George Raymond Williams, M.D. Orthopaedic Surgery v. Bestcomp, Inc.

STATE OF LOUISIANA

COURT OF APPEAL, THIRD CIRCUIT

20-106

GEORGE RAYMOND WILLIAMS, M.D., ORTHOPAEDIC SURGERY,
A PROFESSIONAL MEDICAL LLC, ET AL.

VERSUS

BESTCOMP, INC., ET AL.

**********

APPEAL FROM THE
TWENTY-SEVENTH JUDICIAL DISTRICT COURT
PARISH OF ST. LANDRY, NO. 09-C-5242-A
HONORABLE JAMES PAUL DOHERTY, JR., DISTRICT JUDGE

**********

JONATHAN W. PERRY
JUDGE

**********

Court composed of Elizabeth A. Pickett, John E. Conery, and Jonathan W. Perry,
Judges.

AFFIRMED.

Patrick J. McShane
Carl E. Hellmers, III
D. Burke Stough
Frilot L.L.C.
100 Poydras Street, Suite 3700
New Orleans, Louisiana 70163
(504) 599-8000
COUNSEL FOR DEFENDANT/APPELLANT:
Landmark American Insurance Company

George D. Fagan
Leake & Andersson LLP
1100 Poydras Street, Suite 1700
New Orleans, Louisiana 70163
(504) 585-7500
COUNSEL FOR DEFENDANT/APPELLANT:
Chartis Specialty Insurance Company

Thomas A. Filo
Somer G. Brown
Cox, Cox, Filo, Camel & Wilson, LLC
723 Broad Street
Lake Charles, Louisiana 70601
(337) 436-6611
COUNSEL FOR PLAINTIFFS/APPELLEES:
George R. Williams, M.D., Orthopaedic Surgery,
A Professional Medical L.L.C., et al.

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

Stephen B. Murray
Stephen B. Murray, Jr.
Arthur M. Murray
Murray Law Firm
909 Poydras Street, Suite 2150
New Orleans, Louisiana 70112-4000
(504) 525-8100
COUNSEL FOR PLAINTIFFS/APPELLEES:
George R. Williams, M.D., Orthopaedic Surgery,
A Professional Medical L.L.C., et al.

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

PERRY, Judge.

This matter arises from alleged violations of the Louisiana Preferred Provider

Organization Act (“PPO Act”), La.R.S. 40:2201–2210. Defendant excess insurers

Chartis Specialty Insurance Company (“Chartis”) and Landmark American

Insurance Company (“Landmark”) (collectively “Appellants”) suspensively appeal

several adverse rulings which resulted in judgment in the amount of $5 million

against each, together with legal interest and court costs. For the following reasons,

we affirm.

FACTS AND PROCEDURAL HISTORY

Louisiana health care providers (“Plaintiffs”) filed a petition for damages and

class certification on September 30, 2009, alleging their workers’ compensation

medical bills were discounted pursuant to PPO agreements without the benefit of

notice as required by La.R.S. 40:2203.1. Plaintiffs’ suit was initially filed solely

against Bestcomp, Inc. (“Bestcomp”), based on allegations that as a group purchaser

under La.R.S. 40:2202(3), Bestcomp failed to comply with the mandatory notice

provisions contained in Subsection B of La.R.S. 40:2203.1 and, thus, was liable for

damages under Subsection G thereof.1

Plaintiffs filed an amended petition on January 11, 2011, naming Advantage

Health Plans, Inc., CCMSI Holdings, Inc.,2 and Stratacare, Inc. (“Stratacare”), as

additional group purchasers liable for damages for failing to follow the mandatory

notice provisions. Plaintiffs alleged Stratacare entered into PPO agreements for

1
Subsection B of 40:2203.1 contains the actual notice requirements group purchasers must
follow. The punitive provisions of Subsection G of 40:2203.1 state that failure to follow the notice
requirements “shall subject a group purchaser to damages payable to the provider of double the
fair market value of the medical services provided, but in no event less than the greater of fifty
dollars per day of noncompliance or two thousand dollars, together with attorney fees to be
determined by the court.”
2
Advantage Health Plans, Inc. and CCMSI Holdings, Inc. were alter egos of Bestcomp.

alternative rates of pay (“PPO discounts”) on its own behalf and on behalf of its

clients.

Plaintiffs’ fifth amended petition named Cannon Cochran Management

Services, Inc. (“Cochran”) as another alleged group purchaser subject to damages

under La.R.S. 40:2203.1(G). In its answer, Cochran filed a third-party demand

against Rehab Review, Inc. (“Rehab Review”). According to Cochran, Rehab

Review “performed bill review services of health care providers who have rendered

medical services to workers’ compensation patients in Louisiana” and “applied PPO

discounts to the bills of [Plaintiffs] ostensibly pursuant to the providers’ respective

contracts with Bestcomp.” Cochran further alleged “the activities of Rehab Review

respecting the Bestcomp contracts and plaintiffs’ bills, are the same as or

substantially similar to the activities of defendant Stratacare” and so “to the extent

Stratacare is deemed to be a ‘Group Purchaser’ . . . then Rehab Review is also a

‘Group Purchaser’ subject to statutory penalties for the discounts applied by it to

providers’ bills without prior notice.” Cochran contended Rehab Review was liable

for damages applicable to any discount applied in violation of La.R.S. 40:2203.1.

Relevant to this appeal, on October 1, 2013, Plaintiffs’ sixth amended petition

added Stratacare’s insurers—Chartis, Landmark, Darwin Select Insurance Company

(“Darwin”), Illinois Union Insurance Company (“Illinois Union”), and Westchester

Surplus Lines (“Westchester”)—as defendants pursuant to the direct-action statute,

La.R.S. 22:1269. Presently, only Chartis and Landmark remain defendants.

Several pre-trial dispositive motions were filed prior to class certification in

the instant matter.3 In motions for summary judgment, Appellants argued Stratacare

3
Darwin, Illinois Union, and Westchester joined in filing most, if not all, of the pre-trial
dispositive motions at issue herein. However, only Chartis and Landmark remained as defendants
when the trial court rendered its judgment on June 20, 2019. Thus, Darwin, Illinois Union, and
Westchester are not involved in this appeal.

2

was not a group purchaser under La.R.S. 40:2202(3) and was not liable for damages

under La.R.S. 40:2203.1. Appellants further alleged that certain terms and

exclusions within their respective insurance policies barred coverage for Plaintiffs’

claims against Stratacare. The trial court deferred consideration of these motions

until after its adjudication of the issue of class certification.

By judgment dated March 8, 2017, the trial court certified the following class:

“All medical providers who have provided services to workers’ compensation

patients as contemplated in La.R.S. 23:1201, et seq., and whose bills have been

discounted after January 1, 2000, pursuant to a preferred provider organization

agreement, as defined in La.R.S. 40:2202, by and through Bestcomp and Stratacare.”

This court affirmed the class certification. See Williams v. Bestcomp, Inc., 17-478

(La.App. 3 Cir. 1/4/18), 237 So.3d 80.

Following class certification, Plaintiffs filed a motion for summary judgment,

contending Stratacare was a group purchaser, failed to comply with the notice

requirements of La.R.S. 40:2203.1, and applied PPO discounts to Plaintiffs’ medical

bills by virtue of its contract with Bestcomp and, in turn, its contract with third-party

defendant, Rehab Review. Plaintiffs further asserted that their claims against

Stratacare fell within the Insuring Agreements of both Appellants’ excess liability

insurance policies and that the total amount of Stratacare’s liability exceeded the

available $5 million coverage provided therein. Plaintiffs submitted the affidavit of

Robert A. Ehlers, CPA, in support of their motion. Mr. Ehlers reviewed Stratacare’s

corporate records and identified a total of 11,126 PPO discounts (from the first date

of service only) taken by Rehab Review, Stratacare’s client and third-party

defendant herein. The number of discounts multiplied by $2,000 equaled

$22,252,000.

3

Next, Appellants filed peremptory exceptions of prescription or, alternatively,

no right of action. Appellants argued Plaintiffs’ claims are delictual in nature and,

as such, are prescribed. See La.Civ.Code art. 3492. The latter exception challenged

Plaintiffs’ ability to pursue Appellants, as insurers, in a direct action should

Plaintiffs’ claims be deemed contractual in nature. See La.Civ.Code art. 3499.

