Insurance Bad Faith Demand Letter - Louisiana

INSURANCE BAD FAITH DEMAND LETTER

State of Louisiana

[LAW FIRM LETTERHEAD]

PRIVILEGED AND CONFIDENTIAL
SETTLEMENT COMMUNICATION — FOR RESOLUTION PURPOSES ONLY
PROTECTED UNDER LA. CODE OF EVIDENCE ART. 408 AND FED. R. EVID. 408

VIA CERTIFIED MAIL, RETURN RECEIPT REQUESTED
AND VIA EMAIL TO: [ADJUSTER_EMAIL]

Date: [__/__/____]

[INSURANCE_COMPANY_NAME]
[CLAIMS_DEPARTMENT_ADDRESS]
[________________________________]

Attention: [ADJUSTER_NAME], [ADJUSTER_TITLE]
Copy to: General Counsel, [INSURANCE_COMPANY_NAME]

Re: FORMAL BAD-FAITH DEMAND — LOUISIANA LAW
Insured/Claimant: [INSURED_NAME]
Policy Number: [POLICY_NUMBER]
Claim Number: [CLAIM_NUMBER]
Date of Loss: [__/__/____]
Parish of Loss: [PARISH_NAME] Parish, Louisiana
Policy Limits: $[POLICY_LIMITS]
Amount Presently in Dispute: $[DEMAND_AMOUNT]
Response Deadline: [__/__/____] (time-limited demand)

Dear [ADJUSTER_NAME]:

I. INTRODUCTION

This firm represents [CLIENT_NAME] ("our client") in connection with the above-referenced insurance claim arising under the laws of Louisiana. This letter constitutes a formal demand for payment of policy benefits wrongfully withheld and serves as notice that [INSURANCE_COMPANY_NAME]'s ("the Company" or "[CARRIER_SHORT_NAME]") claim-handling conduct has violated its duties under Louisiana insurance law — in particular, La. R.S. 22:1892 as comprehensively restructured by Act 3 of the 2024 Regular Session (SB 323), signed by Governor Landry on May 7, 2024, and effective July 1, 2024.

This is a time-limited demand. The Company has until [__/__/____] to tender the full amount owed of $[DEMAND_AMOUNT]. Failure to do so will result in immediate litigation seeking all available remedies under Louisiana law.

II. THE 2024 RESTRUCTURING OF LOUISIANA BAD-FAITH LAW

A. Act 3 of 2024 — Comprehensive Overhaul

Effective July 1, 2024, the Louisiana Legislature enacted Act 3 (SB 323), which:

1. Repealed former La. R.S. 22:1973 (which previously imposed liability for "up to two times the damages sustained" for breach of the insurer's duty of good faith and fair dealing);
2. Consolidated the good-faith duty into La. R.S. 22:1892;
3. Enacted La. R.S. 22:1892.2, which imposes a mandatory 60-day pre-suit cure period for claims arising from catastrophic losses to immovable property;
4. Preserved the "arbitrary, capricious, or without probable cause" standard;
5. Retained the § 1892 penalty framework (50% of the amount found due plus reasonable attorney fees).

This overhaul changes both the available remedies and the procedural prerequisites for bad-faith litigation in Louisiana. Counsel must confirm whether the underlying claim's date of loss falls under the pre-July 1, 2024 regime (where § 1973's "up to 2x damages" penalty is still available) or the post-July 1, 2024 regime (where § 1892 and § 1892.2 govern).

B. Applicable Regime for This Claim

Based on the date of loss ([__/__/____]):

☐ Pre-July 1, 2024 — La. R.S. 22:1892 AND former La. R.S. 22:1973 remedies both available (2x damages available under § 1973)
☐ On or after July 1, 2024 — La. R.S. 22:1892 (as amended) governs; § 1892.2 cure notice required for catastrophic immovable property claims
☐ Non-catastrophic post-7/1/24 loss — La. R.S. 22:1892 applies without § 1892.2 cure requirement

III. LOUISIANA STATUTORY FRAMEWORK

A. La. R.S. 22:1892 — The Core Prompt-Payment and Bad-Faith Statute

La. R.S. 22:1892(A)(1) requires insurers to pay "the amount of any claim due any insured within thirty days after receipt of satisfactory proofs of loss." For motor vehicle property damage claims, § 1892(A)(4) imposes a similar 30-day clock. For first-party UM claims, § 1892 likewise governs.

