This afternoon, following a nearly four hour-long debate, Louisiana state Rep. Kirk Talbot’s sweeping tort reform bill, House Bill 372, screeched to a halt after colliding with members of the Senate Judiciary A Committee. Although the bill is, at least technically, still alive for at least one more week, during which it will be under the scrutiny of the legislative fiscal office, it was left so badly bruised and beaten that Talbot eventually begged for mercy, asking his colleagues to just remove his proposal’s most important component, a provision reducing Louisiana’s jury trial threshold, instead of waiting to find out how much it’d end up costing taxpayers.

The committee provided no such reprieve. State Sen. Jay Luneau waited until the very end of the discussion to introduce what can most accurately be described as a “poison pill” amendment, closing the loophole it creates by assigning the costs of a jury trial to the government, as is the case in every other state without a jury threshold, and requesting a fiscal note within seven days.

Kirk Talbot understood what the move would ultimately mean: His bill had just been put out to pasture.

There were almost certainly more than enough votes to reject the legislation out right, but instead, a majority of members agreed with Luneau, who argued that Talbot’s bill finally provided lawmakers and the public with the opportunity to learn the anticipated price tag of a proposal that the state’s most powerful business lobbyists have championed continuously for more than five years.

Throughout the past month, as a part of our series “Wrecked: How Auto Insurance Takes Louisiana for a Ride,” the Bayou Brief has exhaustively researched the real causes of the state’s exorbitant car insurance rates. Depending on which study you prefer, Louisiana is either the second, fourth, or sixth most expensive state in the country for car insurance. We wanted to know why, exactly, that’s the case and what is really driving our high costs.

In this report, we explain the ways in which the Louisiana Association of Business and Industry (LABI) and insurance lobbyists attempted to manufacture a crisis in order and blame plaintiff’s attorneys for the high price of car insurance, instead of the much more obvious and exponentially more profitable culprit: The insurance industry.

What our research has revealed, thus far, is a largely under-regulated car insurance marketplace that too often relies on discriminatory practices on pricing auto liability coverage- which is mandated by law- in order to entice a certain class of costumers into purchasing other types of insurance.

LABI, which considers HB 372 its most critical priority of this year’s legislative session, has disingenuously marketed the effort as a way of reducing car insurance rates. Talbot dutifully played along, titling his bill the “Omnibus Auto Premium Reduction Act of 2019.” Yet the bill has nothing to do with actually reducing car insurance rates.

The state Senate committee was unpersuaded by state Rep. Talbot and by testimony offered from representatives of trucking, sugarcane, sand and gravel, and logging businesses, who attempted to blame Louisiana’s legal climate for the high price of commercial auto insurance coverage.

“My problem is that there’s nothing in this bill that would reduce rates,” state Sen. Jay Luneau explained. “In fact, the (insurance) industry admits that.”

The Louisiana Rural Hospital Coalition, the Louisiana District Attorneys Association, the Louisiana District Judges Association, and the Louisiana Clerks of Court Association all strongly opposed Talbot’s bill. Among other things, opponents claimed that the bill would likely result in a dramatic increase in court costs and subject Louisiana’s already-strained civil justice system beyond its capacity.

Two district judges, Judge Bob Morrison and Judge Piper Griffin, noted that commercial trucking businesses, many of which have championed a provision lowering the state’s jury threshold, wouldn’t actually be affected by the change in the law. Judge Griffin explained that “99%” of cases involving commercial trucking companies were in excess of $50,000.

But the real breakout star of the marathon hearing was Douglas Heller, the nationally-acclaimed insurance expert who has been collaborating with the Bayou Brief on the “Wrecked” series.

Heller methodically unpacked the ways in which auto insurers in Louisiana engage in discriminatory practices that disproportionately increase costs for customers, based on factors completely unrelated to their driving records.

“Given that state law regulates the behavior of Louisiana drivers by mandating that they purchase auto insurance, I believe there is a special obligation to make sure that rates residents are charged are fair and affordable,” Heller testified. “So it’s troubling that a Premium Reduction Act is before you that requires no reform of the insurance companies that charge these high premiums, as though insurance company pricing and practices are just incidental to the cost of coverage.”

Heller went on to share a series of premium quotes he received from a major national insurer that revealed how safe drivers in Louisiana get punished because of their socio-economic status and personal characteristics that have nothing to do with their driving safety record. He noted that the company would charge a female investment banker with a Masters degree $126 more than a male investment banker with a Masters degree, even though they both lived at the same address, drove the same car, had the same commute, and, most importantly, had the same perfect driving record.

