The case of American Zurich Insurance v. Caterpillar arose from a truck fire that took place in Natchitoches Parish on April 7, 2010. American Zurich insured the truck and Caterpillar manufactured the truck’s engine. American Zurich opened up a loss file on the truck the day of the fire. American Zurich paid out almost $77,000 dollars to the insured.
On April 26, 2010, Zurich was informed of a possible defect in the engine by an inspection agency they hired to look into the claim. A year later, on April 26, 2011, American Zurich filed suit against Caterpillar in West Baton Rouge Parish seeking reimbursement for the costs they incurred, but the case was subsequently moved to Natchitoches Parish in June 2011. On November 10, 2011, the trial court granted Caterpillar’s peremptory exception of prescription and their motion for summary judgment and dismissed American Zurich’s claims. American Zurich appealed the trial court’s decision and the case made its way to the Third Circuit Court of Appeal. While you read the rest of this case summary, keep the dates mentioned above in mind.
So why does keeping these dates straight in our minds matter, and what is a peremptory exception of prescription? Actions brought under the Louisiana Products Liability Act, or LPLA, must be filed within one year “from the day injury or damage is sustained.” This one year time period is known as a prescriptive period. A peremptory exception of prescription is a defense motion arguing that the plaintiff has no case because they failed to file their case in the required prescriptive period of time. So one of the major issues in this case became on what date did that prescriptive period begin? Caterpillar claimed it started on April 7, 2010, the day of the fire. American Zurich claimed it began on April 26, 2010, which was the day their investigators told them about the engine defect.
The court noted that “prescription begins to run when the defect manifests itself, not on the date the underlying cause of the defect is found.” In other words, the court said that the one year prescriptive period began on the day of the fire, April 7, 2010. The court points out that American Zurich knew about the fire the day it occurred, and therefore, American Zurich had no basis for arguing that the prescriptive date should have started on April 26, 2010. Thus the court holds that American Zurich did not file their case within the one year prescriptive period required under the LPLA which ran out on April 7, 2011.
The court also quickly dispatched a breach of contract claim by American Zurich. American Zurich claimed that by building a defective engine, Caterpillar had failed to perform under their service contract. In Louisiana, the LPLA is the sole remedy against a manufacturer of a defective product. There is one exception to this rule, and that applies when the damage, or part of the damage, is caused exclusively by a breach of contract, and not the defective product itself. So it was important for American Zurich to argue this exception applied in this case because a breach of contract claim has a prescriptive period of ten years in Louisiana.
The court found American Zurich’s argument unpersuasive since the damage was solely attributable to the defective engine, and their claims were not related to the service contract itself. The exception mentioned above was not applicable, and therefore the LPLA was controlled this case. As mentioned above, the prescriptive period had run out before American Zurich filed their case against Caterpillar, and the court affirmed the trial court’s dismissal of American Zurich’s claims.
This case shows the vital importance of taking timely action when engaged in legal matters.