Donelon backs insurance reform legislation, critics say property owners will suffer

Published: Apr. 4, 2023 at 7:34 PM CDT
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NEW ORLEANS (WVUE) - Louisiana Insurance Commissioner Jim Donelon on Tuesday (April 4) unveiled a package of proposed new laws he wants the legislature to approve during the upcoming legislative session.

“We are currently in the midst of an insurance crisis,” Donelon said.

He believes passing new laws will help attract more insurers to Louisiana’s property insurance market.

“We need insurance companies to come back to Louisiana and this is the best way to get it done,” Donelon said. “While we are not copying what Florida did legislatively, we are taking the lead in an effort to introduce several legal and claims process reforms that should strengthen our market for the long term.”

One of the bills gives insurers more power, in terms of dealing with policyholders who make claims.

“Insurers would be allowed to require a sworn proof of loss statement from the policyholder, to establish such proof of loss,” he said. “The bill also adds a two-year statute of limitation for policyholders to seek penalties and attorneys’ fees for untimely payment of claims.”

Another bill would impact policyholders who want to assign their benefits to a contractor.

“That would prohibit property insurance policyholders from assigning their benefits to third parties like roofing contractors without their (insurance) company’s approval,” Donelon said. “Assignment of benefits has been used by bad actors to commit insurance fraud.”

Donelon also proposes changes to the appraisal process.

“Our bill outlines the qualifications and duties for appraisers and umpires, something needed as well, and prohibits one-sided communication between the umpire and any one party, without giving the other party an opportunity to participate,” he said. “And other reforms as well.”

Another bill would benefit Louisiana Citizens, the state’s insurer of last resort, by preventing it from being subjected to bad-faith fines.

“If Citizens is ordered to pay bad-faith penalties in excess of what it could afford, it would just access all policyholders in the state,” Donelon said. “For these reasons, we are proposing legislation that would put Citizens in line with the Louisiana Insurance Guaranty Association and immunize it from bad-faith penalties.”

Ben Riggs, executive director of the nonprofit Real Reform Louisiana, says the proposed new laws will undermine property owners.

“Louisiana families, residents, small businesses, they’re all still struggling to recover from three, four horrific storms,” Riggs said. “We don’t need to be relaxing measures of accountability. We don’t need to be making it easier for insurance companies to cheat storm victims.”

Riggs said he takes issue with Donelon saying the proposed reforms are meant to imitate what Florida is doing.

“We don’t need to be copying what Florida’s doing,” Riggs said. “We need to be doing what we can to address our insurance crisis. We don’t need legislation that’s written by the insurance industry that’s going to hurt consumers.”

Donelon says he will fight any attempt by insurers to get rid of the rule that says if a policyholder has been with an insurer for three years they cannot be dropped at will by insurers.

“I will be active in whatever efforts to water down or repeal the three-year rule that I feel is so important,” Donelon said.

And Donelon said he wants to keep insurers from targeting policyholders who want to use public adjusters.

“This bill will disallow insurers from including such clauses, prohibiting the use of public adjusters in their policies,” he said.

The legislative session begins April 10 at the state capitol building in Baton Rouge.

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