Louisiana crafts tort reform, seeks to ward off Florida courtroom refugees

Florida's insurance and tort reforms may end up exporting the state's bad actor's to other southern jurisdictions, incentivising parallel reforms throughout the region.

“I expect those bad actors to target Louisiana homeowners next,” the state's insurance commissioner Jim Donelon told a briefing. “In fact, we're already seeing it.” The state was forced to issue its first ever cease-and-desist order against a law firm working in tandem with a contractor to flood the courts.

Louisiana, suffering like Florida from a dearth of insurance carriers, is now plotting reforms to litigation, new claims handling standards, limits on assignment of benefits and more to keep from repeating Florida’s record litigation rates.

Florida has been the example of what to not let your market become: an open invitation to unholy alliances between lawyers and contractors that flood courts with claims against insurers. To date, Louisiana had been the beneficiary of those conditions as Florida-heavy insurers evacuated that market, including towards Louisiana.

More recent Florida reforms appear likely to make that state "more attractive for insurers than for bad actors," Donelon said.

A series of pending bills will cap assignment of benefits, manage the appraisal process, set time frames by which insurers must respond to claims, set a two-year window for policyholder claims of penalties and attorney fees, protect policyholder rights to find second opinions and bolster roofing upgrade grants.

The state's insurer of last resort, Citizens, will also benefit from the legislative initiative by making the firm immune from bad faith penalties on the grounds that the not-for-profit is not incentivised to such actions in the first place.

Louisiana will not bargain away its core policyholder legal protection, a mandate that insurers not be able to walk away from any customer it held on the books for at least three years.

“Truly the companies have always hated it,” Donelon said, citing current lobbying attempts to find a workaround. “I think what they hate the most about it is the possibility of it spreading nationwide.”

That law backstop's Louisiana against the key weakness undermining the Florida market: the lack of major national players. Some 60% of homeowner policies written in Louisiana come from a group of 8 of the nation's 9 largest carriers. The same group writes only 25% of Florida, Donelon claimed.

“I recognise that this is an infringement upon the private sector ... but it is the most important statute on the books in Louisiana to protect the homeowners of our state from the whimsical writing and non-writing of coverage,” Donelon said.

To date, Louisiana has moved to stem problems with an incentive program for carriers. That recently approved program has seen eight applications approved for $42 million in grants that should result in some $250 million in new premiums, officials said.

Some 40,000 policies might be lifted from the hands of Louisiana Citizens in the first year of the programme and another 50,000 new policies written, Donelon said.

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