Tiffany Watson, her mother-in-law, and their Lake Charles church all are caught in a legal limbo in their effort to get paid for insurance claims they filed shortly after Hurricanes Laura and Delta laid waste to the western part of Louisiana in late 2020.

Their three claims are among thousands of storm-related insurance cases still wending their way through the state’s local and federal courts years after they were first filed.

Though there is no central tally for the state, parishes that were most affected by the hurricanes of 2020 and 2021 have kept tabs on insurance claims cases. There are about 2,000 still in the Calcasieu Parish court, about 3,500 in Orleans Parish court and 4,300 in Jefferson Parish, according to court officials. The federal courts do not track cases in the same way, but they generally get claims cases above $75,000 and for out-of-state insurance companies, so they likely have thousands more.

The claims filed by Watson, her mother-in-law, Annie Marbury, and their place of worship, the Church of Jesus Christ House of Prayer, have followed a familiar pattern. They got estimates from contractors, filed their claims with their insurance companies, which then assessed their damages at far below the contractors’ estimates. After months of trying and failing to reach a compromise, the claimants hired a lawyer to file lawsuits.

As the process has dragged on, Watson said she and other parishioners have now been told by the city of Lake Charles that they might face fines for blight if their church isn’t repaired soon. They have a hearing Nov. 2 and hope to convince officials that it isn’t their fault.

“What’s so disappointing is we paid our monthly insurance bills and we played our part,” said Watson. “If the insurance companies had come in and done their part we wouldn’t have all these attorneys fees and it wouldn’t have taken so much time and so much more money to fix these buildings.”

Their church, in the 1600 block of Opelousas Street, has been unusable since the storms. It sustained about $300,000 worth of damage and needs to be rebuilt, according to contractors hired by Watson. The insurance company, Colony, a subsidiary of $30 billion insurance group Argo, has maintained that damage amounts to no more than $47,000.

An Argo spokesman said the company does not comment on any litigation.

Statewide backlog

The backlog of cases underlines a fundamental problem in Louisiana over disputed insurance claims: long-standing law provides that when insurance companies are found to have acted in “bad faith,” they can be forced to pay as much as 2.5 times the amount of the claim in penalties, in addition to the plaintiff’s legal expenses.

However, the law is unclear on key points, such as when the clock starts  to determine if insurance companies have acted in bad faith, according to state Sen. Kirk Talbot, R-River Ridge, chairman of the Senate Insurance Committee.

Streamlining the dispute process in Louisiana is a crucial part of fixing the state’s broken insurance market, Talbot said, because it would give both consumers and insurers more certainty about the rules and encourage more companies to operate in Louisiana.

“We’re trying to make it a process where you won’t need litigation, but it’s a delicate dance,” Talbot said.

A bill Talbot sponsored with state Rep. Michael Huval, R-Breaux Bridge, in the last legislative session sought to speed up the disputed claims process by mandating that an insurance company would pay out the undisputed portion of a claim quickly, leaving the rest to be arbitrated or decided by a court. But that bill stalled, mainly because lawyer groups lobbied against it, according to Talbot.

A familiar debate

The argument over what ails the insurance industry in Louisiana and elsewhere typically is framed as “insurance companies vs lawyers.”

The Insurance Information Institute, a non-profit think tank that generally makes the case for the insurance industry, has often pointed to lawsuits as a principal reason for high insurance costs.

Sean Kevelighan, the institute’s CEO, said recently when supporting Florida’s new insurance laws, which included restrictions on lawyers’ compensation to deter “frivolous” property insurance claims: “Floridians pay the highest homeowners insurance premiums in the nation for reasons having little to do with their exposure to hurricanes…For years, the state has been the home of too much litigation and too many fraudulent roof replacement schemes.”

Talbot said he has formed a committee to study measures like those signed into law by Florida Gov. Ron DeSantis last year. “It looks like it’s working there,” Talbot said. The committee will wrap up in February, and Talbot said he hopes to put forward new legislation next year.

For their part, lawyers argue that the insurance industry overplays the role of lawsuits and fraudulent schemes — like the large-scale collusion in Florida between lawyers and roofers that led to last year’s reform — to try and weaken policyholders’ limited recourse.

Indeed, many argue that the system is already heavily tilted in favor of insurance companies, who have the financial heft to drag out lawsuits and deter policyholders from going to court. The Insurance Institute’s data show that nationally, only about 1% of claims end up in litigation, and most of those settle before trial.

With 800,000 property damage claims after the 2020-2021 storms, the number of disputed claims lawsuits in Louisiana has been many times higher than the national average, clogging up the courts and leaving many facing uncertainty about when their homes can be repaired.

“The way insurance works they can say, ‘Why pay now when I can pay two years or more from now?” said Mark Montiel, a lawyer representing Watson and Marbury.

The insurance laws that were passed in Louisiana this year offered only marginal help for consumers, or could even make things worse.

One new law prevents insurers from barring policyholders from hiring their own independent assessors, referred to as public adjusters. Louisiana was one of a handful of states that allowed such a restriction. However, the new law did not include most commercial property policyholders.

Another law passed in August exempted Louisiana Citizens, the state-mandated insurer of last resort, from bad-faith lawsuits. Lawmakers argued the exemption was needed to prevent another class-action lawsuit like the one Citizens faced after Hurricane Katrina, the cost of which is still being borne by private sector policyholders.

A balm or a bane?

Consumer advocates argue the Citizens exemption will make it even harder for policyholders to remedy disputed claims.

Already, the Louisiana Insurance Guaranty Association, the industry body set up to deal with policyholders whose companies have gone bust, is exempt. That has meant anyone who had a disputed claim against a failed insurance company is now dealing with LIGA, which faces no penalty for delaying payment.

That is the situation for the Atkinson family, whose house in the Marigny Triangle in New Orleans was badly damaged by Hurricane Ida.

Their insurer, United Property and Casualty of Florida, initially determined that damages were less than their $10,000 deductible. The Atkinsons hired an independent adjuster who determined it was above $400,000. They went back and forth for more than a year, and the Atkinsons finally filed a lawsuit.

UPC eventually increased the amount they were willing to pay to above $80,000. Then UPC went bankrupt in February, before a settlement could be reached.

“This has now turned into waiting on the LIGA process, which seems to keep dragging on,” said Jon Atkinson. “Our best-case scenario at this point is to get paid our full claim amount and then have to deduct our (attorneys) fees, which have not been insignificant.

“Additionally, we were dumped onto Citizens when UPC went bankrupt,” he adds. “That meant our annual premium increased almost threefold, from about $4,000 to about $14,000 per year. It is also very difficult to get off of Citizens with unrepaired damages, so you are basically stuck in a vicious cycle.”

John Wells, executive director of LIGA, noted that the association’s cases quadrupled after the storms and bankruptcies to 40,000. After two quiet years, that number is now down to about 6,000.

“What’s left are the last of the worst claims from the worst companies out there,” he said.

LIGA is trying to deal with them as quickly as possible, Wells said, but its adjusters have been stymied by the difficulty in getting good data from the companies that failed.

Wells said a proposal has been floated to mandate arbitration for the state-created agencies to streamline the process. That plan would also offer incentives for private insurers to join. But a fix for the fundamental problem that drags out disputed claims must wait for new legislation.