One of the interesting aspects of my professional life is receiving information from readers of this blog, who alert me to new things and changes in old cases. The texts, emails, and phone calls I receive are from people who work with policyholders, insurers, and even talented insurance defense attorneys who we battle in courtrooms across the country. I appreciate this and try to share a lot of this with you.
In response to my last post, Anti-Public Adjusters’ Recommendations – NAPIA Takes a Leadership Stand Against the Insurance Industry Seeking to Eliminate Public Adjustmentand an old post, Insurance companies prohibit placing anti-public adjuster language in property policiesyesterday we received an administrative order overruling the Louisiana Insurance Commissioner̵7;s directive prohibiting Anti Public Adjuster language in Louisiana property insurance policies.
The order immediately established the decision:
On January 24, 2022, Louisiana Commissioner of Insurance, James J. Donelon
(Commissioner) issued Directive 219 (Directive), requiring all licensed insurers and excess insurers to comply with Louisiana Revised Statutes (La. RS) 22:1704(E)(2). The directive also ordered insurers to review all policy forms and endorsements to ensure compliance with La. RS 22: 1704(E)(2).
Velocity Risk Underwriters, LLC challenged the legal validity of the directive. Based on the following, Directive 219 is not legally valid.
The order based its reasoning and stated in part:
On January 24, 2022, the Commissioner issued Directive 219, interpreting La. RS 22: 1704(E)(2) that insureds have the right to hire a public adjuster to assist in meeting obligations under their policy.
LDI argued that the basis for issuing the directive was because some insurers sought to prohibit the use of public adjusters in their insurance regulations in direct violation of La. RS 22:1704(E)(2). The commissioner stated in the directive that the anti-public adjuster clauses seek to prohibit insureds from hiring, engaging, retaining or using the services of a public adjuster. The commissioner ruled that the prohibitions against public adjusters in insurance contracts directly violate La. RS 22: 1704(E)(2).
Directive 219 is not legally valid because it is based on an incorrect interpretation of the Louisiana Revised Statutes. The directive requires insurers to comply with La. RS
22:1704(E)(2), a statute governing contracts between public adjusters and insureds. The directive interprets La. RS 22:1704(E)(2) to provide a mandatory right to insureds to hire a public adjuster. The directive unambiguously prohibits insurers from using anti-public adjustment clauses in their insurance contracts.
For the sake of argument, if La. RS 22:1704(E)(2) intended to give all insureds a general right to hire a public adjuster in all circumstances, there is no language in the statute that prohibits the insured from waiving that right in an insurance contract in the hope that get a cheaper premium by waiving the right to a public adjuster. The commissioner does not have the authority to create a stricter more absolute standard than the Legislature used in La. RS 22: 1704(E)(2), which simply states that the insured is not required to hire a public adjuster, but the insured has a right to do so. LDI did not cite any statute, promulgated rule, or regulation that gives an insured an inalienable right to a public adjuster in an insurance contract.
The order criticized the Louisiana Insurance Commissioner for not following rules required to make the administrative directive:
Directive 219 was issued without the formalities necessary to establish a rule or regulation. A directive cannot be used to create mandatory prohibitions beyond statutory powers. LDI did not cite any other statute as the basis for Directive 219, nor did it cite any other source of authority for the directive. LDI’s legal basis supporting Directive 219 is “manifestly flawed”. Directive 219 is therefore legally invalid.
I’m not an administrative attorney, but the tone of the order would make me say “ouch” if I were the attorney for the Louisiana Insurance Commissioner.
So, what does this mean? This means that there is no directive and that Louisiana does not administratively prohibit anti-public adjustment language in insurance.
That doesn’t mean these are legal and don’t subject insurers to various antitrust claims. This does not mean that these clauses are valid. These legal battles are only in the early stages of formation.
I left California and a very successful CAPIA meeting and am now in Austin, Texas. I will report on my panel discussion with Rene Sigman and Steve Badger tomorrow.
I appreciate the notes on our settlement in a Texas case noted in Law 360 yesterday. But I can’t comment on that. If you have information or comments you would like to share on other issues, please do not hesitate to do so. They often end up in a future post, and I really appreciate everyone’s help and input.
Anyone who succeeds helps people. The secret to success is finding a need and filling it; find an injury and heal it; find a problem and solve it.
—Robert H. Schuller