LCPI TARGET OF COMPLAINTS

The Louisiana Citizens Property Insurance Corpora-tion, created in 2003 as a state-sanctioned “insurer of last resort” providing homeowners insurance to those who couldn’t get it on the open market, is being slammed by policyholders and an advocacy group for its alleged unresponsiveness following Hurricane Katrina, according to the Associated Press.

“It seems like the policy holders are being kind of universally ignored and unable to get any response at all,” said Joanne Doroshow, executive director of Americans for Insurance Reform.

LCPI chief executive officer Terry Lisotta said a major reason for the problems has to do with a change in companies who run the program. Audubon Insurance was the initial administrator. But LCPI put the job up for bids earlier this year, eventually awarding the contract to three companies: MacNeill Group, Bankers Insurance Group and First Premium Insurance Group. But Audubon and another bidder challenged the decision in court.

“We won,” Lisotta said. But the litigation resulted in a delay in the changeover at perhaps the worst possible time–after Katrina hit.

Margie Dotson, whose home in St. Bernard Parish was devastated by Katrina flood waters, said she tried 12 different telephone numbers in an attempt to get her claim taken care of and has been bounced from one number to another with conflicting information on who is to handle her business.

New Orleans resident Toni Swain Orrill filed an Oct. 6 lawsuit against Audubon and its parent company, AIG Inc., saying policyholders were not provided with any effective way for policyholders to contact the company, initiate claims or receive emergency payments.

An AIG spokesman said the company does not comment on pending litigation. Lisotta also declined comment on the lawsuit but said he does not blame Audubon or AIG for the post-Katrina complaints, since they had been preparing to end the relationship with LCPI.

Another problem possibly contributing to communications problems is the failure of companies and agents who want to do business with LCPI to properly register on the company Web site, Lisotta said.

Creation of LCPI was pushed in 2003 by insurance industry leaders who said at the time that one of several reasons for the dearth of policy writers was the risk entailed in Louisiana by the then-existing last-resort insurers–the FAIR and Coastal plans.

LCPI took over the FAIR and Coastal plans and was allowed to build up reserves tax-free, an advantage the old plans didn’t have. And, in the event of a disaster where damages outstrip reserves, as is the case with Katrina, LCPI can sell bonds to pay off the claims and pay the bonds off gradually, assessing the private companies a monthly fee that can be passed onto customers.

That is expected to happen in the coming months. Katrina is expected to cost LCPI more than $900 million in damage claims and related expenses.