LOUIS MERHIGE v. PACIFIC LIFE INSURANCE COMPANY BARNETT AND ASSOCIATES LLC JAMES BARNETT AND ABC INSURANCE COMPANY (2025)

Relator/defendant, Pacific Life Insurance Company (“Pacific Life”) seeks review of the portion of the trial court's October 3, 2024 judgment, overruling in part Pacific Life's exception of peremption and prescription and co-defendants Barnett & Associates, LLC and James Barnett (collectively “Barnett”) exception of peremption against respondent/plaintiff, Louis Merhige, as to acts, omissions, and neglect “occurring after June 24, 2021, and discovered within one-year prior to June 24, 2024.” 1

For the reasons stated herein, we affirm the trial court's judgment overruling the exception of peremption as to plaintiff's vicarious liability claim against Pacific Life concerning Barnett's advice regarding the wash loan, and we deny that portion of Pacific Life's application.

We reverse the trial court's judgment overruling the exception of peremption regarding plaintiff's vicarious liability claims against Pacific Life concerning Barnett's acts, omissions, or neglect as to the conversion rider and selling the policy, and we grant the exception of peremption as to plaintiff's vicarious liability claims against Pacific Life concerning Barnett's acts, omissions, or neglect as to the conversion rider and selling the policy, and dismiss those claims with prejudice.

PROCEDURAL HISTORY and CLAIMS

In 2014, when plaintiff was 77 years old and a practicing lawyer, he purchased a five-million-dollar premium-financed index universal life insurance policy (“the policy”) from Pacific Life, through his long-time friend and insurance agent, 2 James Barnett. Plaintiff formed an insurance trust, the Louis Bernard Merhige Insurance Trust (“the trust”), which was named as the owner of the policy, with plaintiff as the named insured. Plaintiff's financial advisor, stockbroker, and long-time friend, Wilfred M. Kullman, Jr. (“Kullman”), was designated as the trustee of the trust.

Based on the policy illustrations prepared by Pacific Life and loan illustrations prepared by Succession Capital Alliance (“Succession Capital”), plaintiff chose the policy at issue and chose to finance the policy premiums 3 with loans provided by First Insurance Funding Corporation (“First Insurance Funding”), 4 a banking institution that provides loans to high net-worth individuals, such as plaintiff, for the purchase of life insurance policies like the one at issue in this case. In acquiring the policy, plaintiff and the trustee, Kullman (1) signed all the required documents to obtain the policy and all the necessary financial loan documents to secure payment of the policy's premiums; (2) confirmed that he had a net-worth of $10 million; and (3) confirmed he had sufficient assets to pay for the premiums needed to insure him at his age for that amount of coverage. Pacific Life issued the policy to plaintiff and a policy delivery receipt was signed in October of 2014.

In April of 2024, plaintiff sold the policy. Subsequently, on June 24, 2024, plaintiff filed the instant lawsuit against his insurance agent, Barnett, and insurer, Pacific Life, for alleged acts, omissions and neglect associated with the purchase of the policy. Plaintiff did not name any of the banking institutions (i.e., Succession Capital, First Insurance Funding, or Wintrust) as defendants.

Pacific Life and Barnett filed exceptions of peremption alleging that all of plaintiff's claims against them are related to the sale of the policy in 2014, and as such, are perempted pursuant to La. R.S. 9:5606. Pacific Life also filed an exception of prescription, alleging plaintiff's claims were prescribed under La. C.C. art. 3492. After a lengthy contradictory hearing, the trial court rendered judgment sustaining Pacific Life's exceptions of peremption and prescription and Barnett's exception of peremption as to “acts, omissions, or neglect prior to June 24, 2021,” 5 and overruling the exceptions of peremption as to “acts, omission[s], and neglect occurring after June 24, 2021, and discovered within one-year prior to June 24, 2024.”

Pacific Life filed this writ application contending that (1) the trial court's judgment erroneously held that any cause of action “discovered within one-year prior to June 24, 2024,” was timely, ignoring the language of La. R.S. 9:5606 A and La. C.C. art. 3492 requiring actions to be brought within one year of when the cause of action “should have been discovered;” and (2) the trial court erred in partially denying Pacific Life's exception of peremption and prescription because, pursuant to La. R.S. 9:5606 A and La. C.C. art. 3492, no cause of action in plaintiff's petition relies on conduct independent of the sale of a life insurance policy to plaintiff, which occurred nearly ten years prior to the filing of the petition. Pacific Life points out that plaintiff decided to purchase the policy in 2014, and plaintiff signed numerous documents, including premium financing disclosures, illustrations, the policy, the policy delivery receipt and the loan documents, which contradict plaintiff's claim that he did not understand the nature of the transaction or the risks associated with this type of policy. Pacific Life asserts that under the law, plaintiff is charged with knowledge of the documents and disclosures he signed in 2014. Pacific Life contends that the alleged acts plaintiff complains of occurred almost ten years ago, and therefore his claims are facially perempted and prescribed under La. R.S. 9:5606 and La. C.C. art. 3492. Pacific Life asserts that the allegations of the petition reflect that plaintiff's claims arise out of his well-informed decision to purchase the policy and finance its premiums in 2014, and at the very least, plaintiff should have known of the alleged causes of action years before the petition was filed.

