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Louisiana high court upholds extended deadlines for Katrina, Rita insurance claims

[JURIST] The Louisiana Supreme Court [official website] Friday upheld the constitutionality [opinion, PDF] of two state laws extending the time limit for making insurance claims for damages suffered in Hurricanes Katrina [JURIST news archive] and Rita. The rulings allow homeowners, renters, drivers with auto insurance and nonfederal flood insurance policyholders to file as late as Sept. 1, 2007 in respect to Katrina and as late as Oct. 1, 2007 for Rita. The Supreme Court action was brought by the Louisiana Attorney General, seeking review of a lower court ruling that had taken the same position. State officials acknowledged that the process was unusual, but Attorney General Charles Foti [official website; press release on Friday's ruling] indicated that he wanted to resolve the matter definitively. The ten insurance companies named as defendants in the action argued unsuccessfully that the state laws retroactively altered the terms of existing contracts without the companies' consent, and that such a practice would have negative consequences for the insurance industry and ultimately the public.

For the court, Justice Chet Traylor wrote:

The Contract Clause of the United States Constitution provides that “[n]o state shall ... pass any ... law impairing the Obligations of Contracts.” United States Constitution Article I, Section 10. Similarly, the Contract Clause of the Louisiana Constitution states that “[n]o bill of attainder, ex post facto law, or law impairing the obligation of contracts shall be enacted.” La. Const. Art. 1, Section 23. This court has previously described these constitutional provisions as “virtually identical” and “substantially equivalent.” Morial, 2000-1132 p. 12, 785 So.2d at 13; Segura, 1993-
1271 p. 20, 630 So.2d at 728.

Although the language of these constitutional clauses appears unambiguously absolute, “the Contract Clause does not operate to obliterate the police power of the States.” Allied Structural Steel Co. v. Spannaus, 438 U.S. 234, 241, 98 S.Ct. 2716, 2721, 57 L.Ed.2d 727 (1978).
It is the settled law of this court that the interdiction of statutes impairing the obligation of contracts does not prevent the State from exercising such powers as are vested in it for the promotion of the common weal, or are necessary for the general good of the public, though contracts previously entered into between individuals may thereby be affected. This power, which, in its various ramifications, is known as the police power, is an exercise of the sovereign right of the Government to protect the lives, health, morals, comfort and general welfare of the people, and is paramount to any rights under contracts between individuals.
Allied Structural Steel, 438 U.S. at 241, 98 S.Ct. at 2721, quoting Manigault v. Springs, 199 U.S. 473, 480, 26 S.Ct. 127, 130, 50 L.Ed.2d 272 (1905). Thus, the prohibition contained in the Contract Clause “must be accommodated to the inherent power of the state to safeguard the vital interests of its people.” Energy Reserves Group, Inc. v. Kansas Power & Light Co., 459 U.S. 400, 410, 103 S.Ct. 697, 704, 74 L.Ed.2d 569 (1983) (internal citation omitted).
Friday's ruling does not affect claims made under the National Flood Insurance Program. Last week a federal judge in Mississippi ruled that Nationwide Mutual Insurance Company was not obligated to cover a policyholder's claims for water damage [JURIST report] caused by Hurricane Katrina. AP has more.

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