Due to the State of Emergency declared on August 12, 2016 by Governor John Bel Edwards in response to the historic flooding in parts of Louisiana, and the inability of many insurance policy holders to repair their property within normal time frames because of a shortage of building materials, contractors, and construction workers, the Commissioner of Insurance promulgated Emergency Rule 28, which went into effect retroactively on August 12, 2016. Emergency Rule 28 suspended statutory provisions of the Insurance Code concerning cancellations, terminations, nonrenewals, and nonreinstatements of insurance policies due to a material change in the insured risk, and also gives insureds additional to comply with other policy provisions.

Since Emergency Rule 28 was issued, the Department of Insurance has extended its effectivity with Emergency Rule 30, effective October 13, 2016, and, most recently Emergency Rule 32, which is effective February 10, 2017.

Emergency Rule 32 extends the life of Emergency Rule 28 through May 10, 2017.

The emergency rule applies to all lines of insurance and all regulated entities.

 

Last week, the IRS announced special exceptions for Louisiana residents and businesses affected by the August 2016 floods. According to The Advocate, the IRS will allow those affected “extended deadlines, waived penalties, and quicker request processing” and that “federal disaster assistance is not considered taxable income by [the IRS] or Social Security.”

Read the full article here.

Taxpayers may need to be proactive between now and the end of the year if they intend to deduct their 2016 property taxes on their 2016 federal income tax returns. Taxpayers that own real property in a flood-impacted parish and deduct property taxes paid for federal income tax purposes should be aware that the timing of 2016 property tax payments, and the ability to deduct 2016 property taxes paid on their 2016 federal income tax returns, may be affected.

Normally, a parish mails its property tax bills in December and the taxpayer (or the taxpayer’s mortgage company) pays the property tax in the year the bill is mailed. Due to the flood, at least two parishes, East Baton Rouge and Livingston, are not mailing property tax bills until 2017. A cash-basis taxpayer, i.e., individuals and many businesses, may only deduct state and local taxes in the year the taxpayer pays the tax. A summary of the status of 2016 property tax bills in East Baton Rouge and Livingston Parish 2016 follows.

East Baton Rouge Parish

The East Baton Rouge Sheriff’s Office is not mailing property tax bills until January 2016. A representative of McGlinchey Stafford spoke with a representative of the East Baton Rouge Sheriff’s Tax Office who confirmed that East Baton Rouge Parish is currently accepting payment of 2016 property tax. Taxpayers whose taxes are not held in escrow by their mortgage companies may pay their property taxes online, by mail, or in person. The East Baton Rouge Sheriff’s Office website contains information about how to pay 2016 property taxes.

It appears that some mortgage companies are aware of the delay in East Baton Rouge property tax bills and they are planning to remit the 2016 property tax payments in December 2016. Taxpayers whose taxes are held in escrow by their mortgage companies should check their escrow statements online and confirm whether their mortgage company remitted their 2016 property taxes. If a taxpayer’s mortgage company has not remitted 2016 property taxes, the taxpayer should contact his or her mortgage company and instruct the mortgage company to pay the 2016 East Baton Rouge Parish taxes before the end of the year.

Livingston Parish

The situation in Livingston Parish is more problematic than the situation in East Baton Rouge Parish. Livingston Parish has not completed its 2016 tax rolls. As a result, at this time, the Livingston Parish Sheriff’s Office is not accepting payment for 2016 property taxes. McGlinchey Stafford’s understanding is that the Livingston Parish Tax Assessor’s Office does not plan to send property tax notices the end of January 2017 — at the earliest. Nevertheless, an affected taxpayer should consider checking the Livingston Parish Sheriff’s Parish Office’s website towards the end of the year on the off chance the Sheriff’s Office begins accepting payments.

What happens if 2016 property taxes are paid in 2017?

