Effort to extend time to sue insurance companies for bad faith sidelined by House panel

April 10--A Louisiana House committee narrowly defeated Monday legislation that opponents called the Texas Brine Bail Out Act.

State Rep. Walt Leger III, D-New Orleans, said his legislation intended to sort out a conflict in existing law that limits a person denied insurance coverage for a claim from filing a lawsuit to enforce the policy.

Some Louisiana courts find that a denied person must sue the insurer within 12 months of a bad faith denial. Other courts say the deadline is 10 years.

"It concerns me that we would slant our laws in favor of an insurer" over Louisiana citizens and businesses, Leger said. He wanted the time limit set in law at 10 years because insurance policies are essentially contracts and a company's failure to fulfill its promise to cover losses amounts to a breach of contract. And he wanted the law to apply to litigation already before the courts.

It was the retroactive aspect of House Bill 720 that raised the most questions at the House Committee on Civil Law Procedure. Reps. Tanner Magee, R-Houma, and Alan Seabaugh, R-Shreveport, echoed the concerns of insurance company lobbyists and lawyers that the measure, if approved, could be used in an ongoing lawsuit involving Texas Brine Company LLC, which is something legislators don't do.

The vote was five-to-five, which amounts to a rejection of the legislation.

After the hearing, Leger dismissed the arguments that the Louisiana Legislature doesn't change laws to impact ongoing lawsuits, noting that lawmakers approved laws to sideline claims that oil companies bore some responsibility for coastal erosion.

Ten pending "bad faith" insurance cases applied a one-year period; eight used the 10-year deadline, according to Michael Rubin, a Baton Rouge lawyer representing Indian Harbor Insurance Co. in lawsuit filed by Texas Brine, the petition for which has been sealed by the court.

Texas Brine was involved in the August 2012 Bayou Corne sinkhole in Assumption Parish, which caused 350 nearby residents to evacuate their homes. Texas Brine was held more than half responsible -- and paid out hundreds of millions -- for the breach that caused bayou waters and vegetation to flow into an underground cavern. Texas Brine has since filed a number of lawsuits.

A three-judge First Circuit Court of Appeal panel overturned a trial court judge's decision and found that Texas Brine should have filed allegations one year after its insurer, Indian Harbor Insurance, allegedly acted in bad faith in denying claims.

Bruce E. Martin, Texas Brine's vice president for operations, testified that "almost without exception" insurance companies' first reaction to any claim is to deny or issue a letter reserving the right to deny. "It routinely takes years for these cases to resolve. So, we have file lawsuits within a year to preserve our rights," Martin said.

Often residents and businesses usually don't know of the insurance company's actions within a year's time, said Fred Wolgel, Texas Brine's general counsel.

Baton Rouge lobbyist Chuck McMains, representing property and casualty insurance companies, said the issue does need to be worked out, but Leger's legislation would impose a standard that is not thought through and could impact the state's ability to attract companies willing to write policies in Louisiana. "We would be a complete outlier," he said.

Voting against HB720 (5): Chairman Raymond E. Garofalo,. R-Chalmette; Reps Raymond J. Crews, R-Bossier City; Gregory Cromer, R-Slidell; Julie Emerson, R-Carencro; and Alan Seabaugh, R-Shreveport

Voting for HB720 (5): Vice Chairman Randal L. Gaines, D-LaPlace; Reps Robby Carter, D-Greensburg; Sam Jenkins, D-Shreveport; Tanner Magee, R-Houma; and Gregory A Miller, R-Norco:

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