Louisiana Changes its “Proof of Loss” Law

The Louisiana Legislature recently passed HB 437 which enacts La. § R.S. 22:1892.3 (effective August 1), in an attempt to clarify parties’ respective obligations as it relates to Proof of Loss statements and corresponding payments under an insurance policy. Under this new statute, any type of insurance policy—other than life, health and accident and worker’s compensation—may be written to require submission of a Proof of Loss statement as a condition precedent to payment under the policy. Before any insurers attempt to condition payment on receipt of a Proof of Loss statement, they must ensure full compliance with the statutory requirements to avoid any confusion and late payments.

What was the Law? 
Prior to July 1, 2024, Louisiana’s bad faith statutes required an insurer of a first-party loss to pay amounts due to its insured within 30 days after receipt of “satisfactory proofs of loss”—an undefined term. If payment was untimely an insurer could be subject to statutory penalties and attorney’s fees and costs if the failure to timely pay was found to be “arbitrary, capricious, or without probable cause”; thus, the question of what qualified as “satisfactory proofs of loss” was the subject of much litigation. In Louisiana Bag Co., Inc. v. Audubon Indem. Co., the Louisiana Supreme Court held that an insurer cannot condition payment upon the submission of a proof of loss form even if it is required by the policy. Rather, the Louisiana Supreme Court declared that “satisfactory proof of loss” broadly encompasses that which is sufficient to fully apprise the insurer of the insured’s claims. 

Following Louisiana Bag, Louisiana courts interpreted that ruling broadly to mean that no specific form is even required for an insurer to be in receipt of “satisfactory proof of loss.”  One court even found that, in certain circumstances, an insurer could receive satisfactory proof of loss by way of an independent adjuster’s inspection of an insured property. In that scenario, the insurer’s 30-day payment obligation would  commence from the date of the inspection and not upon receipt of a report or estimate from the independent adjuster as is common in the industry.   

Didn’t Louisiana Change this Law in 2024?
Yes.  Effective July 1, 2024, Louisiana’s bad faith or penalty statutes require that insurers make payment within 30 days (or 60 or 90 days for catastrophic claims) of receipt of satisfactory written proof of loss. The July 2024 addition of the word “written” solved one of the issues noted above (i.e., that payment could be owed from the date of inspection of the property). Instead, payment would not be owed (and the bad faith “clock” would not begin to run) unless and until receipt of a written report, estimate, invoice, or other written document that puts the insurer on notice as to the extent of the claim; however, the July 2024 change did not address the Proof of Loss requirement set forth in policies. 

What’s New About the 2025 Change? 
The new statute goes farther than the 2024 changes in that it attempts to provide insurers with more clarity and flexibility as it relates to Proof of Loss requirements contained in policies.  The 2025 changes also attempt to provide greater clarity as to when “satisfactory written proof of loss” may be received for purposes of statutory penalties for dilatory payments. It allows insurers to control what qualifies as “satisfactory proof of loss” for their policy by requiring a completed proof of loss statement form as a prerequisite to payment. 

What Steps Must Insurers Take Under the New Statute?

To condition payment upon receipt of a Proof of Loss statement, La. R.S. § 22:1892.3 requires the following:

• The policy at issue must requires submission of a Proof of Loss statement as a prerequisite to making payment.

• • For now, it is unclear whether the proof of loss language in the standard policy forms is sufficient or whether more explicit language is necessary to make the submission of a proof of loss statement a prerequisite or condition precedent to coverage.

• Proof of Loss forms must be filed with and approved by Louisiana’s Commissioner of Insurance to be valid. 

• • La. R.S. §22:1892.3(F) provides a model Proof of Loss form that includes: policyholder names, claim number, location of loss, type of property, cause of loss, legal owners/mortgagees, estimated repair costs, other insurance, and a certification from the insured.
  • The Commissioner of Insurance has the right to publish and adopt rules and regulations relating to the proof of loss statement form, so future changes are a possibility.

• Insurers must provide the approved Proof of Loss form to the insured within 10 days of notice of the claim.

• • The insurer must maintain the approved proof of loss statement form on its website in a location easily accessible by claimants.

• Within 10 days of receipt of a Proof of Loss Submission, the insurer must advise the claimant whether it is complete or incomplete.

• • If it is complete and sufficient, payment is owed from the date of receipt.

What if an Insurer Fails to Satisfy All Steps in the Statute?
Failure to comply with any one or more of the four steps outlined above will prevent an insurer from receiving the benefits of La. R.S. § 22:1892.3. If any one of the requirements is not met (i.e. the policy does not require submission of a Proof of Loss statement form as a condition precedent to payment), the insurer’s Proof of Loss statement form was not approved by the Commissioner, or the Proof of Loss statement was not provided to the Insured within 10 days of notice of the claim), an insurer cannot condition payment on receipt of a completed proof of loss statement; and instead, would owe payment from receipt of satisfactory written Proof of Loss per the 2024 changes (this will likely be an early date than the date a Proof of Loss statement is submitted).

Accordingly, if the requirements of La. R.S. § 22:1892.3 are not met and an insurer mistakenly attempts to condition payment on receipt of a Proof of Loss statement, payment could be untimely subjecting the insurer to penalties and attorney’s fees.

If an insurer wishes to invoke the benefits of the new statute and condition payment on a satisfactory Proof of Loss, it should ensure that all statutory requirements are completed in full. If not, an insurer cannot withhold undisputed payments until a Proof of Loss statement is provided by the insured. Any attempt to do so, without full statutory compliance, could expose insurers to penalties and attorney’s fees.

Summary
The enactment of La. R.S. § 22:1892.3 permits insurers to condition payment on the receipt of a proof of loss statement form, which was previously rejected by the Louisiana Supreme Court. The change in the law could allow for more clarity for insurers in adjusting claims and defending bad faith claims and lawsuits. The statute also has the potential to benefit policyholders by streamlining what they must do to satisfy proof of loss requirements and expedite payment of their claims.  Before insurers may avail themselves of the proof of loss form, they must:

• Ensure that their policy language explicitly requires a completed proof of loss statement as a prerequisite or condition precedent to coverage and/or payment and
• Obtain approval from the insurance commissioner of the proof of loss statement form to be used.
• Although applicable to both first- and third-party claims, La. R.S. §22:1892.3 is a significant change in the first-party property context. The new statute provides that if an insurer requires submission of a proof of loss statement as a prerequisite to making payment on the claim, the insurer’s receipt of a proof of loss statement is the only means of constituting satisfactory proof of loss under Louisiana’s bad faith statutes. This effectively overrules the Louisiana Supreme Court’s decision in Louisiana Bag Co., Inc. v. Audubon Indem. Co.

The new statute could provide clarity to insurers in determining when payment must be made and in defending bad faith claims moving forward. However, any insurer seeking to invoke the benefits of La. R.S. § 22:1892.3 should ensure full compliance with the statute before it attempts to condition payment on submission of a proof of loss statement. Failure to comply with any of the statutory requirements will result in the application of the default 2024 law and an insurer’s obligation to make payment will likely be triggered much earlier.  And there are certain to be arguments over whether the Proof of Loss is “complete” or “incomplete.”   

Please contact Ryan Telep, Caroline Crosby, Pablo Gonzalez or any member of the Phelps Insurance team if you have questions or need advice or guidance.