The following is an update on proposed HB 665 in Louisiana that would prohibit wasting limits for many types of policies.
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to what occurred in the Louisiana Senate Insurance Committee, which will be discussed below, the bill has died in committee and will not be passed this legislative session. It likely will come up again in the next session, but, for now, it will not take effect.
We electronically attended the Senate Insurance Committee hearing and can provide you with the following additional information about this proposed bill.
HB 665 is actually known as an Insurance Commissioner bill, which the Commissioner asked a representative in the Louisiana House to put forth. During questioning, the Assistant Insurance Commissioner stated that if the bill became law, thereby disallowing wasting limits, the intent of the Insurance Commissioner would be to waive application of the statute only in "special circumstances".
If this bill, as written, passes, and wasting limits are disallowed under Louisiana law, there is a narrow exception in the bill that would permit the Insurance Commissioner to waive the prohibition and allow wasting limits in some policies. The example given was for the construction market. The commissioner recognizes that available coverage for construction companies is tight, and if allowing wasting limits would broaden the available market for that coverage, he would waive the prohibition in that limited case. But, if there are other options available in the market, it was made clear during the hearing, the Commissioner would not waive application of the statute.
The Commissioner's office stressed that the bill would only apply to admitted carriers. Thus, surplus lines carriers will not be affected. Companies writing professional lines, (D&O policies, E&O policies, etc.), marine and construction policies, as well as other policies that traditionally have wasting limits, should continue to monitor this issue.
As this is an Insurance Commissioner bill, we expect it will be reintroduced next session. The next session convenes on April 13, 2015. We will continue to monitor and keep you apprised of developments.