I was speaking with an attorney from Jefferson Parish in Louisiana about Hurricane Laura claims. He told me that the word that best fit insurance company payments for that storm is “putrid.” If that is the case, insurance companies that wrongfully delay payment of claims in Louisiana for greater than thirty days can be subject to an automatic penalty.
A recent court ruling in Lamar Advertising v Zurich1 stated the following:
Zurich’s failure to provide an explanation as to why it did not pay within the thirty-day period is the definition of the ‘unjustified without reasonable or probable cause or excuse’ behavior the Louisiana Supreme Court held was a per se violation of Louisiana Revised Statutes 22:1892…. Kief Hardware, Inc. v. Hartford Fire Ins. Co., No. CV 16-15762, 2018 WL 2289902, at (E.D. La. May 18, 2018). (‘In the absence of reasonable and legitimate questions as to the extent of the insurer’s liability, an insurer who fails to pay the undisputed amount has acted in a manner that is, by definition, arbitrary, capricious, or without probable cause, and will be subject to penalties under the statute.’). Therefore, Zurich will be subject to penalties under the statute for its failure to pay the undisputed amount within the thirty-day period.”
Undisputed amounts owed must be paid within thirty days. The Lamar court quoted other Louisiana precedent on this issue:
While an insurer need not tender payment for amounts that are reasonably in dispute, this court has explicitly found that there can be no good reason—or no probable cause —for withholding an undisputed amount. Where there is a substantial, reasonable and legitimate dispute as to the extent or amount of the loss, the insurer can avoid the imposition of penalties only by unconditionally tendering the undisputed portion of the claim … Where the exact extent of the damages is unclear, an insurer must tender the reasonable amount which is due. We have defined the amount that is due as a figure over which reasonable minds could not differ.
In sum, an insurer need not pay a disputed amount in a claim for which there are substantial, reasonable and legitimate questions as to the extent of the insurer’s liability or of the insured’s loss. However, an insurer must pay any undisputed amount over which reasonable minds could not differ. Any insurer who fails to pay said undisputed amount has acted in a manner that is, by definition, arbitrary, capricious or without probable cause and will be subject to penalties therefore on the difference between the amount paid or tendered and the amount found to be due.
Insurance companies adjusting Hurricane Ida claims cannot delay investigation, damage valuation, and prompt payment without subjecting themselves to statutory penalties. Insurers must pay undisputed amounts promptly or suffer the consequences.
Thought For The Day
A far greater factor than abolishing poverty is the deterrent effect of swift and certain consequences: swift arrest, prompt trial, certain penalty and – at some point – finality of judgment.
—Warren E. Burger
1 Lamar Advertising v. Zurich American Ins. Co., 473 F.Supp.3d 632 (M.D. La. 2020).