SUPERVISORY WRIT TO THE 19TH JUDICIAL DISTRICT
COURT, PARISH OF EAST BATON ROUGE.
JOHNSON, CHIEF JUSTICE. 
granted this writ application to determine whether a
first-party bad faith claim against an insurer is a delictual
action subject to a one-year prescriptive period, or whether
it is a contractual claim subject to a ten-year prescriptive
period. Finding the bad faith claim arises as a result of the
insured's contractual relationship with the insurer, we
hold it is subject to a 10-year prescriptive period.
AND PROCEDURAL HISTORY
litigation arises from a suit filed by plaintiff, Beverly
Smith, against Darlene Shelmire and her insurer, GoAuto
Insurance Company ("GoAuto"),  as a result of an
automobile accident on July 27, 2010. On February 26, 2015,
following a trial on the merits, the district court entered
judgment in favor of plaintiff against Ms. Shelmire and
GoAuto in an amount in excess of the insurance policy limits.
The judgment was noticed and mailed to all counsel on March
5, 2015. GoAuto devolutively appealed that judgment, but Ms.
Shelmire did not file an appeal. The court of appeal
ultimately affirmed the district court's judgment on
March 10, 2016. Thereafter, Ms. Shelmire assigned her rights
to pursue a bad faith action against GoAuto to Ms. Smith.
her assignment of rights, Ms. Smith filed the instant suit
against GoAuto on March 10, 2017, and amended her petition on
September 27, 2017, asserting a bad faith claim based on
GoAuto's violation of its duties under La. R.S.
22:1973(A) as well as the jurisprudentially recognized duty
of good faith pre-existing the statute. GoAuto answered the
petitions and subsequently filed an exception of
prescription. In its exception, GoAuto argued the
prescriptive period for a bad faith claim against an insurer
is a delictual action and is subject to a one-year
prescriptive period. Plaintiff opposed the exception arguing
a bad faith claim against an insurer is a contractual action
and subject to a ten-year prescriptive period.
a hearing, the district court overruled GoAuto's
exception of prescription, reasoning in part:
The Court, after consideration of the arguments of counsel,
along with what's been submitted to the Court, and the
Court's review of the jurisprudence on the issue, finds
that the nature of the duty of the insurer to its insured or
the assignee of the insured is a contractual duty; and -
-and, therefore, the claim for breach of contractual duties
the insurer owes to an insured under 22:1973 is subject to
the ten-year prescriptive period. Court's going to deny
sought review of the district court's judgment, and the
court of appeal denied writs on the showing made. Smith
v. Citadel Ins. Co., 18-1227 (La.App. 1 Cir. 12/10/18)
(unpublished). GoAuto filed a writ application with this
court, which we granted. Smith v. Citadel Ins. Co.,
19-0052 (La. 5/20/19), 271 So.3d 203.
initial matter, we briefly address GoAuto's argument that
Ms. Smith does not have a cause of action. Citing King v.
Illinois Nat. Ins. Co., 08-1491 (La. 4/3/09), 9 So.3d
780, GoAuto argues the right to file a lawsuit is a strictly
personal right, creating a strictly personal obligation, and
thus cannot be assigned pursuant to La. C.C. art. 2642
("All rights may be assigned, with the exception of
those pertaining to obligations that are strictly personal.
The assignee is subrogated to the rights of the assignor
against the debtor."). GoAuto concedes it did not raise
this issue in the lower courts, nor did it assign this issue
as error in its writ application to this court. Ordinarily we
would refuse to consider an issue raised for the first time
in this court, however this court has previously explained:
An appellate court has the right to consider an issue even
though there was no assignment of error in that regard.
See La. C.C.P. art. 2164, comment (a) ("an
appellate court [has] complete freedom to do justice on the
record irrespective of whether a particular legal point or
theory was made, argued, or passed on by the court
below."); Georgia Gulf Corp. v. Board of
Ethics, 96-1907 (La. 5/9/97), 694 So.2d 173, 176;
Safeway Insurance Co. of Louisiana v. State Farm Mut.
