§1892. Payment and adjustment of claims; policies other than life and health and accident;
good faith duty; breach of good faith duty; vehicle damage claims; extension of time
to respond to claims during emergency or disaster; penalties; arson-related claims
suspension; definitions
A.(1) All insurers issuing any type of contract, other than those specified in R.S.
22:1811, 1821, and Chapter 10 of Title 23 of the Louisiana Revised Statutes of 1950, shall
pay the amount of any claim due any insured within thirty days after receipt of satisfactory
proofs of loss from the insured or any party in interest. The insurer shall notify the insurance
producer of record of all such payments for property damage claims made in accordance with
this Paragraph.
(2) All insurers issuing any type of contract, other than those specified in R.S.
22:1811, R.S. 22:1821, and Chapter 10 of Title 23 of the Louisiana Revised Statutes of 1950,
shall pay the amount of any third party property damage claim and of any reasonable medical
expenses claim due any bona fide third party claimant within thirty days after written
agreement of settlement of the claim from any third party claimant.
(3) Except in the case of catastrophic loss, the insurer shall initiate loss adjustment
of a property damage claim and of a claim for reasonable medical expenses within fourteen
days after notification of loss by the claimant. In the case of catastrophic loss, as defined in
this Section, the insurer shall initiate loss adjustment of a property damage claim within
thirty days after notification of loss by the claimant except that the commissioner may
promulgate a rule for extending the time period for initiating a loss adjustment for damages
arising from a presidentially declared emergency or disaster or a gubernatorially declared
emergency or disaster up to an additional thirty days. Thereafter, only one additional
extension of the period of time for initiating a loss adjustment may be allowed and shall be
approved by the Senate Committee on Insurance and the House Committee on Insurance,
voting separately. Failure to comply with the provisions of this Paragraph shall subject the
insurer to a penalty of the greater of five thousand dollars or the amount provided for in
Subsection I of this Section.
(4) All insurers shall make a written offer to settle any property damage claim,
including a third-party claim, within the applicable number of days after receipt of
satisfactory proofs of loss of that claim that is provided pursuant to this Section or R.S.
22:1892.2, provided that this period shall be extended by the number of days, if any, the
insurer initiates loss adjustment earlier than the deadline provided in Paragraph (3) of this
Subsection.
(5) An insurer shall issue a copy of the insurer's field adjuster report, relative to the
insured's property damage claim, to the insured within fifteen days of receiving a request for
such from the insured.
(6) If an insurer issues a check, draft, or other negotiable instrument that is jointly
payable to an insured and a mortgagee or mortgage servicer as payment of insurance
settlement proceeds for multiple types of coverage, the insurer shall provide with the check,
draft, or other negotiable instrument a statement indicating the dollar amount of insurance
settlement proceeds paid under each type of coverage including but not limited to dwelling,
personal property, and additional living expenses. In lieu of issuing a statement pursuant to
this Paragraph, an insurer may issue separate checks, drafts, or other negotiable instruments
for payment of each type of coverage.
(7) Notwithstanding any provision of this Part to the contrary, an insurer that issues
a property insurance policy with replacement cost coverage may refuse to pay a claim for
withheld recoverable depreciation or a replacement cost holdback under the policy until the
insurer receives reasonable proof of payment by the policyholder of any deductible applicable
to the claim. Reasonable proof of payment includes a canceled check, money order receipt,
credit card statement, or a copy of an executed installment plan contract or other financing
arrangement that requires full payment of the deductible over time.
(8) The provisions of this Subsection do not apply to surety bonds.
B.(1)(a) Except as provided in Subparagraph (b) of this Paragraph, failure to make
payment within thirty days after receipt of satisfactory written proofs and demand therefor
or failure to make a written offer to settle any property damage claim, including a third-party
claim, within thirty days after receipt of satisfactory proofs of loss of that claim, as provided
in Paragraphs (A)(1) and (4) of this Section, respectively, or failure to make the payment
within thirty days after written agreement or settlement when the failure is found to be
arbitrary, capricious, or without probable cause, shall subject the insurer to a penalty, in
addition to the amount of the loss, of fifty percent damages on the amount found to be due
from the insurer to the insured, plus any proven economic damages sustained as a result of
the breach, or one thousand dollars, whichever is greater, payable to the insured, or in the
event that a partial payment or tender has been made, fifty percent of the difference between
the amount paid or tendered and the amount found to be due, plus any proven economic
damages sustained as a result of the breach, as well as, in either instance, reasonable attorney
fees and costs. The penalties, if awarded, shall not be used by the insurer in computing either
past or prospective loss experience for the purpose of setting rates or making rate filings.
(b) In the case of a catastrophic loss, any penalty for payment and adjustment of a
first-party claim arising under an insurance policy for immovable property shall be subject
to penalty pursuant to the provisions of R.S. 22:1892.2, and the provisions of this Paragraph
shall not apply.
