Citizens offers $80 million settlement
The Louisiana Citizens Property Insurance Corp. board Thursday offered $80 million to settle a $93 million judgment against the insurer for taking too long to adjust homeowners’ claims from the 2005 hurricanes.
The homeowners claimed Citizens broke a state law by taking longer than 30 days to begin adjusting claims. In 2009, a state district judge in Gretna ruled that Citizens had to pay $5,000 for each of the more than 18,000 policyholders affected. Citizens, which covers properties private insurance companies won’t, has been fighting to overturn the decision ever since.
An appeals court overturned the decision, but in December the state Supreme Court ruled Citizens had to pay.
“We are continuing to pursue our legal options, all the way up to and including an appeal to the United States Supreme Court,” Insurance Commissioner Jim Donelon said. “But as our options decrease, then we felt it advisable … to put an end to this.”
The settlement will allow Citizens to go into the hurricane season without having to add an additional fee to property owners’ insurance premiums, Donelon said.
The settlement would limit plaintiff attorneys’ fees to $25 million of the $80 million.
Plaintiff attorney Fred Herman said first, it’s improper to discuss attorneys’ fees, which will be set by the judge after a settlement is reached, and second, the judgment is not subject to negotiation.
“A judgment is a judgment,” Herman said.
The original $93 million judgment has grown to more than $104 million as a result of legal interest, which adds more than $10,000 to the total each day.
Herman said it strikes him as odd that Donelon would make a public pronouncement of the negotiations now when all of Citizens’ other discussions about the lawsuit have taken place in closed session.
Donelon is trying to turn public opinion against the plaintiff attorneys and pressure them, Herman said.
Citizens is under pressure to settle the case because on Jan. 30 Gretna Judge Henry Sullivan gave plaintiff attorneys permission to seize Citizens’ cash at Regions Bank to satisfy the judgment.
Regions has set that money aside.
The Jefferson Parish Sheriff’s Office is scheduled to seize the money on Feb. 15.
However, Citizens may be able to buy some time as a result of actions taken by Regions.
Regions has filed a motion with the Gretna court claiming the seizure order was invalid because it was served on the wrong Regions branch.
Instead of the Regions branch in Gretna, West Bank branch, the seizure order should have been issued in 19th Judicial District Court in Baton Rouge, according to the Regions motion. Both the Regions’ principal place of business in Louisiana and the manager of Citizens’ account are located in Baton Rouge.
Plaintiff attorneys also say as many as 7,000 additional Citizens policyholders could be added to the class-action lawsuit, which could add $35 million to the total judgment.
The plaintiffs offered to settle all of the claims for $123 million, according to a letter from Herman dated Monday. The settlement would be paid in three installments: an immediate payment of $56.5 million; $43.5 million by Nov. 1; and $23.0 million by Dec. 31.
Herman said that offer was in response to Citizens’ first settlement proposal of just $35 million.
Donelon said the proposed $80 million settlement would apply to all of the plaintiffs, roughly 25,000 people.
Plaintiff attorneys fees are expected to run from 25 percent to 40 percent of the judgment.
If the plaintiffs settle for $80 million, and the attorneys for $25 million, each policyholder would get about $2,000.
Citizens has $150 million in the bank and can pay the entire judgment, Donelon said. But if Citizens has to do that, there’s a strong chance for at least the next two years that Citizens would have to add an assessment to the insurance premiums of property owners across the state.
Citizens is responsible for the first $75 million in hurricane claims, Donelon said. For amounts above that, Citizens carries reinsurance, the insurance that insurance companies buy.