(The Center Square) — Louisianans must get tired of hearing that the Legislature met to discuss the state’s high auto insurance rates.
When will the actual relief come? It’s hard to say, but Tim Temple, Commissioner of Louisiana Department of Insurance, did present some possible reforms.
High auto insurance rates represent an issue connected and reinforced by several other issues that the legislature is working to address.
There are many factors which contribute to the high rates. One of those issues is Louisiana’s legal environment.
This issue is layered and costly, driving insurers out of Louisiana, thus raising premiums, discouraging and eliminating businesses, eliminating jobs and taxable wages, reducing funding for public services, and driving more people out of the state.
“If we don’t get this right, businesses are leaving, even if their corporate income tax is lower,” Rep. Emily Chenevert, R-Baton Rouge, said, a subtle poke at Gov. Jeff Landry’s mission to bring business to Louisiana.
The legal environment has many interconnected causes. Louisiana citizens have a propensity for filing injury claims, ones that are frivolous and even fraudulent.
Minimal coverage policies can also contribute to Louisiana’s status as a “judicial hellhole.” When drivers with insufficient coverage are involved in accidents, injured parties may sue to recover costs that exceed the insurance payout.
This leads to more legal disputes and claims against underinsured drivers, adding to the strain on the insurance system and driving premiums even higher.
Linda Biernacki, the president of Fire Tech Systems, described a case involving her company where, despite having video evidence exonerating them, they still faced a lawsuit.
“There was a lady — we took video. She walked out. She ran into us,” Biernacki recounted. “We got her on video saying she didn’t have any problem. We got her husband on video saying, ‘Oh no, we’re not going to sue.’ Well, lo and behold, these ambulance chasers come, and they actually talk them into suing us.”
And courts have a record for ruling in their favor, many resulting in payouts which far exceed medical bills or damages.
One auto accident between an ambulance and an electrical line service business, which resulted in grave injury, incurred $158,841 in medical expenses but the plaintiff was awarded $219,910,110. The plaintiff suffered multiple skull fractures, a brain bleed, and a spinal fracture.
The insurer and the defending business are forced to pay this “nuclear verdict”, increasing the insurers cost making premium hikes unavoidable.
While the committee members agree the injuries and any future costs ought to be covered, $200,000,000 bill raises questions about proportionality. Moreover, what if the insurer’s policy limits don’t cover the full cost? A smaller business would be hard pressed to cover such an extreme payout.
These “nuclear verdicts” are pervasive across the state. According to a study by Marathon Strategies, Louisiana state courts issued $409 million in “nuclear verdicts” — awards of $10 million or more — against businesses in 2023.
Insurance companies are often reluctant to take cases to court because the odds are so stacked against them, explained Linda Biernacki, president of Fire Tech Systems.
Biernacki, whose company operates across six states with over 70 vehicles, shared firsthand experiences to illustrate the challenges businesses face in Louisiana’s legal climate.
“One of the reasons… insurance companies don’t litigate is that when they look into it, they see the percentages of a win,” Biernacki said. “Typically, 90% of all litigation is going to be a loss.”
