Louisiana Insurers Lose Ground in Chinese Drywall Battle

The Insurance Journal is reporting that insurance companies in Louisiana are continuing to lose ground in the ongoing battle against a ban on dropping or changing property insurance coverage because of corrosive Chinese-made drywall.

The proposal will now be debated by the state’s full House of Representatives, after finally gaining approval from the House Insurance committee. The Senate has already given the bill, SB 595 – authored by Senator Julie Quinn (R-Metairie) – its unanimous backing.

Representatives of the insurance industry argue that the bill violates existing contracts and could force a statewide increase in insurance premiums. Lobbyists for insurers claim that if the bill is approved, it will be challenged in court because it is retroactive.

Representative Chuck Kleckley (R-Lake Charles), chairman of the House committee, attempted to have the retroactivity clause removed, but a 6-2 vote against him blocked the attempt, and the House then approved the bill without objection. Afterward, Kleckley joked, “I don’t have many friends.”

If approved, Senator Quinn’s bill will prohibit property insurance companies from refusing to renew, canceling, or increasing premiums or deductibles for homes or businesses constructed with Chinese drywall. The wallboard in question is being blamed for health concerns and home corrosion.

The ban would be in force through July 1, 2013, and any insurer found to be violating the terms of the bill would face a penalty of up to $15,000, plus court costs and attorney fees.

State Farm Homeowners Insurance Rates Increase in Louisiana

Consumers seeking cheap homeowners insurance in Louisiana should be advised that State Farm Fire and Casualty Co. has filed a rate increase request for homeowners policies in that state. Across the board, the average increase will be almost 10 percent.

State Farm is the largest home insurer in Louisiana, with roughly 300,000 policyholders in the state.

Earlier this year, State Farm request a much higher rate increase – an average 19.1 percent hike – but state Insurance Commissioner Jim Donelon rejected it, calling it unreasonable, according to a report in the Insurance Journal.

Last year, Louisiana approved an average 8.3 percent rate increase for State Farm, after the insurer filed a request for an increase of 13.7 percent.

The company has also request homeowners insurance rate increases twice in the past year, in Texas, but is reported to have filed suit against the Texas Department of Insurance (TDI) because of its intention to post the rate filings on the Department website. State Farm and the state of Texas have been involved in homeowners insurance rate disputes for several years. In November, 2009, TDI instructed SFL (State Farm Lloyds) to refund $310 million to policy holders in the Lone Star State, after discovering that the insurance company had been overcharging clients for the past six years.

The repayments were halted when State Farm appealed the Texas order. The case remains unresolved.