La. Citizens OKs $35M Settlement; Pays $90M in Hurricane Claims

November 17, 2008

The board of Louisiana’s last-resort insurance company approved paying up to $35 million to settle a class action lawsuit alleging that the firm took too long to pay off policyholders’ claims after the 2005 hurricanes.

The vote by Louisiana Citizens Insurance Corp.’s board means the settlement could get its final approval in a hearing Dec. 15, from state District Judge Kern Reese in New Orleans. The roughly 30,000 claimants could get up to $1,000 each, depending on how many are approved to join the class action suit.

A settlement would have no effect on other lawsuits against Citizens, including those from policyholders who argue the firm paid too little on their claims from hurricanes Katrina and Rita.

Chief Executive John Wortman has told the board that Citizens has paid out $90 million in claims from this year’s hurricanes, with thousands more still outstanding.

The company had about 53,000 claims from hurricanes Gustav and Ike, and has paid about 31,000 from the two storms, Wortman said. Roughly 30,000 of the 50,000 Gustav claims have been paid and about 1,200 of the 3,500 Ike claims have been paid, he said.

Wortman said the firm has paid out $88 million for Hurricane Gustav and $2 million for Hurricane Ike.

The company had 65,000 claims from Katrina, worth $1.5 billion, and 15,000 Rita claims, worth $150 million.

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