Louisiana Avoids Assessments; Citizens Reaches Agreement With Plaintiffs

Louisiana Citizens Property Insurance Corp. will be able to appeal a $95 million judgment against it, avoiding what the insurance commissioner called a potentially catastrophic event complete with assessments on all private insurance carriers, who would then turn to policyholders to recoup the cost.

Commissioner Jim Donelon said Jefferson Parish District Court Judge Henry Sullivan will allow the last-resort insurer to pay $6 million to plaintiffs of a class-action lawsuit while the state-run insurer appeals the judgment. If Citizens had failed to reach an agreement with the plaintiffs, it would have been forced to purchase a $95 million appeal bond. That would have left the insurer with a mere $5 million in cash to pay for operating costs in the middle of the Atlantic hurricane season.

Policyholders allege the state-run insurer did not adjust claims in a timely manner following hurricanes Katrina and Rita in 2005. The plaintiffs had the right to begin drawing down what was owed to them the morning of Aug. 25.

The Jefferson Parish lawsuit was one of three similar suits. The others were filed in St. Bernard and Orleans parishes, but those were settled by Citizens for $17 million. Citizen Chief Executive Officer John Wortman said the Jefferson Parish suit was to be wrapped up in the settlement as well but "the judge never signed off on it." The same allegations also were made against private insurers, but they have access to the federal court in New Orleans, which would not certify the class-action lawsuits, Wortman said (BestWire, Aug. 19, 2009).

The top writers of homeowners multiperil in Louisiana in 2008, according to A.M. Best Co. state/line product information based on direct premiums written, were: State Farm Group, with a 30.4% market share; Allstate Insurance Group, with 16.7%; Louisiana Farm Bureau Mutual Insurance Co., with 6.4%; Farmers Insurance Group, with 6.3%; and Liberty Mutual Insurance Cos., with 6.3%.