Louisiana Citizens Property Insurance Corp. has finalized a $20 million settlement related to claims handled after hurricanes Katrina and Rita, wrapping up one of two remaining storm-related settlements that have weighed on the company.
Orleans Parish Civil District Judge Kern Reese approved the settlement, closing a class action suit that represented more than 7,000 claimants.
New Orleans CityBusiness reports per-claim settlement amounts were capped at $1,000. The judgment also included administrative costs of $550,000, legal fees of $6.6 million and other expenses.
Citizens CEO Richard Robertson said if the various costs don’t deplete the entire $20 million, remaining money would be turned to Citizens.
The state-backed nonprofit company provides property insurance to Louisiana homes and businesses that can’t obtain private insurance.
Claimants sued over the pace that Citizens paid claims after the 2005 storms. Claims must be paid within 30 days once a claimant produces paper proof of a loss.
Robertson said the settlement is one of two expected to cost the company $60 million total. Robertson expects the second class-action suit, which represents claimants in Jefferson Parish, will be finalized in the next 60 days.
Citizens chose to settle both suits in September, just months after paying a $104 million judgment in July to thousands of area policyholders who also sued over slow claims adjustment after the hurricanes.
Separately, the company is also beset by claims from last August’s Hurricane Isaac that have risen above $70 million.
Citizens reported an expected $119 million budget shortfall at a Jan. 10 board meeting.
Robertson said the company has anticipated the legal payments and should be able to build up more reserves in the absence of a significant storm in 2013.
The Citizens board voted against borrowing money to cover the shortfall at the January meeting. Alternate options include charging private insurers throughout the state an assessment for each property policy.
The company also proposed a 7.7 percent average statewide increase to homeowner’s rates. Jefferson Parish would see rates increase 6.1 percent, while Orleans Parish would see a decrease of 2.1 percent.