State Farm is seeking a stay order from the Louisiana Division of Administrative Law (DAL) to put on hold Commissioner of Insurance Jim Donelon’s directive requiring the company to pay policyholders’ evacuation expenses for Hurricane Ida.
Donelon issued Directive 218 on Sept. 7 directing residential property insurers, admitted and surplus lines, to pay loss of use claims regardless of policy language which may require a mandatory order of evacuation or physical damage to the property to trigger the coverage. The order applies to the 25 parishes affected by Hurricane Ida and listed in Emergency Rule 47.
State Farm has refused to go along with the directive and sought a review of the directive by the DAL.
“We have filed a request for a hearing in an administrative law court because we believe we should follow the policy language as approved for customers in the state,” said Roszell Gadson, a State Farm spokesman who handles Louisiana. “Following the terms of the contract ensures fair treatment for all of our customers, regardless of the storm or their location.”
The company is concerned that following the commissioner’s directive could lead to rate increases nationwide, according to Gadson.
“If we were to retroactively change what we agreed to do for our customers, it could have a negative long-term impact on insurance prices across the country,” he said.
At the same time, State Farm is moving forward on contacting policyholders, making damage assessments and issuing payments, Gadson said. The company has received more than 100,000 Hurricane Ida-related claims across multiple states, and as of Sept. 23, more than 90 percent of homeowner policyholders have been contacted, with settlements issued in a quarter of those claims, according to State Farm.
In addition, State Farm has paid out $750,000 in disaster-relief grants to Louisiana community organizations. Among the groups receiving funds were the Red Cross chapter in southeast Louisiana and Second Harvest Food Bank of Greater New Orleans.
For his part, Donelon said in the directive that policy language requiring a mandatory evacuation order is in policies to protect companies from insureds making claims for expenses that were not justified, but “use of that limitation was not intended to unjustly deny coverage to a policyholder who legitimately evacuates to protect their life and health and where it was impracticable for a civil authority to issue a formal order of evacuation.”
According to Donelon, there were enough advance warnings from elected officials to justify a policyholder’s decision to evacuate. Hurricane Ida was a catastrophic event that justified evacuation.
The Louisiana DAL held a telephone status and scheduling conference on the issue Oct. 13, wherein Administrative Law Judge Patrick E. Moore asked representatives of LDI and State Farm to consult and agree upon language for a stay order, according to the DAL’s report on the conference.
After the conference, counsel for State Farm circulated proposed language for the stay order to which there was no objection, according to the conference report. But Moore determined that for a stay order to comply with Louisiana law, it must be granted at a hearing, so an in-person hearing was scheduled for Nov. 17.
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