LA Supreme Court Finds Insurance Claims Extensions Constitutional

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LA Supreme Court Finds Insurance Claims Extensions Constitutional State of Louisiana v. All Property and Casualty Insurance Carriers Authorized and Licensed to do Business in the State of Louisiana, 937 So. 2d 313 (La. Aug. 25, 2006) Jason M. Payne, 2L, University of Mississippi School of Law In response to the extensive devastation of Hurricanes Katrina and Rita in August and September of 2005, the State of Louisiana enacted amendments extending the period that victims of the storm could file insurance claims. The amendments, Acts 739 and 802, also called for the Louisiana Attorney General to file a suit within ten days of the enactment of the amendments seeking a declaratory judgment to determine if the amendments were constitutional. Background Prior to Acts 739 and 802, Louisiana law held that no contract for insurance could set a period of less than twelve months within which to file a claim for damages. Due to the devastation of Hurricane Katrina on August 29, 2005, and Hurricane Rita a mere 27 days later, Governor Blanco of Louisiana issued several executive orders extending various legal deadlines, including filing periods for insurance claims. Most of these executive orders were taken up by the Louisiana legislature and made into state law. Among these were Acts 739 and 802, dealing with the insurance claims filing periods. These acts extended the old deadline for filing claims from one year from the date of the damage to September 1, 2007, for Katrina’s victims, and October 1, 2007, for Rita’s victims. As required by the acts, the attorney general filed a claim for declaratory judgment on behalf of the State of Louisiana on July 10, 2006, listing all property and casualty insurance carriers authorized and licensed to do business in the state as defendants. All of the insurance carriers agreed to the extensions, except for Allstate Insurance Company, State Farm Insurance Company, and USAA Insurance Company (defendants). On August 17, 2006, the attorney general filed papers with the Louisiana Supreme Court urging them to exercise their ability to immediately hear the case due to the time sensitivity of the material and its importance to the citizens of the state. The supreme court agreed with the attorney general and agreed to hear the case, but sent it first to a state district court for an expedited hearing. The district court judge heard the case, concluding that the insurance companies’ arguments were without merit and the acts were constitutional. On August 24, 2006, the Louisiana Attorney General sought a review of the case with the Louisiana Supreme Court to receive a final judgment on the matter. Louisiana Supreme Court The supreme court first dealt with classifying the Acts as either substantive or interpretive law. Louisiana law provides that unless there is legislative intent to the contrary, substantive laws can only be applied prospectively, while procedural and interpretive laws can be applied both prospectively and retrospectively. The court found legislative intent to have the act apply retroactively in order to cover the damage of Hurricanes Katrina and Rita. However, they did find the law to be substantive, since it either established new rules or changed existing ones. Upon this determination, the court had to decide if the new laws impaired contractual obligations or disturbed any vested rights to the point that they could not be applied retroactively. Contract Clauses The insurance companies first argued that Acts 739 and 803 violate the Contract Clauses of both the Louisiana and United States Constitutions, which prohibit states from interfering with private contracts. Although the Contract Clause language seems absolute, the U.S. Supreme Court has found that “… the Contract Clause does not operate to obliterate the police powers of the States.”1 The police powers allow the states to make the necessary laws to protect their residents. The Louisiana Supreme Court looked at the state’s right “… to safeguard the vital interest of its people…”2 in deciding that these acts did not violate the Contracts Clause. The supreme court also weighed the impairment to the insurance companies and determined that, although the insurance companies would be impaired by the extension, the filing extensions were justified since citizens of the state were displaced all over the country and a great quantity of legal documents, insurance policy papers included, were destroyed due to the wind and water. The court further justified the acts by pointing out they were limited in both time and scope to deal only with the two natural disasters that had occurred. The defendants next claimed that the Louisiana Attorney General did not have the right to make a legal claim about the constitutionality of the acts. The insurance companies claimed that the suits should be filed on an individual basis. The court stated that the legislature authorized the attorney general to bring the suit, thus giving him standing. The court also felt that innumerable individual suits would cause too great a strain on the courts and that the attorney general’s suit worked toward judicial efficiency as well. The insurance companies also claimed Act 803 violated the Supremacy Clause of the United States Constitution, which states the U.S. laws “… shall be the supreme Law of the Land.”3 The defendants claim that Act 803, by changing the claim deadlines of flood insurance policies, interferes with the claims deadlines of the federally-run National Flood Insurance Program (NFIP). The court said it must interpret legislation in ways that make it effective, rather than meaningless. In doing this, they recognized Act 803 as referring to all flood insurance programs except the federally run NFIP. The defendants’ final argument was that the hurried nature of the court proceeding interfered with their procedural due process by not giving them adequate time to prepare their defense. The court found that they had been given ample time, since they were served papers notifying them of the declaratory judgment action more than a month before the trial began. Conclusion On August 25, 2006, the Louisiana Supreme Court confirmed the district court’s decision that Acts 739 and 803 are constitutional. The court decided even though the new laws were substantive in nature, they should still be applied retroactively since the damage to the insurance companies was minor in contrast to the benefits provided to the Louisianans in need. The decision gave the displaced, storm-ravaged people of Louisiana an extra year to file claims with their private insurance carriers, while also confirming that the extensions do not pertain to the federally run NFIP. Endnotes 1. State of Louisiana v. All Property and Casualty Insurance Carriers Authorized and Licensed to do Business in the State of Louisiana, 937 So. 2d 313, 323 (La. Aug. 25, 2006). 2. Id. at 324. 3. Id. at 328.
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LA Supreme Court Finds Insurance Claims Extensions Constitutional

State of Louisiana v. All Property and Casualty Insurance Carriers Authorized and Licensed to do Business in the State of Louisiana, 937 So. 2d 313 (La. Aug. 25, 2006)

Jason M. Payne, 2L, University of Mississippi School of Law

In response to the extensive devastation of Hurricanes Katrina and Rita in August and September of 2005, the State of Louisiana enacted amendments extending the period that victims of the storm could file insurance claims. The amendments, Acts 739 and 802, also called for the Louisiana Attorney General to file a suit within ten days of the enactment of the amendments seeking a declaratory judgment to determine if the amendments were constitutional.

