2.4 Other Louisiana Claim-Handling Rules: Communications, Settlement Statements, Depreciation & Liability Settlements
Key Takeaways
- R.S. 22:1893(B) places the burden on the insurer to establish an exclusion when damage to immovable property is covered in whole or in part.
- A homeowners claim payment is not a final settlement unless, before any release, the insured receives a statement showing each coverage category, its maximum and the amount paid (R.S. 22:1895).
- Insurers must include general contractor overhead and profit when a general contractor’s services are reasonably foreseeable, and may not deduct prospective overhead, profit or sales tax in calculating actual cash value (R.S. 22:1892(F)).
- After a covered total loss to an insured dwelling, the insurer must advance three months of estimated additional living expenses on the insured’s request (R.S. 22:1338).
- Unreasonably delaying processing of a properly endorsed settlement check for more than three calendar days, excluding weekends and holidays, costs the greater of $200 or 15% of the check (R.S. 22:1892(C)).
Claims Involving Immovable Property (R.S. 22:1893)
This statute came out of the Katrina and Rita claims era.
- An insurer may not use the floodwater mark on a covered structure, without considering other evidence, to decide coverage under a homeowners policy.
- An insurer may not use the fact that a home was removed or displaced from its foundation, without considering other evidence, to decide coverage.
- If damage to immovable property is covered in whole or in part, the burden is on the insurer to establish an exclusion. Any policy clause that tries to shift that burden is null and void.
- A violating insurer is liable under R.S. 22:1892.
For wind-versus-water claims, the adjuster must document how much damage wind caused, for example with roof and upper-wall damage, debris patterns, engineering input and timelines. The adjuster may not simply measure the flood line and deny everything below it.
Settlement Statements and Claim File Transparency
| Rule | Statute | Requirement |
|---|---|---|
| Homeowners settlement statement | R.S. 22:1895 | A homeowners payment is not a final settlement unless the insured gets a statement listing each coverage category, the maximum payable and the amount included in the payment. It must be given before the insured signs a release. |
| Joint checks with mortgagees | R.S. 22:1892(A)(6) | A check payable jointly to insured and mortgagee for multiple coverages must include a per-coverage statement, or the insurer must issue separate checks. |
| Field adjuster report | R.S. 22:1892(A)(5) | Give the insured a copy within 15 days of the insured's request. |
| Claim file and original estimate | R.S. 22:1964(14)(p)–(q) | On written request, provide non-privileged claim file materials and the original field estimate, identifying who revised it. |
| Payment method | R.S. 22:1892(C)(1) | Pay by check or draft, or by electronic transfer if the insurer offers it and the claimant requests it. |
| Check processing | R.S. 22:1892(C)(2)–(3) | No intentional or unreasonable delay of more than three calendar days, excluding weekends and legal holidays, in processing a properly executed and endorsed settlement check or draft. Penalty: the greater of $200 or 15% of the face amount. |
Catastrophe Communications (R.S. 22:1897 and 22:1898)
Third-adjuster rule (R.S. 22:1897). On a personal residential claim from a named storm or hurricane with a declared emergency, suppose the insurer assigns a third or later adjuster to be primarily responsible within six months. The insurer must then promptly provide:
- a written status report showing how the deductible was applied and whether it is exhausted, amounts available and paid under each coverage, payment dates, payees and delivery addresses or methods, and the open items the insured must still document;
- a primary contact, an adjuster or team knowledgeable about the claim, kept until the claim closes or suit is filed; and
- two or more direct means of communication with that contact. On the insured's request, the primary contact must refer the insured to a supervisor.
Catastrophe claim process disclosure form (R.S. 22:1898). When the governor declares a state of emergency, an insurer settling a resulting property claim must send the commissioner's disclosure form no later than the date of the adjuster's initial investigation, by mail, electronically or by hand. The form explains the claim and supplemental claim processes, how percentage deductibles are calculated, ACV versus replacement cost, policyholder rights and duties, documentation, complaint procedures, mortgagee endorsement issues and the hurricane mediation program. The section creates no civil cause of action.
