Insurers face a number of challenges operating in the ordinary course of business, however, in Louisiana, the environment is more difficult than others due to the volume of litigation that takes place against them. Between 2020 and 2022, Louisiana took the number one spot for insurance litigation filed in the country, with more than 12,000 cases identified in the Eastern and Western Federal District Courts.
This unprecedented wave of litigation presents a significant challenge to insurers that, along with recent efforts at tort reform in 2020, have created a difficult environment for them to operate. Now, the state is considering additional steps to help support insurers by reforming home insurance litigation to reduce the number of frivolous lawsuits filed.
New proposals based on neighboring tort reform
In response to the deluge of litigation that the state has seen against home insurers, Louisiana state officials have proposed adopting a series of tort reforms similar to those enacted earlier this year in nearby Florida. Those reforms were targeted at stabilizing the turbulent homeowners’ insurance market in Florida, where homeowners’ insurance premiums are the highest in the country. Subsequent proposals in that state seek to expand these changes to other insurers.
Proposed changes designed to maintain support a struggling insurance market
Louisiana officials see these reforms as a potential solution to the rising costs for insurers at home. In seeking to apply these reforms to Louisiana, the goal would be to reduce the amount of liability that insurers are exposed to in the state. To accomplish this, the proposed changes seek to accomplish three things:
- Reduce the amount of damages insurers face by eliminating the requirement for insurers to pay the homeowners’ attorneys fees for failure to pay claims in a timely manner.
- Require homeowners to file a subsequent lawsuit for bad faith damages called an adverse adjudication, rather than allowing them to be incorporated into the initial litigation.
- Mandate that homeowners must file an adverse adjudication when their insurance company’s adjuster recommends higher damages than what the insurer agreed to initially pay.
Taken together, these changes are designed to reduce the amount of litigation that home insurers face by reducing the incentives for homeowners to file a lawsuit.