What Happens Now After Landry’s Collateral-Source-Rule Veto?

Something very unusual happened yesterday which might take a while to process. A state legislature which in both houses has a Republican supermajority passed a bill with very near to a veto-proof majority, and a Republican governor just vetoed it.

You won’t see that often.

Jacob Matthews from The Center Square has a rundown of the facts of Gov. Jeff Landry’s veto of HB 423, which would be a change in the state’s collateral source rule, so we’re going to direct you there if you’re not familiar with the veto.

Landry’s press conference announcing the veto was a 40-minute presentation complete with a witness statement and a ton of talking points, many of which were not wrong.

It’s pretty clear, though, that the tort reform crowd wasn’t convinced.

Louisiana Lawsuit Abuse Watch lit the governor up over the veto…

Louisiana Lawsuit Abuse Watch (LLAW) is disappointed that Governor Landry has used his executive power to veto Representative Michael Melerine’s HB 423, which would have revised Louisiana’s judicially-created collateral source rule, increasing transparency in our civil justice system.

This common-sense legislation was part of a comprehensive legal reform package proposed by Insurance Commissioner Tim Temple to tackle Louisiana’s worsening insurance crisis. Incorporating compromises in both chambers, HB 423 received broad bipartisan support in both the House and Senate. This bill would have revised the current rule, allowing civil juries to have access to important information when making judgement decisions, including both the “sticker price” of medical bill(s) and the amount actually paid by the insurance company. There is often a significant discrepancy between these amounts, with the insurance company paying much less than the amount billed by the health care provider. Currently, a jury is not allowed to know the difference between these amounts, and the additional money recovered by the claimant results in a boon to both the attorney and the claimant. The goal should be to make the claimant whole, not to win the “lawsuit lottery.”

In addition to creating more transparency and helping lower insurance rates, this bill would have brought more fairness and balance to our civil justice system, and more predictability to our business climate. Lawsuit abuse does not discriminate – everyone pays the price when the resulting costs are passed down to all of us.

Louisiana has been a fixture on the American Tort Reform Foundation’s Judicial Hellholes list for 14 consecutive years, with excessive tort litigation resulting in more than $230 million in fiscal impact to the state and more than 40,500 lost jobs last year. Additionally, Louisiana residents’ personal income losses totaled nearly $3 billion, and every single Louisiana citizen paid a hidden “tort tax” of nearly $1,000 as a result of these abuses. To change these statistics, we must enact comprehensive legal reform.

LLAW will continue to fight to improve our civil justice system and protect consumers from absorbing the added costs that result when it is abused. We applaud and stand with Representative Melerine, Senator Seabaugh (who handled the bill in the Senate), and the many other lawmakers who are committed to civil justice reform.

And the Louisiana Association of Business and Industry wasn’t too happy, either…

Today, Gov. Jeff Landry vetoed HB 423 by Rep. Michael Melerine (R-Shreveport), which passed with widespread bipartisan support. LABI released the following statement on behalf of President and CEO Will Green.

“The business community is deeply disappointed in the governor’s veto today of HB 423. As we have said since its passage, HB 423 was a compromise bill that helped bring fairness, predictability and transparency to our legal system. The governor’s signature would have sent a resounding message to insurance carriers throughout the state and the country that Louisiana is indeed open for business as we work to fix our unstable insurance market.

“To defend his veto, the governor cherry-picked examples and pointed to other states that have litigation protections and guardrails in place that simply don’t exist in Louisiana, and therefore did not tell the whole story.

“While Gov. Landry could have provided a lifeline for all Louisianans currently drowning in an unaffordable market, he instead chose to stand with the trial bar and the status quo while businesses and citizens across this state scramble to pay yet another year of unsustainable premiums. Simply put, Louisiana’s market is dire and desperate.

“This past session, LABI and a coalition of stakeholders, including Insurance Commissioner Tim Temple, worked tirelessly on legislation to bring stability to the out-of-control insurance market. Gov. Landry’s voice could have ensured a more robust bill.