He then reported that the driver would pay:
* $40 more if she is a bank teller rather than an investment banker.
* Another $135 more if she only has a high school diploma and not a Master’s Degree
* Another $156 more if she lost her job
* Still another $450 more per year if her prior insurance policy had only minimum limits coverage and not more extensive coverage,
* And, finally, an extra $696 if she had previously stopped driving for a few months and didn’t need insurance.

At this point, Heller’s test revealed, the insurance company was charging a woman who had a perfect driving record $2,327 per year for the basic auto insurance required by state law, while someone in the insurance company’s preferred demographic — the male investment banker he first tested — was only charged $721 for the exact same coverage. In fact, even after the male investment banker a policy reported an at-fault accident and a speeding conviction on his record, the insurance company offered him an insurance policy for $500 less than the out-of-work female driver who never caused an accident. He added that insurance companies pile on to lower income folks in more ways, too, including punishing drivers for less than stellar credit scores and, as Bayou Brief has reported, even penalizing widows with higher rates than married folks.

Douglas Heller (center) explains how auto insurance pricing is calculated to members of the Louisiana state Senate Jud-A committee, 

Louisiana law and Insurance Commissioner Jim Donelon have allowed insurance companies to use these and other non-driving rating factors that force higher premiums on to lower- and moderate-income good drivers in the state. Those are the same drivers who are shouldering the heaviest burden when it comes to the challenge of complying with the state’s insurance mandate, and they are the most likely to fall into the ranks of the uninsured or suffer the economic consequences of not being able to drive. Talbot’s bill, however, does nothing to stop insurers from using these factors when setting consumer premiums.

According to Heller, one of the effects of the Commissioner and Legislature allowing these non-driving factors to be used is that hundreds of thousands of drivers are uninsured, which drives up costs for everyone left in the market. These prices also send the wrong message to drivers, he explained.

“You want your insurance premiums to send signals to customers that if they reduce risky behavior they will get the benefit of lower premiums. But what signal does the current pricing system send?” he asked. “Get a better job? Go back to school? Fix your credit? Don’t let your spouse die? Those don’t help people become better drivers.”

The legislature could stop fiddling around with LABI’s attempt to dismantle Louisianans legal rights and draft a bill that would actually reform insurance companies and save money for millions of drivers. Nor would they be alone if they did so.

Maryland recently passed a bipartisan bill to end the widow penalty. Minnesota doesn’t allow auto insurers to consider your homeownership status. California, Hawaii, and Massachusetts prohibit insurance companies from considering credit score. New York regulators recently stopped insurers from using education or occupation in pricing. Montana and six other states don’t allow gender to be a factor.

Changes like this would immediately lower rates for good drivers, especially lower- and moderate-income drivers who face the most significant non-driving related surcharges. In the long term this will both place a greater emphasis on driving safety record, which will help all good drivers and bring more drivers into the insurance pool, which will lower rates for everyone, and as a side benefit, it will incentivize safer driving and that, of course, also creates savings for everyone.

Among other things, Heller also eviscerated the central justification offered by the bill’s proponents: That the auto insurance marketplace in Louisiana is not “competitive.”

With Commissioner of Insurance Jim Donelon sitting quietly behind him, Heller explained that Louisiana law allows the commissioner to take direct action against excessive pricing, but only if he first declares that the marketplace as no longer “competitive.” However, Donelon has consistently declared that the auto insurance marketplace in Louisiana to be “challenging” but nonetheless still “competitive.” The use of that magic word limits his regulatory authority.

While it appears LABI’s signature bill is now almost certain to collapse under the weight of its own deception, it is still important to understand what, precisely, they had hoped to accomplish and to ask ourselves, “How did we even get to this point?”

The answer to that question begins with the diminishment of an American archetype: the truck driver.

Louisiana’s Hercules Trucking. Image by the Bayou Brief.

No one wants to grow up to become a long-distance truck driver any more. At least, that’s what studies suggest. There was a time when the romance of the open road, the allure of not being tethered to a single place, and the adventure of traveling across the expanse of the country carried a certain appeal.

The truck driver was a definitively American character, the center of an entire subculture with their own music and language and places of worship, better known as “truck stops.”

The lack of interest is not because of a job shortage. By one count, in order to keep up with demand, the industry needs to add 51,000 new jobs for commercial truck drivers.

The problem is no one wants them.

What the jaded truck driver will tell you: It’s a really hard job, much more difficult than the public perceives. The hours are terrible. You lose your social life completely. You spend most of your off-time in absurdly cramped quarters, and when you’re driving, you’re treated like the bad guy. Cops take a special satisfaction in pulling you over. Everyone else on the road is either annoyed or terrified by you.

