Louisiana Bad Faith Insurance Statutes

Bad faith insurance attorney

In May 2024, Louisiana enacted significant changes to its insurance bad faith laws through Senate Bill No. 323, which Governor Jeff Landry signed into law as Act No. 3. These revisions, effective July 1, 2024, aim to streamline claims handling, clarify insurer and insured duties, and introduce new procedures for addressing bad faith claims, particularly in the aftermath of catastrophic events like hurricanes.​

Key Changes to La. R.S. 22:1892

1. Consolidation of Statutes

Previously, Louisiana had two separate statutes—La. R.S. 22:1892 and 22:1973—governing insurer bad faith. Act No. 3 repealed La. R.S. 22:1973, integrating its provisions into the amended La. R.S. 22:1892 and the newly created La. R.S. 22:1892.2. This consolidation aims to reduce confusion and provide a more cohesive framework for handling bad faith claims.

2. Insurer's Duty of Good Faith

Under the revised statute, insurers are required to adjust claims fairly and promptly and to make a reasonable effort to settle claims with the insured or claimant. Failure to comply with these duties can result in penalties, including the greater of 50% of the amount owed or $5,000, plus reasonable attorney fees and costs.

3. Insured's Duty of Good Faith

A notable addition is the imposition of a duty of good faith on the insured. The statute outlines specific acts that constitute a breach of this duty, such as failing to comply with affirmative contractual duties, misrepresenting pertinent facts, or submitting claims without a basis for coverage. If the trier of fact determines that the insured breached this duty, it must consider that conduct when determining whether the insured should be awarded penalties and attorney fees. ​

4. Elimination of General Damages

The revised statute removes the provision allowing for the recovery of general damages, such as mental anguish, in bad faith claims. Now, claimants can only recover proven economic damages resulting from the insurer's breach of duty. ​

Introduction of La. R.S. 22:1892.2 – Catastrophic Loss Claims

La. R.S. 22:1892.2 specifically addresses claims arising from catastrophic losses to immovable property, such as those resulting from hurricanes. Under this provision, claimants must provide written notice to the insurer detailing the facts and circumstances of the dispute. The insurer then has a 60-day "cure period" to resolve the issue. If the insurer pays the full amount sought within this period, no further action can be taken under this statute. This process aims to encourage prompt resolution and reduce litigation. ​

Additional Notable Changes

• Prescriptive Period: The statute of limitations for bad faith claims has been reduced to two years, aligning with the prescriptive period for tort claims in Louisiana. ​

• Depreciation Transparency: Insurers are now required to provide a written explanation of how depreciation is calculated on claims, ensuring transparency and fairness in the adjustment process. ​

• Vendor Recommendations: Insurance companies are prohibited from requiring insureds to use preferred vendors or contractors without informing them that they are under no obligation to do so.

Implications for Insurers and Insureds

These legislative changes are designed to balance the interests of both insurers and insureds. Insurers benefit from clearer guidelines and procedures, particularly in handling claims arising from catastrophic events. Insureds, on the other hand, are afforded greater transparency and fairness in the claims process, with mechanisms in place to address bad faith practices.​

If you gave any questions, contact us to help you understand the implications on your claim and protect your rights under Louisiana law.