At a hearing on the parties’ cross-motions for summary judgment and

Appellants’ exceptions, held on September 28, 2018, the trial court found Stratacare

to be a group purchaser liable for damages for failing to follow the mandatory notice

provisions of La.R.S. 40:2203.1. Relying upon the affidavit of Mr. Ehlers, the trial

court further ruled Plaintiffs proved sufficient violations, with each violation being

subject to a damage award of $2,000 pursuant to La.R.S. 40:2203.1(G). The trial

court took under advisement the remaining motions for summary judgment and

peremptory exceptions filed by Appellants.

In March 2019, Appellants filed additional peremptory exceptions and

motions for summary judgment.4 Essentially, Appellants argued res judicata barred

coverage for Plaintiffs’ claims against Stratacare under each Appellants’ second

excess policy, and untimely notice barred coverage under each Appellants’ first

excess policy.

Roughly a week later, on March 26, 2019, the trial court issued written

Reasons for Judgment on the motions and exceptions that were argued on September

28, 2018, denying all relief sought by Appellants. On June 20, 2019, a judgment

was signed, denying Appellants’ motions for summary judgment and peremptory

exceptions, granting Plaintiffs’ motions for summary judgment, and granting

4
On March 18, 2019, Chartis filed a Peremptory Exception of Res Judicata and/or Motion
for Summary Judgment. On March 19, 2019, Landmark filed an Exception of Res Judicata,
Second Motion for Summary Judgment and Supplemental Opposition to Plaintiffs’ Motion for
Summary Judgment.

4

judgment in the amount of $5 million each against Chartis and Landmark, together

with legal interest and all costs of court.

Also on June 20, 2019, the trial court issued a Per Curiam, denying the

peremptory exceptions of res judicata and/or motions for summary judgment which

Appellants filed in March 2019. The trial court explained, in pertinent part:

As to the March 2019 Exceptions and/or Motions for Summary
Judgment filed by Chartis and Landmark, the court views those motions
in the nature of Motions for New Trial based upon arguments of newly
discovered evidence that had arisen after the September 28, 2018
arguments. Without a written signed judgment, any motion for a new
trial would have been premature.

Wishing to preserve for the defendants for further review in this
matter any substantive rights that they may have, the Court denies the
March 29, [sic] 2019 Exceptions and/or Summary Judgment motions
filed by Chartis and Landmark, reserving the rights to Chartis and
Landmark to either file a Motion for New Trial now that a written
judgment on the Exceptions and/or Summary Judgment motions argued
September 28, 2018 has been filed or directly appeal the newly
executed judgment.

Appellants filed motions for new trial, again arguing res judicata barred

coverage for Plaintiffs’ claims against Stratacare under each Appellants’ second

excess policy, and untimely notice barred coverage under each Appellants’ first

excess policy.5 In its motion, Landmark additionally alleged the trial court’s

judgment dated June 20, 2019, and related Reasons for Judgment issued on March

26, 2019, “fail[ed] to apply the Landmark April 1, 2010 unambiguous retroactive

date applicable to Plaintiffs’ claims as set forth in detail in the Landmark original

Motion for Summary Judgment[.]”

The trial court denied Appellants’ motions for new trial after a hearing on

August 30, 2019. Judgment to this effect was signed September 19, 2019.

5
These arguments were first made in exceptions and motions Appellants filed in March
2019.

5

Appellants filed suspensive appeals of the judgments dated June 20, 2019, and

September 19, 2019.

ASSIGNMENTS OF ERROR

Appellants raise five assignments of error correspondingly. First, they argue

the trial court erred in declaring Stratacare is a group purchaser under

La.R.S. 40:2202(3). Second, the trial court erred in not applying the pending or prior

litigation exclusions in Appellants’ policies to deny coverage. Third, the trial court

erred in failing to dismiss Plaintiffs’ claims under Appellants’ exceptions of

prescription or, alternatively, no right of action. Fourth, the trial court erred in not

applying res judicata to dismiss Plaintiffs’ claims under each Appellants’ respective

second policy. Fifth, the trial court erred in not dismissing Plaintiffs’ claims based

on untimely notice under each Appellants’ respective first policy.

Landmark argues two additional errors. It argues the trial court erred in failing

to apply the prior knowledge exclusion and the retroactive date contained in its

policies to preclude coverage.

LAW AND DISCUSSION

Motion for Summary Judgment

Motions for summary judgment were filed to resolve questions surrounding

Stratacare’s alleged group purchaser status and certain terms and exclusions

contained within each Appellants’ policies. The trial court granted Plaintiffs’ motion

relative to Stratacare’s group purchaser status and denied Appellants’ motions,

ruling coverage was afforded for Plaintiffs’ claims against Stratacare.

“A motion for summary judgment is a procedural device used to avoid a

full-scale trial when there is no genuine issue of material fact.” N. Am. Fire &

Cas. Co. v. State Farm Mut. Auto. Ins. Co., 03-300, p. 3 (La.App. 3 Cir. 10/1/03),

856 So.2d 1233, 1235, writ denied, 03-3334 (La. 2/13/04), 867 So.2d 694. “The

6

summary judgment procedure is designed to secure the just, speedy, and inexpensive

determination of every action[.]” La.Code Civ.P. art. 966(A)(2). “The procedure is

favored and shall be construed to accomplish these ends.” Id. Pursuant to La.Code

Civ.P. art. 966(A)(3), a court will grant a motion for summary judgment “if the

motion, memorandum, and supporting documents show that there is no genuine

issue as to material fact and that the mover is entitled to judgment as a matter of

law.” See also Samaha v. Rau, 07-1726 (La. 2/26/08), 977 So.2d 880.

Summary judgments are reviewed on appeal de novo. Dunn v. City of Kenner,

15-1175 (La. 1/27/16), 187 So.3d 404. Appellate courts use the same criteria as the

trial court and ask the same questions: is there any genuine issue of material fact,

and is the movant entitled to judgment as a matter of law. Id.

Group Purchaser

The threshold issue before us is whether Stratacare is a group purchaser. The

definition of group purchaser is set forth in La.R.S. 40:2202(3) as follows:

“Group purchaser” shall mean an organization or entity which
contracts with providers for the purpose of establishing a preferred
provider organization. “Group purchaser” may include:

(a) Entities which contract for the benefit of their insured,
employees, or members such as insurers, self-insured
organizations, Taft-Hartley trusts, or employers who
establish or participate in self-funded trusts or programs.

(b) Entities which serve as brokers for the formation of
such contracts, including health care financiers, third party
administrators, providers, or other intermediaries.

Appellants argue La.R.S. 40:2202(3), strictly mandates that group purchasers

have a “contract[] with providers[.]” They contend Bestcomp is the group purchaser

in this case, while Stratacare is a technology company who simply licensed its

proprietary billing review software, known as Strataware, and provided billing

review services. Appellants assert Stratacare contracted with Bestcomp in 2003,

7

agreeing to access Bestcomp’s PPO for the limited purpose of providing billing

review services to its clients. According to Appellants, Stratacare’s licensees used

Strataware to calculate a recommended discount, but Stratacare’s licensees

determined whether to pay the provider. For instance, Rehab Review used

Strataware to generate recommended payments for the nearly 45,000 discounted

claims at issue in this case. Appellants contend that as a third-party billing review

software licensor, Stratacare had no ability and no duty, and did not issue, control,

or deliver benefit cards to anyone who sought medical care from any health care

providers for any work-related injuries covered by workers’ compensation. Thus,

Appellants argue that because Stratacare undisputedly did not contract with medical

providers, it is not a group purchaser and was neither bound to fulfill the notice

requirements nor subject to damages under La.R.S. 40:2203.1(G).

Appellants refer to the fourth circuit decision in Touro Infirmary v. Am. Mar.

Officer, 09-697 (La.App. 4 Cir. 11/9/09), 24 So.3d 948, to buoy its contention

La.R.S. 40:2202(3) requires an entity to contract directly with medical providers to

be a group purchaser. In Touro, 24 So.3d 948, the health care provider sued

third-party administrators for the difference between the full standard rate of

payment and the discounted alternative rates of payment through the MultiPlan, Inc.

PPO, plus the damages provided by La.R.S. 40:2203.1(G). Neither of the third-party

administrators, however, had entered into any contract with the health care provider.