You gain weight and ache constantly. The money is just okay, enough to live off but usually not enough to save or buy a home or invest, especially if you have a family to support. Oh, and more likely than not, you work for a horrible boss.

The job can also be incredibly dangerous.

Last May, outside of Covington, Louisiana, a driver hauling avocados didn’t hit the brakes as he approached a slow-down on Interstate 12. Four people, including the driver, were killed instantly. In January, in Florida, a church van heading toward Disney World got into a fiery crash with two eighteen-wheelers. The truck drivers both died. The driver of the church van, which carried a group from Marksville, Louisiana, survived, but five of his passengers, all children, did not.

By some estimates, in Louisiana alone, eighteen-wheelers are involved in more than 2,300 accidents every year.

Still, many argue that the commercial trucking industry is only struggling to recruit drivers because they don’t pay drivers nearly enough. If they paid better wages, they would attract better drivers. And better drivers mean fewer accidents. At least that’s the theory.

When they met for the very first time last August in Baton Rouge, members of the Louisiana High Auto Rates Task Force primarily discussed the opinions of the commercial trucking industry. They’d invited representatives of three different trucking companies, ostensibly, to testify about how to reduce insurance premiums; the witnesses, instead, pitched tort reform. They wanted to talk about how the state could reduce their legal costs.

There was no data to suggest this would ever lead to a reduction in consumer costs. Never mind that. For an industry struggling nationally with recruitment, the prospects of reducing their legal exposure meant they’d be taking in more revenue.

The whole thing was a farce, pure pageantry. The task force met only two more times and never issued a final report. In other words, it didn’t manage to make any findings on the issue it had been established to address. That was just a pretense.

Image by the Bayou Brief.

The trucking companies were affiliated with LABI, and the task force was chaired by State Rep. Kirk Talbot, one of the insurance industry’s favorite legislators and one of LABI’s favorites as well.

Since 2014, LABI has lusted after another round of tort reform, and this year, they’d frame the whole package as a proposal to reduce auto insurance premiums, even if they couldn’t point to a single piece of evidence that suggested a connection between the two.

A “tort” just means a “harm,” but if it were called “harm reform,” it’d be more difficult to sell.

Advocates of tort reform claim to be promoting policies aimed at reducing legal costs and preventing frivolous lawsuits. The truth, though, is that while advocates focus on the excesses of the legal industry, tort reform is typically about constraining an individual’s legal rights and reducing the amount of money big business will be required to pay whenever they’re guilty of harming someone.

This year, auto insurance would be, pardon the pun, the vehicle to tort reform.

As soon as the legislature reconvened this spring, Talbot pre-filed HB 372; it was almost entirely a grab bag of wishes from the business lobby. Even though it was named the “Omnibus Auto Premium Reduction Act of 2019,” it wouldn’t be heard by the House Insurance Committee. Instead, it was assigned to the House Civil Law Committee.

During committee hearings and from the floor of the House, Talbot referred to testimony he’d heard when he chaired the Louisiana High Auto Rates Task Force. When confronted by the task force’s failure to produce a final report, he offered himself as an expert.

Stephen Waguespack, the president of LABI, called Talbot’s HB 372 “the most important” of the entire year and then directed the distribution of a floor note to members of the state House, urging the bill’s passage.

Image by the Bayou Brief.

Jim Donelon, Louisiana’s Commissioner of Insurance, must’ve not gotten the memo before the first meeting of the task force. He’d subsequently get on script, but audio recordings of the proceedings obtained by the Bayou Brief reveal that, at least initially, Donelon had a vastly different explanation for what caused auto insurance to be so expensive in Louisiana, and it didn’t have anything to do with lawsuits against trucking companies.

Commissioner Donelon attributed the high price of auto insurance “exclusively” to three factors: “distracted driving, cheap gas, and cost of repairs.”

“The good news,” he said, “is that we have seen a stabilization of the rate increase trend.”

As soon as he wrapped up, the task force turned to a representative from Hercules Trucking, who deftly changed the subject.

He wanted to talk about reducing the jury trial threshold. It seemed like an oddly specific request, but according to the trucking company rep, Louisiana’s $50,000 jury threshold, the highest in the nation, was forcing them to make larger settlements than they ordinarily would.

That was all Task Force Chairman Talbot needed to hear, and since then, we haven’t heard much at all from trucking companies. The insurance lobby took the wheel.

Commissioner Donelon immediately changed his tune.

When asked him to respond to their recent survey showing Louisiana with the nation’s second most expensive car insurance, Donelon didn’t mention the three “exclusive” factors. Nope. Instead, he talked about lawsuits. His explanation would work its way into a report, and that report would become a key talking point in the argument for tort reform.

