Full Indemnification and the Prohibition of “Betterment” Deductions in Third‑Party Auto Property Damage Claims
Commentary on Ngoc Troung v. Marcus Dewayne Sanders & Old American Indemnity Co., Supreme Court of Louisiana (No. 2025‑C‑00169)

I. Introduction

The Supreme Court of Louisiana’s decision in Ngoc Troung v. Sanders addresses, for the first time, whether a negligent driver (and his liability insurer) may reduce a third‑party auto property damage claim by a “betterment” deduction when repairs require new parts that are arguably superior to the damaged parts.

The Court’s holding is twofold:

As a matter of Louisiana tort law under Civil Code article 2315, a third‑party auto tort victim is entitled to full indemnification of repair costs; a tortfeasor may not reduce that recovery on the theory of “betterment.”
On these facts, the insurer’s reliance on a betterment deduction in an issue of first impression does not warrant bad‑faith penalties under former La. R.S. 22:1973, because there was no knowing misrepresentation of “pertinent facts” and the insurer had a reasonable legal basis to litigate the issue.

The case squarely pits widespread insurance “industry standards” (and laws in many other states) against Louisiana’s longstanding doctrinal commitment to full reparation: that a tort victim is to be made whole and restored, as nearly as possible, to his pre‑loss position. The Court reaffirms that principle in an uncompromising way for third‑party auto property damage claims.

II. Case Background

A. The Accident and Damage

On January 21, 2023, Marcus Sanders rear‑ended a 2019 Honda CR‑V driven by Ngoc Troung in Caddo Parish. Sanders’ vehicle was insured by Old American Indemnity Company (“Insurer”).

The collision rendered the CR‑V inoperable due to damage to:

the exhaust system;
components of the front‑wheel‑drive assembly; and
a tire, whose interior wall melted when the muffler was pushed into it.

B. Adjusting the Claim and the “Betterment” Deduction

The insurer’s appraiser, Chad Rogers, prepared an initial estimate on February 6, 2023, limited to rear bumper and liftgate repairs ($3,008.02), which was paid promptly to Troung. At Troung’s direction, the vehicle went to Roundtree/Mercedes‑Benz of Shreveport Collision Center.

The repair shop then requested supplements to address additional damage, including:

a replacement tire; and
repairs to the quarter panel, rear body and floor, and exhaust system.

On February 16, 2023, Rogers issued a supplement increasing estimated repair costs but introducing a $313.79 “betterment” deduction consisting of:

$131.95: 50% “betterment” for prior tread wear on the tire (based on 5/32" remaining tread, half of the standard 11/32");
$130.38: 23% “betterment” for prior wear on the muffler and pipe; and
$51.46: 23% “betterment” for prior wear on the rear muffler.

Because used tires and exhaust components could not safely be installed, the shop necessarily used new parts, and the insurer treated the fact that the new parts were “better” than the worn ones as justifying a partial charge to the innocent third‑party.

Across the initial estimate and three later supplements, total repair cost for the vehicle came to $7,109.48. The insurer paid $6,795.69, withholding $313.79 as “betterment.” When repairs were completed on March 16, 2023, the shop refused to release the vehicle until the $313.79 balance was paid. Troung’s attorney advanced that amount to obtain the vehicle.

C. Litigation and Issues Presented

Despite demands, the insurer refused to reimburse the $313.79. Troung sued Sanders and the insurer, alleging:

Louisiana law does not authorize “betterment” deductions in third‑party auto tort claims; and
the insurer’s refusal to pay the full repair cost was arbitrary, capricious, and without probable cause, warranting penalties under La. R.S. 22:1973.

After suit was filed, the insurer tendered $667.83 (double the amount of the betterment deduction) to Troung and his counsel, expressly reserving its legal position on betterment. The parties stipulated to the facts and narrowed trial to three legal questions:

Does Louisiana law permit a betterment deduction in third‑party auto property damage claims?
Did the insurer’s assertion of betterment constitute a misrepresentation of “pertinent facts” under La. R.S. 22:1973(B)(1)?
Are statutory penalties owed under La. R.S. 22:1973(C) (now substantially incorporated into La. R.S. 22:1892(I))?

