Hurricane Katrina turned Aug. 29 into a red-letter date in New Orleans history, but storm victims should circle Aug. 28 on their calendars.  In Louisiana, August 28th is the deadline for filing suit against your insurance company for damage caused by Hurricane Katrina, and the state is bracing for an onslaught of last minute lawsuits being filed prior to the impending deadline. Louisiana has a one year prescription period (aka "statute of limitations"). The effect of the law would have been to force thousands of insurance disputes into litigation prematurely and much hardship on already burdened insureds.


Given the enormity of Katrina claims outstanding and in dispute, the Louisiana Legislature added a year to what was the one-year prescription on insurance claims, specifically for claims arising from Hurricanes Katrina and Rita. The Louisiana Supreme Court held that this change in the law was constitutional. From a lawyers pecuniary perspective, a short limitation period of a year or two is great for business. It forces parties to litigate to resolution rather than have the matter resolved through negotiation or other means. From the insurer’s view, people that procrastinate or are not aware of the implication of not filing can simply lose any right to claim benefit in the future.

A short limitation period can reduce claims from the failure of policyholders to retain attorneys and file suit. In Florida, the Citizens Task Force has questioned why and how people re-open claims long after disasters. They have also suggested that the Florida Legislature should shorten the five year statute of limitations to one or two years to solve "the problem" of re-opened claims and late opened claims. I would suggest that this thinking is very anti-consumer and the result of legislators who are more concerned with running their insurance business rather the representation of Floridians.

The truth is that large disasters take months, sometimes years, to determine the final repair costs. In parts of Mississippi, construction still has not been allowed because of new building codes or because people are just now getting their money. Until repairs begin it is nearly impossible to figure out if the insurance estimates missed something or were just wrong. It is quite common for supplemental claims to arise several years after a storm. Next week will be interesting at the courthouses in Louisiana. Given the number of outstanding insurance controversies, the lines could be longer than the mail lines at the post office on April 15th.