26) that Louisiana bad faith laws applied to a Texas motor vehicle accident since the defendants were based in Louisiana and the relevant insurance policies were issued in Louisiana.

Ducote v. Progressive

On August 8, 2017, a fatal motor vehicle accident occurred between Texas residents, and a Louisiana based defendant while in the course and scope of his duty with his Louisiana based employer. As a result of the accident, several lawsuits were filed in Texas by the surviving family members resulting in a $4.5-million judgment against the defendant and his Louisiana-based employer.

A subsequent lawsuit was filed in July 2022 in Louisiana by the surviving family members alleging third-party bad faith claim under La. R.S. 22:1973 against Progressive Paloverde Insurance Company as the insurer of the Louisiana-based employer and a first-party bad faith claim against Progressive Security Insurance as the insurer to one of the Texas-based surviving family members who owned the vehicle involved in the accident. The first-party bad faith claim against Progressive Security Insurance Company filed by the Texas-based surviving family member was dismissed following exceptions for no right of action and no cause of action.

Plaintiffs filed a motion for partial summary judgment seeking the court apply Louisiana bad faith laws regarding their third-party bad faith claim. Progressive filed a cross-motion seeking the Stowers doctrine, a Texas-based doctrine, be applied. After hearing the motions, the trial court ruled that Louisiana law applied, granted plaintiff’s motion for partial summary judgment, and denied Progressive’ cross-motion. Progressive appealed to the Louisiana Third Circuit Court of Appeal.

Louisiana Third Circuit Court of Appeal Ruling

The Court of Appeal performed a choice-of-law analysis under La. C.C. art. 3515 and 3537, noting the dispute arose over a contractual obligation (the relevant insurance policy) and therefore La. C.C. art. 3537 applied. La. C.C. art. 3537 states:

Except as otherwise provided in this Title, an issue of conventional obligations is governed by the law of the state whose policies would be most seriously impaired if its law were not applied to that issue. That state is determined by evaluating the strength and pertinence of the relevant policies of the involved states in the light of:

1. the pertinent contacts of each state to the parties and the transaction, including the place of negotiation, formation, and performance of the contract, the location of the object of the contract, and the place of domicile, habitual residence, or business of the parties;
2. the nature, type, and purpose of the contract; and
3. the policies referred to in Article 3515, as well as the policies of facilitating the orderly planning of transactions, of promoting multistate commercial intercourse, and of protecting one party from undue imposition by the other.

The Court found since plaintiff’s lawsuit arose from Progressive’s affirmative duty to adjust claims fairly and promptly under La. R.S. 22:1973 and that Progressive issued its policy to the Louisiana-based employer in Louisiana, Louisiana had a compelling interest to apply its own law in the case. Further the Court, citing, McKnight v. Villareal, 23-157, p. 7 (La. App. 1 Cir. 10/18/23) wrote “courts of this state have often found that the state where the insurance policy was issued had a more substantial interest in apply its laws than the state where the accident occurred.” The Court ultimately affirmed the trial court’s decision granting plaintiff’s motion for partial summary judgment and denying Progressive’s cross-motion.

While not part of the Court’s choice-of-law analysis, the Court also pointed out that Progressive’s position that Texas law applied was seriously undermined due to: 1) Progressive’s commercial automobile policy issued to the Louisiana employer contained a choice-of-law provision stating that Louisiana law would apply in any dispute, and 2) that in the Texas cases Progressive argued Louisiana law should apply.

Takeaway

Louisiana insurers issuing Louisiana policies to Louisiana based defendants should be mindful they may not get the protections of any out-of-state bad faith laws for any accidents that occur outside of Louisiana.