D. Lower Court Decisions

1. Trial Court

The trial court held that because Louisiana law did not expressly prohibit betterment deductions in third‑party claims, and no jurisprudence or regulation squarely forbade them, betterment was permissible. On that basis it rejected Troung’s bad‑faith claims without reaching them.

2. Court of Appeal (Second Circuit)

The Second Circuit reversed:

It held that under La. C.C. art. 2315(A), the tortfeasor is “legally bound to repair the damage” he caused, and nothing in Louisiana law allows a tortfeasor or liability insurer to reduce that duty through a betterment deduction.
It further concluded the insurer violated its duty of good faith by:
- authorizing all repairs,
- failing to tell Troung he would be responsible for the betterment amount, and
- asserting the deduction only when the vehicle was to be released, thus effectively holding the vehicle hostage.
On that basis, it found a “knowing misrepresentation of pertinent facts” under La. R.S. 22:1973(B)(1) and awarded:
- $313.79 (the amount paid on Troung’s behalf); and
- $5,000 in statutory penalties.

The defendants sought certiorari on:

whether a betterment deduction is permissible in third‑party tort actions; and
whether penalties were properly awarded.

III. Summary of the Supreme Court’s Opinion

Authored by: Weimer, C.J. (Hughes, J., dissenting in part, would have affirmed the court of appeal entirely).

A. Holding on Betterment

The Court held that under La. C.C. art. 2315 and Louisiana’s policy of full indemnification:

A tortfeasor is not entitled to reduce a third‑party tort victim’s auto property damage recovery for “betterment.”
When a vehicle can be repaired, the measure of damages is the cost to restore it as nearly as possible to its pre‑loss condition—even if that requires new parts rather than used parts.
Industry practice and the law of other states cannot override Louisiana’s statutory and jurisprudential commitment to full reparation.

The Court rejected the insurer’s argument for prospective‑only application, holding the decision applies in the normal, retroactive fashion; Article 2315 has long embodied this principle.

B. Holding on Penalties

On penalties under former La. R.S. 22:1973:

The Court held that:
- Section 1973(B)(1) penalizes misrepresentation of pertinent facts, not misstatements of law or legal entitlement.
- The insurer did not knowingly misrepresent or conceal factual information.
- This was an issue of first impression with reasonable legal arguments on both sides, and under established jurisprudence, bad‑faith penalties are generally inappropriate in that circumstance.
Result: The Court reversed the penalty award and rejected statutory bad‑faith liability.

Accordingly, the Supreme Court:

Affirmed the court of appeal’s ruling that betterment deductions are not permitted in third‑party auto tort claims.
Reversed the court of appeal’s imposition of penalties against the insurer.

IV. Detailed Legal Analysis

A. Precedents and Authorities Cited

1. Core Tort Principle: La. C.C. art. 2315 and Full Reparation

Article 2315 is the foundational Louisiana tort provision:

“Every act of man that causes damage to another obliges him by whose fault it happened to repair it.”

Key jurisprudence relied upon:

Coleman v. Victor, 326 So.2d 344 (La. 1976)
- Articulated the principle that the tortfeasor must put the victim in the position he would have occupied absent the injury.
- In the context of vehicle damage, distinguished between:
  - Total loss: measure is pre‑loss value minus salvage; versus
  - Repairable damage: measure is cost of repair to restore to pre‑loss condition.
Roman Catholic Church of Archdiocese of New Orleans v. Louisiana Gas Serv. Co., 618 So.2d 874 (La. 1993)
- Reaffirmed full reparation and tied it to the state constitutional guarantee that property owners be compensated “to the full extent of their loss” in expropriation cases.
- Emphasized that when private property is damaged by a tortfeasor, the victim should be compensated at least as fully as in public expropriation.
Jordan v. Travelers Ins. Co., 257 La. 995, 245 So.2d 151 (1971)
- Underscored that no rigid formula governs property damage; each case depends on its facts, but full reparation remains the guiding principle.

The Court synthesizes these authorities to reaffirm:

The primary objective in property damage is to restore the property as nearly as possible to its condition immediately before the injury.
The measure of damages is therefore the reasonable cost of repair when the property is repairable.

2. Depreciation vs. Betterment: Reisz, Littleton, and Related Cases

The insurer relied heavily on older and different contexts to analogize betterment to depreciation.

