Released: August 19, 2009

Commissioner of Insurance Jim Donelon and Louisiana Citizens Property Insurance Corporation (Citizens) CEO John Wortman held a press conference today to alert the public to a potentially catastrophic event looming on the horizon relative to Citizens.

Commissioner Donelon said Citizens, the state’s residual property insurance market, is pursuing several options in order to preserve its right to appeal a lawsuit filed in Gretna on behalf of Citizens policyholders who allege their 2005 Hurricane Katrina/Rita claims were not adjusted in accordance with the statutory deadline. Citizens previously entered into a settlement agreement that was approved by the Civil District Court for Orleans Parish on these exact same issues for a total payment of $17 million prior to the rendering of the judgment in Jefferson Parish. The Jefferson Parish court has required Citizens to post a $95 million bond in order to pursue its appeal right, despite the fact that state agencies are not required to file appeal bonds.

The plaintiffs in the pending class action lawsuit can seize from Citizens’ checking account the full amount of their $95 million judgment as of Tuesday morning, which would leave only $5 million left for continuing operations, even as two named storms are approaching. By posting a cash bond, Citizens will preserve its right to access a review of this judgment by the Louisiana Supreme Court and through an assessment on every property insurance policy in the state be able to resume paying claims and commissions through the ongoing hurricane season.

Additional options being pursued by Citizens to address this crisis are as follows:

(1) Mr. Wortman, with the assistance of Governor Bobby Jindal, will continue his efforts to obtain an appeal bond;
(2) Citizens’ attorneys will continue to try to work out a compromise with plaintiffs’ counsel;
(3) Commissioner Donelon, State Treasurer John Kennedy, Mr. Wortman and Citizens’ attorneys are scheduled to participate in a special meeting on Thursday afternoon in New Orleans with U.S. District Court Magistrate Judge Joseph Wilkinson in an effort to reach a compromise on these matters;
(4) Another option will include the approval by the Citizens Board of Directors for an assessment of $95 million to collateralize any bond written by a surety company on behalf of Citizens;
(5) The last option would be for the Citizens Board of Directors to authorize the posting of a $95 million cash bond and to temporarily suspend the payment of claims and commissions while implementing an assessment on every property insurance policy in the state to replenish its treasury.

Citizens is scheduled to hold a special meeting of its Board of Directors Friday afternoon to discuss all of these options and the steps it can take to preserve its continued operations.

“All of the options being weighed at this point are the result of a class action lawsuit which resulted in actual fisticuffs in the courtroom between the warring groups of attorneys representing plaintiffs in Orleans and Jefferson Parishes,” Commissioner Donelon said. “We have been unsuccessful in eight out of eight attempts to get the Louisiana Supreme Court to intervene in this matter on an interim basis,” he added.

“On the day of the plaintiffs’ attorneys scuffle in court, I testified in New Orleans for a $17 million settlement that would have resolved all penalty cases pending in St. Bernard and Orleans Parishes and preempted the case in Jefferson Parish. That settlement was approved by Judge Kern Reese of the Civil District Court in Orleans Parish but enjoined by Judge Henry Sullivan of the 24th Judicial District Court in Gretna,” said Commissioner Donelon.

“ The 90% of claims filed against private insurance companies post Katrina/Rita, like my own insurance claim, were not adjusted in a timely fashion due to extreme circumstances caused by both hurricanes but were denied class certification by the federal courts in New Orleans, so only policyholders of the state-financed residual market will enjoy this $5,000 per head windfall if we are ultimately unsuccessful in our efforts to overturn this judgment,” Commissioner Donelon said.