Republicans disagree on insurance, kill pro-industry bill in Louisiana Senate

Senate Bill 113 would have shielded Louisiana Citizens Property Insurance Corp. from so-called "bad faith" penalties — fees that insurer pays when policyholders accuse it of failing to fulfill contract terms. The bill aligned with Republicans' pro-industry approach to the state's insurance crisis, which stems from a series of devastating hurricanes that sent a number of small insurers belly up.

But the state Senate rejected the legislation Monday after lawmakers including Republicans clashed over whether a lighter hand on Citizens, which took on thousands of new policies after successive hurricanes in recent years, would make a dent in the crisis.

The outcome showed the delicate line some Republicans walk on insurance issues, as they seek to appease powerful insurance company lobbyists and cater to voters, many of whom are furious over soaring homeowners' premiums.

"You wouldn't hold your CEO accountable if all of a sudden the financials weren't good at Citizens?" Sen. Jay Morris, R-West Monroe, who voted against the bill, asked Talbot on the Senate floor. Morris argued the bill would disproportionately benefit Citizens' executives over policyholders because the company has an incentive to minimize payouts.

Talbot, who chairs the Senate Insurance Committee and sits on Citizens' board, argued that the bill would have lifted an unreasonable burden on Citizens that doesn't exist in other states. He argued that the company doesn't have the same incentive to pay lower claims as do privately-held firms.

"Bad-faith penalties are there for a reason. They're there to keep insurance companies honest... Those are good things for the policyholder," he said. "Citizens is a different entity."

Eight Republicans and 11 Democrats joined Morris in voting against the bill and it died, 20-18.

Its failure may end up being an anomaly. Other pro-industry bills have advanced in the state House and Senate recently, while pro-consumer legislation, much of it carried by Democrats, has faltered.

A package of bills that advanced last month are favorable to insurance companies, allowing them to drop policyholders, raise rates more easily and have more time to pay claims after a storm.

In one win for pro-consumer interests, the state could soon require loosely regulated affiliates of home insurers to report more information to the state, under a bill filed in response to a series published by the Times-Picayune | The Advocate that found 11 of the 12 insurers that failed used an affiliate model that has come under scrutiny by regulators.