Prohibits insurance companies from including defense costs within the limits of liability except under certain circumstances. (8/1/21)
Impact
The proposed regulations would directly affect various types of insurance policies, including personal lines, medical malpractice, commercial vehicle coverage, and commercial general liability. By enforcing these changes, the law aims to enhance consumer protection for policyholders, ensuring that they maintain their liability limits regardless of the defense costs incurred during legal proceedings. This could potentially lead to greater transparency and fairness in the insurance industry, as clients would have a clearer understanding of their coverage levels.
Summary
Senate Bill 131 aims to reform the property and casualty insurance framework in Louisiana by prohibiting the inclusion of defense costs within the limits of liability in insurance contracts, under specific conditions. The new stipulation ensures that the liability coverage remains intact and not diminished by legal defense expenses unless a waiver is granted by the state commissioner. This legislation is designed to protect policyholders from incurring additional costs associated with their legal defense that would otherwise reduce their available liability insurance coverage.
Sentiment
The sentiment regarding SB 131 appears to be largely positive among consumer advocacy groups and public policy experts who support enhanced protections for individuals insured under liability policies. Proponents argue that the bill addresses a critical concern in the insurance industry—ensuring that insured parties are not disadvantaged due to legal costs. Conversely, some insurance companies may view the bill as a restriction that could hinder their ability to manage risks effectively, thus representing a point of contention within industry circles.
Contention
A notable point of contention around SB 131 relates to the waivers allowed by the commissioner. Certain types of insurance, such as professional liability (excluding medical malpractice), directors' and officers' liability, and specific commercial liability coverages, may still incorporate defense costs under specific conditions. Critics are concerned that this exemption could lead to inconsistencies in how different types of insurance are treated and may complicate the regulatory environment. Additionally, there are apprehensions that the broader implications of this bill might impact market dynamics, including competitive pricing and coverage availability.