(c) For the purposes of this Section and R.S. 22:1892.2, the following definitions
apply:
(i) "Catastrophic loss" means a loss that arose from a natural disaster, windstorm, or
significant weather-related event that was a presidentially declared emergency or disaster or
a gubernatorially declared emergency or disaster.
(ii) "Immovable property" means a tract of land with its component part, including
a factory-built or modular home as defined in R.S. 51:911.22.
(iii) "Residential property" means property defined as improvements for residential
purposes pursuant to R.S. 47:2322.
(2) The period set herein for payment of losses resulting from fire and the penalty
provisions for nonpayment within the period shall not apply where the loss from fire was
arson related and the state fire marshal or other state or local investigative bodies have the
loss under active arson investigation. The provisions relative to time of payment and
penalties shall commence to run upon certification of the investigating authority that there
is no evidence of arson or that there is insufficient evidence to warrant further proceedings.
(3) The provisions relative to suspension of payment due to arson shall not apply to
a bona fide lender which holds a valid recorded mortgage on the property in question.
(4)(a) If a property damage claim is on a personal vehicle owned by the third-party
claimant and as a direct consequence of the inactions of the insurer in settling the third-party
claimant's loss, the third-party claimant is deprived of use of the personal vehicle for more
than five business days, the insurer responsible for payment of the claim shall pay, to the
extent legally responsible, for reasonable expenses incurred by the third-party claimant in
obtaining alternative transportation for the entire period of time during which the third-party
claimant is without the use of his personal vehicle. If the insurer fails to make such payment
within thirty days after receipt of adequate written proof and demand therefor, and the failure
is found to be arbitrary, capricious, or without probable cause, the insurer is subject to, in
addition to the amount of reasonable expenses incurred, a reasonable penalty not to exceed
ten percent of such reasonable expenses or two thousand five hundred dollars, whichever is
greater, together with reasonable attorney fees for the collection of such expenses.
(b) In a first-party claim, if an insurer fails to provide an insured who is entitled to
a rental vehicle under his policy with rental vehicle coverage within three business days of
the insured's written request for such, and the insurer's failure is found to be arbitrary,
capricious, or without probable cause, the insurer is subject to, in addition to the amount of
reasonable expenses incurred by the first-party insured, a reasonable penalty not to exceed
fifty percent of such reasonable expenses or two thousand five hundred dollars, whichever
is greater. Reasonable expenses shall only include rental expenses or expenses associated
with loss of use of the insured vehicle during the time rental coverage was not approved.
This Paragraph does not apply to an insurer conducting an investigation of coverage under
a Reservation of Rights.
(5) If an insurance policy provides for the adjustment and settlement of first-party
motor vehicle total losses on the basis of actual cash value or replacement with another of
like kind and quality, and the insurer elects a cash settlement based on the actual cost to
purchase a comparable motor vehicle, such costs shall be derived by using one of the
following:
(a) A fair market value survey conducted using qualified retail automobile dealers
in the local market area as resources. If there are no dealers in the local market area, the
nearest reasonable market can be used.
(b) The retail cost as determined from a used motor vehicle industry source generally
recognized by the business industry including but not limited to insurers, bankers, and loan
officers, such as an electronic database, if the valuation documents generated by the database
are provided to the first-party claimant, or a guidebook that is available to the general public.
If the insured demonstrates, by presenting two independent appraisals, based on measurable
and discernable factors, including the vehicle's preloss condition, that the vehicle would have
a higher cash value in the local market area than the value reflected in the source's database
or the guidebook, the local market value shall be used in determining the actual cash value.
(c) A qualified expert appraiser selected and agreed upon by the insured and insurer.
The appraiser shall produce a written nonbinding appraisal establishing the actual cash value
of the vehicle's preloss condition.
(d) For the purposes of this Paragraph, local market area shall mean a reasonable
distance surrounding the area where a motor vehicle is principally garaged, or the usual
location of the vehicle covered by the policy.
(6)(a) For the purposes of this Paragraph the following terms have the meanings
ascribed to them:
(i) "Damaged property" means a dwelling, structure, personal property, or any other
property, except a vehicle, that requires repairs, replacement, restoration, or remediation to
reestablish its former condition.
(ii) "Depreciation" means depreciation including but not limited to the cost of goods,
materials, labor, and services necessary to replace, repair, or rebuild damaged property.
(b) An insurance policy covering damaged property may allow for depreciation.
(c) An insurance policy covering damaged property shall provide notice that
depreciation may be deducted or withheld, in a form approved by the commissioner.
(d) If depreciation is applied to a loss for damaged property, the insurer shall provide
a written explanation as to how the depreciation was calculated.
