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House committee advances bill allowing judges discretion on insurance 'bad‑faith' penalties
Summary
After hours of questioning and testimony from consumer advocates, insurers and the Department of Insurance, the House Committee on Insurance voted 10–6 to report House Bill 577 favorably. The bill would change penalty language to allow courts to award up to 50% rather than a mandatory 50% in bad‑faith insurance cases.
The House Committee on Insurance advanced House Bill 577 on March 25 after more than two hours of debate over whether restoring 'up to' language for bad‑faith penalties would weaken consumer protections or help lower insurance costs.
Representative Glorioso, the bill’s sponsor, told the committee HB 577 corrects what he described as a drafting error in the 2024 consolidation of bad‑faith statutes and restores judicial discretion over penalty awards. "All my bill does is add back in the 'up to' and gives discretion to the court," Glorioso said, arguing that in nominal delays — for example, a one‑day mailing glitch — an automatic 50% penalty is excessive and can drive unnecessary litigation and higher rates.
Opponents — including witnesses from the Louisiana Association for Justice and the advocacy group Real Reform Louisiana — warned the change would remove a key deterrent for insurers. "Penalty provisions are guardrails for insurance companies acting properly towards their insureds," said Luke Williamson of the Louisiana Association for Justice. He urged the committee not to weaken statutory penalties that, he said, helped hold insurers accountable after hurricanes and other catastrophes.
Brian Katz, also speaking for the association, added that technical delays are sometimes already treated reasonably by courts and that the bill risks creating more opportunities for insurers to delay payments. Ben Riggs of Real Reform Louisiana said HB 577 would "weaken accountability for insurers" and would not produce meaningful premium reductions for policyholders.
Representatives pressed both sides on whether changing penalty language would affect reinsurance costs and ultimately lower homeowners' premiums. Glorioso said he expected most jury verdicts to remain at the full penalty but that discretion would reduce needless litigation and encourage settlements. "I think it would encourage more settlement because it's not guaranteed," he said.
Officials from the Louisiana Department of Insurance described the state as an outlier on penalty structure and said many other states use lower fixed penalties. Deputy Commissioner Adam Patrick said the department does not collect court judgment data in the form requested by members but noted a 10‑year lookback showing some lines (auto) have litigation frequency above the national average. He offered to provide specific NAIC or Schedule T references on request.
After closing remarks from the sponsor and questions of witnesses, Chairman Furman moved to report the bill favorably. The committee recorded an objection from Representative Green but proceeded to a roll call. The motion passed on a 10–6 vote and the chair announced House Bill 577 was reported favorably.
The committee did not adopt amendments on the floor of the hearing. The bill now moves forward in the legislative process with the committee recommendation to report favorably.
