LEGISLATION
INSURANCE & TORT
REFORM LEGISLATION
MOVING THROUGH LEGISLATURE
JEFF ALBRIGHT
DELEGATION
BIG I AGENTS PRESS
LOUISIANA’S CONGRESSIONAL DELEGATION
DAVID TATMAN
FLOOD
FLOOD INSURANCE: LOUISIANA AGENT E&O
NIGHTMARE
JEFF ALBRIGHT
Benjamin Albright
Chief Executive Officer, President balbright@iiabl.com (225) 236-1357
Jeff Albright
Consultant
jalbright@iiabl.com (225) 236-1366
Karen Kuylen
Director of Accounting & Finance kkuylen@iiabl.com (225) 236-1353
Jamie Newchurch
Director of Insurance Programs
jnewchurch@iiabl.com (225) 236-1350
Kathleen O'Regan
Director of Communications & Events koregan@iiabl.com (225) 236-1360
Karson Roberts
Communications & Events Administrator
kroberts@iiabl.com (225) 236-1351
Lyra Roberts
E&O Administrator lyra.roberts@iiaba.net (225) 236-1352
Dustin Wambsgans
Agency Consultant dwambsgans@iiabl.com (225) 236-1361
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RELIABILITY. EVERY STEP OF THE WAY.
The Louisiana Legislature continues to pass important insurance and tort reform measures to address the Louisiana insurance crisis. Your IIABL team has been aggressively pursuing these reforms, working with Commissioner Temple and his team along with the business community and insurance industry.
Many legislators finally seem to understand that significant reforms are necessary to reduce loss costs and bring new insurers to Louisiana in the hopes that a competitive market will make insurance more available and affordable. Important reforms are moving through the process. Following is an update on important reform legislation.
You can click on the bill numbers to see information about the bills.
1) HB 678 (Firment) / SB 323 (Talbot)
Fair claims handling & proof of loss R.S. 22:1892 & R.S. 22:1973
The most important reform needed to improve the property insurance market is to reform the good faith claims handling statutes. The reform bills provide a claims process that allows policyholders to get their claims paid without litigation, while eliminating unnecessary litigation and bad faith penalties for insurance companies. SB 323 by Senator Kirk Talbot is the primary fair claims handling bill which represents a compromise between business and Louisiana Association of Justice (plaintiff lawyers) that provides for a written proof of loss requirement and a cure period to resolve claim disputes before litigation may be pursued. SB 323 passed the House Insurance Committee and is pending House floor action. HB 678 by Rep Gabe Firment is an alternative bill modeled after Texas claims handling statutes. HB 678 is scheduled in the House Insurance Committee.
2) HB 611 (Firment) / SB 370 (Bass)
Modify the “more than 3-year rule” R.S. 22:1265.D. & R.S. 22:1333.C.
Amending the “more than 3-year rule” is critical to bringing new Homeowners insurers to Louisiana. IIABL opposes a complete repeal of the law given the extremely hard market and the hardship widespread renewals would cause for our agents and their policyholders. HB 611 & SB 370 provides reasonable exceptions to the more than 3-year rule including:
A) Grandfathering the statute so that it does not apply to new policies written after August 1, 2024
B) Allowing increases in individual deductibles up to 5%
C) Allowing insurers to nonrenew up to 5% of policies in any parish / zip code per year
SB 370 passed the House Insurance Committee and is pending House floor action. HB 611 passed the Senate Insurance Committee and is pending Senate floor action.
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Reform collateral source & transparency of actual medical costs
Automobile insurance, particularly commercial auto insurance, has suffered from inflated medical expenses under Louisiana law. Our “collateral source” statute provides plaintiffs with a 40% profit on paid medical expenses which inflates automobile loss costs and encourages bodily injury claims. HB 423 / SB 18 / SB 244 would eliminate this 40% profit and limit payment to actual paid medical expenses. HB 423 has passed the House by a vote of 88-10 and will be heard in the Senate Judiciary A Committee.
Reduction of direct action
Louisiana is one of only 3 states that allows lawsuits directly against insurance companies (LA, WI, RI). Courts are more likely to award an increased number of judgements and larger payments against outof-state insurance companies than they would a local citizen or business. This direct legal action discourages insurance companies from doing business in Louisiana and increases claim costs, which results in higher automobile insurance premiums. HB 337 by Representative Jack McFarland and SB 250 by Senator Robert Allain will significantly reduce direct actions and bring Louisiana law in line with 47 other states. HB 337 passed the House by a vote of 85-15 and will be heard in the Senate Insurance Committee.