§ 1892(B)(1) Penalty: Failure to pay within the statutory period "when such failure is found to be arbitrary, capricious, or without probable cause" subjects the insurer to:

• Fifty percent (50%) damages on the amount found due; OR
• For immovable property claims, penalties not to exceed 50% of damages or $5,000, whichever is greater; PLUS
• Reasonable attorney fees and costs.

B. La. R.S. 22:1892.2 — Cure Period for Catastrophic Immovable Property Losses

For catastrophic losses to immovable property, La. R.S. 22:1892.2 requires a claimant to provide written cure-period notice before filing suit for penalties and attorney fees. The insurer has sixty (60) days to tender the full amount. If the insurer pays within the cure period, no § 1892.2 penalty lies. Partial payment within the cure period halves any penalty. This letter [CONSTITUTES / DOES NOT CONSTITUTE] the § 1892.2 cure notice, as noted in the caption.

C. La. R.S. 22:1964 — Unfair Trade Practices

La. R.S. 22:1964 enumerates the following as unfair or deceptive acts:

1. Misrepresenting pertinent facts or policy provisions;
2. Failing to acknowledge and act reasonably promptly upon communications;
3. Failing to adopt and implement reasonable standards for the prompt investigation of claims;
4. Refusing to pay claims without conducting reasonable investigation;
5. Failing to affirm or deny coverage within a reasonable time after proof-of-loss forms are submitted;
6. Not attempting in good faith to effectuate prompt, fair, and equitable settlement of claims in which liability has become reasonably clear;
7. Compelling insureds to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in actions brought by such insureds;
8. Attempting to settle a claim for less than the amount to which a reasonable person would have believed he was entitled;
9. Failing to promptly provide a reasonable explanation of the basis in the policy in relation to the facts or applicable law for denial of a claim or for the offer of a compromise settlement.

D. The Reed v. State Farm Standard — "Arbitrary, Capricious, or Without Probable Cause"

The Louisiana Supreme Court in Reed v. State Farm Mut. Auto. Ins. Co., 857 So. 2d 1012 (La. 2003), defined "arbitrary, capricious, or without probable cause" as synonymous with "vexatious refusal to pay" — that is, unjustified conduct "without reasonable or probable cause or excuse." The Court emphasized that the bad-faith statutes are penal in nature and must be strictly construed, but also affirmed that penalties are appropriate where the insurer's refusal lacks a good-faith defense.

E. Obligation of Good Faith Under the Louisiana Civil Code

Beyond Title 22, Louisiana's Civil Code imposes an overarching duty of good faith in every contract. La. C.C. art. 1983 provides that "contracts have the effect of law for the parties and may be dissolved only through the consent of the parties or on grounds provided by law. Contracts must be performed in good faith." La. C.C. art. 1997 provides that "an obligor in bad faith is liable for all the damages, foreseeable or not, that are a direct consequence of his failure to perform." Louisiana courts have held that the Civil Code duty of good faith supplements, but does not replace, Title 22 remedies.

IV. POLICY INFORMATION AND COVERAGE

A. Policy Details

B. Coverage Analysis

The policy provides coverage for [DESCRIBE_COVERED_LOSS_TYPE]. The loss clearly falls within the insuring agreement. Any ambiguity must be construed against [CARRIER_SHORT_NAME] as drafter per La. C.C. art. 2056 and Cadwallader v. Allstate Ins. Co., 848 So. 2d 577 (La. 2003).

