United States District Court, E.D. Louisiana
KAREN WELLS ROBY, Magistrate Judge.
On December 12, 2014, Plaintiff, RSUI Indemnity Company ("RSUI") filed a Motion for Leave to File Amended Complaint (R. Doc. 65), seeking leave to file a supplemental and amending complaint to plead additional facts and causes of action. The motion is opposed. See R. Doc. 68. The motion was heard for oral argument on Wednesday, January 7, 2015.
This action is a dispute between the excess and primary liability insurance carriers of a common insured. The excess insurer, RSUI, seeks to recover from the primary liability insurer, American States Insurance Company ("American"), the $2 million it paid as a result of American's alleged breach of the duty to defend the common insured, as more fully set out in the facts below.
II. Factual Summary
An employee of the common insured, Ameraseal LLC ("Ameraseal"), was in a motor vehicle accident with Stacia Barrow in June 2010. Barrow's vehicle struck the rear of Ameraseal's vehicle as its employee made a left turn in front of Barrow, who was allegedly speeding. As a result of the accident, Barrow alleged that she suffered injury to her head, neck, pelvic, spine, arm and leg. She filed suit in state court against Amerseal, its employee, and American. American undertook the defense of Amerseal but did not notify RSUI of Barrow's claims against the common insured until about two weeks before the discovery deadline and about three months before the trial.
Barrow alleged brain and spinal injuries, and there was an indication that her speeding may have been a contributing cause of the accident. Despite the significant injuries alleged by Barrow and her possible contributory negligence, the defense counsel assigned by American allegedly did not take depositions of the plaintiff, her doctors, or attempt to obtain an independent medical examination. Furthermore, defense counsel allegedly failed to oppose the plaintiff's motion for summary judgment, which was granted by the state trial court.
Two weeks before the discovery deadline, American notified RSUI of Barrow's claim against Amerseal and informed them that the claim was worth only between $150, 000 and $500, 000, which was well within American's policy limit. Shortly after, American retained new defense counsel in February 2012, a month before trial, who advised the insured that the value of the case exceeded the $1 million primary policy limit and that a jury verdict could exceed all excess coverage, which was $4 million. However, counsel advised the insured that American was unwilling to offer Barrow the policy limits at that time.
Subsequently, Barrow demanded $5 million, the combined policy limits of American and RSUI. American then settled with Barrow for its policy limit of $1 million and received a release of American of all claims and a release of Amerseal from liability of damages in excess of $5 million, the combined available insurance limits of American and RSUI. Thereafter, RSUI negotiated a further settlement with Barrow for $2 million for a full release of Amerseal from all liability. RSUI claims that it settled with Barrow for $2 million rather than intervene the eve before trial because it was left with no discovery from American to support the defense of Amerseal.
On November 26, 2012, RSUI, excess insurance carrier, filed this action against American, the underlying carrier, as subrogee of the common insured, alleging bad faith failure to defend the common insured properly in the underlying suit by failing to investigate and to take appropriate defensive action that resulted in the increased settlement value of the case.
This Court granted American's summary judgment motion against RSUI on November 13, 2013 under the theory that a cognizable claim did not exist because there wasn't an adjudication of the excess judgment since RSUI entered into a settlement with the underlying plaintiff. See R. Doc. 42. The Court's opinion was appealed and the Fifth Circuit reversed and remanded the case, holding that under these circumstances, where an excess carrier alleges that a primary insurer in bad faith breached its duty to defend and caused exposure of the common insured to an increase in the settlement value of the case above the primary policy limits, which the excess insurer must satisfy, the excess insurer has a subrogated cause of action against the primary insurer. See R. Doc. 57.
After the action was remanded on October 21, 2014, a new Scheduling Order (R. Doc. 59) was entered on November 12, 2014, setting December 12, 2014 as the amendment deadline. RSUI filed the subject motion for leave to amend on December 12, 2014. See R. Doc. 65.
In the subject motion, RSUI seeks to amend its complaint to allege additional facts and to add statutory causes of action under Louisiana Revised Statute ("La. R.S.") Sections 22:1892 and 22:1973. See R. Doc. 65-1, at 2. RSUI claims that the additional facts and causes of action only became known to it through preliminary discovery. See R. Doc. 65-2, at 2. RSUI further claims that the amendment will not result in undue prejudice to the opposing party, and that there has been no undue delay, bad faith, or dilatory motive on the part of RSUI. Id. at 1.
III. Standard of Review
Federal Rule of Civil Procedure ("Rule") 15(a), which governs the amendment of pleadings, provides that leave to amend pleadings "shall be freely given when justice so requires." This, and other federal rules, "reject the approach that pleading is a game of skill in which one misstep by counsel may be decisive to the outcome and accept the principle that the purpose of pleading is to facilitate a proper decision on the merits." Conley v. Gibson, 355 U.S. 41, 48 (1957).
Thus, Rule 15(a) evinces a liberal and lenient amendment policy and a motion to amend should not be denied absent a substantial reason to do so. See Jacobsen v. Osborne, 133 F.3d 315, 318 (5th Cir. 1998). Furthermore, "this policy' is strongest when the motion challenged is the first motion to amend." Thompson v. New York Life Ins. Co., 644 F.2d 439, 444 (5th Cir. 1981). Permission may be granted even though the original pleading is defective in its statement of a claim for relief or defense. Id.
Leave to amend is by no means automatic, but is within the sound discretion of the trial court. Addington v. Farmer's Elevator Mut. Ins. Co., 650 F.2d 663, 666 (5th Cir. 1981). In exercising its discretion, the trial court must determine that there is a "substantial reason" for the delay. Mayeaux v. Louisiana Health Service and Indemnity Co., 376 F.3d 420, 425 (5th Cir. 2004). The Court may consider such factors as (1) undue delay, bad faith, or dilatory motive on the part of the movant; (2) repeated failure to cure deficiencies by amendments previously allowed; (3) undue prejudice to the opposing party by virtue of allowance of the amendment; and (4) futility of the amendment. Gregory v. Mitchell, 634 F.2d 199, 203 (5th Cir. 1981).
RSUI filed the subject motion for leave to amend its complaint on December 12, 2014, which is the date of the amendment deadline set forth in the Scheduling Order (R. Doc. 59). As such, the Court will apply the liberal and lenient amendment policy of Rule 15(a) to the subject motion. Under Rule 15(a), the Court may consider such factors as (1) undue delay, bad faith, or dilatory motive on the part of the movant; (2) repeated failure to cure deficiencies by amendments previously allowed; (3) undue ...