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Louisiana direct action reform bill awaits Landry’s signature

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(The Center Square) – A Louisiana bill that would ban the practice of direct action, a legal practice where a claim is placed against an insurance company and not the policyholder, is awaiting a decision from Gov. Jeff Landry.

After the Senate passed by a 39-0 vote the amended form of the bill on May 7, the House concurred with the upper chamber’s changes on May 8 with a 97-0 tally.

House Bill 337 is sponsored by Rep. Jack McFarland, R-Jonesboro, R-Jonesboro, and passed both chambers unanimously in amended form.

“This was a tremendous, concerted effort by many on both sides,” McFarland said on May 8 during debate for his bill. “It was a collective effort by everyone to get this legislation advanced. I’m excited about it because I am the type of guy that writes a check every month paying these premiums. I am one of those guys sitting here today telling you that I’m seeing companies go out of business every week. And you don’t have to be a big contractor.

“I’m talking about men and women that only own one truck that are losing their livelihoods. I think we have more work to do, but I think this will move the ball forward.”

The bill was sent to Landry on Tuesday and is due back from him with 10 business days, which would be on May 27.

The bill is part of Louisiana commissioner of insurance Tim Temple’s package of legislation designed, through tort reform and other measures, to lower insurance rates for consumers on both vehicles and property.

“The direct action statute is somewhat unique to Louisiana. It’s also something that insurance companies hate,” said Sen. Alan Seabaugh, R-Many, who presented the bill on April 24 to the Senate Committee on Insurance. “I’ve had multiple conversations over the years with insurers that write business in other states and don’t write in Louisiana that point to this as one of the factors that keeps them from looking at Louisiana as a place to do business.”

Seabaugh also told the committee that most states, unlike Louisiana, don’t allow direct action lawsuits against insurers except “under very isolated circumstances.”

Under present law, direct action litigation against an insurer can take place if the insured are dead, insolvent or been judged bankrupt, the cause for a lawsuit stems from damage between children and their parents or a married couple or the insurer is an uninsured motorist carrier.

The bill is supported by the Temple, the Louisiana Loggers’ Association, the National Federation of Independent Businesses, the Pelican Institute, rideshare provider Lyft, the Louisiana Concrete Association, the Louisiana Auto Dealers’ Association and the Louisiana Oil and Gas Association.

It is opposed by the nonprofit group Real Reform Louisiana.

Scott Andrews from the Louisiana Association for Justice spoke out against the bill, saying that the way the bill is written would require much of this litigation to be two trials instead of one, with one against the insured and another directed at the insurer.

McFarland said on the House floor that the Senate amendments would clarify the bill’s language and ensure that two lawsuits weren’t required in this type of litigation if the bill becomes law.

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