Cox, Cox, Filo, Camel & Wilson, LLP v. Louisiana Worker's Comp. Corp.

STATE OF LOUISIANA
COURT OF APPEAL, THIRD CIRCUIT

20-408

COX, COX, FILO, CAMEL & WILSON, LLC

VERSUS

LOUISIANA WORKERS’ COMPENSATION
CORPORATION

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APPEAL FROM THE
FOURTEENTH JUDICIAL DISTRICT COURT
PARISH OF CALCASIEU, NO. 2019-506
HONORABLE RONALD F. WARE, DISTRICT JUDGE

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SHANNON J. GREMILLION
JUDGE

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Court composed of Shannon J. Gremillion, Van H. Kyzar, and Candyce G. Perret,
Judges.

AFFRIMED.

Michael H. Rubin
McGlinchey Stafford, PLLC
301 Main Street, Suite 1400
Baton Rouge, LA 70801
(225) 383-9000
COUNSEL FOR DEFENDANT/APPELLANT:
Louisiana Workers’ Compensation Corporation

Gregory E. Bodin
Baker, Donelson, Bearman, Caldwell & Berkowitz, PC
Chase Tower North
450 Laurel Street, 21st Floor
Baton Rouge, LA 70801
(225) 381-7030
COUNSEL FOR DEFENDANT/APPELLANT:
Louisiana Workers’ Compensation Corporation

Todd A. Townsley
Townsley Law Firm
3102 Enterprise Boulevard
Lake Charles, LA 70601
(337) 478-1400
COUNSEL FOR PLAINTIFF/APPELLEE:
Cox, Cox, Filo, Camel & Wilson, LLC

GREMILLION, Judge.

This unusual matter presents a question of first impression: whether the duty

of good faith and fair dealing imposed by La.R.S. 22:1973(A) applies to workers’

compensation insurance policies. Louisiana Workers’ Compensation Corporation

(LWCC) appeals the judgment of the trial court awarding the law firm of Cox, Cox,

Filo, Camel & Wilson, LLC (the Firm) damages in the amount of $150,083.50 and

penalties of $300,167.00, plus interest, $1,000.00 in expert witness fees, and all costs

resulting from LWCC’s failure to procure counsel to defend the Firm in a workers’

compensation claim initiated by its former office manager. For the reasons that

follow, we hold that La.R.S. 22:1973(A) does apply to workers’ compensation

policies and affirm the trial court.

FACTS

Ms. Polly Pousson has worked for the Firm since 1971. Until 2018, she was

the Firm’s office manager; however, she complained that her vision was becoming

increasingly impaired from the strain of working at a computer screen. She reported

this to the Firm’s managing partner, Mr. Thomas A. Filo, on October 18, 2018. Ms.

Pousson’s doctor recommended that she limit her work on a computer to four hours

a day. The Firm demoted her to assistant office manager and elevated her assistant

to fill the office manager’s position. Ms. Pousson then filed a January 15, 2019

Disputed Claim for Compensation Form (1008) with the Office of Workers’

Compensation Administration (OWC) seeking medical treatment and supplemental

earnings benefits (SEBs).

On January 16, 2019, Mr. Filo’s assistant, Ms. Amy Maynard, emailed the

adjuster for LWCC to inform her of the claim and asked for the name of the Firm’s

counsel. The adjuster replied the following day to acknowledge the filing of the

claim and to advise that counsel had not yet been assigned. Mr. Filo responded the

same day, “You have no idea how much we appreciate this response. This will be

fun.”

On January 22, 2019, the adjuster emailed Ms. Maynard to advise that outside

counsel was being assigned the Firm’s defense “due to the apparent conflict that has

arisen.”1 One week later, Ms. Maynard forwarded discovery the Firm had received

and asked again who was being retained to defend the Firm. That same day, an email

was sent by Attorney Gregory Bodin to Mr. Filo asking Mr. Filo call him.

On January 29, 2019, the present petition, alleging that LWCC had breached

its obligations to defend the Firm and failed to pay an amount due a person insured

under the contract in violation of La.R.S. 22:1973, was filed in the Fourteenth

Judicial District Court.

In a series of subsequent communications between Mr. Bodin and Ms.