Background
Prior to Acts 739 and 802, Louisiana law held that no contract for insurance could set a period of less than twelve months within which to file a claim for damages. Due to the devastation of Hurricane Katrina on August 29, 2005, and Hurricane Rita a mere 27 days later, Governor Blanco of Louisiana issued several executive orders extending various legal deadlines, including filing periods for insurance claims. Most of these executive orders were taken up by the Louisiana legislature and made into state law. Among these were Acts 739 and 802, dealing with the insurance claims filing periods. These acts extended the old deadline for filing claims from one year from the date of the damage to September 1, 2007, for Katrina’s victims, and October 1, 2007, for Rita’s victims.

As required by the acts, the attorney general filed a claim for declaratory judgment on behalf of the State of Louisiana on July 10, 2006, listing all property and casualty insurance carriers authorized and licensed to do business in the state as defendants. All of the insurance carriers agreed to the extensions, except for Allstate Insurance Company, State Farm Insurance Company, and USAA Insurance Company (defendants).

On August 17, 2006, the attorney general filed papers with the Louisiana Supreme Court urging them to exercise their ability to immediately hear the case due to the time sensitivity of the material and its importance to the citizens of the state. The supreme court agreed with the attorney general and agreed to hear the case, but sent it first to a state district court for an expedited hearing. The district court judge heard the case, concluding that the insurance companies’ arguments were without merit and the acts were constitutional. On August 24, 2006, the Louisiana Attorney General sought a review of the case with the Louisiana Supreme Court to receive a final judgment on the matter.

Louisiana Supreme Court
The supreme court first dealt with classifying the Acts as either substantive or interpretive law. Louisiana law provides that unless there is legislative intent to the contrary, substantive laws can only be applied prospectively, while procedural and interpretive laws can be applied both prospectively and retrospectively. The court found legislative intent to have the act apply retroactively in order to cover the damage of Hurricanes Katrina and Rita. However, they did find the law to be substantive, since it either established new rules or changed existing ones. Upon this determination, the court had to decide if the new laws impaired contractual obligations or disturbed any vested rights to the point that they could not be applied retroactively.

Contract Clauses
The insurance companies first argued that Acts 739 and 803 violate the Contract Clauses of both the Louisiana and United States Constitutions, which prohibit states from interfering with private contracts. Although the Contract Clause language seems absolute, the U.S. Supreme Court has found that “… the Contract Clause does not operate to obliterate the police powers of the States.”1 The police powers allow the states to make the necessary laws to protect their residents.
The Louisiana Supreme Court looked at the state’s right “… to safeguard the vital interest of its people…”2 in deciding that these acts did not violate the Contracts Clause. The supreme court also weighed the impairment to the insurance companies and determined that, although the insurance companies would be impaired by the extension, the filing extensions were justified since citizens of the state were displaced all over the country and a great quantity of legal documents, insurance policy papers included, were destroyed due to the wind and water. The court further justified the acts by pointing out they were limited in both time and scope to deal only with the two natural disasters that had occurred.

The defendants next claimed that the Louisiana Attorney General did not have the right to make a legal claim about the constitutionality of the acts. The insurance companies claimed that the suits should be filed on an individual basis. The court stated that the legislature authorized the attorney general to bring the suit, thus giving him standing. The court also felt that innumerable individual suits would cause too great a strain on the courts and that the attorney general’s suit worked toward judicial efficiency as well.

The insurance companies also claimed Act 803 violated the Supremacy Clause of the United States Constitution, which states the U.S. laws “… shall be the supreme Law of the Land.”3 The defendants claim that Act 803, by changing the claim deadlines of flood insurance policies, interferes with the claims deadlines of the federally-run National Flood Insurance Program (NFIP). The court said it must interpret legislation in ways that make it effective, rather than meaningless. In doing this, they recognized Act 803 as referring to all flood insurance programs except the federally run NFIP.

The defendants’ final argument was that the hurried nature of the court proceeding interfered with their procedural due process by not giving them adequate time to prepare their defense. The court found that they had been given ample time, since they were served papers notifying them of the declaratory judgment action more than a month before the trial began.

Conclusion
On August 25, 2006, the Louisiana Supreme Court confirmed the district court’s decision that Acts 739 and 803 are constitutional. The court decided even though the new laws were substantive in nature, they should still be applied retroactively since the damage to the insurance companies was minor in contrast to the benefits provided to the Louisianans in need. The decision gave the displaced, storm-ravaged people of Louisiana an extra year to file claims with their private insurance carriers, while also confirming that the extensions do not pertain to the federally run NFIP.

Endnotes
1. State of Louisiana v. All Property and Casualty Insurance Carriers Authorized and Licensed to do Business in the State of Louisiana, 937 So. 2d 313, 323 (La. Aug. 25, 2006).
2. Id. at 324.
3. Id. at 328.