SLS 20RS-330 ORIGINAL
2020 Regular Session
SENATE BILL NO. 119
BY SENATOR ROBERT MILLS
LIABILITY. Prohibits insurers from reducing the limits of property and casualty insurance
policies to fund defense costs. (8/1/20)
1 AN ACT
2 To enact R.S. 22:1272, relative to property and casualty insurance; to provide relative to
3 defense costs; to prohibit inclusion of defense costs in insurance contracts under
4 certain circumstances; to provide for waivers; to provide for an effective date; and
5 to provide for related matters.
6 Be it enacted by the Legislature of Louisiana:
7 Section 1. R.S. 22:1272 is hereby enacted to read as follows:
8 ยง1272. Defense costs; prohibition; waiver
9 A. No policy or contract of insurance shall include defense costs that
10 would reduce the limit of liability set forth in the policy or contract unless
11 waived by the commissioner as provided in this Subsection.
12 (1) The commissioner shall not waive the prohibition in this Subsection
13 for the following types of insurance coverage:
14 (a) All personal lines.
15 (b) Medical malpractice.
16 (c) Commercial vehicle.
17 (d) Commercial general liability.
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Coding: Words which are struck through are deletions from existing law;
words in boldface type and underscored are additions. SB NO. 119
SLS 20RS-330 ORIGINAL
1 (2) The commissioner may waive the prohibition in this Subsection for
2 the following types of insurance coverage:
3 (a) Professional liability other than medical malpractice.
4 (b) Directors' and officers' liability.
5 (c) Errors and omissions liability.
6 (d) Pollution liability.
7 (e) Employment practices liability.
8 (f) Cyber and technical liability.
9 (3) The commissioner may waive the prohibition in this Subsection for
10 other types of insurance, except those listed in Paragraph (1) of this Subsection,
11 after a consideration of the level of market competition, the nature and design
12 of the product, the availability of insurance coverage, and other relevant
13 factors.
14 B. Any policy or contract of insurance issued pursuant to a waiver shall
15 be subject to the following requirements:
16 (1) Defense costs that reduce the limit of liability shall not include
17 overhead costs, adjusting expenses, or other expenses incurred by the insurer
18 in the ordinary course of business.
19 (2) Defense costs that reduce the limit of liability shall include only
20 reasonable attorney fees and expenses directly connected to the insurer's
21 defense of a specific liability claim on behalf of an insured and any other
22 litigation expenses directly arising from the defense of a specific liability claim.
23 (3) The inclusion of defense costs in the limit of liability shall not exhaust
24 the entire amount of liability coverage.
25 C. The commissioner may do any of the following:
26 (1) Limit the amount of the defense costs that reduce the limit of liability
27 or set a minimum amount of liability coverage from which defense costs shall
28 not be deducted.
29 (2) The commissioner may further limit or define the term "defense
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Coding: Words which are struck through are deletions from existing law;
words in boldface type and underscored are additions. SB NO. 119
SLS 20RS-330 ORIGINAL
1 costs that reduce the limit of liability" for all or specific types of insurance
2 coverage.
3 D. Any policy or contract of insurance shall include a separate notice or
4 inclusion on the declaration page stating that the insurance policy or contract
5 includes defense costs within the limit of liability. The notice shall be
6 prominently printed or stamped in bold on the policy or contract and shall not
7 be less than ten-point type.
The original instrument and the following digest, which constitutes no part
of the legislative instrument, were prepared by Carla S. Roberts.
DIGEST
SB 119 Original 2020 Regular Session Robert Mills
Proposed law prohibits a policy or contract of insurance from including defense costs that
would reduce the limit of liability set forth in the policy or contract unless waived by the
commissioner.
Proposed law mandates that the commissioner shall not waive the prohibition in proposed
law for certain types of insurance coverage, including personal lines, medical malpractice,
commercial vehicle, and commercial general liability.
Proposed law allows the commissioner to waive the prohibition in proposed law for certain
types of insurance coverage, including professional liability other than medical malpractice,
directors' and officers' liability, errors and omissions liability, pollution liability,
employment practices liability, and cyber and technical liability. Allows the commissioner
to waive the prohibition in proposed law for other types of insurance, except those in the
mandatory list, after a consideration of the level of market competition, the nature and
design of the product, the availability of insurance coverage, and other relevant factors.
Proposed law places limitations on any policy or contract of insurance issued pursuant to a
waiver.
Proposed law specifies that defense costs that reduce the limit of liability shall include only
expenses directly related to the insurer's defense of a specific claim such as reasonable
attorney fees and litigation expenses. Proposed law further specifies that defense costs that
reduce the limit of liability shall not include overhead costs, adjusting expenses, or other
expenses incurred in the ordinary course of business.
Proposed law requires any policy or contract of insurance to include a conspicuous notice
on the policy declaration page indicating that the insurance policy or contract includes
defense costs within the limit of liability.
Effective August 1, 2020.
(Adds R.S. 22:1272)
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Coding: Words which are struck through are deletions from existing law;
words in boldface type and underscored are additions.