Pousson’s attorney, Mr. Bray Williams, Mr. Bodin obtained three extensions of time

to file responsive pleadings, the last of which, obtained on March 1, 2019, was

indefinite. He communicated these by emails to Mr. Filo. On February 25, 2019,

Mr. Bodin proposed to Mr. Williams that LWCC would pay Ms. Pousson benefits

retroactive to November 1, 2018, and would continue paying benefits pending the

Workers’ Compensation Judge’s ruling on her claim. In exchange, Ms. Pousson

would dismiss the Firm as a party without prejudice.

In the meantime, the Firm took the position that the failure of LWCC to hire

an attorney to defend it constituted a breach of La.R.S. 22:1973. This position was

communicated by email from Ms. Maynard to Mr. Bodin. Mr. Bodin responded that

1
The “conflict” has been characterized as both the nature of the Firm’s business, which
consists exclusively of representing personal injury and workers’ compensation claimants, and that
the Firm took the position that the claim of its employee of almost forty years was legitimate and
compensable.
2

the statute had no bearing on workers’ compensation disputes. The Firm had also

responded to discovery Ms. Pousson served on it.

On March 1, 2019, Mr. Williams agreed to grant the Firm an indefinite

extension of time to file an answer because he was aware that there was an issue

with finding an attorney to represent it. Nonetheless, on March 19, 2019, Mr. Filo

prepared and filed an answer and cross claim in the workers’ compensation matter

in which he did not dispute that Ms. Pousson had sustained an occupational injury

or disease and asserted that LWCC had breached its obligations under the policy to

defend and indemnify the Firm.

LWCC answered the Firm’s suit in the present matter and asserted that La.R.S.

22:1973 did not apply to workers’ compensation policies under the terms of La.R.S.

23:1395, which governs the regulation, surplus requirements, reserve requirements,

deposit requirements, reporting, and taxation of LWCC.

Mr. Ted Williams, an attorney from Baton Rouge, filed a motion to be

substituted as counsel for the Firm in Ms. Pousson’s workers’ compensation case on

June 27, 2019.

LWCC filed exceptions of no cause of action, no right of action, and lack of

subject matter jurisdiction in the instant matter on October 18, 2019. That matter

was heard on November 27, 2019. At the hearing, counsel for LWCC withdrew its

exception of no right of action. The trial court denied the exceptions of no cause of

action and lack of subject matter jurisdiction.

Trial of the Firm’s demands was held on December 4, 2019. The Firm offered

three witnesses, Mr. Filo, Mr. Bray Williams, who testified by deposition, and Mr.

Robert Ehler, a certified public accountant who was offered and accepted by the trial

court as an expert in the field of accounting. LWCC presented the testimony of Ms.

Jamie Bourg, its Assistant Vice President of Claims.
3

Mr. Filo testified he is the managing partner of the Firm. He first became

aware of Ms. Pousson’s eye condition well before she filed her 1008. He and Mr.

Kevin Camel, another partner in the Firm, advised her that she may be eligible to

receive SEBs because her hours had been restricted by her doctor. Mr. Camel

prepared the employer’s report to OWC and reported the matter to LWCC. Mr. Filo

testified regarding his discussions with the adjuster beginning in November.

The petition the Firm filed was motivated, according to Mr. Filo, to “get

[LWCC] off dead center.” Mr. Bray Williams had spoken to Mr. Filo on several

occasions and suggested that the Firm should pay Ms. Pousson’s benefits and

demand reimbursement from LWCC. Mr. Filo was particularly concerned because

the Firm’s policy did not allow it to make voluntary payments to Ms. Pousson.

Nonetheless, Mr. Filo was aware that employers and insurers are liable for workers’

compensation benefits, and either could be assessed penalties and attorney fees for

failure to pay.

Mr. Filo concentrates on representing claimants in personal injury matters.

Because his work focuses on this area, he does not maintain time sheets or other

such records. His productivity to the Firm is strictly gauged by the revenue he

generates. The only way he knows to determine the value of the time he spent in

taking legal action to defend the Firm is to look at his revenue history and extrapolate

based on the time he devoted to the workers’ compensation case. To this end, he

estimated the time he spent and created a document reflecting his estimate of 68.5

hours spent in defending the Firm.

It was for the purpose of determining the value of Mr. Filo’s time that Mr.

Ehlers was retained as an expert. Mr. Ehlers looked at the revenue Mr. Filo

generated for the ten years preceding the claim. If Mr. Filo worked 2,080 hours per

year, his hourly rate would be $2,080.50 based upon his ten-year history. Based on
4

Mr. Filo’s five-year average, his hourly rate would be $2,107.00. His average over

the three years prior to trial would be $2,386.50 per hour.

