Continuing with the exploration of the definitions of “total loss” in different states, I turn this week to Louisiana. Unlike last week’s survey of limited Georgia case law on the issue, Louisiana has plenty. Given Louisiana’s propensity to be hit hard by major disasters, this is not surprising.
Louisiana’s standard for total loss is well settled with case law dating back to the 1960s. The standard originated in the automobile context before evolving into the property insurance realm. The well settled state of the law allows for a rather succinct review of the law as it has been artfully simplified by the courts. Ultimately,
The test for determining whether damaged property is a total loss is whether the cost of repairs exceeds the value of the property.1
While this standard is fairly common, what makes Louisiana interesting is its Valued Policy Law. Generally speaking, the Valued Policy Law requires that when a property is determined to be a total loss, the insurer must pay policy limits to the insured. However, Louisiana gives insurance companies the ability to avoid this requirement. Specifically,
The language of the statute clearly provides that if an insurer places a value on covered property and uses that valuation to determine the premium charged the insured, in the case of total loss the insurer shall compute and compensate any covered loss of the property at that valuation without deduction or offset unless a different method of loss computation is set forth in the policy and policy application in type of equal size. The legislative history shows an attempt by the insurance industry to lessen the impact of the statute by providing a means for the insurer to set forth a different method of loss computation, an attempt which was ultimately successful as the legislature included the provision in the statute. This compromise allows insurers to set forth an alternative method of loss computation, but protects insureds by requiring the insurers to provide notice in the application that an alternative method of loss computation has been stated in the policy.2
While this can be cause for concern for policyholders, take solace in the fact that the Supreme Court of Louisiana limited the above to only claims brought under fire insurance policies. Id. In fact, federal courts interpreting Louisiana law have refused to allow insurance companies to use these “different methods of loss computation” to their advantage for not related to fire.3
1 Dumond v. Mobile Insurance Co., 309 So.2d 776, 778 (La.App.1975).
2 Landry v. Louisiana Citizens Property Insurance Co., 983 So.2d 66 (La.2008).
3 Watson v. Allstate Ins. Co., No. 07-3462, 2009 WL 1704730 (E.D. La. June 17, 2009).