(e) Depreciation shall be reasonable and based on a combination of objective criteria
and subjective assessment, including the actual condition of the property prior to loss.
(7) Claims for penalties and attorney fees pursuant to this Subsection are subject to
a liberative prescriptive period of two years.
C.(1) All claims brought by insureds, workers' compensation claimants, or third
parties against an insurer shall be paid by check or draft of the insurer or, if offered by the
insurer and the claimant requests, electronic transfer of funds to the order of the claimant to
whom payment of the claim is due pursuant to the policy provisions, or his attorney, or upon
direction of the claimant to one specified; however, the check or draft shall be made jointly
to the claimant and the employer when the employer has advanced the claims payment to the
claimant. The check or draft shall be paid jointly until the amount of the advanced claims
payment has been recovered by the employer.
(2) No insurer shall intentionally or unreasonably delay, for more than three calendar
days, exclusive of Saturdays, Sundays, and legal holidays, after presentation for collection,
the processing of any properly executed and endorsed check or draft issued in settlement of
an insurance claim.
(3) Any insurer violating this Subsection shall pay the insured or claimant a penalty
of two hundred dollars or fifteen percent of the face amount of the check or draft, whichever
is greater.
D.(1) When making a payment incident to a claim, no insurer shall require repairs
be made to a motor vehicle, including window glass repairs or replacement, in a particular
place or shop or by a particular entity.
(2) An insurer shall not recommend the use of a particular motor vehicle service or
network of repair services without informing the insured or claimant that the insured or
claimant is under no obligation to use the recommended repair service or network of repair
services.
(3) An insurer shall not engage in any act or practice of intimidation, coercion, or
threat to use a specified place of business for repair and replacement services.
(4) The commissioner may levy the following fines against any insurer that violates
this Subsection:
(a) For a first offense, one thousand dollars.
(b) For a second offense within a twelve-month period, two thousand five hundred
dollars.
(c) For a third or subsequent offense within a twelve-month period, five thousand
dollars.
(5) A violation of this Subsection shall constitute an additional ground, under R.S.
22:1554, for the commissioner to refuse to issue a license or to suspend or revoke a license
issued to any producer to sell insurance in this state.
E.(1) An insurer shall not require that repairs, replacement, restoration, or
remediation be made to an insured's property by a particular preferred vendor or
recommended contractor when making a payment on a residential or commercial property
damage claim.
(2) An insurer shall not recommend the use of a particular preferred vendor or
recommended contractor without informing the insured or claimant that the insured or
claimant is under no obligation to use the preferred vendor or recommended contractor to
complete repairs, replacement, restoration, or remediation of the insured's property.
F.(1) In the adjustment or settlement of first-party losses under fire and extended
coverage policies, an insurer is required to include general contractor's overhead and profit
in payments for losses when the services of a general contractor are reasonably foreseeable.
This requirement applies to policies that provide for the adjustment and settlement of losses
on a replacement cost basis and to policies that provide for the adjustment and settlement of
losses on an actual cash value basis.
(2) The deduction of prospective contractor overhead, prospective contractor profit,
and sales tax in determining the actual cash value of an adjustment or settlement is not
allowed on replacement cost policies or on actual cash value policies.
G. Residential property insurance policies shall contain the following provision, with
permission to substitute the words "this company" with a more accurate descriptive term for
the insurer:
"Appraisal. If you and this Company fail to agree as to the amount of loss, either
party may demand that the amount of the loss be set by appraisal. If either party makes a
written demand for appraisal, each party shall select a competent appraiser and notify the
other party of their appraiser's identity within twenty days of receipt of the written demand
for appraisal. The appraisers shall select a competent and impartial umpire. If after fifteen
days the appraisers have not agreed upon who will serve as umpire, the umpire shall be
appointed by a judge of the court of record in which the property is located. The appraisers
shall appraise the loss pursuant to law. If the appraisers submit written notice of an
agreement as to the amount of the loss to this Company, the amount agreed upon shall set
the amount of the loss. If the appraisers fail to agree within thirty days, the appraisers shall
submit their differences along with any supporting documentation to the umpire, who shall
appraise the loss. The appraisers may extend the time to sixty days for which they shall agree
upon the amount of loss or submit their differences and supporting documents to the umpire,
if the extension is agreed to by the appraisers from both parties. A written agreement signed
by the umpire and either party's appraiser shall set the amount of the loss, pursuant to the
appraisal process, but shall not preclude either party from exercising its rights under the
policy or the law. Each appraiser shall be paid by the party selecting that appraiser. Other
expenses of the appraisal and the expenses of the umpire shall be divided and paid in equal
shares by you and this Company. If there is an appraisal award, all applicable policy terms,
limits, deductibles, and conditions shall apply. If you file a lawsuit relative to this policy
against this Company prior to a demand for appraisal, the lawsuit will be held in abatement
during the period between a timely demand for appraisal and the deadline for execution of
an appraisal award, pursuant to this clause. The court of record in which the property is
located may enforce the deadlines of this clause, set a reasonable deadline for timely
demanding appraisal after all parties have filed pleadings in a lawsuit, and require
compliance with discovery and disclosure obligations relative to aspects of the lawsuit
unrelated to the appraisal."
