Hurricane Ida: Have You Been Denied “Loss of Use” Insurance Coverage?

October 12, 2021 Announcements and Law Updates

Hurricane Ida: Have You Been Denied “Loss of Use” Insurance Coverage?

As a result of the widespread property damage and loss of life caused by Hurricane Ida, the Louisiana Department of Insurance Commissioner, Jim Donelon, has issued a number of insurance-related Emergency Rules, Bulletins and Directives that are intended to protect the residents of Louisiana from oppressive insurance practices.

One of the more important directives relates to “loss of use” coverage. Loss of use insurance provisions, also commonly called “additional living expenses” provisions or “Coverage D” insurance, helps covered insureds receive reimbursement for additional costs that might be necessary for reasonable housing and living expenses if storm damage makes a personal residence temporarily uninhabitable while it is being repaired or rebuilt. Examples of expenses that might be covered include:

  • Hotel or a motel costs
  • Costs for alternative transportation
  • Pet boarding
  • Meals and additional food costs

For more details, see this explanation from the Traveler’s Insurance website. However, typically, loss of use provisions ONLY apply if “civil authorities” like Governor John Bel Edwards have declared a State of Emergency and if evacuation orders have been issued.

On September 3, 2021, Donelon issued Bulletin 2021-07, which attempts to protect Louisiana residents from having their loss of use claims rejected by insurance companies. Bulletin 2021-07 directs insurance companies to waive insurance contract provisions that allow insurance companies to reject loss of use claims. As of September 5, 2021, three companies — Allstate, USAA, and PURE Insurance Company — had agreed to waive such provisions and had agreed to pay loss of use claims. See new report here.

However, apparently, other insurance companies had advised Donelon that they would NOT waive their policy rights to reject use of loss claims in those parishes and areas where no express order to evacuate was issued by local and municipal authorities.

Donelon was not pleased and, on September 7, 2021, he issued “Directive 218.” Donelon explained his reasoning as follows::

“The [evacuation order] provision in the insurance policy form is placed in the contract for the protection of the insurer. This is to prevent an insured from making a claim for expenses that were not justified by a legitimate need to protect their safety by evacuating. However, the use of that limitation was not intended to unjustly deny coverage to a policyholder who legitimately evacuates to protect their life and health and where it was impracticable for a civil authority to issue a formal order of evacuation.”

Donelon also explained that Hurricane Ida progressed from a tropical depression to a Category 4 hurricane in less than 72 hours. Given the quick acceleration of the storm, Donelon noted that there was insufficient time for local and city authorities to issue express evacuation orders. Further, Donelon noted that Hurricane Ida actually caused loss of life, a great number of injuries, massive property damage and loss of essential services. As such, Donelon noted that it was “entirely appropriate” for policyholders to evacuate their premises for their own safety and the safety of their families. As such, Donelon exercised his statutory authority as Louisiana Insurance Commissioner to direct insurance companies to treat the “multiplicity of actions” taken by public and civilian authorities as “being tantamount to an order to evacuate” that fulfills any insurance policy requirement that triggers loss of use coverage. Donelon concluded Bulletin 2021-07 by telling the insurance companies that “[y]ou are hereby directed to immediately bring your practice into compliance with the unequivocal purpose and intent of Directive 218.”

What Should You Do if You are Denied Loss of Use Coverage?

First, if you have loss of use coverage, it is important to QUICKLY make a loss of use claim to your insurance carrier if you live in one of the 25 parishes where the State of Emergency has been declared. Second, it is important to keep good records of any expenses that you have made related to the evacuation of your family. Keep all expense receipts even if you are not sure whether it will be covered. Note, that loss of use claims can only be made for “reasonable” expenses. Finally, if you are denied loss of use coverage, it would be wise to seek legal advice and counsel from experienced Louisiana insurance coverage attorneys. Under Louisiana law, insurance companies have a duty to settle claims that they clearly owe under the relevant policy and to settle claims quickly. If an insurance company fails in these duties, it can be sued in state court for money damages. If it is shown that an insurance company refused to settle a claim in bad faith, the policyholder can be awarded statutory penalties of up to 50% of the amount that should have been paid (and more if the claim relates to personal injury).

Our Attorneys Can Help

For more information, contact the Louisiana insurance claims and personal injury lawyers at Mansfield, Melancon, Cranmer & Dick LLC. Contact us by calling one of our offices: New Orleans at (504) 500-1108, Baton Rouge at (225) 612-0800, or Lafayette at (337) 409-0003. You can also request a free consultation by using our “Contact Us” page.