LDI gives a preview of its legislative package

The legislative liaison for the Louisiana Department of Insurance previewed several bills which will be introduced during the 2021 Regular Session of the Legislature. The bills make up the department’s legislative package for the session convening April 12.
Louisiana Insurance Commissioner Jim Donelon
David Pearce, LDI’s legislative liaison, gave a rundown of the legislative proposals to the Property/Casualty Work Group during a virtual meeting on March 29. The Property/Casualty Work Group is a sub-group of the Agent Advisory Board to the Commissioner of Insurance.

As of the March 29 meeting, not all of the bills had been filed, but a week later they all were. The bills Pearce talked about are:

-House Bill 15 by Rep. Sherman Q. Mack, R-Albany, creates the crime of staging a motor vehicle collision and defines the elements of the crime as causing a motor vehicle collision for the purpose of obtaining anything of value; participating in a scheme to create documentation of a motor vehicle collision that did not occur for the purpose of obtaining anything of value, and participating with an intent to defraud by making a claim for insurance benefits or monetary damages and/or attempting or assisting in attempting to obtain any benefit to which the person is not legally entitled. The proposed law provides for a prison term, with or without hard labor, not to exceed five years and/or a $5,000 fine. Proposed law creates the crime of aggravated staging of a motor vehicle collision and defines it as the staging of a motor vehicle collision which causes the death of or serious bodily injury to another person. For that crime, proposed law provides for a prison term, with or without hard labor, for not less than five years or more than 30 years and/or a fine not to exceed $15,000.

-House Bill 65 by Rep. Michael Echols, R-Monroe, removes the requirement that the triennial audit of title insurers be conducted on-site. Proposed law specifies that the authority to set forth the standards and the form of periodic title insurer audits rests with the commissioner of insurance.

-House Bill 283 by Rep. Paul Hollis, R-Covington, repeals reporting requirements related to commercial motor vehicle policies, effective on signature of the governor. Present law requires automobile insurers to report to the commissioner certain data related to commercial motor vehicles, including number of policies written, amount of direct premiums written and direct paid losses, by parish and zip code.

-House Bill 462 by Rep. Mike Huval, R-Breaux Bridge, expands the surplus lines tax to include insurance placed through and directly by Louisiana licensed surplus lines brokers and unauthorized insurers regardless of the covered property, risk or exposure. Present law imposes a tax of 4.85 percent per annum on the gross premium of surplus lines insurance for Louisiana home state policyholders. Present law exempts from quarterly reporting requirements surplus lines brokers who are not in possession of any surplus lines. Proposed law adds a requirement that surplus lines brokers not have other unauthorized insurance premiums to report in order to be exempt from the quarterly reporting requirement. Proposed law provides that each policyholder directly placing insurance shall transmit a direct placement tax report to the commissioner and remit the tax payable within 30 days. Proposed law provides that the commissioner shall prescribe the manner and form of the direct placement tax report. Under present law after the 30 days lapses, until the report is filed and the delinquent tax paid, the commissioner may revoke the license of the delinquent surplus lines broker. The proposed law gives the commissioner discretion to suspend or revoke the license of the delinquent surplus lines broker.

-House Bill 577 by Rep. Scott McKnight, R-Baton Rouge, deals with residential flood coverage in the private market and does not apply to commercial lines insurance and surplus lines insurance. The proposed law provides that Louisiana Citizens Property Insurance Corp. shall not provide residential flood coverage. Insurers writing residential flood coverage shall file with the commissioner a plan of operation, financial projections and any revisions, and shall note the premiums, deductibles and policy limits prominently on the declarations page. The insurer must advise the commissioner when an approved policy form will no longer be marketed, when an approved policy form will be withdrawn from the state and whether or not flood coverage under a discontinued or withdrawn policy form will remain in force or be renewed. The proposed law provides that, in addition to excess coverage, insurers may issue standard flood coverage, preferred flood insurance, customized flood insurance, flexible flood insurance and supplemental flood insurance. The proposed law provides that insurers writing residential flood insurance establish and use rates in accordance with present law. If the commissioner determines that a rate is excessive or unfairly discriminatory, the commissioner shall require the insurer to provide appropriate credit to affected policyholders and an appropriate refund to affected former policyholders. When a producer places residential flood coverage with a surplus lines carrier and the applicant was receiving coverage from the NFIP, the producer shall inform an applicant that the NFIP coverage is at a subsidized rate and, if the applicant discontinues NFIP coverage, the full rate may apply to the property.

-Senate Bill 42 by Sen. Louis Bernard, R-Natchitoches, requires an insurer to give notice of the reinstatement of a casualty policy to any known person shown by the policy to have an interest in any loss that may occur, including anyone who received the notice of cancellation. Present law already requires notice of cancellation to the insured and to any known person shown by the policy to have an interest in any loss that may occur. Proposed law extends the notice requirement to all lines of property/casualty insurance, not just property.

-Senate Bill 131 by Sen. Robert Mills, R-Minden, prohibits insurance companies from including defense costs within the limits of liability unless the commissioner executes a written waiver. Proposed law applies to all personal lines, medical malpractice, commercial vehicle and commercial general liability. A waiver of the prohibition may be obtained for professional liability, other than medical malpractice; directors and officers liability; errors and omissions liability; pollution liability; employment practices liability, and cyber and technical liability. Every policy which gets a waiver, and policy limits are reduced by defense costs, must not include overhead costs, adjusting expenses or other expenses in the reduction of limits; only reasonable attorneys’ fees and expenses directly related to the defense of a claim may be included. Expenses are not to exhaust the entire limit of liability coverage. Proposed law authorizes the commissioner to limit the amount of defense expenses.

According to Pearce, the proposed bill aligns the statute with the guidance the department has provided for 32 years.

Sandbox Program

Not part of the LDI package is another bill, SB-231, introduced by Mills. This proposal creates the Insurance Regulatory Sandbox Program which enables a person to obtain limited access to the insurance market in the state to test an innovative product or service without obtaining a license or other authorization that might otherwise be required.

The commissioner may execute agreements that follow the best practices of the U.S. Consumer Financial Protection Bureau or the best practices of another state that is administering similar innovative insurance programs. The law would bar from participation in a Sandbox Program anyone convicted or who pleads nolo contendere to a crime involving theft, fraud or dishonesty.

A nonrefundable fee of $4,500 is to be submitted with the application; however, the fee may be waived if the applicant holds a license.

The commissioner is to inform the applicant whether or not the application is approved within 90 days of the application being submitted. If approved, the insurance sandbox participant has 24 months to test the innovative product or service. Consumers who are offered the products must be Louisiana residents.

No guaranty association in the state shall be held liable for the business losses or liabilities of the sandbox. At least 30 days prior to the end of the 24 months, the sandbox participant may request an extension. Proposed law requires the sandbox report quarterly to the commissioner.

Beginning Oct. 1, 2022, the commissioner shall provide an annual written report to the Senate Insurance Committee and the House Insurance Committee. The report should contain information on each sandbox participant and recommendations regarding the effectiveness of the program.