George Raymond Williams, M.D. v. Sif Consultants of Louisiana, Inc.

STATE OF LOUISIANA
COURT OF APPEAL, THIRD CIRCUIT

12-419

GEORGE RAYMOND WILLIAMS, M.D.,
ORTHOPAEDIC SURGERY, A PROFESSIONAL
MEDICAL L.L.C.

VERSUS

SIF CONSULTANTS OF LOUISIANA, INC.,
RISK MANAGEMENT SERVICES, L.L.C.,
MED-COMP USA, INC., ET AL.

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APPEAL FROM THE
TWENTY-SEVENTH JUDICIAL DISTRICT COURT
PARISH OF ST. LANDRY, NO. 09-C-5244-C
HONORABLE ALONZO HARRIS, DISTRICT JUDGE

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J. DAVID PAINTER
JUDGE

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Court composed of John D. Sanders, Marc T. Amy, and J. David Painter, Judges.

RENDERED AND AFFIRMED.

Thomas A. Filo
Michael K. Cox
Cox, Cox, Filo, Camel & Wilson, L.L.C.
723 Broad Street
Lake Charles, LA 70601
(337) 436-6611
COUNSEL FOR PLAINTIFFS-APPELLEES:
George Raymond Williams, M.D., Orthopaedic
Surgery, A Professional Medical, L.L.C.

John S. Bradford
William B. Monk
Stockwell, Sievert, Viccellio, Clements
& Shaddock, L.L.P.
One Lakeside Plaza, Fourth Floor
Lake Charles, LA 70601
(337) 436-9491
COUNSEL FOR PLAINTIFFS-APPELLEES:
George Raymond Williams, M.D., Orthopaedic
Surgery, A Professional Medical, L.L.C.

Patrick C. Morrow
James P. Ryan
Morrow, Morrow, Ryan & Bassett
324 West Landry Street
Opelousas, LA 70570-5120
(337) 948-4483
COUNSEL FOR PLAINTIFFS-APPELLEES:
George Raymond Williams, M.D., Orthopaedic
Surgery, A Professional Medical, L.L.C.

Stephen B. Murray
Stephen B. Murray, Jr.
Arthur M. Murray
Murray Law Firm
909 Poydras Street, Suite 2550
New Orleans, LA 70112-4000
(504) 525-8100
COUNSEL FOR PLAINTIFFS-APPELLEES:
George Raymond Williams, M.D., Orthopaedic
Surgery, A Professional Medical, L.L.C.

Steven W. Usdin
Edward R. Wicker, Jr.
Erica A. Therio
Barrasso, Usdin, Kupperman, Freeman &
Sarver, L.L.C.
909 Poydras Street, Suite 2400
New Orleans, LA 70112
(504)589-9700
COUSEL FOR DEFENDANT-APPELLANT:
Executive Risk Specialty Insurance Company

Randall K. Theunissen
Michael E. Parker
D. Paul Gardner, Jr.
Allen & Gooch
2000 Kaliste Saloom Road, Suite 400
Lafayette, LA 70598
(337) 291-1000
COUSEL FOR DEFENDANT-APPELLANT:
Homeland Insurance Company of New York

Michael J. Rosen
Boundas, Skarzynski, Walsh & Black, L.L.C.
200 East Randolph Drive, Suite 7200
Chicago, IL 60601
(312) 946-4200
COUNSEL FOR DEFENANT-APPELLANT:
Homeland Insurance Company of New York

Gerard G. Metzger
Charles T. Curtis, Jr.
Gerard G. Metzger A.P.L.C.
829 Baronne Street
New Orleans, LA 70113
(504) 531-9322
COUNSEL FOR DEFENDANT:
Med-Comp USA

PAINTER, Judge.

Healthcare providers sought to bring a class action against managed care

errors and omissions insurers under Louisiana‟s direct action statute. The trial

court certified the class, and insurers appealed.

FACTS AND PROCEDURAL HISTORY

Plaintiffs are healthcare providers who allege that their workers‟

compensation medical bills have been discounted pursuant to preferred provider

organization (PPO) agreements without the benefit of notice as required by La.R.S.

