Louisiana Rating Bureau Brawl Continues

Louisiana Insurance Commissioner Jim Donelon, continuing his criticism of the state's rating bureau/management organization, said Friday that the entity should not seek a court ruling to determine whether it is a private or public operation.

The commissioner issued his statement concerning the Property Insurance Association of Louisiana, which in addition to setting property rates manages Citizens, the state's homeowners insurer of last resort.

He said last month he wants PIAL abolished, along with the Louisiana Automobile Insurance Plan (LAIP).

Mr. Donelon called those operations “confusing and secretive layers of bureaucracy.”

Joseph Deutsch, PIAL executive director, said the board voted last week to go into court and seek a declaratory judgment as to whether they are a public or private agency because they want to know how to proceed legally to wrap up business if they are abolished.

PIAL, which has more than 125 employees, has questions concerning civil service, pensions and liabilities that will arise if it is dissolved, he said.

The PIAL felt it should go into court rather than seek a ruling from the state attorney general, Mr. Deutsch said, because a ruling from the attorney general “would not be as powerful or as strong.”

By going to court, the PIAL is challenging a finding by the state auditor that PIAL–founded in the late 19th century as a private group–had over time morphed into a public operation.

PIAL was established as a fire rating bureau for property insurance, providing a rating for insurance companies to help determine premiums based on fire risk.

PIAL has also managed the Louisiana Automobile Insurance Plan, which is the high-risk pool for motor vehicles, as well as the Citizens Property Insurance Corp.

The legislative auditor found that the PIAL is a public body subject to open meetings, public bid and other state laws–a conclusion that PIAL legal counsel disputes.

“The PIAL should be asking the attorney general for an opinion on these matters just as the Louisiana Citizens Property Insurance Corp. and the Louisiana Automobile Insurance Plan (LAIP) boards have indicated they will do when necessary,” Mr. Donelon said in a statement.

He added that “when the PIAL has a question that is beyond their legal counsel's comfort level, they should access the attorney general for those answers. This would certainly save policyholders the cost of such litigation.”

The commissioner has said he will seek legislation to dissolve the PIAL and the LAIP, and turn their operations over to national organizations that perform the same services across the country. He argues the move will save money and make operations for both groups more efficient.

Mr. Deutsch said PIAL now has only three employees at Citizens. He said the other PIAL employees would transfer over if the entity is dissolved. He noted that of 50 states, only five currently have independent rating bureaus.

He said the PIAL board's position is that the state auditors' findings have misread the facts.