LIGA Frequently Asked Questions
LIGA Frequently Asked Questions (FAQ)
What is the Louisiana Insurance Guaranty Association?
Prior to 1970, there was no insurance safety net in Louisiana. If an insurance company was declared insolvent, the policyholder or claimant had to file a claim in the liquidation proceeding. Any assets from the insolvent insurer would eventually be divided among hundreds or thousands of creditors and claimants according to rank. These bankruptcy-like proceedings usually took years and rarely resulted in the significant payment of most claims.
In 1970, the Legislature created the Louisiana Insurance Guaranty Association (“LIGA”) as a private, non-profit entity designed to create a safety net for insurance consumers if their insurer becomes insolvent during the period of their policy coverage. LIGA steps in to pay certain statutorily defined claims. The payment of claims by LIGA has been a continuing source of reliability and relief to thousands of families and companies whose loss would have otherwise gone unpaid. LIGA covers property and casualty insureds only.
Some people compare LIGA to the FDIC, which protects the public when a bank becomes insolvent. When you buy your insurance from a licensed company in Louisiana you have the peace of mind as a consumer, knowing that your claim will be addressed, even if something unfortunate and unexpected happens to your insurance company.
The stabilization created by LIGA also inures to the benefit of all insurers in Louisiana.
There is another guaranty association system, which covers policyholders of life insurance policies, health insurance policies and annuities sold in Louisiana. Information on that protection through that system is available through the Louisiana Life and Health Insurance Guaranty Association (LLHIGA), Post Office Drawer 44126, Baton Rouge, LA 70804, 225-381-0656.
Does it matter where I live?
The claimant or insured must be a resident of Louisiana at the time of the insured event; or the property from which the claim arises is permanently located in Louisiana.
How is LIGA funded?
LIGA can assess member insurers up to 1% annually for funds necessary to pay the obligations of the association subsequent to an insolvency, the expenses of handling covered claims and other expenses authorized by LIGA. The assessments of each member insurer shall be in the proportion that the net direct written premiums of the member insurer for the preceding calendar year.
LIGA also files a claim within the receivership proceedings and typically shares in the court’s distribution of the insolvent insurer’s assets.
What benefits are provided?
Maximum limits are $500,000 per accident or occurrence and a maximum limit of $10,000 for unearned premiums. Claims are also subject to $100 deductible.
What is the difference between rehabilitation and liquidation?
Rehabilitation is the process whereby an insolvent or an impaired insurance company is placed under a Court approved plan to return the company to solvency. Depending on the rehabilitation plan, claims may be prorated, delayed or suspended for a period of time. Often, companies placed in rehabilitation may subsequently be placed in liquidation. The Court appointed supervisor of the company should periodically advise you of your company’s status.
Liquidation is a process whereby assets of an insolvent insurance company are sold in order to pay claims. Since insolvent companies do not have adequate assets to pay claims, guaranty associations make up the difference. Normally, following an order of liquidation, the Court appointed receiver would send each claimant a proof of claim form. Each claimant should complete the proof of claim form and return it to the supervisor. The receiver will then verify the claim and forward it to the appropriate guaranty association for payment.
Who can provide me with information about my claim or policy?
Usually, the Court appointed receiver can provide you with specific information regarding policies and claims. In many cases, you will receive periodic notices from the rehabilitator or liquidator concerning the status of the insurer.
Once a claim has been referred to LIGA, LIGA will assign an adjuster to coordinate all matters regarding LIGA coverage and payments.