Insurers Ordered to Pay Louisiana Policyholders’ Ida Evacuation Expenses

Louisiana’s top insurance regulator on Sept. 7 directed insurance companies pay policyholders’ Hurricane Ida evacuation expenses.

Directive 218, issued by Insurance Commissioner Jim Donelon, requires insurers to pay claims for loss of use for policyholders who evacuated or were prohibited from using their premises because of the storm.

The order follows a bulletin released by the Louisiana Department of Insurance encouraging insurers to voluntarily pay claims for prohibited use even if every Ida-impacted parish didn’t issue a formal mandatory evacuation order. In a press conference on Sept. 8, Donelon said Bulletin 2021-07 urging insurers to voluntarily accommodate policyholders was issued after Allstate requested one and indicated the company would comply. Donelon said USAA and other insurers stepped up as well.

Not all insurers are on board with the order to pay loss of use or additional living expenses, notably the state’s largest homeowners insurer, State Farm, which holds about 25% of the state’s homeowners market, Donelon said. He strengthened the LDI’s regulatory action over the loss of use issue after State Farm said it would not pay loss of use claims where no express civil authority order was in place.

“State Farm can’t ignore my order, no insurer can,” Donelon said during the press conference. “But they can challenge it in court. … We expect that it will be challenged.”

Donelon noted that while the language in insurance policies concerning orders from civil authorities, such as mandated evacuations, are not entirely the same, there are similarities and most policies restrict payment of short term additional living expenses to 14 days.

In advance of Ida, officials throughout the region issued guidance “that people needed to leave or stay in a safe place,” Donelon said in an annoucement released by LDI. “Insurers must treat the many diverse actions taken by public officials as an order to leave and pay people who have coverage for their expenses.”

The problem with Ida is that it developed so quickly, becoming a major storm within 72 hours. Because of the storm’s rapid development, many public authorities were wary of the types of traffic grid lock that had occurred before previous storms, Donelon said at the press conference. As a result, some localities ordered mandatory evacuations and some did not.

Donelon said he had heard from policyholders that many companies were denying loss of use claims.

The directive for insurers to provide the coverage applies to policies in the 25 parishes listed in Emergency Rule 47, a measure issued by LDI to protect policyholders from cancellations and non-renewals after Hurricane Ida.