La. Citizens Considers Settlement in Ongoing Katrina-Related Lawsuit

The board of Louisiana Citizens Property Insurance Corp. is considering a settlement in an ongoing lawsuit stemming from alleged mishandled Hurricane Katrina-related claims. Plaintiffs in the case have already been awarded more than $100 million.

The settlement talks came after State Judge Henry Sullivan denied Citizens' request to enforce an order from Aug. 24, 2009, which allowed it to take an appeal from the money judgment. Sullivan said the denials by the state and U.S. Supreme Courts, who considered the same order, support his ruling to deny Citizens' request.

"We have heard that Citizens would consider settlement throughout this litigation. They have passed on a number of opportunities to settle, so it would be no surprise to us if they still do not settle it now," Wiley Beevers, a New Orleans-based attorney representing the plaintiffs, said in a statement.

Fred Herman, another plaintiffs' attorney involved in the case, told Best's News Service his legal team is preparing for the possibility Citizens will petition the U.S. Supreme Court to hear the case. "We are ready for whatever comes next."

Earlier this month, U.S. Supreme Court Justice Antonin Scalia denied Citizens' request for an emergency petition to stay the execution of the judgment against Citizens. Louisiana Citizens' lawyer Theodore Olson, a partner with Gibson, Dunn & Crutcher, argued the stay would give the corporation time to file a petition to have the Supreme Court consider whether to examine the case, which centers upon how claims were handled in the wake of Katrina (Best's News Service, Feb. 1, 2012).

In December, the Louisiana Supreme Court held in a 4-3 decision that Citizens should be held liable for $92.8 million in damages because it was untimely in initiating of loss adjustment, even though there was no evidence that the corporation had acted in bad faith. The court determined the plaintiffs in the case were each entitled to up to $5,000 in penalties for that inaction when damages are not proven to be higher. The court also held Citizens should also have to pay roughly $11 million in interest (Best's News Service, Dec. 21, 2011). The state Supreme Court denied a rehearing in January (Best's News Service, Jan. 23, 2012).

Louisiana Insurance Commissioner Jim Donelon has said that while Citizens has the money to pay the judgment, it could hamper the corporations ability to pay claims if another large hurricane hits the Bayou State in the near future (Best's News Service, Jan. 23, 2012).

The top five writers of homeowners multiperil in Louisiana in 2010, according to BestLink, were: State Farm Group, which had a market share of 28.63%; Allstate Insurance Group, with 13.41%; Liberty Mutual Insurance Cos., with 6.52%; Louisiana Farm Bureau Mutual Insurance Co., with 5.79%; and Louisiana Citizens Property Insurance Corp., with 5.29%.

(By Jeff Jeffrey, Washington Correspondent: jeff.jeffrey@ambest.com)