Insurance commissioner doubles down as State Farm refuses to cover evacuation costs

For the second time in a week, Louisiana Insurance Commissioner Jim Donelon has said he is considering levying fines against insurance companies that continue to refuse to comply with his emergency directive to cover the temporary living expenses of policyholders who evacuated during Hurricane Ida.

“What I would do is find that they are not in compliance with a lawful order that I have issued and take action to suspend their license, which is unlikely, or fine them, which is more likely, for their failure to comply,” Donelon said, referring by name to the company at the center of the dispute: State Farm.

Donelon made the remarks during a virtual town hall discussion hosted by the Advocate on Thursday, just days after delivering similar remarks as the featured guest at the Baton Rouge Press Club luncheon.

The issue stems from a provision contained in most homeowner’s insurance policies that covers living expenses only if the policyholder is under a mandatory evacuation order. Ahead of Hurricane Ida, only some Southeast Louisiana parishes were put under a mandatory evacuation order. Most of New Orleans and Jefferson Parish were not, despite not having running water or power for several days after the storm. 

Many parishes and municipalities did not issue mandatory evacuations ahead of Hurricane Ida because there was not enough time for such evacuations to be safely carried out. The fast-moving storm took many by surprise and officials were worried that mandatory evacuations would create situations reminiscent of Hurricane Ivan in 2004.

“It was a horrible experience for those folks, in particularly the elderly who were caught up in it,” Donelon said in his earlier speech to the Press Club.

During mandatory evacuations for Ivan, many Southeast Louisiana residents were trapped in gridlock traffic for periods as long as 8 hours, running out of fuel, food and water, Donelon said. 

“That was part of the decision making process for those public officials trying to decide whether to order an evacuation or not,” he said.

After Ida made landfall Aug. 29, Donelon urged insurance companies to voluntarily waive that provision after he received an email from Allstate saying the company was already planning to do so. USAA and other companies joined with Allstate in meeting Donelon’s request, but State Farm did not, prompting Donelon to turn his request into a mandate.

He said he is waiting on State Farm to respond to the consumer complaints his office has received regarding the company’s refusal to cover food, hotel and other evacuation expenses claimed by homeowners from parishes that were not under a mandatory evacuation order.

Under state statute, insurance companies have 30 days to comply with the commissioner’s emergency directives before the commissioner can take further regulatory action such as levying a fine or suspending the company’s license. Such action can be delayed even further if the company challenges the directive in court or appeals the fine to the Division of Administrative Law, in which case the fine would be suspended pending a judge’s ruling.

Donelon’s emergency directive took effect on Sept. 7. State Farm had not filed any challenges or appeals as of Thursday, he said. 

“That remains to be seen, and it’s frankly, at this point, in State Farm’s court,” he said. “Once we have a response from them relative to complaints we’ve received, we will take our action and that may precipitate a response in the court system by State Farm.”

In response to a request for comment, a State Farm spokesperson emailed the following statement:

“State Farm stands with our customers to help them recover in those states impacted by Hurricane Ida. Our hearts go out to all those impacted. We are working with our customers one-on-one to determine their individual circumstances and provide assistance in their recovery process. We are committed to pay what we owe and encourage our policyholders who have suffered a loss to submit a claim.”