A class action lawsuits over its slow response. Louisiana Citizens Property Insurance Corp. has agreed to pay $35 million to settle two class action lawsuits over its slow response to Hurricanes Katrina and Rita in 2005. The Louisiana Citizens Property Insurance Corp., the state’s insurer of last resort, voted yesterday to set aside funds to pay the settlements, however, the company has not admitted any fault.
According to the New Orleans Times-Picayune, the funds will settle Adrian Chalona v. Louisiana Citizens and Toni Swain Orrill v. Louisiana Citizens. Both lawsuits alleged that the insurer failed to provide a written offer to settle Katrina and Rita claims within 30 days of being notified of losses.
The Times-Picayune reported that 70,000 individuals have filed claims. However, John Wortman, Louisiana Citizens’ chief executive officer said that far fewer – about 30,000 – probably will be entitled to a cash award of as much as $1,000. If a court determines that more than 30,000 individuals deserve payment, the individual awards will be reduced with the $35 million divided among those qualified, the Times-Picayune said.
The Settlement Will Not Affect Any of the Lawsuits.
The settlement will not affect any of the lawsuits filed against Louisiana Citizens that claim the insurer underpaid Katrina or Rita claims. Many companies insuring Gulf Coast policyholders have faced these types of lawsuit since storms. Most disputes center on whether damage to a home was caused by storm surge flooding or wind. Conventional property insurance does not cover flood damage.
Conflicts between Hurricane Katrina homeowners and insurance companies over the storm surge issue led to more than 1000 lawsuits against insurance companies, the largest number ever to follow a natural disaster in the US. A 2008 Government Accountability (GAO) report urged better assessment of “the accuracy of flood payments on hurricane-damaged properties.” Insurance companies’ handling of damage claims from hurricanes, where both wind and water destroy property, needs closer government scrutiny, the report said.
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