Auto. Ins. Co., 36, 853 (La.App. 2 Cir. 3/5/03), 839
So.2d 1022, 1027; Wheeler v. Kelley, 28, 379
(La.App. 2 Cir. 11/7/95), 663 So.2d 559, 561, writ
denied, 95-2721, 664 So.2d 404 (La.1995).
Wegener v. Lafayette Ins. Co., 10-0810 (La.
3/15/11), 60 So.3d 1220, 1232, n. 11. We also recognize that
an exception of no cause of action can be noticed by an
appellate court on its own motion. La. C.C.P. art. 927;
see also Langsford v. Flattman, 03-0189 (La.
1/21/04), 864 So.2d 149, 151. Since we have freedom to do
justice on the record, irrespective of whether the issue was
raised in the lower courts or whether there was an assignment
of error, we have examined whether Ms. Smith has a cause of
action and find that issue has no merit. First, GoAuto's
reliance on King is misplaced. King
considered whether an individual's unexercised right to
institute litigation through the filing of a lawsuit could be
involuntarily seized by a writ of fieri facias.
King did not involve a voluntary assignment of
rights. Moreover, this court in King specifically
declined to address whether an unexercised right to institute
a lawsuit could be assigned, as that issue was not before the
court. King, 9 So.3d at 786. La. C.C. art. 2642
allows for the assignment of all rights, except those
"pertaining to obligations that are strictly
personal." Following King, this court
implicitly recognized that the assignment of an insured's
cause of action resulting from the insurer's bad faith is
permissible under Article 2642. Kelly v. State Farm
Fire & Cas. Co., 14-1921 (La. 5/5/15), 169 So.3d
328, 334. In Kelly, this court answered two
certified questions related to an insurer's liability
under La. R.S. 22:1973. In so doing, we referenced La. C.C.
art. 2642 and explained the plaintiff, Kelly, had been
assigned the insured's causes of action (resulting from
an excess judgment against the insured):
[W]e must emphasize that Kelly does not seek to recover
directly for his own damages. Instead, Kelly has been
assigned [the insured's] causes of action, as might have
been available to [the insured], for State Farm's actions
which allegedly subjected [the insured] to the judgment in
excess of [the insured's] insurance policy limits.
Therefore, the causes of action asserted by Kelly are not
those of a third-party claimant, but rather those of an
Kelly, 169 So.3d at 334, 335 n. 24. Thus, we find
Ms. Shelmire's right to file a lawsuit against GoAuto
could be validly assigned to Ms. Smith pursuant to Article
final preliminary matter, we reject Ms. Smith's argument
that this court need not reach the legal issue of whether a
ten-year or a one-year prescriptive period applies in this
case. According to Ms. Smith, her suit was timely even if
filed under a one-year prescriptive period because she
brought suit within one year of the accrual of her cause of
action. Ms. Smith contends her cause of action did not accrue
until GoAuto's asserted policy defense was finally
resolved when the court of appeal affirmed the district
court's judgment on March 10, 2016. We disagree. In this
case, judgment was entered on February 26, 2015. The notice
of judgment was mailed on March 5, 2015. La. C.C.P. art. 2123
provides, in relevant part, that a suspensive appeal must be
taken within thirty days of the expiration of the delay for
applying for a new trial. Thus, in this case, the deadline to
file a suspensive appeal expired on April 15, 2015. Ms.
Shelmire did not appeal the judgment against her. GoAuto
filed a devolutive appeal pursuing its coverage
defenses. Liberative prescription commences when injury or
damage is sustained. La. C.C. art. 3492. After the delay for
a suspensive appeal has elapsed, a judgment creditor is
entitled to execute on the judgment. La. C.C.P. art. 2252.
Thus, after April 15, 2015, the excess judgment against Ms.