Valuation Rules That Change Estimates
- Depreciation (R.S. 22:1892(B)(6)). For "damaged property," meaning dwellings, structures and personal property other than vehicles, a policy may allow depreciation. Depreciation may include goods, materials, labor and services. The policy must give notice, in a form the commissioner approves, that depreciation may be deducted or withheld. When depreciation is applied, the insurer must give a written explanation of how it was calculated. It must be reasonable, based on objective criteria and subjective assessment, including the property's actual pre-loss condition.
- Overhead and profit (R.S. 22:1892(F)). Under fire and extended coverage policies, first-party payments must include general contractor overhead and profit when a general contractor's services are reasonably foreseeable, on both replacement cost and ACV policies. Deducting prospective contractor overhead, prospective contractor profit and sales tax in determining ACV is not allowed.
- Deductible proof for holdbacks (R.S. 22:1892(A)(7)). A replacement cost insurer may withhold recoverable depreciation or a replacement cost holdback until it receives reasonable proof the deductible was paid. Examples include a canceled check, money order receipt, credit card statement, or an executed installment or financing agreement.
- ALE advance on total loss (R.S. 22:1338). After a covered total loss to an insured dwelling, an insured with additional living expense coverage may request an advance equal to three months of estimated increased living expenses. Further ALE is paid on satisfactory proof if actual costs exceed the advance. Insurers may restrict payment when fraud is suspected.
Steering Limits
- Vehicles (R.S. 22:1892(D)). An insurer may not require repairs, including window glass, at a particular shop or entity. It may not recommend a repair service or network without telling the insured or claimant there is no obligation to use it, and may not intimidate, coerce or threaten anyone to use a specified business. The commissioner may fine $1,000 for a first offense, $2,500 for a second within 12 months, and $5,000 for a third or later offense within 12 months.
- Property (R.S. 22:1892(E)). An insurer may not require repairs, restoration or remediation by a particular preferred vendor or contractor. It may not recommend one without disclosing that the insured has no obligation to use it.
Liability Settlements and Loss of Use
| Situation | Rule |
|---|---|
| Written settlement with a third-party property damage or medical expense claimant | Pay within 30 days after the written agreement (R.S. 22:1892(A)(2)). An insurer that knowingly fails to pay a settlement within 30 days after it is reduced to writing breaches its good-faith duty (R.S. 22:1892(I)(2)(b)). |
| Third-party claimant loses use of a personal vehicle for more than five business days because the insurer did not act on the claim | Pay reasonable alternative transportation expenses for the whole period, to the extent legally responsible. Arbitrary failure to pay within 30 days of adequate written proof and demand adds a penalty up to the greater of 10% of those expenses or $2,500, plus attorney fees (R.S. 22:1892(B)(4)(a)). |
| First-party insured entitled to rental coverage | Provide the rental within three business days of a written request. Arbitrary failure adds a penalty up to the greater of 50% of the reasonable expenses or $2,500. This does not apply while the insurer investigates coverage under a reservation of rights (R.S. 22:1892(B)(4)(b)). |
| Damaged personal vehicle in a storage facility | The responsible insurer must appraise it within 10 working days of notice of its location and availability, or 20 working days after a natural disaster, catastrophe or unusual circumstances. Penalty: the greater of 10% of the vehicle's appraised value or $1,000, plus appraisal and attorney fees (R.S. 22:1297). |
A homeowners policy covers wind damage to a dwelling that also has flood damage. Under R.S. 22:1893, who bears the burden of establishing that part of the damage is excluded?
Before a Louisiana homeowners insured signs a release, what must the insurer provide for the payment to be treated as a final settlement under R.S. 22:1895?
An adjuster computes actual cash value on a large kitchen fire requiring a general contractor. Which approach complies with R.S. 22:1892(F)?
A covered fire totally destroys an insured’s home, and the policy includes additional living expense coverage. What does R.S. 22:1338 allow the insured to request?
A claimant’s car sits in a tow yard after an accident caused by the insured. Under R.S. 22:1297, how soon must the liability insurer appraise the vehicle in ordinary circumstances?