The third-party administrators successfully asserted, at the trial court level, a

peremptory exception of no cause of action and the provider’s claims were dismissed

with prejudice. In upholding part of the trial court’s judgment, dismissing the

provider’s claims for damages under La.R.S. 40:2203.1(G), the fourth circuit

declared, “Under La.R.S. 40:2202(3) the party who contracts with the ‘provider’ is

8

the ‘group purchaser[.]’” Id. at 955. However, the judgment was vacated, in part,

and the case was remanded on other grounds.6

Appellants also point to Wightman v. Ameritas Life Ins. Corp., 19-11628

(11/26/19), 426 F. Supp.3d 258, which followed Touro, 24 So.3d 948. The

Wightman court found plaintiffs failed to state a claim under La.R.S. 40:2203.1(G)

based upon its interpretation that Touro “analyzed the term ‘provider’ as

contemplated in both La.R.S. 40:2202(3) and La.R.S. 40:2203.1(G) and determined

it refers to the ‘provider involved in this litigation.’ In other words, there must be

privity of contract between the provider seeking Subsection G damages and the

entity against whom they are seeking Subsection G damages.” Wightman, 426

F. Supp.3d at 268.7

Plaintiffs contend Appellants’ analysis results in La.R.S. 40:2203.1 meaning

there can be only one, not multiple, group purchasers. They assert contracting

directly with medical providers is not the sole means by which an entity qualifies as

a group purchaser.

Plaintiffs argue Stratacare is a group purchaser because it acted as an

intermediary by contracting for discounted alternative rates of payment from

providers through Bestcomp and then made those PPO discounts available to its

clients, such as Rehab Review. Plaintiffs assert this is the reason the definition of

group purchaser includes those entities who contract indirectly with medical

providers to secure and pass along PPO discounts, i.e., intermediaries. See

La.R.S. 40:2202(3)(b).

6
The Touro court held the provider “ha[d] stated a cause of action against [the third-party
administrators] for the difference between the discounted ‘alternative rates of payment’ and the
full standard rate of payment as billed by [the provider].” Id., 24 So.3d at 955.
7
Wightman, 426 F.Supp.3d 258, is purely persuasive to the situation before this court. See
Perro v. Alvardo, 20-339 (La.App. 3 Cir. 9/30/20), 304 So.3d 997.

9

Plaintiffs further highlight La.R.S. 40:2203.1(A), which states “the

requirements of this Section shall apply to all preferred provider organization

agreements that are applicable to medical services rendered in this state and to group

purchasers as defined in this part[.]” Next, Plaintiffs point to the definitions of

“preferred provider organization” and “group purchaser” in La.R.S. 40:2202,

asserting that examination of these definitions is necessary to understanding the

applicability of La.R.S. 40:2203.1.

Under La.R.S. 40:2202(5)(a), a PPO is defined as: “a contractual agreement

or agreements between a provider or providers and a group purchaser or purchasers

to provide for alternative rates of pay specified in advance . . . .” (Emphasis added).

According to Plaintiffs, a PPO is nothing more than a contractual agreement or series

of agreements for PPO discounts between providers—those being discounted for

medical services—and group purchasers—those obtaining the discounts. Plaintiffs

assert a PPO can consist of one agreement or multiple agreements and, likewise, the

PPO can include one group purchaser or multiple group purchasers depending on

the number of agreements involved in the formation of the PPO.

We find no merit to Appellants’ contention Stratacare is not a group

purchaser, as its contract with Bestcomp proves. Stratacare’s agreement with

Bestcomp shows: (1) it “provides its clients with computer programs that perform

the bill review functions including PPO repricing;” (2) it “desires to provide its

clients with the benefits of utilizing [Bestcomp’s] network of healthcare providers

with their discounted fees for services;” and (3) Bestcomp was “willing and able to

provide the provider data, including demographics and rates for such services to be

incorporated into the bill review software such that the software is able to reprice the

services to [Bestcomp’s] contracted rates.” Stratacare also agreed: “that [Bestcomp]

shall be [Stratacare’s] non-exclusive supplier of networks of healthcare providers[,]”

10

that it “may continue to offer to clients, in addition to [Bestcomp’s] network, other

networks of healthcare providers to which [Stratacare] now or hereafter has

access[,]” and that it “agrees to present clients with the option of choosing

[Bestcomp’s] network and Other Networks to provide Covered Services to their

members.”

These provisions indicate Stratacare was more than simply a passive provider

of software. Stratacare also provided its clients with alternative rates of pay obtained

through its contract with Bestcomp. Stratacare was an intermediary as envisioned

in La.R.S. 40:2202(3)(b).8 Consequently, Stratacare meets the definition of group

purchaser and, thus, is liable for damages for failing to follow the mandatory notice

provisions of La.R.S. 40:2203.1.

Insurance Coverage

The parties also raised issues concerning insurance coverage via motions for

summary judgment. The trial court denied each Appellants’ motions, ultimately

resulting in a judgment for damages in favor of Plaintiffs.

On appeal, Appellants contend endorsements contained in each of their

respective policies bar coverage for Plaintiffs’ claims against Stratacare and they

further argue the trial court erred in failing to apply unambiguous exclusions of

coverage for pending or prior litigation and prior knowledge. The interpretation of

an insurance contract and its exclusions is a question of law which can be resolved

by a motion for summary judgment. Vidrine v. LaFleur, 07-1299 (La.App. 3

Cir. 3/5/08), 979 So.2d 609.

Appellants’ excess liability insurance policies were designated “follow form”

policies. “The ‘follow form’ designation means that it follows the conditions and

8
We will not speculate why our colleagues on the fourth circuit held a different view in
Touro, 24 So.3d 948. Considering the evidence before us, we will not ignore the broader concept
of the “group purchaser” definition encompassed in La.R.S. 40:2202(3)(b).

11

agreements of an underlying policy. Unless there is an express exception to the form

of the underlying insurance, the excess carrier in a follow form policy must act

according to the underlying insurance policy’s terms.” Toston v. Nat’l Union Fire

Ins. Co. of La., 41,567, p. 5 (La.App. 2 Cir. 11/3/06), 942 So.2d 1204, 1207, writ

denied, 06-2881 (La. 2/2/07), 948 So.2d 1086 (citations omitted).

In this case, Chartis issued two policies to Stratacare, both entitled “EXCESS

EDGE[.]” The first, numbered 01-715-33-88, was effective from April 1, 2010,

through September 30, 2010 (“First Chartis Policy”). The second, numbered

01-204-72-24, was effective from September 30, 2010, through September 30, 2011

(“Second Chartis Policy”).

Landmark also issued two policies to Stratacare, both entitled “EXCESS

PROFESSIONAL LIABILITY COVERAGE FORM CLAIMS MADE BASIS –

FOLLOW FORM[.]” Landmark’s first policy, numbered LHZ725644, was

effective from April 1, 2010, through September 30, 2010 (“First Landmark

Policy”). Landmark’s second policy, numbered LHZ727636, was effective from

September 30, 2010, through September 30, 2011 (“Second Landmark Policy”).

The First Chartis Policy and the First Landmark Policy followed the form and

were excess of an underlying policy issued by Darwin to Stratacare, numbered

0304-1262 and effective from September 30, 2009, through September 30, 2010.

The Second Chartis Policy and the Second Landmark Policy followed the form and

were excess of an underlying policy issued by Illinois Union to Stratacare, numbered

EON G24578562 001 and effective from September 30, 2010, through September

30, 2011.

As with any insurance contract, definitions form a significant part of the

agreement. The definition of “claim” is not contained in either Appellants’ policy;

12

therefore, we look to the underlying policies. The following definition is contained

in Darwin’s policy:

Claim means:

1. any written demand for monetary, non-monetary or injunctive
relief;

2. any civil proceeding in a court of law or equity, including any
appeal therefrom, which is commenced by the filing of a
complaint, motion for judgment or similar proceeding;

3. any administrative or regulatory investigation or proceeding;

4. any arbitration proceeding;

5. any prosecution or governmental action related to Privacy
Wrongful Acts; or

6. any written request to toll or waive a statute of limitations.

The following definition is contained in Illinois Union’s policy:

Claim means:

1. with respect to Insuring Agreements A, B, C, D, and G:

a. a written demand against any Insured for monetary or
non-monetary damages;

b. a civil proceeding against any Insured seeking monetary
damages or non-monetary or injunctive relief, commenced
by the service of a complaint or similar pleading; or

c. an arbitration proceeding against any Insured seeking
monetary damages or non-monetary or injunctive relief;

2. also, with respect to Insuring Agreements C and D only, a
Regulatory Proceeding;

3. with respect to Insuring Agreement E, a written report by the
Insured to the Insurer of a failure by the Insured or by an
independent contractor for which the Insured is legally
responsible to properly handle, manage, store, destroy or
otherwise control Personal Information;

4. with respect to Insuring Agreement F, a Network Extortion
Threat;

including any appeal therefrom.

