Louisiana’s top insurance regulator on Sept. 7 directed insurance companies pay policyholders’ Hurricane Ida evacuation expenses as damaged infrastructure and dangerous living conditions in Southeast Louisiana keep people from returning home.
Directive 218, issued by Insurance Commissioner Jim Donelon, requires insurers to pay claims for loss of use for policyholders who evacuated or were prohibited from using their premises because of the storm.
The order follows a bulletin released by the Louisiana Department of Insurance encouraging insurers to voluntarily pay claims for prohibited use even if every Ida-impacted parish didn’t issue a formal mandatory evacuation order.
In a press conference on Sept. 8, Donelon said Bulletin 2021-07 urging insurers to voluntarily accommodate policyholders was issued after Allstate requested one and indicated the company would comply. Donelon said USAA and other insurers stepped up as well.
Not all insurers are on board with the order to pay loss of use or additional living expenses, notably the state’s largest homeowners insurer, State Farm, which holds about 25% of the state’s homeowners market, Donelon said.
Commissioner Donelon strengthened the LDI’s regulatory action over the loss of use issue after State Farm, the state’s largest insurer of homes, said it would not pay loss of use claims where no express civil authority order was in place.
“State Farm can’t ignore my order, no insurer can,” Donelon said during the press conference. “But they can challenge it in court. … We expect that it will be challenged.”
In the Sept. 8 press conference, Donelon said the insurance department wants to “make sure insurers are holding up their end of the contract,” with policyholders. He noted that while the language in insurance policies concerning orders from civil authorities, such as mandated evacuations, are not entirely the same, there are similarities and most policies restrict payment of short term additional living expenses to 14 days.
“Hurricane Ida was a clear and present danger to the citizens of Louisiana,” Commissioner Donelon said in an announcement regarding Directive 218. “Officials throughout the region took to the airwaves to get out the message that people needed to leave or stay in a safe place. Insurers must treat the many diverse actions taken by public officials as an order to leave and pay people who have coverage for their expenses.”
The problem with Ida is that it developed so quickly, becoming a major storm within 72 hours. Because of the short notice of the storm’s approach, many public authorities were wary of the types of traffic grid lock that had occurred before previous storms, Donelon said at the Sept. 8 press conference. As a result, some localities ordered mandatory evacuations, and some did not. “I am saying that [with] all of those messages regarding evacuations … insurers should honor them as mandatory.”
The directive for insurers to provide coverage applies to policies in the 25 parishes listed in Emergency Rule 47, a measure issued by Commissioner Donelon to protect policyholders from cancellations and non-renewals after Hurricane Ida. the 25 parishes are also listed in Gov. Edwards’ Hurricane Ida emergency declaration.
Donelon said he issued the Sept. 3 request for voluntary accommodation, expecting the industry to comply. He issued the advisory following a visit to the Ida-devastated area in St. John the Baptist Parish by President Joe Biden, who also urged insurers to pay policyholders evacuation expenses. Donelon said he had heard from policyholders that many companies were denying loss of use claims.
According to an insurance department media release: “Most homeowners policies include coverage for additional living expenses (ALE) under the prohibited use coverage that generally pays extra expenses for up to two weeks when an evacuation order prohibits policyholders from living in their homes. When homeowners have physical damage to their properties that is covered by insurance, additional living expense coverage will pay for longer term additional expenses if a home is uninhabitable during the repair.”
The department recommends that affected policyholders also apply for individual assistance through the Federal Emergency Management Agency. Donelon said FEMA and insurance carriers communicate with each other regarding coverage and payouts for individual policyholders.
Additional living expenses are not covered by National Flood Insurance Program policies, the LDI noted.
“The Louisiana Department of Insurance encourages everyone to keep receipts for any extra expenses they face after a disaster. Additional living expense coverage pays the expenses beyond a policyholder’s normal expenses for housing and food, such as the cost of a hotel room or apartment rental and reasonable restaurant meals when someone is unable to cook,” the department’s media release said.
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