40:2203.1. Plaintiffs initially filed suit against Med-Comp USA, Inc. (Med-

Comp), Risk Management Services, L.L.C. (Risk Management), and SIF

Consultants of Louisiana, Inc. (SIF). Plaintiffs filed an amended petition naming

CorVel Corporation (CorVel) and its insurers, Executive Risk Specialty Insurance

Company (Executive Risk) and Homeland Insurance Company of New York

(Homeland), as defendants. Plaintiffs reached separate settlement agreements with

Risk Management, SIF, and CorVel. In the settlement agreement with CorVel,

Plaintiffs reserved the right to proceed against the insurers.

With respect the settlement with CorVel and for settlement purposes only,

the court conditionally certified the following class:

All medical providers, institutions, and facilities that have provided
services to workers‟ compensation patients pursuant to the Louisiana
Workers‟ Compensation Act, LSA-R.S. 23:1021 et seq., and whose
bills have been discounted, adjusted, paid on a reduced basis, or
otherwise paid at less than the billed amount pursuant to a Preferred
Provider Agreement contracted with CorVel or owned or operated by
CorVel.

Executive Risk and Homeland raised several exceptions, including an

exception of no right of action, in their answers to Plaintiffs‟ suit. Plaintiffs filed a

motion to certify the class, and a hearing on that motion was held on January 18,

2012. At that hearing, Executive Risk and Homeland argued that the issue of

standing, i.e., their exception of no right of action, had to be considered before a

class could be certified. In written reasons for judgment, the trial court

acknowledged that Executive Risk and Homeland raised the issue of standing but

made no further mention of it. Likewise, the judgment certifying the class is silent

as to that issue.

Executive Risk and Homeland appealed the judgment. Med-Comp, although

it remains as a defendant, has not appealed the class certification.

DISCUSSION

We must first address the issue of the exception of no right of action.

Plaintiffs contend that this issue is not properly before this court because the trial

court never heard the exception of no right of action and has not ruled on it.

Executive Risk and Homeland assert that the issue was clearly before the trial court

since Plaintiffs‟ alleged lack of standing was central to their opposition to class

certification and that the judgment‟s silence as to the issue and certification of the

class necessarily means that the trial court rejected the argument as to their

assertion of no right of action.

We find that this issue is properly before us. Although it is true that

Executive Risk and Homeland made no formal motion to have the exception of no

right of action heard, it is clear that it was argued before the trial court and that the

trial court considered the issue. “Usually, when a trial court judgment is silent as

to an exception, it is presumed that the trial court denied the exception.” Five N

Co., L.L.C. v. Stewart, 02-181, p. 12 (La.App. 1 Cir.7/2/03), 850 So.2d 51, 58.

Furthermore, the exception of no right of action can be noticed by this court on its

own motion, and Executive Risk and Homeland have clearly raised the exception

before this court. So, whether or not the trial court considered the exception of no

right of action, it is properly before this court.

2

Since it presents an issue of law, we review an exception of no right of

action de novo. Joseph v. Hosp. Serv. Dist. No.2 of the Parish of St. Mary, 05-2364

(La. 10/15/06), 939 So.2d 1206.

Executive Risk and Homeland phrase the issue here as whether a healthcare

provider may directly sue an insurer for alleged violations of La.R.S. 40:2203.1 by

the insured party. Executive Risk and Homeland contend that such an action is

prohibited by the direct action statute, La.R.S. 22:1269, because this statute

provides a procedural right of action against insurers for claims that arise only in

tort, not in contract. Executive Risk and Homeland further argue that Plaintiffs

have admitted that their claims are contractual in nature by availing themselves of

the ten-year prescriptive period applicable to actions arising in contract.

Plaintiffs argue that they are healthcare providers and as such, they are the

only ones who have a right of action under La.R.S. 40:2203.1(G). Plaintiffs also

contend that Executive Risk and Homeland‟s argument that Plaintiffs have no

standing is really an exception of no cause of action and that they have not

admitted that their claims are contractual in nature. Plaintiffs argue that their

claims arise out of a breach of a statutory duty and that the ten year prescriptive

period for personal actions provided in La.Code Civ.P. art. 422 is applicable. As

the issue of prescription is clearly not before us, we make no determination as to

what prescriptive period applies. We focus solely on the issue of whether

Plaintiffs have a right of action against the insurers.