13

For the remaining provisions pertinent to our review, we look to Appellants’

policies.

The declaration sheet of the Chartis policy provides:

NOTICES: Depending on the terms, conditions and limitations of the
Followed Policy, this policy may (1) only provide coverage for loss
from claims first made or first made and reported during its Policy
Period; (2) have its limit of liability reduced by the payment of defense
costs and/or claim expenses, and (3) not impose a duty to defend on the
Insurer. Please read the Followed Policy and this policy carefully and
discuss the coverage provided thereunder and hereunder with your
insurance agent or broker.

The “INSURING AGREEMENT” contained in the policies Chartis issued to

Stratacare declares:

This policy shall provide coverage in accordance with the same terms,
conditions and limitations of the Followed Policy, as modified by and
subject to the terms, conditions and limitations of this policy.

The Insurer’s coverage obligations under this policy attach to the
Insurer only after the Total Underlying Limits have been exhausted
through payments by, on behalf of or in the place of the Underlying
Insurers of amounts covered under the Underlying Policies. This
policy shall continue in force as primary insurance only upon the
exhaustion of the Total Underlying Limits by reason of such payments
and satisfaction of any applicable retention. This policy shall recognize
erosion of an Underlying Limit of an Underlying Policy through
payments by others of covered amounts under that Underlying Policy.
The risk of uncollectability of any part of the Total Underlying Limits,
for any reason, is expressly retained by the Policyholder and any
insureds, and is not insured under this policy or assumed by the
Insurer.

In addition, “ENDORSEMENT #4” amends the “INSURING AGREEMENT” of

only the Second Chartis Policy as follows:

Notwithstanding the foregoing, the policy shall continue in force as
primary insurance upon exhaustion of the sub-limits in the Followed
Policy for any amounts described in (ii) through (iii) of the
Declarations, but solely with respect to such amounts that are otherwise
covered and solely up to the amount of this policy’s sub-limit for such
amounts as set forth in (ii) through (iii). The Insurer shall not be
responsible for any other Loss until the exhaustion of the Total
Underlying Limits.

14

In the two policies Landmark issued to Stratacare, the scope of the coverage afforded

is set forth as follows:

I. Insuring Agreement

The Company as shown in the Declarations, in consideration of the
payment of the premium and in reliance upon all applications,
documents and information provided or made available to it by or
on behalf of the Insured, and subject to all of the terms, conditions
and other provisions of this policy, including endorsements hereto,
agrees with the Insured that the Company shall provide the Insured
with insurance during the Policy Period which is in excess of the
total limits of liability and any retention or deductible amounts under
the Underlying Insurance, as shown in the Declarations and shall
pay Damages and associated Claim Expenses arising from a Claim
first made during the Policy Period for a negligent act, error, or
omission taking place after the Retroactive Date as shown in the
Declarations.

In addition, “II. Definitions” states:

E. Retroactive Date means the date stated in the Declarations on or
after which any alleged or actual negligent act, error or omission
must have first taken place in order to be considered for coverage
under this policy.

Before understanding Appellants’ arguments as they relate to relevant policy

language, it is necessary to also survey proceedings which Appellants allege are

significant herein. For this, we reproduce a timeline penned by the trial court in its

Reasons for Judgment:

On September 13, [sic] 2009, [Hammerman] and Gainer, Inc.
(hereinafter referred to as “H & G”) filed suit against Stratacare, Inc.
for indemnification involving discounted payments to healthcare
providers pursuant to Title 23 of the Louisiana Revised Statues [sic]
(workmen’s comp claims). The H & G action sought damages from
Stratacare’s alleged failure to review bills properly and to apply
Louisiana law as to how much should be paid for the services as
required under Title 23. Subsequently, on February 3, 2010, H & G
amended its original complaint in this suit to also add a claim for
indemnity from Stratacare arising out of litigation (hereinafter referred
to as referred to as [sic] the “Mor-Tem action”), described below.

The next filing of consequence were two suits filed on September
[30], 2009 by George Raymond Williams, MD, Orthopaedic Surgery,
a Professional Medical LLC (hereinafter “Williams”). On that date,
plaintiff filed two class actions. The first was filed against Mor-Tem,

15

H & G and Integra alleging PPO discounts were taken in workmen
compensation cases without giving prior notice in violation of both
Title 23 and Title 40. Stratacare was added to this suit by a Third Party
Demand filed on May 5, 2010 by H & G and Mor-Tem seeking defense
and indemnity from the claims brought alleging that the medical bills
reviewed by Stratacare were improperly discounted under Title 40.

Also, on September 30, 2009, Williams filed suit against
BestComp, et al, on behalf of medical providers who claimed that as a
member of a PPO, they failed to receive statutory notice of discounts to
their billings as provided for in Louisiana R.S. 40:2203, et seq.
Stratacare was added as a defendant in this litigation by Williams on
January 11, 2011.

Appellants contend the trial court erred in ruling the exclusionary language

contained within their respective policies did not preclude coverage for Plaintiffs’

claims against Stratacare in this matter. Appellants, as the insurers, have the burden

of proving a loss falls within a policy exclusion. Estate of Munsterman v. Unitrin

Auto & Home Ins. Co., 20-209 (La.App. 3 Cir. 11/18/20), 307 So.3d 297.

Additionally, in determining whether an exclusion applies to preclude
coverage, courts are guided by the well-recognized rule that an
exclusionary clause in an insurance policy must be strictly construed.
Calogero v. Safeway Ins. Co. of La., 99-1625 (La. 1/19/00), 753 So.2d
170. Nonetheless, “an insurance policy, including its exclusions,
should not be interpreted in an unreasonable or strained manner so as
to enlarge or to restrict its provisions beyond what is reasonably
contemplated by its terms or so as to achieve an absurd conclusion.”
N. Am. Treatment Sys., Inc. v. Scottsdale Ins. Co., 05-081, p. 20
(La.App. 1 Cir. 8/23/06), 943 So.2d 429, 443, writs denied, 06-2918
(La. 2/16/07), 949 So.2d 423, 06-2803 (La. 2/16/07), 949 So.2d 424.

Id.

Pending and Prior Litigation Exclusion

We first address Appellants’ shared contention the trial court erred in not

denying coverage for Plaintiffs’ claims against Stratacare under the pending or prior

litigation exclusionary language set forth below. In the two policies Chartis issued

to Stratacare, “ENDORSEMENT #1” states:

16

PENDING AND PRIOR LITIGATION
EXCLUSION FOR EXCESS LIMITS

In consideration of the premium charged, it is understood and agreed
that with respect to the Limit of Liability $5,000,000 excess of the first
$5,000,000 Limit of Liability stated in the Declarations, the Insurer
shall have no liability to make any payment in connection with any
pending or prior litigation as of the Pending & Prior Date (as defined
below) or alleging or derived from the same or essentially the same
facts as alleged in such pending or prior litigation.

For purposes of this endorsement, the Pending & Prior Date means:
April 1, 2010.

Both policies issued to Stratacare by Landmark contain the “PRIOR AND

PENDING LITIGATION EXCLUSION ENDORSEMENT” in “Endorsement

No. 07” which states:

In consideration of the premium charged, it is agreed that this policy
does not apply to any Claim(s) arising from:

1. any Claim or litigation against any insured occurring prior to, or
pending as of April 1, 2010 including (but not limited to) Claims,
demands, causes of action, legal or quasi-legal proceedings,
decrees, or judgments;

2. any subsequent litigation of Claims arising from, or based on
substantially the same matters as alleged in the pleadings of such
prior or pending litigation;

3. any act, error, or omission, Personal Injury or Advertising
Liability of any insured(s) which gave rise to such prior or
pending litigation or Claims.

All other terms and conditions of this policy remain unchanged.

Appellants assert their respective exclusions preclude coverage for any

pending or prior claim or litigation against Stratacare as of April 1, 2010, as well as

any claim or litigation after April 1, 2010, arising from or based on similar facts or

matters as those alleged in the pleadings of pending or prior litigation. Appellants

argue coverage for Plaintiffs’ claims against Stratacare is excluded because the

instant matter, the H & G action, and the Mor-Tem action were filed prior to and

were pending as of April 1, 2010.

