Mayhall Fondren Blaize

Looking at Louisiana’s insurance bad faith statute

Insurance, in all its various forms, is an important resource to protect from major loss, and businesses in the insurance industry have the responsibility of ensuring they treat their insured fairly when it comes to settling claims. Louisiana has codified fairly straightforward duties insurance companies owe to their insured and claimants.

Under Louisiana’s Unfair Trade Practices Act, insurance companies are prohibited from engaging in misrepresentations and false advertising of insurance policies. This includes making misleading statements regarding policy benefits, advantages, conditions, and terms, as well as making statements to induce the lapse, forfeit or surrender of an insurance policy. 

Insurance companies are also bound in the state of Louisiana by a duty of good faith and fair dealing. This duty obliges insurers to adjust claims fairly and promptly and to make reasonable effort to settle claims with the insured and/or the claimant, depending on the circumstances.

Failure to abide by the duty of good faith and fair dealing is what forms the basis for claims of insurance bad faith. State law identifies a variety of actions which are considered a breach of this duty. Among them are: knowingly misrepresenting pertinent facts or provisions of an insurance policy regarding coverage; knowingly denying coverage or attempting to settle a claim based on an application the insurer altered without obtain the consent of the insured or providing notice; knowingly failing to pay on a settlement within 30 days of reaching an agreement; and arbitrarily, capriciously, or without probable cause, knowingly failing to pay what is due by contract to the insured within sixty days of receiving satisfactory proof of loss.

Bad faith insurance claims often come up in automobile insurance or homeowner’s insurance policies, but they can certainly come up in other contexts as well.  For insurance companies, it is important to have a clear understanding of their duty of good faith and faith dealing under state law both to ensure effective policies are put in place to avoid liability and to deal with allegations of bad faith when they arise. We’ll say more about this in a future post.

Source: L.R.S. 22: 1964; 1973

No Comments

Leave a comment
Comment Information