A package of legislation to benefit insurance companies found broad support in a Louisiana Senate committee Wednesday after just one member questioned why the state would help the industry instead of drivers and homeowners who pay extremely high premiums.
The Senate Insurance Committee has approved four bills that are part of Louisiana Insurance Commissioner Tim Temple’s program to support the industry. Before winning election last year, Temple spent more than two decades in the insurance industry, managing and owning the kinds of companies he now regulates.
In a departure from the way his predecessor, Jim Donnellan, ran Louisiana’s insurance department, Temple has promised what he calls a “free market” approach with less regulation in hopes of attracting more insurance companies to the state. He said more competition would lead to lower rates for consumers and end the crisis that followed five costly natural disasters in a 12-month period.
Temple’s agenda includes a number of so-called “tort reform” bills that would make it harder for policyholders and accident victims to sue insurance companies and reduce the amount of money insurers have to pay when they lose case.
A similar tort reform package passed in 2020, which Donelon and insurance lobbyists promised would lower auto insurance rates within a year, has been a complete failure. Not only did policyholders fail to notice the drop in interest rates, they actually watched them steadily increase. That was after tort reform bills took away some of the best tools consumers had to take insurance companies to court.
A new tort reform effort could force Louisiana lawmakers to confront those broken promises or re-enact them. So far, lawmakers have shown a willingness to give them another chance.
One of the suggestions is Senate Bill 323, sponsored by Sen. Kirk Talbot, R-River Ridge, who chairs his chamber’s insurance committee. It would all but overturn the state’s “bad faith” law passed after Hurricane Katrina, when lawmakers realized insurance companies weren’t treating their customers fairly.
Louisiana auto insurance rates are rising despite a law meant to keep them low
Bad faith law allows a homeowner to collect an additional penalty of up to 200% of the value of the loss if a court determines that the insurance company willfully avoided trying to settle a claim and pay what it owed during a catastrophic disaster. Talbot’s bill would reduce the penalty to 50%.
Flanked by corporate insurer executives, Temple testified in support of the bill, saying the state’s bad faith law is the main source of contention he’s heard from executives who don’t currently work in Louisiana.
Talbot’s bill passed without objection, sending it to the Senate.
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The committee also passed a bill that would make it easier for insurance companies to refuse to renew policies protected by the state’s three-year rule. Unique to Louisiana, the three-year rule makes it very difficult for an insurance company to turn away a customer if the insurer has written the customer’s insurance policy for three years.
Senate Bill 370, sponsored by Sen. Adam Bass, R-Bossier City, would repeal the three-year rule, although the bill includes a grandfather clause for current policies. It will apply to all new policies written after the bill becomes law.
Another measure that passed the committee unopposed was Senate Bill 250, sponsored by Sen. Robert Allen, R-Franklin. The legislation would prohibit lawsuits from specifically naming the defendant’s insurance company as one of the parties to the lawsuit when the company is not actually being sued. Currently, lawsuits often specify the defendant’s insurance company if the company will cover any settlement or judgment amounts in the case.
Insurance executives told the committee the bill wouldn’t change anything about whether judgments are covered by insurance policies, and it took some prodding from Sen. Royce Duplessis before they acknowledged why the bill mattered to them.
Juries are often more generous with verdict amounts if they know the defendant is covered by insurance and won’t have to personally pay the verdict, according to industry observers.
“So at the end of the day, this bill is really designed in many ways to shape how jurors are going to feel about the case,” Duplessis said.
Chaz Cicero, a trial attorney who testified against the entire legislation, said they would do nothing to lower premiums and likely make insurance companies and lawyers even richer. He called Temple’s proposals “corporate welfare.”
When pressed, Temple would not say for certain whether his proposals would actually lead to lower insurance premiums. He told lawmakers he would take all the blame if his program fails to lower interest rates in Louisiana, but did not say whether he would call for repeal of the measures if they don’t work.
Lawmakers didn’t do much to address the failure of the 2020 benefit reform program. Those laws are still on the books and in full effect.