With the informal title of a judicial hellhole and the reputation of being one of the states with the highest auto insurance rates in the country, Louisiana is hurting when it comes to its legal climate, according to The Advocate.
A number of factors contribute to the legal situation the state finds itself in, but one of the reasons is linked to an allowance that only exists in three states, Louisiana being one of them, in which residents are permitted to bring direct action against insurance companies. Though it may not sound like a legal nightmare, it is causing incredibly high settlements, thus driving the costs up for taxpayers.
Pelican Institute for Public Policy Vice President for Government Affairs Renee Amar recently talked with the Louisiana Record about this allowance and what she fears it does to the state's legal situation.
"As with other aspects of Louisiana's failed legal and regulatory structure, allowing residents to sue insurance companies directly combined with our extraordinarily high damages threshold for jury trials are driving up costs on Louisiana residents," Amar said.
In most states, the legal action is brought against the group that is actually at fault for the damages in an incident, such as the other driver, which keeps the costs down, as individuals do not have millions of dollar to offer for a settlement. Insurance companies, however, are another story entirely.
"Suing insurance companies directly also causes perception problems in court, because it pits average Louisiana citizens against seemingly deep-pocket insurance companies rather than the true defendants in the case," Amar said. "The more lawsuits filed and the higher the settlements reach mean higher expenses for hard-working families and diminishing opportunity for all."
High settlements are one of the contributors to the tort-related taxes that Louisiana households are responsible for, which total more than $4,000 per household, the Advocate said.