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Recently, the Louisiana House of Representatives passed House Bill 372, a major bill that its proponents claimed would reduce auto insurance rates. However, the proposed legislation was all but rejected on May 7th, after an in-depth review by the Louisiana Senate Judiciary Committee.

The committee raised strong concerns that not only would the bill fail in achieving its goal of lower insurance premiums, but that the bill also clearly favored insurance companies over consumers.

The legislation, which had wide support by insurance companies, sought, amongst other things, to (1) end the collateral source rule and (2) eliminate direct actions against insurance companies.

The legislation also proposed reducing jury thresholds and extending the prescription period to file a personal injury claim or tort action to two years. While lowering insurance rates should be a priority in Louisiana, the proposed legislation sought to fundamentally alter insurance litigation in a way that clearly favored insurance companies.

Ending the Collateral Source Rule

The collateral source rule is a legal rule that prevents a defendant (often insurance companies) from introducing evidence that a plaintiff has received payment from a third party. For example, a defendant in a civil action cannot offer any evidence at trial regarding the payment of the plaintiff’s medical bills or other insurance payments made for the plaintiff’s benefit.

The purpose of the collateral source rule is so that a defendant can be held financially responsible for the full scope of damages they have caused.

Eliminating Direct Action

The Louisiana direct action statute allows a plaintiff to sue a third-party’s insurer directly to recover damages under an insurance policy. For example, if you file a personal injury action, the direct action statute allows a plaintiff to sue both the defendant and its insurance company.

Opponents of the direct action statute claim that a jury is more likely to award more money if an insurance company is named as a defendant. Proponents claim the law simplifies the recovery process for individuals with claims covered by an insurance company. It also ensures a jury will award the full scope of damages caused by the defendant.

From our experience, both the collateral source rule and direct action statute are important legal tools in Louisiana that are aimed at ensuring individuals and businesses are adequately compensated by insurance companies for their losses.

Contact Us Today

If you have questions about the collateral source rule or direction action statue, contact our team today to speak with one of our experienced attorneys. We offer free consultations.

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BFH Law Group Staff

We represent clients in a wide array of civil litigation matters including personal injury, maritime, insurance, and estate cases. Our attorneys collectively represented insurance companies for decades, handling maritime, trucking, property damage, and personal injury cases.