A Louisiana car accident bill whose aim is to lower auto insurance premiums in the state has passed both houses of the state legislature. The Omnibus Premium Reduction Act is headed to the desk of Governor John Bel Edwards. It is expected the governor will sign the legislation, but the bill did not pass without strong arguments on both sides.
The motivation for the bill came from the $2,200 annual average that residents of Louisiana pay to insure their vehicles. That’s more than 48 other states, with only Michigan residents paying out more to insurers.
Whether the legislation will have its desired effect or end up as a giveaway to insurers is where the debate has come in.
The key area of contention is regarding damage caps. Proponents of the caps believe that the reason for skyrocketing insurance rates is that insurers are scared of a potentially huge award in any one case. Providing insurers with more cost certainty makes it easier for them to lower rates.
Proponents further point out that the caps do not apply to reimbursement for medical expenses or cost-of-living. They apply only to punitive damages—the area where a judge or jury has the most leeway.
Opponents believe that limiting the damages will make it easier for unscrupulous insurers to deny claims. High punitive damage awards often come when a judge or jury becomes convinced that an insurer was acting in bad faith. If the number-crunchers at insurance companies can define the exact risk of acting in bad faith, then the behavior becomes more likely.
Other aspects of the Omnibus Premium Reduction Act have caused debate over their side effects. The Act makes it to get a jury trial. There are concerns that instead of having to persuade just a single judge of their case, a personal injury lawyer must now swing an entire jury.
Of course, that goes both ways—the defense lawyer for the insurer will face the same new dynamic. The key variable will be whether or not juries will be more sympathetic to plaintiffs or to insurers.
Supporters of the bill also note that the measure has the potential to cut rates by as much as 25 percent. Furthermore, if insurers do not cut their rates by at least 10 percent, they will be required to provide evidence to the Insurance Commissioner that proves the new law did not save them any money.
Critics of the new law note that there is nothing mandatory about future rate cuts and that there is nothing indicating that the process by which insurers present their financial data to the Commissioner will be transparent.
The problem of ensuring fair treatment for victims of auto accidents, while maintaining reasonable premiums is a familiar one across the nation. If the Louisiana car accident bill becomes law, it will become another tool of analysis by states around the country.