Bills to expand lawsuit options against insurers who are slow to pay claims and to change the way insurance companies get rate hikes were rejected by the Louisiana House Insurance Committee.
Both faced staunch organized opposition from business and insurance groups.
Supporters said the measures – already approved by the Senate – would give an edge to consumers who are struggling to get legitimate claims paid or to get affordable insurance coverage after the hurricanes.
Opponents, including an organization of 25 business groups calling itself the Coalition to Insure Louisiana, said the bills were a knee-jerk reaction to the hurricanes that would chase insurance companies out of Louisiana.
The debates centered mainly on lawmakers weighing what they could do to help homeowners trying to rebuild with worries they could worsen a fragile insurance situation where companies are refusing to write new policies.
One of the rejected bills, SB 707 by Sen. Ed Murray, would broaden the number and type of lawsuits that could be filed against an insurer for failing to operate in “good faith” on insurance claims and would let a judge or jury determine what is a breach of the company’s duties, rather than defining it in law.
The measure would help protect consumers and give policyholders and the state the ability to “slap an insurance company that operates in bad faith,” said Rep. Cedric Richmond, D-New Orleans.
Opponents said Murray’s bill would increase lawsuits, boost the cost of insurance to cover the added price of litigation and decrease the availability of insurance in Louisiana. They said current law already allows for lawsuits and significant penalties when insurance companies don’t follow the contracts they have with policyholders.
“It’s not going to encourage companies to do business here when we desperately need them,” said Jeff Albright, with the Independent Insurance Agents of Louisiana.
But in a committee room packed with lobbyists and regular citizens seeking some help to get their insurance money, the chairwoman of the committee, Rep. Karen Carter, said lawmakers couldn’t ignore the insurance problems that have erupted since hurricanes Katrina and Rita.
“At some point we’re going to have to answer to our constituents: ‘What did you do?”’ said Carter, D-New Orleans.
Even after several provisions were stripped, the committee voted 10-8 against Murray’s bill, stalling it in committee unless he can rally lawmakers to change their votes.
The insurance committee, however, voted for Murray’s bill, SB 620, that would stiffen penalties against insurance companies that refuse to make timely payments on property claims if the refusal to pay the claim is “found to be arbitrary, capricious or without probable cause.”
“From a lot of my constituents, I’m just hearing that they’re not hearing from their agents and adjusters at all, and it’s just really frustrating as they’re trying to put their lives back together,” Murray said.
Under current law, the insurer faces a penalty of 25 percent of the damages owed or $1,000, whichever is greater. Murray’s bill would change the penalty to 50 percent and would require the insurance company to pay the policyholder’s attorney fees.
The measure, already approved by the Senate, goes next to the House for debate. The insurance industry opposed the bill.
In a 12-4 vote, the committee also rejected SB 693 by Sen. Robert Adley, D-Benton, that would require all insurance rate hikes in Louisiana to get approval first from the state’s Insurance Rating Commission before being enacted.
The bill would reverse a law pushed by the insurance industry and passed three years ago that allows insurance companies to raise rates by up to 10 percent a year without first getting approval by the rating commission. Financial experts in the Department of Insurance can block the rate changes if they decide they are not justified.
Adley said rates should be raised only after the facts used to justify those increases are aired publicly and approved by the rating commission, whose members are appointed by the governor.
“What’s wrong with just putting out on the table what we’re doing and why we’re making those decisions?” Adley said.
Rep. Ronnie Johns, R-Sulphur, said it would dissuade insurance companies from staying in Louisiana because it would put a politically appointed commission in charge of all rate hikes. He said the change three years ago attracted new insurers to the state.
Senate Bills 693, 707 and 620 can be found at www.legis.state.la.us.
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