June 12, 2020 UPDATE
Governor Edwards vetoed the Omnibus Premium Reduction Act of 2020 (SB 418) today, June 12, 2020, along with seven other bills. The Louisiana House of Representatives currently has three draft bills which aim, in part, to addressing similar matters to those contained in the now vetoed SB 418. At this time, there is no information to suggest that the Louisiana Legislature is considering an override of the Governor’s veto.
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The Louisiana Legislature passed a bill targeted on tort reform on June 1, 2020. Although not law until signed by the Louisiana Governor, John Bel Edwards, SB 418, if enacted, the Bill would have significant ramifications for the business community and insurers writing in Louisiana.
Background and Current Status of SB 418
After years of unsuccessful efforts and multiple versions of failed bills, a bill entitled the “Omnibus Premium Reduction Act of 2020” passed in the Louisiana Legislature on June 1, 2020. Senate Bill 418 authored by Senator Kirk Talbot (R-River Ridge) passed favorably off the House floor (72-28) and the Senate floor (29-8), after revisions. SB 418 may be found here. SB 418 was sent to Governor John Bel Edwards’ desk for his consideration on June 1, 2020.
It is unclear what Governor Edwards will do. He can sign the legislation into law, veto the legislation on or before June 10, 2020, or allow it to become law without his signature. If Governor Edwards’ vetos SB 418, the Legislature has a limited period of time to attempt a Legislative override of his veto.
So, how would SB418 impact our legal system if it becomes law?
Lowering Louisiana’s jury trial threshold from $50,000 to $10,000.
- Louisiana has the highest jury trial threshold in the nation at $50,000. That means unless your case is valued at $50,000 or higher, a judge rather than a jury, will decide your case. Maryland has the next highest threshold at $15,000 and 32 states have no jury trial threshold.
- If enacted, SB 418 would allow for jury trials in tort/delictual actions where the amount of damages alleged exceeded $10,000 or more. The jury threshold for all other kinds of civil actions, such as a breach of contract case, would be reduced to $35,000.
- The impact of SB 418 would be to greatly expand the availability of jury trials in civil cases.
Ending the collateral source rule.
- The current judicially-made law prohibits evidence of what was actually paid by a plaintiff in medical bills and allows only evidence of full-price or “sticker price” medical bills to be submitted into evidence, without regard to contractual adjustments for health insurance, or limits on reimbursement established by public payors. This allows plaintiffs and their attorneys to recover a windfall that far exceeds both their actual liability for medical care and the costs of health insurance premiums they have paid.
- If enacted, SB 418, would allow a plaintiff to recover only the amount paid by the Plaintiff’s health insurer or public payor for treatment, any portion of cost sharing amount paid by the Plaintiff (deductible or patient portion) plus a mandatory award not to exceed 1.5 times the amount of health insurance premiums for a one year period prior to the accident or occurrence.
- SB 418 does not appear to have language that would impact a plaintiff’s ability to recover the “sticker price” for medical bills that are not paid by a health insurer, Medicare or Medicaid, but instead are to be paid out of pocket by the plaintiff in the future, presumably at a reduced rate based upon agreements existing between the medical provider and plaintiff’s attorney.
Removing direct action against an insurer except in limited, specific circumstances.
- Louisiana is one of only a small minority of states where a plaintiff can directly sue you and your insurance company, regardless of your financial solvency. Most states recognize that bringing an insurance company into a lawsuit needlessly encourages larger damages and increases the cost of litigation. It is human nature to see a company in a different light than a real person, but in the end it’s a real person paying a very real bill.
- If enacted, SB 418 would only allow for a lawsuit directly against an insurer in certain limited cases, such as: when the insured has filed bankruptcy, deceased, or is insolvent. It would also allow for a direct action when the cause of action arises between family members, relates to asbestos exposure, or is a UM action, if insurance coverage has been denied, or if citation cannot be made upon the insured.
Creating a mandatory 10% rate reduction for personal auto insurance.
- Louisiana’s car insurance rates are currently the second highest in the country. The measure assumes insurance companies would drop premiums for private passenger policies by 10% a year after the changes take effect in 2021, because of the anticipated savings the insurance companies would have as a result of SB 481. However, it includes a provision allowing companies to avoid rate cuts.
- Ultimately the goal of the bill is to help rebuild competition in our markets, providing real relief for Louisiana ratepayers.
Extending the prescription period for delictual (torts) actions from 1 year to 2 years for motor vehicle accidents.
- Currently the prescriptive period (Louisiana’s version of a statute of limitation) for motor vehicle accidents is one year. SB 481 would extend the time period to two years for car accidents, as well as aircraft, truck and watercraft accidents.
- This increase in time is intended with the idea to allow more time for settlement negotiations.
- SB 481 was does not modify any other prescriptive deadlines.