Reisz v. Kansas City S. R. Co., 148 La. 929, 88 So. 120 (1921)
- Involved damage to immovable property (a building) and recognized an allowance for depreciation in calculating property damage.
- The insurer argued that if depreciation is allowed despite no express statutory authorization, betterment should likewise be allowed.
- The Supreme Court in Troung declined to view Reisz as controlling or as mandating symmetry between depreciation and betterment, especially in the movable property/auto context and third‑party claims.
Littleton v. Colonial Pac. Leasing Corp., 35,777 (La. App. 2 Cir. 5/8/02), 818 So.2d 283
- First‑party insurance claim for damage to a logging skidder.
- The policy explicitly limited recovery to the “cash value” of the property, “with proper deduction for depreciation.”
- The court enforced a contractual depreciation clause; it did not impose a betterment deduction and did not address third‑party claims.
- In Troung, the Court notes that Littleton arose in a contractual first‑party context and cannot be transposed to limit a tortfeasor’s statutory liability to an innocent third‑party.
Eaves v. Norwel, Inc., 570 So.2d 123 (La. App. 3 Cir. 1990)
- Another first‑party case, involving a John Deere insurer and policy language referencing “depreciation and/or betterment.”
- The court assumed such a provision existed but found the record lacked proof to justify invoking it; again, it did not endorse a betterment deduction.

The Court also notes that depreciation in third‑party auto cases has been recognized in jurisprudence only in limited situations:

Where the vehicle’s market value before and after the damage cannot be reasonably determined; or
Where the cost of repair exceeds the value of the vehicle (total or constructive total loss).

Those situations were not present here; the vehicle was repairable and the repair costs did not exceed the vehicle’s value.

3. Insurance Code and Public Policy: Marcus v. Hanover and Others

Marcus v. Hanover Ins. Co., 98‑2040 (La. 6/4/99), 740 So.2d 603
- Discussed the purpose of Louisiana’s compulsory auto liability insurance law: to provide compensation for persons injured by insured vehicles.
- Emphasized that liability policies are issued “for the benefit of all injured persons” and must be construed to provide protection and coverage to insureds and victims.
- This case supports the Court’s view that insurers cannot impose contractual limitations that undercut statutory and policy‑based guarantees of full indemnification for third parties.
Constitutional property rights (La. Const. art. I, §4)
- The Court, via Roman Catholic Church, reiterates that expropriation law requires compensation to the “full extent of [the owner’s] loss.”
- Justice demands at least equal treatment for victims of private torts.

4. Bad-Faith Penalties: Kelly, Theriot, Rudloff, Baack

On the penalty question, the Court relies on:

Kelly v. State Farm Fire & Cas. Co., 14‑1921 (La. 5/5/15), 169 So.3d 328
- Clarified that La. R.S. 22:1973 is penal and must be strictly construed.
- Stated that a third party has no cause of action under 1973(A) alone; penalties are available only where a specific (B) violation is proved.
- Recognized that 1973(B)(1) addresses misrepresentation or failure to disclose “pertinent facts.”
Theriot v. Midland Risk Ins. Co., 95‑2895 (La. 5/20/97), 694 So.2d 184
- Reinforced that punitive provisions must be narrowly construed.
Rudloff v. Louisiana Health Servs. & Indem. Co., 385 So.2d 767 (La. 1980) (on reh’g)
- Stated that penalties ordinarily should not be imposed when the coverage or liability question is a matter of first impression involving unsettled interpretation of law.
Baack v. McIntosh, 20‑1054 (La. 6/30/21), 333 So.3d 1206
- Confirmed that an insurer acting in good‑faith reliance on a reasonable legal position should not be penalized merely because it ultimately loses on the merits.

B. The Court’s Legal Reasoning

1. Step One: Identify the Insurer’s Fundamental Obligation

The Court begins with the liability policy’s basic promise in “Part A – Coverage for Your Liability to Others” (Sanders’ liability coverage). The insurer agreed to:

“pay damages … for which a covered person is legally liable because of … property damage arising out of an auto accident….”

Critically:

The policy ties the insurer’s obligation to what the insured is “legally liable” for under Louisiana law.
Louisiana law (Art. 2315) imposes on the tortfeasor a duty to “repair” the harm.
Therefore, the insurer’s obligation is coextensive with the tortfeasor’s statutory liability.

