NU Online News Service, Feb. 2, 2:33 p.m. EST
The U.S. Supreme Court has decided 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.
The brief answer from the Supreme Court states, "The application for a stay pending the filing and disposition of a petition for a writ of certiorari in the above-entitled case has bee presented to Justice Scalia, who on January 31, 2012, denied the application."
Citizens' request stems from a 2009 decision in a class-action lawsuit that accuses the state-run insurer of failing to start the claims-adjusting process within the time frame set by law following Hurricanes Katrina and Rita in 2005.
The Louisiana Supreme Court reinstated the $93 million judgment against Citizens in December 2011, paving the way for about 18,575 Citizens policyholders to collect $5,000 each.
Late last month, 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 about the ability to impose a penalty without any showing of bad faith or conduct on the part of the insurer.
Additionally, Louisiana Insurance Commissioner Jim Donelon has called the ruling a "potentially devastating event," as the state's policyholders may foot the bill because Citizens has the ability to levy assessments.
When the Louisiana Supreme Court refused to reconsider the decision last month, plaintiffs sought to execute the judgment, and had the court issue a writ of garnishment, according to Richard Robertson, chief executive officer of Citizens.
This involves seizing funds from the insurer's bank accounts. Robertson says the bank has 15 days to fill out the required paperwork to comply with the writ of garnishment.
It is this action that Citizens sought to delay with its request to the U.S. Supreme Court.
Now that the high court has rejected Citizens' request for a stay, Robertson says the process will continue forward, and if the money is seized, it will go to the court, which will hear and approve a plan for distributing the funds.
Robertson says there are not a lot of appeal avenues left for Citizens other than the U.S. Supreme Court. "I'm guessing that in a couple of weeks, this will either be finished and money will be paid, or there will be some kind of intervention and I'm not sure what that will be," he says.
Wiley Beevers, who serves as class counsel representing the policyholders, says, "It is gratifying to us that the Supreme Court of the United States denied the stay. We can now get on with the process of getting this money to the policyholders. It is unfortunate that Commissioner Donelon and the Citizens board spent $150,000 and committed $500,000 to legal action that is likely to fail and is only meant to further delay the payment to their insureds."
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.