CUNNINGHAM: Louisiana’s Dire, Pressing Need For Tort Reform

When it comes to making Louisiana a better place for residents and businesses, you do not have to look far to see where the most necessary change must happen. In fact, you see it every couple of miles on any interstate and highway you drive.

Almost every billboard in the state displays a trial lawyer promising you, the driver, that if you’re in an accident, they are there to help you. On the flip side of that is the fact that the insurance companies are not based here in Louisiana, and many of them seem more than happy to leave the state altogether, which reduces competition for better rates. The lawyers who say they are helping you are setting up the insurance companies who stay in Louisiana to take more of your money in rates. Both sides get paid, and you’re the one paying.

Because of that type of culture, and the easy opportunities our state system provides these lawyers to get businesses and insurance companies to pay up, your car insurance rates (among other things) are sky high. And while these lawyers tell you they are there to help you, in truth this culture has set up the state to have the 2nd highest rates in the nation and has created an environment that makes it nearly impossible for any person, family or household to pay anywhere close to reasonable rates on their personal insurance. 

And for business and economic development? Large and small businesses that use their own vehicles, like trucking firms, loggers, contractors, small business owners, cannot get insurance at anywhere close to competitive rates with business auto insurance in other states, which forces many of them to move their operations, and their jobs, to neighboring states where the auto insurance rates are much lower.

So, when it comes to tort reform in Louisiana, it is not just a simple case of “we have to push back against the trial lawyers.” We must operate from the perspective of the consumer – the constituents of the people who are going to be working on legislation dealing with the issue of tort reform – and make decisions that will benefit them. The idea seems simple but making the policy changes tends to be a complex process. The system is already rigged against the consumer, and you have to chip away at it while also keeping both sides (the insurance companies and the trial lawyers) at the table to negotiate. But you need them both there. They are both powerful lobbies in the state, and only through them will you get any sort of change in the state.

And what’s in it for the politicians? If enough reforms were enacted in the legislature to reduce auto insurance by 15%, which would still make Louisiana’s auto insurance rates 32% higher than the national average, Louisiana consumers would save $320 per year, per vehicle. Imagine that! It’s a tax-cut-like-benefit without having to cut any taxes! This “tax cut” doesn’t cost the government one dime. For Democrats, no programs are cut and their constituents keep more of their own money. For Republicans, it’s economic development and their constituents keep more of their own money. 

Who doesn’t benefit? For one, your local insurance agent, because the premiums they receive for your insurance rates are going down. But guess what? Your local insurance agent is one of the biggest backers of Tort Reform! They understand that this is an economics issue for the people of the state. Who else doesn’t benefit? Trial lawyers. But you don’t see any of them talking about fairness, lower insurance rates, or sacrifice. 

To best represent the interests of the consumer, the legislature should hire independent actuaries – not those working for the insurance companies who have a vested interest here and not those selected by the trial lawyers, but truly independent actuaries – to go through all the numbers and come up with their own estimates. They will be able to determine what tort reform can accomplish for consumers in the state.

After this, the next step should be to revive Kirk Talbot’s HB 372 from the 2019 legislative session, which drops Louisiana’s jury trial threshold down from $50,000 to $5,000. That $50,000 threshold makes Louisiana’s the highest in the nation – the next highest is Maryland at $15,000, which is ridiculous. Talbot’s law would also have changed Louisiana’s prescription from one year to two years (which gives the lawyers more time to file lawsuits and actually works to their advantage). This would give both the insurance agencies and the lawyers a victory, though ultimately it’s mostly a win for the consumer.

Talbot’s bill also aimed to get rid of the collateral source rule, which basically says if you’re sued by someone over a car accident, they aren’t allowed to introduce evidence that some or all of your bills/losses/etc. have already been covered by your insurance company. Essentially, it allows you to double-dip and get overcompensated, which, again, only serves to drive rates up.

There are other laws on the books that keep your rates high, all of which need to be addressed individually by the legislature.

  1. In Louisiana, the Seatbelt Gag Rule prevents any evidence of whether or not a plaintiff was wearing their seatbelt at the time of an accident from being introduced in court… despite the fact that seatbelts are LEGALLY required and PROVEN to reduce injury in accidents, which would reduce the bodily injury and consequently, the cost of medical bills and the cost of injury in lawsuits.
  2. The Medical Billing Secrecy law in Louisiana states that judges and juries are not allowed to know what your health insurance company has paid for medical bills. Like the Collateral Source rule, this means that you can very well end up overcompensated for the damages caused by a motorist. The court is only allowed to know the initial charge before prices were negotiated by the insurance companies and the doctors.  If you’ve ever looked at your “Explanation of Benefits” from a health insurance claim, you’ll find that doctor’s and hospital’s “charge” one rate, but then immediately write that off because your health insurance company has negotiated a much lower reimbursement rate on your behalf. But this law says the courts should not know about that part.
  3. Louisiana, because of the Direct Action law, is also one of only three states where a plaintiff and their lawyer can sue you AND your insurance company. Most states recognize that bringing an insurance company into the lawsuit encourages a jury to award larger damages. It’s simple behavioral finance. Where’s the largest pocket? Reach inside it. It’s human nature to see a company differently than a person, but in the end, it’s the consumer who is paying the bill through a higher claim and higher rates. 

Talbot’s bill passed the House along party lines, but was defeated this year when it was sent off to Senate Judiciary A, which at the time was made up almost entirely of lawyers. That’s where the new Senate President (who, as of this writing, appears will be Page Cortez of Lafayette) comes in: If the Republicans are serious about pushing reforms and forcing Governor John Bel Edwards (himself a trial lawyer and staunch ally of their cause) to confront his claims of being a conservative Democrats interested in the well being of the people of Louisiana and not special interests, then they cannot allow the trial lawyers of their own party, and the Democrats, to dictate the terms of the reform. That means Cortez needs to avoid loading up key committees (like Judiciary A) with members of his own party who are hostile to tort reform.

They also cannot simply be beholden to the insurance companies, either. This has to be something done for the consumer, the people of Louisiana, in order to improve the state environment. Without reforms like these, the state will continue to lag behind the rest of the states, and it’s only a matter of time before we cannot catch up with them.

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