Pacific Life contends that plaintiff's opposition to the exception only argued that three specific actions, that occurred within three years of the filing of his lawsuit, were not perempted under La. R.S. 9:5606, specifically: (1) failure to disclose the conversion rider in the policy; (2) selling the policy (i.e., failure to pursue the sale of the policy in 2022, a “mismanagement” claim); and (3) advice regarding a wash loan. Pacific Life contends the conversion rider was expressly disclosed in the policy and policy illustration plaintiff received in 2014, and that plaintiff received notice of the conversion rider's expiration date from Pacific Life in August of 2022. Thus, Pacific Life asserts that plaintiff's conversion rider claim is perempted under the one-year and three-year peremptive periods under La. R.S. 9:5606. As to plaintiff's decision to apply for a wash loan, which was obtained in March of 2023, Pacific Life contends this claim is also perempted because the wash loan was obtained more than one year prior to the filing of the petition. Moreover, Pacific Life argues that plaintiff was notified of the risks of the policy in 2014, including a notification that Pacific Life had no authority or responsibility as to plaintiff's premium finance loan(s). Pacific Life therefore asserts that plaintiff knew, or should have known, as early as 2014, and well before June 2023 (i.e., March of 2023 at the latest), that any collateral requirements regarding his premium finance loans were imposed by his lender, First Insurance Funding, not Pacific Life.

Pacific Life also contends that plaintiff has alleged “mismanagement” of the policy during the three-year peremptive period, but has not identified any specific act relating to the policy's performance, whether by Barnett or Pacific Life, which actually occurred with the one-year or three-year period. Plaintiff counters that because the policy was active within one year of filing suit, his “mismanagement” claims are not perempted. However, Pacific Life maintains that plaintiff cannot bring an otherwise perempted cause of action simply because the policy performed as plaintiff was aware it would perform, allegedly resulting in damages within the peremptive period. Alternatively, Pacific Life contends that plaintiff's claims are prescribed under La. C.C. art. 3492 because all of plaintiff's claims against it are based on alleged actions or conduct that occurred in 2014, and plaintiff had notice regarding any potential claim in 2014, and on multiple occasions thereafter.

In opposition, plaintiff contends that his claims against Pacific Life are for its vicarious liability due to the actions of Barnett, as well as direct negligence claims. 6 Plaintiff states he did not dispute that La. R.S. 9:5606 perempted his claims against Barnett and the vicarious liability claims against Pacific Life that occurred more than three years before his lawsuit was filed on June 24, 2024. Plaintiff acknowledges he opposed only the exceptions as to all claims that occurred in 2022 and 2023 and were discovered by plaintiff in September 2023, within one year of filing suit. Plaintiff contends Pacific Life's writ application ignores evidence showing that these claims, are not perempted, and instead, improperly focuses on his claims that occurred when the policy was originally issued in 2014, which he concedes are perempted.

Specifically, plaintiff avers that in 2022, he was faced with decreasing returns on the policy, rising interest rates on the premium-financed loan(s), and reduced income due to the constantly increasing collateral demands, and under those circumstances, he had only three options: (1) convert the policy; (2) sell the policy; or (3) take out a wash loan. Plaintiff claims that instead of evaluating his options collectively and providing him with illustrations that would allow him to make an informed decision as to which option to exercise, Pacific Life and Barnett summarily dismissed the conversion option by evaluating it in isolation and determining that it was not beneficial to him. Plaintiff states that Barnett then failed to pursue potential purchasers for the policy in 2022, and did not present him with a single proposal.

Finally, plaintiff claims that Barnett advised him to take a $2.5 million wash loan with Pacific Life, representing to him that a wash loan would pay down the premium finance loan and reduce the collateral required. Plaintiff asserts that he did not learn until September 2023, the next renewal date, that this representation was incorrect. Plaintiff additionally asserts (1) no disclosures were provided to him as to the wash loan; and (2) the 2014 disclosures relied on by Barnett and Pacific Life do not address the failure to advise plaintiff of the conversion options under the policy, the failure to pursue the sale of the policy, the misrepresentations made regarding the impact of the wash loan on the collateral needs, or the impact of the wash loan on the life of the policy. Therefore, plaintiff contends the trial court did not err in finding that his three claims were timely filed on June 24, 2024, and not perempted under La. R.S. 9:5606.

APPLICABLE LAW

When an insurance agent undertakes to procure insurance for another, he owes an obligation to his client to use reasonable diligence in attempting to place the insurance requested and to promptly notify the client if he fails to obtain the requested insurance. Isidore Newman School v. J. Everett Eaves, Inc., 09-2161 (La. 07/06/10), 42 So.3d 352, 356, citing Karam v. St. Paul Fire & Marine Insurance Co., 281 So.2d 728, 730-731 (La. 1973). The client may recover from the agent the loss he sustains as a result of the agent's failure to procure the desired coverage if the actions of the agent warranted an assumption by the client that he was properly insured in the amount of the desired coverage. Id.

An insurance agent owes a duty of “reasonable diligence” to his client. Roger v. Dufrene, 613 So.2d 947, 949 (La. 1993). “Reasonable diligence” is satisfied when the agent procures the insurance requested. Isidore Newman School, 42 So.3d at 356; Karam, 281 So.2d at 730. Additionally, although an insurance agent owes a duty of “reasonable diligence” to advise his client, the Louisiana Supreme Court has held that this duty has not been expanded to include the obligation to advise whether the client has procured the correct amount or type of insurance coverage. Isidore Newman School, 42 So.3d at 359. The Supreme Court held that it is the insured's responsibility to request the type of insurance coverage, and the amount of coverage needed and that it is not the agent's obligation to spontaneously or affirmatively identify the scope or the amount of insurance coverage the client needs. Id.

It is well settled that it is an insured's obligation to read the policy when received, since the insured is deemed to know the contents of the policy. Id.; McKernan v. ABC Insurance Company, 21-859 (La. 11/23/21), 328 So.3d 69 (per curiam). A party who signs a document or written instrument is presumed to know its contents and cannot avoid its obligations by contending that he did not read or fully understand the contents of the document, or that the other party failed to explain it to him. Emile v. Regal Remodelers, L.L.C., 23-174 (La. App. 5 Cir. 01/31/24), 380 So.2d 696, 705; Agullard v. Auction Management Corp., 04-2804 (La. 06/29/05), 908 So.2d 1, 17.

