On August 12, 2016, Louisiana Governor John Bel Edwards declared a state of emergency in response to historic flooding in Louisiana. The state of emergency is set to expire on Monday, September 12, 2016.

The most recent Louisiana flood statistics report that 20 parishes were declared a major disaster for severe storms and flooding. Almost 30,000 National Flood Insurance Program (NFIP) policyholders submitted claims for flood loss. FEMA-approved financial support to Louisiana flood survivors has exceeded $205 million, $55 million of which account for advanced payments to flood insurance policyholders who have filed a flood loss claim.

What is Emergency Rule 27?

In the state’s ongoing emergency response efforts, Louisiana Governor Edwards issued an executive order granting the Louisiana Insurance Commissioner temporary authority to implement emergency insurance rules aimed to provide flood victims in federal disaster areas more time to comply with their policy provisions.

Louisiana Insurance Commissioner, Jim Donelon, issued Emergency Rule 27, effective August 12:01 a.m. on August 12, 2016 until September 12, 2016, that aims to address the disruption to businesses, financial institutions, the displacement of citizens in the affected parishes, and the inability of these citizens “to timely pay their insurance premiums, access their insurance policies, and communicate with insurance agents and their respective insurance companies for insurance-related matters.” Emer. R. 27.

As a result, Rule 27 suspends certain statutes of the Louisiana Insurance Code, and the rules and regulations that implement the Louisiana Insurance Code with respect to policyholders in parishes declared a “major disaster.” The affected statutes include, but are not limited to, those concerning policy: cancellation, nonrenewal, reinstatement, premium payment, and claim filings with regard to any and all types of insurance subject to the Louisiana Insurance Code. This means that, at least until September 12, 2016, a suspension is in place for any and all cancellations due to a policyholder’s inability to comply with any policy provisions.

Rule 27 mandates that “a cancellation or nonrenewal shall not occur prior to September 12, 2016, unless upon the documented written request or written concurrence of the insured.” See Emer. Rule 27, § 4907, “Suspension of Cancellations or Nonrenewals.” Such a notice from an insurer received by a policyholder in one of the identified parishes is deemed null and void, without force or effect. Due to the notice’s nullity during the suspension period, Rule 27 also requires that the insurer reissue such a notice to the policyholder after September 12, 2016.

How Does Rule 27 Apply?

Emergency Rule 27 applies to all insurers, including health maintenance organizations (HMOs), surplus lines, private flood insurers, and any and all other entities doing business in Louisiana or regulated by the Insurance Commissioner. With respect to its application to policyholders, again, Emergency Rule 27 applies to policyholders located in parishes that have received a Major Disaster Declaration by President Obama, though insurers can extend Rule 27’s application to policyholders outside of those designated parishes as well.

While Emergency Rule 27 is clear that policyholders must still comply with policy provisions and insurers are not prevented from cancelling or terminating an insured based solely on a policyholder’s fraud or material misrepresentations, insurers should be mindful that Emergency Rule 27 is in effect and will impact the claims handling process for both the insurer and the policyholder during this period of the major disaster. The full text of Emergency Rule 27 is available on the Louisiana Department of Insurance site here.