Mr. Bray Williams testified that he represented Ms. Pousson in her workers’

compensation claim. He was aware of the difficulties the Firm had because it was

without an attorney for several months. He and Mr. Filo spoke several times during

those months. Mr. Filo expressed his opinion that Ms. Pousson’s claim was

compensable, but the Firm would not pay any benefits to her voluntarily because of

the policy language that would absolve LWCC of having to reimburse it. In Mr.

Williams’ mind, that made the Firm arbitrary and capricious in refusing to pay

because the Firm was more concerned about its own money than in compensating

its employee. Mr. Williams refused to dismiss the firm without prejudice and

proceed against LWCC alone because the law imposes a duty to pay benefits on both

the employer and the insurer; penalties and attorney fees can be assessed against

either based upon fault.

The Firm rested its case and LWCC moved for an involuntary dismissal on

the ground that La.R.S. 22:1973 did not apply to workers’ compensation insurance

policies. The trial court denied LWCC’s motion. LWCC then presented the

testimony of its only witness, Ms. Bourg, who testified about the trouble LWCC had

in finding an attorney willing to defend the Firm. These efforts began on January

18, 2019. Every attorney LWCC contacted initially indicated that representing the

Firm would create a conflict of interest. LWCC was able to convince Mr. Bray

Williams to grant an indefinite extension for responding to Ms. Pousson’s 1008.

Eventually, Mr. Ted Williams was hired to represent the Firm.

LWCC then rested. The trial court took a brief recess, after which its reasons

were announced from the bench, finding that LWCC breached its obligation to the

Firm of good faith and fair dealing in failing to procure counsel to defend the Firm.
5

The trial court found that the Firm did not manufacture the conflict with LWCC and

that Mr. Filo did not needlessly interject himself into the workers’ compensation

claim for the purpose of creating a conflict. The trial court accepted Mr. Filo’s

testimony regarding the time he spent defending the firm and Mr. Ehler’s method of

calculating the revenue loss to the Firm that resulted from Mr. Filo’s defense of the

Firm. Based upon Mr. Ehler’s analysis, the trial court awarded the Firm $150,083.50

in damages and a penalty of double the damage figure, for a total damage award of

$450,250.50. This appeal followed.

ASSIGNMENTS OF ERROR

LWCC asserts that the following actions of the trial court constitute error that

warrants reversal:

1 The trial court erred in failing to grant LWCC’s exceptions of
lack of subject matter jurisdiction and no cause of action.

2 Even if the trial court had subject matter jurisdiction and the
plaintiff had stated a cause of action (which are denied), the trial
court erred in failing to grant LWCC’s motion for an involuntary
dismissal.

3 Even if the trial court had subject matter jurisdiction, the plaintiff
had stated a cause of action, and the trial court did not err in
failing to grant an involuntary dismissal (all of which are denied),
the trial court nonetheless erred in finding liability under R.S.
22:1973 and awarding damages and penalties under that statute.

ANALYSIS

Subject matter jurisdiction

LWCC maintains that the trial court lacked subject matter jurisdiction over

this claim pursuant to La.R.S. 23:1310.3(F), which states:

Except as otherwise provided by R.S. 23:1101(B), 1361, and
1378(E), the workers’ compensation judge shall be vested with
original, exclusive jurisdiction over all claims or disputes arising out of
this Chapter, including but not limited to workers’ compensation
insurance coverage disputes, group self-insurance indemnity contract
disputes, employer demands for recovery for overpayment of benefits,
the determination and recognition of employer credits as provided for
6

in this Chapter, and cross-claims between employers or workers’
compensation insurers or self-insurance group funds for
indemnification or contribution, concursus proceedings pursuant to
Louisiana Code of Civil Procedure Articles 4651 et seq. concerning
entitlement to workers’ compensation benefits, payment for medical
treatment, or attorney fees arising out of an injury subject to this
Chapter.

In endeavoring to ascertain whether La.R.S. 22:1973 applies to workers’

compensation policies, we first look to the language of the statute itself. Subsection

(D) specifically exempts claims made under health and accident policies. The statute

does not exempt any other kind of insurance. Health and accident insurance is one

of several “Kinds of Insurance” defined by La.R.S. 22:47. That statute also defines

workers’ compensation policies. The exclusion by the legislature of health and

accident policies from La.R.S. 22:1973 and not others indicates that it did not intend

to exclude the others.