An insured is on notice of any alleged claim or misrepresentation made regarding the sale of a policy, and the peremptive period begins to run when the insured receives a copy of the policy. Cerullo v. Heisser, 16-558 (La. App. 5 Cir. 02/08/17), 213 So.3d 1232, 1237; Shermohmad v. Ebrahimi, 06-512 (La. App. 5 Cir. 10/31/06), 945 So.2d 119, 122; Biggers v. Allstate Ins. Co., 04-282 (La. App. 5 Cir. 10/26/04), 886 So.2d 1179, 1181-1183; Bijeaux v. Broyles, 11-830 (La. App. 3 Cir. 02/08/12), 88 So.3d 523, 527, writ denied, 12-970 (La. 06/22/12), 91 So.3d 971; Chapital v. Harry Kelleher & Co., 13-1606 (La. App. 4 Cir. 06/04/14), 144 So.3d 75, 83. For each policy renewal to be the basis of a separate tort, the complained of conduct must consist of separate and distinct acts, each of which gives rise to immediately apparent damages. Biggers, 886 So.2d at 1182; Bustamento v. Tucker, 607 So.2d 532, 540 (La. 1992). If the policy was merely renewed without discussion, the subsequent renewals are “nothing more than a continuation of the ill effects of an original unlawful act” with no further opportunity for the agency to make misrepresentations about the policy. DA Exterminating Co., Inc. v. Discon, 24-116 (La. App. 5 Cir. 10/30/24), 398 So.3d 1239, 1245; Biggers, 886 So.2d at 1182.

Because the acts of an insurance agent are generally imputable to the insurer he represents, La. R.S. 9:5606’s peremptive periods apply to the claims against an insurer under specific facts (i.e., when the claims against the insurer are derivative of those against the agent). See Klein v. Am. Life & Cas. Co., 01-2336 (La. App. 1 Cir. 06/27/03), 858 So.2d 527, 531, writs denied, 03-2073 and 03-2101 (La. 11/07/03), 857 So.2d 497, 499; Halmekangas v. ANPAC Louisiana Ins. Co., 11-1293 (La. App. 4 Cir. 06/08/12), 95 So.3d 1192, 1197, writ denied, 12-1542 (La. 10/12/12), 98 So.3d 873, cf. Sibley v. Blue Cross Blue Shield of Louisiana, 13-924 (La. App. 1 Cir. 03/20/14), 142 So.3d 1022, 1025 (the court found that La. R.S. 9:5606 did not apply to the insurer in Sibley, distinguishing that case from Klein and Halmekangas, because the alleged wrongful act committed by the insurance agent was not a wrongful act committed against the insured; it was a wrongful act committed against the insurer). Where claims against an agent are perempted under La. R.S. 9:5606, the statute applies equally to the situation of the insurer as they do to that of the agent. Bijeaux, 88 So.3d at 527.

In the instant case, we find plaintiff's claims against Pacific Life at issue in this writ application concern the alleged vicarious liability of Pacific Life as to Barnett's acts, omissions, or neglect regarding the conversion rider, selling the policy, and advice regarding the wash loan, and as such, are governed by the peremptive periods set forth in La. R.S. 9:5606.

Peremptive statutes are to be strictly construed against peremption and in favor of maintaining the claim. Lamar Contractors, LLC v. SRF Grp. Consulting, LLC, 22-213 (La. App. 5 Cir. 02/01/23), 358 So.3d 907, 909, writs denied, 23-305 (La. 05/23/23), 360 So.3d 1263 and 23-308 (La. 05/23/23), 360 So.3d 1260. Of the possible constructions of a peremptive statute, the one that maintains the claim, rather than the one that bars prosecution of the claim, should be adopted. Id.

The party who files an exception of peremption bears the burden of proof, unless the pleading is perempted on its face. Gattuso v. Nicaud, 15-670 (La. App. 5 Cir. 02/23/16), 186 So.3d 1238, 1241; Attain Speciality Ins. Co. v. Premier Performance Marine, LLC, 15-1128 (La. App. 1 Cir. 04/08/16), 193 So.3d 187, 191. However, if peremption is evident on the face of the pleading, the burden of proof shifts to the plaintiff. Gattuso, 186 So.3d at 1241; Southern Marble Specialties, Inc. v. Cholley, 22-602 (La. App. 3 Cir. 05/03/23), 365 So.3d 885, 890. If evidence is introduced at the hearing, the trial court's findings of fact are reviewed under the manifest error or clearly wrong standard of review. Id.; Rando v. Anco Insulations, Inc., 08-1163 (La. 05/22/09), 16 So.3d 1065, 1082. If those findings are reasonable in light of the record reviewed in its entirety, an appellate court cannot reverse even though convinced that had it been sitting as the trier of fact, it would have weighed the evidence differently. Id. Credibility determinations are with the trial court's discretion and should not be disturbed upon review, where conflict exists in the testimony, absent a determination that the trial court abused its discretion. Lomont v. Bennett, 14-2483 (La. 06/30/15), 172 So.3d 620, 633.

When no specific findings of fact are issued, appellate courts consider the record as a whole in the light most favorable to the appellee. Ponthier v. Manalla, 06-632 (La. App. 5 Cir. 01/30/07), 951 So.2d 1242, 1253; Brannon v. Callon Offshore Production, Inc., 98-1272 (La. App. 4 Cir. 03/31/99), 731 So.2d 1014, 1017, writ denied, 99-1215 (La. 06/04/99), 745 So.2d 12; Revel v. Snow, 95-462 (La. App. 3 Cir. 11/02/95), 664 So.2d 655, 659, writ denied, 95-2820 (La. 02/02/96), 666 So.2d 1084. Also, in cases where the fact finder concludes that a party carried his burden of proof, a credibility determination can be implied from that finding. Thibodeaux v. Kaufman Trailers, Inc., 12-885 (La. App. 3 Cir. 02/06/13), 108 So.3d 1283, 1286.

