Insurers express relief as Louisiana special session adjourns

Insurance groups breathed a sigh of relief as the special session of the Louisiana Legislature ended Feb. 17 after resolving controversial provisions in two bills dealing with insurance issues. The session began Feb. 6.

According to the Property Casualty Insurers Association of America, Senate Bill 7 as originally drafted had the potential of forcing insurers to re-open many closed claims and possibly adding billions of dollars to the total of insured losses in the state.

The National Association of Mutual Insurance Companies said in its introduced version, SB 7 would have prevented an insurer from using the floodwater mark or the fact that a home was displaced from its foundation as “exclusive proof” to deny a claim. It also included heavy penalties for violations.

“Not allowing insurers to use the information available in settling claims is not in the best interest of all policyholders or the financial stability of insurers,” NAMIC State Affairs Manager Tami Stanton said in a news release. She added that the House removed the excessive penalties and changed the bill’s language to say that an insurer cannot use the floodwater mark or the displacement of the structure from its foundation “without considering other evidence, when determining whether a loss is covered.”

Another measure of concern was Senate Bill 14, which addressed the bonding authority of the Citizens Property Insurance Corporation. Both NAMIC and PCI had opposed a provision in SB 14–which was ultimately removed in conference committee–that would have allowed the Louisiana Insurance Guaranty Association to loan money to the Louisiana Citizens Property Corporation. Louisiana Citizens is the state’s insurer of last resort, created in 2004 by combining Louisiana’s FAIR Plan and the Coastal Plan.

“Loaning money is not the appropriate role for any state guaranty fund. It is particularly unwise in light of insolvencies that may occur as a result of Hurricanes Katrina and Rita,” explained Stanton.

Also passed was House Bill 17, which addresses the length of time a consumer has to submit proof of loss regarding a claim that resulted from a declared disaster. According to PCI, in the bill’s original version the time frame for submitting proof was unlimited. It ultimately was reduced to a 180-day period, which will not begin until the adjuster contacts the insured, civil authorities have allowed access to the property, and the insurer has provided the insured with a reproduction of the proof of loss requirements.

“Louisiana legislators reaffirmed their commitment to ensuring that the state’s insurance industry remains viable and poised to meet the demands of the upcoming hurricane season,” stated Greg La Cost, assistant vice president and regional manager for PCI. “Lawmakers have grappled with very difficult issues in the two special legislative sessions since hurricanes Katrina and Rita.”

The 2006 regular session of the Louisiana State Legislature convenes on March 27.