La. Bill Would Bar Automatic Denial of Claims Because of Water Marks

February 9, 2006

Insurance companies shouldn’t be able to point to floodwater marks or homes shifted from their foundations as the only reason for denying claims, a Louisiana Senate committee has decided.

The bill by Sen. Julie Quinn is another piece of a continuing wind-versus-water-damage debate between insurance companies and policyholders after Hurricanes Katrina and Rita.

Quinn, R-Metairie, said she’s received many calls from homeowners whose insurance claims were being denied by insurance companies because water marks and homes moved off their foundations are deemed damaged by storm surge.

Insurance companies say they shouldn’t have to pay for water damage for homeowners who did not have flood policies, but many homeowners say the water was driven by hurricane winds and should be covered under their traditional homeowners’ insurance. The determination, which is the subject of several lawsuits along the Gulf Coast, will affect thousands of hurricane victims.

Quinn said insurance companies must cover some of those costs and shouldn’t be able to make assumptions they don’t owe homeowners anything based solely on a watermark or home movement.

“I think we all know that a hurricane is wind and storm surge,” Quinn said.

Any insurer violating Quinn’s bill would be required to pay attorney fees and court costs and a penalty to the homeowner equal to three times the damages covered by the insurance policy.

Insurance company officials said they had technical problems with the bill and noted there were mediation programs and courts to hash out these coverage disputes. Chuck McMains, a lobbyist for the Property and Casualty Insurance Association, said he was hopeful the insurance industry could work with Quinn to resolve differences in the bill.

The Senate Insurance Committee approved the bill 4-1, though lawmakers said they wanted some of the provisions tweaked. The legislation moves next to the full Senate for debate.

The House and Senate insurance committees also approved bills to help shore up a state-created insurance company that provides homeowners insurance to those who can’t get it on the open market. The legislation would bar the Louisiana Citizens Property Insurance Corp. from dissolving until its outstanding debts have been paid or covered in some way.

Rep. Karen Carter, D-New Orleans, chairwoman of the House Insurance Committee, said her bill was designed to assure investors that the LCPI wouldn’t default on bonds issued to cover claims after the hurricanes.

The corporation has received approval to borrow up to $1.4 billion by issuing bonds to pay for insured home damage, though corporation officials said they intend to borrow less than that, about $850 million.

The bonds will be paid off gradually by assessing private insurance companies a regular fee that they can pass onto all their Louisiana customers – by increasing premiums by as much as 20 percent each year until the debt is paid, which could take up to 25 years.

Carter’s bill moves to the House floor for debate.

A similar Senate bill, by Senate Insurance Committee Chairman James David Cain, R-Dry Creek, was approved prohibiting the dissolution of LCPI and goes next to the full Senate.

But that measure includes a provision that would give the state-run insurance corporation the ability to borrow money from the Louisiana Insurance Guaranty Association, which can loan money to other insurance companies. Cain said the guaranty association had a $200 million reserve that could be tapped into with fewer administrative fees than a traditional bond sale.

The bills are filed as Senate Bills 7 and 14 and House Bills 2 and 45. They can be found at

Was this article valuable?

Here are more articles you may enjoy.