17

Appellants contend it is inconsequential that Stratacare was not named a

defendant in the instant matter until January 11, 2011. Rather, they argue

Stratacare’s alleged liability had only to be in connection with any action pending

prior to April 1, 2010. Thus, regarding this case, Appellants assert it is enough that

Stratacare’s liability originated from the claims Plaintiffs alleged against Bestcomp

in their original petition filed on September 30, 2009. We disagree.

It is essentially Appellants’ contention that Plaintiffs’ lawsuit against

Bestcomp, not their insured, should constitute pending or prior litigation for the

claims against Stratacare, their insured. We find this interpretation of Appellants’

pending or prior litigation exclusions unsustainable.

By the plain language defining “claim” in the underlying policies of Darwin

and Illinois Union, a claim did not exist until Stratacare was named a defendant in

these proceedings on January 11, 2011. There is no evidence indicating Stratacare

received a written demand for damages, or anything of the sort, prior thereto. Thus,

we do not consider the instant matter to be pending or prior litigation which would

exclude from coverage Plaintiffs’ claims against Stratacare.

Appellants further contend that the claims filed in this case arose from or were

based on similar facts or matters to those alleged in the H & G action and the

Mor-Tem action. Yet again, we disagree.

The H & G action involved a Petition for Declaratory Judgment. H & G, a

third-party administrator of workers’ compensation claims, sought indemnity for

Stratacare’s alleged failure to recommend the proper reimbursement amounts in

accordance with the Fee Schedule under Title 23 of Louisiana’s Workers’

Compensation Act. See La.R.S. 23:1034.2. In addition, H & G amended its original

complaint on February 3, 2010, adding a claim for indemnity from Stratacare arising

out of the lawsuit filed by Plaintiffs in the Mor-Tem action.

18

Though the H & G action existed prior to April 1, 2010, the claims against

Stratacare in the H & G action are different from the claims at issue in the instant

matter. The H & G action followed Stratacare’s alleged violations of the workers’

compensation fee reimbursement schedule. The instant matter stems from

Stratacare’s alleged violations of the PPO notice requirements and involved PPO

discounts taken through Bestcomp.

Contrary to Appellants’ assertions, we do not find the proceedings in the

instant matter and those proceedings in the H & G action to be substantially the same

or derived from essentially the same facts. The H & G action affected Stratacare’s

alleged liability for violations of the workers’ compensation fee schedule in Title 23,

not its alleged obligation as a group purchaser for violating PPO notice requirements

in Title 40. Thus, we do not interpret Appellants’ pending or prior exclusions to

exclude coverage for Plaintiffs’ claims against Stratacare owing to the H & G action.

The Mor-Tem action is also a class action lawsuit filed by Plaintiffs in this

matter and alleged Title 40 claims. The Mor-Tem action was not pending against

Stratacare on April 1, 2010, and Stratacare was not a defendant in the Mor-Tem

action until May 5, 2010, when it was sued for defense and indemnity by the

third-party demands of H & G and Mor-Tem. Furthermore, PPO discounts taken

through Bestcomp were not at issue in the Mor-Tem action as they are herein. For

the same reasons we found that the instant matter was not pending or prior litigation,

we find neither is the Mor-Tem action.

Stratacare’s purported liability was not yet known to Plaintiffs when either

lawsuit against Bestcomp or Mor-Tem was filed. Both filed on September 30, 2009,

neither lawsuit named Stratacare as a defendant. Until Stratacare was brought into

the Mor-Tem action by a third-party demand on May 5, 2010, a claim against

Stratacare did not exist. This claim was clearly made after the pending and prior

19

date set forth in Appellants’ respective policies. Thus, the Mor-Tem action is not

pending or prior litigation entitling Appellants to exclude coverage for Plaintiffs’

claims against Stratacare. Accordingly, having found Appellants’ contentions

relating to pending or prior litigation meritless, coverage for Plaintiffs’ claims

against Stratacare is not barred by Appellants’ pending or prior litigation exclusions.

Prior Knowledge Exclusion

Next, we address Landmark’s contention the trial court erred in not finding

Stratacare knew its acts or omissions were likely to give rise to a claim prior to the

effective date of Landmark’s policy.9 The policies issued by Landmark to Stratacare

contained the “PRIOR KNOWLEDGE EXCLUSION” in “Endorsement No. 08”

which states:

In consideration of the premium charged, it is agreed that the following
Exclusion is added to the policy:

Any alleged act, error, omission, or circumstance likely to give
rise to a Claim that an Insured had knowledge of prior to the
effective date of this policy. This exclusion includes, but is not
limited to any prior Claim or possible Claim referenced in the
insured’s application.

All other terms and conditions of this policy remain unchanged.

Landmark’s argument is twofold. It first contends the actions associated with

its discount activities and potential violations of Title 40 were not only likely to give

rise to a claim, Stratacare was fully aware the alleged discounts had already led to

two lawsuits. In brief, Landmark submits that “[t]he language of the exclusion

precludes coverage on a broad basis for actions or circumstances that may give rise

to a claim[.]”

Explaining its rejection of Landmark’s aforesaid contention in its Reasons for

Judgment, the trial court wrote, in pertinent part:

9
Chartis raised this argument below but has abandoned the contention on appeal.

20

Endorsement 8 denying coverage for an alleged act, error, or omission
or circumstance likely to give rise to a claim that an insured had
knowledge of prior to the effective date of the policy would place the
insurer [sic] in an untenable position of having to make a disclosure of
all possible acts, not just existing, but also perceived acts, errors or
omissions that may lead to further litigation. Such a requirement
expands upon the purpose of a claims made and reported policy. In this
case, Stratacare bargained for and obtained a claims made and reported
policy which required them to report all claims made within the policy
period to the insured.

We fully agree with the trial court’s logic. Landmark’s allegation Stratacare

knew its actions or omissions were likely to lead to a claim suggests Landmark

required an admission of possible wrongdoing.

Furthermore, there is no evidence Stratacare was aware in April 2010 that it

would be sued in January 2011. Consequently, we find no merit to Landmark’s

contention the trial court failed to properly apply its prior knowledge exclusion.

Second, Landmark contends its policy is null because of material

misrepresentations made by Stratacare in its application for insurance. It alleges

Stratacare failed to disclose the prior lawsuits, i.e., the Mor-Tem and H & G actions,

as it was required to do under the warranty. In brief, Landmark alleges “[t]here is

no question, under the circumstances known to Stratacare at the time of the

application, that the issues raised by Plaintiffs were the exact circumstances likely

to give rise to additional claims.” Thus, Landmark argues its policy is null from its

inception.

Louisiana Revised Statutes 22:860(A) states, in pertinent part, “[N]o oral or

written misrepresentation or warranty made in the negotiation of an insurance

contract, by the insured or in his behalf, shall be deemed material or defeat or void

the contract or prevent it attaching, unless the misrepresentation or warranty is made

with the intent to deceive.” The insurer bears the burden of proving an insured made

material misrepresentations sufficient to rescind the insurance policy. Kahl

21

v. Chevalier, 15-1028 (La.App. 3 Cir. 3/23/16), 188 So.3d 449. Under Louisiana

law, to rescind an insurance policy on misrepresentation grounds, an insurer must

prove that: “(1) the insured made a false statement; (2) the false statement was

material; and (3) it was made with intent to deceive.” Willis v. Safeway Ins. Co. of

La., 42,665, p. 6 (La.App. 2 Cir. 10/24/07), 968 So.2d 346, 350.

This court has previously explained: “Intent to deceive under La.R.S. 22:860

is determined from circumstances indicating the insured’s knowledge of the falsity

of the representations made in the application.” Burley v. New York Life Ins. Co.,

15-263, p. 7 (La.App. 3 Cir. 11/25/15), 179 So.3d 922, 930. Further, “[t]o prove

materiality of a false statement under La.R.S. 22:860, the insurer must show that the

statement was ‘of such a nature that, had it been true, the insurer would either not

have contracted or would have contracted only at a higher premium rate.’” Id.

(quoting Ned v. Magnolia Life, 590 So.2d 733, 735 (La.App. 3 Cir.1991)).

The warranty upon which Landmark relies is an “Excess Limits Warranty and

Representation Letter,” sent by Stratacare’s Chief Financial Officer Steven

L. Ditman, which stated, in pertinent part:

1. There has not been nor is there now pending any claims, suits, or
actions (including but not limited to any investigation) against any
person or entity proposed for insurance under the policy referenced
above, except as follows:
Walsh Chiropractic TBD vs. StrataCare, Inc., Case No. 2009 L 001200
(State of Illinois)

....

