Insurance Commissioner Jim Donelon ordered the application fees returned Dec. 12, saying Citizens broke state law because it didn’t list the charge on its policyholders’ declaration page which includes the basics of a policy, such as coverage limits and cost.
“The $16 million is the estimate on what they (Citizens) would have to pay,” Donelon said.
The Advocate reports Donelon isn’t sure how many years Citizens collected the fee but $16 million amounts to about 246,000 application fees.
Citizens is appealing the ruling in state district court in Baton Rouge. Donelon says the agency has posted an $8 million appeal bond to do so.
Steven Cottrell, chief financial officer for Citizens, said the issue apparently dates back to 2005 or earlier. The fee was listed on the application page that policyholders filled out when buying coverage, he said. For some unknown reason, the application fee wasn’t listed on the declaration page; it’s possible that Citizens management at that time wasn’t familiar with the requirement.
Cottrell said Citizens corrected the problem when it was discovered.
Donelon’s ruling is the latest development in a class-action lawsuit originally filed in 2008. He said his ruling closed the door to a class-action lawsuit, but that doesn’t necessarily mean the plaintiff’s attorneys won’t receive a percentage of the application fees.
The attorneys have asked state District Judge Timothy Kelley to award them fees for their work bringing the class action and the Insurance Department complaint, he said.
“I’m not taking a position on what Judge Kelley does or does not do relative to attorneys’ fees. I’m a regulator and I have ordered compliance with the law,” Donelon said.
The plaintiff attorneys, led by Jason L. Melancon, said they have worked on the case for more than five years, battling through a significant amount of opposition, and deserve to be paid for their efforts in fighting alleged illegal activities by the corporation.
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