Published in New Orleans CityBusiness
Affordability and availability of homeowners insurance in Louisiana was top of mind for lawmakers in the 2024 regular legislative session, and several bills have crossed the finish line, recently signed into law by Gov. Jeff Landry.
A common theme across Louisiana’s new insurance laws is an effort to bring the state more in line with neighboring states’ practices in the insurance space and make Louisiana less of an outlier. The stated goal of the insurance reform package is to stabilize Louisiana’s insurance markets by making changes to the law to entice additional carriers to write homeowners policies in the state. The theory is that more carriers will mean greater availability and this additional capacity will make overall coverage more affordable.
We discuss Louisiana’s new insurance laws in more detail below.
Act No. 3 (formerly Senate Bill 323)
*Effective July 1, 2024
- Repeal of La. R.S. 22:1973: Louisiana had two statutes dealing with bad faith in claims handling, and Act No. 3 repeals one of these statutes, doing away with a 200% penalty provision. The ability to recover actual proven economic damages resulting from a breach of the duty of good faith remains.
- Reciprocal Duty of Good Faith: Act No. 3 retains the duty of good faith applicable to insurers contained in the prior law. It also adds a duty of good faith on the part of the insured. Specifically, the bill expressly states that the insured, claimant, or a representative of the insured or claimant has a duty of good faith and fair dealing when asserting a claim for insurance coverage. A knowing commission of the following constitutes a breach of this duty:
- Failure to comply with affirmative duties under the policy (includes provision of information on request of insurer, making demands (for attorneys), setting deadlines, and attempting to settle claim;
- Misrepresentation of pertinent facts or insurance policy provisions relating to any coverages at issue;
- Submission of an estimate or claim for damages that lacks a basis for coverage under the terms of the policy or lacks a good faith evidentiary basis.
- In a claim for bad faith, the trier of fact shall consider that conduct in determining whether or not the insured is to be awarded penalties or attorney fees otherwise provided for in accordance with existing statutes.
- New Time Periods for Catastrophic Losses: Residential Catastrophic Losses – payment is due within 60 days of receipt of satisfactory written proof of loss, and Commercial Catastrophic Losses – payment due within 90 days of receipt of satisfactory written proof of loss. Expressly provides that this period may be extended by 30 days by the Commissioner for commercial policies covering multiple locations.
- 50% Penalty Maintained, Plus Proven Economic Damages Brought in from 22:1973
- Codifies Two-Year Prescription for Bad Faith Claims
- Notice Provision: As a condition precedent to bringing a bad faith claim, the insurer shall be given 60 days written notice of the violation by the insured or his representative (Cure Period Notice).
- Costs 20% Attorney Fees, Plus No Bad Faith Penalties: If the insurer pays within 60 days after the insurer receives cure period notice, the full amount alleged to be due in the notice, together with any actual expenses incurred by the insured and claimed in the notice, including any attorney fees, will not exceed 20% of the amount alleged to be due under the policy. There shall be no further cause of action pursuant to this Section regarding that noticed demand.
- Partial Payment: If a partial payment is made within 60 days of the insurer’s receipt of the cure period notice, the penalty otherwise due on the amount actually paid by the insurer within 60 days of the insurer's receipt of the cure period shall be reduced by half.
- Suspension of Prescription: If a cure period notice is transmitted within the last 90 days prior to the running of prescription, the applicable prescriptive period for an action filed pursuant to the provisions of this Section, or for an action concerning the underlying policy dispute, shall be suspended for a period until 30 days after the insurer transmits its written response to the cure period notice.
- Stay of Premature Suits: If any suit is filed prior to transmitting the cure period notice, it shall be automatically stayed until 60 days after the cure period notice is received. The delay for answering any suit shall automatically be extended until 30 days after the end of the cure period.
Act No. 8 (formerly House Bill 120)
*Effective August 1, 2024
- Act No. 8 removes the June 30, 2025, termination date for the Louisiana Fortify Homes Program, a grant program which offers incentives to homeowners who enhance and revamp their homes to better withstand severe weather.
Act No. 9 (formerly House Bill 611)
*Effective dates vary for different provisions (majority of which go into effect Jan. 1, 2025)
- Act No. 9 addresses what is commonly referred to as the 3-year rule, whereby carriers are generally required to continue to offer homeowner’s coverage where a policy has been in place for more than three years even if the company otherwise might wish to cancel the policy. The bill is a gradual relaxation of the current law, repealing it with respect to policies written after August 1, 2024, and for legacy policies, allowing carriers to non-renew/cancel up to 5% of their policies subject to the 3-year rule.
- Removes the prohibition against cancelling, nonrenewing, or increasing deductibles on homeowners’ policies issued after August 1, 2024. (Effective May 7, 2024)
- Permits insurers to file a plan with the insurance commissioner to non-renew up to 5% of its existing customers’ policies per calendar year for any reason. (Effective January 1, 2025)
Act No. 10 (formerly Senate Bill 295)
*Effective May 7, 2024
- Act No. 10 replaces Louisiana’s pre-approval system with a file and use rating system, a change that brings Louisiana in line with the majority of states that use some form of competitive rating system. Under this bill, insurers’ rate filings are deemed approved upon filing though they can be disapproved by the Commissioner within a 30-day window from the date of filing. Proponents have suggested that this change would increase the speed to market for insurance products.
What’s Next?
It will be interesting to see later this year and into next year how Louisiana’s homeowners’ insurance situation will be improved given these new legislative measures. Companies would be well advised to review their policies and operations under these new provisions to maintain compliance and minimize exposure.
About Our Authors
Chris D’Amour is a Partner in the Adams and Reese New Orleans office and member of the firm’s Litigation Practice Group. Chris defends insurance companies and commercial entities in casualty, coverage, bad faith, property, cargo and transportation, products liability, class action, multidistrict litigation, commercial, construction, E&O and professional liability litigation, handling matters out of every office in the firm’s footprint.
Taylor Brett is a Partner in the Adams and Reese New Orleans office and member of the firm’s Litigation Practice Group. Taylor represents clients across multiple industries, predominately in the energy and natural gas sectors. His work covers a broad spectrum of legal issues involving commercial disputes.
Kellen Mathews is a Partner in the Adams and Reese New Orleans and Baton Rouge offices. He practices in administrative and regulatory matters, litigation, insurance, and government contracting and government relations. In 2024, Kellen was ranked Best Lawyers “Lawyer of the Year” in Baton Rouge in Administrative/Regulatory Law.