Shelmire could have been enforced against her at any time.
GoAuto's pending devolutive appeal did not prevent the
judgment against Ms. Shelmire from becoming executory. Ms.
Shelmire suffered injury when she was exposed to an excess
judgment. See Mathies v. Blanchard, 06-0559 (La.App.
1 Cir. 2/21/07), 959 So.2d 986, 988-89. We hold that Ms.
Shelmire's bad faith action (and thus Ms. Smith's
action, by assignment) accrued on April 15, 2015, when Ms.
Shelmire, as the judgment debtor, was exposed to an excess
judgment. Ms. Smith's suit, filed on March 10, 2017, was
not timely under a one-year prescriptive period.
move on to consider the primary legal issue before this
court-the proper prescriptive period applicable to a
first-party bad faith claim against an insurer. Questions of
law are reviewed de novo, with the judgment rendered
on the record, without deference to the legal conclusions of
the tribunals below. Wooley v. Lucksinger,
09-0571 (La. 4/1/11), 61 So.3d 507, 554. All personal
actions, including an action on a contract, are subject to a
liberative prescription of ten years, unless otherwise
provided by legislation. La. C.C. art. 3499; Roger v.
Dufrene, 613 So.2d 947, 948 (La. 1993). Delictual
actions are subject to a liberative prescription of one year.
La. C.C. art. 3492. The nature of the duty breached
determines whether the action is in tort or in contract.
Roger, 613 So.2d at 948; 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. See also, Certain Underwriters
at Lloyd's, London v. Sea-Lar Mgmt., 00-1512
(La.App. 4 Cir. 5/9/01), 787 So.2d 1069, 1074; 6 Saul
Litvinoff & Ronald J. Scalise Jr., Louisiana Civil
Law Treatise, Law of Obligations § 5.2 (2d
ed. 2018) ("Fault is contractual when it causes a
failure to perform an obligation that is conventional in
origin, that is, an obligation created by the will of the
parties, while fault is delictual when it causes the
dereliction of one of those duties imposed upon a party
regardless of his will, such as a duty that is the passive
side of an obligation created by the law.").
Smith brought a bad faith claim against GoAuto pursuant to an
assignment of rights from the named insured. Thus, the causes
of action asserted by Ms. Smith are those of an insured.
Louisiana courts have long recognized that an insurer owes
its insured a duty of good faith. See,
e.g., Roberie v. S. Farm Bureau Cas. Ins.
Co., 250 La. 105, 194 So.2d 713 (La. 1967) (recognizing
the responsibility of a liability insurer to deal in good
faith with a claim against its insured); Davis v.
Maryland Cas. Co., 133 So. 769 (La.App. 2nd
Cir. 1931) (recognizing an insurer's duty to respond to
settlement offers in good faith). In Holtzclaw v. Falco,
Inc., this court explained:
It is generally accepted that an insurer must carefully
consider the interests of its insured, instead of only
consulting its own self-interests, when handling and settling
claims in order to protect the insured from exposure to
excess liability. While the nature of the insurer's
obligations toward the insured is not clearly defined, this
Court has recognized that a liability insurer owes its
insured a minimum duty to act in good faith and to deal
fairly. Some Louisiana court of appeal decisions indicate the
imposition of a greater duty based upon a combined
requirement to act in good faith and to use reasonable care
and skill in settlement of claims. Language in one appellate
opinion and a scholarly writing suggest the insurer should be
regarded as a fiduciary or a mandatary responsible not only
for unfaithfulness in management of claims but also for his
fault or neglect.
355 So.2d 1279, 1283-84 (La. 1977). The insurer's duty to
act in good faith includes the duty to deal fairly in
handling claims. Smith v. Audubon Ins. Co., 95-2057
(La. 9/5/96), 679 So.2d 372, 376. Additionally, this court
has stated that "... in every case, the insurance
company is held to 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).
R.S. 22:1973 was enacted in 1970 and provides, in
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 ...