HLS 22RS-1948 REENGROSSED
2022 Regular Session
HOUSE BILL NO. 967
BY REPRESENTATIVE SEABAUGH
INSURANCE/POLICIES: Repeals a prohibition on reducing liability limits for certain
costs
1 AN ACT
2To amend and reenact R.S. 22:1272, relative to liability limits; to prohibit the reduction of
3 policy limits based on expenses of defense; to provide for waivers; to provide for
4 which expenses qualify as expenses of defense; to provide for an effective date; and
5 to provide for related matters.
6Be it enacted by the Legislature of Louisiana:
7 Section 1. R.S. 22:1272 is hereby amended and reenacted to read as follows:
8 ยง1272. Defense costs; prohibition; waiver
9 A. The liability limits contained in a policy or contract of insurance issued
10 by an authorized insurer shall not be reduced by the expenses of defense in a suit
11 under the policy unless waived by the commissioner executes a written waiver, as
12 provided in Paragraph (B)(2) or (3) of this Section, to authorize the policy liability
13 limits to be reduced by the defense expenses.
14 B.(1) The commissioner shall not waive the prohibition contained in
15 Subsection A of this Section shall apply to for any of the following types of
16 insurance coverage:
17 (a) All personal lines.
18 (b) Medical malpractice.
19 (c) Commercial vehicle.
20 (d) Commercial general liability.
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HB NO. 967
1 (2) The prohibition contained in Subsection A of this Section shall be waived
2 by the commissioner for 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 risk liability.
9 (g) Information security and privacy liability.
10 (h) Patent defense or other intellectual property infringement liability.
11 (i) Commercial liability coverages sold in combination.
12 (3) The commissioner may waive the prohibition contained in Subsection A
13 of this Section may be waived by the commissioner for other types of insurance,
14 except those coverage not listed in Paragraph (1) of this Subsection, upon
15 consideration by the commissioner of the level of market competition, the nature and
16 design of the product, the availability of insurance coverage, and other relevant
17 factors customs of the industry and the interests of the particular insured.
18 C. Every policy or contract for which a waiver is executed by the
19 commissioner pursuant to this Section shall be subject to the following requirements:
20 (1) Defense expenses used to reduce the liability limits on the policy or
21 contract shall not include overhead costs, adjusting expenses, or other expenses
22 incurred by the insurer in the ordinary course of business.
23 (2) Defense expenses used to reduce the liability limits shall Expenses of
24 defense may include only reasonable attorney fees and expenses directly connected
25 to the insurer's defense of a specific liability claim on behalf of an insured and any
26 other litigation expenses directly arising from the defense of a specific liability
27 claim. Expenses of defense shall not include overhead, unallocated loss adjustment
28 expenses, or other unallocated expenses incurred by the insurer in the ordinary
29 course of business.
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HB NO. 967
1 (3) The inclusion of defense expenses shall not exhaust the entire amount of
2 liability coverage.
3 D. The commissioner is authorized to do any of the following:
4 (1) Limit the amount of defense expenses used to reduce the liability limits
5 or establish a minimum amount of liability coverage from which defense expenses
6 shall not be deducted.
7 (2) Limit or define the amount of expenses that reduce the liability limits for
8 all or specific type of insurance coverage.
9 E. Any policy or contract of insurance containing terms that require a waiver
10 pursuant to this Section shall include a separate notice or inclusion on the declaration
11 page stating that the insurance policy or contract includes defense expenses which
12 may be deducted from the liability limits of the policy. This notice shall be
13 prominently printed or stamped in bold on the policy or contract and shall not be less
14 than a ten-point type.
15 Section 2. This Act shall become effective upon signature by the governor or, if not
16signed by the governor, upon expiration of the time for bills to become law without signature
17by the governor, as provided by Article III, Section 18 of the Constitution of Louisiana. If
18vetoed by the governor and subsequently approved by the legislature, this Act shall become
19effective on the day following such approval.
