7.7 Louisiana Citizens Property Insurance Corporation, the FAIR Plan & the Coastal Plan (RS 22:2291–2317, 22:2321)
Key Takeaways
- A person with an insurable interest in insurable property who has been denied coverage by one or more authorized property insurers may apply to Louisiana Citizens (R.S. 22:2302(A)).
- Citizens issues essential property insurance policies for a term of no more than one year, renewed annually while the property remains insurable (R.S. 22:2302(C)).
- R.S. 22:2303(A) says Citizens rates are not intended to compete with the voluntary market and generally must exceed a statutory benchmark by at least 10 percent.
- Acts 2024, No. 757 temporarily changed Citizens rate rules through December 31, 2027 so that rates may not exceed the higher of the actuarially justified rate or the statutory benchmark rates, subject to market-competition conditions.
- Louisiana Citizens is not liable for general damages, special damages or penalties above the policy limit under R.S. 22:1892(H) and 22:1892.2(F), though legal interest and attorney fees may still apply.
Why Citizens Matters to a Louisiana Adjuster
PSI's Series 204 outline lists Louisiana Citizens Property Insurance Corporation (LRS 22:2291–2314) and FAIR and Coastal Plans (LRS 22:2321) under "Other Types of Insurance Policies." After major hurricanes, a large share of coastal and hard-to-place homes is insured through Citizens, and independent adjusters are routinely deployed on Citizens claims. The claim-handling rules are the same as for other insurers, including R.S. 22:1892 deadlines and the standards of conduct. A few statutes treat Citizens differently.
Creation and Structure
- Act 1133 of 2003 created Louisiana Citizens Property Insurance Corporation (now R.S. 22:2291 et seq.) as the state's residual market for residential and commercial property.
- R.S. 22:2295 re-created and continued two programs Citizens operates:
- the Coastal Plan, formally the Louisiana Insurance Underwriting Plan (see also R.S. 22:2321 et seq.), which historically served wind and hail exposures in designated coastal areas; and
- the FAIR Plan (Fair Access to Insurance Requirements), which provides essential property coverage for insurable property that cannot find coverage in the voluntary market.
- Assessable insurers, meaning authorized insurers writing the relevant property lines, participate in Citizens assessments as a condition of doing business, under the Plan of Operation.
Eligibility and Policies (R.S. 22:2302)
| Rule | Requirement |
|---|---|
| Who may apply | Any person with an insurable interest in insurable property who has been denied coverage by one or more insurers authorized to write property insurance in Louisiana |
| How | Directly or through a representative, on forms that clearly state Citizens is an insurer of last resort |
| Disclosure | The application must identify each carrier that denied coverage |
| Insurable interest | Any lawful and substantial economic interest in the safety and preservation of property from loss, destruction or pecuniary damage |
| Policy term | If the property is insurable, an essential property insurance policy for a term not exceeding one year, renewed annually on payment of premium while the property stays insurable |
| Appeal | Except when the applicant cannot show a prior denial, an applicant who is refused, or whose application is not acted on in time, may appeal to the commissioner, who may direct Citizens to issue a policy |
| Private-market notice | Each application and policy includes a separate page, in 14-point or larger type, explaining how to find producers and insurers that may write the coverage privately |
Rates (R.S. 22:2303)
- The general rule (Subsection A): as residual markets, Citizens plans "are not intended to offer rates competitive with the voluntary market." Rates are set by the governing board, adjusted annually, and must exceed by at least 10 percent the higher of (a) the actuarially justified rate or (b) the highest rates charged by assessable insurers holding at least 2 percent of the parish's direct written premium for that line. For personal lines property, excluding wind and hail, a third benchmark applies based on insurers that grew by at least 25 policies in the parish. Rates include a catastrophe loading.
- Temporary change (Subsection D, amended by Acts 2024, No. 757, effective January 1, 2025): until December 31, 2027, Citizens rates shall not exceed the higher of the actuarially justified rate or those benchmark rates, subject to the statute's noncompetitive-market provisions. The commissioner uses listed factors to find whether a reasonable degree of competition exists, such as the number of insurers, market concentration, barriers to entry and the residual market's share.
- Premium tax equivalent (Subsection B): Citizens collects an additional amount equal to the premium tax and keeps it as a state contribution.
- Filing (Subsection C): Citizens files rates at least once a year, and the commissioner approves them.
Depopulation: The Policy Take-Out Program (R.S. 22:2314)
The Legislature intends Citizens to work toward depopulating its residual plans. Approved private insurers may take out Citizens policies under filed and approved rates:
- In the first year, the take-out insurer's rates must comply with R.S. 22:2303. In years two and three, it applies for actuarially justified rates that may not exceed the rates R.S. 22:2303 authorizes.
- A policyholder who receives an approved take-out offer may keep a properly licensed producer or keep Citizens as the insurer; no rule or depopulation plan may impair that right.
Deficits and Assessments
When Citizens has a plan deficit, it finances the shortfall under R.S. 22:2307 and its Plan of Operation. Regular assessments fall on assessable insurers. If a deficit exceeds what regular assessments recover, the governing board may levy emergency assessments, collected from assessable insureds when policies in the subject lines are issued or renewed; National Flood Insurance Program policies are excluded.
Adjusting Citizens Claims
| Issue | Rule for Citizens |
|---|---|
| Payment and adjustment deadlines | R.S. 22:1892, 22:1892.2 and 22:1892.3 apply as they do to other insurers |
| Class actions for penalties | Citizens and the Louisiana Insurance Guaranty Association (LIGA) are not subject to class actions for damages or penalties under R.S. 22:1892 or 22:1892.2 |
| Damages and penalties | Citizens is not liable for general damages, special damages or penalties in excess of the policy's limit. It may still pay legal interest due from a breach and reasonable attorney fees and costs where the statutes provide them |
| LIGA | Not liable for special damages or penalties under those sections |
| Adjuster conduct | Licensing, catastrophe registration and the R.S. 22:1674.1 standards apply the same way |
A Citizens policy is an essential property policy, often narrower than a voluntary-market homeowners form. Before scoping, read the Citizens form and its Louisiana endorsements, including any hurricane or named storm deductible and the related R.S. 22:1337 disclosure form.
Under R.S. 22:2302(A), who may apply for coverage through Louisiana Citizens Property Insurance Corporation?
What policy term does R.S. 22:2302(C) allow for a Citizens essential property insurance policy?
Which statement correctly describes Citizens’ liability exposure under R.S. 22:1892(H) and 22:1892.2(F)?
What rate principle does R.S. 22:2303(A) state for Citizens, and what did Acts 2024, No. 757 do?