St. Charles Herald-Guide

Insurance dilemma

By Dan Juneau - May 24, 2006

One of the major problems remaining in the wake of Katrina and Rita is the huge number of insurance claims that must be resolved. Literally hundreds of thousands of homes and businesses were damaged by the storms. Many of the claims have already been settled, but many more involve coverage questions that are not easily resolved. The huge number of claims in itself has taxed the claims settlement process to its limits.

Many of the insurance contracts specify that any legal action in claims disputes must be filed within one year of the date of the onset of the damage generating the claim. This means that policyholders and insurance carriers need to have their Katrina and Rita claims settled in the next three to four months (depending on which storm caused the damage), or else the insureds may need to file a lawsuit to protect their interests.

Some well-intentioned legislators have filed bills to extend the timeline for the settlements. Basically, the bills attempt to accomplish the extension by legislatively rewriting the insurance contracts and hoping that the courts will find this action to be constitutional. The odds are probably not high that the courts will ignore the basic tenets of contract law and allow the Legislature to abridge those contracts. If the courts did approve the legislation, it would send a rather chilling message that, in Louisiana, the courts have given the green light for the Legislature to change contracts entered into by consenting parties. It would be an understatement to say such actions would greatly tarnish the economic development image of the state.

On the other hand, many residential and commercial property owners are in a state of flux regarding their property claims. The three-to-four-month window remaining under some of the contract provisions may not be enough time to settle the claims. Actions should be taken to address the current situation without negatively affecting the business climate of the state.

Governor Blanco and the Insurance Commissioner should use all of their influence and power to encourage insurance carriers with claims still pending to voluntarily agree, by a date certain, to extend their contract provisions and allow at least six more months for the settlement process to run its course. The extension should be confirmed not only by public announcements by the carriers, but also by letters written to their policyholders, certifying the extension. The Insurance Commissioner should publicly announce which carriers have met the deadline and which have not. He should do everything in his power to have carriers who do not agree to extend the deadline to also inform their policyholders of this decision, so they can pursue legal options if their claims are not settled by the deadline imposed by their policy.

It is not in the best interest of either the policyholders or the insurance carriers to have a deluge of lawsuits filed a few months from now. It also isn't in the best interest of the future economy of Louisiana to see legislation enacted that could place something as vital as contract agreements in doubt. If the insurance industry will take some reasonable and responsible steps to work through this process with their policyholders, they will serve the best interests of their customers, as well as themselves. If they don't, they will see more punitive legislation introduced that will undoubtedly sour not only the insurance market in Louisiana but our economic development prospects, as well.