Louisiana Insurance Commissioner Jim Donelon last week issued a cease and desist order against a Houston-based law firm, accusing it of fraud involving potentially hundreds of hurricane-related claims in his state.
“The size and scope of McClenny, Moseley & Associates’ illegal insurance scheme is like nothing I’ve seen before,” Donelon said in a press release. “It is rare for the department to issue regulatory actions against entities that we do not regulate, but in this case the order is necessary to protect policyholders from the company̵
7;s fraudulent insurance practices.”According to Donelon, the law firm filed more than 1,500 hurricane claims in Louisiana in three months last year.
The Louisiana property insurance market has deteriorated since the state was hit by record hurricane activity in 2020 and 2021, to the point that 11 insurance companies writing homeowner coverage in Louisiana were declared insolvent between July 2021 and September 2022. The insurers have paid out more than $23 billion in insured losses from over 800 000 claims filed from the two years of heavy hurricane activity. The largest property loss events were Hurricane Laura (2020) and Hurricane Ida (2021).
In addition to driving insurer insolvencies, the mounting losses have caused a dozen insurers to withdraw from the market and more than 50 to stop writing new business in hurricane-prone parishes.
Louisiana’s problems parallel those of another coastal state, Florida, but there are significant differences. Florida’s problems are largely rooted in decades of legal system abuse and fraud, while Louisiana’s have had more to do with insurers being undercapitalized and not having enough reinsurance coverage to withstand the claims that arose during the record-breaking 2020 and 2021 hurricane seasons. , Louisiana insurance companies have not experienced the level of excessive litigation that Florida insurance companies have faced.
“It now appears that some trial lawyers are trying to take a page out of Florida’s playbook by participating in litigation against Louisiana property insurance companies,” said Triple-I Director of Corporate Communications Mark Friedlander. “We commend Commissioner Donelon for swiftly addressing these fraudulent practices.”
According to reporting from Times Picayune/New Orleans Advocate, an investigation by the Louisiana Department of Insurance found that the Houston-based company engaged in insurance fraud and unfair trade practices through Alabama-based Apex Roofing and Restoration and has faced allegations of potentially criminal conduct in courts across the state. In one such case, the newspaper reported, a woman testified that she never intended to retain the law firm when she hired the roofing company to fix her hurricane-damaged roof.
“The company told her insurance company it represented her and even filed a lawsuit on her behalf, although she said she was unaware of it,” the paper said.
Abuse of the legal system is a pervasive problem that contributes to higher costs for insurers and policyholders throughout the country, as well as to rising costs in general, given the importance of insurance to development and trade. Triple-I is committed to informing the discussion around this critical issue.
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