[CARRIER_SHORT_NAME] has [ACKNOWLEDGED/DISPUTED/DENIED] coverage by [DESCRIBE_COVERAGE_POSITION]. Having accepted that a covered loss occurred, the Company owes the following duties under Louisiana law:

• Conduct a thorough, fair, and objective investigation (§ 1964);
• Evaluate the claim in good faith and make prompt settlement offers (§ 1892(A)(3));
• Pay undisputed amounts within 30 days of satisfactory proofs of loss (§ 1892(A)(1));
• Communicate honestly and transparently with the insured (§ 1964);
• Avoid compelling litigation by offering substantially less than owed (§ 1964(7));
• Perform the contract in good faith (La. C.C. art. 1983).

V. FACTUAL BACKGROUND AND CLAIM-HANDLING CHRONOLOGY

A. The Underlying Loss

On [__/__/____], [DESCRIBE_LOSS_EVENT_IN_DETAIL].

[ADDITIONAL_LOSS_DETAILS: _____________________________________________]

B. Chronology of Bad-Faith Conduct

VI. SPECIFIC BAD-FAITH CONDUCT

A. Unreasonable Delay (§ 1892(A)(1), (A)(3))

Despite receipt of satisfactory proofs of loss on [__/__/____], [CARRIER_SHORT_NAME] has failed to:

• [DESCRIBE_SPECIFIC_DELAY_1]
• [DESCRIBE_SPECIFIC_DELAY_2]
• [DESCRIBE_SPECIFIC_DELAY_3]

The 30-day statutory clock has elapsed. Each additional day of non-payment strengthens the "arbitrary and capricious" showing under Reed.

B. Inadequate Investigation (§ 1964(3), (4))

[CARRIER_SHORT_NAME] failed to conduct a reasonable investigation:

• [INVESTIGATION_FAILURE_1]
• [INVESTIGATION_FAILURE_2]
• [INVESTIGATION_FAILURE_3]

C. Lowball Settlement Offers (§ 1964(7), (8))

The gap between the Company's offers and the documented value is the hallmark of conduct that "compels litigation" in violation of § 1964(7).

D. Misrepresentation of Policy Provisions (§ 1964(1))

[DESCRIBE_SPECIFIC_MISREPRESENTATIONS: ______________________________]

E. Failure to Explain Denial (§ 1964(9))

[DESCRIBE_COMMUNICATION_FAILURES: ______________________________]

VII. STATUTORY VIOLATIONS — CONSOLIDATED

[CARRIER_SHORT_NAME] has violated the following provisions of Louisiana law:

☐ La. R.S. 22:1892(A)(1) — failure to pay within 30 days of satisfactory proofs of loss
☐ La. R.S. 22:1892(A)(3) — failure to make written settlement offer
☐ La. R.S. 22:1892(B)(1) — arbitrary, capricious, or without-probable-cause refusal to pay
☐ La. R.S. 22:1964(1) — misrepresentation of policy provisions
☐ La. R.S. 22:1964(2) — failure to promptly acknowledge/act upon communications
☐ La. R.S. 22:1964(3) — failure to adopt reasonable investigation standards
☐ La. R.S. 22:1964(4) — refusal to pay without reasonable investigation
☐ La. R.S. 22:1964(6) — failure to attempt good-faith settlement when liability clear
☐ La. R.S. 22:1964(7) — compelling litigation by lowball offers
☐ La. R.S. 22:1964(8) — attempting to settle for less than a reasonable person would believe owed
☐ La. R.S. 22:1964(9) — failure to explain denial
☐ La. C.C. art. 1983 — breach of good-faith contract performance
☐ La. C.C. art. 1997 — bad-faith obligor liability for all damages

VIII. DAMAGES

A. Contract Damages (Policy Benefits)

B. Consequential Damages

Under La. C.C. art. 1997, a bad-faith obligor is liable for all damages, foreseeable or not, that are a direct consequence of the failure to perform. Recoverable consequential damages include:

C. Mental Anguish (Former § 1973 Cases Only)

For causes of action arising before July 1, 2024, Louisiana courts permitted recovery of mental anguish damages under former § 1973 in appropriate cases. See Goins v. State Farm Fire & Cas. Co., 994 So. 2d 106 (La. App. 2d Cir. 2008). For claims under current § 1892 only, mental anguish recovery is limited.

