The Louisiana Department of Insurance is working overtime as two years of strong hurricanes take a toll on insurance companies making ends meet and insurance adjusters meeting claims regulations. Last week, the Louisiana Department of Insurance filed suit to take over two regional insurance companies. This followed an October 27th Bulletin reminding everyone of rules applicable following hurricane losses.

The Bulletin listed a number of notable reminders about property claims adjustment in Louisiana:

1. Policyholder Bill of Rights – La. R.S. 22:41 sets forth the standards that insurers must adhere to in the treatment of their policyholders. Insurers are instructed to review this statute and ensure compliance with all applicable provisions.

2. Insurersshallprovidetheadjusterreporttothepolicyholder-Pursuantto La. R. S. 22:41 (14), relative to first party property damage claims, policyholders shall have the right to request and receive from the insurer any estimates, bids, plans, measurements, drawings, engineer reports, contractor reports, statements or documents that are not legally privileged that the insurer prepared, had prepared, or used during its adjustment of the policyholder’s claim.

3. Initiating the claims process – La. R.S. 22:1892(A)(3) provides that in the case of a catastrophic loss event, the insurer must initiate loss adjustment of a property damage claim within 30 days after notification of loss by the policyholder. Pursuant to§ 4743 of ER 47, due to the severity of the devastation caused by Hurricane Ida, insurers had an additional 30 days to initiate loss adjustment of a property claim after notification of loss by the policyholder. Therefore, insurers had a total of 60 days to initiate loss adjustment of a property damage claim after notification of loss by the policyholder.

4. Communication with policyholders– Insurers should communicate promptly with their policyholders during the entire claim adjustment process, continuing through the initial claim payment and any supplemental claims processing. In fact, insurers are obligated to respond to all inquiries or requests from the insured within 14 days of the inquiry or request pursuant to La. R.S. 22:1896. Insurers should also communicate promptly with appointed producers who are assisting the policyholders in the claim process.

5. Proof of loss process – Insurers are reminded that they must attempt, in good faith, to effectuate prompt, fair, and equitable settlement of claims and that they owe their policyholders a duty of good faith and fair dealing in accordance with La. R.S. 22:1964(14)(f) and La. R.S. 22:1973(A) and as further discussed in Bulletin 2021-02 and Bulletin 2021-03.

9. Insurers must pay undisputed claims within 30 days – Pursuant to La. RS. 22:41(13), the insurer shall pay to the policyholder the amount of any undisputed claim within 30 days after satisfactory proof of loss. Any undisputed portion of a claim not paid within 30 days of submission of satisfactory proof of loss by the insurer may be deemed in violation of La. RS. 22:1892 and La. RS. 22:1973.

Unfortunately, two Louisiana regional insurance companies did not financially survive these storms. The Louisiana Insurance Guarantee Association will eventually pay those claims, but claims are capped at $500,000 per occurrence with a $100 deductible. The Insurance Journal quoted the Louisiana Insurance Commissioner:

‘We are taking action to protect policyholders,’ Donelon said. ‘Historic back-to- back storm seasons coupled with the average cost of claims coming in higher than expected because of the pandemic got us to where we are today. The good news is that LIGA can pay up to $500,000 per claim and is ready to handle the influx of claims. We have been actively monitoring market conditions and were prepared to do what needs to be done.’

Historically, major catastrophes usually involving fire in urban areas bankrupt many fire insurance companies. As a result, states regulated insurance companies to help ensure that those fire insurance companies were financially and actuarially sound and would not leave citizens without a financial safety net. Today, large regional catastrophes of wind and wildfire are causing similar financial pressures on insurers and keeping departments of insurance busy overseeing this important industry.

Thought For The Day

What the insurance companies have done is to reverse the business so that the public at large insures the insurance companies.
—Gerry Spence