Louisiana Insurance Commissioner Jim Donelon last week ordered insurers to give policyholders an additional year to go to court against them in disputes over damage claims from Hurricanes Katrina and Rita.
His decision was questioned by carriers, but Mr. Donelon, in issuing his Directive 199 on July 11, said Louisiana appears to be the only state in the country with a one-year limit for filing suit over property damage claims.
His notice orders insurance companies to file a stipulation with his department by Aug. 1, stating that any insured with a property and casualty insurance policy in Louisiana has until Aug. 30, 2007 to file suit or a legal action with regard to any claim for property damages caused by Hurricane Katrina, and until Sept. 25, 2007 for a Hurricane Rita claim.
The commissioner mentioned that of the Gulf Coast states hit by Hurricanes Katrina and Rita, Alabama has a six-year prescriptive period, Florida's is four years, Mississippi's is three years and the period in Texas is two years.
But some property-casualty industry representatives said the extension could turn into a questionable rewriting of the contract.
Robert Detlefsen, public policy director for the National Association of Mutual Insurance Companies, said that any time you lengthen the time period to file a claim you run the risk of facts getting fuzzier and more difficult to determine.
Mr. Donelon said he believes it's only fair that policyholders who are still not able to make final, or even initiate, repairs to their hurricane-damaged property be given more time to work out their insurance settlements.
“Many people still don't know the full extent of the damage caused to their insured property by either Hurricane Katrina or Hurricane Rita,” said Mr. Donelon.
The commissioner added that many disputed claims are still in the process of being worked out through the department's mandatory Hurricane Mediation Program and he doesn't want to adversely impact the success of that program.
The mediation program has an 80 percent success rate and has allowed the insurance companies to avoid paying an estimated $50 million in litigation defense costs, the commissioner said.
So far, in addition to the Louisiana Citizens Property Insurance Corporation, four other companies have voluntarily agreed to extend the deadline: Fidelity, Assurant Group, Balboa Group and American Modern Insurance Group.
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