Tort Reform Fails to Deliver Lower Auto Insurance Rates

By Neale deGravelles 

In 2020, Louisiana politicians touted tort reform as necessary to drive down insurance rates in our state. Republican legislators argued that our state’s high auto insurance rates were due to the high number of lawsuits filed against insurance companies.

In response, legislators passed the Civil Justice Reform Act of 2020, House Bill 57 (“HB57”) that would purportedly limit damage suits by people injured in car wrecks. The tort reform bill reduces the jury threshold from $50,000 to $10,000 and requires the party seeking a jury trial to post a $5,000 cash bond before the trial. It also made changes to the Collateral Source Rule that limits the recovery of past medical expenses. 

Here’s the impact the bill has had — and what it means for tort law in our state.

 

Tort Reform Aimed at Lowering Insurance Rates — But Did It?

Louisiana residents face having the second highest insurance rates in the country. Proponents of the bill argued for the reforms on the purported impact it would have on Louisiana auto premiums. They claimed it would make Louisiana’s auto insurance market more competitive and induce insurers to pass cost savings from the bill to consumers.

Further, Jim Donelon, our state insurance commissioner, testified during the legislative session that the bill would reduce rates by at least 10% and possibly 25%.

The plaintiffs’ bar and other civil justice proponents opposed it on the basis that it would pressure plaintiffs into accepting unfair settlements and would greatly reduce their ability to help injured people and to ensure they get a fair settlement. Many district court judges also opposed the bill because of concerns that it would result in a significant increase in low-value jury cases which would bog down their already lengthy dockets even further.

Representatives also pointed out during the legislative session that other factors — like the fact that insurance companies can set rates based on demographics such as a drivers’ gender, age, marital status or credit score— are the driving forces behind rising rates, but bills to outlaw that practice died in committee.

 

Louisiana Needs Evidence-Based Tort Law

So has the tort reform resulted in lowering car insurance rates in our state?

The clear answer is no. Donelon told Fox News Baton Rouge that rates may be headed back up in 2021, and in December, he gave approval for State Farm, the state’s largest auto insurer, to raise rates by 4.3% because of an increase in people on the roads due to stay-at-home restrictions easing.

Almost 6 months into the year, the state has not seen any significant reduction in our auto insurance rates. Meanwhile, plaintiffs face longer courts dockets and increased pressure to settle their claims.

The bill provides a compelling example of the need for evidence-based legal policy and civil justice legislation based on evidence, facts and legal expertise. The evidence in this case was clear that this reform bill was very unlikely to have the purported impact on auto insurance rates, and yet the bill passed. Previous history strongly suggests that it is highly unlikely that a bill which unquestionably curtails rights of the citizens of Louisiana, but provides no apparent benefit in return, will be repealed.

Our state legislature has a responsibility to ensure that evidence and facts drive our civil justice policies and decisions about legal processes, not special interests or unrelated issues.