Louisiana Insurance Chief Seeks Lawsuit Protection for Citizens

September 2, 2009

Louisiana Insurance Commissioner Jim Donelon says that he’ll support legislation to give the state’s “insurer of last resort” immunity against certain lawsuits, a proposal that could retroactively negate the firm’s payout if it loses its appeal of a $95 million class-action.

Donelon said he’ll back such a bill in 2010 to protect Louisiana Citizens Property Insurance Corp. against lawsuits – past and present – that seek financial damages for failure to pay claims on time. Donelon said the Louisiana Insurance Guaranty Association, a state body that pays claims of failed insurers, enjoys a similar immunity.

If passed and deemed constitutional, Donelon said such a measure could nix payouts in an existing lawsuit filed in Jefferson Parish. In it, Citizens is appealing a ruling that the state-backed firm must pay $95 million to 18,573 policyholders because their Hurricane Katrina claims were not settled quickly enough.

One plaintiffs’ lawyer in that case, Fred Herman, was scornful of Donelon’s legislative proposal. He said Donelon’s idea would wrongly revoke policyholders’ rights to sue if the insurer fails to follow the rules of a policy.

If such a measure became law, Herman said, “then Citizens can do whatever they want to do, with impunity.”

Donelon said he’ll also push for a second bill related to the Citizens suit: one that would give the firm immunity against the requirement that a party post a bond while appealing a court’s ruling. Citizens was required to put up a $95 million bond while it appeals the Jefferson Parish suit. Instead, it agreed with plaintiffs’ lawyers and Judge Henry Sullivan to put up $6 million of that, and if the company loses all its appeals, would reduce the total payout to $89 million.

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