D. Statutory Penalty — § 1892(B)(1)

Under the current § 1892:

• Fifty percent (50%) of $[NET_AMOUNT] = $[PENALTY_AMOUNT]; OR
• For immovable property claims, a penalty of 50% or $5,000 (whichever is greater)

E. Former § 1973 Penalty (Pre-July 1, 2024 Losses Only)

For pre-July 1, 2024 losses, former § 1973 authorized penalties of up to twice the amount of damages sustained because of the bad-faith conduct:

• Two (2) x $[TOTAL_DAMAGES] = $[TWO_X_DAMAGES] (former § 1973)

F. Attorney Fees and Costs

Reasonable attorney fees and costs under § 1892(B)(1), calculated per State v. Williamson, 597 So. 2d 439 (La. 1992) (lodestar method).

G. Judicial Interest (La. C.C. art. 2000)

Judicial interest at the rate set annually by La. R.S. 13:4202 runs from date of judicial demand on all sums due.

IX. DEMAND

A. Monetary Demand

Pay the total sum of $[TOTAL_DEMAND_AMOUNT] as follows:

B. Non-Monetary Settlement Terms

In addition to payment:

• Full release of all claims by [CARRIER_SHORT_NAME] against our client;
• Confidentiality agreement (optional, at client's discretion);
• Correction of any adverse information reported to ISO, LexisNexis, CLUE, or other industry databases.

X. DEADLINE AND CURE PERIOD

FOR CATASTROPHIC IMMOVABLE PROPERTY LOSSES: Pursuant to La. R.S. 22:1892.2, [CARRIER_SHORT_NAME] has sixty (60) days from receipt of this letter to tender the full amount demanded. Failure to do so preserves all § 1892.2 remedies including penalties and attorney fees. Partial payment within 60 days reduces any penalty by one-half.

FOR NON-CATASTROPHIC CLAIMS: This demand expires at 5:00 p.m. Central Time on [__/__/____].

Consequences of Failure to Cure

If [CARRIER_SHORT_NAME] fails to tender the demanded amount:

1. Litigation will be filed in [PARISH_NAME] Parish District Court or, if removable, the [EASTERN/MIDDLE/WESTERN] District of Louisiana, seeking:
   - Full policy benefits
   - § 1892 statutory penalties (50% of amount due or $5,000 greater for immovable property)
   - Former § 1973 remedies (if pre-7/1/24 cause of action)
   - Consequential damages under La. C.C. art. 1997
   - Reasonable attorney fees and costs
   - Judicial interest from date of judicial demand (La. C.C. art. 2000)
2. Regulatory complaint will be filed with the Louisiana Department of Insurance, 1702 N. Third Street, P.O. Box 94214, Baton Rouge, LA 70804-9214;
3. Market Conduct complaint referral to the National Association of Insurance Commissioners.

XI. DOCUMENT PRESERVATION NOTICE

This letter constitutes formal notice to preserve — and the Company is hereby instructed not to delete, alter, or destroy — all documents and electronically stored information related to this claim, including but not limited to:

• Complete claim file, including all versions and drafts;
• All internal communications concerning this claim;
• All communications with the insured/claimant;
• Adjuster notes, diaries, and activity logs (including any F9/audit history in Xactimate or Symbility);
• All photographs, videos, and inspection reports;
• All expert reports, estimates, and evaluations (including engineer reports and peer reviews);
• Claim-handling guidelines, manuals, best practices, and standard operating procedures;
• Training materials relevant to this type of claim;
• Reserve information, reserve change history, and reserve supervisor approvals;
• Quality assurance and audit reports;
• Reinsurance communications referencing this claim;
• All communications with third-party administrators (if any).

