Louisiana Governor Jeff Landry recently vetoed a bill that aimed to limit bad faith lawsuits against insurance companies, a decision that has drawn criticism from the insurance sector. The bill, known as SB 111 and sponsored by Senator Alan Seabaugh, sought to clarify when claimants could file lawsuits for bad faith against insurers. It proposed that such lawsuits should not be allowed if insurers had a legitimate dispute regarding liability or medical causation related to the claimant’s injuries.
One of the key provisions of the bill was to prevent bad faith lawsuits if insurers had not been given 30 days to review an offer within policy limits or if they had not been allowed to conduct proper discovery. The bill narrowly passed the House with a vote of 56-44.
Critics of the veto, including Neil Alldredge, president of the National Association of Mutual Insurance Companies, argued that the governor’s action denied important legal reforms that could have improved the state’s insurance market. Alldredge expressed disappointment, stating that residents of Louisiana should be frustrated by this setback in efforts to strengthen the insurance industry.
In his veto message, Landry explained that the bill could make it easier for insurance companies to deny valid claims. He raised concerns that it would introduce uncertainty in the legal process and limit the options available to policyholders seeking recourse. Landry highlighted that the bill could allow insurers to avoid defending their decisions to deny settlements.
The governor’s veto decision surprised many lawmakers, especially since he had previously indicated support for any insurance reform legislation passed during the recent legislative session. Senator Seabaugh noted that he had expected more communication from Landry regarding the veto, recalling how former Governor John Bel Edwards would inform him when he rejected a bill.
Seabaugh had crafted the bill to give insurers a better chance in court. He mentioned that Landry had previously suggested that insurance companies were not aggressive enough in defending themselves in court. Despite the veto, Landry indicated a willingness to work with lawmakers on reasonable changes to the bad faith statute in the future.
This situation reflects ongoing tensions between the insurance industry and policymakers in Louisiana, particularly in the wake of past disasters like Hurricane Katrina, which have shaped the state’s bad faith laws.