Taxpayers who pay their 2016 property taxes in calendar year 2017 will be able to deduct both their 2016 and their 2017 property taxes (assuming the taxpayer pays 2017 property taxes in 2017) on their 2017 tax returns. The double property tax deduction in 2017, however, may trigger the alternative minimum tax. In addition, McGlinchey Stafford is closely following the potential for federal income tax reform in 2017. Certain federal income tax reform proposals, if enacted, may eliminate a taxpayer’s ability to deduct state taxes. Therefore, the potential exists that a taxpayer may not be able to deduct its 2016 property taxes paid in 2017 if federal income tax reform occurs and is effective for the 2017 tax year.

McGlinchey Stafford has not researched the property tax situation in other parishes impacted by the flood, but it is reasonable to assume that similar property tax issues may arise in those parishes. Therefore, if a taxpayer owns real property in a parish that was impacted by the flood, McGlinchey Stafford recommends that the taxpayer check the parish tax collector’s website or call the parish tax collector’s office to determine whether the tax collector issued property tax bills in a timely manner.

The Louisiana Homeland Security and Emergency Assistance and Disaster Act, codified at Louisiana Revised Statutes §§ 29:721-739, confers certain emergency powers upon the governor to ensure that the State will be able to deal adequately with emergencies and disasters. In particular, Section 29:724 (D)(1) permits the governor to “[s]uspend the provisions of any regulatory statute prescribing the procedures for conduct of state business . . . if strict compliance with the provisions of any statute, order, rule, or regulation would in any way prevent, hinder, or delay necessary action in coping with the emergency.” The Louisiana First Circuit Court of Appeal has discussed the limitations on Louisiana Revised Statute § 29:724, stating “[T]here is no provision in La. R.S. 29:724 that permits the governor to enact substantive law.” Louisiana Hosp. Ass’n v. State, 2013-0579, pp. 12-14 (La. App. 1 Cir. 12/30/14); 168 So. 3d 676, 686–87, writ denied, 2015-0215 (La. 5/1/15); 169 So. 3d 372. Thus, some of the Executive Orders recently issued by Governor Edwards may be susceptible to challenge as exceeding his authority under Louisiana Revised Statute § 29:724.

On August 15, 2016, Governor Edwards issued Executive Order JBE 2016-53 in response to the Great Flood of 2016. The Executive Order suspended “all deadlines applicable to legal proceedings, including prescription and preemption, in all Louisiana state courts, administrative agencies and boards . . . .” Governor Edwards amended Executive Order JBE 2016-53 by issuing Executive Order JBE 2016-57, which provides, in part:

Liberative prescription and preemptive periods continue to be suspended throughout the State until Friday, September 9, 2016. Deadlines in legal proceedings in courts, administrative agencies and boards affected by the flooding event, defined as the following parishes: Acadia, Ascension, Assumption, Avoyelles, Cameron, East Baton Rouge, East Feliciana, Evangeline, Iberia, Iberville, Jefferson Davis, Lafayette, Livingston, Pointe Coupee, St. Charles, St. Helena, St. James, St. John the Baptist, St. Landry, St. Martin, St. Tammany, Tangipahoa, Vermilion, Washington, West Baton Rouge and West Feliciana, continue to be suspended until Friday, September 9, 2016…” JBE 2016-57 further provided that “all other deadlines in legal proceedings provided for in Executive Order Number JBE 2016-53 in all courts, administrative agencies, and boards shall end Friday August 19, 2016.

Governor Edwards’ Executive Orders JBE 2016-53 and JBE 2016-57 are comparable to Governor Blanco’s Executive Orders KBB 2005-32, KBB 2005-48, and KBB 2005-67. In response to Hurricane Katrina, Governor Blanco issued Executive Order KBB 2005-32 on September 6, 2005, suspending “all deadlines in legal proceedings, including liberative prescriptive and peremptive periods in all courts, administrative agencies, and boards, and applied retroactively from Monday, August 29, 2005 [the date Hurricane Katrina made landfall], through Sunday, September 25, 2005.” The September 25, 2005 date was extended for an additional 30 days pursuant to Executive Order KBB 2005-48, issued September 23, 2005. In October of 2005, Governor Blanco responded to Hurricane Rita by issuing Executive Order KBB 2005-67, signed on October 19, 2005, which suspended liberative prescription and peremptive periods until Friday, November 25, 2005.

