Starting July 1, 2024, policyholders in Louisiana will should be extra circumspect and scrutinize any estimate submitted to the service, both straight or submitted on their behalf by any third occasion, together with contractors or public adjusters. A big revision to Louisiana Revised Statute 22:1892 imposes an obligation of excellent religion on the policyholder in, amongst different points, submitting estimates to the service. If the trier of reality finds that any estimate submitted to the service by the policyholder lacked religion evidentiary foundation, that discovering could possibly be deadly to the consumer’s proper to recuperate lawyer charges and penalties.
That is probably a big problem for these policyholders who retain public adjusters or solicit estimates from contractors, who then negotiate with the service 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 excellent religion and truthful 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 benefit can be exhaustively litigated. Policyholders ought to anticipate that each service will problem the great 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 typically embrace 15% overhead and 15% revenue of their estimates. That differentiation in pricing can be contested. One can anticipate prolonged discovery, together with depositions of each contractor, solely devoted to the service difficult the scope and estimate of the restore, hoping to undermine the “good religion evidentiary foundation” of each estimate. Subsequently, if the service efficiently convinces the trier of undeniable 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 could possibly 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 regulation imposes unjustifiable scrutiny on the estimates solicited by policyholders however not these estimates generated by the service, the constitutionality of the regulation 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 service. This problem is ripe for a constitutional problem.
It isn’t coincidental that this normal was not imposed on the service. Litigators in first-party property circumstances, Plaintiff and Protection, know that the estimates generated by the service 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 service 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 could have been current and even tried, the service was not bereft of a treatment previous to the revision. In Louisiana, we have now legal penalties and civil penalties, which could be imposed when warranted. This modification merely creates further pointless litigation, delays funds owed to the policyholder, and subverts the method to the detriment of the policyholders in Louisiana.