Louisiana Citizens Board Offers $103M to Settle Lawsuit

Louisiana’s property insurer of last resort is offering nearly $103 million to settle disputes over its handling of claims after hurricanes Katrina and Rita more than six years ago.

The governing board of the Louisiana Citizens Property Insurance Corp. voted 12-0 on Feb. 22 to bump up its previous settlement proposal of $80 million, which had been rejected by the plaintiffs’ lawyers.

Plaintiffs’ attorney Fred Herman said he wouldn’t comment on the proposal until the lawyers receive a written offer.

Insurance Commissioner Jim Donelon, who oversees Citizens, didn’t think the plaintiffs’ attorneys would take the latest offer for 25,000 Citizens policyholders, because of the limits it would include on the payments to lawyers.

“I don’t think they will accept the $25 million cap on attorneys’ fees, although that’s a generous, generous payment for a handful of lawyers to split among themselves,” Donelon said.

The offer also is lower than a judgment already levied against Citizens.

Citizens provides insurance coverage to homeowners and businesses unable to obtain insurance from private companies.

State courts have ruled Citizens moved too slowly on handling claims for the 2005 storms, failing to begin adjusting claims within the 30 days required by law. While Citizens continues to haggle in the courts, the Louisiana Supreme Court upheld a judgment against the company that has grown to nearly $104 million with interest.

Any settlement would have to be approved by a state district judge.

The proposed settlement, discussed for more than two hours in a closed-door meeting, would pay $92.8 million for the class-action judgment for 18,500 policyholders and $10 million to a second set of about 6,500 Citizens customers who have pending claims.

It’s unclear how much money policyholders would receive, when fees are taken from the settlement. The 18,500 policyholders currently covered by court decisions are in line for about $5,000 each, according to their attorneys.

Donelon said if a settlement can’t be negotiated, he’ll ask state lawmakers to retroactively change the law to try to make the pending judgment moot. Such a measure failed to gain support previously in the Legislature, however.

Citizens has said that it was overwhelmed with the back-to-back blows of Katrina, which devastated the New Orleans area, and Rita, which followed a month later and damaged much of southwestern Louisiana.

Under the proposed settlement, the first payment of $70 million would be made immediately. The balance would be paid in November — unless a named storm causes a loss of $50 million or more to Citizens, according to terms described by Sen. Eric LaFleur, a Citizens board member who made the motion to approve the proposal.

LaFleur, D-Ville Platte, acknowledged the company has little negotiating room.

“The Supreme Court has spoken on the issue, so we had no choice,” he said.

Citizens already has turned over $6 million to eventually pay claimants instead of having to post an appeals bond to continue challenging the case. LaFleur said that would be deducted from the insurer’s second payment.