2. No person or entity proposed for insurance under the Policy has
knowledge or information of any act, error or omission which may
reasonably be expected to give rise to a claim, suit or action (including
any investigation) under the Policy, except as follows:
N/A

Notably, this letter is dated April 14, 2010, and the effective date of Landmark’s

policy is April 1, 2010.

22

We find no evidence in the record proving Stratacare was aware of or was the

subject of any claim, as defined in the underlying policies of Darwin and Illinois

Union, prior to April 1, 2010. Though Stratacare was a defendant in the H & G

litigation, we have already stated the Title 23 claims therein are different from the

Title 40 claims in the instant matter. Despite Landmark’s assertions, we do not find

Stratacare’s knowledge of the H & G litigation prior to the effective date of

Landmark’s policy precludes coverage under its prior knowledge exclusion.

Likewise, in regard to the Mor-Tem litigation, a claim was not made against

Stratacare until the third-party demand of H & G was filed. This occurred on May

5, 2010, after the effective date of Landmark’s policy.

Finally, Landmark has not proven Stratacare made material

misrepresentations, and its insinuations are not evidence. There is no evidence

proving that on or before April 1, 2010, Stratacare knew Plaintiffs would levy

against it allegations of Title 40 notice violations. Stratacare’s denials of group

purchaser status and resulting liability is weightier than Landmark’s intimations that

Stratacare must have known its actions were likely to give rise to claims. For these

reasons, we find no error in the trial court’s rejection of Landmark’s prior knowledge

exclusion and refusal to deny coverage for Plaintiffs’ claims against Stratacare.

Retroactive Date

Another contention raised exclusively by Landmark concerns the retroactive

date requirement, which Landmark contends is listed as “04/01/2010” on its

declarations page.10 Under the Insuring Agreement section of the two policies

Landmark issued to Stratacare, the following language appears:

10
Twice Landmark urged and the trial court rejected the retroactive date requirement. This
contention was first urged in Landmark’s motion for summary judgment and denied by the trial
court in its judgment dated June 20, 2019. It was reiterated in Landmark’s motion for new trial
and denied by the trial court in its judgment dated September 19, 2019.

23

The Company as shown in the Declarations, in consideration of the
payment of the premium and in reliance upon all applications,
documents and information provided or made available to it by or
on behalf of the Insured, and subject to all of the terms, conditions
and other provisions of this policy, including endorsements hereto,
agrees with the Insured that the Company shall provide the Insured
with insurance during the Policy Period which is in excess of the
total limits of liability and any retention or deductible amounts under
the Underlying Insurance, as shown in the Declarations and shall
pay Damages and associated Claim Expenses arising from a Claim
first made during the Policy Period for a negligent act, error, or
omission taking place after the Retroactive Date as shown in the
Declarations.

Additionally, “Retroactive Date” is defined in the Insuring Agreement as “the date

stated in the Declarations on or after which any alleged or actual negligent act, error

or omission must have first taken place in order to be considered for coverage under

this policy.”

Landmark contends its Insuring Agreement expressly adopts the coverage

limitation created by the retroactive date; therefore, coverage is limited to only those

claims first made during the policy period for a negligent act which first occurred

after the retroactive date of April 1, 2010. It alleges no evidence exists that a

negligent act by Stratacare first occurred after April 1, 2010. Additionally,

Landmark asserts the supreme court has upheld the retroactive date requirement in

Anderson v. Ichinose, 98-2157 (La. 9/8/99), 760 So.2d 302, and Gorman v. City of

Opelousas, 13-1734 (La. 7/1/14), 148 So.3d 888.11

Plaintiffs contend the retroactive date is Landmark’s attempt to convert a

claims-made policy into an occurrence policy. They argue their claims against

Stratacare fall within the Insuring Agreement because a claim was first made against

Stratacare during the policy period, when Stratacare was named a defendant in this

11
Despite Landmark’s reliance, the retroactive date requirement was not at issue in
Anderson, 760 So.2d 302, nor was the issue in Gorman, 148 So.3d 888, analogous to the retroactive
date issue posed in this case. Thus, we do not find the supreme court’s discussion of occurrence
versus claims-made policies in either Anderson or Gorman to be outcome determinative herein.

24

lawsuit on January 11, 2011. Nevertheless, Plaintiffs refute Landmark’s assertion

there is no evidence of Stratacare’s negligence after April 1, 2010, by offering the

testimony of Stephanie Lilja, Fee Schedule Compliance Analyst with Stratacare. At

her deposition in March 2012, Ms. Lilja verified Stratacare was still not complying

with the notice provisions contained in La.R.S. 40:2203.1.12 Additionally, Plaintiffs

allege an ambiguity exists because Landmark’s declarations page lists a

“04/01/2010” retroactive date as well as a “03/20/2002” retroactive date.

The label “EXCESS PROFESSIONAL LIABILITY COVERAGE FORM

CLAIMS MADE BASIS – FOLLOW FORM” appears on page one of three of the

Landmark policy. Above the title appears the following notice: “This Form

Provides Claims-Made Coverage. Please Read The Entire Form Completely.”

A claims-made policy covers losses from claims made against the insured if

the claim is submitted to the insurer in accordance with the policy terms during the

period specified in the policy. Anderson, 760 So.2d 302; Gorman, 148 So.3d 888.

The Louisiana Supreme Court explained the distinct types of policies in Anderson,

760 So.2d at 305 (quoting Sol Kroll, The Professional Liability Policy “Claims

Made”, 13 FORUM 842, 843 (1978)):

The major distinction between the “occurrence” policy and the “claims
made” policy constitutes the difference between the peril insured. In
the “occurrence” policy, the peril insured is the “occurrence” itself.
Once the “occurrence” takes place, coverage attaches even though the
claim may not be made for some time thereafter. While in the “claims
made” policy, it is the making of the claim which is the event and peril
being insured and, subject to policy language, regardless of when the
occurrence took place.

We have determined coverage was afforded under Landmark’s policy when

Plaintiffs’ claim was made on January 11, 2011. Now, Landmark seeks a

12
The continuing failure to fulfill the notice requirements is expected given Stratacare’s
denials concerning its status as a group purchaser.

25

determination that the retroactive date has nothing to do with when the claim was

made or when the claim was reported but has everything to do with when the

wrongful act that is claimed by Plaintiffs first occurred.

As a claims-made policy, the occurrence of the wrongful act is not the factor

determinative of whether there is coverage; rather, the determinative factor is when

the claim was made. Although a retroactive date requirement is not per se

impermissible, we find that to apply the same inception date and retroactive date

would be duplicitous and, thus, would lead to an absurd result. Interpretation of an

insurance policy should not be unreasonable or strained to enlarge or restrict the

policy’s provisions beyond what is reasonably contemplated by its terms so as to

achieve an absurd conclusion. See Estate of Munsterman, 307 So.3d 297. Thus, we

reject Landmark’s unreasonable interpretation as an attempt to have it both ways,

and we find the trial court correctly denied Landmark’s motions.

All contentions concerning coverage raised by Appellants are meritless.

Thus, Appellants’ motions for summary judgment on issues relating to insurance

coverage were rightly denied.

Peremptory Exceptions

Prescription

We now move on to consider the prescriptive period applicable to Plaintiffs’

claims under La.R.S. 40:2203.1. Appellants contend the trial court erroneously

characterized Plaintiffs’ actions as personal actions, as defined in La.Code

Civ.P. art. 422. As a result, Appellants argue the trial court incorrectly determined

Plaintiffs’ claims had not prescribed because they were subject to a ten-year

prescriptive period found in La.Civ.Code art. 3499.

When Appellants’ peremptory exceptions of prescription were overruled, the

trial court referred both to its prior adjudication of an identical exception raised by

26

Stratacare as well as this court’s decision in Gunderson v. F.A. Richard & Assocs.,

09-1498 (La.App. 3 Cir. 6/30/10), 44 So.3d 779, wherein this court affirmed the trial

court’s finding that claims arising under La.R.S. 40:2203.1 were personal actions

and subject to ten-year prescription. In so ruling, this court declared:

The Louisiana [Preferred Provider Organization Act] does not
set out a prescriptive period for bringing an action for violation of the
notice requirement of La.R.S. 40:2203.1. This action is personal in
nature as defined by La.Code Civ.P. art. 422, which states that:

A personal action is one brought to enforce an
obligation against the obligor, personally and
independently of the property which he may own, claim,
or possess.

