Will Reducing ‘Lawsuit Abuse’ Lower Insurance Rates?

NEW ORLEANS — Now that the crime special session is complete, the Louisiana Legislature will turn its attention to the state’s insurance crisis, among other priorities. When lawmakers convene in Baton Rouge on March 11, they hope to provide relief for citizens struggling with skyrocketing homeowners and flood insurance rates in addition to rising taxes and inflation overall.

That was the message from Michael Hecht, CEO of Greater New Orleans Inc., and Will Green, president of the Louisiana Association of Business and Industry, at the Jefferson Chamber Legislative Breakfast, which took place March 7 at the Hilton New Orleans Airport hotel.

The annual event is a chance for chamber members to rub shoulders with elected officials on the eve of the spring legislative session.

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Hecht and Green used their time onstage to discuss crime, energy, the ports, education and infrastructure — but solutions for the insurance crisis were top of mind. They expressed optimism about what can be achieved under the leadership of new state Insurance Commissioner Tim Temple and Kirk Talbot, the senate’s insurance chairman. And both believe changes to the state’s legal landscape could lower rates despite the state’s increasing exposure to extreme weather events.

“We went with Tim and Kirk to meet with Lloyd’s of London,” said Hecht. “They told us, ‘We’re not climate deniers, but we’re not afraid of hurricanes. We insure all throughout the Caribbean. What we are afraid of is political instability and legal abuse. If you take care of that in Louisiana, you’re gonna be much better off.’”

Hecht said a lot of the insurance legislation that’s going to come through this session will be designed to reduce what many believe is abuse of the state’s legal system. This includes what he described as unjustified lawsuits and abuse related to a rule that says insurance companies have to pay a claim within 30 after settling.

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“If you don’t pay in thirty days, then there’s a 50 percent penalty,” he said. “Well, if you have an attorney that’s getting 40 percent of the 50 percent, that can lead to some strange incentives and make you maybe get a flat tire on the way to that meeting on the twenty-ninth day.”

Hecht is bullish about the state’s investment in the Louisiana Fortify Homes Program, which grants up to $10,000 for homeowners to upgrade their roofs to standards set by the Insurance Institute for Business & Home Safety. The Louisiana Illuminator reported this week that Gov. Jeff Landry reduced funding for the program from $30 million in the current fiscal year to $5 million in his proposed state budget that could take effect July 1, but count Hecht among those who’d like to see the program stay at its original funding levels.

“This is a program that in Alabama has worked miracles,” he said. “The insurance companies love it. If you upgrade your roof to a Fortified standard, it can decrease your wind premium by close to 50 percent. So that’s something proactive that we can all do.”

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Green said Louisiana’s property insurance rates are double that of the median state in the country, “but we also can’t trick the public that there’s a silver bullet, and the rates are going to drop tomorrow.”

He said the insurance companies look at data from the last several years as they set their rates, so a drastic reduction in rates is unlikely consdering the roughly $10 billion in claims paid out after the 2020 hurricane season.

Green said what the legislature can do is pass laws that send a message to the insurance companies that the state is “back over open for business.” He cited recent legislative changes in Alabama, Mississippi and Florida as inspiration.

“They have the same amount of hurricanes and the same environment we do,” he said. “But they instituted transformational tort reform that encouraged insurance companies to write policies in the market. That competition reduces rates, and we’re going to do that in Louisiana.”

Hecht thinks bills from State Sen. Kirk Talbot that define what types of “bad faith” lawsuits would be allowed and change “proof of loss” requirements have a decent chance of becoming law.

“What’s going to be harder to get done is things that pit individuals or companies against the plaintiff attorneys,” he said. “That’s just always a difficult fight politically and so I think those are the ones where you’ll see less success.”

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