The issue is not as simply stated as Executive Risk and Homeland assert.

Here, Plaintiffs sued the insured, CorVel, and its insurers, Executive Risk and

Homeland. At that point, the direct action statute was not at issue. Plaintiffs

settled with CorVel but not with its insurers. In the settlement documents,

Plaintiffs expressly reserved the right to proceed against “any and all insurers.”

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“The function of the exception of no right of action is to determine whether

the plaintiff belongs to the class of persons to whom the law grants the cause of

action asserted in the suit.” Hood v. Cotter, 08-215, p. 17 (La. 12/2/08), 5 So.3d

819, 829. Our review must “focus on whether the particular plaintiff has a right to

bring the suit and is a member of the class of persons that has a legal interest in the

subject matter of the litigation, assuming the petition states a valid cause of

action.” Eagle Pipe & Supply, Inc. v. Amerada Hess Corp., 10-2267, p. 6 (La.

10/25/11), 79 So.3d 246, 256.

“A party has an actionable right, and consequently standing, if it can be said

that the party has a legally protectable and tangible stake in the litigation.” Show-

Me Const., L.L.C. v. Wellington Specialty Ins. Co., 11-528, p. 4 (La.App. 5 Cir.

12/29/11), 83 So.3d 1156, 1158 (citing First Bank and Trust v. Duwell, 10-481

(La.App. 5 Cir. 12/14/10), 57 So.3d 1076, 1078, writ denied, 10-2826 (La.2/11/11),

56 So.3d 1005). “The exception does not raise the question of the plaintiff's ability

to prevail on the merits nor [sic] the question of whether the defendant may have a

valid defense.” Touzet v. V.S.M. Seafood Servs., Inc. 96-225, p. 3 (La.App. 4 Cir.

3/27/96), 672 So.2d 1011, 1013. The exceptor bears the burden of proof to show

that the plaintiff has no right of action. Carter v. Haygood, 04-646 (La. 1/19/05),

892 So.2d 1261.

With respect to the direct action statute, it has been held that “[t]he direct

action statue does not create an independent cause of action against the insurer,”

but instead “merely grants a procedural right of action against the insurer where the

plaintiff has a substantive cause of action against the insured.” Marsh Eng’g Inc. v.

Parker, 04-509, p. 11 (La.App. 3 Cir. 9/29/04), 883, So.2d 1119, 1127, writ denied,

04-2669 (La. 1/28/05), 893 So.2d 73. Thus, “[w]hen the injured party‟s

substantive cause of action against the original tort feasor [sic] is extinguished, the

procedural right of direct action against the insurer, which is purely remedial and

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ancillary to the cause, must fall by operation of law.” Id. However, courts have

also recognized that the release of an insured does not automatically extinguish the

claims against the non-settling insurer, and those claims can remain viable even

though the insured has been released. See Dukes v. Declouette, 10-45 (La.App. 1

Cir. 6/11/10), 40 So.3d 1231, writ denied, 10-1623 (La. 10/8/10), 46 So.3d 1207

(citing Summerall v. Bickham, 03-1252 (La.App. 1 Cir. 9/8/04), 887 So.2d 73, writ

denied, 04-2506 (La. 1/7/05), 891 So.2d 696).

In this case, as in Dukes, Plaintiffs joined the insured, CorVel, as a defendant,

and when Plaintiffs released the insured, they specifically reserved their rights

against the insurers in the settlement agreement. We find that Soileau v. Smith

True Value & Rental, et al., 11-1594 (La.App. 3 Cir. 6/20/12), ___ So.3d ___

(wherein this court recently held that a plaintiff‟s right of action against an insurer

was extinguished when the insured was dismissed from the suit), is distinguishable

because in Soileau, unlike in the case sub judice, the plaintiff did not reserve the

right to proceed against the insurer and because the settlement agreement was

made with the insurer. Furthermore, in Soileau, a high/low settlement agreement

was involved, and the court found that the insurer‟s intent in executing the

high/low agreement was not to allow plaintiff to proceed against it alone but was

obviously to cap its liability at a certain amount regardless of the jury‟s verdict.

