Insurers told to extend deadline
Policyholders deserve 2 years, regulator saysJul 12, 2006 | The Times-Picayune Louisiana Insurance Commissioner Jim Donelon ordered property insurance providers Tuesday to give homeowners and business owners two years to file lawsuits against them.
If insurers don't grant the extension by Aug. 1, Donelon said, he will use all means necessary as the state's chief insurance regulator to force them to do it, including possible fines and revocation of the insurance companies' certificates of authority to operate in Louisiana. The action comes a month after Donelon asked the companies to extend the deadlines voluntarily. Only a few companies did so.
Insurance companies had little time to react to the afternoon announcement.
State Farm, the state's largest homeowners insurer, did not return phone calls seeking comment. Allstate Insurance Co., the state's second-largest property insurer, said it would "consider any requests made by the Department of Insurance."
Farm Bureau of Louisiana, the state's fifth-largest insurer, said it would comply with the request, but that it doesn't think the lawsuit issue is relevant to its customers because most of the company's claims are settled. St. Paul Travelers said it had not yet made a decision.
Unlike other Gulf Coast states, which allow people as long as six years to file lawsuits over insurance claims, Louisiana gives its residents only one year to file in court to resolve disputes. Trial lawyers and the state Department of Insurance say they believe Louisiana's statute of limitations is the shortest in the country.
"I think this is reasonable, and under the circumstances it is justified," Donelon said. "I'm sure the industry will not be happy with my order, but I think consumers in our state are deserving of this protection."
Many property owners were kept from their homes and businesses by flooding and mandatory evacuation orders after Hurricane Katrina, and overwhelmed insurance companies were delayed in starting the adjustment process. As a result, many homeowners are still too early in the process to know whether the insurance settlements they have received are adequate to repair damage to their homes.
Policyholders can pursue their claims after the one-year anniversary of the storm, but not in court. Consumer advocates say the end of the statute of limitations effectively ends insurance company payouts, because the companies know homeowners have no recourse. Insurance industry groups have said carriers will continue to work in good faith with their policyholders, but acknowledged that the deadline is significant.
Court ruling requested
Donelon's directive could sidestep the constitutional questions that have arisen over two bills that passed the state Legislature last month and were signed into law by Gov. Kathleen Blanco.
House Bill 1302, sponsored by Rep. Tim Burns, R-Mandeville, and House Bill 1289, sponsored by Rep. Arthur Morrell, D-New Orleans, would allow property owners two years to file lawsuits over property damage claims as a result of Hurricanes Katrina and Rita. But because the bills would be retroactive, and thus possibly unconstitutional, they instruct Attorney General Charles Foti to get a Supreme Court ruling on the laws before the Aug. 29 anniversary of Katrina.
Foti filed a petition for declaratory judgment Monday in the 19th Judicial District Court in Baton Rouge.
But Donelon said he was afraid the bills wouldn't make it through the court system in time, so on Tuesday he directed insurance companies to extend their statutes of limitations voluntarily.
"I'm ordering them to do it," Donelon said. "That is the only secure and definite way that consumers can be protected."
Because the insurance companies would be voluntarily changing their contracts with the people and businesses they insure, Donelon said, he believes his directive will avoid any constitutionality questions.
In May, the American Insurance Association bristled at the legislative interference and said it preferred to let insurance companies provide extensions to policyholders voluntarily.
On June 5, Donelon asked insurance companies to voluntarily extend the lawsuit deadline to two years. Of the more than 100 companies that write property insurance in the state, Donelon had few takers.
The Louisiana Citizens Property Insurance Corp., the state-sponsored insurer of last resort and the state's third-largest homeowners insurance carrier, had previously extended its deadline to two years for hurricane claims. On Tuesday, four other companies: Fidelity National Insurance Co., the American Modern Insurance Group, the Assurant Group and the Balboa Insurance Group announced they would follow suit.
Donelon said he was "disappointed" with the response, but insurers told him they were leery of setting a precedent by changing their terms with policyholders.
Donelon said he has had no official word from major insurers, but that he is optimistic that it is in companies' best interests to comply with an order from the state's chief insurance regulator.
"I expect that most insurers will comply," Donelon said.
Donelon said consumers should monitor the Insurance Department's Web site, www.ldi.state.la.us, for a list of insurance companies that have agreed to extend the deadline, or call 1 (800) 259-5300 for updates. If consumers don't find their insurance carrier on the Web site by Aug. 1, Donelon said, it's time to hire an attorney.
"To the extent that they don't come by Aug. 1, my advice will be, if you're insured by ABC Insurance Co., go get a lawyer," Donelon said.
Robert E. Kleinpeter, president of the Louisiana Trial Lawyers Association, said that because insurers posted record profits in 2005, and because the Insurance Department cut them some slack in adjusting claims in a timely fashion because they had trouble mobilizing adjusters and accessing properties, it's only fair that they offer the same consideration to their customers.
"If they needed more time, then their policyholders need more time," said Kleinpeter, adding that extending the deadline will actually deter lawsuits because it will give people more time to make repairs and settle their claims without having to file suit to preserve their rights. "This is a big issue."