La. auto insurance rates likely won’t drop this year despite tort reform promises

Critics say lobbyists designed new law to cater to corporate interests

By: - February 26, 2021 2:00 pm

In this file photo, drivers cross the Crescent City Connection that spans the Mississippi River in New Orleans. (File photo/LA Illuminator).

It’s unclear when or if auto insurance rates in Louisiana will ever decrease as predicted by business lobbyists and state Insurance Commissioner Jim Donelon last year when they presented lawmakers with sweeping tort reform legislation. That legislation gives insurance companies an edge against accident victims in lawsuits. 

The tort reform, presented in May as House Bill 57 by House Speaker Clay Schexnayder, was signed into law July 13 as the Civil Justice Reform Act of 2020. The legislation received backing from mostly Republicans, as well as the insurance industry and the state’s largest lobby group, the Louisiana Association of Business and Industry. It was opposed only by Democrats.

The act is designed to lower the amount of money insurance companies are paying to accident victims through Louisiana court judgments. Those savings, as argued by insurance lobbyists and the politicians who backed the legislation, will then trickle down to policyholders by way of reduced auto insurance rates. 

The changes will force jury trials more frequently so that lawyers have to argue damage claims to more people than a single judge; allow information about whether someone was wearing a seatbelt as evidence; limit the mentions of insurance coverage during a trial; and cap certain medical expenses for which damages can be awarded.

Many Democratic lawmakers said they opposed the bill because it did not include any kind of rate-reduction guarantee.

That issue was revisited Tuesday during a meeting of the legislative Task Force on Affordable Auto Insurance, where some lawmakers pressed Donelon and representatives of insurance companies on a timetable for lowering rates. The noncommittal responses were far different than last year’s forecasts during the tort reform debate.

At a House Civil Law committee meeting on May 12, Rep. Mandie Landry, D-New Orleans, asked Donelon if he would support repealing the tort reform law if insurance rates fail to decrease within two to three years. Donelon said he would support a repeal if rates fail to decrease initially. 

I’ll be telling you, Erin, if we get past this and a year from now, the rates aren’t down, I’ll be grabbing a tiki torch right with you, going to the capital saying, ‘This didn’t work.’

– Stephen Waguespack, Louisiana Association of Business & Industry

A PROMISE MADE 

“If they haven’t gone down initially, yes,” Donelon said. “But by then, I don’t know what the future holds. We might have another pandemic or we might have floods like we had in 2016 in Baton Rouge or Lafayette that caused the loss ratio for auto insurance to spike dramatically in 2016 as a result.”

With talk spreading about legislation that would lower auto insurance rates, HB 57 began attracting attention at that time. Business lobbyists were telling legislators and their constituents that the tort reform bill could lower rates by 10 or even 25 percent.

“I’m just telling you it’s going to lower rates,” LABI President Stephen Waguespack said in a June 17 interview with News Radio KEEL’s Erin McCarty. “We’re hearing from actuaries at least 10 percent. The commissioner said it might even be as much as 25 percent” … “I’ll be telling you, Erin, if we get past this and a year from now, the rates aren’t down, I’ll be grabbing a tiki torch right with you, going to the capital saying, ‘This didn’t work.’” 

However, with tort reform now firmly in place, lower auto insurance rates seem to be less of a certainty this year or even next. At Tuesday’s legislative Task Force on Affordable Auto Insurance meeting, Donelon told legislators that it could take years before rates begin to come down. He said something similar to the Illuminator, adding that rate drops could come as early as 2022 but more likely 2023.

“No one promised a specific rate decrease,” Donelon said in a phone interview Wednesday. “I certainly didn’t.”

The commissioner said the act went into effect on Jan. 1 and that it will take time for new cases and settlements to make their way through the court system before the insurance companies begin to realize the savings. 

“Tort reform could have an effect as early as a year from now, but more likely it will show up in the following year when the actual judgments show up,” Donelon said.

Waguespack, who had promised to go to the state capitol with a tiki torch if rates don’t drop, agreed with Donelon. He pointed out that the courts still have a moratorium on jury trials and once lifted, will have to work through a backlog of cases.

“While the judiciary’s pandemic response was appropriate, we remain highly confident that once fully implemented this legislation will bring much needed transparency to our court system, competition to our insurance markets and lower rates for our drivers,” Waguespack said in an email Friday. “In fact, despite the delayed start to implementation, our members tell us they’re already receiving calls from insurance brokers and companies reaching out for data to take a fresh look at writing insurance coverage in Louisiana. This is a great sign of good things to come.”