Thus, we agree with Dukes and Summerall that “the release of the insured did not

bar the plaintiff‟s separate right to pursue the non-settling insurer through a direct

action.”

Thus, the issue becomes whether there is merit to Executive Risk and

Homeland‟s argument that this is an action in contract such that application of the

direct action statute is barred. “[T]the same acts or omissions may constitute a

breach of both a general duty owed to all persons (ex delicto) and a breach of a

special obligation the obligor contractually assumed (ex contractu). Cooper v.

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Louisiana Dept. of Public Works, 03-1074, pp. 19-20 (La.App. 3 Cir. 3/3/04), 870

So.2d 315, 331-32. Here, a statutory duty is involved. Thus, “the source of the

duty involved would not be the contract itself, but rather society's interests in

protecting its members against uncompensated . . . injury.” Id. at 332 (quoting

Glenn G. Morris, Developments in the Law: Business Associations, 50 La.L.Rev.

211, 220-21 & 224 (1989) (citations omitted)). Thus, we find that Plaintiffs have

right of action in this case.

We next consider whether the trial court correctly certified a class in this

case. The trial court certified the Plaintiff class with the following class definition:

All medical providers who have provided services to workers‟
compensation patients, as contemplated in LA. R.S. 23:1021, et seq.,
and whose bills have been discounted, from January 1, 2001 through
December 31, 2006, pursuant to a Preferred Provider Organization
agreement, as defined in LA. R.S. 40:2202, by or through Med-Comp
USA, Inc. and/or CorVel Corporation.

The law is well settled that:

In reviewing a trial court‟s judgment regarding class certification, the
trial court‟s factual findings are subject to the manifest error standard;
however, the trial court‟s ultimate decision of whether or not to certify
the class is reviewed under the abuse of discretion standard. Brooks,
08-2035, p. 10, 13 So.3d at 554 (citing Banks, 98-0551, 737 So.2d at
1280). “Implicit in this deferential standard is recognition of the
essentially factual basis of the certification inquiry and of the district
court‟s inherent power to manage and control pending litigation.” Id.,
p. 11 (quoting Gene and Gene L.L.C. v. BioPay L.L.C., 541 F.3d 318,
325 (5th Cir.2008).

Dupree v. Lafayette Ins. Co., 09-2602, pp. 7-8 (La. 11/30/10), 51 So.3d 673, 680.

Moreover, this court has recently reiterated that “the court should err on the

side of maintaining the class action since the judge may always modify or amend

the class at any time prior to a decision on the merits.” Gunderson v. F.A. Richard

& Assocs., Inc., 07-331, p. 9 (La.App. 3 Cir. 2/27/08), 977 So.2d 1128, 1137, writs

denied, 08-1063, 08-1069, 08-1072 (La. 9/19/08), 992 So.2d 953 (quoting Clark v.

Trus Joist MacMillian, 02-676, 02-512, p. (La.App. 3 Cir. 12/27/02), 836 So.2d

454, 459-60, writ denied, 03-275 (la. 4/21/03), 841 So.2d 793).

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Executive Risk and Homeland assert that the trial court erred in certifying

the class in this case because the requirements of La.Code Civ.P. art. 5911 were not

met in that the Plaintiff is not an adequate class representative, common issues do

not predominate over individual issues, and there is no typicality. Executive Risk

and Homeland further aver that the trial court improperly focused on the actions of

CorVel instead of the insurers in certifying the class.

1
Louisiana Code of Civil Procedure Article 591 reads, in pertinent part:

A. One or more members of a class may sue or be sued as representative parties
on behalf of all, only if:

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(3) The claims or defenses of the representative parties are typical of the
claims or defenses of the class.

(4) The representative parties will fairly and adequately protect the
interests of the class.

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B. An action may be maintained as a class action only if all of the prerequisites of
Paragraph A of this Article are satisfied, and in addition:

****

(3) The court finds that the questions of law or fact common to the
members of the class predominate over any questions affecting only individual
members, and that a class action is superior to other available methods for the fair
and efficient adjudication of the controversy. The matters pertinent to these
findings include:

(a) The interest of the members of the class in individually controlling the
prosecution or defense of separate actions;

(b) The extent and nature of any litigation concerning the controversy
already commenced by or against members of the class;

(c) The desirability or undesirability of concentrating the litigation in the
particular forum;

(d) The difficulties likely to be encountered in the management of a class
action;

(e) The practical ability of individual class members to pursue their claims
without class certification;

(f) The extent to which the relief plausibly demanded on behalf of or
against the class, including the vindication of such public policies or legal rights
as may be implicated, justifies the costs and burdens of class litigation . . .