La. R.S. 9:5606 A provides:

A. No action for damages against any insurance agent, broker, solicitor, or other similar licensee under this state, whether based upon tort, or breach of contract, or otherwise, arising out of an engagement to provide insurance services shall be brought unless filed in a court of competent jurisdiction and proper venue within one year from the date of the alleged act, omission, or neglect, or within one year from the date that the alleged act, omission, or neglect is discovered or should have been discovered. However, even as to actions filed within one year from the date of such discovery, in all events such actions shall be filed at the latest within three years from the date of the alleged act, omission, or neglect. [Emphasis added.]

The one-year and three-year periods of limitation as set forth in subsection A are deemed peremptive periods within the meaning of La. C.C. art. 3458, 7 and as provided in La. C.C. art. 3461, 8 may not be renounced, interrupted, or suspended. La. R.S. 9:5606 D.

TRIAL EVIDENCE and ANALYSIS

The issue before this court is whether plaintiff's vicarious liability claims against Pacific Life concerning Barnett's acts, omissions, or neglect “occurring after June 24, 2021, and discovered within one-year prior to June 24, 2024,” are perempted. In the instant case, the trial court heard extensive testimony from the plaintiff and Barnett, and reviewed numerous exhibits admitted into evidence, regarding the alleged actions, inactions, and/or misrepresentations by Barnett concerning three claims (i.e., the conversion rider, selling the policy, and advice regarding the wash loan), the date(s) of the alleged acts, omissions, or neglect and when plaintiff discovered or should have discovered the alleged claims against Barnett and the vicarious liability claims against Pacific Life as to Barnett's acts, omissions, or neglect.

A review of the record shows that all of plaintiff's claims, as alleged, were perempted on the face of his petition. Therefore, the burden shifted to plaintiff to show his claims were not perempted. Trial testimony and other evidence established the following regarding the three claims against Barnett and the vicarious liability of Pacific Life for Barnett's acts, omissions, or neglect, which plaintiff argued were not perempted under La. R.S. 9:5606.

Conversion Rider

It is undisputed that the policy issued to and received by plaintiff in October 2014 contained the conversion rider, and it provided that the conversion rider expired during the eighth year of the policy (i.e., 2022). Plaintiff explicitly testified he signed 9 all the documents related to his policy but reiterated numerous times that he did not read the policy or any of the financial documents related to the policy. However, plaintiff conceded that as a practicing lawyer, he advises his clients to read their insurance policies. Plaintiff testified that it is “theoretically” important to thoroughly review insurance policies and financial documents prior to signing them.

When defense counsel pointed out that the policy and illustrations, issued and delivered to plaintiff in 2014, contained the conversion rider, plaintiff testified he “didn't understand” what the conversion rider meant, reiterating he did not read the policy and only relied on what Barnett informed him. Plaintiff reluctantly admitted that although he relied on what Barnett told him, he knew that the policy ultimately governed his relationship with Pacific Life and that the contract and its provisions constituted the entirety of the contract between him and Pacific Life. Plaintiff also testified he was “never” aware of his right to convert the policy. He then admitted he had discussions about converting the policy with Barnett in 2022, at which time Barnett told him that it was not worth converting the policy and it was a “bad move.” Specifically, plaintiff testified that Barnett informed him that “it was a bad deal, don't do it.” Plaintiff emphasized that during this time his focus was on selling the policy, not converting the policy, because he “could get out of the policy and make some money.” Plaintiff testified he was trying to get out of the policy because he was required to keep putting up “more and more money ․ And I wouldn't be able to use that amount of my income each year.” Plaintiff further testified that in 2022, he had discussions with Barnett about converting the policy and selling the policy but he ultimately decided to take a wash loan. Plaintiff reluctantly agreed that he became aware that he had a right to convert the policy in 2022, at the absolute latest.

Barnett testified that he inquired about converting the policy in April of 2022. Barnett testified that he spoke to Succession Capital and Pacific Life about the conversion rider, that they both ran illustrations, and they both informed Barnett that at plaintiff's age, it made “no sense” to convert the policy to a new policy and it was not in his client's best interest to do so. Barnett stated he discussed all of this information with plaintiff, who confirmed in his own testimony that the conversion rider was discussed. Barnett testified that the conversion rider was discussed again with plaintiff in August of 2022, after plaintiff received a letter from Pacific Life reminding him of the conversion rider's expiration in October of 2022. Barnett testified that he again inquired into converting the policy and he was again informed that it was not in his client's best interest, which he discussed with plaintiff. Barnett's testimony was supported by evidence admitted at the hearing, specifically (1) the policy and illustration provided in 2014 containing the conversion rider; (2) the August 10, 2022 letter Pacific Life sent plaintiff informing him that the conversion rider had to be exercised prior to its expiration date of October 9, 2022; (3) the August 16, 2022 email from plaintiff to Barnett, which included a copy of the Pacific Life August 10, 2022 letter; (4) Barnett's email(s) to Pacific Life requesting information about converting the policy under the conversion rider; 10 and (5) the Pacific Life email informing Barnett that converting the policy was not beneficial to plaintiff.

Since plaintiff is presumed to know the contents of his insurance policy that he received in October of 2014, which contained the conversion rider (i.e., the date of the alleged act, omission or neglect or date when plaintiff should have discovered the alleged act, omission, or neglect), plaintiff had until October of 2015 to file this claim against Barnett. Consequently, plaintiff's conversion rider claim filed against Barnett on June 24, 2024 was untimely and perempted under La. R.S. 9:5606. Because plaintiff's claim against Barnett is perempted, plaintiff's vicarious liability claim against Pacific Life for Barnett's acts, omissions, or neglect regarding the conversion rider is likewise perempted under La. R.S. 9:5606.

