Insurance companies could face fines or be suspended from doing business for refusing to comply with Louisiana Insurance Commissioner Jim Donelon’s order to cover the temporary living expenses of policyholders who evacuated during Hurricane Ida. But the one thing Donelon cannot make the companies do is pay the actual claims to their policyholders.
Donelon discussed the issue as the featured guest at the Baton Rouge Press Club luncheon Monday and said it was an “absolute shock” when he learned that State Farm refused to waive its mandatory evacuation requirement to cover evacuation expenses.
The issue stems from a provision contained in most homeowner’s insurance policies that covers living expenses only if the policyholder is under a mandatory evacuation order. Ahead of Hurricane Ida, only some Southeast Louisiana parishes were put under a mandatory evacuation order. Most of New Orleans and Jefferson were not, despite not having running water or power for several days after the storm.
After Ida made landfall, Donelon urged insurance companies to voluntarily waive that provision after he received an email from Allstate saying the company was already planning to do so. USAA and other companies joined with Allstate in meeting Donelon’s request, but State Farm did not, prompting Donelon to turn his request into a mandate.
State Farm now plans to challenge that mandate in court, Donelon said.
When contacted by email Monday, the company did not give a specific reason why it’s refusing to cover the temporary living expenses. Instead a corporate spokesman forwarded a general statement saying: “State Farm stands with our customers to help them recover in those states impacted by Hurricane Ida. Our hearts go out to all those impacted. We are working with our customers one-on-one to determine their individual circumstances and provide assistance in their recovery process. We are committed to pay what we owe and encourage our policyholders who have suffered a loss to submit a claim.”
State Farm executives were equally vague with the insurance commissioner, telling him only that they intend to follow the language in their policies, Donelon said.
The insurance commissioner’s emergency declarations are nothing new. Following Hurricane Laura in 2020, Donelon issued emergency declarations prohibiting insurers from cancelling or increasing premiums and a mandate that health insurers suspend limitations on prescription renewals. Similar declarations were made after hurricanes Isaac, Gustav and other named storms.
Last year, health insurance companies challenged Donelon’s order that required expanded coverage for telemedicine and his order that suspended “step” therapy policy provisions — which had required patients to start with the least expensive therapy treatment before trying more expensive options — but those mandates held up under judicial scrutiny, he said.
When policyholders were having problems with Allstate after Hurricane Katrina, Donelon said he fined the company $250,000.
“I have a plethora of authority over the companies licensed to do business in our state,” Donelon said. “That includes the fining authority. It includes the suspending authority. It includes the revocation of their authority to do business in our state.”
Many parishes and municipalities did not issue mandatory evacuations ahead of Hurricane Ida because there was not enough time for such evacuations to be safely carried out. The fast-moving storm took Louisiana by surprise and officials were worried that mandatory evacuations would create hours-long traffic jams.
During mandatory evacuations for Hurricane Ivan in 2004, many Southeast Louisiana residents were trapped in gridlock traffic for periods as long as 8 hours, running out of fuel, food and water, Donelon said.
“It was a horrible experience for those folks, particularly the elderly who were caught up in it,” Donelon said.
“That was part of the decision making process for those public officials trying to decide whether to order an evacuation or not,” Donelon said.
Although Donelon has the authority to fine or suspend an insurance company, he cannot make them pay a policyholder’s claim. Only the courts can order the companies to give money to policyholders, he said.