Before Governor Blanco’s authority could be challenged, the legislature approved, ratified, and confirmed Executive Orders KBB 2005-32, 2005-48, and 2005-67 in Louisiana Revised Statute § 9:5821. The legislature further enacted a Louisiana law that expressly extended the time for filing an insurance claim to September 1, 2007, for Hurricane Katrina and to October 1, 2007, for Hurricane Rita. La. Rev. Stat. § 22:1894. The Louisiana Supreme Court upheld the constitutionality of the enactment of these laws, determining that the laws did not violate the state and federal contract clauses, the federal Supremacy Clause, or insurance companies’ procedural due process rights. State v. All Prop. & Cas. Ins. Carriers Authorized & Licensed To Do Bus. In State, 2006-2030, p. 3 (La. 8/25/06); 937 So. 2d 313, 317. The Court did not discuss the issue of whether Governor Blanco exceeded the authority given to the governor under the statute.

Although the extent of Governor Edwards’ authority pursuant to Louisiana Revised Statute §§ 29:721-739 has not yet been challenged, the legislature has not approved and ratified Executive Orders JBE 2016-53 and JBE 2016-57 as the legislature did for Governor Blanco’s Executive Orders. This means that Governor Edwards’ authority to issue Executive Orders JBE 2016-53 and JBE 2016-57 remains susceptible to challenge.

Under Louisiana Law, most insurance contracts cannot limit the time for the insurer to file a claim against the insurer to a period shorter than one year. La. Rev. Stat. § 22:868(B). Louisiana citizens impacted by Hurricane Katrina and Hurricane Rita had one year from the date of each storm to file insurance claims against their insurer, which would have expired on August 29, 2006, for Hurricane Katrina and September 25, 2006, for Hurricane Rita. However, under Governor Blanco’s Executive Orders, the deadline to file claims against insurance companies would have extended beyond the one-year statutory allowance, which may have exceeded Governor Blanco’s authority under Louisiana Revised Statutes §§ 29:721-739, if the legislature had not approved and ratified her executive orders.

Similarly, Louisiana citizens impacted by the Great Flood of 2016 would have had one year from the date of the flood to file insurance claims against their insurers, which would expire at various times between August 12, 2017, and August 15, 2017. Governor Edwards’ extension of these deadlines may be unauthorized under Louisiana Revised Statutes §§ 29:721-739, if a court finds this action to be an attempt to exercise legislative power.

Executive Orders JBE 2016-53 and JBE 2016-57 are distinguishable from Executive Order BJ 2012–16 issued by Governor Jindal on August 29, 2012, in response to Hurricane Isaac. An explanation of Executive Order BJ 2012-16 will prove useful in understanding the First Circuit Court of Appeal’s determination in Louisiana Hosp. Ass’n v. State that “there is no provision in La. R.S. 29:724 that permits the governor to enact substantive law.” Executive Order BJ 2012–16 was issued to provide for the “LIMITED TRANSFER OF AUTHORITY TO COMMISSIONER OF INSURANCE FOR EMERGENCY RULES FOR HURRICANE ISAAC.” The Order, issued in response to Hurricane Isaac, gave the Insurance Commissioner the Governor’s powers under Louisiana Revised Statute § 29:724. The Insurance Commissioner then implemented Emergency Rule 26, which prohibited out-of-network health care providers from sending written or electronic communication to insureds to attempt to collect any amount that was not fully paid by the insured or the health insurance issuer.