The Court explicitly notes that other policy sections (e.g., collision coverage, UM property damage) contain language limiting payment where repairs result in “betterment,” but Part A (liability)—the operative coverage here—does not. Thus:

The enforceability of a betterment clause in first‑party or UM property coverage is not before the Court.
This opinion only determines what Louisiana tort law requires in a third‑party context.

2. Step Two: What Does It Mean to “Repair It” Under Article 2315?

The Court emphasizes the simplicity of Article 2315’s command: the party at fault must “repair it.” In context:

Before the accident, Troung had a fully functioning vehicle.
After the accident, the vehicle was disabled due to the tortfeasor’s negligence.
Repair necessarily required the use of new replacement parts for safety reasons; used parts of comparable wear could not be safely installed.

Under the civil law tradition, it is the statutory text and the jurisprudential gloss that control. The Court reasons:

If the only way to restore the vehicle to its operative, pre‑loss state is by using new parts, then the cost of those parts is part of “repairing” the damage for which the tortfeasor is responsible.
Because the work performed did not go “beyond repair or restoration to a former condition,” it does not constitute “betterment” in the sense of an extra improvement to the thing; it merely returned the vehicle to service.

In other words, replacing a worn but functioning exhaust system and tire with new equivalents after an accident is categorized not as an upgrade, but as the only feasible method of restoring the status quo ante.

3. Step Three: Rejection of Industry Practice and Other States’ Laws

The insurer advanced a broader policy argument:

Betterment deductions are “long‑standing and well‑accepted industry standards” in third‑party claims.
Many other states explicitly authorize betterment by statute, regulation, or case law (16 by law/rule; 2 by jurisprudence).

The Court acknowledges this multistate landscape but finds it legally irrelevant:

There is no similar statutory, regulatory, or jurisprudential authority in Louisiana.
Article 2315 does not authorize betterment; silence is not a grant of authority to create an exception to full reparation.
Louisiana’s legislative and constitutional policy favors full indemnification of innocent third‑party victims.
Courts are not free to incorporate out‑of‑state regulatory policy or industry standards that conflict with Louisiana’s statutory framework and public policy.

The Court further underscores that insurers cannot contract around these obligations when dealing with third‑party victims:

“An insurer is not at liberty to limit its liability and impose conditions on its obligations that conflict with the law … or related policy established by the legislature…. Obviously, if the legislature wishes to allow a tortfeasor to utilize a betterment deduction … it can expressly do so.”

4. Step Four: Distinguishing Depreciation from Betterment

The insurer argued that since Louisiana cases have occasionally allowed depreciation deductions, betterment should also be permissible. The Court rejects this analogy:

Depreciation occurs in limited, specific contexts (e.g., total loss, lack of ascertainable pre/post damage values).
This case involves a repairable vehicle with a clear repair‑cost measure and no evidence that repair costs exceeded value.
Reisz (immovable property) and Littleton (first‑party contractual) do not dictate the availability of betterment in a third‑party auto tort.

The Court explicitly refrains from revisiting whether a depreciation deduction is proper in Reisz or from extending depreciation beyond its narrow, established uses. It likewise takes no position on whether betterment limitations in first‑party policy provisions are enforceable.

5. Step Five: Full Indemnification and Policy Considerations

The Court situates its holding in broader policy:

Full reparation and the constitutional guarantee to be compensated to the “full extent” of one’s loss reflect a strong protective policy for property owners.
Allowing a tortfeasor to shift part of the repair cost to an innocent victim—particularly when the victim neither sought nor desired “better” parts—would:
- contradict that policy;
- leave the victim in a worse position than before the accident; and
- effectively subsidize the tortfeasor’s liability at the victim’s expense.

The Court thus endorses the Second Circuit’s observation that “assessing the party not at fault with unavoidable costs is not proper.”

6. Step Six: Retroactivity vs. Prospective Application

The insurer requested that the prohibition on betterment deductions be applied prospectively only, citing the Lovell v. Lovell, 378 So.2d 418 (La. 1979), framework for prospective application of new decisions. Lovell requires courts to consider:

Whether the decision announces a new principle of law (e.g., overruling clear precedent or deciding an unforeseeable issue of first impression);
The prior history, purpose, and effect of the rule in question and whether retroactivity furthers its operation; and
Any inequities that retroactivity would impose.

