A Louisiana judge ruled last week that the state’s insurance commissioner’s directive ordering insurers to pay policyholders’ Hurricane Ida evacuation expenses is invalid and unenforceable.
Judge Patrick Moore of the Division of Administrative Law wrote that Louisiana Department of Insurance Commissioner Jim Donelon acted in abuse of his office’s discretion by issuing Directive 218, which authorized all insurers to pay expenses incurred by policyholders who resided in 25 specified parishes, because of evacuation and/or being prohibited from using their insured premises due to Hurricane Ida.
State Farm and Dover Bay Specialty were among companies who refused to waive mandatory evacuation requirements to cover evacuation expenses. Most homeowner’s insurance policies only require insurers to cover living expenses if policyholder is under a mandatory evacuation order. Officials in some of the 25 specified parishes did not order evacuations, nor did they issue declarations asking residents not to return to their homes at any time before or after landfall of Hurricane Ida.
On Sep. 2, 2021, Donelon issued Bulletin 2021-07, which requested that insurers waive policy language that required the issuance of a civil evacuation order to trigger Prohibited Use coverage. Prohibited Use coverage often covers additional living expenses, such as hotel and fuel costs for when a policyholder is under an evacuation or stay-away order.
Five days later, Donelon issued Directive 218 upon learning that some insurers refused Prohibited Use coverage. The directive required payment of those claims.
In Moore’s ruling, he called Directive 218 an “improper exercise” of Donelon’s discretion. Moore wrote that nowhere in the Louisiana Insurance Code gives the Commissioner power to extend Prohibited Use benefits to insureds who resided in parishes or municipalities that were not subject to an evacuation order issued by civil authority.
Moore called Donelon’s interpretation of the Prohibited Use policy language “wrong, manifestly erroneous, and shocking to the conscience of the tribunal.”
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