State House votes to end unique insurance rule for Louisiana

The Louisiana House voted to allow insurance companies to eliminate coverage for homeowners who have had a policy for at least three years, a change approved Wednesday that supporters say will protect Louisiana's Will help in solving the insurance crisis.

Representative Gabe Firmant, sponsor of the legislation, house bill 611said it is desperately needed because Louisiana is the only place in the world that imposes a three-year ban on insurance companies which his bill would repeal.

The vote was 72–32, with Republicans strongly supporting HB 611, while Democrats voted against.

“Passage of HB 611 will join Louisiana with other states and help create a more stable environment based on free market principles and competition,” Ferment, R-Polk, told the House.

Firmant's bill now heads to the Senate, where similar legislation, Senate Bill 370 by Sen. Adam Bass, R-Bossier City, was approved by a 28-9 vote on Tuesday.

Under the law, insurance companies cannot leave more than 5% of their policyholders in a single parish each year, unless the insurance commissioner specifically authorizes more. This would only happen in rare circumstances, Firmant was quick to add.

Rep. Matthew Willard, D-New Orleans, spoke against the bill, saying he feared it would cause insurance companies to turn away 5% of their riskiest policyholders, especially on the Coast, next year.

“We know that homeowners insurance is not affordable at all levels,” Willard said. “The three-year rule is the best consumer protection for consumers.”

Data from each chamber indicate that one of the variants is likely to receive final passage in the coming days.

Ferment's bill is a key part of a package of 19 pieces of legislation put forward by new Insurance Commissioner Tim Temple. He was unopposed last year after promising to deregulate the industry with the argument that it would lead more companies to write policies in Louisiana. Temple believes that having more competition here will keep insurance rates from rising.

Temple, who watched Wednesday's debate from the House chamber side, has said he would convict her if her measure passes and doesn't solve the problem. Governor Jeff Landry supports Temple's efforts but is letting him lead insurance.

Jim Donnellon, who was insurance commissioner for the past 18 years before Temple, strongly supported the so-called three-year rule, saying it kept rates low in Louisiana by forcing insurers to retain their policyholders.

Real Reform Louisiana warns that passage of the law would cause homeowners to lose their policies and then have to seek coverage from the state insurer as a last resort. The group says these rates are 10% higher.

The bill would take effect Jan. 1, “after hurricane season has passed,” Firmant said.

He said data is not available on how many homeowners benefit from the three-year rule, so no one can say how many people would lose their policies if insurance companies removed 5% of them.

“It's going to be a very sophisticated, precise and surgically non-renewable,” Firmant said. “It's the very minimum.”

But Rep. Edmund Jordan, D-Bruslee, questioned whether a large number of insurance companies would want to write more policies in Louisiana.

“None of them have said that if you remove the three-year rule they will definitely come here,” he said.

In related business, the House also approved legislation, 85-16, that would end the practice known as “direct action” in Louisiana, which allows injured people filing damage claims with insurance companies. Also allows a person to sue the person who allegedly caused the injury. The legislation is House Bill 373 sponsored by Rep. Jack McFarland, R-Jonesboro.

McFarland told the House that juries are hearing that insurance companies with deep pockets may be on the hook for losses, so are more likely to award larger claims, noting that Louisiana is one of the few states that allows direct action lawsuits. Let's give.

“This bill in no way affects or removes an insurer's obligation to pay losses,” McFarland said. “That's why we have insurance.”

Representative Wilford Carter, D-Lake Charles, and Representative Robbie Carter, D-Greensburg, said they doubted that McFarland's legislation would actually lower or limit insurance rates.

On Wednesday morning, the House Insurance Committee also introduced a bill that would add more mediation and arbitration options to the claims process. They are part of an effort to reduce insurance-related litigation.

House Bill 510, by Rep. Brian Glorioso, R-Slidell, would allow property insurance companies to include a clause providing for mandatory binding arbitration. There would have to be discounts on those policies, and companies would need to offer consumers alternative options without any such clauses.

Companies will also be required to inform customers about this clause in a separate document attached to the policy.

The committee moved the bill forward without any objection.

House Bill 609, which is part of Temple's package, also cleared the committee without objection. This applies to home insurance and will create a valuation process when insurance companies and the claimant disagree over how much of a loss the insurance company should cover.

If the insurer or claimant requests an appraisal process, each party will select an appraiser and pay their fees. If the evaluators do not agree, an umpire will be assigned to the case.

Both HB 510 and HB 609 now head to the full House for consideration.

Staff writer Meghan Friedman contributed to this article.