It may not be a universal law. But it is a 'best practice' generally to submit a written Proof of Loss ("POL") as a part of making any First-Party Insurance Claim. If it is in writing, not only is it a "Proof of Loss," but it is a clearly provable Proof of Loss in Court.
In Katie Realty, Ltd. v. Louisiana Citizens Property Insurance Corp., 2012 WL 4901067 (La. October 16, 2012), the corporate Policyholder made a claim on its Citizens Commercial Property Insurance Policy for Property Damage caused by Hurricane Gustav. The Policyholder succeeded. The claim was settled at Mediation for a Quarter of a Million Dollars ($250,000.00).
Unfortunately, "Citizens failed to timely pay the settlement funds". Katie Realty then "filed a motion to enforce settlement and to assess penalties pursuant to La. Rev. Stat. ยงยง 22:1892 and 1973." The Louisiana penalties statutes invoked by Katie Realty trigger a penalty for delayed payment and, collectively, they also import a duty of Good Faith and Fair Dealing with additional penalties in the event of a finding of arbitrary and capricious behavior or 'Bad Faith' on the part of the Insurance Company.
Citizens was assessed total penalties of $125,000.00 in this case for the delayed payment and for alleged Bad Faith in delaying the payment. Katie Realty, Ltd. v. Louisiana Citizens Property Insurance Corp., 2012 WL 4901067 *1 (La. October 16, 2012). On appeal, the Louisiana Supreme Court reduced the penalties assessment from $125,000.00 to $5,000.00.
The reason for the reduction rests on the fact that Katie Realty apparently mediated and settled its Property Insurance Claim without submitting a satisfactory Proof of Loss. Katie Realty, Ltd. v. Louisiana Citizens Property Insurance Corp., 2012 WL 4901067 *1, *6 (La. October 16, 2012).
The Louisiana penalties statutes invoked by Katie in this case all require satisfactory Proofs of Loss. Without them, only nominal penalties could be assessed under the Louisiana statutes here. This legal result was reached by the Louisiana Supreme Court redefining 'proofs of loss' to mean 'proof of claim' after the Trial Court and Appellate Court had ruled that the settlement was a legally sufficient Proof of Loss to trigger the penalties statutes.
Here, the payment which was delayed was payment of a settlement. That made all the difference to the Louisiana Supreme Court. "A settlement, however, is not an insurance claim arising under a contract of insurance." Katie Realty, Ltd. v. Louisiana Citizens Property Insurance Corp., 2012 WL 4901067 *7 (La. October 16, 2012). Therefore, said the Supreme Court, not Bad Faith penalties but only "a penalty award of $5,000 is appropriate and warranted." Katie Realty, Ltd. v. Louisiana Citizens Property Insurance Corp., 2012 WL 4901067 *8 (La. October 16, 2012).
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