Louisiana Governor Vetoes Bill Limiting Bad Faith Lawsuits Against Insurers

Louisiana Governor Jeff Landry vetoed a bill last week that would have limited bad faith lawsuits against insurers, a move that raised criticism from the insurance industry.

SB 111, sponsored by Sen. Alan Seabaugh, R-Many, intended to bring clarity to when claimants could bring bad faith personal or bodily injury lawsuits against insurers. The bill proposed that bad faith lawsuits be barred when insurers provide a good faith dispute as to liability and as to medical causations for the injuries alleged by the claimant.

The bill would have prohibited bad faith lawsuits when an insurer hadn’t received 30 days to review an offer within the applicable policy limits or the insurer had not had the opportunity to conduct proper discovery. The bill narrowly passed the House by a 56-44 vote.

By vetoing the bill, Landry denied “common sense legal reform legislation that would have significantly curtailed jackpot justice,” said Neil Alldredge, president and CEO of the National Association of Mutual Insurance Companies.

“Louisianans should rightfully express their frustrations over this failure to strengthen the health and competitiveness of the state’s insurance market,” Alldredge said.

The governor wrote in a veto message that the bill would make it easier for insurance companies to deny valid claims, introduce legal uncertainty and leave policyholders with limited options for recourse. Landry said the bill would shield insurers from having to defend their decisions to deny settlements.

Landry referred to Missouri Senator Josh Hawley’s recent remarks at a Congressional hearing over insurers’ handling of claims following natural disasters. Louisiana’s bad faith statutes stem from the insurance industry’s response to settling claims from past disasters, including Hurricane Katrina and Rita in 2005.

“Historically, some large insurers have adopted strategies to delay and deny claims, minimize payouts, and aggressively defend against policyholders who contest low settlements,” Landry wrote.

Landry’s decision to veto the bill came as a surprise to lawmakers after the governor had previously said he would sign any insurance reform bills passed during the legislative session, which ended last week.

“John Bel would call and tell me when he vetoed a bill,” Seabaugh told Louisiana Illuminator. “Jeff didn’t.”

Seabaugh said during an April 30 Senate Insurance Committee hearing that he drafted the bill to give insurers a “fighting chance in court.”

“One of the things the governor has said is that he thinks insurance companies don’t goto court enough,” Seabaugh told the committee.

Landry wrote in his veto message that he would be willing to work with lawmakers on reasonable changes to the bad faith statute next year.

Topics Lawsuits Carriers Louisiana