Louisiana's 50% Bad Faith Penalty: What Public Adjusters Need to Know
Louisiana's Bad Faith Insurance Laws: An Overview
Louisiana has two primary bad faith insurance statutes that work in tandem: R.S. 22:1892 (formerly §22:658) and R.S. 22:1973 (formerly §22:1220). Together, they create a powerful framework that imposes a 50% penalty on the amount found due, plus reasonable attorney's fees, on insurers who fail to pay claims timely and in good faith. For Louisiana public adjusters, these statutes are the most important tools in the claim file.
R.S. 22:1892 — The 30-Day Payment Deadline
Under R.S. 22:1892, an insurer must pay any claim due any insured or claimant within 30 days after receipt of satisfactory proofs of loss. Failure to make payment within 30 days when the failure is found to be arbitrary, capricious, or without probable cause triggers a penalty of 50% of the amount found due from the insurer to the insured, or $1,000, whichever is greater, plus reasonable attorney's fees and costs.
The 30-day clock starts when the insurer receives "satisfactory proofs of loss" — a term that has been extensively litigated in Louisiana courts. In practice, this means a completed proof of loss form, supporting documentation, and any other items the carrier has requested. Louisiana public adjusters should submit proofs of loss via certified mail and keep the return receipt as evidence of the date of receipt.
R.S. 22:1973 — The Duty of Good Faith and Fair Dealing
R.S. 22:1973 imposes a broader duty of good faith and fair dealing on insurers. Under this statute, an insurer has an affirmative duty to adjust claims fairly and promptly, to make a reasonable effort to settle claims with the insured, and to refrain from misrepresenting pertinent facts or policy provisions. Violation of this duty triggers a penalty of two times the damages sustained or $5,000, whichever is greater, plus attorney's fees.
The key difference between the two statutes: R.S. 22:1892 focuses on the timeliness of payment, while R.S. 22:1973 focuses on the quality of the claim handling. A carrier can violate both statutes simultaneously — for example, by conducting a biased investigation (§22:1973) and then failing to pay within 30 days (§22:1892).
How Louisiana Courts Define "Arbitrary and Capricious"
The 50% penalty under R.S. 22:1892 applies when the failure to pay is "arbitrary, capricious, or without probable cause." Louisiana courts have interpreted this standard broadly. If the carrier had a reasonable basis for disputing the claim — a genuine coverage question, a legitimate dispute about the cause of loss — the penalty may not apply. But if the carrier simply delayed payment without a reasonable basis, or if the carrier's investigation was inadequate, the penalty is likely to apply.
Key factors Louisiana courts consider include: whether the carrier conducted a prompt and thorough investigation, whether the carrier's coverage position was supported by the policy language, whether the carrier communicated its position clearly and timely, and whether the carrier's estimate was unreasonably low compared to the actual damage.
Practical Strategy for Louisiana Public Adjusters
The most effective approach is to build the bad faith record from day one:
- Submit a complete proof of loss immediately. The 30-day clock under R.S. 22:1892 doesn't start until the carrier receives satisfactory proofs of loss. Submit a complete, well-documented proof of loss as early as possible — and send it via certified mail.
- Document every carrier communication. Every phone call, email, and letter should be logged with the date, the carrier representative's name, and the substance of the communication. This record becomes the foundation of any bad faith claim.
- Respond to all carrier requests promptly. If the carrier requests additional documentation, provide it immediately — and document the date of your response. Delays on your end can reset the 30-day clock and give the carrier a defense.
- Reference R.S. 22:1892 explicitly in demand letters. A demand letter that cites the 30-day deadline, calculates the 50% penalty, and references Louisiana case law is far more effective than a generic demand. Carriers know the exposure is real.
- Consider a simultaneous R.S. 22:1973 claim. If the carrier's investigation was inadequate or biased, a R.S. 22:1973 claim for two times the damages adds significant additional pressure.
Hurricane Claims and Louisiana Bad Faith
Louisiana's bad faith statutes are particularly important for hurricane claims, which are the most common large-loss claims in the state. After major hurricanes, carriers often face thousands of claims simultaneously and may delay payments for months. The 30-day deadline under R.S. 22:1892 still applies — there is no hurricane exception — and the 50% penalty can be substantial on large hurricane losses.
Louisiana public adjusters handling post-hurricane claims should be especially careful to document the date of proof of loss submission and to track the 30-day deadline for each claim in their portfolio. A claim timeline document that records every carrier communication and deadline is essential evidence for a bad faith claim.
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See also: How to Write a Bad Faith Demand Letter, Proof of Loss Guide for Public Adjusters, Louisiana Public Adjuster Tools.
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