Examination of other statutes that impose penalties on insurers is also

illustrative. For example, La.R.S. 22:1892 also imposes penalties for improper

claims handling practices. Section (A) of that statute, which governs first party

claims against insurers, specifically exempts vehicle mechanical breakdown insurers,

health and accident insurers, and workers’ compensation insurers from its penalties.

The specific exemption by the legislature of workers’ compensation insurers from

the penalties imposed by La.R.S. 22:1982 and not from La.R.S. 22:1973 represents

another indication that workers’ compensation insurers are not exempt under the

latter.

Not every issue with a workers’ compensation component falls within the

subject matter jurisdiction of OWC as enunciated in La.R.S. 23:1310.3. Pursuant to

La.Const. art. 5, § 16, district courts exercise original jurisdiction over all civil

matters, and exceptions to that rule are narrowly construed. Gunderson v. F.A.

Richard & Assocs., Inc., 07-264,07-331, 07-400 (La.App. 3 Cir. 2/27/08), 977 So.2d
7

1128, writs denied, 08-1063, 08-1069, 08-1072 (La. 9/19/08), 992 So.2d 953. For

example, this court has held that OWC does not possess subject matter jurisdiction

over demands for indemnity and contribution by a statutory employer against a direct

employer. Rodriguez v. Integrity Contracting, 09-1537 (La.App. 3 Cir. 5/5/10), 38

So.3d 511, writs denied, 10-1296, 10-1307 (La. 9/24/10), 45 So.3d 1074, 1076, cert.

denied, sub nom. Vaughn Roofing & Sheet Metal, LLC v. Rodriguez, 562 U.S. 1256,

131 S.Ct. 1572 (2011). In determining whether subject matter jurisdiction is vested

in OWC when workers’ compensation issues are involved, this court looks to the

legislation under which a party seeks relief. Gunderson, 977 So.2d 1128. If the

claim “arises out of a separate act of the legislature,” subject matter jurisdiction does

not arise under Chapter 10 of Title 23 of the Louisiana Revised Statutes, which

governs workers’ compensation. Id. at 1135. In those instances, OWC does not

enjoy subject matter jurisdiction.

The overriding question before the court is whether La.R.S. 22:1973 applies

to workers’ compensation insurance policies. LWCC’s exception of no cause of

action was based upon its contention that La.R.S. 22:1973 does not apply to workers’

compensation policies. Its motion for involuntary dismissal was similarly grounded.

And, per Gunderson, La.R.S. 22:1973 governs whether the district court had subject

matter jurisdiction.

Louisiana Revised Statutes 22:1973 reads:

A. An insurer, including but not limited to a foreign line and
surplus line insurer, owes to his insured a duty of good faith and fair
dealing. The insurer has an affirmative duty to adjust claims fairly and
promptly and to make a reasonable effort to settle claims with the
insured or the claimant, or both. Any insurer who breaches these duties
shall be liable for any damages sustained as a result of the breach.

B. Any one of the following acts, if knowingly committed or
performed by an insurer, constitutes a breach of the insurer’s duties
imposed in Subsection A of this Section:

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(1) Misrepresenting pertinent facts or insurance policy
provisions relating to any coverages at issue.

(2) Failing to pay a settlement within thirty days after an
agreement is reduced to writing.

(3) Denying coverage or attempting to settle a claim on the basis
of an application which the insurer knows was altered without notice
to, or knowledge or consent of, the insured.

(4) Misleading a claimant as to the applicable prescriptive
period.

(5) Failing to pay the amount of any claim due any person
insured by the contract within sixty days after receipt of satisfactory
proof of loss from the claimant when such failure is arbitrary,
capricious, or without probable cause.

(6) Failing to pay claims pursuant to R.S. 22:1893 when such
failure is arbitrary, capricious, or without probable cause.

C. In addition to any general or special damages to which a
claimant is entitled for breach of the imposed duty, the claimant may
be awarded penalties assessed against the insurer in an amount not to
exceed two times the damages sustained or five thousand dollars,
whichever is greater. Such penalties, if awarded, shall not be used by
the insurer in computing either past or prospective loss experience for
the purpose of setting rates or making rate filings.

