FOLLOWING THE PATH OF LEAST RESISTANCE

1. FOLLOWING THE PATH OF LEAST RESISTANCE

2. FOLLOWING THE PATH OF LEAST RESISTANCE

3. PANEL • Ed O’Brien – Deputy Commissioner, Office of Property & Casualty • Warren Byrd – Executive Counsel, Office of Legal Services • Rachelle Carter – Director, Policy Forms Office of Property & Casualty

4. 2008 Legislative Changes

5. 2008 Legislative Changes ACT 854 (SB 160) Effective 7/9/2008 Provides for changes in Homeowner’s Insurance policy deductibles and the application of deductibles in the event of loss. • Insurers may submit for approval to increase named storms or hurricanes not more than 4% for policies in effect more than 3 years • Allows flexibility to provide tiered hurricane deductibles across the state • Insurers must agree to write new business in the regions in which the new deductible applies • Prohibits stacking deductibles to a loss from a single incident

6. 2008 Legislative Changes ACT 415 (SB 335) Effective 1/1/2009 Reorganizes and recodifies the Louisiana Insurance Code, Title 22 ACT 921 (HB 1312) Effective 1/1/2010 Increases the minimum limits for compulsory motor vehicles liability insurance to 15/30/25

7. 2008 Legislative Changes Act 628 (HB 241) Effective 8/15/08 Creates the crime of forged certificates of insurance and insurance identification cards Act 818 (HB 237) Effective 8/15/08 Requires Vehicle Mechanical Breakdown Insurers to file forms Act 883 (HB 222) Effective 8/15/08 Requires Property Residual Value Insurers to file forms

8. ROAD BLOCKSMOST COMMON DISAPPROVAL REASONS

9. INCOMPLETE FILINGS • STATEMENT OF COMPLIANCE NOT INCLUDED • INCORRECT FILING FEES • ADOPTIONS NOT FILED SEPARATELY AND/OR DO NOT INCLUDE DESIGNATION/ITEM KEY NUMBERS LDI REGULATION 78

10. REPRESENTATIONS AND WARRANTIES NO ORAL OR WRITTEN MISREPRESENTATION OR WARRANTY MADE IN THE NEGOTIATION OF AN INSURANCE CONTRACT, BY THE INSURED OR IN HIS BEHALF, SHALL BE DEEMED MATERIAL OR DEFEAT OR VOID THE POLICY UNLESS: • THE STATEMENT IS FALSE, • IT WAS MADE WITH THE INTENT TO DECEIVE, AND • IT IS MATERIAL TO THE RISK LRS 22:619A

11. POLLUTION – PERSONAL LINES LDI DIRECTIVE 137 STATES THAT THE USE OF POLLUTION EXCLUSIONS IN THE LIABILITY PORTION OF A PERSONAL LINES POLICY IS PROHIBITED.

12. POLLUTION – COMMERCIAL LINES • TOTAL POLLUTION EXCLUSIONS WILL ONLY BE APPROVED AS AN ENDORSEMENT FOR CERTAIN CLASSES OF INSUREDS WHO ARE REQUIRED TO PROVIDE PROOF OF FINANCIAL RESPONSIBILITY FOR CLEAN-UP COSTS TO FEDERAL, STATE, OR LOCAL ENVIRONMENTAL REGULATOR AGENCIES, OR FOR WHOM THERE IS SOLID UNDERWRITING JUSTIFICATION • THE NATURE OF THE COVERAGE MUST SUPPORT THE USE OF A POLLUTION EXCLUSION, OTHER THAN GOVERNMENT IMPOSED CLEAN-UP COSTS. LDI ADVISORY LETTERS 97-01, 01-01, 01-01 ADDENDUM

13. VACANCY (PERSONAL LINES) PURSUANT TO LRS 22:691, CONDITIONS SUSPENDING OR RESTRICTING INSURANCE – COMPANY SHALL NOT BE LIABLE FOR LOSS OCCURRING WHILE A DESCRIBED BUILDING, WHETHER INTENDED FOR OCCUPANCY BY OWNER OR TENANT, IS VACANT, OR UNOCCUPIED BEYOND A PERIOD OF SIXTY CONSECUTIVE DAYS.

14. ANIMAL EXCLUSIONS LOUISIANA CIVIL CODE ARTICLE 2321 PREVENTS THE EXCLUSION OF LIABILITY FROM LOSS DUE TO ANIMALS. HOWEVER, THIS CAN BE EXCLUDED BY ENDORSEMENT ONLY; SIGNED OFF BY THE INSURED.