Even assuming that plaintiff was not aware of and did not discover the conversion rider until he received Pacific Life's letter containing the expiration date of the conversion rider, plaintiff had one year from August 10, 2022 (the date plaintiff allegedly discovered or should have discovered this claim), or until August 10, 2023, to file this claim against Barnett. Because plaintiff did not file his lawsuit until June 24, 2024, plaintiff's conversion rider claim against Barnett is untimely and perempted under La. R.S. 9:5606, as is plaintiff's vicarious liability claim against Pacific Life for Barnett's acts, omissions, or neglect regarding the conversion rider.

The trial court here did not state any findings of fact related to peremption. When the trial court makes no specific findings of fact in support of a fact-dependent ruling, the appellate court considers the evidence admitted and the record as a whole in the light most favorable to the party in whose favor the trial court ruled (here, the plaintiff). We have done so on this issue and likewise on the issues which follow, and further, we remain mindful that uncertainties and doubt are resolved against prescription and peremption, and in favor of maintaining the action. Nonetheless, the facts clearly show from well-developed evidence in the record that the suit against Barnett was filed on the conversion rider claim long after the latest of every calculation of time limits under La. R.S. 9:5606 A, for the reasons explained above. Accordingly, we find that the trial court was manifestly erroneous in overruling Pacific Life's exception of peremption as to plaintiff's vicarious liability claim against Pacific Life regarding Barnett's acts, omissions, or neglect as to the conversion rider. Therefore, we reverse this portion of the trial court's judgment and sustain Pacific Life's exception of peremption as to plaintiff's vicarious liability claim against Pacific Life regarding Barnett's acts, omissions, or neglect as to the conversion rider, dismissing the same with prejudice.

Selling the policy (i.e., failure to pursue the sale of the policy in 2022)

Barnett testified that sometime after plaintiff was required to post approximately $30,000 in additional collateral in May of 2022, plaintiff began exploring the idea of selling the policy. 11 On June 2, 2022, Barnett sent an email to Joe Robles with Succession Capital stating that plaintiff was inquiring about selling the policy and he requested information about a current payoff on plaintiff's loan. Robles responded the same day with the current cash surrender value and attached the policy summary, payoff amount, and per diem. A few hours later, Barnett sent an email with plaintiff's information to Ryan Brusca, with Coventry First (“Coventry”), and inquired about selling the policy. The next day, Brusca responded stating that they were interested but did not guarantee that the policy could be sold. Brusca stated he had talked to his underwriter and they felt that “based on current market conditions, there is capital out there that would enable us to get close to the loan or higher, and we'd love to give this a go.” Brusca attached an authorization form for plaintiff to sign to start the process. Barnett immediately forwarded the email to plaintiff informing him that if he wanted to sell his policy, “there is now a chance that we can do it.” [Emphasis added.] Barnett asked plaintiff to sign the authorization form and to return it to him to start the process “to see if [it is] possible to sell it.” A few hours later, plaintiff responded “Jim, always interested in a deal.” Plaintiff also asked Barnett questions about the “buildup value” and tax implications. On July 5, 2022, Barnett forwarded the plaintiff's signed authorization to Brusca “to see if there is a market for his policy.” Barnett testified that Coventry responded that they were not interested in buying the policy at that time. Specifically, Barnett testified that after they received plaintiff's medical records and made an “assessment,” Coventry informed him that plaintiff was “too healthy” and therefore, they were not interested in buying the policy. Barnett testified that selling a premium-financed universal life policy like the plaintiff's is handled differently than a regular policy that someone might sell because the policy is financed. Barnett testified that he always informed plaintiff about anything related to his policy and that he had no reason to keep anything from plaintiff.

Barnett testified that shortly thereafter, plaintiff received his September 2022 renewal package. He stated plaintiff complained to him about, and they discussed, the additional and increasing collateral requirements. Plaintiff also testified that he discussed with Barnett, at length, the fact that “they” kept “requiring more and more money to be put up” and that he “was putting up $750,000 a year of my stock.” Plaintiff testified that Barnett stated he could sell the policy, which they “discussed that at length.” However, Barnett also told him that at that time, the policy had a negative cash value. When he asked Barnett what that meant, Barnett replied “we sell the policy. You have to pay some money.” Plaintiff testified he would have had to pay from $800,000 “up to like over a million dollars” out of pocket to “get out of the policy.” Barnett testified that around October of 2022, he and plaintiff also discussed the option of taking a wash loan to pay down some of his debt. Barnett testified that efforts or inquiries were still being made to try and sell the policy even while they proceeded with the wash loan (i.e., documents for the wash loan were signed by plaintiff on March 7, 2023). As previously discussed supra, plaintiff testified that in 2022, he and Barnett discussed all three options (i.e., the conversion rider, selling the policy, and taking a wash loan) but he ultimately elected to take out a wash loan.

Barnett further testified plaintiff did not get serious about selling the policy until “2024 or 2023.” Barnett stated he advised plaintiff not to sell the policy because it was a $6.6 million asset, but stated it was plaintiff's policy to “do whatever he wants to with it.” Barnett testified that in 2024, two companies competed over the opportunity to purchase plaintiff's policy, Coventry and Settlement Masters, with the policy ultimately being sold to Coventry.

Plaintiff testified that in April of 2024, he decided to sell the policy, and the policy was sold in July or August. Counsel pointed out that the policy was actually sold in April of 2024. 12 At the time the policy was sold, plaintiff acknowledged that there was a net benefit of $6.6 million for his beneficiaries, which showed that the policy actually outperformed all the prior projections provided to plaintiff. 13

Therefore, the evidence shows that plaintiff discussed selling the policy in May of 2022 with Barnett. Barnett made inquiries, Coventry indicated it was not interested in purchasing the policy, and plaintiff was informed of this decision. Around the same time plaintiff and Barnett discussed selling the policy, they also discussed the option of taking a wash loan. Plaintiff explicitly testified that in 2022, he discussed with Barnett the conversion rider and selling the policy but he ultimately decided to take the wash loan. Thus, at the latest, once plaintiff signed the wash loan documents and the wash loan was confirmed (both of which occurred in March 2023), and decided not to pursue selling the policy, plaintiff had one year or until March 2024 to file his claim against Barnett for failure to pursue the sale of the policy against Barnett, as well as his vicarious liability claim against Pacific Life regarding this claim. Because plaintiff's lawsuit was not filed until June 2024, plaintiff's vicarious liability claim against Pacific Life for Barnett's acts, omissions, or neglect as to selling the policy was untimely and perempted under La. R.S. 9:5606.

