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The Louisiana legislature has passed a bill that would prevent insurers from canceling or nonrenewing homeowners policies because of Chinese drywall claims.
The legislation, SB 595, sponsored by Senator Julie Quinn, R-Metairie, passed the Senate unanimously in April and was revised before passing the House last week.
Insurer associations opposed the measure, with Greg LaCost, assistant vice president, state government affairs for the Property Casualty Insurers Association of America (PCI), noting in an April statement that the bill “sends the wrong message” about addressing the Chinese drywall issue by imposing legislative fixes that could be harmful to the insurance marketplace.
Mr. LaCost argued that existing state laws and regulations are adequate for addressing any Chinese drywall insurance concerns.
The Senate version of the bill included commercial policies in the coverages that could not be cancelled or nonrenewed, but an amendment by Rep. Walt Leger III, D-New Orleans, struck that language before the bill passed unanimously in the House.
Mr. LaCost said legislators were concerned about homeowners and so narrowed the bill to address their concerns without causing disruptions with the way commercial insurance is run. Confusion may have arisen on the commercial side, Mr. LaCost said, because it involves many different types of buildings and businesses, and there may have been some uncertainty regarding how the legislation would apply.
Mr. LaCost said other provisions were added that made the legislation more acceptable to the industry. One, he said, was a sunset provision for July 2013.
Another amendment, he said, stipulates that the bill would not impact premium. He said companies can raise rates on the affected homes if the increases are actuarially sound.
Additionally, Mr. LaCost said the original bill stated that if the drywall is in the building, insurers cannot cancel or nonrenew the policy. The final version, he said, clarifies that Chinese drywall cannot be the sole basis for a cancellation.
He said the bill did not specifically address if cancellations would be allowed for ensuing losses resulting from the drywall, such as corroded wiring.
In April, Sen. Quinn told NU Online that she drafted the bill in response to some insurers denying coverage and in some cases cancelling or nonrenewing homeowners who had made Chinese drywall claims.
Regarding her legislation, she said, “This is a very reasonable solution to a very unique problem.”
Mr. LaCost said he expects the bill to be signed into law sometime in the next 10 days.