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5) HB 613 (Firment) / SB 295 (Cloud)
Deregulate insurer rate filing process to “file & use” rating
Louisiana currently regulates insurance rates under a “prior approval” system whereby the insurance commissioner must approve each rate filing. HB 613 by Rep Gabe Firment and SB 295 by Senator Heather Cloud would move Louisiana to a more favorable “file & use” system whereby insurers may use a new rate filing 30-days after filing unless the insurance commissioner disapproves the filing. The commissioner may still disapprove a rate filing if it is not actuarily justified or is unfairly discriminatory. HB 613 passed the Senate Insurance Committee and is pending Senate floor action. SB 295 passed the House Insurance Committee and is pending House floor action.
6) HB 336 (Chenevert)
Disclose third-party litigation funding arrangements
In recent years, private equity firms and other investors have started loaning money to attorneys to finance lawsuits. They pay all the expenses for a lawyer to sue someone, and then they receive a percentage of anything the lawyer wins in court. Return on these loans are reported to be 20%-40%. Litigation financing can dramatically increase the number and cost of trials. HB 336 by Representative Emily Chenevert and SB 8 by Senator Rick Edmonds does not prohibit the use of third-party litigation financing. These bills require that the plaintiff attorney disclose third-party litigation financing to the defendant and the court. The bills also prohibit the third-party financier from being involved in decisions related to the strategy and settlement of the case. HB 336 passed the House by a vote of 84-17 and will be heard in the Senate Judiciary A Committee.
Remove sunset on Fortified Homes Program
The Fortified Homes Program is an important component of the strategy for building better to reduce loss costs and insurance premiums. HB 120 by Representative Matthew Willard helps expand access to the Fortified Homes Program by removing the sunset provision and allowing the program to continue in the future. The Louisiana legislature will need to provide funding for the grant program as part of the annual state budget this year. Commissioner Temple plans to create an ongoing funding source for the program during the fiscal session next year. HB 120 passed the Senate Insurance Committee and is pending Senate floor action.
8)
License & regulate the appraisal umpire process
Most property insurance policies include an appraisal clause which allows the policyholder to hire their own appraiser if they disagree with the insurance company appraiser on the value of their property claim. If the two appraisers cannot come to agreement, they can engage a third “umpire” appraiser.
Ben Albright
December 2023
Unfortunately, there are no regulations, standards o procedures established to help policyholders with this process. HB 609 establishes a regulatory framework for the Louisiana Department of Insurance to license, regulate, and assist policyholders through the appraisal process. HB 609 passed the House by a vote of 79-22 and will be heard in the Senate Insurance Committee.
Exempts LA Citizens from bad faith penalties
After Hurricane Katrina, LA Citizens paid over $250 million in a class action lawsuit for bad faith damage
As the market of last resort, all Louisiana policyholders have paid those bad faith penalties through a LA Citizens assessment Other states shie their market of last resort from bad faith penalties SB 113 would exempt LA Citizens from bad faith penalties SB 113 failed to pass the Senate by a vote of 18-20 and is on the Senate calendar Subject to Call
2 Year Prescription (only support if paired with collateral source)
Louisiana is unusual in that we have a 1-year prescription on tort liability claims. Many states have two or more years for prescription. Some people think that more serious injuries need more than one year to develop and that the 1-year prescription causes more lawsuits to be filed instead of settled. The problem is that because of our problems with inflated medical expenses (collateral source) a 2-year prescription would provide twice as much time to inflate medical expenses. Business groups and the insurance industry prefers a 1-year prescription but would be willing to accept a 2-year prescription if we solve the inflated medical expense issues related to collateral source. HB 315 by Rep Johnson is a standalone 2-year prescription bill sponsored by Rep Johnson at the request of Governor Landry. The business community and insurance industry are opposed to HB 315 because it does not provide medical expense safeguards. HB 315 passed the House by a vote of 83-18 and will be heard in the Senate Judiciary A Committee. SB 334 by Senator Talbot includes medical expense safeguards and is preferred by business and the insurance industry. SB 334 is in the Senate Judiciary A Committee.
DAVID TATMAN PRESIDENT THE TATMAN GROUP
Spring is always a beautiful time to be in our Nation’s Capital. It is also a great time to press Congress on key issues impacting our insurance markets. I had the pleasure of joining Big I agents from across Louisiana to take part in the National Independent Agents Association (Big I National) Legislative Conference in Washington, DC. We had the opportunity meet face-to-face with members of the Louisiana Congressional Delegation and their staff to address critical issues impacting the insurance industry and consumers. We focused on several important issues facing our industry.
