Jose R. Ruiz | DeutschKerrigan
In Bennett vs. DEMCO Energy Services, LLC,[1] rendered on May 10, 2024, the Louisiana Supreme Court resolved a conflict among the appellate courts and held that a defendant’s contractual claim for defense and indemnity against a co-defendant or third-party defendant was not legally “premature” and could be asserted in the pending litigation, instead of waiting for a final judgment or determination of the defendant’s liability.
The First Circuit Court of Appeal had for many years held that such defense and indemnity claims were subject to an exception of prematurity. The practical effect of that exception is to dismiss the indemnifying party from the litigation and prevent the defendant from asserting its indemnity claim in a separate proceeding until liability is established. The Third, Fourth, and Fifth Circuits had each ruled that such indemnity claims were not premature and could be asserted in the litigation, bringing the indemnitor into the lawsuit. Still, no summary judgment could be issued on the indemnity claim until the liability in plaintiff’s favor had been established.[2]
The source of the differing rules in the appellate courts arose from ambiguous language in the Louisiana Supreme Court’s 2005 decision in Suire v. Lafayette City-Parish Consolidated Gov’t,[3] a case involving complicated claims arising out of a public bid contract subject to limitations under the Public Bid Law. In Suire, the plaintiff sued the City of Lafayette and a general contractor hired by the City, seeking damages to his home allegedly sustained by adjacent construction activities, including absolute liability for the installation of metal sheeting as an ultra-hazardous pile driving activity.[4] The City filed a cross-claim against the general contractor for defense and indemnification under the terms of the construction contract, including a claim for defense against the absolute liability claim.[5] The district court dismissed the absolute liability claim on the City’s motion for summary judgment, but, despite that dismissal, granted the City’s motion against the contractor, holding it liable for the City’s defense costs for the absolute liability claims, but not for indemnity as that claim had been dismissed.[6]
It is important to note that the contractor had not filed an exception of prematurity, which under procedural rules typically results in a waiver of that defense. So, the district court was not being asked to determine if the City’s defense and indemnity claims were premature. Instead, the district court was asked only to determine if the City was entitled to defense and indemnification under its contract. On appeal, the Third Circuit reversed the district court’s dismissal of the plaintiff’s absolute liability claim, held that the sheet driving was, in fact, an ultra-hazardous activity, and held that the contractor owed the City both defense and indemnity for damages caused by that activity.[7]
The Louisiana Supreme Court reversed the Third Circuit’s ruling, held that sheet driving was not an ultra-hazardous activity, and reinstated the district court’s dismissal of the absolute liability claim. But here’s where the confusion arose. In reversing both lower courts’ decisions that the contractor owed the City defense and indemnity, the Court held that under contracts of indemnity, an indemnitor (contractor) is not liable until the indemnitee (the City) “actually makes payment or sustains loss” and that a “cause of action” for indemnity does not arise “until the lawsuit is concluded, and defense costs are paid.” Because the suit on the City’s liability was still pending, the Supreme Court held that the claim for defense was premature (though technically that issue had been waived), reversed the Third Circuit’s decision holding the contractor liable as a matter of law for the City’s defense costs, and deferred the indemnity claim “until the lawsuit is concluded and liability is determined.”[8] It is likely the Court’s reliance on when the “cause of action” for indemnity arises was intended to elide the issue of waiver due to the absence of a timely filed exception.
Following Suire, third-party defendants brought into lawsuits on contractual claims of defense and indemnification relied on Suire’s confusing holding to argue that defense and indemnity claims against them were premature and could not be asserted until a final determination of liability in the principal demand. This led to the split in the appellate courts described above.
