New Bill Would Allow Louisiana Home Insurers to Block Lawsuits in Exchange for Cheaper Premiums

In response to Louisiana’s rapidly rising home insurance premiums, a state lawmaker has proposed legislation that would lower homeowners’ costs — at a unique price.

House Bill 379, sponsored by Rep. Mark Wright, would allow Louisiana property insurance companies to issue policies that prohibit customers from suing their insurer. In exchange for giving up the right to sue, non-litigation policyholders would receive premium discounts, and a third-party arbitrator would resolve any disputes over claims.

The Louisiana House recently passed the bill, moving it forward to the Senate.

The proposal comes among a series of bills aimed at tackling Louisiana’s growing insurance crisis.

Increasingly frequent and severe weather events have made it difficult for insurance companies to stay solvent, and several have shuttered or withdrawn from the state in recent years. The remaining insurers have rapidly raised rates to keep up with climate risks and inflation.

Insurify data shows that the average home insurance premium in Louisiana has surged to $10,964 per year for a $300,000 property — a 38% year-over-year increase.

Insurify’s data scientists project rates will increase by an additional 27%, to nearly $14,000, by the end of this year.

Arbitration-only policies could leave homeowners without legal recourse

The bill requires insurers to clearly inform customers who sign an arbitration-only policy endorsement that they’re giving up legal rights, including the right to sue and have a jury trial. Policyholders who waive their right to sue would be entitled to an unspecified premium discount. The legislation would also require insurers to offer policies without the arbitration-only endorsement.

Yet some worry that even with these stipulations, homeowners may not realize the potential consequences of non-litigation policies.

“Insurance policy terms and conditions are already difficult for many homeowners to understand,” said Matt Brannon, data journalist at Insurify. “Some policyholders might see a discount and sign arbitration agreements without realizing that they’re giving up certain leverage.”

“Arbitration is generally more difficult to appeal, meaning less recourse for the policyholder if they get an unsatisfying outcome. In some cases, an independent arbitrator may be less sympathetic than a jury of peers may be to a policyholder who feels they’ve been wronged.”

Louisiana experiences an annual average of 6.8 weather events that cause $1 billion or more in damage, according to the National Oceanic and Atmospheric Administration.

An unresolved hurricane damage claim could cost homeowners tens or hundreds of thousands of dollars.

What’s next? The Louisiana Senate votes on HB 379

HB 379 passed the Louisiana House with 64 votes. Thirty-five representatives voted against the bill, and five were absent. Next, the Senate will vote on the bill. If the Senate passes HB 379, Louisiana Gov. Jeff Landry can veto or sign it into law.

Landry previously vetoed Senate Bill 111, a tort reform bill that would have watered down Louisiana’s “bad faith” statute, which imposes penalties on insurers who unreasonably deny or delay claims. Landry, whose veto of SB 111 upset at least one member of his own Republican party, hasn’t commented on HB 379.

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