A federal judge in New Orleans has dismissed some claims in a lawsuit filed by a former Louisiana Attorney General Charles Foti against dozens of insurance companies over payments to policyholders receiving funds from the state’s Road Home homeowner grant program.
But the ruling by U.S. District Judge Stanwood Duval Jr. doesn’t resolve the case, which insurers claim would force them to increase payouts for damage from hurricanes Katrina and Rita in 2005.
Duval dismissed the state’s claims that insurers acted in bad faith and breached their fiduciary duty. He also threw out claims premised on insurers’ denial of coverage for flood damage from Katrina levee breaches in greater New Orleans.
Attorney General James “Buddy” Caldwell inherited the 2007 case from Foti, who filed it before he lost his bid for re-election.
Lawyers for Allstate Insurance Co., State Farm Fire and Casualty Co. and other insurers claim the attorney general’s office is trying to act as a “superpolicyholder,” taking over the rights to more than 155,000 policyholder claims in an effort to recover money the state paid out through Road Home program.
Road Home grants were meant to help repair damage not covered by insurance. Before leaving office, Foti sued insurance companies for any payments that might have reduced Road Home grants.
The companies say the state already had deducted insurance payments in calculating grant awards.
Caldwell’s office asked Duval to transfer part of the case to state court, but the judge ruled it belongs in federal court.
Both sides found something favorable in Duval’s ruling on March 12.
Assistant Attorney General Trey Phillips, director of Caldwell’s public protection division, said the ruling upholds the state’s right to try to recover Road Home money.
“It’s still alive, and the state’s position is solid,” Phillips said of the suit.
Allstate spokesman Michael Siemienas said the company is pleased with Duval’s dismissal of “extra-contractual” claims.
“Allstate is confident in the integrity of its claims handling practices and will continue to vigorously defend the action,” he said.
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