Lapse of Insurance Coverage Disputes in Louisiana
Individuals and businesses purchase insurance to protect themselves from unexpected losses. Discovering that your policy has been terminated just when you need it most is a stressful and dangerous situation.
An insurance policy can end in several ways:
- It may lapse (end of the agreement term).
- It may be terminated by the insurance company.
- It may be cancelled by you, the insured.
Understanding the difference between these scenarios—specifically between a “lapse” and a “cancellation”—is critical to your legal rights.
The Difference Between Lapse and Cancellation
Under Louisiana law, a lapse of coverage is distinctly different from a cancellation.
- Cancellation: Generally requires the insurance company to provide you with notice. This requirement exists to give you time to obtain new coverage before the old policy ends.
- Lapse: Generally occurs as a natural consequence of the policy ending or a failure to pay premiums. Because it is presumed that you know when your policy expires, insurance companies are often not required to give you notice prior to a lapse.
As noted in Guidry v. Shelter Ins. Co., if an insured fails to pay the premium due, the insurance contract often lapses under its own clear terms.
Can a Lapse of Coverage Be Challenged?
While the law generally favors insurance companies in lapse cases, there are important exceptions. The variance in state laws makes analyzing these cases complicated, but a lapse is not always final.
1. Waiver and Estoppel
An insurance company may be legally stopped (“estopped”) from claiming your policy lapsed if their conduct suggested otherwise. For example, if the insurance company accepts and retains a past-due premium, they may have waived their right to claim the policy lapsed.
2. Fault of the Mortgage Company
For many homeowners, insurance premiums are paid through an escrow account managed by a mortgage company. If your policy lapsed because your mortgage lender failed to pay the premium on time from your escrow account, you may have a valid claim against the lender or the insurer for the reinstatement of your coverage or for damages. You should not be penalized for a bank’s clerical error.
3. No Notification of Dropped Coverage
While notice is not always required for a standard lapse, there are specific statutory scenarios where an insurer must notify you. If your coverage was dropped or altered without the mandatory legal notification, the termination of your policy may be invalid. We investigate whether the insurer followed the strict procedural steps required by Louisiana law.
Why You Need Competent Insurance Counsel
The complex nature of insurance law makes it imperative that you retain counsel who understands the distinction between lapse and cancellation.
At the Berniard Law Firm, we have extensive experience dealing with lapse in insurance coverage matters. We utilize an innovative, hands-on approach to ensure that insurance companies meet their obligations and that your rights are protected. We dig into the details to see if the insurer waived the lapse, if a third party (like a mortgage company) is at fault, or if proper notice was neglected.
Speak With an Attorney Today
Don’t face an insurance dispute alone. If your claim has been denied due to a lapse in coverage, contact us immediately.
Call us at (504) 521-6000 to speak directly with an attorney, or complete our Contact Us form to have an attorney reach out to you within 24 hours.
No Fees Unless We Win All initial consultations are free. We handle cases on a contingency fee basis, meaning there are no costs to you unless we secure a settlement or a court award in your favor.
Co-Counsel and Expert Consultation Services
The Berniard Law Firm is also available to assist other legal professionals and corporations. We have served as lead counsel, co-counsel, and expert consultants in complex insurance disputes.
Our attorneys have worked with corporate counsel, risk managers, public adjusters, and contractors through every phase of the claim process—from investigation and adjustment to mediation and litigation. Please call us today to discuss how we can partner with you to ensure policyholders receive the coverage they paid for.