Spoliation will be the subject of sanctions and adverse-inference instructions at trial.

XII. PRESCRIPTION / LIMITATIONS

Contract actions are subject to a ten (10)-year prescriptive period under La. C.C. art. 3499. However, many property policies contain contractual suit limitations (typically 24 months from date of loss for named-storm claims, and one or two years for other claims under La. R.S. 22:1311 Standard Fire Policy form). Counsel must confirm applicable limitations.

Date of Loss: [__/__/____]
Contractual Suit Limitation Date: [__/__/____]

XIII. CONCLUSION

[CARRIER_SHORT_NAME]'s handling of this claim represents precisely the conduct Louisiana's legislature targeted when enacting and restructuring the bad-faith statutes. Act 3 of 2024 preserved — and in many respects strengthened — the insurer's obligation to pay valid claims promptly and in good faith. The Louisiana Supreme Court in Reed v. State Farm made clear that insurers cannot manufacture defenses to avoid payment of clear claims.

We invite [CARRIER_SHORT_NAME] to use the cure period (or 30-day deadline) to resolve this matter in accordance with its contractual and statutory obligations.

Please direct all further communications regarding this claim to the undersigned.

Respectfully submitted,

[LAW_FIRM_NAME]

By: _______________________________
[ATTORNEY_NAME]
Louisiana Bar Roll No. [BAR_NUMBER]
[ADDRESS]
[CITY], LA [ZIP]
Phone: [PHONE]
Fax: [FAX]
Email: [EMAIL]

Counsel for [CLIENT_NAME]

ENCLOSURES:

• Policy declarations page and relevant provisions
• Sworn Proof of Loss
• Claim correspondence chronology
• Damage documentation (photos, estimates, inventories)
• Expert reports (engineer, contractor, adjuster)
• Proof of mitigation expenses
• Medical records and bills (if bodily injury claim)
• Wage loss documentation (if applicable)

CC:

• [CLIENT_NAME]
• General Counsel, [INSURANCE_COMPANY_NAME]
• Louisiana Department of Insurance, P.O. Box 94214, Baton Rouge, LA 70804-9214 (via forthcoming complaint)

LOUISIANA BAD-FAITH QUICK REFERENCE

SOURCES AND REFERENCES

• La. R.S. 22:1892 — https://legis.la.gov/Legis/Law.aspx?d=509041
• La. R.S. 22:1892.2 — enacted by Act 3 of 2024 Reg. Sess. (SB 323)
• Act 3 of 2024 Regular Session — https://legis.la.gov/legis/ViewDocument.aspx?d=1372369
• La. R.S. 22:1964 — Unfair Trade Practices
• La. R.S. 22:1269 — Direct Action Statute (as amended by Act 275 of 2024): https://legis.la.gov/legis/Law.aspx?d=508142
• La. C.C. arts. 1983, 1997, 2000, 2056, 3499
• Reed v. State Farm Mut. Auto. Ins. Co., 857 So. 2d 1012 (La. 2003): https://caselaw.findlaw.com/court/la-court-of-appeal/1104532.html
• Theriot v. Midland Risk Ins. Co., 694 So. 2d 184 (La. 1997): https://caselaw.findlaw.com/la-supreme-court/1101894.html
• Cadwallader v. Allstate Ins. Co., 848 So. 2d 577 (La. 2003)
• Goins v. State Farm Fire & Cas. Co., 994 So. 2d 106 (La. App. 2d Cir. 2008)
• Keogh Cox — "Louisiana Legislature Enacts Changes to Bad Faith Statutes": https://keoghcox.com/louisiana-legislature-enacts-changes-to-bad-faith-statutes/
• Phelps — "New Duties for Insurers and Insureds Under LA Overhaul of Bad Faith Statutes": https://www.phelps.com/insights/new-duties-for-insurers-and-insureds-under-la-overhaul-of-bad-faith-statutes.html
• Louisiana Department of Insurance: https://www.ldi.la.gov/