Citizens to Pay Class Action Attorneys, Rather than Post Appeal Bond

August 25, 2009

Louisiana Citizens Property Corporation will now pay a group of attorneys in a class action lawsuit $6 million in order to go forward with the appeal of a $95 million award against the state backed insurer of last resort for allegedly taking too long to pay claims after Hurricane Katrina in 2005.

Commissioner of Insurance Jim Donelon announced Aug. 24 that a judge has agreed to let Citizens pay the $6 million instead of posting an appeal bond that was originally set at $95 million, the full amount of the judgment against Citizens. The case originated in Jefferson Parish and involves more than 18,500 policyholders.

Citizens CEO John Wortman told Insurance Journal on Aug. 21 that Citizens’ board had negotiated an appeals bond for an amount far less than the full $95 million, an amount that Citizens would have been able to pay without having to assess property insurance policyholders in the state to cover the cost of the bond. Wortman also said, however, that Citizens was still trying to work out a deal with plaintiffs attorneys to allow the appeal to move forward without posting a bond.

According to Donelon, Citizens successfully negotiated a deal on Monday. If the insurer had not posted an appeal bond or worked out a deal with the attorneys by the end of the day on Aug. 24, it would have been required to pay the $95 million judgment to a group of policyholders whose successful lawsuit claimed the insurer did not adjust their Hurricane Katrina and Rita claims in accordance with the statutory deadline.

The decision by Judge Henry Sullivan of the 24th Judicial District Court in Gretna to sign the agreement allows Citizens to move forward with their appeal with no assessment of insurance companies or policyholders. Citizens will get the $6 million credited against any judgment or settlement eventually reached in the case, and would have had to pay that amount or more to purchase a commercial appeal bond, the Louisiana Department of Insurance reported.

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