D. The provisions of this Section shall not be applicable to
claims made under health and accident insurance policies.

The statute has been extensively litigated and has generated a prodigious body

of jurisprudence. In Theriot v. Midland Risk Insurance Co., 95-2895 (La. 5/20/97),

694 So.2d 184, the supreme court answered one of the most important questions

posed by the statute when it held that third parties are afforded a remedy for an

insurer’s bad faith, but only as to those specific acts enumerated in Subsection (B).2

While third parties are only afforded a remedy under subsection (B), Subsection (A)

establishes a broader duty of good faith and fair dealing in favor of the first-person

insured.

2
At the time, the statute was numbered La.R.S. 22:1220. It was renumbered La.R.S.
22:1973 by 2008 La. Acts No. 415, § 1.
9

LWCC points to our decision in Sneed v. Gilchrist Construction Co., 619

So.2d 888 (La.App. 3 Cir.), writ denied, 625 So.2d 1059 (La.1993), for the

proposition that the district court lacked subject matter jurisdiction. In Sneed, an

injured employee filed suit against his employer’s workers’ compensation carrier

because it allegedly failed to pay a settlement within thirty days. Citing Alford v.

Travelers Ins. Co., 609 So.2d 906 (La.App. 4 Cir. 1992), writ denied, 613 So.2d 626

(La.1993), this court found that the Workers’ Compensation Act provides exclusive

remedies for employees against employers and insurers who engage in arbitrary and

capricious claims handling. Thus, the district court lacked subject matter jurisdiction.

We distinguish Sneed on the basis that it involved a third-party claim against the

insurer and did not address a first-party case such as the one at bar. Further, the issue

in Sneed involved the validity of the claim rather than the fundamental insurance

issue of providing a defense to the insured. While we recognize that La.R.S.

23:1310.3 vests OWC with subject matter jurisdiction over workers’ compensation

coverage issues, we also note that LWCC has not denied coverage; it simply failed

to defend the Firm for a significant period of time.

The fact that workers’ compensation forms an employee’s exclusive remedy

for injuries or compensable sickness or diseases was one basis for the Sneed and

Alford decisions. See La.R.S. 23:1032. Employees are third parties for purposes of

La.R.S. 22:1973. Further, the Louisiana Workers’ Compensation Law (the Law)

mandates the time and place of payment to an injured employee and gives the

employee remedies when the employer or insurer fails to pay timely. See La.R.S.

23:1201. The Law makes no such provision for remedies for an employer who might

be arbitrarily and capriciously denied a defense under its workers’ compensation

policy.

10

These factors—that La.R.S. 22:1973 does not form part of the Law, pursuant

to the rationale of Gunderson; that the Law affords no remedy to an insured who is

denied a defense; that workers’ compensation insurance is regulated by Title 22; and

that workers’ compensation insurers are exempted from certain penalty provisions

in Title 22 but not from La.R.S. 22:1973—force us to conclude that Section 1973

applies to first-party claims by an insured for arbitrary and capricious refusal of the

workers’ compensation insurer to defend it and that the district courts maintain

subject matter jurisdiction over those claims. Accordingly, LWCC’s argument that

the trial court erred in failing to maintain its exception of lack of subject matter

jurisdiction lacks merit.

Cause of action

LWCC argues that the trial court erred in rejecting its exception of no cause

of action, which stated that La.R.S. 22:1973 “is inapplicable under the current

circumstances.” The argument posed in the exception is that La.R.S. 22:1973 does

not afford a remedy to workers’ compensation insureds. Further, LWCC argues, the

duty to defend is a contractual matter not subject to La.R.S. 22:1973. We have

already addressed whether Section 1973(A) can be applied to a workers’

compensation insurer. We will now address LWCC’s argument that the duty to

defend can be a subject of a claim under that provision.