15. BINDING APPRAISAL & ARBITRATION • LANGUAGE CAN NOT DEPRIVE LOUISIANA COURTS JURISDICTION. NO BINDING CLAUSES OR APPRAISALS. • APPRAISAL: LANGUAGE MUST STATE NON-BINDING • ARBITRATION: LANGUAGE MUST STATE VOLUNTARY AND NON-BINDING LRS 22:629A and LDI DIRECTIVE 173 (FOR UM COVERAGE SEE LRS 22:680)

16. BLANK ENDORSEMENTS • BLANK ENDORSEMENTS ALLOW FOR FREE-FORM LANGUAGE WHICH IS IN CONFLICT WITH LRS 22:620, PRIOR APPROVAL STATUTE.

17. DUTY TO DEFEND • AN INSURER’S DUTY TO DEFEND ENDS WHEN THE LIMIT OF LIABILITY HAS BEEN EXHAUSTED BY THE PAYMENT OF A JUDGMENT OR SETTLEMENT. • ACCORDINGLY, THE DUTY TO SETTLE OR DEFEND DOES NOT NECESSARILY END WHEN THE INSURER’S LIMIT OF LIABILITY HAS BEEN EXHAUSTED. • INSURERS CANNOT SIMPLY TENDER THEIR LIMIT OF LIABILITY BEFORE A SETTLEMENT OR JUDGMENT IS REACHED, AND THUS, RELIEVE THEMSELVES OF THEIR DUTY TO DEFEND THE INSURED. LRS 22:2 AND 22:655D

18. FULLY EARNED PREMIUM • POLICIES THAT PROVIDE FOR A FULLY EARNED PREMIUM, UNLESS THE POLICY IS NOT CANCELABLE, ARE NOT APPROVABLE. LRS 22:636 AND LRS 22:637, et al • PREMIUMS CANNOT BE FULLY EARNED IN THE EVENT OF A TOTAL LOSS. THIS WOULD CREATE AN INEQUITABLE DISTRIBUTION OF THE RATE OR COULD CREATE AN EXCESSIVE RATE FOR THE RISK. LRS 22:652 AND LRS 22:1402

19. LOSS PAYMENT • AN INSURER IS REQUIRED TO PAY THE AMOUNT OF ANY CLAIM DUE TO AN INSURED WITHIN THIRTY DAYS AFTER RECEIPT OF SATISFACTORY PROOF OF LOSS FROM THE INSURED OR ANY PARTY IN INTEREST. • FULL COMPLIANCE, AGREEMENT OR AN APPRAISAL AWARD MAY NOT BE A PREREQUISITE TO PAYMENT OF LOSS. • IN THE EVENT OF A DISPUTE, THE INSURER MUST UNCONDITIONALLY TENDER TO THE INSURED THE UNDISPUTED PORTION OF THE CLAIM. LRS 22:658

20. FUNCTIONAL VALUATION LOSS SETTLEMENT • THE STANDARD FIRE POLICY SPECIFICALLY STATES THAT INSURERS MUST, AT THE TIME OF LOSS, “REPAIR OR REPLACE THE PROPERTY WITH MATERIAL OF LIKE KIND AND QUALITY.” • PROVISIONS USING TERMS SUCH AS “FUNCTIONAL REPLACEMENT PARTS”, “EQUIVALENT PROPERTY”, “SIMILAR PROPERTY”, OR “COMMONLY USED MATERIAL” WOULD ALLOW LOSS SETTLEMENT TO FALL BELOW THE MINIMUM MANDATED BY STATUTE. LRS 22:6(10)(d) AND LRS 22:691

21. INNOCENTCO-INSURED INNOCENT CO-INSUREDS SHOULD NOT BE DENIED COVERAGE FOR THEIR INTEREST IN INSURED PROPERTY BASED ON INTENTIONAL AND/OR ILLEGALS ACTS OF ANOTHER INSURED. LRS 22:691.2 & 22:615(B)

22. GENERAL PROVISIONS AUTOMOBILE COMMERCIAL HOMEOWNERS STANDARD FIRE POLICY LRS 22:636 CANCELLATION LRS 22:636.1 LRS 22:636.4 , LRS 22:636.2 635.3, 1405C, 1471 LRS 22:691.F

23. Upcoming Year’s Enhancements • STATEMENT OF COMPLIANCE: • Electronic Completion of Statement of Compliance • Overhaul of Statement of Compliance • NAIC’S PRODUCT CODING MATRIX • SERFF INTEGRATION WITH CRAFT

24. QUESTIONS?

25. CONTACT INFORMATION • LOUISIANA DEPARTMENT OF INSURANCE • Website - www.ldi.state.la.us • Phone (800) 259-5300 • OFFICE OF PROPERTY & CASUATLY INSURANCE RATING & POLICY FORMS DIVISION • Phone (225) 342-5203 • POLICY FORM SECTION: • Phone (225) 342-1258 • pc@ldi.state.la.us