Critics of the tort reform act believe that Donelon and the business lobby are intentionally walking back what was promised last year when they were pushing to get the bill passed.

“It’s clear that there’s nothing planned,” said Eric Holl, executive director of Real Reform Louisiana, an advocacy group that opposed last year’s legislation. “There’s nothing. There’s no rate cuts coming.”

A STRATEGY TO EXCITE ‘JOE SIX-PACK’

Holl, who was the communications director for Gov. John Bel Edwards’ 2019 reelection campaign, said the tort reform legislation was part of a long game played by the business lobby to benefit corporate interests. He pointed to comments made by lobbyist Jeff Albright of the Independent Insurance Agents Association during a Zoom meeting in August for the legislative leadership economic task force. 

After years of failing to get tort reform passed, the insurance industry changed its strategy by tying tort reform to lower auto insurance rates in an effort to, Albright said, “excite ‘Joe Six-Pack’” into supporting the legislation. 

“Tort reform is an important part of improving the business environment. We all get that,” Albright said at the August meeting. “But it’s not really an issue that’s going to excite ‘Joe Six-Pack’ to call their legislator and press for tort reform. And so the change in strategy was we kind of tied tort reform to automobile insurance this time because we have the second highest auto rates in the country. Frankly I think we’re going to be number one next year.”

Pointing to Albright’s comments, Holl said the tort reform act was designed by lobbyists to “pad the profits of big corporations at the expense of working Louisianans.” Donelon and the legislators that pushed it will continue to “move the goalpost” to three or four years from now so that people will forget, he said.  

In a phone interview Friday, Albright called Holl’s theory “absolutely false” and said the business industry as a whole — not the insurance industry —  was the primary mover of tort reform. Businesses in Louisiana have few options for commercial auto insurance. For instance, Albright said, there are currently no companies willing to write policies for commercial log trucks.

“Insurance is very, very competitive,” Albright said. “If the cost of claims goes down, insurance companies are going to reduce their premiums because they want to write more business. The notion that it would make insurance companies suddenly more wealthy is false. The insurance commissioner regulates rates and is not going to let insurance companies make obscene profits.” 

Donelon, as an elected insurance commissioner, ran a campaign that was largely funded by the insurance industry. A review of his 2020 campaign finance reports by the Illuminator shows he received nearly $150,000 from various insurance companies, brokers, underwriters and agents — out of about $190,000 in total contributions last year. Additionally, Donelon received $680,000 from the insurance industry from 2015 to 2019, according to a review of campaign finance reports by Real Reform Louisiana.

Holl would not disclose Real Reform Louisiana’s funding sources or contributors.

During Tuesday’s meeting of the legislative Task Force on Affordable Auto Insurance, Sen. Katrina Jackson, D-Monroe, asked representatives from Geico and Go Auto insurance companies when Louisianans would see rate reductions. In response, they said they supported tort reform but knew of no current plans to reduce rates. 

“We have seen already that some are willing to make big promises of rate reductions if we pass certain legal changes, only for those promised reductions to be delayed indefinitely,” Jackson said in a press release Thursday. “If we do not ask simple questions about what the State of Louisiana and the insurance companies that operate here are doing to address costs and increase competition, we will never see lower insurance rates.”

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Wesley Muller
Wesley Muller

Wes Muller traces his journalism roots back to 1997 when, at age 13, he built and launched a hyper-local news website for his New Orleans neighborhood. In the following 22 years since then, he has worked as a journalist for the Times-Picayune in New Orleans, the Sun Herald in Biloxi, WAFB-9News CBS in Baton Rouge, and the Enterprise-Journal in McComb, Mississippi. Much of his work has involved reporting on First Amendment issues and watchdog coverage of municipal and state government. He has received several honors and recognitions, including McClatchy's National President's Award, the Associated Press Freedom of Information Award, and the Daniel M. Phillips Freedom of Information Award from the Mississippi Press Association, among others. Muller is a New Orleans native, a Jesuit High School alumnus, a University of New Orleans alumnus, a veteran U.S. Army paratrooper, and an adjunct English teacher at Baton Rouge Community College. He lives in Ponchatoula, Louisiana, with his teenage son and his wife, who is also a journalist.

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