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Committee approves amended bill to clarify surplus-lines insurer rules after parish officials raise arbitration concerns
Summary
House Bill 561, proposing clarifications for surplus-lines insurers and arbitration clauses, was advanced after amendments removed a provision relating to public-contract arbitration; parish officials urged additional guardrails so local governments will not be forced into out-of-state arbitration forums.
House Bill 561, sponsored by Insurance Committee Chair Furman, would clarify the regulatory posture for surplus-lines insurance and confirm contractors’ freedom to negotiate forms, arbitration clauses and other contractual terms in surplus-lines contracts. The committee adopted an amendment that removed language changing public-contract arbitration rules and reported the bill favorably with the remaining technical edits.
The amendment struck the section that would have authorized out-of-state arbitration clauses in public‑entity contracts; after the change the bill does not alter current law that has been interpreted by the Louisiana Supreme Court to prohibit arbitration clauses in public contracts which require forum or law outside Louisiana. Chair Furman and Department of Insurance staff said the amendment restores current law for public entities while clarifying that other surplus-lines transactions can include negotiated terms.
Representatives of Cameron and Calcasieu parishes, and the district attorney for Cameron Parish, urged explicit protections for public bodies, noting pending litigation in which surplus-lines policies included out-of-state arbitration clauses. Parish officials said arbitration in distant forums imposes large costs and can deprive local tax-supported entities of timely recovery. Industry witnesses said the bill’s core goal is to preserve a functioning surplus-lines market and to avoid creating an outlier regulatory regime that would reduce insurer participation.
The committee adopted technical and redomestication clarifications at the sponsor’s request, and Chair Furman said he will continue to meet with parish officials and the department to refine language to address public-body concerns.
Why it matters: Surplus-lines carriers provide coverage for risks not available in admitted markets; uncertainty about arbitration and contract enforceability can affect market capacity, price and availability. Parish officials warned that undoing existing public-procurement protections could force local governments to litigate in distant forums and delay recovery.
What’s next: HB 561 was reported favorably as amended; the sponsor and local-government representatives said they will continue to negotiate clarifying language before floor action.
