Citizens’ payout blocked again by Court of Appeal

A state appeals court has blocked policyholders of Louisiana Citizens Property Insurance Corp. from collecting more than $100 million for the company’s failure to handle claims quickly enough following the 2005 hurricanes.

The state 5th Circuit Court of Appeal issued a temporary order Wednesday keeping plaintiff attorneys from seizing the money from the accounts of Louisiana’s insurer of last resort, said Richard Robertson, Citizens’ chief executive. The appeals court will decide later whether to hear a full appeal, Robertson said Friday.

At issue is whether a $6 million appeals bond posted by Citizens covers a possible appeal to the U.S. Supreme Court. The plaintiffs contend that payment covered only state court actions.

Insurance Commissioner Jim Donelon said Friday that Citizens also is arguing that it is a state agency – and, therefore, payment of any court judgment against it would have to be appropriated by the Legislature.

So far, Citizens has lost all state appeals of a $92.8 million judgment in favor of about 18,500 policyholders claiming the company did not begin to adjust their claims for damage from hurricanes Katrina and Rita within the 30 days required by state law. Another 6,500 Citizens policyholders have pending claims.

Since the original decision, the bill has grown to about $105 million with judicial interest.

Citizens has made several offers to reach a settlement that would cover all 25,000 policyholders with claims. But plaintiff attorneys have rejected the offers, which contained caps on attorney fees, saying those fees should be determined by a court.

Citizens is considering an appeal to the U.S. Supreme Court, which has denied an emergency stay to block the seizure. The high court does not have to agree to hear the case.

In the meantime, at least two bills have been filed in the current legislative session that would bar the class-action recovery of penalties against Citizens. Donelon said those bills are designed to cover retroactively all of the class-action claims against Citizens. Donelon said there is precedent for the move: the state extended the limit for filing insurance damage suits resulting from the 2005 storms from one year to two years.

Plaintiff attorney Fred Herman said he was confident that policyholders would eventually collect their money. Donelon “has shown an ability in the past to pursue an unwinnable strategy,” Herman said Friday.

Last week, a state district judge in Jefferson Parish had cleared the way for the plaintiffs to begin seizing money from Citizens’ bank accounts to pay the judgment. The 5th Circuit ruling again froze that process.