After considering the evidence admitted and the record as a whole, in the light most favorable to plaintiff because the trial court did not state any findings of fact, we find the trial court was manifestly erroneous in overruling Pacific Life's exception of peremption as to plaintiff's vicarious liability claim against Pacific Life concerning Barnett's alleged acts, omissions, or neglect regarding selling the policy. Accordingly, we reverse this portion of the judgment overruling Pacific Life's exception of peremption, and sustain Pacific Life's exception of peremption as to plaintiff's vicarious liability claim against Pacific Life for Barnett's acts, omissions, or neglect regarding selling the policy, dismissing this claim with prejudice.

The wash loan

As previously discussed, plaintiff was sent renewal documents in September of 2022, which required plaintiff to post approximately $600,000 in additional collateral and showed an increased interest rate. Despite the additional collateral requirement and increased interest rate, plaintiff signed the renewal documents. The testimony also established that around that time, Barnett discussed with plaintiff the option of taking out a wash loan 14 from the policy's cash value to pay down some of the First Insurance Funding loan debt, which was now owned or administered by Wintrust.

On October 28, 2022, Lauren Forlizzi of Wintrust sent Barnett an email regarding the wash loan. On October 31, 2022, Barnett responded to Forlizzi, explaining to her that he spoke to “Mark” about the wash loan. Specifically, Barnett stated, in pertinent part:

We can take a wash loan from Pacific Life and pay off a sizable amount of the debt on [plaintiff's] loan. Due to the rise of the interest rates at almost 6% all of the debt we pay off will at least earn him what he would be paying in interest. I sent his total account value as per Mark's request. We want to substitute collateral at [Wintrust] for the loan amount and then we will pay off as much of the loan as possible. He should still have over $1 million of debt. Once the loan is paid off we will leave as much collateral as needed by [Wintrust] and then the rest of the collateral can be released.

On February 15, 2023, Barnett subsequently emailed Robles with Succession Capital, asking him to send the paperwork so that plaintiff could take out a $2,500,000 wash loan with Pacific Life to pay off that amount of the Wintrust loan debt. Robles responded that he would inform the lender and get back with him when he had an update. On March 7, 2023, Barnett's assistant sent an email to Robles attaching plaintiff's signed loan documents to Pacific Life requesting the wash loan.

On May 19, 2023, Barnett sent another email to Robles, which was copied to plaintiff, stating that plaintiff “took out a loan from [Pacific Life] to pay 2.5 million debt at [Wintrust]. He or I have not received anything showing the debt was paid down.” He asked Robles to check on it and let him know. On May 23, 2023, Robles responded “Confirming funds were received by the carrier on March 17th. The lender is drafting up an updated balance letter, and I should have it for you by the end of the day.” Plaintiff responded to Robles on the following day, thanking him for his assistance. On May 25, 2023, Liliana Barajas of Succession Capital emailed plaintiff an updated balance letter, copying Barnett. Later that evening, plaintiff forwarded the email from Succession Capital to Barnett, stating in part, “Jim this shows loan balance. Is this before or after I borrowed & paid the $2.5 mil? If after the 2.5 deduction, what is this years $$$ I need to pledge as collateral?”

In September of 2023, plaintiff was sent another renewal package, showing the loan interest rate and requiring plaintiff to post additional collateral in the amount of $227,663, with a due date of October 9, 2023. The renewal package information was also emailed to Barnett, which he forwarded to plaintiff on September 12, 2023. After notification that plaintiff did not comply and renew by the renewal date, Barnett resent plaintiff the renewal documents via email on October 11, 2023. Plaintiff then emailed Robles with Succession Capital on October 14, 2023, stating, “Joe, I'm confused.” Plaintiff stated he did not receive the “usual bill for $65k,” and he asked Robles “how” he was supposed to make out the “$227k check” and where it was to be mailed. On October 16, 2023, Robles responded, informing plaintiff that “the lender is requiring documents to be signed and for $228k to be added into the brokerage account. This is the cash amount required.”

Plaintiff forwarded the Robles email to Barnett the same day, stating:

WHAT THE F**K IS HE TALKING ABOUT? MY DEBT WAS REDUCED THIS YEAR BY THE LOAN, NOW HE'S SAYING NOT ONLY PAY THE SAME $65K INTEREST, BUT ALSO THE $32K. DON'T WASTE TIME REPONDING [sic] ․ I DON'T HAVE TIME TO F**K WITH THIS NOW. I'M PAYING THE $65K TOMORROW SINCE CATHY NOW SENT THE PAPER FOR ME TO GO HAVE SIGNED AND NOTARIZED ․ AGAIN. AND WILL BE IN YOUR OFFICE TOMORROW.

In response, Barnett sent plaintiff an email stating, in pertinent part:

Lou. Calm down. Please pay the 65000. Cathy sent you the bank documents this morning. Please sign and have Heather sign and take to my office. You do not have to pay the $32000. They are sending it back to you from pacific life. Call me if you have any questions.