DIGEST
The digest printed below was prepared by House Legislative Services. It constitutes no part
of the legislative instrument. The keyword, one-liner, abstract, and digest do not constitute
part of the law or proof or indicia of legislative intent. [R.S. 1:13(B) and 24:177(E)]
HB 967 Reengrossed 2022 Regular Session Seabaugh
Abstract: Repeals a prohibition on reducing liability limits for certain costs.
Present law provides that liability limits contained in a policy or contract of insurance issued
by an authorized insurer shall not be reduced by the expenses of defense in a suit under the
policy, unless waived by the commissioner.
Present law provides that the prohibition on reducing liability limits in present law does not
apply to personal lines, medical malpractice insurance, commercial vehicle insurance, or
commercial general liability insurance.
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HB NO. 967
Proposed law provides that the commissioner shall not waive the prohibition on reducing
liability limits for personal lines, medical malpractice insurance, commercial vehicle
insurance, or commercial general liability insurance.
Present law provides that the prohibition on reducing liability limits in present law shall be
waived by the commissioner for insurance policies covering professional liability other than
medical malpractice, directors' and officers' liability, errors and omissions liability, pollution
liability, employment practices liability, cyber risk liability, information security and privacy
liability, patent defense or other intellectual property infringement liability, and commercial
liability coverages sold in combination.
Proposed law repeals present law.
Present law provides that the prohibition on reducing liability limits in present law may be
waived by the commissioner for other types of insurance, upon consideration by the
commissioner of the level of market competition, the nature and design of the product, the
availability of insurance coverage, and other relevant factors.
Proposed law repeals present law and provides that the commissioner may waive the
prohibition provided in present law for types of insurance other than personal lines, medical
malpractice insurance, commercial vehicle insurance, and commercial general liability
insurance upon consideration of the customs of the industry and the interests of the particular
insured.
Present law provides that every policy or contract for which a waiver is executed by the
commissioner pursuant to present law shall be subject to the following requirements:
(1)Defense expenses used to reduce the liability limits on the policy or contract shall
not include overhead costs, adjusting expenses, or other expenses incurred by the
insurer in the ordinary course of business.
(2)Defense expenses used to reduce the liability limits shall include only reasonable
attorney fees and expenses directly connected to the insurer's defense of a specific
liability claim on behalf of an insured and any other litigation expenses directly
arising from the defense of a specific liability claim.
(3)The inclusion of defense expenses shall not exhaust the entire amount of liability
coverage.
Proposed law repeals present law and provides that expenses of defense may include only
reasonable attorney fees and expenses directly connected to the insurer's defense of a
specific liability claim.
Present law provides that the commissioner may limit the amount of defense expenses used
to reduce the liability limits or establish a minimum amount of liability coverage from which
defense expenses shall not be deducted and provides that the commissioner may limit or
define the amount of expenses that reduce the liability limits for all or specific type of
insurance coverage.
Proposed law repeal present law.
Present law provides that any policy or contract of insurance containing terms that require
a waiver pursuant to present law shall include a separate notice or inclusion on the
declaration page stating that the insurance policy or contract includes defense expenses
which may be deducted from the liability limits of the policy. Present law provides that this
notice shall be prominently printed or stamped in bold on the policy or contract and shall not
be less than a ten-point type.
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HB NO. 967
Proposed law retains present law.
Effective upon signature of governor or lapse of time for gubernatorial action.
(Amends R.S. 22:1272)
Summary of Amendments Adopted by House
The House Floor Amendments to the original bill:
1. Provide types of insurance for which the commissioner shall not provide a
waiver, relative to the prohibition in present law.
2. Provide that the commissioner may waive the prohibition in present law for
certain types of insurance upon consideration of certain factors.
3. Remove certain requirements for policies for which the commissioner grants a
waiver.
4. Provide certain costs that shall not be included in an insurer's expenses of
defense.
5. Remove certain discretionary authority of the commissioner related to the
limitation of defense expenses.
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are additions.