A real action is one brought to enforce rights in, to,
or upon immovable property.

A mixed action is one brought to enforce both rights
in, to, or upon immovable property, and a related
obligation against the owner, claimant, or possessor
thereof.

Louisiana Civil Code Article 3499 states that personal actions are
subject to a ten year prescriptive period “unless otherwise provided by
legislation.” Unlike the claim for past due wages considered by the
court in Fishbein v. State ex rel. Louisiana State Univ. Health Sciences
Ctr., 04-2482 (La.4/12/05), 898 So.2d 1260, the claim urged by
Plaintiffs is not “otherwise provided by legislation.” Accordingly, we
find no error in the trial court’s determination that a ten year
prescriptive period applies to the action.

Gunderson, 44 So.3d at 784.

Here, Appellants argue Plaintiffs’ claims sound in tort, rather than in contract;

therefore, the trial court should have applied the one-year prescriptive period set

forth in La.Civ.Code art. 3492. Appellants arguments in this regard primarily rely

on the majority ruling of the Louisiana Supreme Court in DePhillips v. Hospital

Serv. Dist. No. 1 of Tangipahoa Parish, 19-1496 (La. 7/9/20), --- So.3d ---, which

they contend implicitly overrules this court’s decision in Gunderson, 44 So.3d 779.

27

Plaintiffs contend DePhillips is inapposite and argue for application of the law

of the case doctrine based on the adjudication of Stratacare’s exception of

prescription in 2013. Then, as now, the trial court overruled the exception relying

on Gunderson, 44 So.3d 779. Subsequently, this court denied Stratacare’s

application for supervisory writ, finding “no error in the trial court’s ruling.”

Williams v. Bestcomp, Inc., 13-219 (La.App. 3 Cir. 5/31/13) (unpublished).

The law of the case doctrine “refers to a policy by which the court will not,

on a subsequent appeal, reconsider prior rulings in the same case. This policy applies

only against those who were parties to the case when the former appellate decision

was rendered and who thus had their day in court.” Day v. Campbell-Grosjean

Roofing & Sheet Metal Corp., 260 La. 325, 331, 256 So.2d 105, 107 (1971)

(footnotes omitted).

Appellants were not parties herein when this court’s prior ruling on

prescription was rendered. For this reason, our review is not controlled by the law

of the case doctrine. We also note the trial court judgment presently at issue predates

the supreme court’s consideration of prescription in DePhillips, --- So.3d ---. For

this reason, we feel our review is judicious.

Questions of law are reviewed de novo, without deference to the legal

conclusions of the court below. Smith v. Citadel Ins. Co., 19-052 (La. 10/22/19),

285 So.3d 1062. Furthermore, our jurisprudence requires prescription statutes to be

“strictly construed against prescription and in favor of the claim sought to be

extinguished by it; thus, of two possible constructions, that which favors

maintaining, as opposed to barring an action, should be adopted.” Wells v. Zadeck,

11-1232, p. 7 (La. 3/30/12), 89 So.3d 1145, 1149.

Under La.Code Civ.P. art. 3499, “Unless otherwise provided by legislation, a

personal action is subject to a liberative prescription of ten years.” A “personal

28

action” is defined in La.Civ.Code art. 422 as “one brought to enforce an obligation

against the obligor, personally and independently of the property which he may own,

claim, or possess.” Whereas a “real action” is “one brought to enforce rights in, to,

or upon immovable property.” Id.

The nature of the duty breached determines whether the action is in tort
or in contract. Roger [v. Dufrene], 613 So. 2d [947, 948 (La.1993)];
Dean v. Hercules, Inc., 328 So. 2d 69, 70 (La. 1976). “The classic
distinction between damages ex contractu and damages ex delicto is
that the former flow from the breach of a special obligation
contractually assumed by the obligor, whereas the latter flow from the
violation of a general duty owed to all persons.” Thomas v. State
Employees Grp. Benefits Program, 05-0392 (La.App. 1 Cir. 3/24/06),
934 So. 2d 753, 757.

Smith, 285 So.3d at 1067.

In DePhillips, --- So.3d ---, the Louisiana Supreme Court examined claims

brought under the Health Care Consumer Billing and Disclosure Protection Act,

La.R.S. 22:1871–1881 (“Balance Billing Act”) by insured patients against

contracted health care providers.13 In classifying the nature of the obligation

breached to determine the applicable prescriptive period, the speaker for the

majority, Justice Crichton, wrote:

Pursuant to the Act, a contracted healthcare provider is prohibited from
taking certain actions to collect amounts owed to the provider,
including discount billing or dual billing a patient to collect amounts
allegedly owed to the provider. La.R.S. 22:1874(A)(1)-(4). These
duties are owed to “an enrollee or insured,” a defined term that means
“a person who is enrolled in or insured by a health insurance issuer for
health insurance coverage.” La.R.S. 22:1872(A)(11). In other words,
by the plain language of the Act, this is a duty owed by all “contracted
health care providers” to all “enrollees or insured,” and is not specific
to any individual. It is a general duty imposed by statute and, thus, does
not arise from any special obligation owed by [defendant health care
provider] to [the plaintiff in this case]. See Smith, 19-0052, p. 6, 285
So. 3d at 1067. We therefore find the nature of the duty breached is
delictual in nature, and the claims are subject to a one-year prescriptive
period. Roger, 613 So. 2d 948.

13
The Balance Billing Act prohibits a contracted health care provider from collecting or
attempting to collect amounts from an insured patient more than the contracted reimbursement
rate. See La.R.S. 22:1874.

29

Id. at --- (footnote omitted). Thus, the insured patients’ claims against contracted

health care providers under the Balance Billing Act were characterized as delictual

and thus subject to a one-year, rather than ten-year, prescriptive period.14

However, less than a year before its ruling in DePhillips, --- So.3d ---, the

supreme court, in Smith, 285 So.3d 1062, found the proper prescriptive period

applicable to a first-party bad faith claim against an insurer to be the ten-year

prescriptive period provided by La.Civ.Code art. 3499. The undivided court noted

“[t]he duty of good faith is an outgrowth of the contractual and fiduciary relationship

between the insured and the insurer, and the duty of good faith and fair dealing

emanates from the contract between the parties.” Smith, 285 So.3d at 1069.

Like this case, Gunderson, 44 So.3d 779, involved claims brought under the

PPO Act by health care providers alleging violations of the notice provisions in

La.R.S. 40:2203.1(B). This court found that interpreting La.R.S. 40:2203.1 supports

“a strong public policy in favor of notice to health care providers that a PPO discount

may be taken.” Gunderson, 44 So.3d at 783.

Under the PPO Act, providers agree to discount medical bills on the condition

that prior notice via benefit card or thirty days written notice will be provided by

group purchasers. The underlying agreement, i.e., the PPO between provider and

group purchaser is the source of the duty owed to providers and the cause of action

for damages under La.R.S. 40:2203.1 belongs only to providers. Thus, the duty

owed by a group purchaser extends only to providers.

In this case, Plaintiffs agreed to perform medical services at alternative rates

of payment (PPO discounts) in exchange for membership in PPOs established by

group purchasers. See La.R.S. 40:2202. Under La.R.S. 40:2203.1(B), PPO

14
Despite ruling the insured patients’ claims are subject to a prescription period of one
year, the supreme court did not reach the issue of when prescription begins to run under the Balance
Billing Act.

30

discounts shall not be enforceable without prior notice via benefit card or thirty days

written notice, otherwise group purchasers shall be subjected to the punitive

provisions of La.R.S. 40:2203.1(G). Thus, the underlying agreement, i.e., the PPO,

between provider and group purchaser for alternative rates of payment is the source

of the duty to providers for causes of action under La.R.S. 40:2203.1. In other words,

Plaintiffs’ claims are an outgrowth of the contractual relationship between providers

and group purchasers.

For these reasons, we stand by the prior ruling of this court set forth in

Gunderson, 44 So.3d 779. Plaintiffs’ claims are subject to a liberative prescription

of ten years. Accordingly, Appellants’ exceptions of prescription were properly

overruled.

No Right of Action

Alternatively, Appellants object to Plaintiffs’ right to sue them in a direct

action should Plaintiffs’ action be characterized as contractual. Appellants argue

Plaintiffs’ claims for Stratacare’s alleged violations of La.R.S. 40:2203.1 are

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.

