Ihave the privilege of serving as vice president of the Louisiana Surplus Line Association (LSLA) and chairman of the Louisiana Surplus Line Task Force. Our goal has been to share our thoughts on regulatory reforms and proposed legislation with the Loui-siana Department of Insurance, Louisiana Legis-lature, PIAL and IIABL to assist Louisiana in attracting new companies and additional insurance capacity. Louisiana has made dramatic improvements in building a better legal climate with significant changes in our tort system and regulatory structure.
Building it
Freedom of Rate and Form: One of the principal foundations of Louisiana’s viable surplus line market is our “near exemption” from rate and form filing, which becomes more important as our DOI continues to relax its regulatory strictness and allows “file and use” of forms and rates for admitted carriers.
Diligent Effort: For personal lines, the originating producer must complete the affidavit of nonavailability within 30 days of binding with a surplus lines insurer. The affidavit is no longer required for commercial lines.
Use of Louisiana Law in Interpreting Surplus Line Policies: This proposed legislation was introduced in the House Insurance Committee but after much debate killed. Several LSLA members testified in opposition to the bill, which would have made the broker’s license subject to suspension and presumed negligent for issuing a policy that contained language requiring the policy language to be interpreted using a law of a jurisdiction other than Louisiana.
Louisiana has enjoyed the reputation of being a “friendly” surplus lines state.
Unearned Premiums or Commissions: The Louisiana Surplus Line Legislative Committee and the DOI developed legislation dealing with the return of unearned premium via the producing agent, alleviating the requirement that the surplus line broker deal directly with the insured.
Surplus Line Stamp: The DOI and several key members of the LSLA negotiated “clean up” language regarding the surplus lines stamp and other issues.
Strict Liability of Property Owners: Louisiana has reformed its laws to protect property owners from liability. Its statutes now protect property owners from liability claims unless there are unreasonable defects in the property.
Punitive Damages: Louisiana has significant limits on punitive damages and is one of the few states that generally does not allow punitive damages in tort actions. There are exceptions involving claims against drunk drivers, perpetrators of sex crimes and intentional torts involving hazardous materials.
Joint Tortfeasors and Solidary Obligations: Over the years, Louisiana suffered from a tort system that frequently found defendants joint and severally liable. An individual is now only responsible for his degree/apportionment of fault.
Product Liability: The Louisiana Products Liability Act is a pro-business statute severely limiting the liability of the manufacturer/distributor of a product to certain prescribed standards of conduct.
Property insurance
Revamp of Fair and Coastal Plans: A progressive financing structure has been established in the new Louisiana Citizens Property Insurance Corp.
Adequate Residual Market Rates: Rates in the Fair and Coastal Plans have increased significantly, and are now well above the voluntary market.
Mandatory Hurricane and Windstorm Deductibles: Insurers may use mandatory percentage hurricane or windstorm deductibles to manage exposure.
Public Adjusters Prohibited from Contingency Fees: Louisiana law prohibits public adjusters from working on a contingency-fee basis.
Limitations on Mold Remediation: Insurers may limit exposure to mold claims through the use of exclusions or other limitations on mold remediation.
Will they come?
Louisiana has enjoyed the reputation of being a “friendly” surplus lines state. However, the exodus of admitted standard markets continues to create a fluid and extremely fluctuating insurance environment. Historically, surplus line carriers have increased their writings in Louisiana and have experienced profitable results. This makes it difficult to attract additional capacity from carriers currently writing in Louisiana to fill certain voids in the market because they have allocated their existing Louisiana capital to classes of business with a proven track record.
Louisiana Commissioner of Insurance Robert Wooley has dramatically improved the DOI and has become the Louisiana Insurance Chamber of Commerce, promoting legislative improvements in Louisiana and pushing progressive reforms. With the help of his staff, IIABL, PIAL and the LSLA, Wooley has experienced success in convincing companies to enter, return and/or expand in Louisiana.
We will continue to promote the successes of “Building a Better Louisiana” in hopes that “THEY WILL COME!”
Richard W. Jenkins, CIC, is executive vice president of First Premium Insurance Group Inc. in Covington, La.
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