Section 1973(A) imposes the following duties on insurers: “a duty of good

faith and fair dealing,” “an affirmative duty to adjust claims fairly and promptly,”

and a duty “to make a reasonable effort to settle claims with the insured or the

claimant, or both.” The Louisiana Supreme Court has stated, regarding the duty of

good faith and fair dealing:

Although the duty of good faith owed by the insurer to the
insured is codified in La. R.S. 22:1973, the bad faith cause of action by
an insured against the insurer does not rest solely on this statute.
11

Gourley v. Prudential Prop. & Cas. Ins. Co., 98-0934 (La. App. 1 Cir.
5/14/99), 734 So. 2d 940, 945 (citing Smith v. Audubon Insurance
Company, 94-1571 (La. App. 3 Cir. 5/3/95), 656 So. 2d 11, 14, rev’d
on other grounds, 95-2057 (La. 9/5/96), 679 So. 2d 372). The 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. In the absence of a contractual obligation, the duty of good
faith does not exist. See La. C.C. art. 1759 (“Good faith shall govern
the conduct of the obligor and the obligee in whatever pertains to the
obligation.”); La. C.C. art. 1983 (“Contracts have the effect of law for
the parties and may be dissolved only through the consent of the parties
or on grounds provided by law. Contracts must be performed in good
faith.”). Because we find an insurer’s bad faith is a breach of its
contractual obligation and fiduciary duty, we hold the insured’s cause
of action is personal and subject to a ten-year prescriptive period. See
also 15 William McKenzie & H. Alston Johnson, Louisiana Civil Law
Treatise: Insurance Law and Practice § 11:25 (4th ed. 2018) (“Unless
otherwise provided by statute, claims under the penalty statutes
prescribe in ten years.”).

Smith v. Citadel Ins. Co., 19-52, pp. 9-10 (La. 10/22/19), 285 So.3d 1062,

1069 (emphasis added). Good faith, then, is a component of the contractual

relationship. For this reason, claims under Section 1973(A) are limited to first

party demands.

LWCC also points to the Firm’s petition and specifically to the allegation that

LWCC failed to pay the claim of Ms. Pousson as statutorily required. We agree that

the Firm has no cause of action against LWCC for failing to pay Ms. Pousson’s

workers’ compensation claim timely; however, that allegation did not form a basis

for the judgment against LWCC. The trial court awarded damages for LWCC’s

failure to defend the Firm.

The duty to defend is expressed in the policy. Our courts have characterized

this duty as “a high fiduciary duty to discharge its policy obligations to its insured

in good faith—including the duty to defend the insured against covered claims and

to consider the interests of the insured in every settlement.” Pareti v. Sentry Indem.

Co., 536 So.2d 417, 423 (La.1988) (emphasis added) (citations omitted). In light of

12

these pronouncements, we find that a breach of the duty to defend can run afoul of

the provisions of La.R.S. 23:1973(A).

Another constituent of LWCC’s exception of no cause of action is that the

damages awarded were attorney fees, and attorney fees are not awardable under

Section 1973(A).

Standard of review

Questions of law are reviewed by the court of appeal de novo. City of

Youngsville v. C.H. Fenstermaker & Assocs., L.L.C., 17-1065 (La.App. 3 Cir.

4/18/18), 244 So.3d 508, writ denied, 18-824 (La. 9/21/18), 252 So.3d 907. When

a trial court has applied the wrong legal standard in a way that interdicts the findings

of fact, the court of appeal may review the case de novo. Lasha v. Olin Corp., 625

So.2d 1002 (La.1993). However, we have concluded that because the trial court had

subject matter jurisdiction over the case, it did not apply the wrong standard in this

case; accordingly, we review the decision to award damages in this case under the

manifest error standard. Horacek v. Watson, 11-1345 (La.App. 3 Cir. 3/7/12), 86

So.3d 766.

Under the manifest error standard, this court reviews the entire record, not to

determine whether the factfinder’s determinations were right or wrong, but whether

they are reasonably supported by the record. Stobart v. State, Dep’t of Transp. and

Dev., 617 So.2d 880 (La.1993). “Even though an appellate court may feel its own

evaluations and inferences are more reasonable than the factfinder’s, reasonable

evaluations of credibility and reasonable inferences of fact should not be disturbed

upon review where conflict exists in the testimony.” Id. at 882.

The statutory language also guides our review. The language of La.R.S.

22:1973(C) provides that a claimant under the statute is entitled “to any general or

special damages” and “may be awarded penalties[.]” The decision, then, to award
13

penalties is reviewed under the abuse of discretion standard. Wegener v. Lafayette

ins. Co., 10-810, 10-811 (La. 3/15/11), 60 So.3d 1220.