The Court in Troung concludes that:

Article 2315’s mandate of full reparation has been in place since 1808; the decision is a straightforward application of that long‑standing principle, not a surprising shift.
Retroactive application furthers the “predictability and stability” of tort law and properly aligns past claims with established principles.
The Court therefore declines to limit the decision to prospective effect.

C. Legal Reasoning on Penalties and “Bad Faith”

1. Statutory Framework: Former La. R.S. 22:1973

At the time of the conduct, La. R.S. 22:1973 provided (now largely incorporated into La. R.S. 22:1892(I)):

Subsection A: An insurer owes its insured a duty of good faith and fair dealing and has an affirmative duty to adjust claims fairly and promptly and to make reasonable efforts to settle claims “with the insured or the claimant, or both.”
Subsection B: Lists specific prohibited acts which, “if knowingly committed or performed,” constitute a breach of this duty. Relevant here is:
- §1973(B)(1): “Misrepresenting pertinent facts…”

Critical doctrinal points from Kelly:

Third parties have no independent cause of action under §1973(A); penalties in a third‑party setting require proof of a specific §1973(B) violation.
“Pertinent facts” refers to facts about the claim or coverage, not legal interpretations or disputed legal theories.

2. Misrepresentation of Facts vs. Misinterpretation of Law

The Court stresses the distinction:

Whether betterment is legally permitted is a question of law, not a question of fact.
Section 1973(B)(1) does not penalize an insurer for misstating or misapplying the law; it targets misrepresentations or concealments of factual information.

Therefore, even if the insurer’s legal position on betterment turned out to be wrong, that alone cannot constitute a “misrepresentation of pertinent facts” under §1973(B)(1).

3. Was There a Knowing Misrepresentation of Pertinent Facts?

The Second Circuit found bad faith largely because the insurer did not communicate with Troung about the betterment deduction until he attempted to retrieve his car.

The Supreme Court carefully reconstructs the timeline:

February 15, 2023: Repair shop first requests a supplement, including the tire and exhaust parts.
February 16, 2023: Insurer issues Supplement 1, expressly reflecting a $313.79 betterment adjustment.
February 17, 2023 and thereafter: Insurer sends payments to the repair shop reflecting the repair costs minus the $313.79 deduction; three additional supplements all show the same deduction.

Key factual findings:

The insurer promptly asserted the betterment deduction as soon as it learned that new parts would be used.
Each supplement included the betterment deduction; there is no evidence the insurer ever approved full repair cost and later backtracked.
There is no evidence in the record about:
- how supplements were delivered to Troung or the shop; or
- whether the shop communicated the deduction to Troung.
The insurer did timely tender repair funds, albeit reduced by $313.79; it did not withhold the entire repair amount.

On this evidentiary record, the Court finds no sufficient basis to conclude that the insurer “knowingly misrepresented or failed to disclose pertinent facts.” The problem, at most, was:

a legal disagreement over entitlement to betterment;
possible breakdowns in communication between the shop and Troung, which are not attributable to deliberate insurer misconduct on this record.

4. First-Impression Question and Reasonable Legal Basis

The Court then invokes Rudloff and similar authorities to hold that penalties are generally inappropriate where:

the coverage or liability issue is one of first impression in Louisiana; and
the insurer has a reasonable, good‑faith legal basis for contesting its obligation.

Here:

No Louisiana court had ever squarely addressed betterment in the third‑party auto context.
The insurer relied on:
- widespread industry practice;
- the Louisiana Department of Insurance’s prior approval of policy forms that included betterment clauses (albeit in other coverage parts); and
- supportive authorities from many other states.
The trial court initially agreed with the insurer; this, and the split among lower courts, further illustrates the genuine legal uncertainty.

The Court concludes that the insurer:

had a reasonable basis to assert and litigate the betterment deduction; and
demonstrated some good faith by later issuing a check for double the amount of the deduction while preserving its legal position.

Under these circumstances, the insurer’s ultimate legal loss on the betterment question does not translate into “bad faith” or justify statutory penalties.