The First Circuit Court of Appeal held that Governor Jindal, and by extension the Insurance Commissioner, did not have authority to issue this emergency rule. Louisiana Hosp. Ass’n v. State, 2013-0579, pp. 13-14 (La. App. 1 Cir. 12/30/14); 168 So. 3d 676, 686–87, writ denied, 2015-0215 (La. 5/1/15); 169 So. 3d 372. The First Circuit explained that the statutory scheme in Louisiana Revised Statutes § 29:721 et seq. was enacted by the legislature “to enable the governor and parish presidents to declare a state of emergency for the stated purposes of, among other things, preserving the lives and property of the state . . . .” The legislature did not intend to convey legislative authority upon the governor during a state of emergency. Although Section 29:724 (D)(1) permits the governor to “[s]uspend the provisions of any regulatory statute prescribing the procedures for conduct of state business . . . if strict compliance with the provisions of any statute, order, rule, or regulation would in any way prevent, hinder, or delay necessary action in coping with the emergency,” there is no provision in Louisiana Revised Statute § 29:724 that permits the governor to enact substantive law. The court found that enacting Rule 26 was an exercise of legislative power, and was therefore inappropriate.

Governor Edwards’ Executive Orders JBE 2016-53 and JBE 2016-57 could be interpreted as an unauthorized exercise of legislative power because it appears to conflict with Louisiana law governing insurance contracts in Louisiana Revised Statute § 22:868(B) and has not been approved and ratified by the legislature. If the legislature intended give the governor the authority to extend legal deadlines, Louisiana Revised Statute § 22:1894 should not have been limited to insurance claims for Hurricane Katrina and Hurricane Rita. Instead, the legislature could enact a law that expressly allows the governor to extend the prescriptive and peremptive periods with ascertainable standards. For example, the legislature could require that the time period for the limitation be equivalent to the amount of time the courts were closed as a result of the emergency or disaster. This standard would give consistency to the executive orders issued by governors regarding legal deadlines in a time of emergency or disaster without leaving the extensions open to challenges as unauthorized exercises of legislative power.

As Florida citizens prepared and then braced for impact with Hurricane Matthew, a storm of tremendous size and strength that loomed off the state’s eastern coastline in early October, President Obama took the anticipatory step of declaring a State of Emergency for the state of Florida.

This declaration allowed federal agencies to open an immediate dialogue with state and local government officials about the type and extent of federal relief that could be made available to those residents most affected by the storm.

In the days that followed, and as the storm continued its northeastern trajectory, the President’s declaration and the resulting relief efforts were extended to include portions of Georgia, South Carolina, and North Carolina.

In Florida, those counties included: Brevard, Duval, Flagler, Indian River, Nassau, St. Johns, St. Lucie and Volusia. In Georgia, those counties included: Bryan, Camden, Chatham, Glynn, Liberty, and McIntosh. In North Carolina, those counties included: Beaufort, Bertie, Bladen, Columbus, Cumberland, Dare, Duplin, Edgecombe, Gates, Hoke, Hyde, Jones, Johnston, Lenoir, Nash, Pender, Pitt, Robeson, Wayne, and Wilson. And finally, in South Carolina, those counties included: Beaufort, Berkeley, Charleston, Colleton, Darlington, Dillon, Dorchester, Florence, Georgetown, Horry, Jasper, Marion, and Williamsburg.

In total, nearly 50 counties across 4 states were ultimately affected by Hurricane Matthew.

The President’s declaration authorized the Department of Homeland Security and Federal Emergency Management Agency (FEMA), in cooperation with the U.S. Department of Housing and Urban Development (HUD), to initiate federal disaster relief measures under Title V of the Stafford Act, a federal relief act intended to provide relief in areas affected by natural disasters such as a hurricane, flood, tornado, earthquake, or typhoon. Its primary goal is to lessen the disaster-induced hardship on mortgagors with FHA-insured mortgages, provide such mortgagors additional time to obtain benefits under their hazard insurance policies, and help mortgagors secure available FHA insurance benefits.

On October 11, 2016, Julian Castro, Secretary of the Department of U.S. Housing and Urban Development, announced the agencies’ intent to offer foreclosure and other housing assistance to residents in affected communities. This assistance includes:

  • The use of HUD’s Community Development Block Grant (CDBG) and HOME programs that allow states the ability to redirect substantial financial resources to address critical needs such as temporary housing, housing repair and replacement, and other related aid to the communities most in need;
  • The granting of a 90-day foreclosure moratorium and forbearance period on mortgages insured by the Federal Housing Administration (FHA);
  • Allowing the FHA to insure qualified mortgages to major disaster victims who lost their homes;
  • Providing loan programs that allow major disaster victims to secure financing to purchase or refinance a home that includes repair or rehabilitation costs in a single mortgage; and
  • Offering state and local governments federally guaranteed loans for specific public purposes such as repairing public infrastructure.

