Louisiana's property insurer of last resort has offered to settle a dispute over the slow handling of claims from hurricanes Katrina and Rita in 2005 for up to $80 million.
The governing board of Louisiana Citizens Property Insurance Corp. approved the offer Thursday, which also would provide no more than $25 million of that total for attorney's fees.
The board was told that would cover about 25,000 policyholders who say Citizens did not begin adjusting their claims for hurricanes Katrina and Rita within 30 days as required by state law. Citizens has said that it was totally overwhelmed in starting the claims adjustment process after Katrina swamped much of the New Orleans area with floodwaters in August 2005 and Rita followed a month later with flooding in southwestern Louisiana.
State courts have rejected Citizens' appeals of a $104 million class-action judgment involving 18,500 policyholders. About 6,500 more have pending claims estimated to be worth $35 million.
Plaintiff attorneys did not respond to requests for comment. They had offered to settle all claims in the case for $123 million. That offer, according to documents reviewed by the board, did not mention how much would go to pay lawyers, but would have covered all 25,000 policyholders with claims against Citizens.
The company earlier turned over $6 million to eventually pay claimants instead of having to post an appeals bond to continue challenging the case. The $80 million offer would be added to that payment.
If attorney fees total $25 million, each policyholder would stand to get around $2,400 under Citizens' offer. The 18,500 policyholders currently covered by court decisions are in line for about $5,000 each, according to their attorneys. Any settlement _and the amount awarded each claimant _ would have to be eventually approved by a state judge.
Insurance Commissioner Jim Donelon, who is the state overseer of Citizens, said the offer was made because Citizens is running out of legal options. Plaintiff attorneys already have seized $104 million from the insurer. That money currently is in a frozen account.
"If we settle, it's over," Donelon said. "If we don't, we have a short fuse on our remaining legal options."
Donelon said that Citizens has enough money to pay the current judgment, but that could strain the company's reserves over the next two hurricane seasons, depending upon whether major storms hit Louisiana. He said the outcome of the case also could force Citizens to impose a special assessment on private insurance companies. Such assessments are generally passed on to private policyholders.