Main Street Tax Certainty Act Support: One of the key issues discussed during the conference was the Main Street Tax Certainty Act (S. 1706 & H.R. 4721), which aims to make permanent the 20% small business deduction (Section 199A of the U.S. tax code) introduced in the 2017 Tax Cuts & Jobs Act. Louisiana agents highlighted the importance of this deduction in keeping their agencies operational, meeting payroll, and serving consumers effectively. They emphasized that allowing the deduction to expire in 2025 would result in a tax increase for many small businesses, creating an unfair disadvantage compared to corporations benefiting from permanent tax cuts.
Addressing the Insurance Market Crisis: Louisiana agents also focused on the current property/casualty (p/c) insurance market crisis, which has made insurance unaffordable and unavailable for millions of Americans. To combat this, agents advocated for measures to crack down on lawsuit abuse and promote risk mitigation:
Lawsuit Abuse: Louisiana agents supported the Protecting Our Courts from Foreign Manipulation Act (S. 2805 & H.R. 5488), aimed at addressing the significant costs added to the insurance system due to abuse of the legal system. They emphasized the need for transparency in thirdparty litigation funding and restrictions on foreign entities' participation in American courts.
Risk Mitigation: Agents advocated for the Disaster Mitigation and Tax Parity Act of 2023 (S. 1953/H.R. 4070), which would eliminate federal taxation on mitigation grant programs. This legislation would encourage homeowners to prepare for natural disasters and reduce post-event costs, ultimately saving taxpayer money.
Federal Crop Insurance: Louisiana agents stressed the importance of supporting the Federal Crop Insurance Program (FCIP) in the new Farm Bill negotiations. They emphasized the critical role crop insurance plays in helping farmers manage risks and called for maintaining funding and the private sector delivery of crop insurance.
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Extending the NFIP: Agents urged our delegation members to support the reauthorization and reform of the National Flood Insurance Program (NFIP) before its September 30, 2024, expiration. They endorsed H.R. 900, which would allow private flood insurance to satisfy continuous coverage requirements, and opposed any policies that would harm the Write-Your-Own (WYO) Program. Agents also called for clearer communication from FEMA regarding rate setting and premium changes under Risk Rating 2.0.
Louisiana's independent insurance agents and brokers’ participation in the National Big I Legislative Conference highlights their dedication to advocating for policies that support Main Street businesses, ensure insurance market stability, and protect consumers and communities across the state. By meeting with members of the Louisiana Congressional Delegation and advocating for key issues, our Louisiana agents demonstrated the importance of grassroots advocacy at all levels of government.
Their efforts underscore the value of the relationships they have built with policymakers and their ability to influence legislation that directly impacts their businesses and clients. Louisiana agents are not only voices for their industry but also champions for their communities, working tirelessly to ensure a fair and stable insurance market for all. As they continue to engage with lawmakers and advocate for meaningful reforms, their commitment to serving as trusted advisors and advocates for Louisiana consumers remains strong.
JEFF ALBRIGHT IIABL CONSULTANT
Louisiana has had more than its fair share of hurricanes and floods in the last 20 years. One lesson we have learned is that flood insurance is the worst E&O nightmare for Louisiana insurance agents.
After Hurricane Katrina, the mother of all hurricanes and flood events, IIABL member agencies had over 650 E&O claims. Most of them were flood insurance claims.
Common allegations were that the agent did not offer flood insurance or that the flood insurance limits were inadequate.
The problem is that policyholders think that if the lender doesn’t require flood insurance, and the property has never flooded, they don’t need flood insurance. The reality is that in Louisiana the risk of flood damage is much greater than any other peril.
There are several E&O loss control procedures to help agents protect themselves from flood related E&O claims.
Any time an agency quotes property insurance, a flood quote should be automatically provided along with the property quote. We are in the business of selling insurance, so cross selling flood with property insurance provides greater income opportunities and great E&O defense.
If a policyholder refuses to buy flood insurance, consider having them sign an acknowledgement form documenting that they rejected flood coverage. Coverage checklists can also be a great documentation tool.
Flood coverage should be cross sold on property policies that do not have flood coverage. This can be done at the time of annual renewal reviews, or annually at the beginning of hurricane season when people are considering their risks. You agency management system makes it easy to identify policyholders that need flood insurance and can easily generate a solicitation letter. Again, this provides a great cross-sell opportunity and terrific E&O defense.
Make all agency staff sensitive to the E&O risks related to flood insurance and train them to take every opportunity to cross sell flood.
Despite news reports and public policy discussions about climate change and increasing catastrophes, including floods, 59% of U.S. adults say they are not likely to reevaluate their need for flood insurance, according to a survey commissioned by Selective and conducted by The Harris Poll.
