Starting July 1, 2024, policyholders in Louisiana will have to be extra circumspect and scrutinize any estimate submitted to the provider, both instantly or submitted on their behalf by any third occasion, together with contractors or public adjusters. A major revision to Louisiana Revised Statute 22:1892 imposes an obligation of fine religion on the policyholder in, amongst different facets, submitting estimates to the provider. If the trier of reality finds that any estimate submitted to the provider by the policyholder lacked religion evidentiary foundation, that discovering might be deadly to the consumer’s proper to get well lawyer charges and penalties.
That is doubtlessly a major concern for these policyholders who retain public adjusters or solicit estimates from contractors, who then negotiate with the provider looking for authorization to finish the repairs. Newly revised Louisiana Revised Statute 22:1892 J(2)(c) mandates:
J. (1) The insured, claimant, or a consultant of the insured or claimant has an obligation of fine religion and honest dealing when asserting a declare for insurance coverage protection.
(2) Any one of many following acts, if knowingly dedicated or carried out by an insured, claimant, or consultant of the insured or claimant, constitutes a breach of the insured’s duties imposed in Paragraph (1) of this Subsection:
(c) A submission of an estimate or declare for damages that lacks a foundation for protection below the phrases of the coverage or lacks religion evidentiary foundation.
The “good religion evidentiary foundation” of each estimate submitted by the policyholder will now be dissected, and its advantage might be exhaustively litigated. Policyholders ought to anticipate that each provider will problem the nice religion foundation of each estimate primarily based upon scope and worth, hoping to nullify penalties and lawyer charges.
Sadly, the statute doesn’t present any framework for the trier of reality to contemplate when figuring out whether or not the policyholder’s estimate lacked religion evidentiary foundation. The policyholder ought to anticipate a free-for-all, a litany of challenges on each minuscule line merchandise within the estimate. For instance, since Hurricane Laura in South Louisiana, pricing has fluctuated amongst contractors, with some contractors together with 10% overhead and 10% revenue of their estimates, whereas others in the identical locality usually embrace 15% overhead and 15% revenue of their estimates. That differentiation in pricing might be contested. One can anticipate prolonged discovery, together with depositions of each contractor, solely devoted to the provider difficult the scope and estimate of the restore, hoping to undermine the “good religion evidentiary foundation” of each estimate. Subsequently, if the provider efficiently convinces the trier of indisputable fact that the general public adjuster’s scope is overly broad, the prices are unreasonable, or {that a} contractor’s estimate was inconsistent with the purportedly affordable quantities charged within the locality, lawyer charges and penalties might be denied primarily based upon these findings alone.
Furthermore, the Legislature didn’t outline the phrase “good religion evidentiary foundation.” Therefore, it’s arguably unconstitutionally obscure to the extent that estimates, even these generated by Xactimate, are subjective in nature and primarily based upon the data and expertise of the estimator or contractor. Moreover, to the extent that the legislation imposes unjustifiable scrutiny on the estimates solicited by policyholders however not these estimates generated by the provider, the constitutionality of the legislation needs to be challenged by the policyholder in each continuing. The Legislature might and will have utilized the identical normal to estimates generated by the provider. This concern is ripe for a constitutional problem.
It isn’t coincidental that this normal was not imposed on the provider. Litigators in first-party property circumstances, Plaintiff and Protection, know that the estimates generated by the provider on the preliminary inspections are sometimes under-scoped, undervalued, incomplete, and, throughout catastrophic occasions particularly, generated by inexperienced, ill-prepared, and overworked adjusters whose loyalty is to not the policyholder. Policyholders merely need the provider to stick to their tasks below the insurance coverage contract and pay what they owe in order that the policyholders can start rebuilding their houses.
In conclusion, this laws is a stereotypical, frenzied, knee-jerk response, creating extra collateral injury and litigation slightly than facilitating making the policyholder complete. This revision was a completely pointless, unjustifiable overreach by the Legislature, replete with unexpected collateral penalties. In these egregious circumstances the place fraudulent conduct might have been current and even tried, the provider was not bereft of a treatment previous to the revision. In Louisiana, we now have prison penalties and civil penalties, which might be imposed when warranted. This modification merely creates extra pointless litigation, delays funds owed to the policyholder, and subverts the method to the detriment of the policyholders in Louisiana.