Louisiana Citizens Reaches Class Action Settlement Over Katrina/Rita Delays

Louisiana Citizens Reaches Class Action Settlement Over Katrina/Rita Delays

By Anne Bucher

Approximately 80,000 Louisianans will receive a notice from their insurance company about a possible class action settlement related to Hurricanes Katrina and Rita.

This class action settlement specifically relates to Louisiana Citizens Property Insurance Corp’s failure to send insurance adjusters in a timely manner in response to claims related to hurricane damage. State law requires adjusters to respond within 30 days. Through a series of appeals, the courts determined that Citizens had not demonstrated a legitimate justification for the delay in sending insurance adjusters to respond to its policyholders’ claims.

The law in question states: “In the case of catastrophic loss, the insurer shall initiate loss adjustment of a property damage claim within thirty days after notification of loss by the claimant.” An insurer who breaches its duty to respond to claims may be subject to penalties “in an amount not to exceed two times the damages sustained or five thousand dollars, whichever is greater.”

The Louisiana Supreme Court noted that the law does not indicate that it is necessary to demonstrate that the insurance provider acted in bad faith before imposing the penalty.

Under the terms of the proposed Citizens Property class action settlement, eligible property owners could receive $3,200 each, depending on the number of policyholders who respond to the notices. Details on how to file a claim were not immediately available.

Judge Henry Sullivan initially awarded the plaintiffs in the Louisiana Citizens Property Insurance class action lawsuit a total of $92.8 million in March 2009, but more than 18,500 eligible Class Members discarded their notices. Upon appeal, the U.S. Supreme Court upheld Judge Sullivan’s award, which has grown to $106 million with accrued legal interest. The amount of legal interest is $10,000 per day. After the Supreme Court issued its opinion, Citizens agreed to settle the remaining lawsuits.

Judge Sullivan is scheduled to hold a fairness hearing at the end of October to consider whether to grant final approval to the class action settlement.

While Citizens has claimed to have sufficient money to pay the insurance claims without raising its rates, the company fought its responsibility to release the money. In response, Judge Sullivan ordered the insurance company’s bank account to be seized. In response, Citizens filed a lawsuit to prevent its bank from seizing $105 million from its account.

Citizens has claimed that it has a number of vacancies on its board which makes it difficult to maintain a quorum to consider the class action settlement. The company has filed numerous appeals to the original class action lawsuit, alleging that it is not required to pay the policyholders because the company has not acted in bad faith. However, courts have maintained that the relevant Louisiana law does not impose a requirement of bad faith when penalizing insurance companies who do not respond to insurance claims in a timely manner.

Citizens is a non-profit, state-sponsored insurance company. The insurance company has been targeted by a number of hurricane-related lawsuits following hurricanes Katrina and Rita. In 2010, the insurance company agreed to a class action settlement over claims that it had withheld payments of general contractors’ overhead and profit from amounts paid under homeowners’ insurance claims. 

Top Class Actions will update this article when a Settlement Administrator website has been established.

The case is Geraldine R. Oubre and Linda Gentry et al. v. Louisiana Citizens Fair Plan in the 34th Judicial Court in Jefferson Parish, Louisiana.

Updated July 18th, 2013

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