Judge’s Ruling Clears Way for Insurance Settlements in Louisiana

June 26, 2008

A ruling by a federal judge in New Orleans has cleared the way for thousands of Louisiana Road Home applicants to settle claims against their insurance companies, a lawyer for hundreds of homeowners said.

An order issued June 23 by U.S. District Judge Stanwood Duval outlines a process for homeowners who have received money from the state’s Road Home grant program to find out how much of that award they would have to pay back if they agree to their insurance settlement.

The Road Home prgoram provides buyout or repair grants of up to $150,000 to homeowners with severe damage from hurricanes Katrina or Rita. More than 111,000 homeowners have received grants so far, totaling $6.5 billion. The program is funded with federal recovery money.

Plaintiffs attorney Joseph Bruno said the ruling should ease a bottleneck for several thousand policyholders who have been waiting for the Louisiana Recovery Authority to sign off on their insurance settlements. The LRA oversees the Road Home program.

“It’s a big breakthrough,” Bruno said.

In the meantime, Bruno said, about $7 million in settlement payments for hundreds of his clients has been held in escrow.

Melanie Ehrlich, co-chair of the Citizens’ Road Home Action Team, said in an e-mailed statement that homeowners who settled with their insurance companies after they obtained a Road Home grant were held in limbo for many months, as the program set up a procedure to deal with possible duplications of benefits.

“If a homeowner had a $5,000 Road Home award but was able to settle with his insurance company for $100,000, the entire $100,000 settlement was withheld from the homeowner until he could get Road Home approval,” she said.

LRA spokeswoman Christina Stephens said the authority hasn’t been able to sign off on many settlements without adequate documentation from the parties.

“We can only move forward when we get a full package of information from the plaintiffs attorneys,” she said.

Associated Press writers John Moreno Gonzales contributed to this report.

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