Louisiana Special Session Adjourns After Resolving Insurance Differences

February 21, 2006

In the final hours of the special session of the Louisiana Legislature, lawmakers sent to Gov. Kathleen Blanco Senate Bill 7, which would
prohibit an insurer from using the floodwater mark without considering other evidence in determining whether a homeowners insurance loss should be covered and Senate Bill 14, which addresses the bonding authority of the Citizens Property Insurance Corporation.

The special session convened Feb. 6 to address hurricane recovery issues. For insurers, much attention was focused on SB 7, which as originally drafted, had the potential of forcing insurers to go back and re-open many closed claims and possibly adding billions of dollars to the total of insured losses. The bill presumed that insurers were being arbitrary or capricious if an insurer did not pay for damages caused by a non-covered peril. However, these provisions were removed from the bill prior to passage.

“Louisiana legislators reaffirmed their commitment to ensuring that the state’s insurance industry remains viable and poised to meet the demands of the upcoming hurricane season,” said Greg La Cost, assistant vice president and regional manager for the Property Casualty Insurers Association of America (PCI).

“Lawmakers have grappled with very difficult issues in the two special legislative sessions since hurricanes Katrina and Rita, and in the end they have taken steps to establish a statewide building code, expand the number of individuals who are allowed to conduct building inspections, and reassure investors that Citizen’s will not default on its bonds. Perhaps most importantly, they have resisted pressure to enact overly burdensome laws that would make it difficult for the
insurance industry to conduct business in the state.”

During the session, PCI expressed concerns about Senate Bill 14 because it authorized borrowing from the Louisiana Insurance Guaranty Association. This provision was removed from the bill in the House and was supported by PCI.

Other bills of note that passed during the session included Senate Bill 5, which adds licensed contactors to the list of certified third-parties that are authorized to conduct residential housing inspections. With the establishment of the new statewide building code and the amount of new construction occurring, the demand for inspectors will outpace the number of authorized individuals. This bill was designed to provide temporary assistance in getting houses inspected.

House Bill 17 also passed which would make changes to the length of time that a consumer has to submit proof of loss regarding a claim that resulted from a declared disaster. PCI was successful in working with members of the House to amend the bill.

Originally, the time frame for submitting proof was unlimited, but that was reduced to a 180-day period. That period will not begin until the adjuster contacts the insured, civil authorities have allowed access to the property, and the insurer has provided the insured with a reproduction of the proof of loss requirements.

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