An exception of no right of action poses a question of law and is reviewed by

the appellate court de novo. Castille v. La. Med. Mut. Ins. Co., 14-519 (La.App. 3

Cir. 11/5/14), 150 So.3d 614.

The argument before us was considered by this court in Williams v. SIF

Consultants of La., Inc., 12-419 (La.App. 3 Cir. 11/7/12), 103 So.3d 1172, writ

denied, 12-2637 (La. 3/15/13), 109 So.3d 381. In that case, however, the parties

agreed the action under La.R.S. 40:2203.1 was an action in contract. In Williams,

103 So.3d 1172, this court reasoned that despite the insurers’ argument this was an

31

action in contract such that the application of the direct-action statute was barred, a

statutory duty was involved, and thus, the source of the duty involved would not

have been the contract itself, but rather society’s interest in protecting its members

against uncompensated injury.

Applying our reasoning in Williams, 103 So.3d 1172, we find no merit in

Appellants’ contention Plaintiffs have no right of action. Thus, Appellants’

exceptions of no right of action were properly overruled.

Motion for New Trial

Lastly, Appellants’ final two shared assignments of error stem from the denial

of their motions for new trial. Appellants argue the trial court erred in not applying

res judicata to dismiss Plaintiffs’ claims under each Appellants’ respective second

policy and the trial court erred in not dismissing Plaintiffs’ claims based on untimely

notice under each Appellants’ respective first policy.15

In July 2019, Appellants filed motions for new trial, asserting the trial court

wrongly denied, without hearing, the motions for summary judgment which

Appellants filed on or about March 19, 2019, a week before the trial court issued its

written Reasons for Judgment on the coverage issues which had been taken under

advisement at the conclusion of the hearing held on September 28, 2018. They also

alleged entitlement to reconsideration of the trial court’s judgment dated June 20,

2019, pursuant to La.Code Civ.P. arts. 1951, 1971, 1972, and 1973.

15
Illinois Union was a party to a lawsuit in California to establish which of Stratacare’s
insurers had a duty to defend Stratacare in the Mor-Tem action. A judgment rendered on
September 10, 2013, in California, prior to Appellants being named defendants in the instant
litigation by direct action on October 1, 2013, dismissed Illinois Union from the lawsuit in
California. On January 26, 2015, Illinois Union filed Peremptory Exceptions of No Right of
Action and Res Judicata or Alternatively, Motion for Summary Judgment. Therein, Illinois Union
argued the judgment rendered in California excluded coverage for the instant lawsuit. On
November 7, 2018, the trial court in this matter issued judgment granting Peremptory Exceptions
of No Right of Action and Res Judicata or Alternatively, Motion for Summary Judgment.

32

Appellants asserted the trial court’s dismissal of Illinois Union, via judgment

signed on November 18, 2018, barred coverage under both the Second Chartis Policy

and the Second Landmark Policy. The Second Chartis Policy and the Second

Landmark Policy followed the form and were excess of an underlying policy issued

by Illinois Union to Stratacare effective from September 30, 2010, through

September 30, 2011.

Appellants argued coverage is precluded for Plaintiffs’ claims against

Stratacare under each Appellants’ respective first policy because Stratacare’s notice

was provided during the term of each Appellants’ respective second policy. Thus,

Appellants contended Plaintiffs’ claims are barred by res judicata—Illinois Union’s

dismissal eviscerates coverage from September 30, 2010, through September 30,

2011. Furthermore, Appellants contended Plaintiffs’ claims are barred by untimely

notice—Stratacare’s notice in April 2011 did not occur during the term of each

Appellants’ respective first policy from April 1, 2010, through September 30, 2010.

Plaintiffs opposed the motions, arguing Appellants’ motions were neither

based on newly discovered evidence nor was the trial court’s judgment of June 20,

2019, contrary to the law and the evidence. They allege Appellants never contested

the timeliness of notice, or lack thereof, despite Appellants’ having known for

several years when Stratacare’s notice of Plaintiffs’ claim was received by

Landmark and Chartis. Additionally, Plaintiffs argue res judicata does not apply to

warrant dismissal of Plaintiffs’ claims under each Appellants’ respective second

policy.

Appellants’ motions for new trial were denied after a hearing on August 30,

2019. The ruling at issue in this appeal is the refusal of the trial court to reconsider

its prior ruling and concomitant judgment of June 20, 2019.

33

Generally, new trials are granted in the interest of justice and are largely left

to the discretion of the trial judge. Smith v. Alliance Compressors, 05-855

(La.App. 3 Cir. 2/1/06), 922 So.2d 674. The standard of appellate review in ruling

on a motion for new trial is whether the trial court abused its discretion. Martin v.

Heritage Manor S., 00-1023 (La. 4/3/01), 784 So.2d 627. “When reviewing the

grant or denial of a motion for new trial, an appellate court cannot reverse the trial

court’s decision unless an abuse of discretion can be demonstrated.” Wedgeworth

v. Mixon, 15-686, p. 9 (La.App. 3 Cir. 2/3/16), 184 So.3d 876, 883, writ denied,

16-422 (La. 4/22/16), 191 So.3d 1049.

Louisiana Code of Civil Procedure Article 1971 provides the discretionary

grounds that may serve as the basis for granting a new trial:

A new trial may be granted, upon contradictory motion of any
party or by the court on its own motion, to all or any of the parties and
on all or part of the issues, or for reargument only. If a new trial is
granted as to less than all parties or issues, the judgment may be held
in abeyance as to all parties and issues.

Louisiana Code of Civil Procedure Article 1972 provides the peremptory grounds

that may serve as the basis for granting a new trial:

A new trial shall be granted, upon contradictory motion of any
party, in the following cases:

(1) When the verdict or judgment appears clearly contrary to the
law and the evidence.

(2) When the party has discovered, since the trial, evidence
important to the cause, which he could not, with due diligence, have
obtained before or during the trial.

(3) When the jury was bribed or has behaved improperly so that
impartial justice has not been done.

The discretionary grounds for granting a new trial are set forth in La.Code Civ.P. art.

1973, which states that a new trial may be granted at the discretion of the judge “in

any case if there is good ground therefor, except as otherwise provided by law.”

34

Under the provisions of La.Code Civ.P. art. 1975, when the motion for new

trial is based on La.Code Civ.P. art. 1972(2), newly discovered evidence, “the

allegations of fact therein shall be verified by the affidavit of the applicant.” Each

motion for new trial was supported by the affidavit of counsel for each Appellant.

The affidavit of counsel for Landmark notes, in pertinent part: “As noted by

the affidavit of Dylan Gist attached to the Second Motion for Summary Judgment

and the Motion for New Trial, Stratacare first provided notice of a claim to

Landmark on April 20, 2011.” In the affidavit of Dylan Gist, dated March 19, 2019,

the following attestation appears, “On April 20, 2011, Stratacare provided its first

notice of claim to Landmark in connection with any policy issued by Landmark to

Stratacare.” The affidavit of counsel for Chartis notes, in pertinent part: “On April

19, 2011, after being named as a defendant in the First Amended Petition, Stratacare

provided its first notice to Chartis of this—or indeed any—claim.” Significantly,

Appellants’ affidavits do not attest that their notice evidence is newly discovered.

Though Appellants contend the recently rendered judgment dismissing

Illinois Union affects their coverage, Appellants’ allegations relating to notice were

not raised, and Appellants have failed to establish the existence of any newly

discovered evidence that could not have been discovered with due diligence prior to

the trial court’s consideration of the parties various cross-filings.16 See LeBlanc

v. Consol. Aluminum Co., 401 So.2d 1082 (La.App. 3 Cir.), writ denied, 409 So.2d

617 (La.1981). Based on our extensive review of this voluminous record and having

found no merit to any of Appellants’ arguments, we do not find the trial court abused

its discretion in denying Appellants’ motion for new trial.

16
The trial court specifically noted in its Reasons for Judgment: “It was . . . not shown that
once Stratacare was brought in as a defendant in these lawsuits that they failed to give notice.
Whether or not the claim was reported has not been denied by either of the defendants.”

35

DECREE

For the foregoing reasons, the trial court judgments dated June 20, 2019, and

September 19, 2019, are affirmed. All costs of this appeal are assessed to

Defendants/Appellants, Chartis Specialty Insurance Company and Landmark

American Insurance Company.

AFFIRMED.

36