The Louisiana Supreme Court has ruled unanimously that new laws extending the deadline for policyholders to sue their insurers are constitutional due to the extraordinary circumstances resulting from Hurricanes Katrina and Rita.
In his opinion Friday, Chief Justice Chet Traylor said the laws extending the filing period are “based on a significant and legitimate public purpose.”
On Wednesday a lower state court upheld the constitutionality of the extension laws, after which the Louisiana attorney general asked the Supreme Court for a definitive ruling even though he had won the case.
Allstate was among the companies protesting the extension and sought unsuccessfully to move the review to federal court. Insurers claimed that any laws changing contract terms after the fact would not be helpful in general for the business climate.
Greg La Cost, assistant vice president for the Property Casualty Insurers Association of America, said the ruling does not bring about any major change, but is important for the certainty it creates regarding the length of time policyholders have to file catastrophe-related suits.
“The court acknowledged our concerns, but given the unique circumstances the justices determined that it was in the public's interest to allow these contracts to be retroactively changed,” Mr. La Cost said.
He added, “We hope that this ruling will be just an exception and that the court's interference in binding contracts will be very limited.”
In the weeks leading up to the court action, virtually all insurers notified Louisiana's insurance commissioner that they would not strictly enforce the normal 12-month prescriptive period.
“From the very beginning of the claims settlement process, insurers have worked with consumers who have legitimate disputes in order to reach a fair and equitable resolution,” said Mr. LaCost. “That commitment to customers will not change.”
Earlier this month, Insurance Commissioner James Donelon reported that writers representing more than 99 percent of the homeowners have agreed to the extension.
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