H. The Louisiana Insurance Guaranty Association, as provided in R.S. 22:2051 et
seq., and the Louisiana Citizens Property Insurance Corporation, as provided in R.S. 22:2291
et seq., shall not be subject to the provisions of Code of Civil Procedure Article 591 et seq.,
or any other provision allowing a class action, for any damages including any penalties
awarded pursuant to the provisions of this Section. The Louisiana Insurance Guaranty
Association, as provided in R.S. 22:2051 et seq., shall also not be liable for any special
damages or penalties provided for in this Section. The Louisiana Citizens Property Insurance
Corporation, as provided in R.S. 22:2291 et seq., shall not be liable for general damages,
special damages, or penalties in excess of the policy's limit; however, this Subsection does
not limit the Louisiana Citizens Property Insurance Corporation from paying legal interest
due from breach or reasonable attorney fees and costs when otherwise provided by this
Section.
I.(1)(a) An insurer, including but not limited to a foreign line or surplus line insurer,
owes to its insured a duty of good faith and fair dealing. The insurer has an affirmative duty
to adjust claims fairly and promptly and to make a reasonable effort to settle claims with the
insured or the claimant, or both. Any insurer that breaches the duties of this Subsection shall
be liable for any proven economic damages sustained as a result of the breach. For claims
not involving loss to an insured's immovable property, the insured may be awarded penalties
in an amount not to exceed fifty percent of the damages sustained or five thousand dollars,
whichever is greater, together with attorney fees and costs actually incurred due to the
breach. Any penalty for breach of a duty imposed by this Subsection based solely upon a
failure to pay the amount of any claim due to any person insured by the contract within the
period provided by law following receipt of satisfactory proof of loss shall be awarded only
if the breach is found to be arbitrary, capricious, or without probable cause.
(b) For claims arising under an insurance policy covering loss to immovable
property, the insurer shall instead be subject to the provisions of Subsection B of this Section
or R.S. 22:1892.2, as appropriate.
(2) Any one of the following acts, if knowingly committed or performed by an
insurer or representative of the insurer, constitutes a breach of the insurer's duties imposed
in Paragraph (1) of this Subsection:
(a) A misrepresentation of pertinent facts or insurance policy provisions relating to
any coverages at issue.
(b) A failure to pay a settlement within thirty days after an agreement is reduced to
writing.
(c) A denial of coverage or attempting to settle a claim on the basis of an application
which the insurer knows was altered without notice to, or knowledge or consent of, the
insured.
(d) A misrepresentation to a claimant as to the applicable prescriptive period.
(e) A failure to pay claims pursuant to R.S. 22:1893 when the failure is arbitrary,
capricious, or without probable cause.
(3) The provisions of this Subsection shall not create a separate cause of action
against a representative of the insurer distinct and apart from the cause of action against the
insurer.
J.(1) The insured, claimant, or a representative of the insured or claimant has a duty
of good faith and fair dealing when asserting a claim for insurance coverage.
(2) Any one of the following acts, if knowingly committed or performed by an
insured, claimant, or representative of the insured or claimant, constitutes a breach of the
insured's duties imposed in Paragraph (1) of this Subsection:
(a) A failure to comply with affirmative contractual duties or obligations established
in the insurance policy, including the duty to act in good faith in providing information
regarding the claim, in making demands of the insurer, in setting deadlines, and in attempting
to settle the claim.
(b) A misrepresentation of pertinent facts or insurance policy provisions relating to
any coverages at issue.
(c) A submission of an estimate or claim for damages that lacks a basis for coverage
under the terms of the policy or lacks a good faith evidentiary basis.
(3) The duty imposed by this Subsection does not create a separate cause of action
but shall be considered in accordance with Paragraph (4) of this Subsection.
(4) In any action against an insurer pursuant to this Section or R.S. 22:1892.2, if the
trier of fact determines that the insured, claimant, or representative of the insured or claimant
violated the provisions of this Subsection, the trier of fact shall consider that conduct in
determining whether or not the insured is to be awarded penalties or attorney fees otherwise
provided for in accordance with this Section and R.S. 22:1892.2.
(5) This Subsection does not impact any right or remedy available to the insurer,
including but not limited to the right to void the policy or contract or deny coverage.
K. The provisions of this Section do not apply to claims made under life and health
and accident insurance policies.