As Florida strives to handle the problems that led to its present property/casualty insurance coverage disaster, one other hurricane-prone coastal state, Louisiana, is navigating its personal insurance coverage troubles.
The Louisiana property insurance coverage market has been deteriorating for the reason that state was hit by a document stage of hurricane exercise throughout the 2020/2021 seasons, Triple-I says in a brand new Issues Brief on the state’s insurance coverage disaster. Twelve insurers that write owners protection in Louisiana had been declared bancrupt between July 2021 and February 2023.
“While similarities exist between the situations in these two hurricane-prone states, the underlying causes of their insurance woes are different in important ways,” stated Mark Friedlander, Triple-I’s director of company communications. “Florida’s problems are largely rooted in decades of litigation abuse and fraud, whereas Louisiana’s troubles have had more to do with insurers being undercapitalized and not having enough reinsurance to withstand the claims incurred during the record-setting hurricane seasons of 2020 and 2021.”
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). The rising quantity of losses additionally drove a dozen insurers to voluntarily withdraw from the market and greater than 50 to cease writing new enterprise in hurricane-prone parishes.
This is to not say authorized system abuse is absent as an element within the Louisiana’s disaster – fairly the alternative, as highlighted by Insurance Commissioner Jim Donelon’s cease-and-desist order, issued in February, towards a Houston-based regulation agency. According to Donelon, the agency filed greater than 1,500 hurricane declare lawsuits in Louisiana over the span of three months final yr.
“The size and scope of McClenny, Moseley & Associates’ illegal insurance scheme is like nothing I’ve seen before,” Donelon stated. “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.”
McClenny Moseley has since been suspended from follow in Louisiana’s Western District federal courtroom over its work on Hurricane Laura insurance coverage instances.
A daily on the American Tort Reform Foundation’s “Judicial Hellholes” record, Louisiana’s “onerous bad faith laws contribute significantly to inflated claims payments and awards,” in response to a joint paper printed by the American Property Casualty Insurance Association (APCIA), the Reinsurance Association of America (RAA), and the Association of Bermuda Insurers and Reinsurers (ABIR).
“Insurers who fail to pay claims or make a written offer to settle within 30 days of proof of loss may face penalties of up to 50 percent of the amount due, even for purely technical violations,” the paper notes. “To avoid incurring these massive penalties, which are meted out pursuant to highly subjective standards of conduct, insurers sometimes feel compelled to pay more than the actual value of claims as the lesser of two evils.”
As a results of these converging contributors, Louisiana Citizens Property Insurance Corp. – the state-run insurer of final resort – has grown from 35,000 to 128,000 policyholders over the previous two years, in response to the Louisiana Department of Insurance.
Learn More:
Louisiana Insurance Regulator Issues Cease & Desist Order to Texas Law Firm
Hurricanes Drive Louisiana Insured Losses, Insurer Insolvencies