A Federal Judge In Sinkhole Litigation Applies Louisiana Law To One Excess Insurance Policy

Case: Lisa Leblanc, et al v. Texas Brine Co., LLC, et al. U.S. District Court for the Eastern District of Louisiana No. 12:12-2059 & Consolidated Cases (E.D. La. November 23, 2015)

This litigation involves a consolidated $80 million class action to recover damages resulting from the development of a sinkhole on property allegedly belonging to and or under the Defendants, Texas Brine Co., LLC and Occidental Chemical Corporation in Assumption Parish, Louisiana. The sinkhole was allegedly caused by Texas Brine's operations, and in response to Plaintiffs' claims, Texas Brine sued numerous insurers that issued liability policies to the company over the past 20 years. In the demands, Texas Brine seeks defense and indemnity, and with respect to one excess carrier, Liberty Insurance Underwriters (Liberty), Texas Brine also seeks damages, penalties and attorneys fees under La. R.S. Section 22:1973, one of Louisiana's bad faith statutes. The putative class of Plaintiffs also filed claims against Texas Brine's insurers under the Louisiana Direct Action Statute, La. R.S. 22:1269.

Texas Brine moved for summary judgment against all of the insurers (23 different carriers and 113 policies), urging application of Louisiana law to the policies. The insurers objected to the blanket approach to the choice of law issues, noting among other things, the motion by Texas Brine was not policy specific and that it was premature. Texas Brine contended the same factors that apply to one policy should apply to all policies, and thus sought an omnibus ruling from the court.

The Court disagreed and found, if any given policy has an express choice of law provision, the provision may be conclusive of the choice of law question for claims made under that policy, if the provision is valid.

The Court then addressed a separate Motion for Partial Summary Judgment on choice of law Texas Brine had filed against Liberty. The Court first pointed out the Liberty Policy did not contain a choice of law provision. Liberty noted an actual conflict in Louisiana and Texas law when interpreting the scope of the pollution exclusion in its policy and requested the court reject Texas Brine's suggestion that Louisiana law apply and affirmatively rule Texas law applies to the claims brought by Texas Brine against Liberty. The court, noting the policy undisputedly had contacts with both Louisiana and Texas, applied the choice of law analysis under Louisiana law pursuant to Klaxon Co. V. Stentor...