Being repeatedly named "a judicial hellhole," Louisiana has come under extreme scrutiny in recent years due to the lawsuit culture that causes auto insurance companies to face more claims here than in most other states in the U.S., according to The Advocate.
While there is a lot to blame for legal climate of the state, one of the top reasons for never-ending lawsuits is closely connected to a unique allowance that is only permitted in three states. Louisiana allows residents to directly sue insurance companies, which Lana Venable, executive director of the Louisiana Lawsuit Abuse Watch (LLAW), believes to be a major contributor to the "hellhole status" of the state.
"Louisiana is one of only a handful of states with a direct-action statute, allowing a plaintiff to bring a lawsuit directly against an insurance company," Venable told Louisiana Record. "By bypassing the insured, and suing the insurance company directly, the plaintiff avoids the extra time and process required to eventually receive payment."
Venable said the insured is treated as a third party to the litigation and the insurance company is named directly as the defendant. While this might not seem to be a negative legal implication, Venable said direct-action is causing taxpayers even higher costs.
Louisiana Lawsuit Abuse Watch Executive Director Lana Sonnier Venable Photo courtesy of Louisiana Lawsuit Abuse Watch
"Direct-action is a prime example of what is wrong with Louisiana’s civil justice system," Venable said. "Families and businesses in Louisiana were forced to pay nearly $7 billion in expenses related to tort litigation in 2016 – equivalent to more than $4,000 for every Louisiana household."
The "tort tax," as Venable puts it, ranks among the top five states in the nation, with litigation costs totaling nearly 3 percent of Louisiana's gross domestic product.
"In most other states, the claim is brought against the insured, who is perceived to have actually wronged the plaintiff,'" Venable said. "Louisiana trial lawyers should not be allowed to fast-track these cases targeting insurance companies in their quest to expedite 'jackpot justice.' When these lawyers win, Louisiana taxpayers lose."