V. Impact and Implications

A. Immediate Doctrinal Impact

Bright-line rule for third-party auto property damage claims.
- In Louisiana, when a tortfeasor negligently damages a third‑party’s vehicle and the vehicle can be repaired, the measure of damages is the full, reasonable cost of repair necessary to restore the vehicle to its pre‑accident condition.
- No deduction for “betterment” may be taken from that repair cost, even if:
  - new parts replacing worn parts extend the useful life of those components; or
  - industry practice in other jurisdictions would treat the difference as betterment.
Reinforcement of full indemnification.
- The decision fortifies Louisiana’s robust full‑reparation doctrine, aligning tort damages with constitutional property protections and expropriation principles.
- It clearly places the risk of additional cost arising from the use of new parts on the tortfeasor and his insurer, not on the innocent victim.

B. Effects on Insurance Claims Handling and Industry Practice

Claims systems and adjuster training.
- Insurers operating in Louisiana must ensure that their auto claims handling protocols distinguish between:
  - third‑party liability claims governed by Troung (no betterment deduction); and
  - first‑party or UM property damage claims (where policy language about betterment may still be litigated in the future).
- Standardized estimating software that automatically applies betterment to certain components must be overridden in Louisiana third‑party claims.
Potential retroactive consequences.
- Because the Court declined prospective‑only application, prior third‑party claimants whose recoveries were reduced by betterment deductions may seek to challenge those deductions, subject to:
  - prescription (limitations periods),
  - release language in settlements, and
  - defenses such as accord and satisfaction.

C. Questions Left Open

The Court is careful to cabin its holding, leaving room for future litigation on several fronts:

First-party betterment clauses.
- The Court expressly does not decide whether policy provisions that limit payment based on betterment for damage to the insured’s own vehicle (collision coverage, UM property damage, etc.) are enforceable or consistent with public policy.
- That remains an open question likely to be litigated in the future.
Depreciation in third-party cases.
- The Court acknowledges that depreciation has been applied in narrow circumstances but does not refine or expand those doctrines here.
- The opinion expressly withholds judgment on the correctness of older depreciation jurisprudence like Reisz in immovable property contexts.

D. Bad Faith and Penalties: Clarified Limits

Narrowing §1973(B)(1) in application.
- “Misrepresentation of pertinent facts” is reaffirmed as dealing with facts (claim details, policy information, payments), not with erroneous or disputed legal interpretations.
- Insurers can argue legitimate, unsettled legal positions without automatically incurring bad‑faith penalties if they:
  - act reasonably;
  - do not conceal or fabricate facts; and
  - promptly pay undisputed amounts.
First-impression safe harbor (practical effect).
- By invoking Rudloff and recognizing this as an issue of first impression, the Court effectively signals that:
  - penalties are disfavored where an insurer’s position is fairly arguable and not foreclosed by clear precedent; and
  - future bad‑faith liability will turn on whether the law was settled and whether the insurer’s conduct departed from that settled law.
- Now that Troung has clearly established that betterment deductions are impermissible in third‑party claims, insurers who persist in asserting such deductions may face significantly greater exposure to penalties going forward.

VI. Complex Concepts Simplified

1. “Betterment” vs. “Depreciation”

Betterment (as used by the insurer):
- The idea that if a damaged part (e.g., a 50,000‑mile tire) is replaced with a brand‑new part, the owner’s property is now “better” than before, so the owner should pay part of that cost.
- Typical example: A tire that was half‑worn is replaced with a new tire; the insurer pays only half the tire cost, treating the other half as “betterment” owed by the owner.
Depreciation:
- A reduction in value due to age, wear, or obsolescence.
- In tort property cases, depreciation may be used when calculating:
  - the value of property before and after damage when those values are hard to pinpoint; or
  - the value of destroyed property when repair is uneconomical (total loss).
- Louisiana has permitted depreciation deductions only in narrow, fact‑specific settings.

In Troung, the Court says: even if depreciation might be appropriate in some contexts, that does not justify betterment deductions for a repairable third‑party vehicle.

