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Louisiana Insurance Commissioner to Fight Court's Katrina-Related Decision

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Posted on 22 Dec 2011

Louisiana Insurance Commissioner Jim Donelon is asking the state Supreme Court to reconsider its 4-3 ruling requiring the state to pay more than $100 million stemming from problems answering Citizens Property Insurance claims after Hurricane Katrina.

At a news conference Tuesday, Donelon said the court should not have overruled an appellate court ruling in the state's favor on Friday because the state now is liable for about $100 million in fines and interest.

"I consider this just unconscionable," he said. "It's deficient, legally."

Donelon's opposition to the majority decision is backed by the three justices who wrote dissenting opinions. He said he's hoping that if a rehearing is granted, one of the four will join the dissenters.

The Jefferson Parish case centers on a state law that says Citizens has to respond to a customer's claim within 30 days and begin the process of resolving it. Failure to do so qualifies the property owner for a reward of up to $5,000.

After Hurricane Katrina in August 2005, which flooded the Citizens offices in Jefferson Parish, all insurance companies were overwhelmed with claims and even larger private companies weren't able to respond within 30 days, Donelon said. But the law applies only to Citizens.

He said the former Citizens director had to get a National Guard escort to retrieve a hard drive from a computer because flooding sealed off Jefferson Parish.

If the ruling stands, Donelon said, Citizens has enough in reserves to pay "the first wave" of the court-ordered judgment. But if thousands more become available or if there's a hurricane next year, there's a chance every property owner in the state stands to lose.

Citizens probably would have to impose an assessment on every piece of property in the state that's insured by any insurance company.

"If the wind blows like it did in Gustav, there will be an assessment," Donelon said. "Taxpayers end up paying it."
Property owners can claim a refund on what they're assessed for Citizens, but that just means that the state picks up the tab with taxpayer money.


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