Auto insurance reforms headed to Legislature

Advocate staff photo by BILL FEIG --- Insurance Commissioner Jim Donelon
Advocate staff photo by BILL FEIG --- Insurance Commissioner Jim Donelon

Expect a major push for tort reform during the upcoming legislative session, including changes that will allow juries to decide more lawsuits involving automobile accidents, Insurance Commissioner Jim Donelon said Monday.

Donelon spoke at the Baton Rouge Press Club luncheon.

“Auto insurance … is the biggest challenge we face in Louisiana in the insurance marketplace,” Donelon said.

Louisiana’s auto rates are the highest or among the highest in the country, depending on the survey.

In 2013, said Louisiana’s average premium was $2,699 while the national average was around $1,500. Nerdwallet found New Orleans had the second-highest auto rates of any U.S. city. It would cost $4,310 for a 26-year-old male with a clean driving record to insure his 2012 Toyota Camry in New Orleans.

There is agreement that lawsuits play a role in Louisiana’s high auto insurance premiums. There is also widespread disagreement about the reasons for those lawsuits and the best method for reducing them.

The insurance industry and pro-business groups say one solution is to increase the number of jury trials, which result in lower damage awards.

Only 14 states have a “jury threshold,” which is the minimum amount needed to trigger a jury trial. Louisiana’s jury threshold of $50,000 is the nation’s highest, roughly 28 times the average, Donelon said.

Judges, who are elected and who may not wish to alienate potential voters, decide cases below that level.

The Louisiana Association of Business and Industry, which has championed the cause of tort reform for decades, has described the state’s civil justice system as a major detriment to economic development efforts and a scheme designed to increase the wealth of lawyers.

Plaintiff attorneys say the jury process favors insurance companies, whose vastly greater financial resources mean they are better-equipped to handle lengthy judicial proceedings than most motorists.

Plaintiff attorneys also say there’s no proof that making it harder to collect compensation for injuries, or almost any of the other much-hyped lawsuit reforms, leads to lower auto insurance premiums. Plaintiff attorneys say the rates are driven more by insurance companies’ success in investing auto premiums than lawsuits.

Donelon, who is 69, said Louisiana’s auto insurance rates have been among the country’s highest for as long as he can remember.

An Insurance Department study found that insurance rates are higher than the statewide average by more than 5 percent in only four parishes: Orleans, 42 percent higher; St. Bernard, 32 percent; Plaquemines, 16 percent; and Jefferson, 14 percent.

Those rates are driven by the New Orleans metro area’s “soft-tissue industry,” a group that includes plaintiff attorneys or “ambulance chasers, doctors, chiropractors, physical therapists and tow truck drivers,” Donelon said. These people are chasing minor accidents and colluding to turn them into $15,000 windfalls.

Donelon said he expects the state Legislature will consider expanding the “no-pay, no-play” law passed as part of an auto liability reform package in the late 1990s. Under the no-pay, no-play provision, drivers who don’t buy insurance have to forgo the first $15,000 in damages, Donelon said. He expects an effort to take all of the pain-and-suffering, or non-economic, damages off the table.