2. Third-Party vs. First-Party Claims

Third-party claim: A claim by the injured victim against the other driver’s insurer (the liability insurer).
- Governing law: primarily tort law (e.g., La. C.C. art. 2315) plus the Direct Action Statute and insurance code.
- In Troung, this is the type of claim at issue.
First-party claim: A claim by an insured against his own insurer (e.g., collision coverage, comprehensive, UM property damage).
- Governing law: contract (policy terms) plus public policy limits.
- The Court in Troung does not decide whether betterment language in such policies is enforceable.

3. Full Indemnification / Full Reparation

“Full indemnification” means:

The victim is put, as nearly as money can, in the position he would have been in if the wrongful act had never occurred.
For property:
- Repairable property: pay the cost to restore it to its prior condition.
- Total loss: pay the pre‑loss value (minus salvage, if applicable).

It does not mean the victim is entitled to a windfall. But as Troung illustrates, where new parts are the only safe or practical way to restore function, those new parts are part of “making the victim whole,” not an illegitimate upgrade.

4. Direct Action and Solidary Liability

Under Louisiana’s Direct Action Statute (La. R.S. 22:1269, prior to its 2024 amendment), an injured person could sue:

the negligent driver (tortfeasor); and
the tortfeasor’s liability insurer, directly.

The insurer is liable “in solido” (jointly and severally) with its insured up to its policy limits. In Troung, this is why both Sanders and Old American Indemnity are defendants, but the critical legal questions focus on the insurer’s conduct and obligations.

5. Bad-Faith Penalties (Former La. R.S. 22:1973 / Current 22:1892(I))

Louisiana provides for extra‑contractual penalties when insurers act in bad faith. In simplified terms:

Insurers must:
- adjust claims fairly and promptly;
- make reasonable efforts to settle; and
- avoid specific prohibited acts (e.g., misrepresenting facts, failing to pay undisputed amounts).
If they knowingly commit certain acts, they may owe:
- general damages caused by the breach; and
- statutory penalties, on top of the claim amount.

But because these statutes are penal, courts insist on:

clear proof of specific prohibited conduct;
narrow construction; and
a distinction between:
- honest legal disputes about coverage or liability; and
- dishonest or dilatory handling of claims.

Troung underscores that an insurer’s erroneous legal view on an unsettled issue does not, by itself, amount to bad faith.

VII. Conclusion

Ngoc Troung v. Sanders is a significant Louisiana Supreme Court decision that clarifies two important points:

Tort Measure of Damages for Third-Party Auto Property Claims
- When a third‑party’s vehicle is damaged by a negligent driver and is repairable, Louisiana law requires the tortfeasor (and his liability insurer) to pay the full, reasonable cost of necessary repairs to restore the vehicle to its pre‑accident condition.
- “Betterment” deductions—charging the innocent victim for the incremental benefit of new parts replacing worn parts—are not permitted in this third‑party tort context.
- This rule applies retroactively and is grounded in long‑standing principles of full reparation under La. C.C. art. 2315 and related jurisprudence.
Limits on Bad-Faith Penalties
- Misrepresentation of “pertinent facts” under former La. R.S. 22:1973(B)(1) does not include disputes about unsettled legal issues; it targets factual deception, not legal error.
- Where an insurer relies in good faith on industry practices, regulatory approvals, and out‑of‑state authority to litigate an issue of first impression, penalties are generally inappropriate—even if the insurer ultimately loses on the substantive question.
- This principle reinforces a careful, restrained approach to penal statutes and underscores that bad‑faith liability hinges on clear proof of knowing wrongful conduct, not merely on being wrong about the law.

By simultaneously rejecting betterment deductions in third‑party auto claims and declining to impose penalties in a case of first impression, the Court strikes a balance. It firmly protects the full indemnification rights of innocent tort victims, while recognizing that insurers must have room to litigate genuinely unsettled questions without facing automatic punitive consequences.

Going forward, Troung will guide Louisiana courts, insurers, and practitioners in:

structuring and evaluating auto property damage settlements;
distinguishing permissible legal advocacy from sanctionable bad faith; and
shaping potential legislative or contractual responses regarding betterment and depreciation in other insurance contexts.

Full Indemnification and the Prohibition of “Betterment” Deductions in Third‑Party Auto Property Damage Claims Commentary on Ngoc Troung v. Marcus Dewayne Sanders & Old American Indemnity Co., Supreme Court of Louisiana (No. 2025‑C‑00169)