Louisiana Supreme Court: Claims for Indemnity are not Premature, by Margaret Davis

Louisiana Supreme Court Clarifies that Third Party Demands and Cross Claims for Indemnity are Not Premature Before a Decision on the Main Demand, by Margaret N. Davis

On Friday, the Louisiana Supreme Court issued a written opinion in Daniel Bennett v. Demco Entergy Services, LLC et. al., No. 2023-CC-01358 (5/10/24) finally settling an important conflict in Louisiana law. The Court found that cross claims for contractual indemnity and defense are not premature when they are asserted before liability is determined in the main demand. For several years, a circuit split emerged based on several Louisiana Supreme Court decisions that led courts in some circuits to find that cross claims for indemnity were premature before liability was determined. In the construction context, this frequently led to harsh consequences for general contractors, because while they waited for liability to be determined in the main demand, their indemnity cross claims against subcontractors were perempted (dead or unactionable) after five years under La. R.S. 9:2272.  In short, cross claims could be premature during the five-year limit and perempted after the five-year limit.

In the case before the Court, the plaintiff, Daniel Bennett, hit a downed telecommunications line when driving in Baton Rouge. The line caught his car and caused it to stop abruptly; Bennett alleged that he was injured as a result. Bennett sued Cox Communications, the owner of the line, and Cable Man, Inc., which provided maintenance and repair services to Cox, for negligence. Cox then tendered its defense and indemnity to Cable Man based on the indemnity provision in the contract between the two companies. Cable Man refused the tender, and Cox filed a cross claim against Cable Man. In response, Cable Man filed an Exception of Prematurity and argued that, because there was no finding of liability against Cox, Cox’s claim for indemnity had not yet accrued and was therefore premature and should be dismissed. The trial court denied the exception, and Cable Man sought supervisory writs from the Court of Appeal, First Circuit. Citing a prior first circuit decision and the Louisiana Supreme Court’s 2005 Suire v. Lafayette City-Parish Consol. Government, 2004-1459 (La. 4/12/05), 907 So. 2d 37 decisions, the First Circuit determined that Cable Man was correct, and that Cox’s cross claim for indemnity was premature before liability to Bennett was determined. The Louisiana Supreme Court granted Cox’s writ application to settle the issue.

In discussing its reasoning in Bennett, the Louisiana Supreme Court examined the status of indemnity in Louisiana law.  The Supreme Court noted that La. Civil Code art. 2315 generally obligates one to repair the damage caused by his fault and indemnity agreements are contracts whereby one party agrees to protect another against damages incurred by one party as a result of a breach of duty by the other party. Without a particular law to the contrary, indemnity provisions are valid under Louisiana law. Usually, claims for indemnity are brought by third party demand but sometimes indemnity claims are brought via cross claim, as in Bennett; when deciding the issue before the court, the Louisiana Supreme Court found that there was no practical difference between third party demands and cross claims in this context.

Prior to Bennett, the Court in Suire, found that, without a determination as to liability, a court could not adjudicate indemnity but did not determine that the indemnity claim was therefore premature. Instead, determination of the indemnity claim was deferred. Some lower courts  interpreted this deferral to find  that third-party demands and cross claims for indemnity were premature and to dismiss them on exceptions of prematurity. Now, with the Bennett decision, the Supreme Court has made explicit the difference between the right to make a claim for indemnity and the right to collect indemnity.  Elaborating on Justice Weimer’s concurrence in Reggio v . E.T.I., et al., 07-144 (La. 12/12/08), 15 So. 3d 951, the Court explained that asserting a claim for indemnity arising out of the same facts and circumstances as the main demand is not premature before a finding of liability.  The right to collect indemnity is determined after the finding of liability or loss in the main demand, but simply asserting the claim for indemnity in the same action is not premature. Significantly, the Court discussed that its decision promoted judicial economy and efficiency and was consistent with the Civil Code’s articles on third party practice.

With the Bennett decision, general contractors can now assert cross claims or third party demands against subcontractors for contractual defense and indemnity. While the trial court cannot adjudicate the indemnity claim until liability in the main demand has been determined, general contractors should no longer face losing their indemnity rights against subcontractors by being squeezed between prematurity of their claim for indemnity against the subcontractor and the five-year peremptive limit to bring that claim in La. R.S. 9:2772.