LABI's Chauvin details true cost of direct action against insurance companies

By Carrie Bradon | Mar 18, 2019

Lauren Chauvin   Courtesy of LABI

According to a recent article by The Advocate, Louisiana -- which has long been known as "a judicial hellhole" -- is struggling amid a flood of auto insurance lawsuits. 

Per 100,000 residents, New Orleans trial lawyers filed 853 auto liability suits, whereas in other large cities like Miami and Dallas, the numbers are 110 and 275, respectively. 

In addition to high insurance costs and plaintiffs' attorneys who are seeking large settlements, another situation is causing Louisiana and its residents to suffer: it is one of three states that allows direct action against insurance companies. That is, Louisiana allows residents to directly sue insurance companies rather than the just the parties at fault. 

Lauren Chauvin, Civil Justice Reform Director at Louisiana Association of Business and Industry (LABI), explained why this allowance is problematic for Louisianans. 

"Wisconsin, Rhode Island and Louisiana are the only states that allow an insurance company to be sued directly," Chauvin told Louisiana Record. "This takes an important human element out of an issue; all of a sudden someone is facing a corporation and not their neighbor. When someone is suing a massive corporation rather than an individual, something interesting happens that drives up settlement costs. This lack of sympathy would naturally inflate verdicts leading to more lawsuits and higher settlements."

While the average resident might not think this course of action impacts the state's taxpayers, it does, and is one of the contributors to the high tort-related costs that Louisiana households pay — roughly $4,000 per household, according to The Advocate.

"This setup offers a false sense of financial security for the citizens of Louisiana. While it appears the insurance companies are the only ones paying the verdict, the reality is, the defendant and every other Louisiana citizen is paying for it in their premiums," Chauvin said. "This costs hits Louisiana wallets hard."

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