Their insurer went broke years ago. These Louisianans are still fighting to be made whole.

Douglas Figueroa-Pena was living the American dream.

After emigrating from Honduras two decades ago, he had finally gotten permanent citizenship. And in the summer of 2021, he bought a house in a suburban Metairie neighborhood for him, his wife and her parents, using money he earned working heavy machinery on construction sites.

Two months later, it all started to fall apart.

Hurricane Ida pummeled his house, wiping out his enclosed back porch and tearing up the roof, causing water to leak into his ceiling and insulation.

His insurance company, Americas, sent an adjuster, who didn't even peek inside the house, Figueroa-Pena said. The company wouldn't pay for the family's lengthy hotel stay in Florida, where they had evacuated. By June 2022, Americas had only paid about $14,000, a fraction of the damages.

Then it collapsed.

Since then, Figueroa-Pena has been stuck in limbo trying to get his claims paid by the Louisiana Insurance Guaranty Association – a state-backed nonprofit that takes on outstanding claims from failed insurers and is ultimately supported by taxpayers.

With the collapse of 12 property insurers in Louisiana, LIGA found itself overwhelmed. The organization received about 400 new claims in 2020, LIGA data shows. Over the next three years, a staggering 41,704 new claims from the failed home insurers landed on its desk.

Many policyholders say they've faced lengthy delays in getting their claims closed out by LIGA, and data backs them up. The association has been getting 1,400 new claims a month and closing out 1,000, on average. The result is a backlog of 15,294 pending claims as of this month – most of which stem from the collapse of home insurers.

Delays can drag on especially long for people who sued their insurer and are now in court with LIGA. Those people are running into the hard truth that LIGA doesn't play by the same rules as private insurers when it comes to litigation.

'We're all paying for it'

LIGA is set up to get money to policyholders quickly, so they don't have to wait years for insolvencies to run their course. But thanks to the scope of damage from the 2020 and 2021 storms -- and the rash of collapses that followed – the organization has had to raise money to pay the claims.

So far, LIGA has paid out more than $800 million in claims and premium refunds to people whose insurers failed.

John Wells, executive director of the organization, said LIGA will probably pay out between $950 million and $1.2 billion.

LIGA gets that money by issuing bonds and assessing solvent insurers 1% of every premium dollar they collect. With the enormity of the claims pouring in, lawmakers agreed to let LIGA assess a fee of up to 2% in 2024. In the 16 previous years, LIGA made no assessments.

Insurance companies aren't missing the money for long. They have two options for recouping it: charge it to policyholders or claim a tax break from the government. So in the end, either homeowners or taxpayers cover the debts of the failed companies. Most insurers choose to get their money from the state, leaving Louisiana with fewer dollars to pay for government services in the coming years.

"One way or another, we all pay for it in taxes, or we all pay for it in our premiums," Wells said. "But we're all paying for it."

Compounding problems

Figueroa-Pena hasn't come close to being made whole. He used the small payment from his bankrupt insurer to replace his fence and clean up his porch, but he and his family are still living in a home with roof and ceiling damage. His lawsuit against LIGA has been mired in delays.

For many, the skyrocketing insurance premiums and the emotional distress of the slog of recovery is almost too much to bear.

Figueroa-Pena, who called himself a "working-class person," said his monthly payments for mortgage and insurance has risen from $1,700 a month to $2,700 – though his house is still damaged.

These days, he leaves his construction job and heads to a new second job waiting tables at a Mexican restaurant on nights and weekends. Even so, he's at risk of "losing everything," he said.

Rash of claims

LIGA was set up to provide a strong safety net.

Louisiana is one of only 10 states whose guaranty associations pay up to $500,000 for unpaid claims. Most states cap payments at $300,000.

But the scale of the crisis has strained LIGA's ability to get the money out the door.

Wells, the director, said the failed insurers varied in how they handled claims. Some just let them pile up, while others wrote checks they couldn't afford, thinking they would have reinsurance money come in later. Some sent out adjusters who only assessed exteriors.

LIGA hires its own adjusters after taking on a claim.

Nearly all of the companies that failed operated using a structure in which the insurer took on the risk but paid millions to affiliates for underwriting and handling claims. The affiliates faced less scrutiny from regulators than the insurers themselves.

And the documentation LIGA received from insurers after they went broke indicates the work of some affiliates was subpar.

"One of the biggest issues is getting good data from the insurance companies," Wells said.

Many of the delays are due to difficulties getting and sorting through thousands of pages of documents, Wells said. LIGA has had to hire hundreds of people to adjust and process claims, as well as lawyers to litigate.

"The way we're designed is intended to be a lot better than someone ending up in receivership," a process that can take years, Wells said. "But we're not built to be an insurance company standing by with thousands of people to help folks."

The 1% fee on insurers that LIGA is allowed to assess is the lowest such rate in the country. Because of the staggering amount of claims the association has received, the Legislature agreed to let it temporarily assess up to 2% this year.

Most pending claims are in litigation. LIGA is facing 7,100 open lawsuits, Wells said, mostly from policyholders who sued their insurer. He said he has hired 25 law firms, and about 175 lawyers are handling the cases. When an insurer that has been sued goes under, LIGA takes its place as defendant.

Court dates drag on

Part of the reason it takes so long to resolve lawsuits is that LIGA doesn't step in immediately.

Instead, there's a six-month stay after an insurer is put into liquidation, though Wells said the organization often tries to get the court case rolling before the end of the six months.

But Mark Montiel, an attorney representing Figueroa-Pena, said LIGA's lawyers also often ask for and receive extensions, and there's little attorneys representing policyholders can do to speed up the process.

Perhaps more importantly, unlike regular insurance companies, LIGA is immune from attorneys' fees and penalties. Montiel said it makes sense to protect LIGA from penalties for the bad behavior of a private insurer. But he is suing over whether LIGA should be immune in cases where it becomes a bad actor.

"If you take away penalties and attorneys' fees, you're damning people to get 40-60% of what they're owed on property claims," he said. "I'd be shocked to ever see anyone get paid fairly again."

Montiel, whose firm is litigating numerous claims against LIGA, said he's baffled by what he sees as the organization's propensity to fight instead of settling claims.

"LIGA does not give a s–t about resolving any of the cases it has," he said. "I still have Hurricane Laura LIGA cases."