“While the governor has signed into law a property insurance reform package that helps bring fairness and balance back to our property insurance market, for which we are grateful, he has not yet adequately addressed the auto insurance crisis crippling the state. Without holistic reform addressing both property and auto insurance, we will continue to see insurers flee the state in favor of those with better business climates—leaving Louisiana citizens with few options and the highest rates in the country.

“Despite this misguided decision, LABI stands ready to work alongside Gov. Landry should he choose to be an active participant in this very important conversation.”

And Tim Temple, the state’s insurance commissioner, was decidedly grouchy as well…

So where are we now?

Landry’s side of the story contains some valid points here. He notes that back in 2020 the legislature passed a raft of tort reform bills which were supposed to lower rates and they ended up increasing. That’s true, and there were people back in 2020 who warned about that very thing and what the future effect would be.

Now, those warnings were a critique that the 2020 tort reforms were too timid. That passing them would give off a false sense of optimism that, once reality set in, would rob the tort reform movement of momentum.

If not credibility.

The counter to those arguments was that something had to be done, and if the reforms were watered down to a level through which then-governor John Bel Edwards would sign them, then it was best to take what was available.

One could make the argument, if one if to interpret Landry’s veto of HB 423 as him getting in bed with the trial lawyers, that the critics of the 2020 reforms were right. Landry made a pretty big show in his press conference of ripping into the insurance companies and calling them out for what he insinuates is gaslighting the public while gouging us. He says trial lawyers only provided seven percent of the dollars which funded his gubernatorial campaign and he’s in a position to dislike both the trial lawyers AND the insurance companies.

Give him some credit for that from a political standpoint, because most of the people of this state would say they share his sentiments.

Landry also claimed that he’s signed some 26 different tort reform measures, among them the change to a two-year prescriptive period in which a lawsuit must be filed after the event which caused the harm and a bill changing the state’s direct action rule by which plaintiffs now have to sue a defendant rather than just their insurance company. And those are things which might help lower rates.

Collateral source is the big-ticket item, though.

What effect all this will have can’t really be assessed yet. Everybody around this campfire is saying they want to keep talking and keep working together, which means maybe a different change to the collateral source rule can be agreed on. Landry and Temple are both saying they want to do something about the Housley presumption, which is a figment of Louisiana case law which establishes that if a plaintiff has injuries or pain after an accident that he didn’t have before it, that pain is presumed to have been caused by the accident. That sounds like it’s reasonable, but it can run off into a ditch very quickly when you consider what else could be going on in a plaintiff’s life.

There ought to be a way all of these people can get together on these items, and if they do then maybe the kerfuffle over this veto can go away.

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If not, though, what we said about this a couple of weeks ago will hold, which is that Landry will then be the Republican governor the business groups can’t trust. That’ll make for some strange circumstances.

And there is an argument to be made, and many among the state’s conservatives are making it, that Landry right now suffers from something we’ll call a Sellable Wins Deficit. There are a lot of things coming out of the legislative session on crime and this regular session which are good changes, but how many of them are big-ticket things which would, in the public’s perception, offset this veto and other things like redrawing the congressional map to essentially give Cleo Fields a congressional district, or appointing Democrats like Remy Starns and John Carmouche to the LSU Board of Supervisors.

Landry counters that by saying it’s a matter of what the media chooses to report on, and he isn’t wrong. He also says the substance of these things won’t turn out the same as their perception. For example, the redistricting issue is a process he’s very confident will turn out exactly as conservatives want in the long run – that’s another post altogether – and those LSU board appointments won’t affect the voting majority on that body at all.

It’s fair to note that making too many judgments about his governorship based on this stuff is a little like writing off a football game because your team is down a touchdown in the first quarter.

On the other hand, Landry is going to need allies for the big fights and major reforms yet ahead. And items like this veto, which has many of those allies spitting mad, cost political capital.

Temple’s suggestion for a special session on insurance reform is a good one. We would suggest Landry take him up on it, and all the players come to the table and emerge with as close to one voice as possible on a good set of insurance reforms that will ratchet rates down. If he can do that, yesterday’s veto won’t be a big deal in the long run.

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