The evidence shows that plaintiff actually sent a check for the $32,000 to Pacific Life on October 6, 2023, prior to his October 16, 2023 email to Barnett, and that he told Barnett it was mailed. Thereafter, Barnett engaged in several emails with representatives of Pacific Life seeking a refund of the $32,000 check because plaintiff inadvertently sent the money to Pacific Life instead of to Wintrust. Barnett informed Pacific Life that the money should have gone to Wintrust along with plaintiff's $65,000 payment. On November 1, 2023, a representative of Pacific Life emailed Barnett stating that a refund check was mailed to plaintiff on October 31, 2023. Barnett forwarded the email to plaintiff informing him that the check was in the mail, he was currently on vacation, and he would see him next week. Plaintiff's email response was friendly, he commented on Barnett's vacation, stated he would see Barnett next week, and concluded with the casual comment “ps did you sell my insurance policy yet?” Barnett replied “I am waiting on a response as to pricing. I sent them everything.”

Barnett conceded that initially, it was his understanding that paying down the Wintrust loan with the $2.5 million wash loan would reduce plaintiff's collateral demand. He also conceded he “probably” informed plaintiff of his understanding of the wash loan. Barnett further admitted that he did not understand that the $2.5 million wash loan, would reduce “the value in the policy so that the collateral need does not go down.”

Barnett agreed that plaintiff began exploring the idea of “selling or getting out from the policy in 2022, after he received notice about the need to post additional collateral ($30,000 in June 2022 and $594,000 in October 2022). Barnett acknowledged that after plaintiff posted the approximately $600,000 in additional collateral, plaintiff received an email indicating that he was in default and he needed to post even more collateral. On December 7, 2022, Barnett sent an email to Wintrust inquiring as to why plaintiff was in default when he just posted the collateral requested. Barnett also admitted that he is the one who communicated with Succession Capital about running the illustrations or projections for the wash loan. Plaintiff testified that in 2022, he discussed the conversion rider and selling the policy with Barnett, but he ultimately decided to take out a wash loan. The documents were signed and the wash loan was processed in March of 2023.

A review of the evidence and testimony established that plaintiff and Barnett did not discover until the September 2023 renewal documents, or at the latest via emails in October of 2023, that the wash loan did not pay down the debt like they both thought it would. Thus, plaintiff's lawsuit filed less than a year later on June 24, 2024 was timely and not perempted as to plaintiff's vicarious liability claim against Pacific Life as to Barnett's advice regarding the wash loan.

Considering the evidence and the record as a whole in the light favorable to plaintiff because the trial court did not state any findings of fact, we find the trial court was not manifestly erroneous in overruling Pacific Life's exception of peremption as to plaintiff's vicarious liability claim against Pacific Life as to Barnett's advice regarding the wash loan. Accordingly, this argument is without merit.

CONCLUSION

After a thorough review of this writ application, opposition, extensive exhibits, and the approximately 400-page transcript, we find the trial court's judgment overruling Pacific Life's exception of peremption as to plaintiff's vicarious liability claim against Pacific Life as to Barnett's advice regarding the wash loan is reasonably supported by the testimony and evidence presented and was not manifestly erroneous. Therefore we deny that portion of Pacific Life's writ application, and affirm the trial court's judgment overruling the exception of peremption as to plaintiff's vicarious liability claim against Pacific Life concerning Barnett's advice regarding the wash loan.

However, we find the trial court's judgment overruling the exception of peremption as to plaintiff's vicarious liability claims against Pacific Life concerning Barnett's acts, omissions, or neglect as to the conversion rider and selling the policy is not reasonably supported by the testimony and evidence for the reasons stated supra, and therefore, the trial court was manifestly erroneous in overruling Pacific Life's exception of peremption as to those claims. Consequently, we grant that portion of Pacific Life's writ application, reverse the trial court's judgment overruling the exception of peremption regarding plaintiff's vicarious liability claims against Pacific Life concerning Barnett's acts, omissions, or neglect as to the conversion rider and selling the policy, grant the exception of peremption as to plaintiff's vicarious liability claims against Pacific Life concerning Barnett's acts, omissions, or neglect as to the conversion rider and selling the policy, and dismiss those claims with prejudice. 15

DECREE

For the reasons stated herein, we affirm the trial court's judgment overruling the exception of peremption as to plaintiff's vicarious liability claim against Pacific Life concerning Barnett's advice regarding the wash loan, and we deny that portion of Pacific Life's application.

We reverse the trial court's judgment overruling the exception of peremption regarding plaintiff's vicarious liability claims against Pacific Life concerning Barnett's acts, omissions, or neglect as to the conversion rider and selling the policy, and we grant the exception of peremption as to plaintiff's vicarious liability claims against Pacific Life concerning Barnett's acts, omissions, or neglect as to the conversion rider and selling the policy, and dismiss those claims with prejudice.

AFFIRMED IN PART AND REVERSED IN PART

FIFTH CIRCUIT

101 DERBIGNY STREET (70053)

POST OFFICE BOX 489

GRETNA, LOUISIANA 70054

www.fifthcircuit.org

SUSAN M. CHEHARDY CHIEF JUDGE

FREDERICKA H. WICKER

JUDE G. GRAVOIS

MARC E. JOHNSON

STEPHEN J. WINDHORST

JOHN J. MOLAISON, JR.

SCOTT U. SCHLEGEL

TIMOTHY S. MARCEL

JUDGES

CURTIS B. PURSELL CLERK OF COURT

SUSAN S. BUCHHOLZ CHIEF DEPUTY CLERK

LINDA M. TRAN FIRST DEPUTY CLERK

MELISSA C. LEDET DIRECTOR OF CENTRAL STAFF

(504) 376-1400

(504) 376-1498 FAX

NOTICE OF JUDGMENT AND CERTIFICATE OF DELIVERY

I CERTIFY THAT A COPY OF THE OPINION IN THE BELOW-NUMBERED MATTER HAS BEEN DELIVERED IN ACCORDANCE WITH UNIFORM RULES - COURT OF APPEAL, RULE 2-16.4 AND 2-16.5 THIS DAY JULY 16, 2025 TO THE TRIAL JUDGE, CLERK OF COURT, COUNSEL OF RECORD AND ALL PARTIES NOT REPRESENTED BY COUNSEL, AS LISTED BELOW:

