Donelon orders insurers to extend hurricane claims period in Louisiana

Just over a month after asking insurers in his state to voluntarily do so, Louisiana Commis-sioner of Insurance Jim Donleon issued Directive 199 mandating that all companies insuring property in Louisiana extend the period in which a policyholder can file a lawsuit as a result of a Hurricane Katrina or Rita claim from one to two years.

Most property and casualty policies in Louisiana limit an insured’s right to file suit up to a period of 12 months after the date of loss.

Directive 199 orders insurance companies to file a stipulation with the Department of Insu-rance by Aug. 1, 2006, stating that any insured with a property and casualty insurance policy in Louisiana shall have until Aug. 30, 2007, to file suit or a legal action with regard to any claim for property damages caused by Katrina, and until Sept. 25, 2007, for a Rita claim.

According to Donelon, Loui-siana appears to be the only state with a one-year statute of limitations on property damage lawsuits. He said of the other Gulf Coast states hit by Hurricanes Katrina and Rita, Alabama has a six-year prescriptive period, Florida’s is four years, Missis-sippi’s is three years and the period in Texas is two years.

Donelon says he believes it’s only fair that policyholders who are still not able to finalize or even initiate repairs to their hurricane-damaged property be given more time to work out their insurance settlements.

“Many people still don’t know the full extent of the damage caused to their insured property by either Hurricane Katrina or Hurricane Rita,” Donelon said. The commissioner added that many disputed claims are still in the process of being worked out through the department’s Hur-ricane Mediation Program and he doesn’t want to adversely impact the success of that program. The mediation program has an 80 percent success rate and has allowed the carriers to avoid paying an estimated $50 million in litigation defense costs.

On June 5, Donelon asked all Louisiana P/C insurers to voluntarily extend the prescriptive period to two years. The Louisiana Citizens Property Insurance Corporation Board of Directors had previously voted to extend the deadline to two years on all policies with a hurricane claim.

The Associated Press reported that Donelon recognized insurers are not likely to be happy about the extension order. Although they cannot be forced to honor the directive because it is not state law, according to the AP a variety of punishments are being considered for companies that refuse.

On July 11, the department received notice from four insurers who intend to voluntarily extend the deadline to two years: Fidelity Nation-al Insurance Co.; American Modern Insurance Group, including American Modern Home Insu-rance Co., American Family Home Insu-rance Co., American Western Home Insu-rance Co., American Southern Home Insurance Co. and G.U.I.C. Insurance Co.; Assurant Group, including American Security Insurance Co., American Bankers Insurance Co. of Florida, Standard Guaranty Insurance Co., American Reliable Insurance Co. and Voyager Property and Casualty Insurance Co.; and Balboa Insurance Group, which includes Meritplan Insurance Co.