While Florida is struggling to deal with the problems that caused the property/casualty insurance crisis, another coastal state, Louisiana, is dealing with its own insurance problems.
The property insurance market in Louisiana has been shrinking since the state was hit by hurricanes in the 2020/2021 seasons, Triple-I said in a Brief News on the state’s insurance crisis. A dozen home insurance companies in Louisiana were declared insolvent between July 2021 and February 2023.
“While there are similarities between the conditions in the two hurricane-prone states, the underlying causes of their insurance risks differ in important ways,” said Mark Friedlander, Triple-I’s director of corporate communications. “Florida’s problems have been rooted in abuse and fraud for years, while Louisiana’s problems have had more to do with insurers running out of money and not having enough insurance to cover what happened during the hurricanes of 2020 and 2021.”
Insurers have paid more than $23 billion in insured losses from more than 800,000 claims filed during the two years of the hurricane. The largest property loss events were Hurricane Laura (2020) and Hurricane Ida (2021). The magnitude of the losses also caused a dozen insurers to leave the market and more than 50 to stop writing new business in parishes hit by the hurricane.
That’s not to say legal abuse isn’t the cause of Louisiana’s problem — quite the opposite, as Insurance Commissioner Jim Donelon’s cease-and-desist order, filed in February, against a Houston law firm. According to Donelon, the company filed more than 1,500 lawsuits in Louisiana over a three-month period last year.
“The scale and scope of McClenny, Moseley & Associates’ illegal insurance business is like nothing I’ve ever seen,” Donelon said. “It is difficult for the department to issue regulations to regulate entities that we do not regulate, but in this case, this rule is necessary to protect policyholders from fraudulent insurance companies.”
McClenny Moseley has been suspended from trial in the Western District of Louisiana for his role in the Hurricane Laura insurance lawsuit.
Always on the American Tort Reform Foundation’s “Judicial Hellholes” list, “Louisiana’s dangerous bad faith laws contribute significantly to recovery and awards,” according to a paper compiled by the American Property Casualty Insurance Association (APCIA), a Reinsurance Association. of America (RAA), and the Association of Bermuda Insurers and Reinsurers (ABIR).
The newspaper said: “Insurance companies that fail to pay the debt or write a statement to repay the debt within 30 days after providing proof that they have lost the money, may be fined up to 50 percent of the total amount that should be paid, even if they only broke the law. “In order to avoid receiving these large penalties, which are imposed according to independent standards, insurers are sometimes forced to pay more than the actual value of the claim as the lesser of the two worst.”
Due to converging contributors, Louisiana Citizens Property Insurance Corp. — the last state-run insurer — has grown from 35,000 to 128,000 policyholders over the past two years, according to the Louisiana Department of Insurance.
Learn more:
Louisiana Insurance Regulator Issues Cease & Desist Order at Texas Law Firm
Hurricane Drives Louisiana Insurance Losses, Uninsured