7

“The requirement of „adequate representation‟ is satisfied when the claims

of the class representatives are typical or a cross section of the claims of all of the

members in the class.” Martello v. City of Ferriday, 01-1240, p. 9 (La.App. 3 Cir.

3/6/02), 813 So.2d 467, 476, writs denied, 02-990, 02-1002, 02-1514 (La. 6/7/02),

818 So.2d 770, cert. denied, Town of Ferriday v. Martello, 537 U.S. 1072, 173

S.Ct. 673 (12/9/02).

The test for determining the existence of adequate
representation under La. C.C.P. art. 591(A)(4) consists of three
elements: (1) the claims of the chosen class representatives cannot be
antagonistic or conflict with those of other class members; (2) the
chosen representatives must have a sufficient interest in the outcome
to ensure vigorous advocacy; and (3) counsel for the chosen
representatives must be competent, experienced, qualified, and
generally able to conduct the litigation vigorously.

Boyd v. Allied Signal, Inc., 03-1840, p. 26 (La.App. 1 Cir. 12/30/04), 898 So.2d

450, 465, writ denied, 05-191 9 (La. 4/1/05), 897 So.2d 606.

In making its decision, the trial court considered the testimony of several

witness, both live and by deposition. Based on all of the evidence presented, the

trial court determined that the class representative chosen would adequately

represent the interests of the class, partly because of the expertise of Plaintiffs‟

counsel in class action litigation, and because the proposed class representative

would more than adequately represent the broad spectrum of Louisiana healthcare

providers who would be class members. We find no manifest error in this factual

finding.

Executive Risk and Homeland also assert that individual issues predominate

over common issues such that certification of the class was improper. We do not

agree with this assertion. In this case, there is but one issue: whether there was a

violation of La.R.S. 40:2203.1. Plaintiffs assert a single cause of action.

Executive Risk and Homeland assert that coverage issues would require individual

8

inquiry; however, both these companies allegedly insured CorVel. This is not an

issue of multiple policies written to multiple insureds.

The argument regarding whether proper notice was given to each member of

the class requires individualized inquiries was squarely addressed and rejected in

Gunderson. We agree that “[w]hatever the applicability of affirmative defenses in

limiting or extinguishing . . . liability to certain individual claimants, the initial

imposition of such liability remains rooted solely in the failure to give timely

notice.” Gunderson, 977 So.2d at 1138. Thus, we find no manifest error in the

trial court‟s determination that common issues predominate over individual issues

in this case.

Executive Risk and Homeland next argue that the class lacks typicality. We

find no merit to this argument because the claim of every single class member is

the same. Again, we note that this lawsuit alleges a single cause of action for

violation of La.R.S. 40:2203.1 and seeks solely the remedy found in that statute.

Executive Risk and Homeland assert that the trial court improperly focused

on the claims against the insured party, CorVel, who was released after reaching a

settlement agreement with the proposed class. The claims against the insured and

insurer(s) are the same. The insurer stands in the shoes of the insured with respect

to the direct action statute. Ferrell v. Fireman’s Fund Ins. Co., 92-2116 (La.App.

4 Cir. 7/31/96), 680 So.2d 690, reversed on other grounds, 96-3028 (La. 7/1/97),

696 So.2d 569. Thus, we find no merit to this assignment of error.

Accordingly, we find no abuse of discretion in the trial court‟s certification

of the class herein.

9

DECREE

For all of the foregoing reasons, we find that Plaintiffs have a right of action

to pursue this claim against Executive Risk and Homeland and render judgment

denying the exception of no right of action. We further affirm the trial court‟s

class certification. All costs of this appeal are assessed to Defendants/Appellants,

Executive Risk Specialty Insurance Company and Homeland Insurance Company

of New York.

RENDERED AND AFFIRMED.

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