Released: August 24, 2009

Commissioner of Insurance Jim Donelon announced today that a judge will allow Louisiana Citizens Property Insurance Corporation (Citizens) to pay $6 million to a group of class action attorneys while the state entity appeals a $95 million lawsuit judgment without having to post a cash bond in the same amount. That agreement, proposed by the Citizens board of directors on Friday, negates the immediate need for a $95 million Citizens emergency assessment on all property insurance policies in the state to cover the cost of the bond.

Citizens had until tomorrow to either pay a $95 million judgment to a group of policyholders whose successful lawsuit claimed the insurer did not adjust their Hurricane Katrina and Rita claims in accordance with the statutory deadline, or post a $95 million bond to preserve their right to appeal the judgment.

Either action would have nearly depleted Citizens’ cash on hand, leading to the suspension of paying claims and commissions as we approach the peak of this year’s hurricane season, and necessitated a $95 million assessment to be paid by all property insurers doing business in the state. Insurers could then recoup the full amount of that assessment from their policyholders.

Today’s decision by Judge Henry Sullivan of the 24th Judicial District Court in Gretna to sign the agreement allows Citizens to move forward with their appeal with no assessment of insurance companies or policyholders. Citizens will get the $6 million credited against any judgment or settlement eventually reached in the case, and would have had to pay that amount or more to purchase a commercial appeal bond.

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