Monday, July 15, 2024

Louisiana judges says state can’t force insurance companies to pay for evacuation expenses

by BIZ Magazine

By Victor Skinner | The Center Square contributor

A Louisiana judge has ruled Louisiana Department of Insurance Commissioner Jim Donelon abused his power to force insurance companies to pay evacuation expenses for policyholders in 25 parishes.

Administrative Law Judge Patrick Moore wrote last week that Donelon went out of bounds when he issued Directive 218 in September 2021 that demanded insurers waive policy language that required a civil evacuation order to trigger Prohibited Use coverage, or payments for living expenses associated with an evacuation, Insurance Journal reports.

The directive came less than a week after a bulletin from the Louisiana Department of Insurance that encouraged insurers to voluntarily pay claims for prohibited use, even though not all parishes impacted by Hurricane Ida issued a formal mandatory evacuation order.

Allstate requested the directive to comply, and USAA and other insurers also stepped up to cover the Prohibited Use claims, while State Farm, the state’s largest homeowners insurer, had refused in absence of an official evacuation declaration.

Many local officials were wary of issuing evacuation orders because of the speed of the storm’s approach and potential to create traffic gridlock that could have put residents in danger. The directive applied to policies in the 25 parishes listed in Emergency Rule 47, a measure aimed at protecting policyholders from cancellations and non-renewals in the wake of the storm. The same 25 parishes were listed in Gov. John Bel Edwards’ Hurricane Ida emergency declaration, according to the Journal.

The initial advisory followed Donelson’s tour of St. John the Baptist Parish with President Joe Biden in which policyholders complained about companies denying loss of use claims. The directive came after both Donelson and Biden urged insurers to voluntarily cover costs and not all complied.

“Hurricane Ida was a clear and present danger to the citizens of Louisiana,” Donelon said in announcing Directive 218. “Officials throughout the region took to the airwaves to get out the message that people needed to leave or stay in a safe place. Insurers must treat the many diverse actions taken by public officials as an order to leave and pay people who have coverage for their expenses.”

Farm Bureau and Dover Bay Specialty challenged the directive in court, and Moore found Donelon’s interpretation of the prohibited use policy was “wrong, manifestly erroneous, and shocking to the conscience of the tribunal.”

Moore ruled Directive 218 an “improper exercise” of Donelon’s discretion, the Journal reports.

The ruling came the same week Donelon held a press conference to highlight new laws passed during the 2022 Legislative Session to enhance protections for policyholders and strengthen the state’s insurance market.

Those reforms included House Bill 83, now Act 434, sponsored by Rep. Laurie Schlegel, R-Jefferson, which changed how insurance companies cover additional living expenses due to an evacuation. Instead of the requirement for an official emergency declaration to trigger coverage, the new law requires consideration of the totality of circumstances.

Other reforms included an increase in the minimum capital and surplus requirement for insurers to $10 million by 2031, an Insurance Incentive Program to attract more companies to Louisiana, a three-adjuster rule with new requirements for insurance companies, new disclosures for catastrophic claims, a required catastrophic response plan for every insurance company, and a new Louisiana Fortify Homes Program to provide grants for homeowners to retrofit roofing to higher standards.

You may also like

Update Required Flash plugin