BATON ROUGE – Louisiana’s climb to near the highest car insurance rates in the country is a result of a lawsuit happy court system and lawyer gouging as well as too many uninsured drivers, experts say.
“For many Louisiana families struggling with a tight budget, it’s not good news to learn that it’s going to be even more expensive to insure their vehicles,” Melissa Landry, executive director of the watchdog nonprofit Louisiana Lawsuit Abuse Watch (LLAW), told the Louisiana Record. “It’s especially troubling for folks in New Orleans and Baton Rouge where increases could be dramatic.”
Many Louisiana residents will see big rate hikes in their insurance, some as much as 22 percent, according to a Feb. 24 report by Theadvocate.com. Customers living in urban areas of Louisiana such as New Orleans and Baton Rouge will see the biggest jumps, partly because more city dwellers have no insurance and more cars are stolen in the bigger cities, the report stated.
An annual average car insurance bill currently runs $4,000 in New Orleans and approximately $3,300 in Baton Rouge. New Orleans previously was second only to Detroit in car insurance rates while Baton Rough was fifth highest according to personal finance website Nerd Wallet.
In 2010 Louisiana had the highest insurance rate in the country, then dropped back to No. 4, but is now on the rise in second place, the Advocate report stated.
“Bad roads and uninsured drivers certainly contribute to these increasing rates, but there’s no question that Louisiana’s poor legal climate is a major factor as well,” Landry said.
Louisiana has long been known as a frivolous lawsuit state and lawsuit abuse is tabbed as one of the major causes of skyrocketing insurance rates. U.S. Chamber of Commerce Institute for Legal Reform (ILR) President Lisa A. Rickard is quoted in the Advocate report as saying the long history of lawsuit abuse in the state and the questionable performance of its court system is propelling the high rates.
So is the state’s threshold for jury trials. Louisiana has a threshold for jury trials of at least a $50,000 claim. Other states have thresholds of $15,000. This causes lawyers to attempt to pad their claims for higher amounts and as a result Louisiana’s claims amounts are double the national average.
In addition, since insurance is more unaffordable in Louisiana, drivers in the state are more apt to drive without insurance, further exacerbating the problem.
“This is an example of how Louisiana law is far out of alignment with most other states and it contributes to a negative perception of our state as a judicial hellhole,” Landry said. “By encouraging unnecessary and sometimes meritless litigation, it also increases the cost of everyday goods and services---like insurance.”
Landry said lawmakers need to deal with the problem and correct the situation.
“The LLAW supports legislation to do just that,” she said. “We hope policymakers will take a very close look at passing this and other important legal reform measures this legislative session."