La. Commissioner Orders Insurers to Extend Hurricane Prescription Period

July 11, 2006

Just over a month after he asked insurance companies in his state to voluntarily do so, Louisiana Commissioner of Insurance Jim Donleon issued Directive 199 mandating that all companies insuring property in Louisiana extend the period in which a policyholder can file a lawsuit as a result of a Hurricane Katrina or Rita claim from one to two years.

Most property and casualty policies in Louisiana limit an insured’s right to file suit to a period of 12 months after the date of loss.

Directive 199 orders insurance companies to file a stipulation with the Department of Insurance by Aug. 1, 2006, stating that any insured with a property and casualty insurance policy in Louisiana shall have until Aug. 30, 2007, to file suit or a legal action with regard to any claim for property damages caused by Hurricane Katrina and until Sept. 25, 2007, for a Hurricane Rita claim.

According to Donelon, Louisiana appears to be the only state in the country with a one-year statute of limitations on property damage lawsuits. Commissioner Donelon also pointed out that of the Gulf Coast states hit by Hurricanes Katrina and Rita, Alabama has a six-year prescriptive period, Florida’s is four years, Mississippi’s is three years and the period in Texas is two years.

Commissioner Donelon says he believes it’s only fair that policyholders who are still not able to finalize or even initiate repairs to their hurricane-damaged property be given more time to work out their insurance settlements.

“Many people still don’t know the full extent of the damage caused to their insured property by either Hurricane Katrina or Hurricane Rita,” Donelon said. The commissioner added that many disputed claims are still in the process of being worked out through the department’s mandatory Hurricane Mediation Program and he doesn’t want to adversely impact the success of that program. The mediation program has an 80 percent success rate and has allowed the insurance companies to avoid paying an estimated $50 million in litigation defense costs.

On June 5, Commissioner Donelon asked all Louisiana property and casualty insurers to voluntarily extend the prescriptive period to two years. The Louisiana Citizens Property Insurance Corporation (Citizens) Board of Directors had previously voted to extend the deadline to two years on all policies with a hurricane claim.

On July 11, the department received official notice from four insurers who intend to voluntarily extend the lawsuit deadline to two years.

Those companies are:

(1) Fidelity National Insurance Company;
(2) American Modern Insurance Group, which includes American Modern Home Insurance Company, American Family Home Insurance Company, American Western Home Insurance Company, American Southern Home Insurance Company and G.U.I.C. Insurance Company;
(3) Assurant Group, which includes American Security Insurance Company, American Bankers Insurance Company of Florida, Standard Guaranty Insurance Company, American Reliable Insurance Company and Voyager Property and Casualty Insurance Company; and
(4) Balboa Insurance Group, which includes Meritplan Insurance Company.

Source: Louisiana Department of Insurance

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