CURTIS B. PURSELL CLERK OF COURT

24-C-520

E-NOTIFIED

24TH JUDICIAL DISTRICT COURT (CLERK)

HONORABLE DONALD L. FORET (DISTRICT JUDGE)

NICHOLAS A. HART (RESPONDENT)

ANNE B. HOSKINS (RELATOR)

JOSEPH L. MCREYNOLDS (RESPONDENT)

PAUL J. POLITZ (RESPONDENT)

STEPHEN O. SCANDURRO (RELATOR)

RAYMOND C. LEWIS (RESPONDENT)

SAMANTHA P. GRIFFIN (RESPONDENT)

TIMOTHY D. SCANDURRO (RELATOR)

MAILED

KEVIN C. CARTER (RESPONDENT)

ATTORNEY AT LAW

755 MAGAZINE STREET

NEW ORLEANS, LA 70130

JOSHUA R. HESS (RELATOR)

MAYNARD NEXSEN, P.C.

1901 SIXTH AVENUE NORTH

SUITE 1700

BIRMINGHAM, AL 35203

FOOTNOTES

1.   Barnett and plaintiff have also filed writ applications with this court, 24-C-524 and 24-C-522 respectively, seeking review of the trial court's October 3, 2024 judgment.

2.   It is undisputed that prior to 2014, Barnett was not plaintiff's insurance agent.

3.   Plaintiff borrowed $1 million to fund the policy's premium for the first year and $750,000 per year for six years to fund the remaining premiums. The premium finance loan had to be 100% collateralized by either the cash value of the policy or plaintiff's investments. Plaintiff was required to post additional collateral each year as the balance of the premium finance loan increased. The balance continued to increase annually because all interest above $65,000 was deferred so that plaintiff would only have to pay $65,000 per year in interest payments. Plaintiff testified that he was not aware that the premiums paid for the policy were being invested in the stock market until he had “some long discussions” with Barnett about it when he was trying to sell the policy the first time in 2017, when he had a problem with one of the beneficiaries to the trust, Heather Gonzales, who he thought had stolen money from him.

4.   It was undisputed that the First Insurance Funding loan(s) was later owned or administered by Wintrust Life Finance (“Wintrust”).

5.   At the hearing, and in his brief to this court, plaintiff conceded that his claims concerning the original sale and issuance of the policy in 2014 as well as the early management of the policy are perempted under La. R.S. 9:5606, unless and until he can plead a fraud claim related to the same. Therefore, this part of the judgment is not before this court in this writ application.

6.   In a footnote in his appellate brief, plaintiff contends that he seeks to recover from Pacific Life for its vicarious liability based upon the actions of Barnett as well as its direct negligence in underwriting. Plaintiff contends the trial court dismissed his direct negligence claims against Pacific Life, which is the subject of his writ application before this court in 24-C-522. Because plaintiff does not address his direct negligence claims in this application, this court likewise does not consider those claims herein.

7.   La. C.C. art. 3458 provides:Peremption is a period of time fixed by law for the existence of a right. Unless timely exercised, the right is extinguished upon the expiration of the peremptive period.

8.   La. C.C. art. 3461 provides:Except as otherwise provided by law, peremption may not be renounced, interrupted, or suspended.

9.   It is also undisputed that all of the required documents related to the policy and financial loan documents were also signed by the trustee, Kullman. Further, and that once Kullman resigned in 2021, plaintiff and his new co-trustee and a beneficiary of the trust, Gonzales, thereafter, signed all required documents relating to the policy and financial loan documents.

10.   The evidence also supported Barnett's testimony that he inquired about the conversion rider in April of 2022.

11.   This was not the first time plaintiff inquired about selling the policy. Plaintiff testified that in 2017, when he thought one of the beneficiaries of the trust, Gonzales, was stealing money from him, and he sued the beneficiary. On advice of his lawyers, he consulted with Barnett about selling the policy and getting individual policies for each beneficiary. Plaintiff ultimately did not sell the policy, he dropped the lawsuit, and made Gonzales a co-trustee of the trust and a signatory on the policy at issue.

12.   Barnett notified Brusca via email dated April 19, 2024, that plaintiff authorized him to accept Coventry's offer on the sale of the policy. Barnett sent plaintiff an email on May 2, 2024, providing him with the release of all collateral and payoff letter on the policy. Barnett also informed plaintiff that the money would be transferred that afternoon and that he would also receive a check for the overpayment of interest to Wintrust. Later that day, Barnett informed plaintiff that the money was transferred to plaintiff's account and it was “[a]ll done.”

13.   The net benefit was determined by using the value of the policy at the time it was sold ($9.1 million) minus the amounts due on the premium finance loans taken out by plaintiff to equal the net benefit. The transcript reflects that in discussing these amounts, counsel and the witnesses used approximate values instead of the exact amounts as shown in the exhibits.

14.   Although Barnett testified he had nothing to do with the financial aspects of the policy and the financial institutions would be in a better position to answer questions regarding the premium finance loan documents they prepared, the evidence does establish that Barnett often relayed financial information and documents to plaintiff that were sent to him and discussed financial options with plaintiff in dealing with payment of the premiums for the policy.

15.   Considering plaintiff's opposition only argued that three claims were not perempted, we find the judgment was overly broad in stating it was overruling the exceptions as to “acts, omissions, or neglect occurring after June 24, 2021 and discovered within one year of filing suit.” This broad language could imply that plaintiff alleged more than the three claims discussed in this disposition against Barnet and Pacific Life during this time period. Thus, pursuant to our ruling as stated above, plaintiff only has one remaining cause of action against Pacific Life that is not perempted (i.e., plaintiff's vicarious liability claim against Pacific Life as to Barnett's advice regarding the wash loan).

STEPHEN J. WINDHORST JUDGE