Louisiana Insurance Commissioner Jim Donelon supports legislation to be proposed that would limit the ability of homeowner's insurance policyholders to sue their coverage provider when they fail to pay claims adequately or in a timely fashion. (Courtesy of Louisiana Department of Insurance)
After pushing so-called tort reform legislation in 2020 that failed to reduce auto insurance rates, Louisiana Insurance Commissioner Jim Donelon is backing a similar proposal this year to benefit homeowner insurance companies.
During a town hall meeting Monday, Donelon said he would “absolutely” support a proposal that would make it harder and more expensive for property owners in Louisiana to file lawsuits against insurance companies that refuse to pay claims.
Donelon’s proposal is modeled after a bill approved in Florida in a December special session on insurance. Now in regular session, lawmakers in Florida have advanced a measure that would place similar restrictions on other forms of tort — wrongful acts where a person injured or impacted can seek remedy.
Real Reform Louisiana, a nonprofit that opposes laws that shield insurance companies from lawsuits, has criticized a legislative package the Louisiana Department of Insurance unveiled at a March 12 meeting with insurance industry executives.
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One of the slides in Donelon’s presentation summarized three provisions in the Florida legislation that would give insurance companies legal advantages over homeowners and small businesses.
The first would repeal the ability of courts to award attorney fees as a penalty when insurers fail to pay claims on time. This would force policyholders to pay their own legal expenses even if they win in court.
The second would introduce the requirement of an adverse adjudication, which means policyholders would have to first win a court judgment proving a breach of contract before seeking additional bad faith damages. This stipulation would essentially force policyholders to go to court twice, according to Real Reform Louisiana Executive Director Ben Riggs.
The third provision says that if an insurance company’s own appraiser recommends more in damages than the insurer awards, the policyholder must still go to court for the adverse adjudication.
As of Thursday, no such legislation had yet been pre-filed in Louisiana ahead of the 2023 regular session that opens in 17 days. Republican state lawmakers, in general, have supported legislation that benefits corporate interests and hold supermajorities in both chambers of the legislature.
In 2020, Donelon proposed similar legislation for the automobile owners. Business lobbyists repeatedly promised the proposal would lower auto insurance rates, arguing that Louisiana was an overly litigious state with laws that were too harsh on insurance companies.
Lawmakers believed that argument and approved the legislation. It became harder for car accident victims to sue insurance companies, but it did nothing to bring down policy premiums. Instead, auto insurance rates only got worse.
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Donelon’s latest proposal comes on the heels of a $45 million incentive package the legislature approved last month in a special session to get insurance companies to write more policies in the state.
The insurance department has approved grants totaling $41.8 million for eight insurance companies that will remove roughly 90,000 policies from Louisiana Citizens Property Insurance Corp., the state’s insurer of last resort.
Insurance department staff said Donelon is attending a conference this week and wasn’t available for comment.
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