The U.S. Supreme Court has refused to stall payment of a $93 million judgment against Louisiana’s property insurer of last resort, a decision that could get money within six months to policyholders who won the lawsuit against the company.
The Louisiana Citizens Property Insurance Corp. asked the high court to stop immediate collection process of the judgment, which has grown to nearly $104 million with interest, while Citizens asks the court to consider its application for appeal.
But the Supreme Court denied Citizens’ request for an emergency stay order, which means the seizure of funds from Citizens will continue to satisfy the terms of the judgment.
Citizens was found to have moved too slowly in dealing with claims after the 2005 hurricanes. More than 18,500 policyholders stand to receive $5,000 each from the judgment.
Insurance Commissioner Jim Donelon said he’s not sure how the company will proceed. He said the insurer is weighing other legal options to stop the judgment from being collected, though he wouldn’t say what those were. If the seizure of the company’s payment continues, he said he’s unsure whether Citizens will attempt the federal appeal.
“If we are not able to stop the judgment from being executed on, the money will be gone. To spend more money to prove the rightness of our position is something that will have to be decided,” Donelon said.
Fred Herman, one of the plaintiff attorneys, said an order was issued to Citizens’ bank on Monday to start the process of seizing money to pay the judgment. That process involves the bank turning over the money to the Jefferson Parish sheriff and then to the court for supervision before the judge decides how to distribute the dollars.
Herman said Citizens policyholders could receive their payments within about six months if the U.S. Supreme Court doesn’t take further action.
Citizens offers insurance coverage to homeowners and businesses unable to obtain insurance from private companies.
In the long-running court case, the Louisiana Supreme Court said Citizens failed to begin adjusting claims for hurricanes Katrina and Rita in 2005 within the 30 days required by law.
Citizens chief executive Richard Robertson said the company wasn’t given proper due process to dispute the lawsuit.
The Citizens board of directors agreed Tuesday to a $500,000 contract with a Washington, D.C., law firm to lodge the federal challenge of the judgment. Gibson, Dunn & Crutcher LLP was being paid $150,000 for its emergency stay request that was denied by the Supreme Court and will be paid the rest of the amount if Citizens decides to pursue its application to appeal.
The Supreme Court doesn’t have to take up the case and could deny even considering it. Donelon said a decision would be made by Wednesday about whether to pursue the Supreme Court request.
Plaintiffs’ attorneys say the Supreme Court would have no reason to look at the case because it is a state dispute. Herman said if Citizens continues to pursue legal action, the company would be wasting money.
“They created a monumental mess, and they keep compounding it,” he said.
Robertson said the company has the cash on hand and assets to cover the judgment and interest without a special assessment of private insurance companies.
“We would still be sound. We would be less sound than we are today,” he said.
When Citizens money used to pay claims gets low, the company assesses private insurers for each property policy, and that cost is passed on to private insurance customers.
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