In Arceneaux v. Amstar Corp, the Louisiana Supreme Court decided an important issue of first impression in Louisiana: whether the duty to defend in long latency disease cases may be prorated between insurer and insured during periods of self-insurance when occurrence-based policies provide coverage for only a portion of the time during which exposure occurred. In a unanimous decision, the court held that the duty to defend should be prorated based upon policy language.Writing for the court, Justice Hughes noted that, while Louisiana law is clear that an insurer’s duty of indemnification is allocated pro rata in long latency disease cases. Louisiana courts have not decided whether an insurer’s duty to defend may be prorated among insurers and the insured during periods of self-insurance in long latency disease cases. Nationwide, two general approaches to allocation of defense costs in long latency disease cases have emerged: the pro rata allocation method and the joint and several allocation methods. In this instance, the Court chose to adopt the pro rata approach used by other jurisdictions. Based on the particular policy language in this case, the Court held that the pro rata method of allocation would not violate the reasonable expectations of the insurer or the insured. Furthermore, the Court found that the pro rata approach is “…an equitable system, that can be readily used in long latency disease claims in Louisiana.” The Arceneaux decision has certainly clarified an unsettled issue in Louisiana insurance law. However, the court’s decision was not so broad as to make the pro rata approach the de facto rule for long latency exposure cases. Instead, the Louisiana Supreme Court stressed that “the manner in which defense costs are to be allocated may need to be determined on a case by case basis, according to the precise language of the insurance contract at issue.” Arceneaux, et al v. Amstar Corp., et al, LA Supreme Court, 2015-0588, September 7, 2016.

Download decision here.