Appellate review of such discretionary decisions is conducted under the
“abuse of discretion” standard of review. Generally, an abuse of
discretion results from a conclusion reached capriciously or in an
arbitrary manner. Burst v. Board of Com’rs, Port of New Orleans, 93-
2069 (La.App. 1 Cir. 10/7/94), 646 So.2d 955, 958, writ not considered,
95-0265 (La. 3/24/95), 651 So.2d 284. The word “arbitrary” implies a
disregard of evidence or of the proper weight thereof. Burst, 646 So.2d
at 958. A conclusion is “capricious” when there is no substantial
evidence to support it or the conclusion is contrary to substantiated
competent evidence. Burst, 646 So.2d at 958.

Quality Envtl. Processes, Inc. v. IP Petroleum Co., Inc., 16-230, p. 23 (La.App. 1

Cir. 4/12/17), 219 So.3d 349, 375, writ denied, 17-915 (La. 10/9/17), 227 So.3d 833.

Review of the evidence

Our review of the evidence, taken as a whole, reveals no manifest error in any

finding of fact. The insurer and insured disagreed about whether the insured’s

employee manifested a compensable occupational injury or disease. As a result, the

insurer claims, it had difficulty obtaining representation for the insured. Yet, the

duty to defend remained, and whether there was a conflict of interest—the nature of

which is not readily apparent to the court— is immaterial. Particularly in the context

of a workers’ compensation case, time is of the essence. The plaintiff may grant an

extension such that the employer may refrain from filing an answer without fear of

being defaulted, but the deadlines for payment of benefits are not abated by the

plaintiff granting that extension, and either the insurer or the employer may be

assessed penalties as the WCJ sees fit. The testimony of Mr. Bray Williams on this

point indicates the predicament in which the Firm found itself. It believed its

employee should be compensated, yet it was prevented from compensating her under

its workers’ compensation policy; this, Mr. Williams felt, made the Firm itself

arbitrary and capricious because it placed its interests above that of its employee.

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The Firm placed LWCC on notice of the claim the day it was filed. The

counsel LWCC finally retained to represent it filed a motion to enroll six months

later. In the meantime, discovery was served on the Firm. The Firm was inquiring

frequently about who was being hired to protect its interests. Its inquiries went

unanswered for months. Under the circumstances, the trial court found that Mr. Filo

took the steps the Firm deemed appropriate and began defending the Firm.

The trial court accepted the estimate of the time Mr. Filo spent in this endeavor.

Mr. Filo generates a tremendous revenue stream for his firm. LWCC also asserts

that the award in this matter is not allowed under La.R.S. 22:1973 because that

statute only authorizes an award of damages and not attorney fees. Mr. Filo’s efforts

on behalf of the firm constitute attorney fees, LWCC maintains; thus, the award is

inappropriate.

How one frames a debate often determines its outcome. Where one party sees

attorney fees, its opponent sees lost earnings. The trial court accepted the Firm’s

perspective on the case. Louisiana Revised Statutes 22:1973(A) provides that an

insurer who breaches the duty of good faith and fair dealings “shall be liable for any

damages sustained as a result of the breach.” An attorney’s time represents his stock

and trade. If his attention is diverted from his client’s cases to defend his firm from

a loss against which it is insured, the time (and, thus, revenue) he has lost represents

damage consequential to the breach of the insurer’s obligation to defend. The

prohibition against an award of attorney fees in a case under Section 1973(A)

prevents the plaintiff from recovering his attorney’s fees in the pursuit of the claim,

not the consequential damages resulting from the insurer’s breach. Accordingly, we

find that the award of damages does not represent attorney fees, but rather damages

in the form of lost revenues of the Firm.

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No evidence contradicted Mr. Filo’s testimony about the time he spent,

estimated though it was. No evidence contradicted Mr. Ehler’s calculations about

what that time represented to the Firm in terms of revenue. We find no manifest

error in the trial court’s award of damages. Further, we find no abuse of discretion

in the award of penalties. The trial court’s decision was not arbitrary, in that it gave

proper weight and consideration to the evidence presented and was not capricious

because there was substantial evidence supporting it.

CONCLUSION

We conclude that a cause of action exists for insureds of workers’

compensation policies pursuant to La.R.S. 22:1973(A) arising from an insurer’s

failure to defend its insured. Because La.R.S. 22:1973(A) represents legislation

apart from the Louisiana Workers’ Compensation Law, subject matter jurisdiction

over such claims is vested in the district courts. We find no manifest error in the

trial court’s ruling. All costs of this appeal are taxed to defendant/appellant,

Louisiana Workers’ Compensation Corporation.

AFFIRMED.

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