Of the U.S. adults surveyed, only 14% had flood insurance. Among those with a standalone flood policy, 66% had filed a claim, which is an indicator of the prevalence of floods, Selective pointed out in its press release.
Meanwhile, the misnomer that homeowners and renters policies cover flood damage continues. Two-thirds of consumers with homeowners and renters insurance incorrectly believe their current policy covers flood-related damage to home structure or contents, the survey found.
“Flooding is the most common natural disaster and can occur anywhere in the country. Recent inland flood events and increased frequency of hurricanes highlight the very real risks facing property owners," said Cassie Masone, vice president of flood operations at Selective Insurance. “Homeowners and renters often have a false sense of confidence that a flood won't impact them because they are far from bodies of water, but changing weather patterns and evolving topography make it more important than ever to have a flood insurance policy.”
Additionally, consumers have significant misconceptions about flooding causes and what is and isn't insured under their homeowners or renters policies. Sixty-two percent believe that major storms, like hurricanes or tropical storms, are among the most common causes of large-scale flooding, not taking into account other common causes like persistent rainfall (59%), river and lake flooding (49%), levee or dam breaks (33%), rapid snow melt (30%) and ice jams (16%).
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Another cause that consumers didn't list is wildfire-charred land, which is prone to flooding because it can't absorb rainfall.
This week brought more winter storms and flood threats to California, which has been saturated by atmospheric storms and flooding this winter. Heavy downpours on Tuesday and Wednesday flooded streets and sidewalks in San Francisco, with mudslides closing roads to the north and south, ABC News reported, while the Los Angeles area has recorded around 10 inches of rain in February so far. The latest storms come weeks after an earlier winter storm brought severe floods and mudslides to the state.
However, few homeowners in California have flood insurance, with Trevor Burgess, CEO of Neptune Flood, placing the amount at 2% in January 2023. In its survey, Neptune found respondents haven't purchased flood insurance because they don't believe they are at risk (61%), followed by it not simply being on their mind (30%), not having disposable income (29%) and believing it was too expensive (28%).
CHRIS BURAND PRESIDENT BURAND & ASSOCIATES
Recently, I’ve come across many instances of agencies binding coverage without realizing they do not have the authority or they do not even realize they are binding coverage.
First things first What is a binder? I find that only a small minority of people whom I ask, know the correct answer As the formal issuance of binders has dwindled to almost zero, people have lost the knowledge of what a binder is
A binder, simplistically, is a short-term insurance policy IT IS AN INSURANCE POLICY If you do not believe me, read the ACORD binder form
A binder IS NOT EVIDENCE OF INSURANCE! When you issue a binder, you are issuing an insurance policy When you issue an evidence, you are issuing evidence that insurance exists, but you are not issuing an insurance policy The difference is huge
When a binder is issued as an evidence, an insurance policy already exists Therefore, issuing a binder in this situation, which is extremely common, means issuing a second insurance policy. A binder should only be issued if no other policy exists. To issue an evidence, a policy must already exist. Therefore, to substitute a binder for an evidence means issuing a second policy and no good can come from issuing a second policy. Issuing a binder to prove a policy already exists is incorrect.
The argument that a binder in this instance is not a second policy does not hold water because a binder form states it is a policy. The argument that a binder is required because the actual physical policy has not arrived does not hold water either. If a policy number has been issued, a policy exists. Whether it is lost in the mail or the carrier is a month behind with their printers (one would think carriers could afford more printers, but that does not seem to be the case), is a moot point. Issue an evidence if you have a policy number. In fact, this is a perfect scenario for an evidence because you are providing evidence coverage exists even though the policy itself has not arrived.
Additionally, read the terms and conditions on the binder. If I am a plaintiff attorney and an agent has issued a binder when a policy exists, but the binder’s terms and conditions are silent, how will that attorney interpret coverages?
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Additionally, I am now seeing staff and producers, who do not adequately know the differences between admitted and non-admitted carriers, binding coverage in surplus lines. Retail agencies almost never have binding authority of any kind in surplus lines.
Sometimes they bind completely innocently, not thinking about their words and likely trying to sound like they have more authority than they do. A producer will tell a client, “Thank you. I’ll get your coverage bound today.” Unless the agency possesses binding authority, the agent cannot tell a client they’ll get coverage bound or that they will bind coverage. Saying this arguably means the agency has issued an even worse binder, a verbal binder. The better response is to tell the client you’ll request coverage be bound and you will let them know the result.
Sometimes the agent feels like they are under pressure because of carriers and surplus lines markets’ poor service. The policy does not arrive for a month or six months. The insured needs the policy, and the agent feels compelled to give them a policy. The market’s incompetence does not change the agency’s contractual limitations.
