Blanco Administration Admits Error in La. Insurance Rebate Letters

January 22, 2007

The Blanco administration mailed 1.8 million letters to Louisiana homeowners with incorrect information about credits for post-Katrina surcharges on their property insurance policies, a Blanco aide said.

Taxpayers reported the problems in the letter: an inaccurate time frame for applying for the tax credit, plus incomplete information about eligibility. Revenue Secretary Cynthia Bridges admitted the error, The Times-Picayune reported in Jan. 19 editions.

The letters marked the second time in two months that Gov. Kathleen Blanco’s administration mailed wrong financial information to residents related to recovery from hurricanes Katrina and Rita.

In November 2006, administrators of the governor’s Road Home program sent out 10,000 preliminary award letters, then admitted that 2,500 of them were incorrect. The $7.5 billion program is designed to help homeowners with post-storm rebuilding costs.

The recent admission, involving a far larger mailing, has led the administration to consider sending out corrected letters.

The letter includes errors about how and when property owners can get a tax credit reimbursing them for special fees they paid to bail out the state’s property insurance company of last resort, Citizens Property Insurance Corp., which had about $850 million in claims after Hurricane Katrina.

The first paragraph of the letter gives an incorrect time frame for applying the tax credit and does not address all the types of surcharges that would be eligible for the benefit.

Puzzled taxpayers called to ask about the rules, Bridges said. She said the problem stemmed from the agency’s misreading of an interagency briefing paper.

“We erroneously interpreted this,” she said.

Citizens was created in 2003 to offer coverage to homeowners or businesses unable to get insurance from private firms.

The corporation had not built up a reserve of cash to handle a catastrophe when Katrina struck in 2005. Private insurance companies in the state are responsible for replenishing Citizens’ coffers and are allowed to collect the money from their customers.

In December, Blanco pushed a bill through the Legislature that essentially would refund the fees – or “assessments” – that homeowners pay so Citizens can pay off the nearly $1 billion debt it incurred after Hurricane Katrina. Citizens imposed a 15 percent fee on all homeowners insurance companies in the state, most of which then passed it on to policyholders. Further assessments are set for future years.

Information from: The Times-Picayune,

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