It took Hurricane Katrina in 2005 and people getting angry at their adjusters to pass legislation requiring licenses for adjusters. After the 2020 Hurricane season, people affected by the storms were every bit as angry at adjusters, and more legislation was passed during the 2021 Regular Session of the Louisiana Legislature that attempts to rein in adjusters and mollify the hurricane victims.
The recent legislation passed without a dissenting vote, but that does not mean that everyone in the insurance community believes the 2021 legislation is wise or even smart.
Matthew Monson, the Monson Law Firm, a presenter at the Louisiana Claims Association meeting held in June, is among those who believe the legislation is a “stupid” law — more delicately put: not well thought out.
Monson’s topic at the LCA Convention and Expo was Laura Delta Zeta We Can Help Ya Help Ya Help Ya. During his one hour presentation Monson discussed the 2020 “unprecedented year” for tropical weather; case management orders in the courts, designed to make hurricane-related lawsuits move forward more quickly, and House Bill 591, which became Act 345 and deals with claims settlement practices.
The five storms making landfall in Louisiana were Cristobel and Marco, along with hurricanes Laura, Delta and Zeta. At 150 mph, Laura was the strongest storm to make landfall, according to Monson, who said Katrina and others were stronger out in the Gulf of Mexico, but their strength fell off before making landfall, while Laura continued to strengthen. Even 30 miles inland in Lake Charles there were 130 mph gusts. And Zeta was the first time since Betsy in 1965 that the eye of a hurricane passed over the city of New Orleans.
Delta hit about 43 days after Laura which made landfall Aug. 27, both coming ashore in southeast Louisiana in Cameron Parish. Nineteen days after Delta, Zeta came ashore setting another record – the latest land-falling hurricane, Oct. 28. Zeta was an “aggravation to be sure with power outages, but nothing like what people in Lake Charles went through,” Monson said.
In order to avoid the deluge of lawsuits, such as the 10,000 lawsuits from Katrina that clogged the federal courts for a long time, the federal court has issued an administrative order and case management order to create a disaster protocol and streamline the settlement process.
Under an administrative order from the U.S. District Court for the Western District, issued in the Lake Charles and Lafayette divisions, all the cases that have anything to do with Laura and Delta will go to Judge James David Cain Jr. whose father ran for commissioner of insurance in 2006.
The case management order governs procedure to expedite discovery, followed by a streamlined conference and mediation protocol.
“Everyone with half a heart can understand that the people of Lake Charles need to get everything that is coming to them,” Monson said. From his perspective as a defense attorney, the problem is that the stated purpose of the case management order is to “allow the people of Louisiana to move forward with recovery.” Translate: make the insurance companies pay.
That is not to say Cain is unfair, but when the basis of the process is “making sure people get paid, obviously the deck is stacked against (insurance companies) when litigating these matters,” Monson said.
He explained the disaster protocol, which provides for the disclosure of information between insured and insurer, and contains a detailed list of information to be provided, which Monson reviewed.
The case management order sets a two-stage settlement process with a special master and deputy special master ordered to administer, coordinate and preside over the settlement process. The case management order also lists neutrals pre-approved to conduct mediations.
Monson told his audience that the court appointed neutrals are “not necessarily the most knowledgeable people in the field of property damage.” That being said, Monson is sure that “by the end of this they will be more experienced than they want to be.”
The mediation is paid for 25 percent by plaintiffs and 75 percent by defendants. “If things are going to be done on an ethical basis,” Monson said, “it should be 50/50.”
According to Monson, on March 16, Calcasieu Parish issued a case management order similar to the one in the Western District with the same built-in bias. Cameron Parish does not have a case management order, so it is litigation as usual.
Legislation to rein in adjusters
The law providing for claims settlement practices was sponsored by a representative who is a licensed adjuster. He decided “to stick it to his own industry because he doesn’t like what people are doing,” Monson said. “Because he is a licensed adjuster, his stuff just sailed through (the legislature) without a dissenting vote.”
Monson reviewed some aspects of the new law.
A special notice is to be promulgated by the Department of Insurance indicating that reasonable depreciation may be deducted or withheld.
Per the new law, an insurer cannot require repairs to be done by a particular vendor. Monson pointed out that some policies give the insurer the right to make the repairs. While Monson believes that is not wise to do, those policies will have to be changed to comply.
Overhead and profit are required to be included in the settlement when the service of a general contractor is reasonably foreseeable. Monson believes this requirement will make lawyers a lot of money arguing about what is reasonable.
The final section of the law mandates that an appraisal clause be added to residential property insurance policies on or after Jan. 1, 2022.
Monson pointed out that an appraisal clause is already in the standard fire policy. “It is already there. It has been there for decades, and it has worked,” Monson said.
He found fault with the appraisal clause because if the appraisers fail to agree within 30 days, the appraisers submit their differences to the umpire “who shall appraise the loss,” the statute reads.
Appraising the loss is not the job of an umpire. “The umpire’s job is to resolve the dispute and only the disputed items,” Monson said.