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Louisiana Citizens Property Corporation avoided what Commissioner of Insurance Jim Donelon had called a potential disaster when it negotiated an agreement to pay a group of attorneys in a class action lawsuit $6 million in order to go forward with the appeal of a $95 million award against Citzens for allegedly taking too long to pay claims after Hurricane Katrina in 2005.

Donelon said Aug. 24 that a judge agreed to let Citizens, the state’s property insurer of last resort, pay the $6 million instead of posting an appeal bond that was originally set at $95 million, the full amount of the judgment against Citizens. The case originated in Jefferson Parish and involves more than 18,500 policyholders.

Citizens CEO John Wortman told ¾ÅÉ« on Aug. 21 that Citizens’ board had negotiated an appeals bond for an amount far less than the full $95 million, an amount that the insurer would have been able to pay without having to assess property insurance policyholders in the state to cover the cost of the bond. Wortman also said at that time, however, that Citizens was trying to work out a deal to allow the appeal to move forward without posting a bond.

According to Donelon, if Citizens had not posted an appeal bond or worked out a deal with the attorneys by the end of the day on Aug. 24, it would have been required to pay the $95 million judgment.

The decision by Judge Henry Sullivan of the 24th Judicial District Court in Gretna allows Citizens to move forward with the appeal with no assessment of insurance companies or policyholders. Citizens will get the $6 million credited against any judgment or settlement eventually reached in the case, and would have had to pay that amount or more to purchase a commercial appeal bond, the Louisiana Department of Insurance reported.

Citizens has about $100 million on hand to pay claims and operating costs, Wortman said. Its board had feared that Citizens would have to put up the $95 million and subsequently be forced to assess all Louisiana property insurance policyholders — even non-Citizens policyholders — in order to recoup that money.

Topics Lawsuits Louisiana