La.R.S.22:1892(A)(5) — insurer’s additional affirmative duty

By Alexis C.Griffis; The Law Office of Alexis C.Griffis, LLC; New Orleans, Louisiana

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Effective August 1, 2021, HB 585 (Act 344) added subsection (A)(5) to La. R.S. 22:1892; it requires a field adjuster report to be given to policyholders within 15 days of receiving a request from the insured. Interestingly, unlike La. R.S. 22:1891A(1)-(4), (A)(5), on its face, is devoid of any penalties associated with failing to produce the requested report. This leaves uncertainty as to the applicability of the bad faith statute as it relates to any failure to produce a field adjuster report.

Before HB 585 became law, the U.S. District Court for the Middle District of Louisiana addressed the issue of interpreting subsection (A) of La. R.S. 22:1892. In Lamar Advertising Co. v. Zurich American Ins. Co., the insured argued separate and independent claims under 22:1892(A)(1) and (A)(4) and that each violation entitles him to a separate and additional imposition of penalties. 1

In addressing whether each subsection of (A) is a separate claim, the court concluded:

[T]he plain language of subsection (A) provides separate affirmative duties on the insurer when paying claims to its insured and/or third parties. Subsection (A)(1) states an insurer “shall pay the amount of any claim due to any insured within thirty days after receipt of satisfactory proofs of loss from the insured.” Whereas subsection (A)(4) states, “All insurers shall make a written offer to settle any property damage claim, including a third-party claim, within thirty days after receipt of satisfactory proofs of loss of that claim.” As such, subsection (A)(4) extends obligations beyond first[-]party insureds to a third-party claim. Because the subsections provide separate affirmative duties, an insured can bring a claim for violation of any of the subsection. 2

In accordance with the jurisprudence, each subsection of La. R.S. 22:1892(A) is a separate affirmative duty, and, thus, the addition of subsection (5) provides an additional affirmative duty of the insurer. 3 However, the ultimate issue is whether a breach of the insurer’s affirmative duty provided by subsection (5) provides a penalty for that breach alone.

In addressing the applicable penalties provided by La. R.S. 22:1892(A) the court in Lamar Advertising Co. concluded:

[F]or any given property damage claim by an insured, an insurer has multiple affirmative duties to promptly pay or settle that claim. The failure to comply with one or more of those duties can subject that insurer to a penalty, if the insurer's failure is found to be arbitrary, capricious or without probable cause. In other words, the plain language of the statute does not support the conclusion that an insured can recover statutory penalties for each of an insurer's failures to comply with its affirmative duties. Instead, the statute provides a penalty for any and all of an insurer's failures when handling a property damage claim. 4

Disagreeing with the insured, the court explained that the plain language of the statute does not support the conclusion that the penalty is imposed for each failure to comply with each affirmative duty. 5 Instead, the penalty imposed in subsection (B)(1) applies if the insurer fails to comply with one, more, or all of its affirmative duties when handling the insured’s property damage claim. 6 Therefore, should an insurer fail to pay a claimant or make a written settlement offer or both, in accord with the statutory provisions, the insurer, in either instance, subjects itself to the penalties subsection (B) imposes.

However, unlike the issues addressed in Lamar Advertising Co., (A)(5) fails to state the imposition of penalties for this violation. That is, the penalty imposed in subsection B mandates penalties and attorney fees when an insurer fails to pay a claimant or make a written offer to settle a property damage claim. HB 585 did not address nor did it add a provision to subsection (B) for penalties to apply for violation of (A)(5). In fact, subsection (B) specifically identifies (A)(1)-(4).

In interpreting a statute, the Supreme Court of Louisiana instructs:

[T]he interpretation of any statutory provision starts with the language of the statute itself. 7 When the provision is clear and unambiguous and its application does not lead to absurd consequences, its language must be given effect, and its provisions must be construed so as to give effect to the purpose indicated by a fair interpretation of the language used. 8 Unequivocal provisions are not subject to judicial construction and should be applied by giving words their generally understood meaning. 9

Further, as applied to La. R.S. 22:1892, “this statute must be strictly construed because it is penal in nature.”10

With this is mind, under the plain language of the statute and given that penal statutes are strictly construed, it is likely the imposition of penalties for La. R.S. 22:1892 is not applicable for an insurer’s breach of its affirmative duty to give policyholders the field adjuster report upon request, should this be the only breach.

However, even if no penalties are imposed for violation of subsection (5) alone, should the insurer fail to provide a copy of a field adjuster report within 15 days upon request, this violation is a breach of the insurer’s affirmative duty and is further evidence that any additional breach is arbitrary, capricious, and/or without probable cause to support a finding of penalties.

Endnotes

1. Lamar Advertising Co.v.Zurich American Ins. Co.,473 F.Supp.3d 632 (M.D.La.2020). 2. Id.

3. The affirmative duty of the insurer provided by subsection (5) is only triggered upon request of the field report.

4. Id.

5. Id.

6. Bourg v.Safeway Ins.Co.of Louisiana,2019- 0270 (La.App.1 Cir.3/5/20).

7. In re Succession of Faget,10-0188,p.8 (La.11/30/10_,53 So.3d 414,420.

8. La.C.C.Article.9; La.R.S.1:4; In re Clegg, 10-0323,p.20 (La.7/6/10),41 So.3d 1141. 1154.

9. La.C.C.Article 11; La.R.S.1:3.

10. Richardson v.GEICOIndem.Co.,2010-0208 (La.App.1 Cir.9/10/10).