After post-Ida lawsuit spike, lawmakers seek big changes for home insurance claims [The Advocate, Baton Rouge, La.]

Mar. 13—After Hurricanes Laura and Ida, thousands of Louisiana homeowners filed lawsuits against their insurance companies, alleging the insurers were lowballing and delaying their claims as they struggled to rebuild.

The crop of lawsuits, many still winding through the state's court system, has become central to the debate over how to stem Louisiana's property insurance crisis. And as the legislative session begins, lawmakers are weighing bills that would limit how and when homeowners are allowed to sue their insurer.

Republican Insurance Commissioner Tim Temple is backing an ambitious pro-insurance industry agenda he argues will attract more companies to the state and eventually lower premiums. He has said he wants to "rebalance" the legal system by reducing the number of lawsuits filed against insurers.

Two lawmakers have filed bills, HB678 and SB323, that would make sweeping changes to laws surrounding how claims are handled by setting new deadlines for when insurers must pay claims, providing new definitions for key terms in the claims process and changing some rules for how and when policyholders can file lawsuits.

The effort would deliver on a longstanding gripe of insurers who say lawsuits drive up their costs and make Louisiana a bad place to do business.

But the lawyers who represent homeowners, along with consumer advocates, say cracking down on homeowners' ability to file suit wouldn't help bring down premiums. Instead, they argue it would simply leave people without recourse the next time a major storm wreaks havoc on south Louisiana if their insurance company denies their claim.

Close observers of the debate say the greatest room for compromise is on the claims process that occurs before a lawsuit is filed. The idea is to push more homeowners to resolve disputes with insurers before filing suit, by clarifying timelines and proof of loss and giving both sides more time before going to court. And a rarely-used law dealing with bad faith by insurers could be stripped from the books.

Litigation is only one part of the debate over insurance, though it will perhaps be the most hotly contested. Temple is also pushing measures to make it easier for insurers to raise rates and drop policyholders, among other things. And lawmakers will decide whether to allocate $15 million or more to a fortified roof program aimed at delivering direct savings to homeowners.

Gov. Jeff Landry, a Republican, said in a state of the state speech Monday that he agrees with Temple's approach to loosening regulations on insurers. But he also made a key distinction in his comments about lawsuits, saying the spike in lawsuits against insurers was caused by "the delay in getting claims fairly and thoroughly processed," cutting against insurers' argument that frivolous litigation is to blame.

Spike in suits

In Louisiana, the rate of lawsuits filed in relation to claims that were closed without payment surged from around 1% of those claims to around 20% after devastating hurricanes in 2020 and 2021, according to data from the National Association of Insurance Commissioners, making the state one of the most litigious in the nation for those years. But the data also indicates Louisiana homeowners filed fewer lawsuits than other states from 2014 to 2020, years without major hurricanes.

In all, from 2014 to 2022, Louisiana's rate of litigation in claims closed without payment was 3.55%. While that was the second-highest among states, it was well below Florida's rate of 21%.

Temple said the NAIC data show Louisiana is at a "significant disadvantage" when it comes to attracting new insurers because of the rash of litigation after hurricanes.

"If we don't reform our legal and regulatory environment in Louisiana so that it is at least similar to those in Texas, Mississippi and the other coastal states we are competing with, our insurance problem won't stay the same—it will get worse," Temple said in a statement this week.

Dicey proposition

Proposing any changes to insurance regulation has long been a dicey political proposition in Louisiana, where residents of the storm-prone coast often have a troubled relationship with home insurers and plaintiffs attorneys hold sway at the Capitol.

Policyholders reported widespread lowball payments and delays by insurers following recent hurricanes, which prompted then-Commissioner Jim Donelon to levy several fines against insurers. The influx of complaints lent credence to the idea that lawsuits had merit.

"These aren't frivolous lawsuits," said Jared Dunahoe, a Natchitoches trial attorney who has represented hurricane victims. "They're settling 99% of them. The ones they aren't, they're getting beat by a jury."

Ben Riggs, head of Real Reform Louisiana, which has lobbied against so-called "tort reform" bills, said the NAIC data suggests the bulk of the lawsuits weren't frivolous, like some claim.

The spike in lawsuits didn't start until a year after Laura, suggesting people filed suit not as a first step but a last resort after spending months trying to get paid by their insurer, Riggs said.

"Insurance lobbyists like to blame storm victims as an excuse to strip away their legal rights," Riggs said.

Ben Albright, head of the Independent Insurance Agents & Brokers of Louisiana, argued litigation is a "significant factor" in Louisiana's high premiums, and that Louisiana needs to make its laws more like other states.

"The most important part of the fair claims handling legislation this year is clarifying the process," Albright said. "Policyholders must be able to push for claims resolution without involving an expensive attorney, and insurers need bright lines to show their responsibilities under the law."

Bills on deck

While a host of bills have been filed related to the state's insurance market, SB 323 by Sen. Kirk Talbot, R-River Ridge, and HB678 by Rep. Gabe Firment, R-Pollock, will likely receive the most interest.

The bill filed by Firment, an insurance consultant who was a member of Temple's transition team, seeks to mirror Texas' claims handling laws and would set new timelines for the claims handling process. It would also make sweeping changes to how attorneys fees are calculated in lawsuits, require policyholders to give insurers notice before suing and make other changes.

In a statement, Firment called his bill consumer friendly and said it would make the claims process more streamlined and easy to understand, driving down the rate of litigation.

He said adopting the bill would send a "clear message to the market that Louisiana is serious about reforming its claims environment" and would lead to more companies coming to the state

Both Firment's and Talbot's bill try to make more clear what a "satisfactory proof of loss" means, a key legal term that starts the clock on payment deadlines.

Talbot said insurers and policyholders can manipulate the timelines under the current system. His bill would give insurers another month to pay claims after a hurricane and require a 60-day "cure period" for policyholders to work out differences with the insurer before suing. Talbot is also carrying legislation to exempt Citizens, the state-backed insurer of last resort, from bad faith penalties.

Still, even if both bills are passed, legislators acknowledged that immediate relief in terms of lower premiums isn't likely. Talbot said that it would be "foolish" to say the bills introduced would lower rates in the near term, given inflation, but said they may start to bring competition.

"The only guarantee that will definitely lower rates is fortified roofs," Talbot said, referring to the state's grant program that gives people $10,000 grants to put stronger roofs on their home. The program has received widespread praise for addressing the underlying problem in Louisiana's market, which is its coastal and climate risk.

"I can tell you if we do nothing, rates will continue to spike," he added.

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