La. Insurers not Voluntarily Extending Policy Deadlines

A month after Louisiana Insurance Commissioner James Donelon called on insurers to voluntarily extend the one-year deadline for customers to file suits for unsettled claims related to Hurricanes Katrina and Rita, not a single private company has done so.

The Louisiana Citizens Property Insurance Corp., the state-created insurance provider of last resort, is the only insurer voluntarily agreeing to extend from one to two years the time period in which its policyholders can seek relief as a result of hurricane-related claims.

Most property insurance policies in Louisiana carry a one-year time limit for lawsuits disputing their settlements. After that period, homeowners lose critical leverage to negotiate with insurers.

Many Katrina claims have not been settled, raising the prospect of a flood of lawsuits before Aug. 29, the anniversary of the storm.

Donelon now is exploring other options, a spokeswoman said.

While insurance companies are not volunteering to fulfill the insurance commissioner’s request, they still can extend the legal deadline by complying with new state laws.

That seems to be how State Farm, Louisiana’s largest insurer, is approaching the issue. The company was not willing to extend the period voluntarily “simply because we were concerned that it was precedent-setting,” State Farm spokesman Morris Anderson said. “Changing or making waivers in the contract after claims have been filed, we just didn’t think that was in our best interest.”

However, State Farm has no plans to challenge new legislation, Anderson said. After the recent state legislative session, a new law is in place saying that insurance claimants have two years after hurricane damage to file a suit, although lawmakers recognized that the bill raises constitutional questions because it affects existing contracts between private parties.

Another new law calls upon a legal principle recognized by the courts that basically says it is unfair to impose a time restriction on a legal filing if a person was unable to file a suit for some valid reason.

“We will abide by the legislation. If we have to extend the prescription period, we will certainly abide by that,” Anderson said.

Information from The (New Orleans) Times-Picayune.