Servicers of FHA-insured loans have been provided with directives and guidelines for extending the above relief measures to qualified mortgagors. However, homeowners in disaster areas that are experiencing difficulties paying their mortgage are still urged to take the initiative and contact their loan servicers directly to discuss their eligibility for the benefits set forth above. Homeowners may be asked to provide documentation to establish that they qualify for a particular form of available relief.

A general discussion of disaster relief options available to FHA homeowners is available via HUD’s website.

To the extent a homeowner is unsatisfied with the outcome of those discussions, they are invited to call a HUD-approved counseling agency at (800) 569-4287 or contact HUD’s National Servicing Center.

McGlinchey Stafford attorneys Rudy Aguilar, Jr. and J-P Perrault were quoted in an article in the Greater Baton Rouge Business Report, “Businesses Impacted by Flooding Have Options for Financing Their Recovery, But They Need to do Some Homework.” Businesses can follow a number of courses of action, from taking on debt to applying for federal loans, to get back on their feet. Aguilar and Perrault discuss additional options, including loan modifications and even how customers might help a flood-affected business during hard times. Read the full article here.

The Greater Baton Rouge Business report has highlighted the Flood Law Blog as a resource for businesses affected by the catastrophic Louisiana floods. Rudy Aguilar, Managing Member of McGlinchey Stafford, was quoted as saying, “We always strive to provide unprecedented legal services to our clients, and right now countless businesses throughout Louisiana seek to find answers on post-flood legal issues. We hope that this new free resource will help both our clients and the broader business community on their path to recovery.”

Read the full article here.

The Flood Law Blog was featured in two articles in the Baton Rouge and New Orleans edition of The Advocate.

In the New Orleans Advocate, an article titled “Law Firms Use Katrina Experience to Help Baton Rouge Area Flood Victims,” McGlinchey Stafford attorneys Brad Axelrod and Jean-Paul Perrault discussed the blog’s roots in the firm’s experience helping clients after Hurricane Katrina in 2005, and how the Flood Law Blog has helped serve as a resource for FEMA assistance and SBA loans.

Perrault is quoted in a second article, “Post-Flood Insurance, Legal Issues Dot Businesses’ Road to Recovery,” on landlord-tenant issues relating to commercial property that have arisen following the flood. Axelrod also commented on cash-flow challenges for small and midsized businesses following a disaster.

Dear Readers,

The Flood Law Blog Editorial Team closely monitored Hurricane Matthew and its aftermath. We are thankful that the damage that was expected largely did not occur and that the people on the East Coast are safe. Due to this positive news, the Flood Law Blog Editorial Team has decided not to go forward with launching the Hurricane Law Blog. If you have any questions related to hurricane recovery, you can direct those to the Flood Law Blog team through our Contact page.

Thank you,

The Flood Law Blog Editorial Team

Dear Readers,

We are keeping a close eye on Hurricane Matthew in the Atlantic Ocean and are keeping all in harm’s way in our thoughts.

While the Flood Law Blog may not be relevant to those who are in Matthew’s path, we believe that information, press releases, and articles similar to those we were able to gather here for the Louisiana floods will serve the people of Florida, Georgia, South Carolina, and North Carolina.

After Hurricanes Katrina and Rita in 2005, McGlinchey Stafford launched the Hurricane Law Blog as a resource for businesses during their recovery process. We are working diligently to reinvigorate that endeavor, so be on the lookout for the newly updated Hurricane Law Blog. We hope that it can be a resource to those affected by Hurricane Matthew in the same way the people of Louisiana were able to use the Flood Law Blog.

Stay safe. We will have more information as it becomes available.

Sincerely,

The Flood Law Blog Editorial Team