Supreme Court turns away Louisiana Citizens appeal

Reuters News
Posted: Jun 25, 2012 12:40 PM
Supreme Court turns away Louisiana Citizens appeal

By Ben Berkowitz

(Reuters) - The U.S. Supreme Court on Monday said it would not hear an appeal from insurer Louisiana Citizens on a class-action lawsuit that followed Hurricane Katrina, handing another victory to plaintiffs who are already owed more than $105 million.

A local court in 2009 ordered Louisiana Citizens, the state's insurer of last resort, to pay penalties to policyholders because it took too long to start adjusting more than 18,500 claims after the devastating hurricanes Katrina and Rita in 2005.

A state appellate court overturned the verdict, but the Louisiana Supreme Court reinstated it last December. On Monday the nation's highest court denied Citizens' petition for the court to consider its case, which an attorney for the plaintiffs said effectively ended the insurer's appeals.

"What this tells us is that there was no mistake by the Louisiana Supreme Court and there was no federal question," said the attorney, Wiley Beevers of the Louisiana law firm Beevers & Beevers.

Louisiana Citizens had sought to appeal on the grounds it was denied due process, since class members had not been required to prove individually whether they were entitled to the maximum civil penalty of $5,000 each, and Citizens had not had the chance to defend against each claim.

Its petition to the U.S. Supreme Court was filed by Theodore Olsen, the former solicitor general in the Bush administration.

With the petition rejected, Beevers said he could move ahead with an effort to seize the insurer's bank account, a process that he said was "well down the road."

The chief executive of Louisiana Citizens told Reuters the bank account seizure was not imminent because the insurer was still seeking a hearing before the U.S. 1st Circuit Court of Appeals.

"We still have an issue in 1st Circuit court ... with respect to our status as a political instrumentality," Dick Robertson said in a phone interview. Louisiana Citizens' position is that it is not subject to its accounts being seized because of that political status.

Robertson added that he expects that question to eventually go to the state's supreme court, suggesting any resolution is a fair way off.

Either way, Louisiana Citizens has adequate cash on hand to pay the verdict if it needs to, Robertson said. But if the state were subsequently hit by a major storm, "it would be highly likely" it would need to levy an assessment to cover claims, he said.

Citizens has the ability to make both regular and emergency assessments to cover shortfalls. Regular assessments are levied against insurers, who can then surcharge policyholders to cover their costs. Emergency assessments are mandatory against all policyholders in the state and are used to service bonds issued to cover funding gaps.

The insurer previously issued nearly $1 billion in bonds to cover its post-Katrina deficit, for which it has been charging emergency assessments since 2007.

State insurers of last resort like Louisiana Citizens exist to offer coverage to people who cannot obtain it through regular insurance markets, usually because the risk is too high. The biggest ones are in markets with high exposure to hurricanes and earthquakes, like Louisiana and California.

(Reporting By Ben Berkowitz; editing by John Wallace)