From the March 2012 issue of Claims Magazine •Subscribe!

Louisiana Citizens’ Class Action Suit Heats Up

The U.S. Supreme Court opted not to delay the execution of a judgment against Louisiana Citizens Property Insurance Corp. while the last-resort insurer prepares an application for the high court to hear the case.

In a brief answer, the Supreme Court stated, “The application for a stay pending the filing and disposition of a petition for a writ of certiorari in the above-entitled case has been presented to Justice Scalia, who on January 31, 2012, denied the application.”

This denial prompted the board overseeing Citizens to offer $92.8 million to the individuals who are members of the class action lawsuit Geraldine Oubre et al. v. Louisiana Citizens Fair Plan. They offered an additional $10 million to other claimants who are not part of the lawsuit, but could be incorporated into it.

In addition, Citizens offered a $25 million cap on attorneys’ fees.

The board says it is hopeful that the offer will settle a class-action lawsuit that accuses the state-run insurer of failing to start the claims-adjusting process within the time frame established by law following Hurricanes Katrina and Rita in 2005.

Donelon, however, has voiced skepticism that the offer will be accepted.

“I don’t think [the plaintiffs’ lawyers] will accept a $25 million cap on the attorney’s fees,” he says.

In early February, Citizens offered an $80 million settlement, with a $25 million cap on attoneys’ fees. The plaintiffs’ lawyers countered with a $105 million settlement, which still equated to about $38 million less than Citizens’ total exposure.

In December 2011, the Louisiana Supreme Court reinstated the $93 million judgment against Citizens, paving the way for about 18,575 Citizens policyholders to collect $5,000 each. Donelon and Citizens have appealed the ruling. Interest has incurred at $10,200 a day; the judgement now stands at close to $104 million.

In late February, Citizens asked the state Supreme Court to reconsider its decision, but the court declined, prompting the last-resort insurer to take the matter up with the U.S. Supreme Court.

Citizens has raised constitutional issues with the decision, including questions as to the ability to impose a penalty without any showing of bad faith or conduct on the part of the insurer.

Donelon plans to ask the legislature to approve a bill that would declare Citizens a state agency, insulating it from having assets seized in future court cases.

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