There are four primary components of Talbot’s proposed legislation: Decreasing the jury threshold from $50,000 to $5,000, extending the prescriptive period from one year to two years, eliminating the collateral source rule, and ending the ability to take direct action. (Talbot claims there is a fifth component that requires the Commissioner of Insurance to order a reduction in auto insurance premiums whenever he determines it is actuarially justified, which is already mandated under existing law).

Unless you’re a lawyer or a lobbyist for the insurance industry, this all probably sounds like a bunch of boring legalese; tort reform proponents are counting on that.

As a little lagniappe, here’s a primer:

The Jury Threshold

The jury threshold refers to the amount of money in controversy necessary for a plaintiff to take their case to a jury. At $50,000, Louisiana has the highest jury threshold in the country, which means that if you are suing someone for $49,999 or less, your case will be up to a judge to decide.

Both the commercial trucking and the insurance industries claim they’re being forced to dole out more for settlements as a consequence of the high threshold. Unlike other states, in Louisiana, plaintiffs run the risk of having to pay for the costs of a jury trial if they lose. In rural parishes, a typical jury trial can cost as much as $8,000.

Reducing the threshold would intentionally discourage people from suing for anything less than the price of a jury trial, improving the industry’s bargaining power in smaller settlement negotiations.

The higher threshold has several obvious advantages: It saves taxpayer money and helps reduce the backlog of district civil cases entitled to a jury.

Although a jury trial is often a bigger and less manageable risk for a defendant than a trial decided by a judge, in cases involving a relatively small amount of money, for a plaintiff (who almost always enjoys far fewer resources than the insurance industry), the threshold encourages settlements.

Perhaps most importantly, there is no evidence or data that suggests Louisiana’s jury threshold is, in any way, correlated with the high price of car insurance. Six of the ten most expensive states in the nation don’t have any threshold, including Michigan, where insurance is more expensive than Louisiana.

The Prescriptive Period

In Louisiana, the prescriptive period simply refers to what most people know as “the statute of limitations,” and of the four primary components of state Rep. Talbot’s bill, extending the prescriptive period from one year to two years is the only one that expands rights instead of constraining them.

LABI has marketed this component as proof the bill is somehow a “compromise.” However, extending the prescriptive period was actually the only policy considered by the task force that had been previously correlated with reducing costs, and while supporters of the legislation have played up their reluctance to include the provision expanding the prescriptive period, it’s actually not much of a controversy at all, although, bizarrely, a representative of the Louisiana Municipal Association spoke in opposition of this particular provision earlier today.

When people have a longer amount of time before they must file suit, there should be, typically, an overall reduction in the annual volume of lawsuits, because a longer prescriptive period provides more opportunity to reach a settlement and better ensures that courts hear cases in which there is a legitimate dispute. At least, that’s the thinking.

That said, there is nothing particularly special about extending Louisiana’s prescriptive period to two years; several other states have more generous statutes of limitations.

The Collateral Source Rule

The collateral source rule is best explained by way of example. Right now in Louisiana, auto insurers are not permitted to hold someone’s health insurance against them. In other words, if someone with health insurance is injured in a car accident due to another person’s negligence, courts consider the total costs of their medical care, not just the total amount they had to pay out of their own pocket.

Let’s say, hypothetically, a person accumulates $1 million in medical bills as a consequence of an injury she sustained in a car crash caused by someone else. If she has a health insurance plan that covers 80% of the costs, without the collateral source rule, she would only be allowed to collect $200,000. However, if the same person with the same injuries and the same exact medical care did not have health insurance, she could collect the full value of her medical care, all $1 million.

There are several reasons for the collateral source rule, but at its core, it doesn’t allow a negligent party to mitigate their damages merely because their victim followed the law.

Notably, if the victim is covered by Medicare or Medicaid and a judge or a jury finds that they are entitled to the full costs of their medical care, whatever money still owed to the government is paid to the government. Or, it’s supposed to be.

The collateral source rule allows a person who purchases a private-sector plan to collect the full value of their medical costs when they are injured as a result of someone else’s negligence.

Not surprisingly, while auto insurers want to end collateral source in Louisiana, health insurers and healthcare providers see the situation much differently. Still, no one has seriously argued that ending collateral source would ever lead to a reduction in the state’s auto liability premiums.

Direct Action

This is the easiest concept to understand. Auto insurers want to prevent people from suing them directly. By eliminating direct action, Talbot’s bill would do just that in Louisiana. It’s the most brazen component of the proposed legislation, and although it has largely gone unnoticed, today’s committee meeting made it clear that the bill’s proponents struggle the most in explaining how eliminating direct action correlates with lower prices for car insurance.