Following major insurance reforms enacted in Florida, Louisiana officials are proposing similar policies that could affect how roofing contractors do business in the state.
On Tuesday, Louisiana Insurance Commissioner Jim Donelon unveiled reforms to the state’s insurance market aimed at stabilizing rates for homeowners and providing incentives for FORTIFIED roofing.
“This package … is the most ambitious property insurance reform we have attempted to achieve in my 17 years as insurance commissioner,” said Donelon, who was joined by Senate Insurance Committee Chairman State Sen. Kirk Talbot and House Insurance Committee Chairman State Rep. Mike Huval.
Like Florida, Louisiana’s property insurance market has suffered due to the constant battering it’s received from hurricanes. A total of 11 insurers that write homeowners coverage in Louisiana were declared insolvent between July 2021 and September 2022.
Donelon pointed to Florida’s recent insurance reforms that, among other changes, eliminated the “Assignment of Benefits” provision. The provision allowed for insurance carriers to pay roofing contractors or others directly, though the process often resulted in lawsuits. The provision allowed contractors to recoup attorney fees from insurers with successful cases. Florida lawmakers eliminated this to deter frivolous lawsuits that drove up costs.
“Assignment of benefits has been used by bad actors to commit insurance fraud,” he said.
The concern is that Florida’s reforms will cause rogue law firms to head to Louisiana, evidence of which is already apparent. In February, Donelon placed a cease-and-desist order on a law firm out of Texas, alleging it was working with a roofing contractor to “fraudulently represent” several hundred homeowners in hurricane claims against insurance companies.
“While we are not copying what Florida did legislatively, we are taking the lead in an effort to introduce several legal and claims process reforms that should strengthen our market for the long term,” Donelon said.
The proposed legislation would prohibit property insurance policyholders from assigning their benefits to third-parties like roofing contractors without their company’s approval. Donelon said the Texas law firm used this provision to develop a scheme to have policyholders sign over their rights to negotiating with an insurer on their behalf without he policyholder’s knowledge.
“We’ve seen rogue law firms file frivolous lawsuits against insurance companies, which drives up costs for honest homeowners and makes it harder for legitimate claims to be processed,” said Donelon.
Another bill will address the issue of insurance companies attempting to prohibit policyholders from hiring public adjusters for second opinions. Additionally, a bill introduced by Huval would add a two-year statute of limitation for policyholders to seek penalties and attorney fees for untimely payment of claims.
Other legal and claims process reforms would attract more insurers from across the country to Louisiana’s market to stabilize costs for homeowners. There are also proposals to block former officers and directors of failed insurers from switching to new companies.
Along with legal reforms, the package centers on the state’s Fortify Homes roof grant program. FORTIFIED is a reroofing method tested by the Insurance Institute of Business and Home Safety [IBHS] that is shown to withstand winds up to 130 mph, and requires shingles that can withstand 2-inch hail impacts.
The Louisiana Fortify Homes Program provides qualifying homeowners with grants to build stronger roofs that meet or exceed FORTIFIED standards, which in turn would lower their insurance premiums. Homeowners will need to meet edibility requirements and pay for permits, inspections and similar fees. The program passed last year but has not been funded.
In the upcoming legislative sessions beginning April 10, Huval said they will pursue $20 million to fund the program.
“Stronger roofs means fewer insured losses and lower rates,” Huval said. “This program will help a lot of folks resist storm damage in the near future while potentially reducing residential property insurance costs for the entire state in the longer term.”
The Louisiana Department of Insurance also plans on introducing legislation that would require insurance companies to offer a discount and an endorsement to upgrade their policyholders’ roofs to the FORTIFIED roof standard.
“This will ensure policyholders who are putting in the time, money and effort to build or retrofit their structures to FORTIFIED standards while reaping all the benefits of that decision,” said Huval.
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