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Insurance companies can cancel, not renew policies for Ida victims after Louisiana rule expires

NGS emergency response imagery shows damage to buildings and homes in Houma, Louisiana, following Hurricane Ida.
Courtesy of NOAA
NGS emergency response imagery shows damage to buildings and homes in Houma, Louisiana, following Hurricane Ida.

Louisiana insurance policyholders in 25 parishes are subject to cancellation and non-renewal of their policies starting Monday.

From Aug. 26 to Oct. 24, Southeast Louisiana policyholders were protected from losing their policies by Louisiana Department of Insurance Emergency Rule 47, which forced insurance companies to continue honoring the policies they issued even if policyholders failed to pay their premiums.

Emergency Rule 47 most notably provided protections for residents holding life, vehicle, liability, health and homeowners’ insurance policies. Policyholders were given coverage for two months after the storm, even if they failed to make payments.

The rule also ensured that residents with health insurance could pick up certain prescription medicines early to replace prescriptions lost during the hurricane.

The emergency rule applied to Ascension, Assumption, East Baton Rouge, East Feliciana,

Iberia, Iberville, Jefferson, Lafourche, Livingston, Orleans, Plaquemines, Pointe Coupee, St. Bernard, St. Charles, St. Helena, St. James, St. John the Baptist, St. Martin, St. Mary, St. Tammany, Tangipahoa, Terrebonne, Washington, West Baton Rouge and West Feliciana parishes.

With these protections gone, some policyholders could lose coverage even if they paid their premiums after the storm.

The Advocate reported that Jim Donelon, the state’s insurance commissioner, said the cancellation and non-renewal process won’t happen immediately. Insurance companies will have to send cancellation notices to policyholders, and any non-renewal processes that began before Aug. 26 will have to start over from the beginning.

Thanks to a law unique to Louisiana, insurance companies are limited in their ability to increase deductibles and cancel policies if a customer has held their policy for at least three years. That’s good news for longtime policyholders who made their payments on time after Ida.

To justify ending the emergency rule, Donelon said some insurance companies are facing “solvency concerns” in the wake of Ida; basically, they’re running out of funds to pay out insurance claims.

It’s estimated that the hurricane caused more than $20 billion in insured damages, and that figure doesn’t include FEMA flood insurance payouts.

Donelon said extending the rule for another month would be giving policyholders “free insurance,” because policyholders who didn’t pay premiums while the rule was in effect can now switch to another insurance provider without paying their former provider what they owed.

Donelon said that insurance providers are under “significant stress” from the financial burden of claim payouts. Donelon did not mention which providers are strapped for cash, but he noted that only about a third of claims relating to Hurricane Ida had been resolved.

One insurance company, GeoVera, will stop doing business in Louisiana altogether after seeing the damage caused by Ida. Donelon said this was a “significant indication” of how providers feel about doing business in the state.

State officials and insurance companies have fought throughout the storm recovery process, most notably over a Department of Insurance mandate which required insurance companies to pay for evacuation expenses incurred by their policyholders, even if their parish was not under an emergency evacuation order.

Aubry is a reporter, producer and operations assistant in Baton Rouge.