The Supreme Court did not squarely address the issue again until Bennet, though Justices Weimer and former Justice Victory had in subsequent decisions acknowledged the confusion caused by Suire. In their respective concurring opinions in Reggio v. E.T.I.[9] and Morena v. Entergy Corp.,[10] for example, both noted the distinction between a right to claim indemnity vs. a right to collect indemnity and reasoned that while a right to collect indemnity was premature until a final determination of liability, the right to claim indemnity could — and in fact should — be brought during the pendency of litigation pursuant to the Code of Civil Procedure Articles governing third party practice.[11]
The Louisiana Supreme Court finally addressed the confusion in Bennet and adopted the distinctions articulated by Justices Weimer and Victory in their concurring opinions authored over a decade before. Bennett involved a plaintiff injured in an automobile accident after driving over a downed telecommunications line that belonged to Cox Communications.[12] The plaintiff sued, among other defendants, Cox and Cable Man, Inc., a company hired by Cox to perform maintenance on the downed line at issue.[13] Cox asserted a cross-claim against Cable Man, for defense and indemnity from plaintiff’s claims, as provided under the terms of the Master Construction Agreement between them.[14]
Cable Man excepted to the cross-claim on the grounds of prematurity, arguing it could not be sued for defense and indemnity, even by cross-claim, until liability had been determined.[15] The trial court overruled Cable Man’s exception, but the Louisiana First Circuit reversed,[16] Citing Suire, it held: “[I]t is well-established that claims for indemnity, as well as claims for defense arising under an indemnity agreement, are premature prior to a determination that damages are actually owed and the indemnitee sustains a loss.”[17]
To dispel the confusion caused by Suire,[18] the Supreme held that “a claim for indemnity raised during the pendency of the litigation and before a finding of liability is not premature,[19] and clarified its prior decision with the following statement: [T]o the extent any prior jurisprudence can be interpreted otherwise, we now clarify that such a claim for indemnity is not prohibited before a liability adjudication.”[20] The Court felt this holding not only “comport[e]d with principles of judicial economy and efficiency,” but also that “the relevant Code of Civil Procedure articles pertaining to third party practice dictate this result.”[21] In reaching its holding, the Court relied heavily upon the concurring opinions of Justices Weimer and Victory in Reggio and Moreno.[22]
The ruling in Bennett has far-reaching implications for lawsuits involving claims for defense and indemnification. It is highly unlikely that they won’t be brought into the litigation and forced to participate whenever there is a colorable claim for defense or indemnity under their contracts. Co-defendants or third-party defendants can no longer rely on exceptions of prematurity to remove them from the litigation, nor can they now wait for final judgment on the plaintiff’s claims before defending themselves against defense and indemnity claims. Any defenses they think they have must now be presented in the litigation when they are brought into the suit.
[1] 23-1358 (La. 5/10/24).
[2] C.f., Willis v. Fronzen Water, Inc., 15-0900 (La. App. 1 Cir. 12/23/15), 2015 WL 9466625; Bellard v. ATK Constr., LLC, 22-306 (La.App. 3. Cir. 10/26/22), 352 So.3d 1052; Pizani v. St. Bernard Par., 12-1084 (La. App. 4 Cir. 9/26/13), 125 So.3d 546, 550; Cato v. SPS Servs., LLC, 21-715 (La.App. 5 Cir. 12/8/21), 2021 WL 6129547 (unpub’d).
[3] 04-1459 (La. 4/12/05).
[4] 907 So.2d at 42.
[5] Id. at 43.
[6] Id. at 44.
[7] Id.
[8] Suire, 907 So.2d at 51.
[9] 07-1433 (La. 12/12/08), 15 So.3d 951 (Weimer, J, concurring).
[10] 10-2268 (La. 2/18/11), 64 So.3d 761 (Victory, J., concurring).
[11] Id., at 763-66 (citing La. C.C.P. arts. 1111-1116).
[12] Bennett vs. DEMCO Energy Services, LLC, p. 1.
[13] Id. at pp. 1-2.
[14] Id. at p. 2.
[15] Id. at p. 3
[16] Id. at p. 3; see also Bennett vs. DEMCO Energy Services, LLC, 23-581 (La. App. 1 Cir. 9/11/23), 2023 WL 5843557 (unpub’d).
[17] Id. (citations omitted).
[18] Bennett vs. DEMCO Energy Services, LLC, 23-1358, p. 3.
[19] Id. at p. 4.
[20] Id. at p. 5.
[21] Id. at p. 4.
[22] Id. at pp. 5-6, 8-9.
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