Another example is when the client needs a certificate before the policy is issued, prior to even receiving a policy number, and the agency issues a certificate. Arguably the agency has bound coverage here, which is not correct. Instead, this might be one of those situations where, if binding authority exists, the agency should actually issue a binder.
Do not verbally bind any coverage, ever, even if you have binding authority. Do not issue certificates on policies that do not exist. Do not try to make clients think you have more authority and power than you actually possess. And never, ever guess or assume you have authority or power that is not in a contract. Any authority you have should be expressly stated in your carrier contracts. Know your limits and do not exceed those limits.
Binders done incorrectly are fairly straightforward E&O claims the agency is almost certain to lose. Whether the insured sues or the carrier pays the claim and subrogates against the agency for violating their binding authority, the agency is likely to lose. Stay simple and do not issue binders unless you must absolutely do so in a situation where the insured does not have coverage, needs coverage, and you have the authority to offer coverage. An example might be someone that does not have auto coverage on Saturday morning and needs it immediately and you cannot issue a policy on a carrier’s system that morning, so you issue a binder within your authority.
And here’s the other benefit! It’s less work for your staff to not issue binders!
Sixty-five percent of U.S. residents who have homeowners or renters insurance incorrectly believe their current policy protects their home and belongings against flood loss, according to a recent poll from Selective Insurance.
In fact, “many homeowners or renters are shocked to learn their standard insurance policy provides no coverage when they file a claim for flood damage, underscoring the importance of education and communication with clients," says Cassie Masone, vice president, flood operations, Selective Insurance.
Over the past several years, the number of catastrophic weather events leading to severe flooding incidents has increased in frequency and severity, according to a report by Climate.gov. As the climate changes, independent agents play a major role in educating their clients on the need to purchase flood insurance, as well as providing advice to them on the steps to take to protect their property.
Here are three pieces of advice agents can offer clients to protect their properties from a flood:
1) Proactively mitigate flood risk. “Because of the way we're seeing weather patterns change, protecting a home can simply come down to drainage," says Richard Folkman, vice president of catastrophe operations, flood & carrier practice leader, Crawford & Company. For clients, “it's about being proactive with the areas around your house, making sure that water can't accumulate. We see faulty or blocked drainage around houses where, unfortunately, the client has put it in as a flood claim, but the drainage around the house itself is not draining away from the house that's not a flood at that point."
“Clients should elevate the building as a first step to protect their properties from flooding," Masone says. “If boosting a structure is cost-prohibitive, we recommend installing flood vents, filling in basements, and moving machinery to higher floors. Even with these steps, flood insurance is critical to protect against flood losses."
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2) Protect your home with flood insurance. Clients need to understand that “just because FEMA categorizes your property into a specific flood zone, it doesn't mean that you do or don't have flood exposure," says Christa Nadler, executive vice president, Risk Placement Services Inc Flooding is the most frequent and expensive natural disaster in the U S and is not covered through most homeowners and renters insurance policies With more than 20% of the NFIP claims coming from outside high-risk flood areas, those who live in areas with low-to-moderate flooding risk should understand their risk and consider flood insurance, according to the National Association of Insurance Commissioners (NAIC)
We see a lot of people ignoring the risk, so step No 1 is to think what can happen an example is all of the flash flooding events that we've seen over the last few years," says Matt Junge, head of property underwriting U S , Swiss Re “So, whether it's hurricane-induced heavy rainfall, or intense localized rainfall like what happened in Maryland recently where they had what is called a 'thousand-year flood,' people tend to think if they don't live near a body of water, they're not going to be flooded And that's just not true "
3) Photograph property and contents. Once a flood occurs, it is difficult for an insurance company to identify what exactly was in the property.
“You should document what you have in your house every year. Go through and take pictures of everything on the inside of your house," Folkman says. “Because once a flood hits, mitigation companies come in and clear everything out, and then it's up to adjusters to try and figure out what was there beforehand. And if we can't approve it, we can't pay for it."
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PRESIDENT, ARMOND K. SCHWING
PRESIDENT-ELECT, BRET HUGHES
SECRETARY-TREASURER, ROSS HENRY
NATIONAL DIRECTOR, JOHNNY BECKMANN, III
PAST PRESIDENT, MICHAEL SCRIBER
YOUNG AGENT REP, KRISTIN SWANSON SCOTT
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Hughes Insurance Services, Inc - Gonzales
Henry Insurance Service, Inc. - Baton Rouge
Assured Partners - Metairie
Scriber Insurance - Ruston
Swanson & Associates - New Orleans
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A. EUGENE MONTGOMERY, III
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RANDY PERISE
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