Louisiana Insurance Commissioner Jim Donelon final week issued a cease-and-desist order towards a Houston-based legislation agency, accusing it of fraud involving doubtlessly tons of of hurricane-related claims in his state.
“The size and scope of McClenny, Moseley & Associates’ illegal insurance scheme is like nothing I’ve seen before,” Donelon mentioned in a press launch. “It’s rare for the department to issue regulatory actions against entities we don’t regulate, but in this case, the order is necessary to protect policyholders from the firm’s fraudulent insurance activity.”
According to Donelon, the legislation agency filed greater than 1,500 hurricane declare lawsuits in Louisiana over the span of three months final 12 months.
The Louisiana property insurance coverage market has been deteriorating because the state was hit by document hurricane exercise in 2020 and 2021, to the extent that 11 insurers that write householders protection in Louisiana had been declared bancrupt between July 2021 and September 2022. Insurers have paid out greater than $23 billion in insured losses from over 800,000 claims filed from the 2 years of heavy hurricane exercise. The largest property-loss occasions had been Hurricane Laura (2020) and Hurricane Ida (2021).
In addition to driving insurer insolvencies, the rising losses have brought on a dozen insurers to withdraw from the market and greater than 50 to cease writing new enterprise in hurricane-prone parishes.
Louisiana’s troubles parallel these of one other coastal state, Florida, however there are vital variations. Florida’s issues are largely rooted in many years of authorized system abuse and fraud, whereas Louisiana’s have had extra to do with insurers being undercapitalized and never having sufficient reinsurance protection to face up to the claims incurred throughout the record-setting hurricane seasons of 2020 and 2021. In common, Louisiana insurers haven’t skilled the extent of extreme litigation that Florida insurers have confronted.
“It now appears some trial attorneys are trying to take a page out of the Florida playbook by engaging in litigation abuse against Louisiana property insurers,” mentioned Triple-I Director of Corporate Communications Mark Friedlander. “We commend Commissioner Donelon for quickly addressing these fraudulent practices.”
According to reporting by the Times Picayune/New Orleans Advocate, an investigation by the Louisiana Department of Insurance discovered the Houston-based agency engaged in insurance coverage fraud and unfair commerce practices by means of Alabama-based Apex Roofing and Restoration and has confronted accusations of doubtlessly prison conduct in courts throughout the state. In one such case, the paper reported, a girl testified that she had by no means meant to retain the legislation agency when she employed the roofing firm to repair her hurricane-damaged roof.
“The firm told her insurance company that it represented her and even filed a lawsuit on her behalf, though she said she was unaware of it,” the paper mentioned.
Legal system abuse is a pervasive drawback that contributes to greater prices for insurers and policyholders nationwide, in addition to to rising prices usually, given the significance of insurance coverage in growth and commerce. Triple-I is dedicated to informing the dialogue round this crucial situation.
Learn More:
Hurricanes Drive Louisiana Insured Losses, Insurer Insolvencies
Florida Insurance Crisis Reforms Gain Momentum With Latest Proposal
Florida And Legal System Abuse Highlighted at JIF 2022
IRC Study: Public Perceives Impact of Litigation on Auto Insurance Claims
A Piecemeal Approach Toward Transparency in Litigation Finance