Louisiana’s Struggle with Defining Bad Faith in Insurance Law

Louisiana is making a concerted effort to clarify its bad faith insurance laws. Recently, Governor Jeff Landry vetoed Senate Bill 111, which aimed to provide clearer language around what constitutes a misrepresentation by an insurer to an insured. The bill sought to define such misrepresentation as a breach of the insurer’s duties—unless the insurer had not yet had the opportunity to conduct adequate discovery, in which case it would not be considered actionable.

But this raises an important question: who was actually asking for this bill? From the policyholder’s perspective, no one was demanding this clarification. In contrast, insurers already have the legal right to deny claims based on intentional misrepresentations by insureds. Shouldn’t the same standard apply in reverse?

The reality is that this bill appeared to be more about protecting insurers than policyholders. Its intent seemed focused on reducing legal costs for insurance companies and maximizing their profitability. This comes at a time when carriers are grappling with the financial impact of catastrophic loss events over the past decade—events that have hit Louisiana particularly hard. The result has been a significant reduction in the number of insurers willing to underwrite policies in the state, which in turn drives up the cost of insurance for everyone.

Meanwhile, insurance agents have shown little resistance to these rising premiums. Their profits have surged—up 50% year over year—thanks to the shrinking pool of insurers in the market. So what are insurance companies really up to? Many are aggressively cutting labor costs and moving toward a future where artificial intelligence handles most aspects of claims management—from communicating with insureds to determining coverage, setting reserves, and even estimating damages.

In Louisiana, when a carrier delays a claim or acts in bad faith, the insured’s only recourse is to hire legal counsel. That’s an expensive and time-consuming process. A more balanced approach would be to lift restrictions on public adjusters, allowing them to properly document and present claims. If insurers would also restore claim authority to independent adjusters, it could significantly reduce the time it takes to resolve claims.

Louisiana has an opportunity to lead by example—by protecting policyholders, promoting transparency, and ensuring that the insurance system works fairly for everyone.